Hafza v Chief Commissioner of State Revenue [2006] NSWADT 116

CITATION: Hafza v Chief Commissioner of State Revenue [2006] NSWADT 116

DIVISION: General Division

APPLICANT PARTIES: Belal Hafza RESPONDENT Chief Commissioner of State Revenue

FILE NUMBER: 053229

HEARING DATES: 8/03/2006

SUBMISSIONS CLOSED: 03/22/2006

DATE OF DECISION: 04/20/2006

BEFORE: Hole M - 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

Duties Act 1997 LEGISLATION CITED : First Home Owners Grant Act 2000 State Revenue Legislation Further Amendment Act 2005

CASES CITED: Calcaro v Chief Commissioner of State Revenue [2004] NSW ADT 158 Chief Commissioner of State Revenue v Ferrington [2004] NSW ADTAP 41

APPLICANT In person REPRESENTATION: RESPONDENT S Free, solicitor

ORDERS: 1. The decision of the Commissioner of State Revenue is affirmed

REASONS FOR DECISION 1 This is an application by Mr Belal Hafza to review the decisions of the Chief Commissioner of State Revenue to recall the First Home Owner Grant ("the Grant") matter number 053229 together with a penalty thereon and to revoke the stamp duty concession under the First Home Plus Scheme ("the Concession") matter number 056071 together with interest thereon. 2 The facts are identical in respect of the circumstances of the Grant and the Concession. Circumstances 3 The applicant agreed to purchase a home unit at Bankstown ("the property") by way of Contract for Sale of Land which was exchanged on 23 July 2002. The Contract provided for settlement to occur within 6 weeks, and the applicant was to obtain vacant possession on settlement. 4 When the applicant received mortgage papers to sign the address of the property was shown as being at 'Yagoona' rather than 'Bankstown'. The applicant was concerned about this as he wished to purchase a property in Bankstown. The agent who introduced the applicant to the property was a friend and they had known each other since childhood. The applicant had been advised by a solicitor. When the applicant found that the address was Yagoona he sought the advice of the solicitor as to how he could get out of the Contract. According to the applicant the real estate agent and his solicitor did not accept any blame for the different address of the property. Ultimately a deed was entered into between the applicant, the agent and the solicitor whereby a sum of money by way of liquidated damages was paid to the applicant in relation to various disputes in respect of the address of the property. This deed is dated 19 September 2002. 5 Prior to the exchange of contracts, the applicant had inspected the property which at that time he believed was in Bankstown. He had placed a "holding" deposit of $500.00 with the agent. The UBD Street Directory Edit 40 discloses that the property is located on a street which is the dividing line, for part of its length, of the post code for Yagoona and Bankstown. One side of the street has Yagoona postcode and the other side has Bankstown postcode. 6 The applicant's wife came to Australia on approximately 9 or 10 July 2002. She lived with the applicant at the applicant's mother's home near the property. The applicant's wife did not speak any English at that time and she did not give any evidence to the Tribunal. The applicant stated that his wife did not see the property prior to exchange of contracts on 23 July 2002. 7 The applicant's wife was too scared to live in the property as it was a ground floor unit, she was pregnant, she did not speak English and she would be there alone for long periods when the applicant was at work. The applicant's wife made it clear to him that she would not move into the property and that she wished to stay at the applicant's mother's home for security and safety. The applicant is Australian born and is bilingual. 8 The applicant made an application for the Grant which was signed on 1 August 2002. The date that was shown as to when he expected to occupy the property was 3 September 2002, the expected date of completion. The applicant stated that the real estate agent had filled out the form of application and then the applicant had signed it. 9 The applicant stated that he was concerned about any time limit required for his occupation of the property and that when he enquired of the solicitor he was told that "there's nothing that states that you've got to be there for a period of time" and that "… it could be for a couple of weeks". This enquiry by the applicant of the solicitor was apparently about the time that the application was filled out. 10 The application for the Concession was made on or about 14 August 2002. The applicant did not have any knowledge about that application. It is possible that this application was made either by the mortgagee or by the solicitor acting for the applicant. The Concession was granted on 14 August 2002. 11 Following receipt of mortgage documents from the proposed mortgagee, the applicant discovered that the address of the property was in Yagoona not Bankstown. He immediately sought ways to get out of the contract for sale as he wanted to purchase in Bankstown not Yagoona. 12 The applicant sought to get out of the contract in view of the address, he was advised that he would lose his 10% deposit if he did. He was worried about the mortgage repayments. Ultimately $10,000.00 was withheld at settlement in relation to the various issues and who was responsible therefor. The applicant thought that he was being misrepresented by his solicitor and did not know who to trust. The agent advised him to go ahead and that he could rent it out which would assist his mortgage repayments. 13 An undated deed was entered into between the applicant and the vendor to him relating to the reduction of the purchase price in settlement of any claim in relation to the address of the property. A deed dated 19 September 2002 was entered into by the applicant with the agent and the applicant's solicitors whereby the applicant was paid a sum in respect of the address being Yagoona rather than Bankstown. 14 Immediately following settlement on 10 September 2002 the applicant stayed in the property for 3 weekends and the week days thereafter being approximately 16 days. The electricity and gas had remained connected after settlement. The applicant was able to move a mattress, TV and lounge into the property using his work truck; he also had some cleaning products there. The applicant returned to his wife at his mother's home (which is nearby in Bankstown – approximately three (3) minutes by car, as disclosed by Whereis search directions) each morning for breakfast and to collect his lunch; he returned to the property at night. 15 A Management Agency Agreement was entered into on 12 September 2002 by the applicant for leasing the property for 26 weeks. The applicant stated that the agent agreed with him that the property was not to be let out until he (the applicant) was ready. Ultimately the property was let on 23 October 2002 for a period of 12 months to a tenant that the applicant found. The lease was for 12 months notwithstanding the Agency Agreement and the applicant indicated that he had not seen the lease until after it was signed by the agent on his behalf. 16 The applicant did not supply any evidence other than his statement given in response to the Office of State Revenue's compliance check letter and his evidence under oath at the hearing. 17 The applicant was randomly selected for investigation pursuant to the First Home Owners Grant Scheme Residency Project of the Office of State Revenue and a letter was forwarded to him requiring "Confirmation of Residency" prior to 16 June 2004. The applicant returned the Statutory Declaration and made the voluntary disclosure on 16 June 2004 that he lived in the property for a two week period. That he was unable to state that the property was his principal place of residence as his wife refused to stay there as she was afraid of the area and surroundings. He offered to pay back the Grant by instalments and expressed concern that he may not be able to obtain the Grant in the future due to his not having fully understood the conditions surrounding the Grant. 18 The First Home Owner Grant application form, signed by the applicant on 1 August 2003, discloses that he is single. The applicant stated that his wife came to Australia on approximately 9 or 10 July 2002 and that she lived with him as his wife at his mother's home from then. Applicable Legislation The Grant 19 Section 12 of the First Home Owner Grant Act 2000 ("the Act") Criteria 5 (Relevant provisions as at 10 September 2002) "(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 12 months after completion of the eligible transaction or a longer period approved by the Chief Commissioner. (2) If an application is made by joint applicants and at least one (but not all) of the applicants complies with the residence requirement, the non-complying applicant or applicants are exempted from compliance with the residence requirement." 20 This criteria, as it was at the relevant time, required the applicant to occupy the property within 12 months of completion of the purchase as the applicant's principal place of residence. Section 28(3) "28 Reviews by Administrative Decisions Tribunal (3) The applicant has the onus of proving the applicant's case in an application for review." The Concession 21 Section 76(1) Duties Act 1997 "76 Residence requirement (1) The home must be occupied or intended to be occupied by the person or persons who are acquiring it on or before settlement, or within 12 months after settlement, as the principal place of residence." 22 This required the applicant to occupy or intend to occupy the property within 12 months after settlement as the applicant's principal place of residence. Applicant's submissions 23 The applicant submitted that when he exchanged the contract to purchase the property he intended to occupy it, with his wife, as his principal place of residence. That when he discovered that the property was in Yagoona rather than Bankstown, that he did not wish to proceed with the purchase. That he did not know who to trust in respect of his attempts to resolve the issue. He further submitted that when he raised the issue of living in the property and the requirement for the Grant (in particular) that he had relied heavily on the advice of his solicitor that "there is nothing that states that you've got to be there for a period of time." 24 The applicant submitted that when his wife had become aware that the property was on the ground floor then she expressed concern that she would feel unsafe and that she did not want to move in, likewise he had no intention to live separately from his wife. He decided that, relying on the advice of his solicitor, he would move into the property, move minimal furniture to the property, continue to pick up his lunch, clothes and breakfast at his mother's where his wife was living until such time as he thought he was "eligible". 25 The applicant submitted that he had relied on his solicitor's advice and that he had tried to reside at the property even though he had not taken any steps to change his address to the property as his principal place of residence. His principal oral submissions were to the effect that:- he wanted the property to be in Bankstown not Yagoona and he tried to get out of the contract for sale but could not without losing 10%; his wife was new to the country and was too scared to live in the ground floor unit; that he did not realise the full requirements as a third party had filled out the application and he had just signed it; and he relied on the solicitor's advice. 26 The applicant expressed concern that if the Grant was correctly recalled that he would not be able to apply again. 27 The applicant advised the Tribunal that he had since sold the property and that it had not been his intention to mislead. Respondent's submissions 28 The respondent's representative provided extensive written submissions to the Tribunal in relation to both the Grant and the Concession. The respondent's representative submitted that in respect of the Grant the applicant had not complied with the Residence requirement of Criteria 5 Section 12. That the relevant principles for determining eligibility are as set out in the Appeal Panel's decision in Chief Commissioner of State Revenue v Ferrington [2004] NSW ADTAP 41 particularly at paragraphs 41 and 42. That any occupation of the property by the applicant lacked the essential element of permanence as referred to in Ferrington. Following the oral evidence given by the applicant at the hearing, there being no other evidence provided, that the applicant's taking of some belongings to the property and continuing to eat at home was merely transient and temporary occupation. 29 That once the applicant was satisfied that he had satisfied the requirements of the Grant then he was going to move out, rent the property out and move back home. A rental agreement having been entered into with a renting agent on 12 September 2002, two days after settlement. 30 That the applicant had truthfully signed the Statutory Declaration that the home was not occupied within 12 months of settlement when he returned the form on 16 June 2004 albeit his reason given was that his wife refused to stay there for particular reasons. 31 The respondent's representative submitted that when the Grant was made following the application dated 1 August 2002, a requirement thereof was that if the applicant was not going to be able to comply with a condition (in this case the residence requirement) then he had an obligation to advise the Chief Commissioner and repay the Grant. 32 That as the applicant had not advised the Chief Commissioner that he could not comply until he received the compliance check letter, then the question of penalty arises. Taking into account the Tribunal's decision by P Molony, JM in Calcaro v Chief Commissioner of State Revenue [2004] NSW ADT 158 and the factors set out at paragraph 51 as they relate to this matter that: the applicant intended to move in within 12 months (at the time that he applied for the Grant); he was unable to because of circumstances outside his control (be it because of the address or his wife's concerns); he has been co-operative and frank with the Chief Commissioner and the Tribunal; and he held the Grant for over 3 years then the appropriate penalty is 20%. 33 The respondent's representative submitted that in respect of the Concession, an applicant, to be eligible must at the time of settlement of the purchase (or within the twelve months following settlement) occupy the property as a principal place of residence or intend to occupy the property as a principal place of residence (being the alternative limits of Section 76 as it applied at the relevant time herein). 34 That the applicant, when he exchanged the contract for sale to purchase, did intend to occupy the property as his principal place of residence. That the applicant did not have this intention at the time of settlement and had not provided sufficient evidence to allow the Tribunal to be satisfied that he intended as at the date of settlement to occupy the property as his principal place of residence. This being particularly so as the applicant had not demonstrated his genuine intention to move into the property within the 12 month period. Amending Legislation 35 In response to the request to do so the respondent's representative made supplementary submissions clarifying the status of the amendments to the Act regarding the eligibility of applicants who have previously received the Grant who have later been required to repay the Grant. The submissions made are: "2 Section 10 of the FHOG Act contains the relevant eligibility criterion relating to receipt of an earlier Grant. Section 10 was amended by the State Revenue Legislation Further Amendment Act 2005 which was assented to on 7 December 2005 and commenced on the same day. Following that amendment, s. 10 of the FHOG Act now provides: "10 Criterion 3 – Applicant (or applicant's spouse) must not have received an earlier grant (1) Subject to subsection (2), an applicant for a first home owner grant is ineligible for the grant if: (a) the applicant or the applicant's spouse has been a party to an earlier application under this Act or a corresponding law, and (b) a grant was paid on the application. (2) An applicant is not ineligible if the grant was paid but later paid back together with any penalty payable under section 45." 3. The amended version of s. 10 of the FHOG Act applies to applications for a Grant made on or after 7 December 2005 (cl. 9 of Sch1 of the FHOG Act). 4. The effect of s. 10(2), as amended, is that an applicant for a Grant is no longer considered to be ineligible for the Grant despite having received an earlier Grant, where that earlier Grant has been repaid (together with any penalty). 5. Accordingly, if Mr Hafza makes an application for a fresh Grant in the future, he will not be deemed ineligible by reason of the fact that he previously received the Grant in respect of the purchase of the property, if the result of the present proceedings is that the applicant has to repay the Grant (together with any penalty)." Reasons for decision 36 At the time that the applicant contracted on 23 July 2002 to purchase the property he believed the address was at Bankstown rather than Yagoona. He applied for the Grant on 1 August 2002 disclosing the address as Yagoona, the form having been filled out by another person. This declaration refers to his expectation to occupy the property on 3 September 2002. 37 The applicant has signed several statutory declarations which include his reasons for not taking up residence following the settlement. On 16 April 2004 he stated in his response to the compliance check that: "… It was my intention to reside in the property but had to make other arrangements. … Had I fully understood the conditions surrounding the Grant I would have taken steps to advise you of the situation earlier." 38 On 20 October 2004 he stated in his objection to the Chief Commissioner's decisions that:- "I tried to reside at the address and I did reside their for three (3) weeks, at the time my wife was new to the country and did'nt feel safe there as it was a ground floor unit. There was no mention made to me by my solicitor as to how long I had to reside there so I decided to move out and rent elsewhere. Had I known that I had to tell the Office of State Revenue that I was nt living there anymore I would of but because my solicitor and I were having problems with each other there was a breakdown of communication from his part and he did'nt tell me anything about the grant – only that I was eligible for it if I was going to move in within the next twelve (12) months in which I did. Legaly to my knowledge there is no law that states how long I must live there for, therefore I was under the impression that I had satisfied the criteria of the grant. I am claiming that I was misrepresented by my solicitor. There was so much drama happening at the time that I was unable to stay on top of everything. I did not know the law and relied on my solicitor to take care of things which he did'nt. It was never my intention to misuse the grant." 39 The applicant gave oral evidence which was, in my opinion, truthful. He declared that he wanted to buy a unit he could live in but would also be a good investment. He was most concerned when he discovered that the address was Yagoona and not Bankstown, whereupon he immediately attempted to get out of the contract. This is borne out by the subsequent deeds which disclose his concern. In his opinion he was required to complete the contract and accepting the advice of his solicitor "he tried" to reside at the property for a short period even though he was then separate from his wife who stayed at his mother's. He expressed lack of knowledge of the requirements of the Grant or Concession as other person's had attended to the applications therefore. 40 The concern of the applicant, that he may not be eligible in the future has resulted in the respondent's representative providing submissions in respect of the amending legislation. Those submissions are set out above. 41 The applicant's intention to reside in the property as his principal place of residence changed once he became aware of the different address of the property. The applicant's wife's attitude to living in a ground floor unit could have been ascertained prior to exchange of contracts for sale and accordingly this was not outside the control of the applicant, this is so even though she had only been in Australia for a period of some 2 weeks. 42 The applicant's occupation of the property was at best a temporary moving in of a small amount of furniture, his attendance at the property for selected periods of the 16 days, his continuation of his mother's address as his principal place of residence and was to be limited to a time that he specified until a tenant was found (who was one that he found rather than the agent). Thus in the terminology of the Appeal Panel in Ferrington at paragraph 42:- "… This is so since a recipient's occupation of a home, while short, may have the requisite degree of permanence to it. But that will not happen if, when considered objectively, the occupation was transient, temporary, contingent or of a passing nature, or for some other purpose. One may occupy premises for a short time on a transient, temporary, or contingent basis, but one can also occupy for a short time as one's principal place of residence. It is the nature of that occupation which provides the element of permanence. The fact that a period of actual occupation is short, as in the present case, will in practice make it harder for a recipient to show that the occupation was as his or her principal place of residence, but it will not make it impossible, as Gaines demonstrates. Sixthly, the reasons for a persons' departure from the home must be both reasonable and adequately explained when considered objectively in the light of their personal circumstances: Re Alison Lesley Gaines and Secretary Department of Health, Housing and Community Services . In Bates the Tribunal said that "whether the reasons for not residing at the property were as a result of matters entirely out of the control of the applicant" was a factor to be considered. While that is undoubtedly correct, it should not be read as stipulating a requirement that the reasons for departure must be entirely out of that person's control. The facts in Gaines illustrate that there are circumstances, peculiar to the individual concerned, which may, objectively viewed, adequately and reasonably explain a person's decision to move out of a property, but which are not entirely out of the person's control." 43 Pursuant to Section 28(3) of the Act the applicant bears the onus of proving that he had satisfied the criteria. He has not proven that the property became his principal place of residence. This temporary occupation was transient and solely in an attempt to ensure his eligibility for the Grant and concession as he understood it, it was not to make the property his principal place of residence. 44 The applicant had signed a declaration that if one of the essential requirements, i.e. the residence requirement, changed then he must notify the Chief Commissioner. He indicated that he was not aware that he should have done this, however, he truthfully responded to the Chief Commissioner's compliance enquiry. 45 The applicant did not intend as at the date of completion to reside in the property as his principal place of residence. His intention at that time was to remain at his mother's and to satisfy the requirements of the Grant (as opposed to the Concession) as he understood those requirements to be. 46 The amendment to the Act by State Revenue Legislation Further Amendment Act 2005 will be applicable to an application by the applicant in the future and the provision of Section 10(2) will apply if the Grant together with any penalty is repaid. ORDER 1. The decision of the Chief Commissioner of State Revenue is affirmed.