Marilyn E Trethowan v Chief Commissioner of State Revenue  NSWSC 576
|Date of judgement||17 May 2013||Proceeding No.||12/195020|
|Court or Tribunal||Supreme Court of New South Wales|
|Legislation cited||Duties Act 1997
Real Property Act 1900
Taxation Administration Act 1996
|Catchwords||TAXES AND DUTIES - stamp duties - instrument of transfer of land under Real Property Act 1900 - instrument not lodged for assessment of duty prior to registration - instrument later deregistered by Registrar-General and withdrawn - assessment for duty issued in respect of transfer to plaintiff - plaintiff's objection disallowed - whether instrument of transfer cancelled - whether transfer of dutiable property to transferee occurred - whether no duty payable under s 50A(1) Duties Act 1997 - whether assessment should be set aside|
|Cases cited||Gardiner v Chief Commissioner of State Revenue  NSWSC 107; (2004) 59 NSWLR 549|
The taxpayer sought review of a decision of the Chief Commissioner of State Revenue (the Chief Commissioner), to assess her as liable to pay duty on the transfer of land pursuant to s 8(1)(a) of the Duties Act 1997 (the Act). The land consisted of 3 contiguous lots, 1 of which contained the principal place of residence of the taxpayer and her husband. A transfer of the land from the husband as sole owner to the taxpayer and her husband as joint owners was registered without having been stamped, and was subsequently deregistered after the husband became aware that only the lot containing the residence was exempt under s.67.
The taxpayer contended that she was not liable for duty pursuant to s 50A of the Act on the ground that the transfer instrument had been cancelled and the dutiable property had not been transferred (and was not cancelled to give effect to a sub-lease). The Chief Commissioner maintained that the elements of s 50A(1) had not been satisfied, so that the taxpayer was liable to duty pursuant to s 8(1)(a).
The Court allowed the appeal, finding that from 7 May 2010, the taxpayer and her husband no longer had any intention to transfer the land. Abandonment was confirmed when the dealing was withdrawn on 4 November 2010, and therefore the instrument was cancelled within the meaning of s 50A(1)(a). The effect was that the register has the same validity and effect as it would have had if the erroneous registration had not occurred (s 12(3)(c) RP Act).
On 1 February 1996 the taxpayer’s husband became the registered proprietor of three adjacent lots known as Lots 1, 2 & 3 over which the National Australia Bank (the NAB) holds a registered mortgage. The taxpayer and her husband reside in a house which is situated on Lot 3, however there are no fences dividing any of the lots.
In about March 2009, the taxpayer’s husband instructed his solicitor of his wishes to transfer the land from himself as transferor to both the taxpayer and himself as transferees as joint tenants for no monetary consideration. One transfer instrument was prepared for all three lots to give effect to these instructions. Subsequently the taxpayer’s husband made a statutory declaration to this effect for the purpose of an exemption under s 67 of the Act, for a transfer to married couples. (Note that s.67 of the Act was repealed and replaced with Division 4, namely s 104B(1) by State Revenue Legislation Amendment Act 2012, No 20).
The instrument and declaration were provided to the Mortgagee who lodged them with the then Land and Property Management Authority (LPMA). Prior to lodgement the transfer was not lodged for assessment of duty and was not stamped.
On 15 April 2010 the documents lodged by the NAB were registered and Certificates of Title were returned to the NAB.
On 6 May 2010, it came to the Chief Commissioner’s notice that the transfer had been registered without being stamped and without duty having been paid, and the taxpayer’s solicitor was informed.
On 7 May, 2010, the taxpayer’s solicitor advised the LPMA that an error had occurred, including that the transfer included 3 lots when it should have included only 1 lot. On 10 May 2011, the NAB wrote to the LPMA endorsing the solicitor’s views and requesting deregistration of the transfers to rectify the errors.
On 26 May 2010 the LPMA caused the deregistration of the instrument relating to the three lots. A related departmental dealing to effect this was registered on the same day. The titles for the three lots were returned to their pre-registration state. By 26 May 2013, the transfer had been registered for 42 days.
On 12 August 2010, the client issued a notice of assessment for the transfer, with the exemption in relation to s.67 applying to only one of the 3 lots in the transfer.
On 25 October 2010, the NAB requested the withdrawal of the instrument and the related mortgage dealings to allow registration of the correct dealings. The LPMA notified the NAB on 4 November 2010 of the withdrawal of those instruments.
The taxpayer objected to the assessment, and the objection was disallowed.
Relying on s 50A(1) of the Act, the taxpayer’s case was:
the transfer instrument was cancelled in that the transfer was abandoned as she and her husband decided not to transfer the lots;
the property had not been transferred to herself and her husband.
Chief Commissioner’s case
The Chief Commissioner’s case was that s 50A did not apply and:
the deregistration by the Registrar-General in the exercise of his power of correction under s 12(1)(d) of the Real Property Act (RPA) did not have the effect of cancelling the transfer instrument, nor did it nullify the transfer to the transferees;
Registration vested the legal estate in the taxpayer and her husband, and established conclusively the transfer of those properties to them, and the later deregistration did not affect this;
The lack of stamping, contrary to s 301 of the Act, did not undermine the effect of registration;
In the alternative, the effect of s 12(3)(b) of the RPA was that the deregistration of the instrument which constituted the correction had no force or effect, deregistration being prejudicial to the NAB.
It was common ground that cancellation of the instrument was not brought about by its deregistration.
The Court found that from 7 May 2010, the taxpayer and her husband no longer had any intention to transfer the three lots with the use of the instrument for that purpose, or that it should have any operative effect. Abandonment was confirmed when the dealing was withdrawn on 4 November 2010, and therefore the instrument was cancelled within the meaning of s 50A(1)(a).
The Court rejected the Chief Commissioner’s submission that s 12(3)(b) of the RPA had no force. His Honour found that the evidence supported the view that the NAB consented and in fact endorsed such deregistration, and in doing so would have considered its interests.
On the issue of whether the dutiable property had been transferred, the Court found that it had not. The registration without prior payment of duty was erroneous; the effect of which was that the register has the same validity and effect as it would have had if the erroneous registration had not occurred (s 12(3)(c) of the RPA). Therefore, the Court held that the dutiable property had not been transferred to the transferees. The Court allowed the appeal on the basis that the application of s 50A(1) was enlivened. The effect was that the register has the same validity and effect as it would have had if the erroneous registration had not occurred (s 12(3)(c) RP Act). It restored the status quo ante with the result that the plaintiff and Mr Trethowan were divested of the title evidenced by registration of the instrument on 15 April 2010. Thus the register showed that the taxpayer’s husband was the registered proprietor of each of lots 1, 2, and 3 which he became upon registration of dealing no. 0909829 on 1 Feb 1996. It followed, in the Court’s opinion, that the dutiable property had not been transferred to the transferees.