Chrissie Group Pty Ltd atf All Angels Family Trust v Chief Commissioner of State Revenue [2018] NSWCATAD 77

Background

These proceedings concerned the Chief Commissioner’s decision to assess ad valorem duty in respect of a Real Property Act Transfer Form which was executed by the applicant in relation to a purchase of a property at Goulburn, New South Wales (“the Property”).

By way of summary of the key facts:

1. On 25 July 2016, the applicant company (Chrissie Group Pty Ltd) was incorporated, with Mrs Akkari being the sole shareholder, director and secretary.
2. On 26 July 2016, The All Angels Family Trust was settled, with the applicant as trustee.
3. On 24 August 2016, Mrs Akkari (as purchaser) entered into an agreement to purchase the Property in Goulburn, and ad valorem duty was paid on the agreement.
4. An undated Real Property Act Transfer Form was subsequently executed in respect of the purchase of the Property (“the Transfer”), with the transferee listed as “Chrissie Group Pty Ltd”. The Tribunal found that the applicant “did take the transfer as trustee of a discretionary trust” (at [19]).
5. The Transfer was subsequently assessed by the Chief Commissioner to ad valorem duty, on the basis that it was not in conformity with the agreement.

The Statutory Framework

The key issue in dispute in this matter was whether the Transfer was eligible for the concession in s.18(3) of the Duties Act 1997 (“the Act”) - in particular, whether the requirement in s.18(3)(d)(i) was satisfied that, at the time the agreement was entered into, and at the completion of the agreement, the purchaser under the agreement (ie Mrs Akkari) and the transferee under the Transfer (ie Chrissie Group Pty Ltd atf All Angels Family Trust) were “related persons”.

The Dictionary to the Act defines a “related person” as follows:

“‘related person’ means a person who is related to another person in accordance with any of the following provisions:

1. natural persons are related persons if:
   1. one is the spouse or de facto partner of the other, or …
2. companies are related persons if they are related bodies corporate,
3. a natural person and a private company are related persons if the natural person is a majority shareholder or director of the company or of another private company that is a related body corporate,
4. a natural person and a trustee are related persons if the natural person is a beneficiary of the trust (not being a public unit trust scheme or discretionary trust) of which the trustee is a trustee,
5. a private company and a trustee are related persons if the company, or a majority shareholder or director of the company, is a beneficiary of the trust (not being a public unit trust scheme or discretionary trust) of which the trustee is a trustee”.

Submissions

The applicant’s key submission was that the “related person” definition states that if “any” of the provisions are satisfied the persons are related, and Mrs Akkari and the applicant are “related persons” in this case by virtue of paragraph (c) of the “related person” definition (on the basis Mrs Akkari was the majority shareholder and a director of the applicant at all relevant times).

The Chief Commissioner submitted that when s.18(3)(d)(i) and the definition of “related person” are read together, the relevant item in that definition in the circumstances of this case is paragraph (d), not (c), for the following key reasons:

1. the “related person” definition needs to be read in the context of s.18(3) of the Act, which looks at the capacity in which persons are operating under the agreement and under the transfer (such as s.18(3)(d)(ii) of the Act which focusses on the purchaser under the agreement in the capacity of trustee);
2. paragraph (d) of the definition of “related person”, by specifically referring to trustees, suggests that it was intended to deal with trustee situations specifically, and to override situations where the more general provisions (such as paragraph (c)) would apply; and
3. the Applicant’s interpretation of the definition of “related person” leaves the s.18(3) concession open to abuse.

Decision

In approaching the task of statutory construction, the Tribunal relied on the guiding principles set out by the High Court of Australia in Project Blue Sky Inc. v Australian Broadcasting Authority (1998) 194 CLR 355. Its task was to “consider the text of the statutory provision itself in the first instance; and seek its meaning by reference to the context in which it sits” (at [27]). The Tribunal also noted that taxing provisions are subject to the same principles of interpretation as other statutes.

The Tribunal noted that the introductory words of the definition of “related person” say that if “any” of the following provisions apply the persons are related, and it was clear that the applicant and Mrs Akkari “met the literal words of par (c) of the definition” (at [36]). However, the Tribunal described the issue in these proceedings as being “whether the context requires the clear, natural meaning of these words to yield to another provision [paragraph (d)] which deals with the relationship between a natural person and a trustee” (at [29]).

The Tribunal ultimately accepted the Chief Commissioner’s contextual approach, and found that

“this is an appropriate case for application of the rule of interpretation that the special overrides the general” (at [34]).

Key aspects of the Tribunal’s reasoning included:

1. the Tribunal’s finding that there was “a purpose in the definition of ‘related persons’ to address the ‘mischief’ that could result from allowing the use of discretionary trusts in cases where a purchaser … wished to make a ‘subsale’” (at [34]);
2. the fact that the definition draws a distinction between the various capacities in which persons are acting in defining them as ‘related’, and it contains a provision which particularly deals with trustees as related persons (being paragraph (d)); and
3. the Tribunal’s finding that “it would be repugnant to the purpose of par (d) of the definition of ‘related person’ (which prevents trustees of discretionary trusts from being related to other persons) to carve out a wide group of entities (private companies acting as trustees) simply because the directors and shareholders met the literal words of par (c) of the definition.”

Accordingly, the Tribunal found that the applicant and Mrs Akkari were not to be treated as “related persons” because they did not satisfy the more specific paragraph of the definition (being paragraph (d)), with the effect that the s.18(3) concession did not apply to the Transfer.

Orders

The decision under review was affirmed.

Link to decision

Chrissie Group Pty Ltd atf All Angels Family Trust v Chief Commissioner of State Revenue [2018] NSWCATAD 77