CITATION: Mawad & anor v Chief Commissioner of State Revenue [2005] NSWADT 207 DIVISION: General Division APPLICANTS Edward Mawad PARTIES: Hanaa Nosir RESPONDENT Chief Commissioner of State Revenue FILE NUMBER: 053016 HEARING DATES: 13/04/05 SUBMISSIONS CLOSED: 04/29/2005 DATE OF DECISION: 09/07/2005 BEFORE: Higgins S - Judicial Member APPLICATION: First Home Owners Grant Act - first home owners grant - approval of application - 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 State Revenue Legislation Further Amendment Act 2003 DY v Chief Commissioner of State Revenue [2002] NSWADT 259 CASES CITED: Gregoriou v Chief Commissioner of State Revenue (2003) NSWADT 145 Taylor v Chief Commissioner of State Revenue [2004] NSW ADT 36 REPRESENTATION: In person B Baker, solicitor ORDERS: 1.The decision of the Commissioner to refuse the applicants' application for an extension of time within which to occupy the property as their principal place of residence is set aside; 2. In substitution thereof a decision is made to extend the period of time within which the applicants were to occupy the property as their principal place of residence to 20 February 2004. REASONS FOR DECISION Background 1 This is an application by Edward Mawad and Hanna Nosir ("the applicants") seeking review of a decision of a delegate of the Chief Commissioner of State Revenue ("the Commissioner") to: (a) refuse their application for an extension of time to occupy the property the subject of their first home owner grant ("the grant") under the First Home Owner Grant Act 2000 ("FHOG Act"); and (b) to dismiss their objection to the Commissioner's decision to request that they repay the $7,000 grant and the decision to impose a penalty of $1,400 as a result of their failure to repay the grant. 2 The grant that is the subject of this application was paid to the applicants on 17 September 2002. It related to a property the applicants had agreed to purchase in Casula ("the property"). They had applied for the grant on 22 August 2002 and in their application form they stated that they expected to occupy the property, on 18 September 2002. This was the date that the sale of the property was settled, however, for the reasons set out below, the applicants did not occupy the property as their permanent place of residence until February 2004. 3 On 1 June 2004, the Commissioner wrote to the applicants seeking confirmation that they had occupied the property as their permanent place of residence within 12 months of settlement as required under s. 12 of the FHOG Act ("the residence requirement"). The applicants replied to the Commissioner's request and advised that they had occupied the property as their principal place of residence since February 2004. They also provided a detailed explanation as to why they had not moved into the property until that date, even though they had intended to do so at the time they purchased it. They also supported their explanation with copies of references and medical reports. 4 On 29 July 2004, the Commissioner wrote to the applicants advising them that he had reversed his decision to approve the grant and requested the repayment of the grant together with a penalty of 20%. The basis of the decision was the fact that the applicants had failed to meet the residence requirement. 5 On 29 August 2004, the applicants wrote to the Commissioner following receipt of legal advice and requested an extension of time within which to meet the residence requirement. On 7 September 2004, the Commissioner wrote to the applicants advising them that he had determined to disallow their request for an extension of time on the grounds that their application had been made outside the 12 month period in which the applicants were required to occupy the property as their principal place of residence. 6 On 28 September 2004, the applicants wrote to the Commissioner lodging an objection, pursuant to s.25 of the FHOG Act, to the Commissioner's decision to refuse their application for an extension and to request repayment of the grant and the payment of a penalty. On 12 November 2004, the Commissioner wrote to the applicants advising them that he had disallowed their objection and confirmed his earlier decision. 7 The applicants did not lodge their application for review until 11 January 2005, which was outside the 60 day period provided in s. 28(4)(a) of the FHOG Act. However, on the application of the applicants and without objection from the Commissioner the Tribunal extended the period within which the applicants' application could be lodged to 11 January 2005. Issues 8 There are numerous issues in this application, which can conveniently be categorised as relating to the following matters: (a) the Commissioner's power under s. 20 of the FHOG Act to extend the period within which an applicant for a grant is to occupy the property the subject of the grant as his/her principal place of residence ("application for the extension of time to meet the residence requirement"); (b) the Commissioners power under s.23(1) of the FHOG Act to reverse his previous approval of a grant and his decision to request the repayment of the grant under s.45(1) of the Act ("reversing approval and requesting repayment"); and (c) the Commissioner's power to impose a penalty under s.45(3) of the FHOG Act ("penalty"). 9 At the hearing, the Commissioner conceded that if the Tribunal were to find in favour of the applicants in respect of their application for the extension of time, this would dispose of the review application without the need to consider the issues relating to the matters of reversing approval and requesting repayment and penalty. 10 For the reasons set out below, the Tribunal finds in favour of the applicants in respect of their application for an extension of time. Accordingly, it is unnecessary to consider the issues relating to the other two matters. 11 In respect of the applicants' application for an extension of time the relevant issues are as follows: (a) whether the Commissioner has power to consider and grant an application for an extension of time to meet the residence requirement where the extension of time is sought after the residence requirement period prescribed in s.12 of the FHOG Act has expired (i.e. more than 12 months after settlement); (b) if the answer to (a) above is in the affirmative, what factors is the Commissioner to have regard to in exercising his discretion to extend time; (c) whether, the decision of the Commissioner to refuse the applicants' application for an extension of time was the correct and preferred decision having regard to the factors referred to in (b) above and the applicants' circumstances. The Evidence 12 There is no dispute that the twelve-month period within which the applicants were to occupy the property the subject of the grant as their principal place of residence was from 19 September 2002 to 18 September 2003. Nor is it disputed that they failed to meet this requirement and that they had tenanted the property from 28 September 2002, which was 10 days after the settlement of the property. 13 Hanaa Nosir gave sworn evidence on behalf of herself and her husband as her husband felt that she was more able to explain what had happened and what their concerns were. 14 Mrs Nosir said she and her husband had signed a contract for the purchase of the property at the commencement of the final school in June 2003. At the time they were living in Liverpool with their three children. The house at Liverpool was close to the children's' school, in particular the school of her daughter who commenced her Year 12 studies in the last school term of 2002. 15 Ms Nosir explained that education was very important to them culturally and this was one of the reasons they had migrated to Australia. After they had signed the contract to purchase the property, she and her husband became unemployed. Her husband had regained employment for about two months. She also regained employment which was about an hour's drive away from the Liverpool house. 16 Ms Nosir explained that she and her husband had delayed settlement of the property a few times. However, when they lodged their application for the grant on 22 August 2002, they genuinely expected to occupy the property on 18 September 2002, which was the date on which the purchase was to settle. 17 She explained that her daughter became very anxious after they had signed the contract for the purchase of the property. The pressure on their daughter became worse when Ms Nosir started working as her daughter was required to take responsibility for looking after her two younger brothers while her parents were working. This included getting the boys ready for school in the morning and being home in the afternoon. By the time of settlement Ms Nosir's daughter became even more panicky and stressed and begged her parents not to move into the property, which was a considerable distance away from her school. 18 Because her daughter became so concerned about the move, Ms Nosir and her husband decided to rent the property for a period of six months. The property was tenanted as from 28 September 2002 and the lease produced by the real estate agent, pursuant to a summons, confirms this. Notwithstanding this agreement, it is not disputed that the same tenants remained in the property until February 2004. 19 Ms Nosir went on to explain that after she and her husband had tenanted the property, their daughter's condition deteriorated further in that she became even more stressed. At the time they did not fully understand what was wrong with her, however, on obtaining advice from their daughter's doctor and counsellors they decided that they would not move until after their daughter had finished her Year 12 exams. They were advised that she was suffering severe depression and that a move to the property during her Year 12 studies would be detrimental to her health and her schooling. 20 Ms Nosir also explained that during their daughter's final year at school she and her husband were also under a lot of stress. 21 In support of her explanation as to why she and her family had not moved to the property until February 2004, Ms Nosir relied on the letters and reports she had provided to the Commissioner. These included: - (a) a letter from her daughter's general practitioner who stated that he had seen Ms Nosir's daughter in September 2002 and that she had symptoms of stress panic attacks, insomnia and depression and that the panic attacks arose from her then fear of moving to a new house and changing her usual place of study; (b) a reference from the principal of her daughter's school, dated 16 September 2003, in which the principal said that the daughter had managed to complete her last year of school successfully notwithstanding her illness; (c) a reference from the local parish priest, dated 25 September 2003, in which the priest made reference to her daughter's illness during her last year of school. 22 The abovementioned references were not obtained specifically for the purpose of providing an explanation to the Commissioner as to why the applicants had failed to move into the property before 18 September 2003. They appear to be references written in support of Ms Nosir's daughter's achievements at school and within the community as preparation for her further education or other paths she may have chosen to take. To have made reference to her illness in these references, in my opinion, is suggests that the illness was in fact a serious one. Had it not been there would undoubtedly have been no reference to it as the daughter appears to have been very hard working and a dedicated student. 23 At the hearing Ms Nosir also tendered into evidence a letter dated, 7 March 2005, from Dr S Benjamin, a consultant psychiatrist who had assed their daughter the previous month. In that letter Dr Benjamin said that he was on the opinion that Ms Nosir's daughter "may have suffered with Adjustment Disorder with Anxiety" during her last year. 24 While her daughter had completed her exams by October 2003, Ms Nosir explained that they did not move into the property until February 2004 when the tenants vacated the property. The move was delayed because of Christmas and other festivities at that time. However, they have continued to reside in the property and intend to remain there. The Tribunal also notes from certificates provided by the applicants to the Commissioner in June 2004 that the applicants' son was hospitalised in late October 2003 as a result of an asthma attack. 25 When looked at as a whole, in my opinion the evidence demonstrates that Ms Nosir's daughter did suffer severe depression and anxiety during the latter part of 2002 and through 2003. During this time she received treatment for the illness and appears to continue to do so. 26 Ms Nosir explained that on receiving the letter from the Commissioner in June 2004, she replied by providing copies of electricity bills and other relevant information to show that they were living in the property and that it was their home. She also explained that at all times she and her husband had informed the Commissioner of the reasons why they had not occupied the property earlier. 27 I found Ms Nosir to be a truthful witness and I accept her evidence of the impact that her daughter's illness had on her and husband. That is, the illness was of sufficient severity to prevent them from moving into the property prior to February 2004. I am also satisfied that when they did move into the property they did so on the basis of the property becoming their principal place of residence and that it has remained so ever since. 28 I also accept that Ms Nosir and her husband were generally aware of the requirement to occupy the property within 12 months after settlement but they were unaware of the consequences if they failed to meet this requirement and their ability or need to seek an extension of time. In regard to the need to seek an extension of time, I note that the application completed by the applicant's made no reference to the applicants making an application for an extension of time if they failed to make the property their permanent residence within 12 months of settlement or that they would be required to repay the grant if they did not make the property their home within the 12 month period. Commissioner's power to extend the period for occupation 29 Under the FHOG Act there are five eligibility criteria that an applicant for a grant is required to meet in order to qualify for a grant: see Division 2 of Part 2 of that Act. The fifth criteria is the residence requirement and is contained in s.12(1) of the FHOG Act. That section, as it applied at the time the applicants received their grant provided, so far as is relevant, as follows: s.12(1) An applicant for a first home owner grant must occupy the home to which the application relates as the applicant's principal place of residence within twelve months after completion of the eligible transaction or a longer period approved by the Commissioner. 30 In this application, the "completion of the eligible transaction" was the applicants' purchase of the property on 18 September 2002. 31 Section 20(1)(b) of the FHOG Act (as it applied at the time the applicant's received their grant) gave the Commissioner power to approve an application for a grant "in anticipation of compliance" with the "resident requirement", if the Commissioner was satisfied that the applicant who was required to comply, but had not complied, with the residency requirement, intended to occupy the home as his/her principal place of residence within twelve months after completion of the eligible transaction. That is, under this paragraph the Commissioner was given power to issue a grant prior to an applicant occupying the property as his/her principal place of residence. The sub-section also gave the Commissioner power to extend the period within which the applicant was required to take up occupancy of the property as his/her principal place of residence. 32 Sub-section 20(3) of the FHOG Act (as it applied at the time the applicant's received their grant) provided that where a grant was paid "in anticipation of compliance" with the "resident requirement", such payment was made on condition that, if the "resident requirement" was not complied with the applicant would within fourteen days after the end of the period allowed for compliance, give written notice of that fact to the Commissioner and repay the amount of the grant. The term "resident requirement" is defined in s.3 of the FHOG Act in similar terms to that contained in s.12. A failure to comply with subsection 20(3) constitutes an offence, which is punishable by a maximum penalty of 50 penalty units. 33 The Tribunal has previously held that the Commissioner has no power to grant an extension of time to comply with the residence requirement, where the applicant is in default as set out in s.20 (3) of the FHOG Act: see Taylor v Chief Commissioner of State Revenue [2004] NSW ADT 36 at [19] and [20] and DY v Chief Commissioner of State Revenue [2002] NSWADT 259 at [18] and [19]. However, at the hearing of this application Ms Baker, who appeared for the Commissioner informed the Tribunal that the Commissioner had now formed a contrary view and conceded that ss 12 and 20 of the FHOG Act could not be construed so as to limit the Commissioner's power to grant an extension of time to applications that are made during the prescribed 12 months period from the date of settlement of the property the subject of the grant. Accordingly, there is no dispute that the Commissioner has power to consider the applicants' application for an extension of time. Factors to be taken into account when exercising discretion to extend time 34 There is also no dispute that the Commissioner's power to extend the time within which the residence requirement is to be met is a discretionary one. 35 However, the Commissioner contends that where an application is made outside the prescribed residence requirement period the Commissioner should only grant an extension of time in exceptional circumstances. Ms Baker went on to state that the extempore decision in Gregoriou v Chief Commissioner of State Revenue (2003) NSWADT 145 is an example of such exceptional circumstances. The Commissioner's earlier decision is stated to have been set aside on appeal without considering any conclusions as to the underlying decision. It is noted that the decision related to a review of the Commissioner's decision to reverse his decision to grant Mr Gregoriou a first home owner grant and to request repayment of the grant. 36 Ms Baker informed the Tribunal that the decision was set aside by consent of the parties as Mr Gregoriou had made an application for an extension of time within which to meet the residence requirement and the Commissioner had granted that extension. 37 While the Tribunal accepts the Commissioner's submissions that the circumstances in the Gregoriou application may have justified the Commissioner exercising his discretion to extend time, in my opinion, each application must be decided on its own facts having regard to the factors relevant to the exercise of the discretion. 38 As the legislation does not set out the factors that are to be taken into account in considering an application for an extension of time, the Commissioner has formulated a policy, dated 4 October 2002, which sets out the circumstances in which the discretion should be exercised to grant an extension of time: see Business Rules at 2.2.1. These circumstances are specified to be: Interstate/overseas employment; Hospitalisation; Tending to sick relatives; or Any other unforeseen circumstances which prevents occupation within 12 months. 39 The policy also provides that applications must be made before the expiration of the residence requirement period. However, as mentioned above, Ms Baker, on behalf of the Commissioner informed the Tribunal that the Commissioner had reassessed the policy in this regard and no longer applied such a limitation. 40 While each of the factors referred to in the Commissioner's policy are relevant to the question of how the Commissioner is to exercise his discretion under ss12 and 20 of the FHOG Act, in my opinion, the discretion is to be exercised primarily having regard to the overall objects and purposes of the Act. In this case, they are to be inferred from the provisions of the FHOG Act. In my opinion, that inference is readily reflected in the long title of the Act namely; "An Act to encourage and assist home ownership and to offset the effect of the Goods and Services Tax on the acquisition of a first home, by establishing a scheme for the payment of grants to first home owners, …" 41 That is, the object of the FHOG Act is to encourage and assist in the acquisition of a first home. That encouragement and assistance is not at large so as to apply to any person wishing to purchase their first residential property, it only applies to those persons who purchase their first residential property for the purpose of making this property their permanent home. That is, those persons, who have not previously acquired or held an interest in a residential property and who intend and will make the property for which a grant is sought their permanent home not long after they have purchased it and no later than 12 months after the date of purchase, unless the Commissioner allows a longer time. The legislation does not specify for how long applicants must make the property their home, but I note the amendments that were made to ss. 12 and 20 of the FHOG Act by the State Revenue Legislation Further Amendment Act 2003 (see Schedule 3 [5], [6] and [9]) contains a 6 month residence requirement. 42 In giving the Commissioner a discretion to extend compliance with the residence requirement outside the 12 months period, Parliament has recognised that the circumstances of those who obtain a grant prior to making it their home can change. In my opinion, the circumstances set out in the Commissioner's policy do not adequately set out all the factors relevant to the exercise of the discretion to extend time within which to comply with the residence requirement. Having regard to the objects and purposes of the FHOG Act these, in my opinion, are: - (a) the date on which the application for extension of time was made – in particular, whether the applicant, on realising that he/she will not satisfy the residence requirement of the grant has delayed in making the application, and where there has been a delay, whether there is a satisfactory explanation thereof; (b) date on which the applicant will or has made the property the subject of the grant his/her principal place of residence; (c) reasons why the applicant cannot or has failed to meet the s 12 residence requirement – in particular, whether those reasons were due to matters unforeseen at the time of the applicant's application for a grant and are of such a nature that they reasonably prevented the applicant from complying with the residence requirement; and (d) whether in the circumstances having regard to all the facts and the provisions of the FHOG Act the extension of time will be contrary to the objects and purposes of the Act. Commissioner's decision 43 In this application the applicants lodged their application for an extension of time almost 12 months after the prescribed 12-month period of time as set out in ss 12 and 20 of the FHOG. This was a significant delay and the application was made after the Commissioner had requested material so that he could be satisfied that they had met the prescribed residence requirement. That is, it was the Commissioner's request to ascertain their compliance with the grant that prompted the application for an extension of time. This, in my opinion, would not be sufficient to justify a granting of an extension of time as this is a significant delay and prima facie contrary to the objects and purpose of the FHOG Act. 44 However, in this application the applicants had, at the time the application was made and before receiving the Commissioner's request, made the property their home and it has continued to be their home. Furthermore, the period for which an extension is sought is 4 months and not 12 months. Again the reason for this delay of 4 months is explained. 45 Having regard to the evidence in this particular application I find the following: (a) after they had signed the contract for purchase and the application for the grant, the applicants' circumstances began to change because of their daughter's illness; (b) that the applicants' daughter's illness continued during 2003 and that the move to the property during 2003 would have been detrimental to her health and her schooling; (c) notwithstanding these changed circumstances, the applicants at all times intended to make the property their home and that of their children and the primary reason they did not move to the property until February 2004 was due to their daughter's illness. 46 In my opinion, in this application the applicants have adequately explained the reason for the delay in making the property their home and these in my opinion were unforseen and prevented them from moving. Finally, in my opinion, having regard to the abovementioned findings, in particular the fact that the applicants have now lived in the property for over a year and intend to remain there, an extension of time would not be contrary to the objects and purposes of the FHOG Act. Conclusion 47 For the reasons set out above, in my opinion the Commissioner's decision to refuse the applicants' application for an extension of time is not the correct and preferred decision. Orders 1. The decision of the Commissioner to refuse the applicants' application for an extension of time within which to occupy the property as their principal place of residence is set aside. 2. In substitution thereof, a decision is made to extend the period of time within which the applicants were to occupy the property as their principal place of residence to 20 February 2004. 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