Appeal Panel - Internal CITATION: Chief Commissioner of State Revenue v Clapoudis [2008] NSWADTAP 7 APPELLANT Chief Commissioner of State Revenue PARTIES: RESPONDENT Eva Clapoudis FILE NUMBER: 079041 HEARING DATES: 9 October 2007 SUBMISSIONS CLOSED: 9 October 2007 DATE OF DECISION: 22 February 2008 BEFORE: Needham J SC - Deputy President; Hole M - Judicial Member; Koutoulas D - Non Judicial Member CATCHWORDS: Question of law MATTER FOR DECISION: Principal matter DECISION UNDER APPEAL: Clapoudis v Chief Commissioner of State Revenue [2007] NSWADT 133 FILE NUMBER UNDER APPEAL: 066145 DATE OF DECISION UNDER APPEAL: 06/20/2007 LEGISLATION CITED : Conveyancing Act 1919 Family Provision Act 1982 CASES CITED: Commissioner of State Revenue v Paravizzini [2005] VSC 302 APPELLANT M England, barrister REPRESENTATION: RESPONDENT A Giusti, agent ORDERS: 1. The appeal is allowed. 2. The decision of the Commissioner not to allow the application for a grant pursuant to the First Home Owner Grant Act 2000 is affirmed. REASONS FOR DECISION 1 The Chief Commissioner for State Revenue ("the Commissioner" or "the appellant") appeals from a decision of Judicial Member Seve in the Revenue Division of this Tribunal. The learned Tribunal Member's decision was delivered on 20 June 2007 and this appeal was filed, within time, on 17 July 2007. 2 The proceedings came before the Appeal Panel and were heard on 9 October 2007. The Notice of Appeal sought: (a) an appeal on a question of law; and (b) leave to appeal on the merits of the decision. 3 At the hearing, however, the application for leave to extend the appeal to the merits was not pursued, as that application was based on a submission analogous to one that natural justice had not been afforded during argument in the Tribunal below. As the matter was to be fully argued before the Appeal Panel, however, the application for leave to extend to the merits was withdrawn and the appeal continued as of right on a question of law alone. The Decision - background facts 4 The decision was one under the First Home Owner Grant Act 2000 ("the Act"), and the facts underlying it were generally not in dispute. 5 Eva Clapoudis ("Ms Clapoudis" or "the respondent") was married to Mr Ferrara, and her husband ("the deceased") died on 12 June 2003. The respondent's married name was Eva Ferrara. 6 The property, in which Ms Clapoudis resided with the deceased, and after his death, was held in the name of the deceased alone and formed the major asset of his estate. It was located in Liverpool, New South Wales and was occupied by the respondent and her daughter from her marriage to the deceased, Victoria Ferrara. The deceased had two other daughters, Sonia Ferrara and Daniela Dawes, from a previous relationship. Each of the daughter's will, without meaning any disrespect, be referred to by their first names. 7 By his will, the deceased: (a) appointed Sonia and Daniela as executors and trustees; (b) made a number of minor bequests, both to the respondent and to his daughter Daniela; (c) left the residue of the estate, which included the matrimonial home, to be sold and the proceeds distributed equally to each of the deceased's wife (the respondent herein) and his three daughters. 8 Probate was granted to Daniela on 27 August 2004, Sonia having previous renounced probate. According to the inventory of assets, the estate was worth $583,220.83, and included the house property being estimated at $500,000. 9 The respondent was advised to commence proceedings under the Family Provision Act 1982 and orders were made in relation to those proceedings on 6 December 2005 as follows: (1) ORDER pursuant to subsection 7 and 10 of the Family Provision Act 1982 that provision be made for the plaintiff, Eva Ferrara, as if the balance of clause 5 of the will dated 16 January 1995 after the words "UPON TRUST" were deleted and the following inserted in lieu thereof: "5. To pay or distribute thereout: i. a legacy of $40,000 to Sonia Ferrara; ii. a legacy of $40,000 to Daniela Dawes; iii. any Fiat motor vehicle in Italy and my gold pinky ring which belonged to my mother Anna Ferrara to Sonia Ferrara; iv. my silver plated Army sword to my daughter Daniela Dawes; and v. the rest and residue of my estate to my wife Eva Ferrara". 10 The order continued with various mechanical provisions, including provision for interest to be paid if the legacies in 5(i) and (ii) were not paid by 17 March 2006, and a note that the costs of Ms Clapoudis and of Daniela as executor be paid out of the estate, the latter on the indemnity basis. 11 While the status of the order was originally unclear, it was revealed during the hearing that this order was a consent order achieved by settlement of the Family Provision Act proceedings. The settlement seems appropriate given the amount in the estate and the proportion of the estate made up by the dwelling occupied by the respondent, the widow of the deceased. 12 Obviously the estate was insufficient to pay all of the legacies set up by the consent orders, the undisturbed legacies in the will, and the costs, and to enable Ms Clapoudis to stay in the house unless moneys were raised by Ms Clapoudis to pay out the pecuniary or monetary legacies and the costs order. She chose to do this by way of mortgage over the property and the property was transferred to the respondent's name and a mortgage registered over the property on 11 April 2006. Given the time requirements in the consent orders, a small amount of interest was payable on the legacies to Daniela and Sonia. 13 On 22 May 2006 the respondent lodged an application for a grant under the Act with the Commissioner. Her application noted that Ms Clapoudis paid money, which was characterised as consideration, and submitted that the payment of money and her retention of possession of the property, along with the transfer of the house into her name, constituted an eligible transaction and triggered an entitlement to a First Home Owner Grant. 14 The application for a First Home Owner Grant was refused on 30 May 2006. The respondent then objected to the decision not to approve a grant. The respondent's case is succinctly stated in the objection, which was dated 8 March 2007. The objection stated, after citing various sections of the Act: "We submit that Mrs Clapoudis became entitled to possession of the home on the day of settlement. We submit that the consideration of $41,173.70 paid to Sonia Ferrara, $41,173.70 to Daniela Dawes, the registration of the Transfer issued pursuant to Supreme Court orders made on 6 December 2005 at which time Mrs Clapoudis became entitled to possession, constitutes the completion of the transaction". 15 On 31 October 2006 the Commissioner wrote to the respondent and disallowed the objection, stating: "Section 13(1) of the First Home Owner Grant Act 2000 states that an eligible transaction is a contract made on or after 1 July 2000 for the purchase of a home in New South Wales. For an applicant to be eligible to receive the grant, they must have acquired the property under an eligible transaction. Unfortunately, when you acquired your home it was pursuant to the due administration of your husband's estate and not via a contract. Please find attached a copy of the case CSR v Joseph Paravizzini [2005] VSC 302 which discusses this issue at great length". The Decision - Reasons 16 As noted above, the respondent sought a grant on the basis that her acquisition of title to the Liverpool property, formerly the property of her deceased husband, entitled her to a grant pursuant to subsection 7 and 13 of the Act. Those sections provide, relevantly: "Section 7 Entitlement to grant (1) A first home owner grant is payable on an application under this Act if: (a) the applicant or, if there are 2 or more of them, each of the applicants complies with the eligibility criteria, and (b) the transaction for which the grant is sought: (i) is an eligible transaction, and (ii) has been completed. …" and "Section 13 Eligible Transactions (1) An "eligible transaction" is: (a) a contract made on or after 1 July 2000 for the purchase a home in New South Wales … (5) An eligible transaction is "completed" when: (a) in the case of a contract for the purchase of a home: (i) the purchaser becomes entitled to possession of the home under the contract; and (ii) except in the case of a terms contract, if the purchaser acquires an interest in land under the contract that is registrable under a law of the State - the purchaser's interest is registered under that law …" 17 The only basis of dispute is whether the relevant transaction was an "eligible transaction" as outlined in section 13, and would qualify for a grant, the other necessary criteria in subsection 8-12 of the Act, including the residence criterion, not being in dispute in these proceedings. 18 The learned Tribunal Member, by her reasons for decision and order dated 20 June 2007, set aside the decision of the Commissioner. She identified the question in paragraphs [14]-[16] of the decision as follows: "14. This case hinges on the incorrect legal characterisation of the Transfer which, in turn, depends on the facts of this particular matter. 15. If the Transfer is a distribution of trust property for no consideration under the Will (as contended by the Commissioner), the Transfer is not an "eligible transaction" as defined in the FHOG Act (Commissioner of State Revenue v Paravizzini [2005] VSC 302). 16. However, if the Transfer is a contract for the purchase (or a transfer pursuant to a contract for the purchase) of a home (the Property) for consideration (as contended by the Applicant), there is an "eligible transaction" as defined in the First Home Owner Grant Act 2000". 19 The reasons on which the decision was set aside are as follows (necessarily paraphrased, and leaving out some discussion which ultimately did not assist the final decision): (a) The Will itself, either in the variation constituted by the consent order, or as originally admitted to Probate, did not entitle the Applicant to a transfer of the property; (b) The estate assets were insufficient for all claims on the estate to be satisfied and to leave the property intact as a residence for the respondent; (c) The Transfer referred to the consideration supporting it as "Pursuant to Supreme Court order", and as such, that description "supports an inference (being the [Ms Clapoudis'] submission) that [Ms Clapoudis] purchased the property." (d) In paragraph [30] of the decision, the learned Tribunal Member characterises the payment of moneys raised on mortgage to various persons including legatees under the consent orders as being either: (i) "paid by [Ms Clapoudis] as consideration for the extinguishment of respective rights of the payees against the Deceased's estate; or (ii) paid by way of gift or loan to the executrix by [Ms Clapoudis], on behalf of the executrix, such that the payments were in satisfaction of the debts of the Deceased's estate and the specific pecuniary bequests under the Will". (e) The learned Tribunal member went on in paragraph [31]-[32] to find that: (i) it was reasonable to infer that the payments made by [Ms Clapoudis] were made on behalf of the executrix for the Deceased's estate rather than in her own right; and (ii) the payments were made at the direction of the executrix for the deceased's estate, under a contact for purchase of the property by [Ms Clapoudis] rather than by way of gift or loan by [Ms Clapoudis] to the deceased's estate. (f) in so finding, the learned Tribunal member distinguished the Victorian Supreme Court's decision in Paravizzini (supra), on the basis that the applicant in that case, in a transaction which was held not to attract the Victorian equivalent of a grant under the Act, was an executor of the estate and paid money to the other beneficiaries by which he retained the estate property. In that case the transaction proceeded without, it seems the benefit of a Court order, but rather pursuant to a contract between the applicant and his sisters (the other beneficiaries) that they would, on payment of a sum of money, give up their rights to the residuary estate. The learned Tribunal Member distinguished Paravizzini on the basis that she had not "inferred a contract(s) between [Ms Clapoudis] and Sonia and Daniela (in her personal capacity) disclaiming their respective rights under the Will" (see paragraph [40]). 20 The conclusion reached by the learned Tribunal Member is set out in paragraph [41]: "For the foregoing reasons, I find that the Transfer was not by way of distribution to [Ms Clapoudis] as a beneficiary under the Will but was itself or, was made pursuant to, a contract for the purchase of the Property entered into between the Applicant and the executrix of the Will, after the Supreme Court order was made. As such, I find that there is an "eligible transaction" as defined in section 13(1)(a) of the First Home Owners Grant Act 2000". The Applicant's Submissions 21 The Applicant cites the question to be decided in this appeal as: (a) whether, properly characterised, the question of whether the transfer of the property to the Respondent was pursuant to a "contract for the purchase of a home" and whether that question is a question of law, a question of law and fact, or a question of fact alone; and (b) whether the learned Judicial Member erred in finding that the transfer of the property to the respondent was by way of contract for purchase of the property for consideration. 22 The Applicant takes issue with the characterisation by the learned Tribunal Member of the transfer as a "contract for the purchase of the property", given that the learned Judicial Member found, in paragraph [28] of the decision, that the will as varied by the Supreme Court orders did not entitle Ms Clapoudis to a transfer of the property. Further, the Commissioner takes issue with the learned Tribunal Member's finding that the will as varied required a sale of the assets of the estate from which payment to the respondent would then be made, and that there was an available inference that there was a purchase of the property, such inference being supported by the description of the consideration on the transfer as "pursuant to Supreme Court order". 23 The Commissioner's submissions, oral and written, go on to analyse the legislation upon which the submissions are founded (being the Family Provision Act 1982, the Conveyancing Act 1919, and the First Home Owner Grant Act 2000). The submissions also deal with Paravizzini's case, and the reasons for distinguishing that decision which are raised in the decision and which are not accepted by the respondent. The Respondent's Submissions 24 The respondent was assisted at the hearing by a friend, Mr Giusti, who made oral submissions. Mr Giusti pointed out that Ms Clapoudis satisfied all other criteria required by the Act and noted that nowhere in section 13 is a formal, written contract required. Mr Giusti submitted that there was nothing else but the house out of which payments could be made, and so the raising of money on mortgage was effectively a purchase of the house, because otherwise the house would be sold and Ms Clapoudis provided with a sum of money rather than the house. 25 Mr Giusti sought to distinguish Paravizzini's Case by noting that Mr Paravizzini was the executor, while Ms Clapoudis was not. He said that the orders made by the Court constituted a contract, but gave no details as to the basis of this submission. 26 Finally, Mr Giusti relied upon the intention and spirit of the Act, which was, he said, to assist homeowners in purchasing a home and was not intended to be overly technical. Consideration of the Appeal 27 The crux of this case is whether the actions leading up to the transfer constituted a "contract for the purchase of a home". This, it seems to us, is a question of law; the characterisation of a series of actions as contractual or not is a legal matter and not a fact-finding exercise. 28 In deciding whether the transfer was the final culmination of a "contract for the purchase of a home", it is useful to set out the steps leading to that culmination. Those steps were: (a) the Will was admitted to probate and Daniela appointed executor; (b) the respondent filed an application under the Family Provision Act1982; (c) the respondent and Daniela then settled the proceedings, and orders were made by the Supreme Court by consent; (d) those orders did not, technically, vary the will itself, but made provision for the plaintiff (and under section 10 for Daniela and Sonia) pursuant to the Family Provision Act 1982; (e) in order to comply with the orders, it was necessary, if the respondent wished to retain the house, to pay money on behalf of the estate to the legatees and to pay the costs, otherwise, the house, as the major asset of the estate, would need to be sold; (f) on payment of the legacies and other sums by the respondent, the house was transferred by the executor, who had held it in her name as executor of the estate, to the name of the respondent. 29 The learned Tribunal member held that the contract for purchase was "inferred" by reason of the rejection of what was put forward as an alternative explanation; the respondent was held not to have "made a loan to the executrix" (see paragraph [33]). An inference was required to reach that conclusion because no direct evidence, either oral or written, of a contract of purchase was available. The learned Tribunal Member inferred the contract arose because Ms Clapoudis: "would only have been entitled to a transfer [of] the property under the will, after the debts of the deceased's estate and the specific pecuniary legacies under the Will had been paid. In this case, according to the evidence of [Ms Clapoudis] which has not been refuted by the Commission, the debts of the deceased's estate and the specific pecuniary legacies were paid "upon" the transfer of the property and not before it. This supports a finding that the Transfer was a transfer of the Property to the Applicant for valuable consideration and that the Applicant never became entitled to a distribution of the property under the Will" (paragraph [34]). 30 It appears to us that even if the transfer was the result of a payment moving from the transferee, it was not necessarily a transfer to the transferor. Nor was it a payment specifically referable to the transfer of the property; while the payment certainly enabled that transfer, it could not be said that the payments were payments of a purchase price in the usual sense. Nor does the mere fact that the applicant paid money and received a property in her name make up the necessary factual matrix for the transaction to become a "contract for purchase of a home". There was never any contractual intention sufficient for a purchase or for a sale. Instead, what happened was that there was a distribution of the estate of the deceased in circumstances where one beneficiary wished to retain a particular asset in specie and was prepared, with the assistance of the Supreme Court orders, to pay out estate debts in order to enable that asset to be retained and to be distributed to her in the course of estate administration. 31 The decision of Paravizzini (supra) is instructive. In very similar circumstances, except, as has been pointed out, as to the identity and role of the executor, the Victorian Supreme Court held that the arrangement between the eventual transferee of the property and the other beneficiaries of the estate was not a "contract for the acquisition of a relevant interest in the property" (see par [60]). Justice Hansen asked the question in Paravizzini, "What was the contract?" (paragraph [50] and here, too, that question must be asked. 32 The learned Tribunal Member inferred the existence of a contract. In order to reach the decision she did, she had to so infer the terms and existence of a contract because, as noted above, there was no evidence upon which she could find so directly. The elements of contract were not present in the facts as recited above; in particular, there was no offer to sell or acceptance to buy, and it is questionable whether the payment of moneys in relation to legacies and debts and costs of the estate was "consideration" in the proper sense in that it related relevantly to the transfer of the property from the executor's name to that of Ms Clapoudis. In Paravizzini, his Honour said that "the only conclusion open to the Tribunal was that there was a contract between the respondent (in his personal capacity) and his sisters whereby his sisters disclaimed the gift of property under the will, in consideration of money paid to them by the respondent" (paragraph [51]). 33 In this case, any contract between Daniela and the respondent was of a similar nature. Cases where family arrangements are put in place contrary to the terms of the will (some of which are, as in this case, enshrined by Court orders by way of settlement of Family Provision Act 1982 proceedings) are commonplace. The rights of Ms Clapoudis to the residue of the estate are unaffected by the fact that the residue was insufficient to allow her to retain the residence in toto; what she did by borrowing sufficient funds to pay out the pecuniary legacies, costs and debts of the estate was to enable the executor to transfer the fee simple to her rather than requiring a sale to pay out those liabilities of the estate. The contract, if there were one, was not a sale of the property; it was for a distribution of the estate on a basis, which would allow Ms Clapoudis to retain the property in specie. 34 If the arrangement between the parties was not a sale, then it could not have been a "contract for the purchase of a home" (cf Paravizzini, paragraph [55]). 35 The wording of the transfer does not, in our view, assist the conclusion that the arrangement in relation to this estate was in fact a contract for purchase. It merely notes the Supreme Court orders, which do not, it is clear, reflect a sale or a purchase of the house. Instead, they make provision for the plaintiff in those proceedings as the widow of the deceased, and re-arrange the entitlements of the daughters of the deceased of his first marriage, along with mechanical and transactional orders aimed at avoiding further dispute between the parties. 36 It follows from the above that the learned Tribunal Member erred in law in holding that the transactions in relation to the estate of the deceased constituted an inferred contract for sale by the estate and purchase by Ms Clapoudis of the property at Liverpool. There is no basis for the inference of that contract as there is no evidence, direct or circumstantial, for its existence. Nor is it the only reasonable or rational explanation for what happened; the Supreme Court orders do not make such a finding of a purchase inevitable. Conclusion 37 The appeal is accordingly allowed. 38 The proper finding in this case is that the decision of the Commissioner not to approve the application for a grant under the First Home Owner Grant Act 2000 is affirmed. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.