CITATION: Britten v Chief Commissioner of State Revenue [2008] NSWADT 38 DIVISION: Revenue Division APPLICANT Paul Britten PARTIES: RESPONDENT Chief Commissioner of State Revenue FILE NUMBER: 066119 HEARING DATES: 19 June 2007 SUBMISSIONS CLOSED: 28 June 2007 DATE OF DECISION: 1 February 2008 BEFORE: Greenwood J - Judicial Member CATCHWORDS: First Home Owners grant - reversal by administrator MATTER FOR DECISION: Principal matter LEGISLATION CITED : First Home Owners Grant Act 2000 Bramley v Chief Commissioner of State Revenue (2003) NSW ADT 135 CASES CITED: Chief Commissioner of State Revenue v Bramley (GD) (2003) NSW ADT AP 63 Maguire v Chief Commissioner of State Revenue (2001) NSW ADT 172 APPLICANT In person REPRESENTATION: RESPONDENT S Benjamin, agent ORDERS: The Chief Commissioners decision is affirmed. REASONS FOR DECISION The application and the legislative scheme 1 The applicant received a first homeowner grant of $7,000.00 under the First Home Owner Grant 2000 ("the Act") on 8 March 2004 in respect of a property at 30 Gordon Street Wyndham ("the Wyndham property"). The settlement date for the transaction was not provided, however a Transfer date is given in documents produced in evidence as 19 September 2003, and indicates the application for the grant was made after settlement and the grant was also paid after settlement. 2 The administrator of the Act and the respondent, the Chief Commissioner of State Revenue ("the Commissioner"), has now required the applicant to repay the grant of $7,000.00 plus penalty interest at the rate of 100 percent because the applicant, in the opinion of the Commissioner, has failed to satisfy the following preconditions to the grant: a) The applicant had a prior relevant interest in land prior to 1 July 2000 pursuant to section 11(1a) b) The prior property was defined as capable of being " residential property" to which the FOHG legislation exclusion conditions could apply. 3 The applicant has applied to the Tribunal for review of the Commissioner's refusal to accede to his objection to the decision. The applicant's case was that the prior property was not capable of being a residential property, sufficient to disallow his right to the grant. 4 The right to make an application for a grant is given by section 7 of the Act. The applicant must satisfy the eligibility criteria. Section 45 gives the Commissioner the power to request the repayment of a grant and to impose a penalty for non-compliance with such a request, or with the conditions of a grant. See also subsection 23 and 24 of the Act. 5 The grant is commonly made in advance of the applicant moving into occupation, however in this case the grant was paid on 8th March 2004 after settlement. As a result of an audit and a letter of enquiry sent to the applicant, the Commissioner concluded that the criterion and the conditions to the grant had not been satisfied. The Legislation 6 Section 11 Criterion 4 (1)(a) provides: "(1) An applicant for a first home owner grant is ineligible for the grant if the applicant or the applicant's spouse has before 1 July 2000, held: (a) a relevant interest in residential property in New South Wales (b) an interest in residential property in another state or a territory that is a relevant interest under the corresponding law of that State or territory (2) In working out for the purposes of subsection (1) whether an applicant held a relevant interest (within the meaning of this Act or a corresponding law) in a residential property at a particular time, any deferment of the applicants right to occupation (because the property was subject to a lease) is to be disregarded. 7 Section 3 of the Act defines residential property as: residential property – land in Australia is residential property at a particular time if there is, at that time, a building on the land lawfully occupied as a place of residence or suitable for occupation as a place of residence. 8 Section 45(2) of the Act on Penalty states: 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 notice in which repayment is required or as a separate notice impose a penalty not exceeding the amount the applicant is required to pay. The Facts 9 In this case Applicant in two of his letter dated March 2004 in answer to questions raised by the respondent makes comment as to his personal circumstances where he describes himself as " not long out of hospital", " on unemployment benefits", and then latter "as an honest hardworking man, a member of the working class poor". The facts in this case are unusual as is the applicant's history of property transactions. The Respondent's office carried out significant investigation of the applicant's property owning history, which is set out chronologically in detail as follows: A) September and October 1986 - By Transfer, the applicant and Kathryn Workman purchase Lot 13 in DP 621764 for $25,000.00. This property is a rural property referred to alternately as 119 Harris Road Brogo and Warrigal Range Road Brogo, hereinafter referred to as "the Brogo property"). At the time of the purchase the applicant's address shown on the Transfer was 104 Westgarth St Fitzroy. The property was a vacant rural property, capable of providing a right to build a residence, subject to the usual council approvals of the time. B) In 1986 and 1987 - The applicant submits plans to Council to build a two storey home, however the approval lapses. C) 31 January 1990 - By Transfer, The applicant purchases Ms Workman's interest for $10,000.00, and becomes the sole owner of the Brogo property. At the time of the transaction the applicant's address shown on the Transfer was Warrigal Ranges Road Brogo. D) In 1992 - The applicant constructs a shed on the property and at some time between 1987 and 1990 the applicant moves a 13 foot caravan onto the property and states that he lived in it on the property from time to time. E) Between 1985 and 1999 - by reference to aerial photographs produced by the Respondent taken by the Department of Lands show a series of improvements, including a second storey added onto the shed or garage building (the main building), the alignment of the caravan to the main building. Further photographs were produced from the Bega Valley Council's file which showed that in 1997 a second storey timber construction was built onto the shed, with a hot water service unit and plumbing pipes installed to the wall, a large round rainwater tank with plumbing to the roof appeared to be set up to collected rain. A further photograph of the applicant is produced standing in front of the open main building which contained personal items and what appeared to be a generator and building materials .In addition the applicant had written to the Council in 1997 seeking information from the Council as to the method by which he might legalise his building work to obtain Council approval. Significantly, the Council produced copies of its correspondence to the applicant seeking plans, onsite sewerage details, pest certificate and a certificate from a structural engineer, however the material was not provided by the applicant. This evidence and evidence given by the applicant at the hearing indicated that the unauthorised improvements, whilst illegal as far as the Council was concerned and the rustic design of the main building, were used by the applicant in his residential occupation of the Brogo property. Significantly, the applicant gave evidence that he installed taps and plumbing, he described the walls of the main building, which he called a "studio" was made of mud brick, a concrete slab floor and wooden beams. F) In November 1999 - the applicant sold the Brogo property to his brother for $72,000.00. G) In December 1999 - the applicant purchased vacant land zoned residential 2a) Lot 22 DP 243817 and known as 23 Bellbird Crescent Merimbula for $27,000.00. On the contract of purchase he showed his address as the Brogo property. H) In September 2003, 23 Bellbird Crescent was sold by the applicant for $140,000.00. On the sale contract he showed his address as the Brogo property. I) In November or December 2003 - the applicant purchased a 2/7 share as a tenant in common with two other persons, of a property (referred to by the applicant as "Verona") identified in a Transfer as lot 7 in DP 709641 for $90,000.00. Significantly the signature on that transfer matched other transfers signed by the applicant as vendor. J) In September 2003 the applicant purchases a former land grant identified as Lot 16/30/759125 for $70,000.00, being the Wyndam property, the subject of the grant. The applicant's purchase and sale history indicates he is person with some entrepreneurial knowledge in the purchase and sale of property. 10 The Respondent based its decision to decline the application for a grant based on its consideration of the matter pursuant to section 11(1)(a) that the applicant had a relevant interest in land which he had purchased prior to 1 July 2000, which had a building on the land that is suitable for occupation as a place of residence, namely the Brogo property. The Applicant submitted that the main building was a shed and it was an illegal structure as far as the Council was concerned and that he in fact moved around to suit his employment and lived at various locations during the time he owned the Brogo property. 11 The question in this case is twofold: a) Whether the applicant had a "relevant interest" in the Brogo land? b) Whether the main building, which was an illegal structure "is suitable for occupation as a place of residence", within the meaning of the Act? 12 The Respondent cited two cases upon which it relied, namely Bramley v Chief Commissioner of State Revenue [2003] NSW ADT 135 (Bramleys case) and Maguire v Commissioner, Office of State Revenue [2001] NSW ADT 172 (Maguire's case). In both of those cases the residential dwellings were conforming dwelling houses and there was no issue about the legality of the structure. 13 In Maguire's case the Tribunal found that the applicant had to have a fee simple interest in the land and he had to be an "owner" without any other limitations and that case dealt with the investigation of potential trusts as a limitation to a legal interest and true access to use the property. 14 Bramleys case was a situation where a co-owner was excluded from occupation by virtue of an agreement to allow one of the co- owners with the greater interest to occupy and pay all outgoings to the mutual exclusion of the other co-owners (one of which was the applicant) with the lesser proportional legal interest in the property. Bramleys case looked at the legislation as it appeared at the time: (8) A first home owner grant is payable under the First Home Owner Grant Act 2000 ('the Act') if a person complies with the eligibility criteria and the purchase of the home is an 'eligible transaction' (section 7) The transaction appears to be an eligible one, and Ms Bramley appears to fulfill the eligibility criteria save, it is alleged by the respondent, for Criterion No 4 which appears in section 11 of the Act. That section provides, relevantly: " 11. Criterion 4 – Applicant (or applicant's spouse) must not have had relevant interest in residential property . An applicant for a first homeowner grant is ineligible for the grant if the applicant or the applicant's spouse has, before 1 July 2000, held: (a) a relevant interest in residential property in New South Wales …" (9) Section 5 of the Act deals with the definition of "relevant interest" and provides, relevantly: " 5 Ownership of land and homes (1) A person is an "owner" of a home or a "home owner" if the person has a relevant interest in land on which 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 ... (b) … (c) a perpetual lease of the land granted by the Commonwealth or the State (d) … (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 …" 15 In the current case, the applicant had a legal fee simple interest in the prior Brogo property without limitations, which he had owned since purchase in 1986. The Brogo property was capable of immediate occupation by the applicant in that he was entitled to make the necessary applications to building a complying building. The applicant had lodged building plans with the Council, which he subsequently allowed to lapse. The Applicant then built an illegal structure, namely a main building which was fitted out with plumbing, a second storey, a hot water heater, water tank and generator. There is no issue that the main building and the facilities were "rustic" in character and were intended to be and were in fact used by the applicant as a residential building. The main building was then augmented as a living quarters by the addition of a caravan. The Applicant gave evidence that he lived at the Brogo property on and off over that time and on his driving licence and on legal documents he referred to the Brogo property as his address. Firstly, the applicant sought to legitimise his structure with the Council, he failed to take the necessary steps to do so and he should not now rely on his own wrongful actions in failing to properly construct a Council complying dwelling to ground his application for a first home grant for a new standard residential property. Secondly, the applicant spent a lot of time, effort and some money in carrying out his improvements and building work to the main structure of the Brogo property. The Tribunal takes judicial notice of the fact that the applicant would not have carried out such improvement works, notwithstanding they were illegal building works, but for the fact that the Brogo property was being used as his residence to make it habitable. Thirdly, he was in immediate occupation of the works and the Brogo property at all relevant time periods prior to 1 July 2000. In this case the applicant embarked on a course of illegal conduct in his building aspirations and used the Brogo property and its improvements (such as they were) for occupation as a residence over a long period of time from about 1986 to 1999 and the electoral roll search indicated the period as 1986 to 2000. Conclusion 16 This Tribunal takes note of parliament's intention in providing the First Home Grant Scheme, which is primarily to assist persons to obtain their first home, which they may not otherwise achieve without assistance. It is not a scheme, which is intended to assist serial property speculators or property entrepreneurs. As a matter of fairness it is not a scheme, which applicants could seek to utilize due to their own prior illegal building acts, in failing to comply with Council building regulations. The Tribunal finds that the word "suitable for occupation as a place of residence" should be given the wider meaning when viewed against the actions the applicant takes in making the property his home and his form of occupation. Such actions also give an insight as to the applicant's intention to make the property his home in the usual sense of making habitable improvements. The Tribunal finds the Brogo property was suitable for occupation, by virtue of the fact that the applicant occupied it as his residence and actively carried out work on the property to make it habitable for the applicant's purposes. The Chief Commissioner's decision to decline the application for a grant on review and after investigation is upheld. 17 Turning to the issue of Penalty, the Tribunal is in agreement with the Chief Commissioner's decision to remit the 100 percent penalty claimed by the Respondent, due to the circumstances of the matter and the Tribunal does not therefore need to deal with this aspect further. Order The decision of the Chief Commissioner of State Revenue to request repayment of the First Home Owner Grant in the sum of $7,000.00 together with interest is affirmed. 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.