Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Altitude G3 Pty Limited v Chief Commissioner of State Revenue [2022] NSWCATAD 316 Hearing dates: 23 March 2022 Date of orders: 28 September 2022 Decision date: 28 September 2022 Jurisdiction: Administrative and Equal Opportunity Division Before: C Mulvey, Senior Member Decision: The decision of the respondent on 8 April 2021 is affirmed. Catchwords: REVENUE –dutiable value – s 21 Duties Act 1997 Category: Principal judgment Parties: Altitude G3 Pty Limited (Applicant) Chief Commissioner of State Revenue (Respondent) Representation: Counsel: Mr O Berkmann (Respondent) Solicitors: Cassab & Associates Solicitors (Applicant) Crown Solicitor (Respondent) File Number(s): 2021/252232 Publication restriction: None REASONS FOR DECISION 1. Altitude G3 Pty Limited as Trustee for the Altitude G3 Trust is the Applicant ('the Applicant'), seeking a review of a decision of the Chief Commissioner of State Revenue ('the Respondent'), who refused its claim that the dutiable value of Unit 3/1 Boys Avenue, Blacktown in New South Wales ('the Property') was $880,000. The Respondent asserts that the correct dutiable value of the property is instead the unencumbered value of $1,045,000, being greater than the consideration paid by the Applicant. Background 1. The Respondent has raised duty on two occasions in respect of the Property. First, an initial assessment ('the Assessment') was issued on 21 January 2020 indicating duty payable in the amount of $35,052 raised on the consideration ($880,000) paid by the Applicant. A valuation report prepared by Robertson & Robertson Consulting Valuers ('the Robertson valuation') dated 20 January 2020 derived the consideration for the property. The Robertson valuation was completed the day before execution of the agreement for sale and transfer of the Property. 2. Second, on reassessment on 8 April 2021 ('the Reassessment'), additional duty was raised in the amount of $7,745 plus $613.47 interest. The Reassessment was based upon a market valuation completed by Nicholas Garnsey of Cushman & Wakefield ('the Cushman & Wakefield valuation'). The unincumbered value of the Property was $1,045,000. The Cushman & Wakefield valuation arose in proceedings in the Supreme Court of New South Wales, Owners of Strata Plan 97121 v RCBS Devco Pty Limited (2020) NSWSC 1257 ('the Supreme Court proceedings'). The Supreme Court proceedings related to allegations and findings of fraud against the Applicant pursuant to s 37A of the Conveyancing Act 1919 (NSW) concerning the conveyance of the Property. 3. The additional duty of $7,745 is the subject of these proceedings that arose following the Reassessment. It is this decision the Applicant seeks the Tribunal to review. The application seeking administrative review was filed on 3 September 2021. 4. I note, before filing the application in this Tribunal, the Applicant made a request for a determination of an objection for the purposes of s 96 of the Taxation Administration Act 1996 (NSW) ('TAA') concerning both the assessment and the reassessment. That application was not successful. 5. The Applicant's grounds for administrative review appear to be based on the following: The Respondent 'cherry picked' the valuation evidence presented within the context of the Supreme Court proceedings; the Applicant's valuation, produced an objection to the reassessment that was equally as reputable as the valuation relied upon by the Respondent; reliance on the Cushman & Wakefield valuation by the Respondent was one of 'a self-serving money grab'; and the Cushman & Wakefield valuation relied upon by the Respondent does not reflect the prior offers received in relation to the sale of the property, being $685,000. 6. The Applicant also relies on a history of marketing the Property for sale, offers made and the final sale of the Property to evidence the unincumbered value of the Property to assess duty. For the reasons set out below, I have preferred and rely upon the expert valuer's evidence in the disposition of this application and determining the unincumbered value of the Property to assess duty payable. The Issue 1. The issue for determination in these proceedings is the true and correct valuation of the property and the additional duty payable, if any, pursuant to the Duties Act 1997 (NSW) ("the Act"). The Supreme Court proceedings 1. In the Supreme Court proceedings Hammerschlag J set out in detail at [7] to [51] the background to the transaction which led to the Reassessment. The Respondent in written submissions has set out the salient facts, and I repeat them: 'The sale of the property arose in circumstances where the vendor, RCBS Land Co Pty Limited as Trustee for the RCBS Property Trust (Land Co), and the Applicant, as purchaser, were known to each other. Land Co and the Applicant are 'associated persons' as defined under the Act. By way of Agreement for Sale dated 21 January 2020, Land Co agreed to sell the property to the Applicant for an amount of $880,000. The sale did not occur by way of auction or was an 'arm's length' transaction. The same day, duty in the amount of $35,032 was assessed and paid for by the Applicant in respect of the Agreement for Sale. Nominal duty in the amount of $10 in respect of a duplication of the Agreement for Sale and $10 for the transfer was also raised and paid. It cannot be in dispute that the transfer of the property and the distribution of those funds were made by the Applicant and Land Co with the intent to defraud creditors. Settlement occurred in accordance with the terms of the agreement of the sale and the property was transferred to the Applicant (the initial transaction). The Applicant was recorded as the registered proprietor and a Certificate of Title was issued in the name of Altitude G3 Pty Limited. On 8 April 2021, the Respondent formed the view that the unencumbered value of the property was greater than $880,000 and pursuant to s21(1) of the Act and by way of the reassessment, raised the additional duty. The value relied upon by the Respondent was based on the Cushman & Wakefield valuation of $1,045,000 which the Supreme Court in the matter in which the Supreme Court in the Supreme Court proceedings accepted as being the correct market value. In those proceedings, the Court was tasked with determining whether the acquisition of the property by the Applicant from Land Co was made with the intent to defraud creditors pursuant to s37A of the Conveyancing Act 1919 (NSW). Also, at issue was whether the sale of the property from Land Co to the Applicant in the amount of $880,000 was market value. In his decision, His Honour Hammerschlag J found that the figure of $880,000 was 'at a significant undervalue' and accepted the Cushman & Wakefield valuation. The Court held that the sale to the Applicant by Land Co was made with the intent to defraud creditors and consequently declared the transaction void. On 29 September 2020 and by order of the Court the transfer (registered as dealing AP848173) was declared 'void' (order 1) and 'cancelled' (order 2) with the property to be transferred back to Land Co (order 3). Notably, His Honour made no such orders in respect of the agreement for sale as it pertained to the property.' 1. In compliance with the Supreme Court orders on 8 October 2020, the Applicant requested that the proposed transfer back to Land Co ('the second transaction') ought to be exempt pursuant to s 65 of the Act. A request was also made for a refund of duty paid on the initial transaction under s 50A of the Act, on account that the transfer was declared by the Court as 'void and cancelled'. On 24 November 2020, the Respondent confirmed that the second transaction would be exempt but rejected the Applicant's claim that a refund was payable in relation to the duty paid on the initial transaction. 2. On 8 December 2020, an objection was lodged in respect of the refusal to grant a refund. On 8 April 2021, the Respondent disallowed that objection and issued the reassessment based on the Cushman & Wakefield valuation. The Respondent in his determination letter said that in the event that a refund was applicable in respect of the initial transaction, it would be way of s 50 of the Act and not s 50A, as the transfer duty was paid on the 'agreement for sale' and not raised under the memorandum of transfer (to which s 50A of the Act applies). 3. The Respondent asserts that he was at liberty to rely on the Cushman & Wakefield valuation over that of the consideration paid on the initial transaction or the Robertson Valuation, as per s 305(1)(c) of the Act and was permitted to reassess the Applicant for the additional duty pursuant to s 305(2) of the Act. 4. The Applicant, on 22 April 2021 lodged a further objection in relation to the Reassessment. The Robertson report was produced by the Applicant in support of this objection. On 6 August 2021, the Respondent disallowed the objection, maintaining that for the purposes for determining duty payable on the Property, the dutiable value was derived on the basis of the calculation in the Cushman & Wakefield valuation. 5. Following this decision, on 3 September 2021, the Tribunal received the Applicant's application for administrative review of the second objection in respect of the issue of valuation. 6. In the written material and in oral submissions the Applicant does not press or agitate a review in respect of its request for a refund under either s 50 or s 50A of the Act. The only issue for determination is the application of s 21(1)(a) and (b) of the Act, being the determination of the dutiable value of the Property as the greater of: the consideration (s 21(1)(a)); and the unencumbered value of the property (s 21(1)(b)). The Evidence 1. The Applicant relied on the following material: * bundle filed 15 November 2021 (excluding the Deed entered into between the parties in the Supreme Court Proceedings); * submissions and email filed 19 November 2021; and * Folders 1 and 2 filed 15 February 2022. 1. The Respondent relied upon: * s 58 documents filed 15 October 2021; * Affidavit Nicholas Garnsey 23 December 2021 Ex-NWG-1; * Affidavit Nicholas Garnsey 22 March 2022 Ex- NWG-2 ('the Garnsey valuation'); and * Written submissions and a bundle of authorities. Relevant Legislation 1. The onus is on the Applicant of proving its case - Section 100(3) of the TAA (see Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) (2013) NSWADTAP 25 at [30] and [37]). The standard of proof is on the balance of probabilities (R & L Linings Pty Limited v Chief Commissioner of State Revenue (2008) NSWCA 187). 2. It is upon the Applicant to discharge the burden of proof by establishing the correct amount of duty payable and not merely by showing an error on behalf of the Respondent (Levitch Design Associates Pty Limited atf Levo Unit Trust v Chief Commissioner of State Revenue (2014) NSWCATAD 2015 at [27]). 3. The Applicant has the onus of satisfying this Tribunal that the correct dutiable value of the Property is $880,000 or less by way of either the consideration or the unencumbered value of the property (whichever is greater). 4. Section 8 of the Act refers to duty imposed with respect to 'certain transactions' concerning 'dutiable property'. 5. Section 8(1)(b)(i) of the Act relevantly includes 'an agreement for the sale or transfer of dutiable property', where 'dutiable property' includes land (s 11(1A)(a)). 6. Pursuant to s 9(1) of the Act where a dutiable transaction referred to in s 8(1)(b) occurs, duty is to be charged as if such dutiable transaction were a transfer of property. 7. Section 12 of the Act imposes a liability for duty when a transfer of dutiable property occurs, and, if the transfer of dutiable property is affected by a written instrument, liability arises when the instrument is first executed (s 12(2)). 8. Pursuant to s 19 of the Act, duty is charged on the dutiable value of the dutiable property subject to the dutiable transaction at the relevant rate which is set out in Part 3 of the Act. 9. 'Dutiable value' of dutiable property is defined in s 21 of the Act as follows: 21 What is 'dutiable value' of dutiable property? (1) The dutiable value of the dutiable property is subject to a dutiable transaction is the greater of (a) the consideration (if any) of the dutiable transaction (being the amount of a monetary consideration or the value of a non-monetary consideration), and (b) the unencumbered value of the dutiable property. (2) … 1. Section 23 of the Act defines 'unencumbered value' of dutiable property as the value of the property determined without regard to any encumbrance to which the property is subject. 2. The Respondent is afforded a discretion to obtain or rely on evidence of value and the type of evidence required, for the purposes of determining whether a person is liable for duty or for determining the person's liability for duty pursuant to s 305 of the Act: 305 Value of property (1) The Chief Commissioner may, for the purpose of determining whether a person is liable for duty or determining a person's liability for duty – (a) require of the person, by notice in writing given to the person, to provide any evidence of the value of the property that the Chief Commissioner considers appropriate, or (b) obtain a valuation of property from a person the Chief Commissioner is satisfied is suitably qualified to provide evidence of the property, or (c) rely on a valuation of property prepared for any purpose by a person the Chief Commissioner is satisfied is suitably qualified to provide evidence of the value of the property. (2) The Chief Commissioner may assess duty on the basis of a valuation or other evidence referred to in subsection (1). (3) If a person is liable to pay duty under this Act that is chargeable by reference to the value of the property, the Chief Commissioner may recover from the person the cost of obtaining a valuation of the property under this section.' 1. It is important at this juncture to note s 305(1)(c). The Respondent can 'rely on a valuation of property prepared for any purpose' and may assess duty on the basis of that valuation pursuant to subsection (2). This is exactly what the Respondent has done in determining duty for the purposes of the Reassessment. He relied on the Cushman & Wake man valuation used in the Supreme Court proceedings. 2. I also note s 305(2) of the Act extends the power to assess to the making of an assessment, and reassessment (s 5 of the Act and s 3 of the TAA); (Molyneux & Vermeesch v Chief Commissioner of State Revenue (RD) (No 2) (2013) NSWADTAP 41 at [42]). Matters to be considered concerning s 21(1)(a) 1. The Act does not prescribe when evidence of value in respect of the unencumbered value of dutiable property must be obtained. The Respondent refers to, which I accept, that guidance can be found in the 'Revenue Ruling DUT12_v3: Evidence of value requirements and guidelines' (DUT12_v3). This ruling articulates circumstances where it can be expected or desirable to determine the dutiable value of dutiable property by way of valuation over that of consideration. 2. Relevantly, paragraphs (4)(2)(6) of DUT12_v3 provide: 'When evidence of value is required 4. Evidence of value will usually be sought to verify the adequacy of the consideration in the following circumstances … (c) the parties to the transaction are related or associated with a person, or there is evidence of a broader relationship between the parties or their associates; or … (e) the same legal or professional firms are acting for both parties, or … (g) the Chief Commissioner is not satisfied that the consideration is an adequate indication of the unencumbered value of the property (for example, where the consideration appears low for the type of property being sold). … 6. It is important to determine whether or not the parties are dealing with each other at arm's length. Therefore, any relationship between the parties or their associates is relevant, as associated parties may not act independently in forming their bargain in the same manner that the unrelated or non-associated parties would normally do.' 1. Under clause 2 within the dictionary of the Act 'associated persons' is defined. Clause 2(1)(d) of the dictionary provides that a Trustee of a Trust and a Trustee of another Trust are associated persons if any person is a beneficiary common to both the Trusts. 2. I find as a matter of fact that Land Co and the Applicant are 'associated persons'. This is because they have beneficiaries common to both Trusts (see the Supreme Court proceedings at [7], [46] and [49]). 3. I also find, given consideration to the following circumstances surrounding the initial transaction, and the fact that consideration as derived from the Robertson valuation, the dutiable value is to be ascertained from the unencumbered value of the property for the purposes of s 21(1)(b). This is because: 1. the sale of the property has previously been determined in unrelated proceedings as occurring 'at a significant undervalue' (Supreme Court proceedings at [68]); 2. my findings concerning associated persons above; 3. there is evidence of a broader relationship between Land Co and the Applicant through, Robert Cassab and Brett Suttor (Supreme Court proceedings at [4]). At least as of 21 January 2020, Robert Cassab and Brett Suttor were Directors of the Applicant and Brett Suttor was the Director of Land Co (with Robert Cassab being a former Director). The shareholders of both companies are also Robert Cassab and Brett Suttor; 4. the acquisition of the property was not at arm's length or by auction and the same legal firm acted for both Land Co and the Applicant; and 5. the findings of the Supreme Court were that the purpose of the transfer was to defraud creditors (Supreme Court proceedings at [87]). The Supreme Court also found there was a clear motivation for a lower purchase price to be paid to avoid increased transfer duty (Supreme Court proceedings at [67]). What is the unencumbered value of the property s 21(1)(b) 1. The applicant contends for the following matters to be considered in deriving a value for the property. Since the end of the first marketing and sales phase there has been a single offer on the property as per attachment 10 comprising offer of $685,000 excl GST. So, to conclude at a high level we say the subject property was never at the purported value on which the CSR is asserting the additional duties are payable, and that the CSR has simply 'cherry picked' a single piece of evidence presented as part of a litigation proceeding, and chosen to ignore all other contemporaneous information and evidence provided. We consider the following high level bullet points supports this: From circa May 2018 - December 2019 was marketed for sale by a reputable sales and marketing agent in Colliers intentional. No offers were received for the purpose of the property. In January 2020 a valuation was commissioned again with a reputable valuer for Stamp Duty purposes to complete the subject property transaction, with a value estimate of $800,000 (excl GST). In January 2020 a 3rd party commenced litigation proceedings, which in part included the subject property and hence the 3rd party commission a valuation for litigation purposes, with a value of $1,045,000 excl GST; In February 2021 a lease was entered into with a tenant of the subject property with rental payments commencing Dec 2021 of $55,000 per annum (hence objectively one would argue increasing the marketability of the subject property since the subject valuations); … In October 2021 after an extensive sales and marketing campaign and public auction the same subject property was passed in without offer; To date the only single offer received for purchase of the subject property comprises $685.000. 1. I have considered these matters and prefer the evidence set out in the Garnsey valuation. This is because the Garnsey valuation has been prepared for the purposes of these proceedings and includes the relevant acknowledgement required of an expert witness giving evidence before the Tribunal. Also, some the above matters were, appropriately, put to Mr Garnsey in cross-examination by Mr Sutton to test his evidence. 2. The respondent relies upon the Garnsey valuation in support of deriving a value for the Property. Mr Garnsey used the same calculation and method as was used in the Supreme Court Proceedings. A Direct Comparison method was used in the Garnsey valuation which compared similar properties in the Blacktown area. Mr Garnsey concludes the value of the property as $1,060,000 which is the mid-point between a range of $1,030,000 to $1,090,000. The report looked at the Capitalisation Method of calculating the value which produced a figure of $1,030,000. In reconciling the various amounts, Mr Garnsey concluded that the unencumbered value of the Property, as of 21 January 2020, was $1,045,000. 3. Mr Garnsey was cross-examined. He agreed with the proposition that 'market valuation' was what a willing buyer will pay and what a willing seller sell in an arm's length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and with compensation at particular moment in time, as being, the base line of market value. A number of questions were asked of Mr Garnsey to test the accuracy and reliability of the valuation, particularly, in respect of a modest change in market conditions in the Blacktown and the wider Sydney metropolitan areas. The cross-examination did not sufficiently challenge Mr Garnsey's opinion to the degree that his evidence could be found to be unreliable. 4. In submissions, the applicant contends that the Robertson valuation should be preferred as the true unencumbered value of the Property. Further, the Applicant seeks to rely on a later sale price of the Property of $700,000 that was negotiated with Colliers to challenge the unencumbered value ($1,045,000) in the Garnsey valuation. The Applicant submits that Mr Garnsey's opinion about the unencumbered property value was based upon the wider Sydney Metropolitan area and was not specific to the Blacktown area. He suggested that because the property sold for $700,000, the valuation of Mr Garnsey of $1,045,000 cannot be accepted as the market has not dropped over $300,000. I reject that submission because it alone does not sufficiently refute the opinion expressed in the Garnsey valuation and the methodology used. 5. I have also considered what weight to attribute to the Garnsey valuation and the Robertson valuation. I prefer the Garnsey valuation. This is because, the Garnsey valuation was prepared as an expert report in these proceedings and it includes the expert's agreement to be bound by the NCAT Expert Code of Conduct. The Robertson report does not. Also, the authors of the Robertson report were not made available for cross-examination. I attribute no weight to the Robertson report and prefer the Garnsey valuation. 6. I find that the unencumbered market value of the Property was $1,045,000 as of 21 January 2020. 7. In disposing of this matter, the test to be applied is under s 21 of the Act. I have considered the operation of that provision and find that the dutiable value of the Property is the unincumbered value of $1,045,000 because that is an amount greater than the consideration being $880,000. 8. The decision of the respondent is affirmed. Orders 1. The decision of the respondent on 8 April 2021 is affirmed. ********** I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 28 September 2022