Appeal Panel - Internal CITATION: Chief Commissioner of State Revenue v Pacific General Securities Ltd and Finmore Holdings Pty Ltd (No 2) (RD) [2005] NSWADTAP 54 This decision has been amended. Please see the end of the decision for a list of the amendments. APPELLANT PARTIES: Chief Commissioner of State Revenue RESPONDENT Pacific General Securities Ltd and Finmore Holdings Pty Ltd FILE NUMBER: 059030 HEARING DATES: 13/07/05 SUBMISSIONS CLOSED: 07/13/2005 DATE OF DECISION: 07/13/2005 Pacific General Securities Ltd & Finmore Holdings Pty Ltd v Chief Commissioner of State Revenue [2005] NSWADT 85 DECISION UNDER APPEAL: BEFORE: O'Connor K - DCJ (President); Block J - ADCJ (Judicial Member); Bennett C - Non Judicial Member CATCHWORDS: statutory interpretation MATTER FOR DECISION: Principal matter FILE NUMBER UNDER APPEAL: 046047 DATE OF DECISION UNDER APPEAL: 04/15/2005 LEGISLATION CITED : Duties Act 1997 Taxation Administration Act 1996 Pacific General Securities Ltd & Finmore Holdings Pty Ltd v Chief Commissioner of State Revenue [2005] NSWADT 85 Pacific General Securities Ltd & Finmore Holdings Pty Ltd v Chief Commissioner of State Revenue (No 2) [2004] NSWADT 74 Chief Commissioner of State Revenue v Pacific General Securities Ltd & Finmore Holdings Pty Ltd (RD) [2004] NSWADTAP 51 Old Reynella Village Pty. Ltd v Commissioner of Stamps (S.A.) (1989) 51 SASR 378; 89 ATC 4916 Stocks and Holdings (Constructors) Pty Ltd v Federal Commissioner of Taxation (1973) 129 CLR 617 Minister for Aboriginal Affairs v Peko-Wallsend Limited (1986) 162 CLR 24 Giris Pty Ltd v F.C. of T. (1968) 119 CLR 365 CASES CITED: Della-Franca & Anor v Chief Commissioner of State Revenue [2005] NSWADT 106 Federal Commissioner of Taxation v Swift (1989) 89 ATC 5101 Attorney-General v Cohen [1937] 1 KB 478 Davis v Commissioner of Stamp Duties (1995) 30 ATR 405 Lee v Chief Commissioner of State Revenue (NSW) (1998) 99 ATC 4042 Chief Commissioner of State Revenue (NSW) v Lee 2000 ATC 4600 Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577 Re Drake (No. 2) (1979) 2 ALD 634 House v The King (1936) 55 CLR 499 REPRESENTATION: I Young, barrister S Heathwood, Company Director ORDERS: 1. Appeal allowed; 2. Decision under appeal set aside; 3. Leave is granted to extend the appeal to the merits; 4. The decision under review is affirmed; 5. Order that the premium component of interest be waived as from the date of lodgement of the application for review until the date of publication of written reasons for this decision are provided REASONS FOR DECISION 1 The Appeal Panel made its orders immediately on the conclusion of the hearing of the appeal on 13 July 2005. It indicated that it would publish its reasons later. These reasons are now provided. 2 This appeal relates to the interpretation and application of the discretion conferred on the appellant (the Commissioner) by s 25(2) of the Duties Act 1997 (the Duties Act). The decision under appeal is that of the Revenue Division of the Tribunal (the Tribunal) made in Pacific General Securities Ltd & Finmore Holdings Pty Ltd v Chief Commissioner of State Revenue [2005] NSWADT 85. 3 The Commissioner appeals on a question of law, and seeks the leave of the Appeal Panel to extend the appeal to the merits: see ss 112 and 113 of the Administrative Decisions Tribunal Act 1997 (the Tribunal Act). 4 The provisions which are the focus of this Appeal are two of the several sub-sections of s 25 of the Duties Act – s 25(1) and s 25(2), in particular s 25(2): ' 25 Aggregation of dutiable transactions (1) Dutiable transactions relating to separate items of dutiable property, or separate parts of, or interests in, dutiable property are to be aggregated and treated as a single dutiable transaction if: (a) they occur within 12 months, and (b) the transferee is the same or the transferees are associated persons, and (c) the dutiable transactions together form, evidence, give effect to or arise from what is, substantially, one arrangement relating to all of the items or parts of, or interests in, the dutiable property. Note. Associated person is defined in the Dictionary. (2) Dutiable transactions are not to be aggregated under this section if the Chief Commissioner is satisfied that it would not be just and reasonable to do so in the circumstances.' 5 This is the second time that the respondents to the appeal (the taxpayers) have been successful at first instance in the Tribunal in having set aside an assessment for duty issued by the Commissioner. The first decision is reported as Pacific General Securities Ltd & Finmore Holdings Pty Ltd v Chief Commissioner of State Revenue (No 2) [2004] NSWADT 74. The Tribunal found that s 25(1) was not, having regard to its interpretation in various cases, applicable to the circumstances under notice. The Appeal Panel set aside that decision: see Chief Commissioner of State Revenue v Pacific General Securities Ltd & Finmore Holdings Pty Ltd (RD) [2004] NSWADTAP 51. The Appeal Panel held that the Tribunal had misinterpreted, and accordingly misapplied, s 25(1). 6 The matter was remitted to the Tribunal (now differently constituted as the previous Member was not available to sit) for redetermination in light of the Appeal Panel's reasons. There remained the question of whether, given that s 25(1) applied, the taxpayers should be given the benefit of the relief discretion found in s 25(2). They had made submissions to that effect. Those submissions had not been considered by the earlier Tribunal as it had not been necessary in light of its ruling. 7 The Tribunal on remitter, necessarily in light of the Appeal Panel's ruling, found s 25(1) applicable, but went on to find that the circumstances warranted the exercise of the discretion in s 25(2) with the result that the Commissioner's decision was again set aside. 8 On receipt of the appeal against this decision from the Commissioner, directions were made to the parties of the usual kind in relation to the filing of submissions. The Commissioner complied with the directions. No submissions in reply were filed by the taxpayers. This type of non-compliance is often of no great moment, as respondents to appeals will often simply rely on the reasons of the Tribunal below. 9 The taxpayers did, however, appear at hearing through a director, Mr Heathwood. He made an application for the matter to be adjourned without costs so that they could have a barrister appear on their behalf. This application was first notified to the Appeal Panel and the Commissioner on 12 July 2005, only the day before the hearing. The Appeal Panel, after referring to the limited power of the Tribunal to make costs orders (the Tribunal Act, s 88), indicated that in fairness to the Commissioner (who had counsel and a solicitor ready to proceed) such a late application for adjournment could only reasonably be allowed on the basis that the respondents met the Commissioner's costs of the day thrown away. 10 In light of that indication, the taxpayers did not further press its application for an adjournment, and the matter proceeded. Mr Heathwood indicated that the respondents relied on the reasons for decision of the Tribunal below, and the submissions relevant to this matter made at the first hearing before the Tribunal. He asked to be excused, and his request was granted. 11 Mr Young of counsel appeared for the Commissioner, and made oral submissions in supplementation of his filed written submissions. As noted at the outset, at the close of the hearing the Appeal Panel allowed the appeal with reasons to issue later, and made the orders which appear at the end of these reasons. 12 We will not in these reasons deal with every point raised by Mr Young, nor with all aspects of the reasoning of the Tribunal below. Basic Circumstances 13 The basic factual circumstances of this matter have been set out in detail in the two earlier Tribunal decisions and the earlier Appeal Panel decision. We will deal with them in summary in this decision. 14 Reduced to essentials, they are relatively simple and common circumstances. The taxpayers acquired from five neighbouring owners a row of five residential properties in Dee Why. Initially the properties had been the subject of options to purchase while a development application was being made. The development was approved, and the options were exercised. The approval permitted the taxpayers to undertake a mixed commercial and residential development on the sites. The taxpayers spent approximately $3m acquiring the properties. The individual transfers were dutiable transactions. The taxpayers paid duty at the rate applicable to the transactions assessed separately. As a result of a compliance audit, the Commissioner decided that the transactions constituted a single dutiable transaction and should be aggregated as required by s 25(1), with the result that an assessment was issued for the amount payable on an aggregated basis reduced by the amount already paid. Scope of Section 25(1) 15 There has not been any dispute that criteria (a) and (b) of s 25(1) apply. The issue in contest before the Tribunal on the first occasion was whether criterion (c) applied, i.e. whether - '(c) the dutiable transactions together form, evidence, give effect to or arise from what is, substantially, one arrangement relating to all of the items or parts of, or interests in, the dutiable property.' 16 The Tribunal found that this was not the case, and was influenced to that view by reasoning in some leading English revenue cases dealing with that country's (differently expressed) aggregation provision. In particular it considered that there had to be shown to be a 'bilateral' relationship between the vendors and the purchasers in relation to the 'arrangement' before it could be said to be 'substantially, one arrangement' for the purposes of s 25(1)(c). 17 In its previous decision the Appeal Panel agreed with the Commissioner that there had been a misunderstanding of the English revenue decisions on this point, and that the previous Tribunal had erred in distinguishing certain South Australian cases dealing with the aggregation provision in that jurisdiction's law (which though again differently expressed was quite close in its terms to the New South Wales provision). The Appeal Panel emphasised the following: + It was not normally significant that the vendors of the dutiable property had no connection with each other and had no shared involvement with the common purchaser in the use to which the purchaser intended to put the dutiable property + To similar effect, the word 'arrangement' could properly be construed as embracing an 'arrangement' which did not have a bilateral character as between the vendors and the purchaser but was unilateral, in that the common purchaser could have an objective for the dutiable property acquired by means of the separate transactions in the formulation and execution of which the vendors had played no part. + The leading case in Australia going to these issues is Old Reynella Village Pty. Ltd v Commissioner of Stamps (S.A.) (1989) 51 SASR 378; 89 ATC 4916. That case involved the interpretation of the generally similar South Australian duty provision, and involved a situation where the common purchaser had acquired 20 adjoining lots pursuant to 4 contracts and 16 options, was pursuing a development application, with the intention of integrating the land to one holding and building a shopping centre. The Appeal Panel approved the reasoning in Old Reynella, where the Court found that the transactions were subject to duty on an aggregated basis. 18 We agree with the submissions of Mr Young that there is no material distinction between the circumstances under notice here and those under notice in Old Reynella. In our view, therefore, it followed that, on remitter, it was inevitable that the Tribunal would find that s 25(1) did apply to the circumstances. It did so. 19 One of the Commissioner's criticisms is that, nonetheless, the Tribunal, in its reasoning process surrounding s 25(2), made statements which directly contradicted the Appeal Panel's interpretation of s 25(1). It in effect used the discretion found in s 25(2) to read down the scope of operation of s 25(1). It effectively limited the operation of s 25(1) to circumstances where the taxpayer had acquired a single item of property and then split it into several items, with the result that the amount of duty that would have applied to the single item is reduced to the lower combined amount payable in respect of the split items. This practice is known as 'transaction-splitting' or 'contract-splitting'. 20 There is no doubt that in the course of its consideration of s 25(2), the Tribunal did adopt the view that s 25(1) was limited to 'transaction-splitting' of this kind. This view was reached by an elaborate process of reasoning. We do not propose to deal with it at length in these reasons. The exercise was an impermissible one in light of the Appeal Panel's ruling. The Appeal Panel's ruling is abundantly clear, that the scope of s 25(1) extends to the obverse of 'transaction-splitting', i.e. the engagement at arms length in several separate transactions in circumstances where the purchaser has a common objective or purpose for engaging in those transactions but does not treat them as combined (or aggregated) when presenting the relevant instruments for assessment. 21 The starting point for the Tribunal's decision to investigate the history of s 25(1), which then led it to the conclusion that its only purpose was to tax transaction-splitting, was a statement in the Minister's Second Reading Speech on the introduction of the Duties Act in 1997 which said that the Act's aggregation duty provisions 'continued' the tax previously the subject of the Stamp Duties Act 1987 (which in turn was based on the Stamp Duties Act 1920). 22 In our view the Tribunal misunderstood the words of the Minister. All the Minister was saying was that this kind of tax 'aggregation duty' continued to be part of the new measure. The Minister was not making a statement of the exactitude attributed to it by the Tribunal. He was not saying that the new provision sought to continue exactly and in every detail the precise tax as it was previously formulated. It is true that in the past the tax had focused on transaction-splitting but the words of the new s 25 were more widely expressed than previously; and in any case the aggregation of separate dutiable transactions was a limited feature of the previous law. We will not repeat here the submissions of Mr Young which dealt at length with this point. 23 The Tribunal's reasons, consequent on its misinterpretation of the scope of s 25(1), said that the situations that were caught were those where: 'one dutiable transaction is effected by one instrument'; 'one dutiable transaction is effected by more than one instrument or by other means'; but on the other hand - If the vendors were not " collectively involved " in the one arrangement there could not have been any transaction-splitting [and therefore s 25(2) should be applied in their favour]. 24 The Tribunal expressed its ultimate conclusion at para [86] of its reasons. It then employed the premise adopted – that s 25 continued the same substantive approach to aggregation as previously existing – to support a favourable exercise of the s 25(2) discretion: '[It] would not be just and reasonable for dutiable transactions to be aggregated under Section 25(1) in circumstances where the dutiable transactions are effected by separate instruments and those dutiable transactions are not part of a transaction-splitting arrangement.' - and stated further at [87] 'Circumstances where an arrangement is effected by more than one instrument and the arrangement is not a "transaction-splitting" arrangement are circumstances where it would not be just and reasonable for aggregation under section 25(1) to apply.' 25 In the Commissioner's submission, the reasons in effect rewrote s 25(2) to read: 'The dutiable transactions together form, evidence, give effect to or arise from what is, substantially one arrangement ( in the nature of a 'transaction-splitting arrangement' to which the transferors were a party) relating to the all of the items or parts of, or interests in, the dutiable property.' 26 We agree. 27 The error is a plain one, and it affected the entirety of the reasoning. Dispensing Powers in Revenue Legislation 28 The appeal also raises the question of the proper interpretation of a dispensing power. The dispensing power found in s 25(2) is one typical of complex legislative schemes of regulation, especially in the revenue area. A relief discretion is an important adjunct to necessarily complex legislation operating in an often-changing commercial environment. See further, Stocks and Holdings (Constructors) Pty Ltd v Federal Commissioner of Taxation (1973) 129 CLR 617 at 624.4, and 625.5 – 626.1 per Stephen J with whom Barwick CJ, Menzies and Mason JJ agreed. The words used in s 25(2) are wide ones, and the discretion is unfettered. It might seem that anything is permissible. 29 The discretion belongs to a context. The discretion must be applied in a manner which does not defeat the fundamental legislative objectives of the scheme of regulation within which the dispensing power is located. It is a relief mechanism for hard cases. Where a statute is silent as to the factors to be taken into account then the discretion must be exercised by reference to factors "determined by implication from the subject-matter, scope and purpose of the Act." (See Minister for Aboriginal Affairs v Peko-Wallsend Limited (1986) 162 CLR 24 at pp 39-40 per Mason J and Giris Pty Ltd v F.C. of T. (1968) 119 CLR 365 at p 384.7 per Windeyer J.) 30 In the present instance, it is clear, in our view beyond doubt, that s 25 is attaching duty consequences to circumstances where several transactions are engaged in, but they have been undertaken with a common purpose in mind and can properly be found to involve 'substantially, one arrangement'. It will often be the case that vendors with small individual parcels of property will not have any involvement with the end objective of the common purchaser. In a development context, their only involvement may be to furnish a consent to a development application as a condition of an option to purchase. This is an everyday circumstance. 31 On its face there is nothing special about this transaction, and there would have to be some unusual or special considerations which would take the case outside the normal application of duty. To use the discretion to relieve a purchaser from duty would require special justification. A dispensing power should not lightly be applied. 32 This case involves in our view a judgment on the part of the Tribunal which goes well beyond a mere difference within the range of reasonable differences that different minds might bring to the assessment of a particular set of circumstances. 33 The President sitting at first instance in Della-Franca & Anor v Chief Commissioner of State Revenue [2005] NSWADT 106 dealt with a case involving the acquisition of two neighbouring lots from different vendors by related purchasers, with a view to development on the combined sites of a block of 18 flats. 34 The taxpayers had originally disputed an assessment as it related to aggregation duty. They sought to rely on a declaration of trust to defeat the assessment, with the result that at hearing the dispute transmuted into one disputing the further assessment that issued in respect of the declaration of trust. The President noted at para [38] of the reasons: 'Transfer duty was initially paid on the basis that two properties acquired involved separate transactions. The Commissioner's subsequent reassessment requiring payment of aggregation duty was, in the Tribunal's opinion, clearly open. This appears to be the very kind of case to which aggregation duty is directed: for a recent discussion by the Appeal Panel of the Tribunal, see Chief Commissioner of State Revenue v Pacific General Securities Ltd & Finmore Holdings Pty Ltd (RD) [2004] NSWADTAP 51.' 35 The Commissioner referred to several statements of the higher courts going to the way in which a dispensing power is to be applied. 36 In Giris the High Court dealt with a comparable discretion in the Commonwealth income tax legislation. Menzies J said at 381: 'The enactment of such a provision can only be regarded as an acknowledgment by the legislature of its inability to make laws laying down prospectively what will give rise to a particular taxation liability. It leaves, as a problem for the Commissioner to decide, retrospectively and in the light of what has happened, whether the particular provision should not apply to a particular trust estate [c.f. "substantially one arrangement"] in respect of a year that has passed.' 37 Another instance is provided by French J in Federal Commissioner of Taxation v Swift (1989) 89 ATC 5101 at 5116, a company tax case, where his Honour stated: 'Instead of endeavouring to spell out the circumstances in which burdens imposed by the legislation might be lifted, the Parliament has provided for a dispensation that is capable of exercise by reference to the widest range of factors. In this context, the scope and purpose of the Act can be seen as the collection of company tax subject to a dispensing power. The dispensing power is incidental and ancillary to the primary object of the legislation. On the spectrum of cases in which it could conceivably be exercised, there will be a threshold beyond which it would defeat the primary object of the legislation.' (Emphasis added) 38 Earlier at page 5112, he said: 'Nevertheless, the magnitude of the task involved in carrying out original decision-making and supervising and regulating the exercise of delegated authority under the taxation laws, is a powerful indicator that appropriate guidelines are essential for the avoidance of administrative chaos and for the achievement of reasonable consistency. The need to maintain the perception and reality of equal treatment is an important factor in the administration of all laws and not least in those relating to taxation.' 39 We see the purpose of the kind of discretion given by s 25(2) as to provide a measure of discretion to deal with unforeseen consequences, anomalies or unexpected outcomes (such as the unexpected application of more than one head of duty). The discretion might be open to be applied also where there is an unexpected social policy consequence of a taxation measure which should be ameliorated in the short term, ahead possibly, in some instances, of amending legislation. The Commissioner mentioned at hearing an example where a particular head of duty under his administration had been the subject of amelioration in its application to new housing, with its attendant benefits to the first home owner market. 40 Another important value that revenue law should seek to uphold is that of equitable treatment of taxpayers. It is important that a relief discretion is exercised consistently as between taxpayers in like circumstances. That does not mean of course that a Commissioner can prevent a Tribunal or Court taking a different view simply because his office has not taken the same view in the past. 41 In this instance the Commissioner says, essentially, this is a typical case, there are no special features, and the well known authority of Old Reynella should apply. The effect of the Tribunal's decision was, the Commissioner submits and we agree, to deny the authority of Old Reynella even though the Appeal Panel had expressly approved the decision. This is a 'guideline case' for the Commissioner and the affected community of taxpayers. 42 Old Reynella is materially indistinguishable from the present case. It involved the acquisition of 20 adjoining lots pursuant to 4 contracts and 16 options, a development application, and an intention to integrate the land to one holding and the erection of a shopping centre development. At page 4,919 his Honour Mohr J concluded as follows: 'it is, I think, clear that the Hall Group were engaged in the process of acquiring separate but adjoining blocks of land with the intention of integrating them in due course into one holding, and on that land entered into a contract or contracts for the erection of a shopping complex. That being so, I am of the opinion that the relationship between the transactions was in the words of Greene LJ "an integral and not a fortuitous one".' (Emphasis added) 43 As the Appeal Panel stated in its reference to the decision in Old Reynella: 'Its importance, as we have indicated, lies in its illustration of the appropriate approach to provisions such as s 25(1), especially where there is no significant involvement by the original vendors in the commercial objectives of the purchasers and their beneficiaries.' 44 Similarly, in Attorney-General v Cohen [1937] 1 KB 478, Lord Justice Greene gave the following example: 'Again, a builder developing a building estate might have under one contract an option to purchase different plots at different times, so that each option, when exercised, would create a separate contract . … [It] would at the least be a matter of doubt whether a particular … conveyance could be said to form part of a larger transaction, but there would, I think, be in each case such an integral relationship between the transactions as to constitute each indubitably part of a series of transactions.' (Emphasis added) 45 The Tribunal in its reasons attached considerable significance to the case of Davis v Commissioner of Stamp Duties (1995) 30 ATR 405 deriving from the legislative history the understanding that all the new words in s 25(1) were seeking to achieve was an overturning of the Davis case. 46 The facts in Davis are narrower than Old Reynella. In that case two agreements were entered into on the same day between the same parties. First, by a contract for sale of land (and subsequent transfer), real property was sold. Second, by deed, the vendor covenanted to assign a lease and to build in accordance with design documents, a building on the land. 47 Davis, unlike Old Reynella and Della-Franca, is not a case of different vendors of separate items of property. Section 25(1) does not just overcome Davis, as the Tribunal decision suggests, but additionally, ensures that situations materially similar to Old Reynella are aggregated. 48 We should comment on another aspect of the reasoning process in respect of the relief discretion. 49 One of the factors to which the Tribunal gave weight in deciding to apply s 25(2) was that the evidence disclosed no intention to avoid tax, or any contrivance to that end. We are inclined to the view that this consideration is an irrelevant one. 50 The collection of revenue proceeds on the basis that liability attaches to specified circumstances. It is an objective process. Taxpayers are bound to pay the tax that properly attaches to their circumstances. An intention to evade or avoid tax may count against them when a discretion comes to be exercised. This is acknowledged in the area of application of penalty tax. But an intention not to evade or avoid tax is a neutral factor, we think. It does not count in favour of the taxpayer. 51 Many taxpayers have the same intention (not to avoid tax), pay their tax promptly and in an orderly way, without fanfare, and do not expect to receive a reward for that. 52 In giving weight to the factor of the absence of an intent not to avoid tax, the Tribunal was influenced by the Court of Appeal decision in Lee v Chief Commissioner of State Revenue (NSW) (1998) 99 ATC 4042; on appeal, Chief Commissioner of State Revenue (NSW) v Lee 2000 ATC 4600. That case involved the following circumstances. 53 As at September 1988 a private company had 200,000 issued shares held equally by two brothers. Another 300,000 (or 60% of the issued capital) were issued in equal tranches to each of their father, mother and sister. Later, in September 1998 the company acquired two pieces of land and was as a consequence a land rich company. In June 1991 one of the brothers transferred 30,000 shares to his mother to avoid the thin capitalization rules, on account of that brother becoming a resident of Taiwan. Thus in June 1991 6% of the shares were transferred. However the Chief Commissioner assessed duty on the basis of aggregating the June 1991 transfer of the 6% stake with the 60% allotment of shares in 1998, a total of 66% of the issued capital. In essence, a 6% transfer of shares occasioned an assessment as if 66% of the company's land had been transferred. The issue was whether the Chief Commissioner erred in failing to exercise his discretion under s 99F(3) so that the allotment and subsequent transfer were not aggregated. 54 At first instance, Sperling J held that the land rich provisions should not be used to extract additional duty than that which was payable if the land itself was transferred. On appeal by the Commissioner, the Court of Appeal agreed. Meagher JA (with whom Clarke AJA agreed) said (at 4606): 'There is no doubt, in my opinion, that the discretion ought to be exercised in the respondent's favour. There are at least three reasons why this is so. The first is that the parties to the transaction, TML and HJL, had no intention to evade any New South Wales tax or duty; .... The second is that, if the purpose of Division 30 was to ensure that there was no evasion of the payment of ad valorem duty on land deals, that is wholly inappropriate in the present circumstances; ...The third is the anomaly of being taxed as if a transaction consisted of the sale of 66% of the company's realty whereas it was in fact only 6%.' 55 We agree with the Chief Commissioner that the facts in Lee are clearly different from those in this case. There is no anomaly here in the five transactions being viewed as substantially one arrangement. The facts here satisfy the three elements necessary for aggregation to occur. Unlike the facts in Lee, the five dutiable transactions in this case do involve the purchase and sale of real property. The duty payable on aggregation is not grossly disproportionate. There is no fiction involved and it is not wholly inappropriate to aggregate the transactions. 56 We acknowledge that Meagher JA did refer to the lack of an intention to evade tax, but that was merely one of several factors to which he referred. In our view the significant matter, the one which tilted the balance, was the disproportionate relationship between the amount of the assessment and the scale of the transaction that had triggered the assessment, realistically measured. 57 The Commissioner noted also that it is rare in duties legislation for there to be a reference as a criterion for imposing duty to the subjective intention or purpose of the parties to an arrangement. The Commissioner mentioned one exception found in s 24 of the Duties Act which refers to a "significant purpose of any party". That provision deals with a very different situation, namely, an arrangement to depress, or alternatively shift, the value of property. 58 Another aspect of the Commissioner's submissions on this point made reference to the provision in the Tribunal Act, s 64(4), allowing the Tribunal to 'have regard' to any relevant policy issued by the administrator (unless unlawful or unjust). It is obviously desirable when exercising administrative review powers to have regard to the considered policies and guidelines issued by the administrator. The administrator will, hopefully, have a more comprehensive and specialist understanding of the legislative scheme under which the administrator's office operates than can be acquired by an external review tribunal that only occasionally intersects with the various areas of administration. 59 Administrative policies also serve another important end, especially in connection with the exercise of discretion. They enable those who might be affected by a discretion to obtain some insight into how their cases might be viewed. Transparent policies on matters of regulatory discretion should assist in avoiding public suspicion over whether discretions are applied equitably and fairly, and in a manner consistent with the overall objectives of legislation. The existence of policies on matters that an external tribunal or court is called upon to address also militates against the possibility that the external forum becomes the maker or driver of policy on key matters. See further, Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577 at 591 per Bowen CJ and Deane J and Re Drake (No. 2) (1979) 2 ALD 634 at 639 per Brennan J. 60 It is clearly preferable that a review tribunal not be placed in the position of being seen to be the first framer of public guidelines going to the exercise of particular heads of discretion. Administrative adherence to policies is more likely if the policies are owned and driven through public guidelines issued by the administrator rather than having them being seen, possibly, as imposed. 61 In this case, the Commissioner has identified a published policy of his office as being relevant to the Tribunal's determination: Revenue Ruling DUT 022. At paragraph 20 – 22 under the heading "Not just and reasonable" the Commissioner refers to the discretion found in s 25(2) . In paragraph 20 the point is made that s 25(1) is wider than the predecessor provisions which were introduced to counter contract splitting. At paragraph 21 it is stated: 'As a consequence, the discretion to not aggregate will only be exercised in exceptional circumstances, and would depend on the facts of each case. The mere fact that the use of separate transactions was not for the purpose of avoiding duty is not sufficient reason to exercise the discretion. As a general rule, the situation would have to be an unintended consequence of the broad wording of the legislation.' 62 While this guideline goes part of the way to being a transparent policy, it gives no indication, for example by way of past decisions, as to what might be a situation perceived to be an 'unintended consequence'. It is of limited usefulness. As we have already indicated, however, we agree with the general point it makes, though we would perhaps use the additional words of generality found in formulations such as those of French J. Miscarriage of Discretion 63 It will be seen that we agree with the thrust and much of the detail of the Commissioner's submissions in this matter. 64 The Tribunal's approach to the application of s 25(2) misunderstands the function of a dispensing power in a legislative scheme; and involves, we consider, the kind of miscarriage of discretion that it amounts to an error of law of the kind referred to in the well known statement in House v The King (1936) 55 CLR 499 at 505-506. Leave to Extend to the Merits 65 In the interests of finalising these proceedings, and because in the Appeal Panel's view, the conclusion to be drawn is clear, the Appeal Panel gave leave for the appeal to extend to the merits. (1) Aggregation of Duty 66 For the reasons canvassed in our examination of the error of law appeal, there is in our view no reasonable basis upon which s 25(2) could be exercised to relieve the taxpayers of their primary liability. (2) Imposition of Interest 67 The one aspect of the proceedings that remains to be considered is that part of the original application for review that challenged the Commissioner's decision in relation to interest. As to this matter the Commissioner advised that the assessment had not yet been paid. 68 A tax default, for the purposes of the Taxation Administration Act 1996 (the TAA), occurs if the duty remains unpaid 3 months after the time when the liability to pay the duty arose. By s 21 of the TAA, if a tax default occurs, interest is imposed at the applicable rate and calculated from the last day for payment, on the amount of tax unpaid. 69 Pursuant to s 22 of the TAA, the interest rate has two components, namely, the market rate component and the premium component of 8%. 70 Tax (including interest) may be recovered notwithstanding that an objection or application for review is pending. 71 By s 12 of the Duties Act, a liability for duty arises when a transfer of dutiable property occurs. Where a written instrument effects that transfer, as is the case here with the contracts, the liability for duty arises when the instrument is first executed. 72 It is the taxpayers, as the transferees, who are liable to pay the duty. That was, of course, one reason why the Panel concluded that the focus may be "entirely" on the purchasers as to whether there was one arrangement. 73 By the Chief Commissioner's assessment dated 22 October 2002, the liability for duty arose upon a single dutiable transaction on 30 November 2001. The tax default, in respect of the unpaid tax of $42,470, first occurred on 28 February 2002. Interest accrued, including both market rate component and premium component, as at the date of assessment was $3,555,43. Thereafter, interest accrues daily at the combined rate of 12.84%. 74 The Chief Commissioner, and this Tribunal, if it is considered "in such circumstances … appropriate", are empowered to remit, both the market rate and the premium component, in whole or part. 75 It is clear that the taxpayers have been put to considerable efforts beyond those that they might have first anticipated in pursuing their application for review. They have been successful twice at first instance (and also in respect of an interlocutory application) but have found their success taken from them at appeal. 76 At hearing, the Commissioner indicated that the office would be prepared in the interest of bringing finality and in recognition of the unusual length of these proceedings to remit the premium component of interest for the period that the matter has been before the Tribunal i.e. as from the date of the lodgment of the application for review to the date of publication of the written reasons for decision. He did not press his submissions that no remission should be granted. 77 This is, in our view, a generous concession. It is not necessary to examine the Commissioner's submissions on the law. Orders: 1. Appeal allowed. 2. Decision under appeal set aside. 3. Leave is granted to extend the appeal to the merits. 4. The decision under review is affirmed. 5. Order that the premium component of interest be waived as from the date of lodgement of the application for review until the date of publication of written reasons for this decision are provided 09/11/2005 - To correct name of suburb from Crows Nest to Dee Why - Paragraph(s) 14 31/01/2006 - To correct Order 5 and Paragraph 76 - Paragraph(s) Order 5 and Paragraph 76 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.