Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Chief Commissioner of State Revenue v Danny and Steven Knezevic [2015] NSWCATAP 98 Hearing dates: 4 May 2015 Date of orders: 22 May 2015 Decision date: 22 May 2015 Jurisdiction: Appeal Panel Before: The Hon DA Cowdroy OAM QC, Principal Member A Britton, Principal Member Decision: 1. The appeal is upheld. 2. The decision under appeal is set aside and in substitution, the decision made by the respondent on 6 December 2013 is affirmed. 3. If any party wishes to apply for any special order for costs, such application is to be made to the Registrar within 21 days of this decision. Catchwords: ADMINISTRATIVE LAW — stamp duty — whether an interest in land constitutes "dutiable property" —whether exemption for stamp duty on "matrimonial property" applies where property purchased by former party to the marriage and third party, as tenants-in-common Legislation Cited: Duties Act 1997 (NSW) Interpretation Act 1987 (NSW) Property Law Act 1969 (WA) Cases Cited: Bunny Industries Limited v F. S. W. Enterprises Pty Limited (1981) Qd R 2588 Chief Commission of State Revenue v Centro (CPL) Limited [2011] NSWCA 325 Chief Commissioner of State Revenue v Pacific National ACT Limited [2007] NSWCA 325 Nullagine Investments Pty Limited v The Western Australian Club Inc. (1993) 177 CLR 635 Trust Company Limited v Chief Commissioner of State Revenue [2007] NSWCA 255 Trust Company of Australia Ltd v Commissioner of State Revenue [2007] VSC 451 Trust Company of Australia Ltd v Commissioner of State Revenue [2007] VSC 451 Category: Principal judgment Parties: Chief Commissioner of State Revenue (Appellant) Danny and Steven Knezevic (Respondents) Representation: AH Rider (Appellant) I Sethi (Appellant) D Barlin (Respondent) File Number(s): AP 14/58301 Decision under appeal Court or tribunal: NCAT Jurisdiction: Administrative and Equal Opportunity Division Citation: Administrative and Equal Opportunity Division Date of Decision: 30 October 2014 Before: R Deutsch, Senior Member File Number(s): 1410234 REASONS FOR DECISION Introduction 1. This appeal concerns the question of whether the exemption from stamp duty under s 68(1) of the Duties Act 1997 (NSW) ("the Duties Act") applies where pursuant to an order of the Family Court of Australia, land comprising matrimonial property is sold at auction and one party to the dissolved marriage who was the owner of a half interest therein purchases a half interest in that property. Facts 1. Prior to the institution of proceedings for the dissolution of marriage instituted in the Family Court, Dana Knezevic and Danny Knezevic were married and owned certain properties, including a property at Dee Why ("the Dee Why property"). The Dee Why property was owned by the parties to the marriage as tenants-in-common in equal shares. 2. On 7 August 2013, orders were made, by consent, in the Family Court of Australia, in relation to the disposition of the properties, including the Dee Why property ("the orders"). 3. Significantly, the parties to the marriage agreed to "do all acts and things and sign all documents necessary to cause to be sold by public auction, the … Dee Why propert[y]." Thereafter, the parties agreed to orders concerning the allocation of the sale monies. 4. Clause 8 of the orders provided:- "Both parties may bid at any auction held or make an offer to purchase either of the properties." 1. Pursuant to the orders, the Dee Why property was duly submitted to auction on 26 October 2013. Such property was sold at the auction to Danny Knezevic, the former husband of the marriage, and his brother, Stevan Knezevic for a purchase price of $1,352,000. The transfer records that Danny Knezevic and Stevan Knezevic purchased the whole of the fee simple in the Dee Why property as tenants-in-common in equal shares. 2. Stamp duty of $25,930 under the Duties Act was paid by the purchasers, calculated by applying ad valorem stamp duty rates to 50% of the purchase price. However, on 6 December 2013, the Office of State Revenue issued an assessment requiring a further $33,940 in stamp duty to be paid forthwith. Such amount was paid on 10 December 2013, but on 14 January 2014, the purchasers lodged an objection seeking an assessment calculated on 50% of the purchase price. As recorded by the Tribunal member in his decision at [15], the grounds of objection were described as follows: "13 Section 68(1)(a) requires that there be a transfer of property to, inter alia, the parties to a marriage, or to either of them. 14 It is incontrovertible that property was (in part) transferred to, inter alia, a party to the marriage, that the property was matrimonial property immediately prior to the auction, and the transfer is effected by a purchase at public auction. 15 Section 68(1)(a) does not require that the transfer be to the stipulated persons only." 1. The Tribunal member upheld the objection. The critical findings of the Tribunal member, which are challenged in this appeal are as follows: "62 In other words, notwithstanding that there was one contract [for the sale of the Dee Why property], Danny Knezevic and his wife each conveyed their own share of the Property and each of the Applicants acquired their own share in the Property. 63 It is true that Danny Knezevic and his wife concurred in the conveyance of the shares in the Property as a whole but in law they in fact sold their individual interests. By parity of reasoning the Applicants acquired their own distinct shares in the Property even though by concurrence the purchase of the Property was achieved by way of one contract and one transfer. 64 In construing the relevant legislation, the focus must be on what it is that has been transferred and not the manner by which the transfer was affected. Here the manner of transfer was the relevant contract but the dutiable property was 2 interests as tenants in common in certain property. The fact that the manner of transfer was under one contract only, does not change the content of what it is that was transferred." 1. The appellant appeals the decision, submitting that the Tribunal member erred in his finding that individual interests were sold by the vendors, and in holding that the exemption under s 68(1) applied to the transfer of the one half interest to the former husband. 2. The respondents rely upon the fact that the contract for sale records that the purchasers were acquiring their interest in the Dee Why property as tenants-in-common in equal shares. Accordingly, the relevant interest acquired by Danny Knezevic is defined. The respondents submit that the interest purchased by Danny Knezevic comprised an interest in land; that such interest comprised matrimonial property as defined in s 68(5) of the Duties Act; and that accordingly, as a result of the operation of s 68(1), the one half interest conveyed to him as tenant in common is free of duty. 3. Accordingly, the respondents submit that they each acquired interest in land and whether it was the whole or part of the land is irrelevant. They submit the critical fact is that while here was a conveyance of the whole of the land, the interests of each purchaser were separately defined. 4. In Chief Commissioner of State Revenue v Pacific National ACT Limited [2007] NSWCA 325, Hodgson JA said at [4]: "'Land' is defined in the dictionary of the Act to include a stratum. 'Land' is further defined in s 21 of the Interpretation Act 1987 (NSW) to include "messuages, tenements and hereditaments, corporeal and incorporeal, of any tenure or description and whatever may be the estate or interest therein". 1. In Trust Company Limited v Chief Commissioner of State Revenue [2007] NSWCA 255 at [37] Giles JA stated: "Where duty is imposed on an instrument by reference to the value of what is conveyed or transferred, it is necessary accurately to identify the property conveyed or transferred by the dutiable instrument …" Further, at [49], his Honour referred to the fact that "land" may be interpreted as "involving an estate or interest in the land or an interest in the land. By s 21(1) of the Interpretation Act 1987, in any Act or instrument it includes "messuages, tenements, and hereditaments, corporeal and incorporeal of any tenure of description, whatever may be the state or interest therein". 1. In Chief Commission of State Revenue v Centro (CPL) Limited [2011] NSWCA 325, Sackville AJA at [106] to [109] noted that the definition of "dutiable property" contained in s 11(1) of the Duties Act includes land in New South Wales, as well as an interest in land in New South Wales. 2. The respondents rely upon statements of principle in support of their contention that whilst the whole of the Dee Why property was conveyed to them, what was conveyed comprised separate interests in the land. 3. The respondents then submit that having identified the separate interest purchased by Danny Knezevic, the orders cause s 68(1) to operate, claiming that the interest which was conveyed to him had been and remained matrimonial property. As such, this sub-section relevantly provides:- "No duty is chargeable under this Chapter on a transfer, or an agreement for the sale or transfer of matrimonial property if: (a) The property is transferred…to the parties to a marriage that is dissolved…or to either of the, or to a child or children of either of them or a trustee of such a child or children, and (b) The transfer…is effected by or in accordance with…an order of the court under (the Family Law Act)…" 1. The term "matrimonial property" is defined in s 68(5) of the Duties Act as follows: "matrimonial property means property in relation to the parties to a marriage of either of them (within the meaning of the Family Law Act 1975 of the Commonwealth) including any property treated as property in relation to the parties or of either of them as a result of an order made under that Act." 1. The respondents submitted that interest in property did not lose its character as "matrimonial property". The interest in land transferred to Danny Knezevic remains "matrimonial property" as defined by s 68(5). The rights of Danny Knezevic as vendor are not extinguished only because there is an auction sale of the property. 2. In support of the above proposition, reliance is placed upon the decision in Bunny Industries Limited v F.S.W. Enterprises Pty Limited (1981) Qd R 2588, in which the Queensland Full Court considered the consequences of the vendor, as contracting party, agreeing to sell subject land to another. The Full Court found that the defendant vendor became a trustee of the land for the purchaser, and that the Court would not permit the vendor to transfer their legal estate to a third person, because in equity, the property had already been transferred to the purchaser. Reference is also made to the decision of Mandie J in Trust Company of Australia Ltd v Commissioner of State Revenue [2007] VSC 451. Findings 1. Pursuant to s 8(1)(a) Duties Act 1997, duty is imposed on a transfer of "dutiable property". Pursuant to s 8(1)(b)(i), duty is also chargeable on an agreement for the sale or transfer of dutiable property. (However, pursuant to s 18(2) of the Duties Act, where a transfer of dutiable property is made in conformity with an agreement for the sale or transfer of that property, the duty payable is only $10 if the duty chargeable in respect of the agreement has been paid. 2. Section 11(1)(a) defines "dutiable property" as "land in New South Wales". It also includes "an interest in any dutiable property referred to in the preceding paragraphs…": see s 11(1)(l). 3. The dictionary to the Duties Act defines "land" as follows:- "land" includes a stratum 1. It follows that an interest in land is dutiable, and as found by Sackville AJA in Centro (CPL) Limited, at [106], "if there were any doubt that the definition includes an estate or interest in land, such doubt is removed by the definition of "land" contained in s 21(1) of the Interpretation Act". 2. The orders did not require that either the whole of the property, or any interest in the property be transferred to any person of the marriage, nor indeed, to any child thereof. Rather, the orders record the intention that the whole of the fee simple of the Dee Why property was to be submitted to public auction. Order 8 of the orders, acknowledged that the former parties to the marriage might bid at the auction. 3. Section 68 of the Duties Act provides an exemption from payment of duty where there is a dissolution of marriage or other relationship, and where an interest in land comprising matrimonial property is to be transferred to either of the parties to the marriage, or to a child or children of either of them, or to a trustee of such child or children. However, significantly, the orders did not direct that the Dee Why property or any interest therein should be transferred to Danny Knezevic, the husband. 4. The critical issue for determination is whether the correct approach is to regard the transfer of the Dee Why property as being, insofar as Danny Knezevic is concerned, a transfer of his interest only in the property or whether it is to be considered as a transfer of the whole property to the purchasers. 5. The contract for sale demonstrates that the whole of the property was to be transferred. No reference was made to the sale of any separate interests of either the vendors, although the vendors are referred to as holding the land as tenants in common. The transfer records that the estate or interest being transferred is "the estate in fee simple", and the whole of the land was identified as being transferred to "Steven Knezevic and Danny Knezevic as tenants in common in equal shares." 6. The Annexure to the contract for the sale of the land contained clause 30 of the Agreement which provided: "REPRESENTATIONS The purchaser acknowledges that the provisions of this contract constitute the full and complete understanding between the parties and that there is no other understanding, agreement, warranty or representation whether express or implied in any way extending, defining or otherwise relating to the provisions of this contract or binding on the parties hereto with respect to any of the matters to which this contract relates." 1. In Nullagine Investments Pty Limited v The Western Australian Club Inc. (1993) 177 CLR 635, the majority of the High Court of Australia considered the application of s 126(1) of the Property Law Act 1969 (WA) where two tenants-in-common in equal shares of land entered into an agreement which provided that neither would dispose of their interest without first offering it to the other. It was held by the High Court (by majority) that such agreement applied only to the disposition of the interest held by one of the parties, and not to a disposition of the complete freehold interest in land. Accordingly, the agreement did not preclude one of the parties from applying under s 126(1) for an order of partition or sale of the land. 2. At page 657, the majority (Deane, Dawson, Gaudron JJ), said: "Where sale is decreed, the single conveyance in fee simple by the tenants in common or joint tenants pursuant to a court order does not involve the sale or disposition of the individual share or interest of the individual tenant. The court order directing the sale of "the land" is an order for the sale of the fee simple in the whole of the land. It follows that the conveyance in such a case extinguishes the share or interest of the individual tenant and effects the sale or disposition of the freehold itself. Indeed, there is strong support for the view that the making of the order for sale extinguishes the equitable interests of the co-tenants in the land itself even before a sale is effected." [footnotes omitted]. 1. In Nullagine, Brennan J (as he then was) in dissent, said that: "Each tenant in common has a separate and individual title to the property limited according to the estate or term granted to or acquired by the tenant" 1. Although the legislation under consideration by the High Court was different to present circumstances, by analogy, there is no reason why the same principle should not apply. That is, the orders make it plain that the whole of the Dee Why property was to be sold at public auction. There is no reservation in such orders of any one party's particular interests, and whilst Brennan J's observation confirms the interest of a tenant in common, it does not address the effect of orders made for sale of the whole property. Further, the provision of paragraph 8 of the orders which allowed each of the parties to bid at auction made it plain that either party was entitled to bid for the whole property. 2. The respondents submit that Nullagine has no application, since the facts are distinguishable. In that decision, a trustee for sale was interposed. However, we consider that the critical factor in the High Court's decision was the existence of a court order directing the sale, as in the matter now before us. The order converted the interests of the parties to the marriage to personality: see In re Dodson; Yates v Morton [1908] 2 Ch 638 at 641-642 per Eve J. 3. It must follow that, as a consequence of the orders being made for the sale of the property at public auction and upon the transfer of the land, the individual interests therein ceased and their interest in the land ceased to be "matrimonial property". 4. Having found that the whole property was transferred, the next issue is whether s 68 has application. The exemption in s 68(1)(a) cannot apply as Stevan Knezevic was not one of the persons within the purview of that subsection. Conclusion 1. The orders did not contemplate the sale of specific interests in the Dee Why property, but rather of the whole; neither did the contract for sale contemplate the sale of specific interests of Danny Knezevic. 2. The representation in cl 30 of the contract, per se, adds nothing to the central issue. It only serves to confirm the absence of any understanding or agreement outside of the contract. We conclude that the observations of the majority in Nullagine have application, namely that the effect of the order effects the sale or disposition of the freehold itself. 3. Applying the principle in Nullagine, we find that the Tribunal member erred in his decision that there were two separate transactions. Once the sale of the Dee Why property was effected as directed by the orders, the whole of the fee simple was transferred by the vendors. 4. For the above reasons, we makes the following orders: 1. The appeal is upheld. 2. The decision under appeal is set aside and in substitution, the decision made by the respondent on 6 December 2013 is affirmed. 3. If any party wishes to apply for any special order for costs, such application is to be made to the Registrar within 21 days of the date of delivery of this decision. 4. In the event of no application being made as provided in (3), no order for costs be made. I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar Amendments 22 May 2015 - Case Title correction 29 May 2015 - Representation on coversheet amended 29 May 2015 - Representation on coversheet amended 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. Decision last updated: 29 May 2015