CITATION: Azevedo v Chief Commissioner of State Revenue [2006] NSWADT 171 DIVISION: General Division APPLICANT PARTIES: David Azevedo RESPONDENT Chief Commissioner of State Revenue FILE NUMBER: 053138 HEARING DATES: 9/08/2005 SUBMISSIONS CLOSED: 08/09/2005 DATE OF DECISION: 06/09/2006 BEFORE: Greenwood J - Judicial Member CATCHWORDS: first home owners grant - reversal of original decision - First Home Owners Grant Act - first home owners grant - reversal of original decision MATTER FOR DECISION: Principal matter LEGISLATION CITED : First Home Owners Grant Act 2000 CASES CITED: Calcaro v Chief Commissioner of State Revenue [2004] NSW ADT 158 Moore v Chief Commissioner of State Revenue [2002] NSW ADT 49 APPLICANT In person REPRESENTATION: RESPONDENT B Baker, solicitor ORDERS: 1.Application dismissed; 2. Decision under review affirmed; 3. Penalty confirmed at 100% REASONS FOR DECISION Background 1 The Applicant, Mr Azevedo, purchased a property located at 184 Lakelands Drive, Dapto ("Lakelands Drive") for the sum of $144,000.00 as the named Purchaser, by contract dated 8 November 2000, which was completed on the 14 December 2000. 2 Mr Azevedo made an application for the First Home Owner Grant ("FHOG") on the 6 November 2000 and received a grant of $7,000.00 in relation the application which indicated that occupation was to occur on the stated date of 14 December 2000. 3 Evidence was given by the applicant's Stepfather, Mr De Sousa Rocha, that a Westpac Bank Officer had assisted him in the lodgement and processing of the applicant for FHOG grant, although the form itself had been filled in by the applicant's Stepfather, Mr Antonio De Sousa Rocha. 4 As a result of a request for a reduction in stamp duty on the transfer of the subject property from Mr Azevedo to his Stepfather and mother Antonio De Sousa Rocha and Margarid Da Silva Borges Darocha (the "Transferees") in or about September 2003 the Wollongong office of the Office of State Revenue began an investigation into the property history. As a result of that investigation, the Chief Commissioner of State Revenue requested repayment of the FHOG grant pursuant to S45 of the First Home Owner Grant Act 2000. 5 It emerged from the lodgement request and during the investigations by the Commissioner and as part of the lodgement request by the Transferees for reduced stamp duty, that Mr Azevedo and the Transferees had signed a document bearing the date of 31 October 2000 referred to as " Deed of Trust" and produced in the bundle of s.58 documents lodged on behalf of the Commissioner as exhibit "1". This Deed of Trust, (the "Deed") predated the contract of purchase of Lakelands Drive and the claim for FHOG grant. The deed of agreement particularly identified Lakelands Drive as the property which was to be held by Mr Azevedo in trust for the Transferees and part of the purchase money for Lakelands Drive was in fact provided by the Transferee. Mr Azevedo was named as the Trustee and the Transferees were named as the beneficiaries of the Lakelands Drive property. The deed further provided for the transfer of the property pursuant to clauses 2 and 7, which was ultimately effected by the parties to the deed in or about September 2003. The Evidence 6 Mr Azevedo was assisted and accompanied by his Stepfather Mr Antonio De Sousa Rocha throughout the hearing and both persons gave verbal evidence in the course of the hearing. Mr Azevedo indicated that he was directed in the purchase and in all things by his Stepfather, Mr DeSousa Rocha. The Stepfather gave evidence that he was reliant upon the advice given by his solicitors at the time and he had made and pursued a claim against them in the Consumer Trader & Tenancy Tribunal (CTTT) in 2004. The material subpoenaed and exhibit 4 produced in that hearing indicated that the Stepfather was the sole named claimant in the documents lodged with CTTT. 7 There appears to be a dispute between the Stepfather and his solicitors as to the nature of the instructions given for the trust deed. The claim was settled by consent orders and the payment of the sum by the solicitors for $10,000.00. The applicant was not a party to that claim, notwithstanding the same firm of Solicitors acted on the preparation of the trust deed and the contract for the purchase of Lakeside Drive. 8 A letter dated December 2004 and produced at tab 13 in Exhibit "1" to the Office of State Revenue signed by both Transferees, the Transferees set out the history, manner and the intentions with which the property, Lakelands Drive was purchased. At paragraph 4 the author states: ''….it was explained that the home would belong to my wife and I and that we would pay all expenses in relation to the home. Our son was to help by using his name in the purchase of the home. Because of the loan, the house was to be in his name." 9 A further letter dated 17 February 2005 and signed by the applicant is produced at Tab 17 in Exhibit "1 "and it is almost identical to the initial letter dated December 2004 initially produced by the Transferees and states the same intentions. There can be no doubt that Lakeside Drive was purchased without the requisite intention for it to be the Applicant's first home. 10 The applicant, Mr Azevedo, stated in his verbal evidence, that the purchase and all arrangements were made by his stepfather and that he did not read his documents before he signed them. Mr Azevedo acknowledged that he knew the application was a legal document and it was an application to claim money, but he did not read the form and in effect he "shut his eyes" to the consequences. The Legislation 11 Section 7(1)(b)(i) of the Act provides that the Grant is payable in respect of an "eligible transaction". Eligible transactions are defined in s.13 of the Act, and include contract made on or after 1 July 2000 for the purchase of a home in New South Wales (s.13(1)(a)). 12 Section 13(2) provides that contract is a contract for the purchase of a home if the contract is a contract for the acquisition of a relevant interest in land on which a home is or is to be built under the contract by or on behalf of the vendor. 13 To be eligible for a Grant under the Act, an applicant must then satisfy the five eligibility criteria that are contained in Div 2 of Pt 2 of the Act and in s.7 of the Act. 14 Section 15 of the Act further provides that all "interested persons" must be an applicant. Section 15(2) of the Act provides that an "interested person" is a person: "…. who is, or will be, on completion of the eligible transaction to which the application relates, an owner of the relevant home except such a person who is excluded from the application of this section by the Chief Commissioner because the Chief Commissioner has recognised the interest of another person to be a non-conforming interest under section 5(4)." 15 Section 5 relevantly provides as follows concerning ownership of homes: "5(1) A person is an "owner" of a home or a "home owner" if the person has a relevant interest in land on whi c h a home is built. (2) Each of the following is, subject to subsection (3), a "relevant interest" in land: (a) an estate in fee simple in the land, … (3) Subject to subsection (4): (a) an interest is not a relevant interest at a particular time unless the holder of the interest has, or will have within 12 months after that time (or a longer time allowed by the Chief Commissioner), a right to immediate occupation of the land, and (b) an interest is not a relevant interest in the hands of a person who holds it subject to a trust. (4) The Chief Commissioner may recognise an interest (a non-conforming interest") as a relevant interest in land even though the interest may not conform with the above provisions (and even though the interest may not be recognised at law or in equity as an interest in land) if there is, in the Chief Commissioner's opinion, good reason to do so. (5) If the Chief Commissioner recognises a non-conforming interest as a relevant interest in land and, in consequence, a first home owner grant is to be paid, the Chief Commissioner may impose appropriate conditions on the payment of the grant to ensure its recovery if suppositions about future conduct or events made by the Chief Commissioner in recognising the interest later prove to be incorrect. …" 16 Section 45 of the Act provides as follows: " 45 Power to require repayment and impose penalty (1) The Chief Commissioner may, by written notice, require an applicant (or former applicant) for a first home owner grant to repay an amount paid on the application if: (a) the amount was paid in error, or (b) the Chief Commissioner reverses the decision under which the amount was paid for any other reason. (2) If, as a result of an applicant's dishonesty, an amount is paid by way of a first home owner grant, the Chief Commissioner may, by the notice in which repayment is required or a separate notice, impose a penalty not exceeding the amount the applicant is required to repay. (3) If an applicant (or former applicant) for a first home owner grant fails to make a repayment required under this section or the conditions of the grant, the Chief Commissioner may, by written notice, impose a penalty not exceeding the amount the applicant is required to repay. (4) If an amount is paid in error on an application for a first home owner grant to a third party, the Chief Commissioner may, by written notice, require the third party to repay the amount to the Chief Commissioner." Penalties and Case Law 17 By the applicant's own admissions and those of his Stepfather, it is clear that the applicant was never entitled to a Grant under the Act on the basis of a conforming or "non-conforming" interest. He only ever held the property on trust for his parents. Accordingly, the applicant was not an "owner" within the meaning of s.5 of the Act. 18 Further, there was no eligible transaction pursuant to s.7(1)(b)(i) of the Act in that: - there was no purchase of a home (after 1 July 2000), as required by s.13(1)(a) because s.13(2) relevantly provides that contract is a contract for the purchase of a home if the contract is a contract for the acquisition of a relevant interest in land (emphasis added) on which a hone is or is to be built under the contract by or on behalf of the vendor. And - Section 5(3) covers the present situation, as the applicant never had the relevant interest in land, holding the property as he did on trust. 19 The Commissioner imposed a penalty of 100% of the grant, namely $7,000.00. It is submitted by the Commissioner that this was an appropriate penalty in the circumstances of this case. The Commissioner relied on two cases: 1) In Calcaro v. Chief Commissioner of State Revenue [2004] NSW ADT 158, Judicial Member Molony set out a number of considerations which the Commissioner may have regard to in deciding whether to impose a penalty, and the quantity of any such penalty. At para [53], Judicial Member Molony adopted the following recommendation of the Australian Law Reform Commission in Principled Regulation: Federal Civil and Administrative Penalties in Australia (2002) ALRC 95 in recommendation 29-1. The matters considered by Judicial Member Moloney as being relevant to penalty included (at para [63]): "a) the need to deter others from not complying the conditions of grant; b) the fact that Mr Calcaro provided incorrect information as to when he would be occupying the premises in his application to grant; c) the fact that Mr Calcaro's initial intention was to live in the premises as his own home at the end of the tenancy; d) the fact that Mr Calcaro's original intention was frustrated by his own financial circumstances; e) the opportunity cost factor; f) the fact that Mr Calcaro showed little respect for matters of propriety and less attention to detail in his dealings with the Administrator; g) Mr Calcaro's failure to be candid with the Administrator and the Tribunal; h) Mr Calcaro's straitened financial circumstances. 20 The Tribunal found that a 100% penalty was not appropriate in Mr Calcaro's because he had initially applied for the Grant with the intention of living in the home. The Tribunal commented that: "…there is a difference between the significance to be attributed to a recipient whoever intended to live in the home for which the grant was paid, and actively misled the Administrator about that fact from start to finish and a recipient who receives the grant with the honest and reasonable intention of living in the home, but who attempts to deceive the Administrator when unexpected circumstances intervene to make that impossible. While both have been dishonest, the actions of the former are planned and deliberate throughout, while the actions of the second are a dishonest reaction to a change in circumstances, and not undertaken in fulfilment of a preordained plan. There is a difference in the degree of dishonesty between the two. In my opinion the former calls for greater censure and penalty than the latter. When considering the nature and effect of a contravention, such an approach is a proper implementation of principles of parity and proportionality". 21 Taking into account all of the matters referred to in para 21 above, the Tribunal considered that a 50% penalty was appropriate. 22 Applying some of the relevant considerations in the current case as those used in Calcaro: a) the applicant and his Stepfather gave misleading instructions to his solicitor and or the bank officer to obtain the grant. b) the applicant and his Stepfather knew the home was not for the applicant and they completed the FHOG application and the applicant signed it anyway. c) the applicant always knew that Lakeside Drive was the property of his parents, and that he was merely assisting his parents with the purchase of the property, notwithstanding the solicitor who acted for both the transferees and the applicant stated – both to the Chief Commissioner and to the Legal Services Commissioner – that he was instructed that the applicant's parents were assisting him (the applicant) to buy a home. d) the applicant signed all documents and the FHOG application knowing they had legal significance and were to be used for a claim for money, without reading them. e) the applicant participated in an arrangement with his parents for the purpose of allowing his name to be used to claim the grant and the mortgage money. f) the applicant's parents had previously owned property in South Australia and would not have been eligible to claim the grant in their own right and the grant was used to discharge part of the purchase price. g) the applicant who was an adult and almost 24 years old at the time of the signing, seeks to claim that he is entitled to sign legal documents without reading them and he relied on what he was told by other persons and that shutting his eyes to the content of those documents is not a form of behaviour to be accepted and should be deterred in others seeking to use such attitudes to avoid complying with the conditions of the grant. h) on any version of the applicant's understanding of the legal documents and the application for the grant, it is clear that the property was in fact always intended to be the applicant's parents' home. Accordingly, if the solicitor is correct, the applicant and his parents gave misleading instructions. The only inference in these circumstances is that the applicant and his parents gave such instructions because they knew that they would not be entitled to the Grant if they correctly informed their solicitor that the property was in fact to be the property of the parents. i) the solicitor's version of events are produced in writing where he says his instructions were not as the applicant and the step father now say they had given. In the absence of the solicitor being produced to give evidence, the failure by the applicant to call the solicitor, that solicitor's evidence could not assist the applicant as per the evidentiary principles in Jones v. Dunkel (1958) 101 CLR 298. j) The applicant had little respect or propriety for checking documents he was signing when he knew that such documents had important legal and financial consequences, he now states that he shut his eyes and didn't read them. k) the property was eventually transferred by the applicant to his parents, where there was another attempt to seek a reduction in stamp duty, based on the Trust document signed first in time. 23 Even if the applicant is to be believed as to his instructions, which he now says he gave to his solicitor, this is still a case in which a substantial penalty is appropriate, because the applicant was never entitled to a grant as his evidence is the property was never intended to be his. If he had read his documents, as was incumbent on him before signing, he could not have failed to notice the information in them was contrary to his intention and those of his parents and the difference in fact were so obvious as to raise a question as to what instructions that he actually gave at the time. That raises the potential question that the solicitor either knew that the application was fraudulent on the Commissioner (in which case a 100% penalty is appropriate) or the solicitor incorrectly advised the applicant, or the applicant gave contrary instructions to his solicitor, a matter that the Solicitor asserts in the various correspondence produced to the Tribunal. The Tribunal takes the view that it makes little difference as to what version is to be preferred, (as the finding in this matter does not turn on it) because it does not release the applicant from his obligation to read and check what he was signing or the obligation to ensure that the information in all the legal documents was true and correct (in which case a 100% penalty is still appropriate). 24 In land tax cases, the Tribunal has made the following comments concerning incorrect advice: "When can incorrect advice warrant a remission of the interest imposed under s.21 of the TA Act. Clearly, if the Chief Commissioner gives the incorrect advice to a taxpayer, the taxpayer would be entitled to a full remission. That would be a circumstance outside the control of the taxpayer. However, where an independent adviser gives incorrect advice to a taxpayer, that would really be a matter between the taxpayer and the adviser. It will only be relevant if the advice relates to a contentious or unsettled area of the land tax law and the advice is based on all relevant authorities. In the latter situation, it could support remission of the premium rate component but not the market rate component": Moore v. Chief Commissioner of State Revenue [2002] NSW ADT 49 at para [23]. (emphasis added) 25 As stated in Moore, if it is found that the solicitor gave an incorrect advice, that is really a matter between the applicant and the solicitor. In fact, the applicant did sue the solicitor in the CTTT in relation to this transaction, and received $10,000.00 by consent of the solicitor. 26 Accordingly, on any conclusion as to the evidence and as a principle of deterring others from failing to comply with all conditions of a grant the Tribunal finds that a penalty of 100% should be confirmed as the Commissioner had no part or contribution to the actions taken by the applicant for himself or at the behest of the applicant's parents. The applicant had a responsibility to read and ensure the accuracy of the FHOG application representations were true and correct. 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.