CITATION: Lotten Pty Limited and ors v Chief Commissioner of State Revenue [2007] NSWADT 212 DIVISION: Revenue Division APPLICANTS PARTIES: Lotten Pty Limited, J K Harrison Pty Limited, Annangrove Holdings Pty Limited, Lot Twelve Pty Limited and Box Hill Holdings Pty Limited RESPONDENT Chief Commissioner of State Revenue FILE NUMBER: 076024 HEARING DATES: 10 September 2007 SUBMISSIONS CLOSED: 10 September 2007 DATE OF DECISION: 14 September 2007 BEFORE: Block J - ADCJ (Judicial Member) CATCHWORDS: Duties Act - refinancing of loans - concession MATTER FOR DECISION: Principal matter Administrative Decisions Tribunal Act 1997 LEGISLATION CITED : Corporations Act 2001 (Cth) Duties Act 1997 Interpretation Act 1987 Bluebird Investments Pty Ltd v Graf (1994) 13 ACSR 271 Chief Commissioner of State Revenue v Group and General Finance Pty Limited (RD) [2004] NSWADTAP 14 CASES CITED: Commissioner of State Revenue v Hayes [2004] VSC 504 Lygon Nominees P/L v Commissioner of State Revenue [2007] VSCA 140, at para. [48] Mount Edon Gold Mines (Aust) Ltd v Burmine Ltd (1994) 12 ACSR 727 Samic Ltd v Metals Exploration (1993) 10 ACSR 652 APPLICANTS L McBride, barrister REPRESENTATION: RESPONDENT H El Hage, solicitor ORDERS: The application by the Applicants for duty relief under section 220 of the Duties Act was correctly refused and the decision by the Respondent is affirmed. REASONS FOR DECISION Part A Preliminary and Introductory. 1 The issue to be decided by the Tribunal turns on the question of whether mortgages made on 24 March 2006 (referred to in this decision as "the refinancing mortgages" or as "the Subsequent Mortgages") are entitled to duty relief pursuant to section 220 (3) of the Duties Act 1997 ("the Act"). 2 The Tribunal had before it the documents lodged pursuant to section 58 of the Administrative Decisions Tribunal Act 1997. It was furnished in addition with affidavits by Adrian Philip Holmes, solicitor, dated 17 August 2007, Paul Michael Conlon dated 30 August 2007 and Frank Sanzari dated 30 August 2007, and which were admitted as Exhibits A1 A2 and A3. Paul Michael Conlon is referred to in these reasons as 'Mr. Conlon' and Adrian Philip Holmes is referred to as 'Mr Holmes'. Furthermore, the Tribunal received detailed written submissions by the parties, and, as will be noted the Tribunal has drawn on those submissions, to a considerable extent, for the purpose of these reasons. 3 Although the application for review was lodged by Lotten Pty Limited, J.K.Harrison Pty Limited, Annangrove Holdings Pty Limited, Lot Twelve Pty Limited and Box Hill Holdings Pty Limited were subsequently, and by consent, joined as Applicants. 4 The volume of the documentation before the Tribunal might suggest that there are a number of complex issues of fact or of law before the Tribunal; in fact the issue to be resolved by the Tribunal falls within a narrow compass. It may be noted that the Tribunal was asked to furnish a written decision and in detail as a matter of future guidance and for this purpose has drawn on the written submissions furnished to it to a greater extent than it otherwise might have thought necessary. It should be noted that in utilising material furnished to the Tribunal in this fashion footnotes have been omitted. Part B Background 5 The Respondent's written submissions filed in the Tribunal on 6 September 207 include a lengthy section entitled 'Background'. That section (clauses 3 to 19) is not controversial and it is convenient to include it in these reasons as follows: BACKGROUND 3 The general factual background to this matter may be summarised as follows. 4 On 8 December 2003, Jaylyn Holdings Pty Limited ("Jaylyn"), as mortgagor, entered into a mortgage with Perpetual Trustee Company Limited ("Perpetual Trustee") in respect of Folio ID. 50/1034349. The borrower on the mortgage was J.K. Harrison Pty Limited ("JK Harrison"). Originally, the mortgage was stamped in the amount of $2,820,000.00. It appears that this was subsequently increased to $3,800,000.00. 5 On 8 December 2003, Lotten Pty Limited ("Lotten"), as mortgagor, entered into a mortgage with Perpetual in respect of Folio ID. 10/27170. The borrower on the mortgage was JK Harrison. The mortgage was stamped as collateral in the amount of $2,820,000.00, although it appears that this was subsequently stamped as collateral in the amount of $3,800,000.00. 6 On 30 June 2004, Box Hill Holdings Pty Limited ("Box Hill"), as mortgagor, entered into a mortgage with Perpetual Trustee, in respect of Folio ID. 10/27502. The mortgage was stamped as in the amount of $1,710,000.00. The borrowers on the mortgage were JK Harrison, Lotten, Austimber Supplies Pty Limited ("Austimber") and Annangrove Holdings Pty Limited ("Annangrove") 7 On 15 October 2004, Lot Twelve Pty Ltd ("Lot Twelve"), as mortgagor, entered into a mortgage with Perpetual Trustee with respect to Folio ID. 1/135732. The mortgage was stamped in the amount of $2,400,000.00. JK Harrison was the borrower on the mortgage. 8 It is convenient to refer to these four mortgages as the "Earlier Mortgages". These Earlier Mortgages were all discharged on 24 March 2006. 9 On 24 March 2006, Lotten, Jaylyn, Lot Twelve and Box Hill, as borrowers, entered into a Deed of Loan with Challenger Managed Investments Limited.6 According to the Deed of Loan, the purpose of the facility was to "refinance existing mortgage ($8,000,000.00), retained interest ($1,113,750.00) and balance for working capital."' 10 The following mortgages were entered into on 24 March 2006: Mortgage between Lot Twelve, as mortgagor, and Perpetual Trustee in respect of Folio ID. 11135732. The borrowers on the mortgage are Lotten, Jaylyn, Lot Twelve and Box Hill; Mortgage between Jaylyn, as mortgagor, and Perpetual Trustee with respect to Folio ID. 5011034349. The borrowers on the mortgage are Lotten, Jaylyn, Lot Twelve and Box Hill; Mortgage between Lotten, as mortgagor, and Perpetual Trustee with respect to Folio ID. 10/27170. The borrowers on the mortgage are Lotten, Jaylyn, Lot Twelve and Box Hill; Mortgage between Box Hill, as mortgagor, and Perpetual Trustee with respect to Folio ID. 10/27502. The borrowers on the mortgage are Lotten, Jaylyn, Lot Twelve and Box Hill. 11 It is convenient to refer to these mortgages as the "Subsequent Mortgages". The total borrowing under the Subsequent Mortgages was $9,900,000.00. Mr Holmes, the solicitor acting for the Applicants, states that, of the total amount borrowed, $8,073,324.36 was "paid out". 12 The twelve issued shares in Austimber, the ten issued shares in Box Hill and the one issued share in Annangrove are each held beneficially by Mr Paul Conlon. The two issued shares in Lot Twelve, the two issued shares in Lotten and the one issued share in JK Harrison are held beneficially by Annangrove. The two issued shares in Jaylyn are held beneficially by Annangrove as trustee for the Jaylyn Family Trust. 13 When the Subsequent Mortgages were lodged with the Office of State Revenue, duty in the amount of $39,621.00 was levied. 14 On 1 June 2006, Paul Conlon lodged an application for exemption from duty with respect to the Subsequent Mortgages. 15 In the application, it was asserted that of the $9,900,000.00 secured under the Subsequent Mortgages, $9,750,000.00 was for the refinancing of the amount secured under the Earlier Mortgages. On that basis, it was asserted that duty should be payable only with respect to the $150,000.00 difference between the two amounts. 16 On 24 July 2006, the Chief Commissioner rejected the application for an exemption. 17 On 14 September 2006, an objection to the Chief Commissioner's refusal to grant the concession was lodged. The basis of the objection was that the borrowers under the Earlier Mortgages were related bodies corporate to the borrowers under the Subsequent Mortgages. 18 On 30 November 2006, the Chief Commissioner disallowed the objection. 19 An application for review of the Chief Commissioner's decision was lodged with the Tribunal on 12 February 200r. in accordance with 100(3) of the Taxation Administration Act 1996 (NSW) ("TA Act"), the Applicants bear the onus of proving their case in these proceedings. 6 I intend as a matter of convenience to utilise the terms and phrases defined in the Background section of the Respondent's written submissions; accordingly the terms 'Earlier Mortgages' and 'Subsequent Mortgages' as also the abbreviated names given to the Applicants have the same meanings when used in these reasons. Part C The legislation. 7 Nearly all of the legislation which is relevant in this matter is set out in the Respondent's submissions under the head of 'Legislation'; it too (clauses 20 to 26) is included as a matter of convenience in these reasons as follows: 20 Pursuant to Ch. 7 of the Duties Act, duty is required to be paid on a mortgage (s. 204), as defined in s. 205. 21 Liability for the payment of duty on a mortgage arises on the date of its first execution: s. 208. The mortgagor is liable to pay the duty on a mortgage: s. 207. Duty on a mortgage must be paid within 3 months from the date of liability (s. 209) and is calculated in accordance with the provisions in s. 210. 22 Part 4 of Ch. 7 of the Duties Act provides certain exemptions from the payment of duty on mortgages. The Applicants rely on s. 220, which was in the following terms as at 24 March 2006: "220 Refinancing of loans (1) In this section: land used for aquaculture means land subject to an aquaculture permit (within the meaning of the Fisheries Management Act 1994). refinancing mortgage means a mortgage that: (a) secures the amount of the balance outstanding under an earlier mortgage that is discharged or to be discharged as part of the arrangements for the new mortgage, and (b) is created to secure an advance to the same borrower as under the earlier mortgage, and (c ) is over the same or substantially the same property or part of the property as the earlier mortgage. (2) For the purposes of subsection (1), mortgages are created to secure an advance to the same borrower if, either directly by the mortgages themselves or indirectly through one or more collateral arrangements, the same person obtains the advances secured by them. (3) A refinancing mortgage is taken to have been stamped with ad valorem duty as a mortgage in respect of the duty-free refinancing amount, except as provided by subsection (5). (3A) For the purposes of this section, the duty-free refinancing amount is the lesser of the following amounts: (a) the maximum amount payable under or secured by the earlier mortgage (being an amount in relation to which mortgage duty has been paid or in relation to which an exemption from duty has been obtained), (b) $1,000,000. (3B) However, if the refinancing mortgage is over land used for primary production or land used for aquaculture, the duty-free refinancing amount is the maximum amount payable under or secured by the earlier mortgage (being an amount in relation to which mortgage duty has been paid or in relation to which an exemption from duty has been obtained). Note. "Land used for primary production" is defined in the Dictionary. (4) If an advance is refinanced by more than one lender, so that mortgages given to the lenders together secure the balance outstanding under an earlier mortgage, the definition of refinancing mortgage in subsection (1) is to be construed as though: (a) the reference to a mortgage securing the outstanding balance were a reference to the aggregate of such mortgages, and (b) the reference to property were a reference to the property securing the aggregate of refinancing advances made by the lenders under their combined mortgages, to the intent that, if the requirements of the definition, as so construed, are satisfied, each lender is taken, for the purposes of this section, to be the holder of a refinancing mortgage. (5) If, as provided by subsection (4), each of a number of lenders is the holder of a refinancing mortgage, a refinancing mortgage held by each lender is taken to have been duly stamped with ad valorem duty as a mortgage in respect of an amount equal to the same proportion of the duty-free refinancing amount as the amount secured by that mortgage bears to the total amount secured by the refinancing mortgages held by all the lenders. (6) If each of two or more refinancing mortgages severally secures the same advance: (a) the provisions of subsection (3) or (5), as the case may be, apply to such one of the mortgages as the Chief Commissioner determines, and (b) no duty is chargeable in respect of any of the others. (7) (Repealed) (8) Duty at the rate of $4 per $1,000 or remaining part of $1,000 is payable on the amount by which the advance made under a refinancing mortgage (not being a mortgage on which, by virtue of subsection (6) (b), no duty is chargeable) exceeds: (a) the duty-free refinancing amount, or (b) the proportion of that amount referred to in subsection (5), in the case of a refinancing to which subsection (4) applies. (8A) If a borrower is a related body corporate of a borrower under an earlier mortgage, the firstmentioned borrower is taken to be the same borrower or the same person for the purposes of subsection (1) or (2). (9) If a borrower under an earlier mortgage dies, or is a party to a marriage that has been dissolved or annulled or, in the opinion of the Chief Commissioner, has broken down irretrievably or is party to a de facto relationship that, in the opinion of the Chief Commissioner, has been terminated, the remaining borrower is, or the remaining borrowers are, taken to be the same borrower or the same person for the purposes of subsection (1) or (2). (10) A party to a marriage or de facto relationship may provide a statement to the Chief Commissioner, in the form of a statutory declaration, to the effect that: (a) in the case of a marriage: (i) the party intends to apply for a dissolution or an annulment of the marriage, or (ii) the parties to the marriage have separated, and there is no reasonable likelihood of cohabitation being resumed, or (b) in the case of a de facto relationship, the de facto relationship has been terminated. The Chief Commissioner is required to have regard to any such statement in exercising his or her functions under subsection (9). (11) Subsection (10) does not limit the functions of the Chief Commissioner under section 72 of the Taxation Administration Act 1996." 23 Section 206 of the Duties Act deals with the meaning of "advance". 24 The Dictionary to the Duties Act provides that a "related body corporate" has the same meaning as in the Corporations Act 2001 of the Commonwealth." 25 The expression "related body corporate" is defined in s. 9 of the Corporations Act 2001 (Cth) ("Corporations Act") as follows: "related body corporate", in relation to a body corporate, means a body corporate that is related to the first-mentioned body by virtue of section 50." 26 Sections 46-50 and 50AA of the Corporations Act provide: 46 What is a subsidiary A body corporate (in this section called the first body) is a subsidiary of another body corporate if, and only if: (a) the other body: (i) controls the composition of the first body's board; or (ii) is in a position to cast, or control the casting of, more than one-half of the maximum number cal votes that might be cast' at a general meeting of the first body; or (iii) holds more than one-half of the issued share capital of the first body (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital); or (b) the first body is a subsidiary of a subsidiary of the other body. 47 Control of a body corporate's board Without limiting by implication the circumstances in which the composition of a body corporate's board is taken to be controlled by another body corporate, the composition of the board is taken to be so controlled if the other body, by exercising a power exercisable (whether with or without the consent or concurrence of any other person) by it, can appoint or remove all, or the majority, of the directors of the first-mentioned body, and, for the purposes of this Division, the other body is taken to have power to make such an appointment if: (a) a person cannot be appointed as a director of the first-mentioned body without the exercise by the other body of such a power in the person's favour; or (b) a person's appointment as a director of the first-mentioned body follows necessarily from the person being a director or other officer of the other body. 48 Matters to be disregarded (1) This section applies for the purposes of determining whether a body corporate (in this section called the first body) is a subsidiary of another body corporate. (2) Any shares held, or power exercisable, by the other body in a fiduciary capacity are treated as not held or exercisable by it. (3) Subject to subsections (4) and (5), any shares held, or power exercisable: a) by a person as a nominee for the other body (except where the other body is concerned only in a fiduciary capacity); or b) by or by a nominee for, a subsidiary of the other body (not being a subsidiary that is concerned only in a fiduciary capacity); are treated as held or exercisable by the other body. (4) Any shares held, or power exercisable, by a person by virtue of the provisions of debentures of the first body, or of a trust deed for securing an issue of such debentures, are to be disregarded. (5) Any shares held, or power exercisable, otherwise than as mentioned in subsection (4), by, or by a nominee for, the other body or a subsidiary of it are to be treated as not held or exercisable by the other body if: (a) the ordinary business of the other body or that subsidiary, as the case may be, includes lending money; and (b) the shares are held. or the power is exercisable, only by way of security given for the purposes of a transaction entered into in the ordinary course of business in connection with lending money, not being a transaction entered into with an associate of the other body, or of that subsidiary, as the case may be. 49 References in this Division to a subsidiary A reference in paragraph 46(b) or 48(3) (b) or subsection 48(5) to being a subsidiary, or to a subsidiary, of a body corporate includes a reference to being a subsidiary, or to a body corporate that is a subsidiary, as the case may be, of the first-mentioned body by virtue of any other application or applications of this Division. 50 Related bodies corporate Where a body corporate is: (a) a holding company of another body corporate; or (b) a subsidiary of another body corporate; or (c) a subsidiary of a holding company of another body corporate; the first-mentioned body and the other body are related to each other. 50AA Control (1) For the purposes of this Act, an entity controls a second entity if the first entity has the capacity to determine the outcome of decisions about the second entity's financial and operating policies. (2) In determining whether the first entity has this capacity: (a) the practical influence the first entity can exert (rather than the rights it can enforce) is the issue to be considered; and (b) any practice or pattern of behaviour affecting the second entity's financial or operating policies is to be taken into account (even if it involves a breach of an agreement or a breach of trust). (3) The first entity does not control the second entity merely because the first entity and a third entity jointly have the capacity to determine the outcome of decisions about the second entity's financial and operating policies. (4) If the first entity: (a) has the capacity to influence decisions about the second entity's financial and operating policies; and (b) is under a legal obligation to exercise that capacity for the benefit of someone other than the first entity's members; the first entity is taken not to control the second entity." Part E Other relevant legislation 8 The Respondent in his written submissions drew particular attention to the fact that the Dictionary to the Act provides that the terms "related body corporate" has the meaning assigned to that term in the Corporations Act and then proceeded in that section of his submissions to deal, in detail, with those sections of the Corporations Act which are of particular relevance. 9 The definitional provision set out in the preceding clause appears in clause 24 in particular of the Respondent's submissions. 10 The Dictionary to the Act also includes a definitional provision in respect of "related person" as follows: "related person" means a person who is related to another person in accordance with any of the following provisions: (a) natural persons are related persons if: (i) one is the spouse or de facto partner of the other, or (ii) the relationship between them is that of parent and child, brothers, sisters, or brother and sister, (b) private companies are related persons if they are related bodies corporate within the meaning of the Corporations Act 2001 of the Commonwealth, (c) a natural person and a private company are related persons if the natural person is a majority shareholder or director of the company or of another private company that is a related body corporate of the company within the meaning of the Corporations Act 2001 of the Commonwealth, (d) a natural person and a trustee are related persons if the natural person is a beneficiary of the trust (not being a public unit trust scheme) of which the trustee is a trustee, (e) a private company and a trustee are related persons if the company, or a majority shareholder or director of the company, is a beneficiary of the trust (not being a public unit trust scheme) of which the trustee is a trustee. 11 It will noted then that the Act makes it clear that companies will be related persons only where they are related bodies corporate; the fact that the Act contains a separate and different provision in respect of related persons is of course relevant. Part D Submissions and findings as to onus. 12 The Respondent is his submissions referred to certain specified clauses in the statutory declarations of Mr. Conlon and Mr. Holmes, and in particular clauses 8 and 9 of Mr. Conlon and clauses 5 and 6 of Mr Holmes. I think it desirable to include the whole of their statutory declarations although without annexures. 13 Accordingly the text of Mr. Conlon's statutory declaration is included as follows: I PAUL MICHAEL CONLON Of 14 Langlands Rd, Annangrove Say on oath: 1 I am the sole director and sole shareholder or beneficial shareholder of the following companies- Lotten Pty Ltd Lot Twelve Pty Ltd Annangrove Holdings Pty Ltd Box Hill Holdings Pty Ltd Jaylyn Holdings Pty Ltd JK Harrison Pty Ltd Austimber Supplies Pty Ltd 2.Annexed and marked A are true copies of current ASIC searches for the above companies which I requested my solicitors North Shore Lawyers to obtain. 3.Over the Past 10 years I have acquired adjoining properties in the Box Hill area for the purpose of amalgamation. At the time I commenced accumulation of those properties, I acquired them in different corporate entities. These properties are currently zoned rural. 4. With respect to all the above companies, I am also the shareholder or beneficial owner of each of the corporate entities. 5. At the time of the transaction the subject of these proceedings, I was refinancing my loan on the whole of the properties in order to raise further funds necessary to settle a Court dispute and realise additional operating capital. The settlement of that Court dispute required payment by 31 March 2006. 6.At the time I arranged for the refinancing, I did this through a broker called Andrew Brzoz of Centrepoint Finance and in the course of the discussions with my broker I said words to the effect. "You must ensure that the same parties are involved so that I can obtain exemptions from Stamp duty under the refinancing provisions". 7. By reason of the number of properties involved and the large size of the borrowing the letter of offer and loan documents, arrived at my solicitors office on 21st March 2006, and I attended to sign those documents at that time. I requested my solicitor to check the application of the Stamp Duty exemption for refinancing. 8. I was informed by my Solicitor, Adrian Holmes, and believe it to be true that the new lenders solicitors required Stamp Duty to be paid from the settlement funds and thereafter I had to apply for a refund. I therefore was not in a position to check the Stamp Duty liability prior to signing the documents and I was not able to take advantage of any opportunity to rectify the documentation in order to more clearly comply with the requirements for the refinancing exemption before completion of the settlement on 24 March 2007. 9. I say that the same real estate has been provided as security by reason of the same corporate owners however the new lender adjusted the structure of the borrowers and I was not made aware that the new structure would adversely affect eligibility for the stamp duty exemption. I say that the adverse effect of the current borrowing structure as determined by the Office of State Revenue has arisen by reason of a genuine mistaken belief and that at all times the refinancing has been for the benefit of the same person and for the same purpose. 14 The text of Mr. Holmes' statutory declaration reads as follows; I, Adrian Phillip Holmes, of 17 Redleaf Avenue Wahroonga, Solicitor, swear under oath: 1.I am the Solicitor for the Paul Conlon Group and have been since about 2003. 2.I recall that at the time of the refinancing, the subject of these proceedings, Mr Conlon and one of his entities had entered into settlement of legal proceedings that required a payment by the end of March and the settlement of the refinance was required by 24 March. 3.The refinance documents arrived on 21 March and Mr Conlon instructed that they should be checked in order to comply with the requirements of the refinancing exemptions. The information that I obtained was that the same security properties was being refinanced and the prior mortgagors were the borrowers under the new finance. I advised Mr Conlon of this. 4.The new lender required payment of stamp duty at settlement without checking the stamp duty exemption prior to settlement and those funds were deducted from the total advanced under the refinancing loan. 5.Mr Conlon proceeded with the refinance on my advice that the mortgagors under the loan's were the same and his understanding that the documents reflected no change in the relevant parties. On this basis Mr Conlon assumed that the stamp duty paid would be refunded after settlement. At this time there was no document available to show that the borrowers were different. 6.It was only after settlement that 1 became aware of the fact that the original loan identified borrowers different from the new loan. The construction of the transaction in this fashion has been done in error and was not the intention of Mr Conlon. 7.On 26 March 2006 a new loan was entered into arranged by Challenger Financial Services for a total of $9,900,000. The total sum of the refinanced loans paid out was $8,073,324. 6 as se out it the direction attached and marked "A". There appears to have been upstamping of the loans but those documents are not presently available. 8.The mortgages were always collateral to each other which created confusion in respect to the borrowing entities identified by the lenders. 9.1 have reviewed the ASIC searches for the Applicants and prepared a Schedule of directors and shareholders for those companies, a true copy is annexed and marked 10.1 have reviewed the refinanced mortgages and made a schedule identifying the properties, amount, borrowers and mortgagors. A true copy of these mortgages and schedule is annexed and marked "C". 11. (omitted) 15 It will be noted that Mr Conlon described himself as the sole director and sole shareholder or beneficial shareholder in a number of companies which might loosely be described as "the Conlon Group". As to what was meant by his statement that he was the beneficial shareholder in those companies which are subsidiaries is unclear and is not supported by other evidence. Put simply Mr. Conlon was undoubtedly the shareholder in Annangrove; he was also the shareholder in Austimber and Box Hill. Annangrove owned shares in J.K Harrison, Jaylyn, Lot Twelve and Lotten; that factor (in respect of Annangrove), did not have the result that as a matter of law he was also the beneficial shareholder in the subsidiaries of Annangrove. Mr. Conlon might have regarded himself in economic terms in this light, (and in fact it would seem that he did so) but as a matter of law the companies are separate entities and so that for Mr. Conlon to describe himself as the beneficial shareholder in such companies was not correct. An annexure to the Respondent's submissions indicates that Mr Conlon was the sole shareholder in all of the named companies. That contention is contradicted by references in the evidence before the Tribunal as to shareholdings in one company owned beneficially by another; see in this regard clause 12 of the Respondent's submissions which although set out earlier in these reasons is repeated in this clause as a matter of convenience as follows: The twelve issued shares in Austimber, the ten issued shares in Box Hill and the one issued share in Annangrove are each held beneficially by Mr Paul Conlon. The two issued shares in Lot Twelve, the two issued shares in Lotten and the one issued share in JK Harrison are held beneficially by Annangrove. The two issued shares in Jaylyn are held beneficially by Annangrove as trustee for the Jaylyn Family Trust. There was no evidence before the Tribunal as to the nature of the Jaylyn Family Trust or for that matter who its beneficiaries are. 16 There can be no doubt that in order to obtain the relief provided by section 220 of the Act the Applicants must establish that there has been compliance with all of the provisions of section 220 (1) of the Act. They must establish inter alia that all of the borrowers under the Earlier Mortgages are the same as the borrowers under the Subsequent Mortgages and to do so must establish that they are all related bodies corporate. It is clear enough having regard to the Interpretation Act 1987 that "borrower" and "mortgage" can include "borrowers" and "mortgages". The term "borrower" refers to the entity which obtained the relevant financial accommodation. See Chief Commissioner of State Revenue v Group and General Finance Pty Limited (RD) [2004] NSWADTAP14 at clauses 34 and 36. 17 The Applicants are obliged (in order to succeed) to establish that the borrowers under the Earlier Mortgages and the borrowers under the Subsequent Mortgages are related bodies corporate. This arises from the fact that two companies are treated as the same company if and only if they are related bodies corporate. 18 The evidence before the Tribunal does not establish that in relation to all of the borrowers each of them is a related body corporate in relation to another of them. To succeed the Applicants must establish that all of the borrowers under both the Earlier Mortgages and the Subsequent Mortgages are the same. The onus is on the Applicants and they have failed to discharge it. The Respondent contended (correctly) that the Holmes affidavit and the Conlon affidavit indeed constituted admissions as to the fact that the Applicants could not establish the necessary relationship between the borrowers. The Respondent contends (again correctly) that the Applicants must therefore fail. Part E Further aspects 19 This Part E is included as a matter of completeness and in case it can be asserted that I have, in respect of any of the preceding provisions of these reasons, erred. 20 The Applicants' written submissions can be summarised in very broad terms as contending that the statutory provisions can and should be interpreted in a broad and beneficial matter and such that all of the relevant companies are related bodies corporate and therefore the same borrowers because Mr. Conlon controls (albeit indirectly in those companies which are subsidiary to Annangrove) all of them. It is clear enough that that control is direct in the case of Annangrove, but this is not so in the case of its subsidiaries. Clauses 24 to 31 of the Applicants' submissions read as follows: The correct approach to the interpretation of the Statutory Provisions 24. As a general rule of statutory interpretation, exemptions and concessions in tax legislation must be read broadly and, where there is any doubt as to the interpretation of such a provision, the benefit of doubt must be given to the taxpayer in order to give proper effect to Parliament's intention. For example in Burt v FCT Barton J. stated that: "Where the construction of such exception is seriously in doubt the interpretation should favour those whose claims are based on the exceptions" 25. In Diethelm Manufacturing Proprietary Ltd v. FCT French J. after noting the need for the taxpayer to establish the facts necessary to fall within an exemption, continued: "on the other hand, an exemption which exists for the purpose of encouraging, rewarding or protecting some class of activity is not to be given a narrow application. The liberal construction of provisions with Customs and Excise legislation allowing rebates on duties and excise payable in respect of fuel used in mining operations is one application of that general proposition: Collector of Customs v. Cliffs Robe River Iron Associates. 26. In FCT v. Murray the court stated that a liberal approach should be taken to the exemption of small businesses from the operation of capital gains tax legislation 27. In the Distribution Group Ltd v. Commissioner of Taxation Warren J. said: in the area of sales tax legislation, the general rules as to the construction of revenue statutes have been approached by the courts by way of the more specific canon that classifications of goods attracting exemptions or beneficial rates should be liberally construed unless the text or context requires a narrow construction. Applicants position in this case 28. The Applicant contends that when properly considered, the relief from duty provided for in sec 220 of the Act is available with respect to the re-financing under consideration because the borrowers under the original mortgage; Harrison with respect to three of the properties, together with Austimber, Annangrove and Lotten are "related body corporate[s]"to Jaylyn, Lotten, Lot Twelve, and Box Hill. 29. Mr Paul Conlon has the capacity to control the exercise of voting power in all of the companies because as the ultimate beneficial shareholder he has "enforceable and immediately exercisable rights" to enable such control. 30. The consequence of Mr Conlon being able to control the exercise of voting power in all the companies that are parties to the initial and the refinancing Mortgage is that Box Hill, Jaylyn, Lot Twelve and Lotten are related bodies corporate to Harrison, Austimber, and Annangrove because by the exercise of Mr Conlon's wishes one company is - (a) able to control the composition of the other company's board; and (b) is in a position to cast, or control the casting of, more than one-half of the maximum number of votes that might be cast at a general meeting. Powers of the Administrative Decisions Tribunal 31. Section101 (l) (b) of the Taxation Administration Act 1996 provides that the Administrative Decisions Tribunal was established as a body competent to engage in merit review. The Tribunal is not bound by the rules of evidence and may enquire into any matter in such manner as it thinks fit, subject to the rules of natural Justice (Administrative Decisions Tribunal Act 1997, s 73). The Tribunal is required to deal with matters according to considerations of efficacy, effectiveness, accessibility and fairness (Administrative Decisions Tribunal Act 1997, s.3) as it is required to decide the correct and preferable decision (Administrative Decisions Tribunal Act 1997, s.63), the Tribunal stands in the shoes of the administrative decision maker: see Affinity Health Ltd v. Chief Commissioner of State Revenue [2005] NSWSC 633 (7 July 2005). Part F. The Respondent's submissions 21 The Respondent's general submissions as to the law and the manner in which statutory provisions of this nature are to be interpreted are set out in clauses 37 to 56 of his written submissions; here again it is convenient (and again as a matter of completeness) to include those clauses (excepting only that clause 37 has been shortened by the omission of examples contained in it) as follows: 37 Under s. 46(a)(i) of the Corporations Act, a body corporate (the first body) is a subsidiary of another body corporate only if the other body controls the composition of the first body's board. Ford's Principles of Corporations Law, Lexisnexis, online edition, at para. [4.330], sets out the following commentary concerning the operation of s. 46(a)(i) and related provisions in s. 47, which deal with 'control': "The 'control' referred to in the first test in s 46(a)(i) has been held to be control flowing from a legally enforceable power. De facto control in the absence of such power is not enough. Hence the fact that a company has a holding of less than 51% which, because of the holding of other shares being widely dispersed, gives effective control is not enough: Mount Edon Gold Mines (Aust) Ltd v Burmine Ltd (1994) 12 ACSR 727; 12 ACLC 185; Bluebird Investments Pty Ltd v Graf (1994) 13 ACSR 271; 12 ACLC 724. (The remainder of clause 37 consisting of examples has been omitted) 38 The meaning of "control" is discussed further at para. [23.050]: "Exceptionally, the word 'control' referred to in the definition of 'subsidiary' in s 46 denotes de jure control in some contexts, and de facto control in others. Thus, the reference to a body which 'controls the composition' of another body's board is a reference to de jure control (Mount Edon Gold Mines (Rust) Ltd v Burmine Ltd (1994) 12 ACSR 727; 12 ACLC 185), while the reference to being `in a position to cast' more than one-half of the votes at a general meeting seems to refer to de facto power, whether legally enforceable or not ( Bluebird Investments Pty Ltd v Graf (1994) 13 ACSR 271; 12 ACLC 724 Operation of s. 46(a) (ii) 39. Under s. 46(a) (ii) of the Corporations Act, the first body is a subsidiary of the other body if the other body is in a position to cast, or control the casting of, more than one-half of the maximum number of votes that might be cast at a general meeting of the first body. Ford's Principles of Corporations Law sets out the following commentary in relation to s. 46(a)(ii), at para. [4.330]: "The voting control test It has been pointed out that the voting control test differs from the composition-of-the-board test in referring to alternatives, 'present ability' and 'control'. For `present ability' some arrangements short of actual 'control' may suffice to create the holding company/subsidiary relationship where the putative holding company is actually in a position where it can vote more than 50% of the total votes capable of being cast: Bluebird Investments Pty Ltd v Graf (1994) 13 ACSR 271 at 282; 12 ACLC 724. For example, the putative holding company may have been given a general proxy to vote a number of shares at future meetings, without any control as to how the votes are to be castle the Bluebird Investments case Santow J concluded that: ... an actual power, revocable or not, legally enforceable or not, to cast more than 50% of the votes does suffice to satisfy the 'present ability' alternative, so long as it does not depend on further action of support and is not under the control of another person. The facts of the case did not admit of that test being satisfied." (emphasis added) Borrowers under mortgages not the same 40 As the commentary above makes clear, the provisions in s. 46(a) (i) and (ii) of the Corporations Act are concerned with the relationship between two bodies corporate, i.e., the power and/or control that the relevant body corporate has with respect to another body corporate. 41 In Mount Edon Gold Mines (Aust) Ltd v Burmine Ltd (1994) 12 ACSR 727 ("Mount Edon"), White J made the following remarks when discussing the equivalent provisions under the Corporations Law (at 744): If one examines the provisions of s. 46 of the Corporations Law in some detail, it becomes, I think, clear that each of the three subparagraphs of para (a) is concerned with legal power. It is difficult to see how, in the absence of a legal power, a body corporate could be said to control the composition of the board of another by virtue of what in fact… 42 Similarly, in Samic Ltd v Metals Exploration (1993) 10 ACSR 652 ("Samic"), Debelle J stated as follows in relation to the question whether the company, GPG, was a subsidiary of another company, BIL (at 663): "What must be proved is whether, on the balance of probabilities, BIL does control the composition of the board of GPG. This is a question of fact." (emphasis added) 43 In Mount Edon, White J accepted (at 744) that the equivalent provision to s. 46(a)(i) of the Corporations Act: is concerned with control as a matter of fact, as opposed to control by the exercise of a power to control." 44 His Honour concluded as follows (at 748): "... I hold that s. 46(a)(i) is directed to a body corporate which, by virtue of the exercise (whether with or without the consent or concurrences of any other person) of a legally enforceable power vested in it, actually controls the composition of the board of another body corporate." (emphasis added) See further Bluebird Investments Pty Ltd v Graf (1994) 13 ACSR 271 ("Bluebird Investments"), at 281. 45 In Bluebird Investments, Santow J concluded as follows in relation to the operation of a provision equivalent to s. 46(a)(ii) of the Corporations Act (at 282-283): "However, the voting control test in the present context does have one vital difference from the composition of the board test. That is, that voting control test alone uses disjunctively the alternative words 'is in a position to cast', alongside the words 'control of casting', the relevant votes. I refer to these alternatives as 'present ability' and 'control', respectively. That must mean in the first case of present ability, that some arrarngements (sic) falling short of control, may nonetheless suffice to bring about a subsidiary/holding company relationship, where the putative holding company is actually in a position where it can vote more than 50% of the total votes capable of being cast. The simplest illustration of this, is where the putative holding company is given a general proxy to vote the necessary number of shares to constitute that majority at future meetings, without any control as to how votes are to be cast. Even if the proxy be revocable, in the absence of revocation, the putative holding company is presently in a position of being able to cast more than 50% of the votes. It follows that such an underlying arrangement, though not legally enforceable, may still satisfy the voting control test. However, if the proxy holder has given a binding covenant to vote the shares according to the direction of the grantor of the proxy, then the proxy holder does not satisfy the present ability alternative nor the control alternative and thus does not satisfy the voting control test. It is the grantor of the proxy who then satisfies the control alternative and thus the voting control test, so long as arrangements are legally enforceable_ In short, an actual power, revocable or not, legally enforceable or not, to cast more than 50% of the votes does suffice to satisfy the `present ability' alternative, so long as it does not depend on further action of support and is not under the control of another person. So too suffices actual enforceable control of that voting capacity." (emphasis added) 46 As the cases above indicate, to establish a subsidiary relationship between any two corporations within s. 46(a)(i) or (ii) of the Corporations Act, it must be shown that either (a) the putative holding company, by virtue of the exercise (whether with or without the consent or concurrences of any other person) of a legally enforceable power vested in it, actually controls the composition of the board of the putative subsidiary company or (b) the putative holding company has an actual power, legally enforceable or not, to cast more than 50% of the votes capable of being cast in a general meeting of the putative subsidiary company. 47 Other than Lotten, the borrowers under the Earlier Mortgages and Subsequent Mortgages are different corporate entities. The Applicants do not identify in their submissions which borrowers are subsidiaries within s. 46(a)(i) and (ii). Nor do they provide any evidence to support their reliance on s. 46(a)(i) and (ii). There is simply an assertion that, because of Mr Conlon's position, the relevant companies should be taken to be related bodies corporate. 48 It is submitted that the Applicants have not established that the borrowers under the Subsequent Mortgages are related bodies corporate of the borrowers under the Earlier Mortgages. In particular, the Applicants have not established that the requisite subsidiary relationships exist within the meaning of s. 46(a)(i) and (ii) of the Corporations Act between the different borrowers under the Earlier Mortgages and the Subsequent Mortgages. 49 For example, the Applicants have not established that each of the borrowers under the Subsequent Mortgages has a relationship, within s. 46(a)(i) and (ii) of the Corporations Act, with Austimber, a borrower under the Earlier Mortgages. There is no evidence whatsoever that Austimber (a) has a legally enforceable power vested in it to actually control the composition of the board of Jaylyn, Lot Twelve, Lotten or Box Hill within s. 46(a)(i) and s. 47; or (b) is in a position to cast or control the casting of (within the principles referred to above) more than half of the votes in a general meeting of Jaylyn, Lotten, Box Hill or Lot Twelve. 50 Similarly, in relation to Box Hill, a borrower under the Subsequent Mortgages, there is no evidence whatsoever that each of the. borrowers under the Earlier Mortgages (a) has a legally enforceable power vested in it to actually control the composition of Box Hill's board or (b) is in a position to cast or control the casting of (within the principles referred to above) more than half of the votes in a general meeting of Box Hill. 51 The Chief Commissioner submits that the proposition at para. [30] of the Applicants' Submissions is contrary to the provisions in s. 46(a)(i) and (ii) of the Corporations Act and the relevant authorities. The fact that Paul Conlon may have an enforceable right to control the exercise of the voting power in the various companies does not mean that the companies are thereby subsidiaries within s. 46(a)(i) and (ii), i.e., related bodies corporate. Section 46 is concerned with the control and/or power a body corporate has with respect to another body corporate. The exercise of Mr Conlon's "wishes" (as the Applicants put it) is just that. It is the exercise of his rights with respect to the relevant company. Thus, when Mr Conlon exercises his rights as the sole shareholder in Box Hill so as to control the composition of the board or the casting of votes, the exercise of such rights is not, without evidence to the contrary, an exercise (for example) by Austimber of a power or right of control of Box Hill. 52 Many of the cases cited in the Applicants' Submissions are concerned with the meaning of "control" in the context of particular legislation. None of those cases support the proposition at para. [30] of the Applicants' Submissions. Nor do they assist the Applicants. As noted above, the provisions in s. 46(a)(i) and (ii) are concerned with the control and/or power of the putative holding company vis-a-vis the putative subsidiary company. 53 The Chief Commissioner submits that the Applicants have not established that the advance under the Subsequent Mortgages is secured by the same borrowers as under the Earlier Mortgages for the purposes of s. 220(1)(b) of the Duties Act (having regard to s. 220(8A)). On that basis, with the Applicants not having established that a// the requirements in s. 220(1) have been satisfied, the exemption in s. 220 cannot apply with respect to the Subsequent Mortgages. Construction of revenue statutes 54 It is not clear what the Applicants intend to submit at paras. [24]-[27] of the Applicants' Submissions. The proposition in Burt v FCT (1912) 15 CLR 469 that where the construction of an exception in a taxing Act "is seriously in doubt, the interpretation should favour those whose claims are based on the exceptions" is of no assistance to the Applicants. The terms of s. 220 of the Duties Act are clear. There is no ambiguity or serious doubt as to the construction of ss. 220(1), 220(2) and 220(8A), having regard to the question before the Tribunal. Mils, there is no basis for departing from the ordinary and plain meaning of the words in those sections. Any suggestion to the contrary should be rejected: see Commissioner of State Revenue v Viewbank Properties Pty Ltd [2004] VSC 127, at para. [38] (which, it is submitted, sets out the correct approach to the interpretation of taxing statutes): "In any event, taxing statutes are technical and frequently complex things and those who seek to take advantage of them, and even more those who seek to avoid them, must know that they will need to approach them accordingly. Despite developments in the law relating to the construction of taxing statutes — so that by and large one is now to approach their construction in the same way as any other statute — the starting point remains the plain natural and ordinary meaning of the words of the legislation and the discernment of the legislative intention from the terms of the legislation viewed as a whole. Within the limits which they impose it is appropriate to construe exemption and exception provisions like s 67A (3) (a) (i) in favour of those who claim that they come within the exception. But where the words of such a provision are clear, the mere fact that a liberal construction of the provision more closely accords with subjective perceptions of what is `equitable' will rarely if ever be sufficient basis to depart from the plain and ordinary meaning of the language that has been employed. Absent a drafting mistake of the kind which underscored the decision in Cooper Brookes or absurd irrational or capricious results or the use of language which as a matter of natural and ordinary meaning permits of a multiplicity of possibilities, or perhaps extrinsic materials which make plain that the language employed simply fails to achieve the result which was intended, it is not permissible to depart from the plain and ordinary meaning of the words." (emphasis added) 55 See also Lygon Nominees P/L v Commissioner of State Revenue [2007] VSCA 140, at para. [48] and Commissioner of State Revenue v Hayes [2004] VSC 504, at paras. [27]- [32]. 56 Further, the issue raised by the Applicants are essentially concerned with the application of provisions under the Corporations Act. There is no room for the application of the principles cited at paras. [24]-[27] of the Applicants' Submissions to the relevant provisions of that Act which are in issue in this proceeding. Part G. General and conclusion 22 In essence the case is concerned simply and only with the meaning to be attributed to the term "related body corporate". The definition in the Act refers to the Corporations Act which in turn specifies when one company will, in relation to another company, be a related body corporate. The definitional provisions in the Act and including those in respect of a "related person" make it clear that the concept of two companies being related persons will turn on whether they are related bodies corporate. 23 This Tribunal is bound by the judgments of White J in Mount Edon and Santow J in Bluebird Investments and which make it clear that it is necessary to focus on the power which one company has in relation to another company. 24 The Tribunal agrees also that the wording of the relevant statutory provision is clear and unambiguous and that there is no room for a broad and general application as contended for by the Applicants. 25 During the course of the hearing Mr. Conlon asked to be heard and in consequence made a brief statement. If I understood him correctly he was seeking to contend that he may have received incorrect advice and either from his finance broker, or a lender, or indeed a member (not named) of the Respondent's staff. I need say only that there cannot be an estoppel against the operation of the Act. 26 I note also that Ms. McBride made mention of the possibility of an application for rectification and pursuant to which one set of mortgages will be amended so as to ensure that the borrowers under both sets of mortgages are the same. It is neither necessary nor desirable for me to express a view as to whether such an application will succeed. If it does then the position may become different and so that a fresh application for relief may be feasible 27 In this case the borrowers under the Earlier Mortgages and the borrowers under the Subsequent Mortgages are not the same and so that the Applicants are not entitled to relief under section 220 of the Act. This being so the application for relief was correctly refused and the decision by the Respondent must be affirmed. 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