Administrative Decisions Tribunal New South Wales

• Medium Neutral Citation: Chief Commissioner of State Revenue v Ghali (RD) [2012] NSWADTAP 20
• Hearing dates: 22 May 2012
• Decision date: 07 June 2012
• Before: Judge K P O'Connor, President; M Hole, Judicial Member; C Bennett, Non-judicial Member

Decision

1. Appeal allowed.

2. Decision under appeal set aside.

3. Decision under review affirmed.

• Catchwords: STATE REVENUE - Principal place of residence - Limited period of occupation - Substantial period of occupation of alternative residence - Degree of practical availability of residence claimed as principal place of residence - Statutory Interpretation - Appeal allowed: Land Tax Management Act 1956 s 10(1)(r); Schedule 1A, cl 2(2)(a), (b)
• Legislation Cited: Administrative Decisions Tribunal Act 1997; Land Tax Management Act 1956; Taxation Administration Act 1996
• Cases Cited: Chief Commissioner of State Revenue -v- Ferrington (GD) [2004] NSWADTAP 41; Chief Commissioner of State Revenue v McIlroy [2009] NSWADTAP 21; Chief Commissioner of State Revenue v Mesiti [2003] NSWADTAP 57; Commissioner of Land Tax v Christie [1973] 2 NSWLR 526; Commissioner of Taxation v Miller (1946) 73 CLR 93; Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68; Gregory v Deputy Commissioner of Taxation (1937) 57 CLR 774; Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366; Levene v IRC [1928] AC 217; Lloyd v Veterinary Surgeons Investigating Committee [2005] NSWCA 456; Mohamed v Chief Commissioner of State Revenue [2010] NSWADT 146; Rogers v Inland Revenue (1879) 1 TC 225
• Category: Principal judgment
• Parties: Chief Commissioner of State Revenue (Appellant); Magdi Botros Ghali (Respondent)
• Representation: Counsel; J Mitchell (Appellant); N Allan (Respondent); Crown Solicitor's Office (Appellant); Northside Law (Respondent)
• File Number(s): 119055

Decision under appeal

• Jurisdiction: 9108
• Citation: Ghali v Chief Commissioner of State Revenue [2011] NSWADT 261
• Date of Decision: 2011-11-14 00:00:00
• Before: Revenue Division
• File Number(s): 116026

REASONS FOR DECISION

1 The Chief Commissioner of State Revenue assessed the respondent, Mr Magdi Botros Ghali, as liable to land tax for the land tax years 2004-2007 in respect of land owned by Mr Ghali ('the Beecroft Road' property). The Chief Commissioner refused Mr Ghali's application to have the land treated as exempt from tax on the basis that it was his principal place of residence. Mr Ghali applied to the Tribunal for review of the decision. His application was successful. The Chief Commissioner (the appellant) now appeals.

2 The basic rule is that '[l]and tax at such rates as may be fixed by any Act is to be levied and paid on the taxable value of all land situated in New South Wales which is owned by taxpayers (other than land which is exempt from taxation under this Act)': Land Tax Management Act 1956 (LTMA), s 7. Notices of assessment are raised annually. The taxing date for this purpose is the 31st day of December in the immediately preceding year: LTMA, s 8. The types of land that are exempted from tax are listed at s 10. The present case relies on the exemption at s 10(1)(r): 'land that is exempt from taxation under the principal place of residence exemption, as provided for by Schedule 1A'.

3 In this case the notices of assessment in dispute relate to the land tax years 2004, 2005, 2006 and 2007. Mr Ghali (the respondent) claimed that his case satisfied either or both of the categories listed in cl 2(2)(a) and (b) of Schedule 1A:

(2) Land is not used and occupied as the principal place of residence of a person unless:

(a) the land, and no other land, has been continuously used and occupied by the person for residential purposes and for no other purposes since 1 July in the year preceding the tax year in which land tax is levied, or

(b) in any other case, the Chief Commissioner is satisfied that the land is used and occupied by the person as the person's principal place of residence.

4 The Tribunal held that his circumstances did not fall within category (a), but it was satisfied that they fell within category (b).

5 The respondent's evidence was that he spent 6 weeks of the year at the Beecroft Road property and spent the other 46 weeks at another property he owned, known in the case as the Harold Avenue property.

6 The Tribunal was primarily influenced by two factors in reaching the conclusion that the Beecroft Road property qualified as the primary place of residence: one, that in its opinion, the respondent had never occupied Harold Avenue as a residence; and two, accepted his evidence that he regarded Beecroft Road as his home, and intended to return there once he had completed renovations at Harold Avenue.

7 The Administrative Decisions Tribunal Act 1997 (ADT Act) confines the right to appeal to any matter that raises a 'question of law'. However, the law goes on to permit the Appeal Panel to give leave to extend the appeal to the merits: ss 112, 113. The appellant's notice of appeal, in accordance with usual appeal practice in the Tribunal, is divided into a section setting out matters said to raise questions of law, and a separate part giving reasons as to why the case should be extended to the merits.

8 These matters of procedure are mentioned at the outset of these reasons, because the respondent has challenged the notice of appeal as not disclosing any questions of law in relation to four of the five grounds pressed.

9 The following is an abbreviated version of the grounds pressed (Ground 5 not pressed):

1. Whether:

a. The Tribunal applied a sole purpose test and thereby failed to apply the test in cl 2(2)(b);

b. Failed to properly and fairly consider the fact that the applicant intended to and did reside at the Harold Avenue property and did so use and occupy that property in the relevant land tax years;

2. Whether the Tribunal found that the subjective intentions of the applicant as to past and future use and occupation of Harold Avenue and Beecroft Road properties were determinative as to his use and occupation of the Beecroft Road property as his principal place of residence;

3. Whether the Tribunal applied the wrong test by finding that the applicant's use and occupation of the Beecroft Road property more closely resembled the facts of a previous case;

4. Whether the Tribunal erred in finding that the applicant used and occupied the Beecroft Road property as a residence in the relevant land tax years because there was no factual basis for that finding; and

6. Whether the Tribunal failed to consider whether the applicant could use and occupy the Beecroft Road property as a residence or his primary residence during the relevant years in circumstances where the property was used and occupied by a tenant and his wife and thereby the Tribunal failed to consider a matter relevant to the 2(2)(b) test.

10 The respondent only concedes that ground 4 raises a question of law, and disputes that grounds 1, 2, 3 and 6 do. As explained below, ground 6 traverses a matter that, in our view, better relates to the issue of whether leave to extend to the merits should be granted. There are seven points given in support of the application for leave to extend to the merits. We will not itemise them.

11 The law is clear that the Appeal Panel may extend to the merits regardless of whether an error of law is demonstrated: Lloyd v Veterinary Surgeons Investigating Committee [2005] NSWCA 456. It follows, we consider, that if a notice of appeal includes an application for leave to extend to the merits it is competent to found jurisdiction even if it recites no questions of law or recites matters which on closer analysis may be said not to be questions of law.

12 In any event, as explained further below, the appellant's notice of appeal does in our view raise arguable questions of law in relation to a number of aspects of the Tribunal's reasoning.

13 The respondent challenges the application for leave to extend to the merits on the basis that it is in the interests of justice to bring an end to a dispute. He submits that the assessment involves a relatively low amount, and notes the extent of consideration the dispute has already received.

The Tribunal's Decision

14 The Tribunal received evidence on the pattern of the respondent's living arrangements in the years 2003, 2004, 2005 and 2006, being the years immediately preceding each of the land tax notices. As noted above, the Tribunal accepted his evidence that he spent no more than 6 weeks of the year's 52 weeks physically present at Beecroft Road. He used Harold Avenue for the remaining weeks of the year.

15 The Tribunal accepted the respondent's evidence that he had always regarded Beecroft Road as his principal place of residence. After his separation from his wife, she had continued to live at the family home, Harold Avenue, and he moved to Beecroft Road. She later asked for Harold Avenue to be upgraded to match the quality of the Beecroft Road property. He agreed to do that. They made an arrangement under which she moved to Beecroft Road and he commenced renovating Harold Avenue. Once the work at Harold Avenue was finished his evidence was that he intended to move back permanently to Beecroft Road, and she would move back to Harold Avenue.

16 He said that during the relevant years Harold Avenue was a renovation site. He had simply set aside there an area which had the basics for human habitation. He slept there, and made meals there. But he had little furniture apart from a bed.

17 He and his wife agreed that he could use Beecroft Road twice a year for two periods of about 3 weeks for events that he wished to hold there connected with his ethnic and cultural background. She would move out. The periods were around Christmas and around July, further details appear in the reasons of the Tribunal.

18 As we have noted, the Tribunal rejected the paragraph (a) case but was satisfied in relation to paragraph (b).

19 In our view this is clearly a case to which paragraph (a) has no application. The respondent's evidence, accepted by the Tribunal, was that he split his time between Beecroft Road and Harold Avenue in the proportions mentioned (6 weeks; 46 weeks). Therefore the case is one where two properties have been 'used and occupied ... for residential purposes' and not one, and therefore the matter of the one to which the exemption is to be applied fell to be decided under paragraph (b).

20 The Tribunal accepted the evidence of his intentions, and his continued connection with the Beecroft Road property, as relevant and decisive in relation to the question of whether Beecroft Road or Harold Avenue was his principal place of residence.

21 The Tribunal concluded:

62 As Mr Ghali resided both at Beecroft Road and at Harold Avenue during the relevant period, it is also necessary to consider which of them was his 'principal' residence. Relevant considerations include his subjective view as to which was his principal place of residence, and objective factors such as the relative amount of time he spent in each, and which of them he nominated as his address in communications with the various government and other agencies with which he had to deal.

63 Subjective factors, objectively ascertained, are relevant, though not conclusive. I am satisfied that, throughout the period in question, Mr Ghali regarded Harold Avenue as a renovation site, where he lived solely in order to execute the renovations which he had undertaken to please Mrs Ghali. He regarded Beecroft Road as his real home, and at all times intended to return there.

64 His occupation of Harold Avenue was lengthy. To that extent, it acquired a 'settled character', as the Chief Commissioner as submitted. However, because the sole purpose of that occupation was a temporary one of renovation, and there was an ever-present intention to return to Beecroft Road as soon as the renovation was complete, the occupation of Harold Avenue was characterised by an underlying transience which did not apply to Beecroft Road.

...

69 ... [T]he marital relationship between Mr and Mrs Ghali had come to an end long ago, even if the marriage remained undissolved, and Mr Ghali did not reside with family members at Harold Avenue at any time during the period in question.

...

71Whether it favours Beecroft Road or Harold Avenue as Mr Ghali's principal place of residence, none of this evidence causes the Tribunal to doubt that he regarded Beecroft Road as his home, that he intended at all times to return there permanently, and that he viewed his stay at Harold Avenue as transient, and one of convenience only, for the purpose of renovations.

22 In the course of its reasons, the Tribunal referred to case-law where the question had arisen of which of two places of residence should be regarded as the principal place of residence: Chief Commissioner of State Revenue v Mesiti [2003] NSWADTAP 57; Chief Commissioner of State Revenue v McIlroy [2009] NSWADTAP 21; and Mohamed v Chief Commissioner of State Revenue [2010] NSWADT 146.

23 The main case relied upon was Mesiti. In that case, the taxpayer had two residences. She spent most of her time in the previous year at a second residence owned by her new partner, and away from her long-term family home, where her sons continued to live. She would return to the first residence on occasions, especially when her partner was away on business trips. She kept the bulk of her possessions at the first residence and it remained set up as the family home. In that case the Tribunal was satisfied that the family home remained her principal place of residence. She lived at the other residence because of the friendship and generosity of her new partner, who at a later time became her husband (see Mesiti at [21]).

24 In the present case, referring to Mesiti, the Tribunal said at [53]:

53 In this case, as in Mesiti, Mr Ghali was the owner of the subject property throughout the period in question. He had control over it. It was he who invited Mrs Ghali to live there, and to install her furniture and belongings there. It was he who decided the duration of her stay, and who decided that she would vacate the property twice a year to accommodate his desire to recreate and entertain friends. Like Mrs Mesiti, he used the land for residential purposes and for no other purposes, even though he arranged for his wife to live in the property for most of the time while he was living elsewhere. Like Mrs Mesiti, he occupied the land because, as its sole owner, he enjoyed control over it and exercised that control. He maintained the right to exclude strangers, and even - however politely - to exclude Mrs Ghali when it suited his convenience. There is no evidence that the Beecroft Road property was used for any purpose other than residential purposes.

Consideration

25 The Tribunal's reasoning in relation to paragraph (b) points, in our opinion, to a misunderstanding of the way paragraph (b) is to be construed and applied.

26 Given the way the respondent presented his case, the focus needed to be placed squarely on his circumstances as they related to Beecroft Road. The first question will be: does it qualify as a residence?

27 The word 'residence' is used in ordinary speech to convey more than a mere place of overnight accommodation. The noun 'residence' derives from the verb 'to reside'. The principal meaning given to 'to reside' in the Macquarie Dictionary, 2005 4th ed., is 'to dwell permanently or for a considerable time; have one's abode for a time ...'. The primary meaning given to 'dwell' is to similar effect, 'to abide as a permanent resident', as is the second of the meanings given to 'dwelling' - 'continued or habitual residence'. See further, Levene v IRC [1928] AC 217 at 222-3 per Lord Cave LC; Commissioner of Taxation v Miller (1946) 73 CLR 93 at 99 per Latham CJ.

28 If it does qualify as a residence, the usual determinant as to which of the residences under notice is the principal place of residence will be the proportionate division of time between the residences. As a case like Mesiti illustrates, proportions of time may, however, not be decisive. Mesiti is a case where the taxpayer continued to use and occupy on an occasional basis the first residence as a home, and she had there many of the trappings of home. It could be said that she had 'retained' it in a practical sense as her family home, somewhat like the circumstances considered in Gregory v Deputy Commissioner of Taxation (1937) 57 CLR 774.

29 The Tribunal was mistaken in treating the present circumstances as being analogous to cases such as Mesiti. The key difference, as we see it, is that in the present case the taxpayer had ceded to his separated wife, as a practical matter, exclusive occupation of the Beecroft Road property for 46 weeks of the year. The fact that Mr Ghali may have had 'control' (reasons, 53]) in a legal and, perhaps emotional, sense over the occupation of the Beecroft Road property does not displace the primary circumstance in this case, that he did not come and go as he pleased. The fact of their separation is in that regard, of course, a significant matter; and is a material difference from the other two residence cases that the Tribunal has considered.

30 The Tribunal referred to authority where courts have stated that so long as a person retains the right to possession and controls possession, that person remains 'in occupation' though absent, for example, Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68 at [29] (Gzell J). In our view, this case can not reasonably be characterised as a case of that type. As noted, the feature present in all the 'competing residences' cases is that the taxpayer has had the ability to move between them at will and without impediment.

31 This factor also affects the approach to be taken to the question of 'occupation'. In our view, it is clearly material to the question of whether a place is the principal place of residence for the purposes of paragraph (b) that the taxpayer be able to demonstrate that it is an available place of abode of the taxpayer on a continuous basis. It is in that sense that we understand the observation of Gzell J in Flaracos, and earlier statements to similar effect, as per Bowen JA in Commissioner of Land Tax v Christie [1973] 2 NSWLR 526 at 533-4.

32 More importantly, we consider that Beecroft Road could not reasonably have been regarded as an available place of abode for him in the other 46 weeks of the year. He had nowhere else to live practically, on his evidence, but Harold Avenue.

33 The cases dealing with the itinerant are instructive in this regard. It has long been recognised that the taxpayer may be involved in a calling or have other circumstances which take him or her away from their usual place of abode for extended periods, and that their sole or primary place of residence may be elsewhere (the usual example is the sailor on extended voyages, away from a permanent home on land). See for example, Levene, cited earlier; Rogers v Inland Revenue (1879) 1 TC 225. None of those cases carry the extra feature, present in this case, of the home itself being out of bounds to the itinerant for substantial periods of their absence.

34 Consequently, no arguable competing residences issue could in fact arise. His place of living - Harold Avenue - was for those weeks his place of residence on any reasonable view of the circumstances, albeit spartan. The fact that he returned to Beecroft Road for two limited periods in each year did not convert Beecroft Road into a residence in its ordinary sense.

35 We uphold Ground 4 of the notice of appeal.

36 The other grounds mainly went to the issue of the extent of reliance the Tribunal placed on the subjective intention of the taxpayer. The case-law has acknowledged the relevance of subjective intention 'objectively ascertained' to the question of whether a place of occupation is a 'residence' and whether it can be regarded as the 'principal place of residence': see, for example, Chief Commissioner of State Revenue -v- Ferrington (GD) [2004] NSWADTAP 41.

37 The Tribunal gave considerable emphasis to the respondent's long term intentions. It accepted the respondent's evidence that his intention was to return to live at Beecroft Road on a full-time basis once the renovations at Harold Avenue had been completed.

38 The focus of the legislation is the living circumstances of those claiming the exemption in the relevant period. As this is an annualised tax system the focus is the circumstances on the taxing date, as reasonably informed by the period surrounding it on either side (see, for example, Gregory per Dixon J at 778 ('events which occurred before and after a given period may be considered as throwing light on and disclosing the significance of habits and conduct within the period').

39 Here the taxpayer left Beecroft Road around 2001 and was away for six years. His future intention to return to Beecroft Road involving such a distance in time should not, we consider, have been taken into account in the away that it was.

40 The appeal also raised issues in relation to the meaning to be accorded to the terms 'use' and 'occupied' in paragraph (b). We agree with the Commissioner's submission that the emphasis seen on 'present use' in a recent Court of Appeal decision in the context of the primary production exemption from land tax is also of assistance in informing the proper approach to construction of paragraph (b). See Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366 at [23]-[24] per Allsop P (Campbell and Whealy JJA agreeing).

Conclusion

41 The meaning to be given to the term 'residence', or to such matters as 'use' and 'occupation' involves a question of fact and one of degree. However, in this case we consider that the Tribunal erred in law, in that, in our respectful opinion, the Tribunal could not have reached any other view on the evidence before it than that Beecroft Road did not qualify as a residence let alone a principal place of residence.

42 There was no exigency of the kind properly taken into account in the itinerant absences cases; nor was there any freedom to come and go, as seen in the usual competing residences cases with which the Tribunal has dealt. In our opinion, he had voluntarily barred himself from dwelling at the property for most of the year. There was no continuousness in the sense required by the ordinary meaning of 'residence'.

43 For the reasons given, the Tribunal could only have been assessed the issue in one way.

Other Matters

44 We will deal briefly with some other points that arose in the appeal.

45 First, the Commissioner sought to have leave if the case were to be extended to the merits, to introduce new evidence that went to the truthfulness of the respondent's evidence in relation to his occupation of Harold Avenue and the activity that he said caused him to reside there, that of renovations. The respondent did not contest the basic thrust of the new evidence, i.e. that a substantial part of the Harold Avenue property had been tenanted during the years under notice, and was not the subject of any internal renovation activity.

46 The Commissioner also wished to have re-examined material that did appear in the documents before the Tribunal below (but appears not to have been seen by the Commissioner's then counsel as necessary to be examined on that occasion). The material showed that part of the Beecroft Road property was tenanted.

47 Again the respondent did not disagree with this evidence. The respondent, through his counsel, explained that the building at Beecroft Road had, effectively, two separate residential zones divided off from each other. He said that this information had always been known to the Commissioner. His wife lived in one part of the building, and the other was tenanted. In our view, were there no determinative error of law, it would have been appropriate to extend to the merits to consider this material.

48 We will comment briefly on the respondent's submission that these matters should have been canvassed below, and as they were not, that is the end of the matter.

49 If, as the Tribunal below considered, it was necessary to have regard to the purpose for which the respondent was living at Harold Avenue, i.e. renovations, then we would have regarded it as desirable for the fresh evidence to be scrutinised. In revenue matters, the taxpayer is in the best position to know all the facts relevant to his case. The taxpayer has a duty of candour and full disclosure in relation to relevant matters: Taxation Administration Act 1996, s 10.

50 In this case, the Tribunal relied entirely on the affidavit and oral evidence of the respondent as to his purpose in being at Harold Avenue. It had no documentary material before it evidencing any renovation work in the relevant years (this material all related to the years 2000-2002). It should have been informed that during the relevant years (2003-2006) that a significant proportion of the property was out of bounds for renovation.

51 Effective merits review of administrative decisions depends on all relevant material being before the review tribunal. The ADT Act places a direct obligation on the administrator to produce all relevant material in the possession of the administrator: ss 58, 59. It may be that a review applicant has relevant material that bears negatively on the review applicant's case. Clearly any non-disclosure of that material could lead to the Tribunal, standing in the shoes of the administrator, making a decision with incomplete information. Therefore it follows that the review applicant is to be expected to disclose all relevant material including material against interest. Equally, if the administrator suspects that there is other material of relevance in the possession of the review applicant but not revealed, the Tribunal may (of its own motion) use coercive processes such as summonses or allow the administrator to use those processes to obtain that material.

52 At hearing we canvassed various options with the parties if we upheld the appeal, as to how we might go on to deal with the case if it were to be extended to the merits. In our view, in this case for the reasons given, the errors of law that we have identified are decisive and there is no need to re-assemble to re-consider the evidence or examine the new evidence.

Order

1. Appeal allowed

2. Decision under appeal set aside.

3. Decision under review affirmed.

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Decision last updated: 07 June 2012