Western City Developments Pty Ltd v Chief Commissioner of State Revenue [2008] NSWADT 293

CITATION: Western City Developments Pty Ltd v Chief Commissioner of State Revenue [2008] NSWADT 293

DIVISION: Revenue Division

APPLICANT Western City Developments Pty Ltd PARTIES: RESPONDENT Chief Commissioner of State Revenue

FILE NUMBER: 086009

HEARING DATES: 29 July 2008

SUBMISSIONS CLOSED: 29 July 2008

DATE OF DECISION: 29 October 2008

BEFORE: Hirschhorn M - Judicial Member

CATCHWORDS: Dutiable value - consideration

MATTER FOR DECISION: Principal matter

LEGISLATION CITED : Duties Act 1997 Taxation Administration Act 1996

Spencer v The Commonwealth [1907] 5 CLR 429 Chief Commissioner of State Revenue v Dick Smith Electronics Holdings Pty Ltd (2005) 221 CLR 496 CASES CITED: McTackett v Chief Commissioner of State Revenue [2003] NSWADT 154 Ambiance (Arncliffe) Pty Limited v Chief Commissioner of State Revenue [2002] NSWADT 206 B&L Linings Pty Ltd & anor v Chief Commissioner of State Revenue [2006] NSWADTAP 32 B&L Linings Pty Ltd & Anor v Chief Commissioner of State Revenue [2008] NSWCA 187)

APPLICANT In Person REPRESENTATION:

RESPONDENT P Singleton, barrister

ORDERS: The decision under review is affirmed.

REASONS FOR DECISION 1 Western City Developments Pty Ltd ("the Applicant") seeks review of a decision of the Chief Commissioner of State Revenue ("the Respondent") made on 18 December 2007 not to refund part of an amount of duty paid by the Applicant in relation to the purchase of real property at 20-26 Young Street West Gosford being: Lots A & B in Deposited Plan 361958, Lot 15 in Deposited Plan 651895 and Lot 16 in Deposited Plan 667778 ("the property"). ISSUE 2 The issue in the case concerns what the correct "dutiable value" of the property was for the purposes of section 21 of the Duties Act 1997 ("the Act") upon which duty should have been calculated. 3 The amount of duty paid by the Applicant to the Office of State Revenue was calculated on the basis that the dutiable value of the property was $3,400,000 which amount corresponded to the "price" shown on the front page of the contract of sale for the property as well as the "consideration" stated in the transfer document for the property. 4 The Applicant claims however that the dutiable value of the property was instead the amount of $2,420,000 as this was the amount of the "consideration" ultimately paid for the property at settlement. The Applicant says that a clause of the contract of sale, namely clause 53, allowed for a rebate of $800,000 off the purchase price (to be deducted from the purchase price at completion) if the Applicant settled on the completion date stated in the contract. As the Applicant settled the contract on the completion date, the Applicant claims that the consideration was reduced in accordance with clause 53 and the Applicant is therefore entitled to a refund of duty. 5 In addition, the Applicant claimed the purchase price was reduced by a further discount of $180,000 although no evidence was provided to the Tribunal about this matter (save for the settlement schedule) at the hearing. FACTS 6 Mr Comer, a director of the Applicant, gave evidence by written statement and partly orally at the hearing and was not cross-examined. He explained that on or around August 2007 he was approached by a gentleman, Mr Phillip Harris, about the prospect of purchasing the property with a development approval to build 48 apartments and 4 commercial shops. 7 Mr Comer stated that Mr Harris said "the vendors were desperate to sell the property and it had been on the market for $3,400,000 but could be obtained for $2,420,000 for a quick sale". Mr Comer said that he indicated to Mr Harris that he (Mr Comer) would not exchange contracts until finance had been approved which negated the need for the clause in the contract allowing the discounts. Mr Comer said that as the contract had already been drawn up at the time, it did not seem necessary to change the contract and the purchase price was always going to be $2,420,000. 8 Mr Comer said that the Vendor of the property was not known to Mr Comer or any of his associates prior to this particular transaction. I observed Mr Comer's demeanour when he gave some evidence at the hearing and he impressed me as being a witness of truth. 9 The Applicant entered into a contract to acquire the property on 31 August 2007 ("the Contract"). The front page of the Contract showed a price for the property of $3,400,000. The completion date was stated to be 15 October 2007. The front page of the Contract also bore the imprint of the stamp of the Office of State Revenue dated 15 October 2007 and indicated that duty was in the amount of $172,490. 10 The Contract contained the following clause on page 7: "53. The Vendor shall allow to the Purchaser on completion, if the Purchaser settles on the Completion Date as set out in this Contract, a rebate off the purchase price of $800,000.00, the same to be deducted from the purchase price at the time of settlement. (a) The Vendor shall allow to the Purchaser on completion, if the Purchaser settles on the Completion Date as set out in this Contract, a rebate off the purchase price of $800,000.00, the same to be deducted from the purchase price at the time of settlement. (b) The Vendor shall allow to the Purchaser on completion, if the Purchaser settles at the time and date and in accordance with any notice to complete issued by the vendor in accordance with this contract*, a rebate off the purchase price of $800,000, the same to be deducted from the purchase price at the time of settlement. * or any extended period for settlement agreed to by the Vendor, (Note: the aforementioned words appearing in italics were a handwritten amendment to clause 53(b) of the contract) (c) If the Purchaser does not effect settlement in accordance with clauses 53(a) or 53(b), then the Purchaser shall not be entitled to any rebate. (d) If the Vendor issues a notice to complete and the vendor is solely responsible for a delay in completion, then the purchaser will be entitled to the rebate referred to in this clause if the Purchaser effects settlement pursuant to this Contract in accordance with and by the date set out in the notice to complete, such date only extended by the period of the Vendor's delay". 11 It should be noted that the Tribunal had in evidence before it, only the front page of the contract and page 7 that contained clause 53. Neither party sought to provide the remaining pages of the contract as evidence before the Tribunal and when I questioned the parties about this matter, the Applicant said that the remainder of the contract was not relevant to the matter before the Tribunal. 12 Mr Comer stated that he rang the Office of State Revenue ('OSR") on or around 10 October 2007 because stamp duty needed to be paid on the contract. Mr Comer said that he spoke to a female officer of the OSR and gave evidence of their conversation that was consistent with the description of the same conversation contained in the objection filed for the Applicant (the terms of which are repeated in paragraph 20 below). 13 Mr Comer says that he then called his solicitor, Mr Rod Harris and passed on the information he had received from the officer of the OSR and asked him to verify that information again with the OSR. Mr Comer stated that Mr Harris did this and confirmed to Mr Comer that he would attend to the refund request immediately after settlement. Mr Harris did not give evidence at the hearing. 14 The transfer document in respect of the property that was in evidence before the Tribunal was dated 15 October 2007 and stated that: "The transferor acknowledges receipt of the consideration of $3,400,000.00 and as regards the land specified above transfers to the transferee an estate in fee simple". 15 The transfer document bore the imprint of a stamp of the Office of State revenue and showed duty in the amount of $2. The transfer document was signed for the Applicant (as transferee) by his solicitor. 16 A settlement statement, in evidence before the Tribunal was dated 23 October 2007 and thus appears to have been prepared following completion on 15 October 2007. The settlement schedule showed the following information: "Purchase Price $3,400,000.00