Alexander Michael Tzovaras v Chief Commissioner of State Revenue  NSWCATAD 265
On 6 May 2015, the Applicant entered into a contract to purchase the Property. The consideration was $736,500 of which $237,292.60 was paid as a Deposit (the “Deposit”).
On the same day the Declaration of Trust was executed between the following parties:
- The Applicant (as “Trustee”);
- The “Purchasers” which included:
- Lesley Anne Tzovaras (“Mother”);
- The Trustee;
- Melissa Elizabeth Phillips (nee Tzovaras);
- Natalie Helen Tzovaras; and
- Philip Anthony Tzovaras
- TL Consulting Pty Ltd (“Original Trustee”); and
- Ted Dorotheos Tzovaras (“Father”).
The Trust contained the following relevant recitals:
- Recital A – the Applicant has entered into a Contract at the request of the Purchasers, the Original Trustee and the Father;
- Recital B – the Applicant agreed to become the proprietor of the Property at the request of the Purchasers, the Original Trustee and the Father;
- Recital C – the purchase price is provided as follows:
- The Deposit would be paid by the Original Trustee
- The balance would be paid from proceeds of a loan (the “Loan”) obtained by the Applicant
- Recital D – the Father undertook to pay all monthly instalments on the Loan and ultimately repay the Loan in full
- Recital E - purchase of the Property is made by the Applicant for the benefit of the Purchasers to be held in trust for the Mother for her life and to the remainder of the Purchasers in equal shares.
Importantly, Clause 4 stated the following:
- The Father and the Purchasers jointly and severally agree to indemnify the Applicant as Trustee from and against any liability incurred by him because of having purchased the Property in his name; and
- The Purchasers in particular agree to pay punctually:
- all rates taxes and other outgoings for the Property, and
- the principal, interest and all other money due and payable under any Mortgage or other charge which, at the request of the Purchasers, the Applicant executes over the Property.
The Contract was lodged with the Chief Commissioner and the duty was paid on 10 June 2015.
The Declaration of Trust was not lodged with the Chief Commissioner until 10 April 2017 with the Applicant’s solicitors requesting the Declaration of Trust be charged Nominal Duty.
On 22 April 2017, the Chief Commissioner issued a Duties Notice of Assessment in relation to the Declaration of Trust assessing the Applicant with duty of $20,415 (“April 2017 Assessment”) and interest of $3,506.45, based on three-quarters of the purchase price for the Property.
The Applicant objected to the April 2017 Assessment and the Chief Commissioner disallowed the objection.
On 18 October 2017, the Chief Commissioner issued a reassessment of duty in relation to the Declaration of Trust (“October 2017 Reassessment”) calculated with reference to the full purchase price of the Property.
The Applicant then objected to the October 2017 Reassessment and the Chief Commissioner also disallowed this objection.
On 16 March 2020, following the commencement of the Tribunal proceedings, the Applicant, Purchasers and Father executed an amended Declaration of Trust (“Amendment Deed”) which:
- Removed the Original Trustee and the Father from the Declaration of Trust; and
- Removed any reference to the Original Trustee or the Father agreeing to pay the Deposit, loan instalments or to indemnify the Applicant in respect of his liabilities in relation to the purchase of the Property.
The Statutory Framework
The issue in this case was whether s. 55(1)(a)(ii) of the Duties Act should apply to the Declaration of Trust on the basis that the Applicant is the apparent purchaser of the Property for the “real” Purchasers so named in the Declaration of Trust. In the alternative, the Applicant argued that s. 18 of the Duties Act applied to prevent “double duty” being paid in respect of one transaction.
The Applicant argued that:
- The Declaration of Trust should be subject to Nominal Duty because:
- The Purchasers in the Declaration of Trust are the real purchasers having effectively provided the money to purchase the Property;
- The purchase price for the Property was provided by the Applicant by applying a debt owed to him by the vendor as a Deposit and the loan raised by the Applicant to pay the balance;
- The Purchasers are legally obliged to pay the purchase price and in the Amendment Deed have agreed to indemnity the Applicant against liabilities incurred by him in purchasing the Property and to undertake payment of mortgage payments; and
- As a result of the Purchasers being jointly and severally real purchasers of the Property, only one of them is required to pay the purchase price to attract the Nominal Duty.
- In the alternative, the Applicant argued that the provisions of s. 18 of the Duties Act should apply arguing that where a dutiable transaction is affected by more than one instrument, only one of the instruments is to be stamped with ad valorem duty. Since the Contract was stamped with ad valorem duty, he argued, the Declaration of Trust should attract Nominal Duty.
The Chief Commissioner argued that:
- The Nominal Duty concession under s. 55(1)(a)(ii) of the Duties Act was not applicable because only the Applicant provided money for the purchase price and the Applicant did not provide sufficient evidence that all the Purchasers provided money for the purchase of the Property; and
- The provisions of s. 18 of the Duties Act do not apply because the Declaration of Trust and the Contract were separate and distinct dutiable transactions.
Does s. 18 of the Duties Act apply?
The Tribunal concluded that s. 18 would only have a role to play if the agreement for the Applicant’s purchase of the Property or creation of Trust over the Property had comprised several individual instruments which, taken as a whole, gave rise to a single agreement or amounted to a declaration of trust, respectively.
While the Applicant argued that the Contract and Declaration of Trust had a commercial objective, this alone did not mean that the transactions “automatically cease to be distinct dutiable transactions.”
The Tribunal concluded that the Contract and Declaration of Trust were clearly two distinct, “self-contained” dutiable transactions and therefore the Applicant was liable for duty on both transactions.
Is the Applicant eligible for the Nominal Duty pursuant to s. 55(1)(a)(ii) of the Duties Act?
According to s. 9 of the Duties Act, the duty imposed on a Contract of Sale is when the agreement is entered into and for a Declaration of Trust when the Declaration is made. The Tribunal concluded, therefore, that the Declaration of Trust should be assessed as at 6 May 2015, the same date the Contract was entered. As a result, the Amendment Deed was not relevant for the purposes of the Tribunal’s review.
The primary issue was to determine whether the purchase money for the Property “has been or will be provided by the real purchaser” pursuant to s. 55 of the Duties Act.
For the following reasons, the Tribunal concluded that the Applicant did not demonstrate he was entitled to the Nominal Duty under s. 55 of the Duties Act or to remissions of interest:
- None of the Purchasers provided payment of the Deposit. Payment of purchase price was considered in Calverley v Green (1984) 155 CLR 242. The Court concluded in that case that purchase price is considered to be what is paid in order to acquire the property (i.e. the deposit); mortgage payments are not considered payment toward the purchase price. In this case, the Applicant provided two versions of events in relation to the payment of the deposit on the Property. Regardless of which version of events is accepted, the only evidence provided was that no other Real Purchaser, apart from the Applicant, paid the Deposit.
- No evidence was provided to confirm that the Loan “has been or will be paid by the real purchaser”. Bank statements for the entire period of the Loan were provided to the Chief Commissioner. The statements show that most Loan repayments were made by the Applicant with a smaller number made by the Applicant’s brother (a Purchaser) and several large payments made by the Applicant’s Father. No other evidence was provided to show that any of the other Purchasers had paid, or intended to pay, any Loan payments.
- The Applicant provided no evidence to support remission of interest. The applicant made no submissions on why interest should be remitted. The Tribunal concluded that on the basis the Applicant did not make reasonable efforts to comply with his tax obligations, provided inconsistent information to the Chief Commissioner and failed to lodge the Declaration of Trust for assessment in a timely way, he was not entitled to remission of interest.
The Tribunal, therefore, confirmed the Chief Commissioner’s decisions:
- to assess the Declaration of Trust with duty of $28,722.50, not nominal duty; and
- to charge interest by reference to both the market rate component and the premium rate component in respect of the duty assessed but unpaid.