Bottle Tower Investments Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 172

Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Bottle Tower Investments Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 172 Hearing dates: 17 September 2014 Decision date: 14 October 2014 Jurisdiction: Administrative and Equal Opportunity Division Before: N S Isenberg, Senior Member Decision: The decision under review is affirmed. Catchwords: Stamp duty; reassessment; contingency principle; interim stamping; full and true disclosure of relevant facts and circumstances; instrument; stamping a document; dutiable value; consideration. Sections 10, 15, 21, 22, 49 and 58(2) Duties Act 1997. Sections 9, 10, 14, 16, 119 and 288 Taxation Administration Act 1996. Section 21 Interpretation Act 1987. Legislation Cited: Administrative Decisions Review Act 1997 Civil and Administrative Tribunal Act 2013 Duties Act 1997 Interpretation Act 1987 Taxation Administration Act 1996 Cases Cited: B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187, (2008) 74 NSWLR 481 Lionore Australia (Avalon) Pty Ltd v Commissioner of State Revenue [2006] WASAT 250 Category: Principal judgment Parties: Bottle Tower Investments Pty Ltd (Applicant) Chief Commissioner of State Revenue (Respondent) Representation: Robert Richards & Associates (Applicant) Crown Solicitors Office (Respondent) File Number(s): 1410248

reasons for decision

Background 1This matter is an application for a review by the Tribunal of a decision by the Respondent (sometimes called the Chief Commissioner in this decision) in relation to an assessment concerning the payment of $70,000 duty on a deed dated 3 November 2011 ("the Deed"). The Applicant submits that no duty should have been paid on the Deed. 2The parties are in substantial agreement on the relevant facts. The parties differ on the interpretation of the law to those facts. In summary the facts are: (1)In mid 2009 Mr Paul James McCullagh decided that a property at Palm Beach ("the Property") jointly owned by himself and his wife should be transferred to the Applicant, a company of which he was at all relevant times the sole director. Mr McCulloch also decided that the Applicant should purchase the Property at its then value. However if the Property increased in value within two years of the purchase, the Applicant would pay to Mr McCullagh and his wife the increase in value up to an additional $1 million ("the Contingent Amount"). Mrs McCulloch agreed with Mr McCullagh's decision. The overall transaction involving the transfer of the Property, the initial payment of $4,800,000 and the conditional agreement to pay the Contingent Amount is sometimes referred to in this decision as "the 2009 Transaction". (2)Mr McCullagh instructed Clayton Utz solicitors, that the Property would be transferred from himself and his wife to the Applicant "at its current valuation". He asked them to start the relevant process and informed them that he would obtain a valuation. Mr McCullagh obtained a valuation ("the 2009 valuation") and provided it to Clayton Utz. The 2009 valuation was in the amount of $4,800,000. (3)A Real Property Act transfer ("the Transfer") was prepared, signed by Mr and Mrs McCullough as transferor and Mr McCullagh (sole director/secretary of the Applicant) as transferee, and dated 3 July 2009. The Transfer was stamped with duty of $276,490 as a transfer of real property with a dutiable value of $4,800,000 and registered with the Department of Lands. (4)In June 2011 Mr McCullagh contacted the accountants who attended to his and the Applicant's accounting and tax affairs, informed them that the Applicant may have to pay an additional amount to himself and his wife based on the value of the Property as at 3 July 2011 and asked for advice. The accountants advised him to get something in writing. (5)After preparation, the Deed setting out details of the 2009 Transaction was signed by Mr and Mrs McCullagh personally and by Mr McCullagh as sole director of the Applicant. The only parties to the Deed were the Applicant and Mr and Mrs McCullagh. (6)The Deed was sent to the Chief Commissioner by Clayton Utz with a covering letter ("the Covering Letter"). The Covering Letter also enclosed a copy of the stamped Transfer, the 2009 valuation, a valuation dated 9 June 2011 which stated that the property had a value of $6,500,000 ("the 2011 valuation") and a cheque in the sum of $70,000 in favour of the Office of State Revenue ("OSR"). The letter referred to the cash consideration of $4,800,000 for the July 2009 sale and noted that stamping of the Transfer was based on a dutiable value of $4,800,000. The letter referred to the oral agreement by the Applicant in 2009 to pay a further amount of up to $1 million to Mr and Mrs McCullagh if the value of the property had increased above its 2009 value within two years of the date of the transfer in 2009 ("the Oral Agreement"); noted that an additional $1 million consideration was payable for the 2009 transfer of the property; estimated that $70,000 additional duty was payable and requested that the Deed be stamped with that additional duty. (7)Subsequently Clayton Utz informed the OSR that there was no written agreement between the parties in 2009 in relation to the Property other than the Transfer. Clayton Utz again requested that the Deed be stamped with the additional duty. (8)The deed was stamped on 31 January 2012. The duty imprint relevantly states: TRANSFER - AGT FOR SALE OF LAND DUTIABLE AMOUNT $ ******5,800.000.00 DUTY $ ********346, 490.00 PREMIUM RATE APPLIED (9)On 2 December 2013 the OSR received a letter from Robert Richards & Associates dated 28 November 2013 ("the Objection") objecting to the assessment of the Deed on the grounds that the Deed was "not a transfer of dutiable property" and requesting additional time to lodge the Objection (beyond that normally permitted by relevant legislation). After further communications between the Applicant and the OSR an extension of time was granted. (10)The OSR reviewed and then disallowed the Objection by letter dated 10 March 2014. In that letter ("the Disallowance Letter") the Chief Commissioner asserted that the true consideration for the 2009 transfer of the Property was the purchase price of $4,800,000 "plus the value of the contingent encumbrances of the purchaser agreed at the time of the transfer" namely the additional consideration of $1 million. The Applicant then applied to this Tribunal for a review of the decision which was the subject of the disallowed objection.