VICTORIAN CIVIL AND ADMINISTRATIVE TRIBUNAL - ADMINISTRATIVE DIVISION

Re Williams and Commissioner of State Revenue

[2004] VCAT 1367

N Megay, Senior Member

23 July 2004 - Melbourne

N Megay, Senior Member. On 18 December 2001, the applicant, Sonia Gaye Williams and/or Nominee signed a contract for the purchase of a property at 278 Dandelion Drive, Rowville. The purchase price was $217,100 and settlement was due 18 March 2002.

2 The applicant applied for a loan and her application was rejected due to her not having sufficient income stream to service the loan.

3 As a result, it was suggested that Melanie Kate Pavey and Adam Michael Robbins be added as purchasers to assist in obtaining the loan.

4 Pursuant to the representations made to the bank, the loan was advanced to all 3, the applicant holding an 80% share and each of Melanie Kate Pavey and Adam Michael Robbins holding 10%.

5 On 22 March 2002, Ms Williams and the others were registered as the proprietors of certificate of title, vol 9681, fol 235 in shares set out as follows:

• Sonia Gaye Williams	80 equal undivided shares
• Melanie Kate Pavey	10 equal undivided shares
• Adam Michael Robbins	10 equal undivided shares

6 At the same time, the mortgage given by the three of them to National Australia Bank Ltd was registered.

7 According to the evidence given by Miss Williams in the interim, the 2 10% propietors paid their share of the loan repayments and she refunded the amounts to them.

8 On 10 August 2003, an instrument of transfer was executed wherein Sonia Williams, Melanie Pavey and Adam Robbins transferred to Sonia Williams the 20% share for a consideration that was said to be an entitlement in equity. That transfer has never been registered.

9 Eventually the property was sold and a transfer from all 3 registered proprietors to the new purchaser was effected and the property duly transferred to the new owners.

10 On 10 September 2003, after receiving statutory declarations by Melanie Pavey and Adam Robbins, and after consideration of valuation of the property performed by Barry Plant Doherty Real Estate, the respondent assessed duty on the transfer in the sum of $1000. That represented duty on one-fifth of the lowest valuation provided by Barry Plant Doherty, that is, one-fifth of $250,000.

11 The applicant objected on 20 October 2003. The basis for the objection was set out as follows:

1. Melanie and Adam paid no money towards the purchase of the property, and on transferring the land into my name only, was not to receive any money. That it was set up this way so I was able to obtain a loan to purchase the property.

2. When I first purchased the property I was unable to obtain a loan in my name only, even though I had the required deposit and [was] able to service the loan. But being a single mother of 2 children, a student and only just entering the workforce, they felt I wasn't a secure client. My sister and her partner, whom I resided with at the time, offered to help me out by putting their names on the loan which also meant their names having to be on the title. It was accepted by the bank as, on both the loan and title - 80% share to myself and 10% share each to Melanie and Adam. Hence I was given the loan, set up as 2 separate loans, which are in all our names but serviced only by myself, paying all payments.

3. I made all the payments in regard to both loans.

4. The reason the property has now been transferred into my own name is because I am now able to obtain a loan in my own name only due to my employment and I wanted to consolidate my debts. It was also necessary for the change as Melanie and Adam are looking at purchasing a block of land and as they have no money invested in the property it is not in their best interest in having their names on the loan and title.

5. On 13 November 2003, the Commissioner disallowed the objection.

The legislation

12 Section 7 of the Duties Act 2000 (Vic) provides that a transfer of dutiable property is a dutiable transaction chargeable with duty unless an exemption applies. The liability to pay duty on a dutiable transaction falls on the transferee.

13 Section 34(1)(b) provides:

34. Property vested in an apparent purchaser

(1) No duty is chargeable under this Chapter in respect of -
…

(b) a transfer of dutiable property or marketable securities referred to in section 10(2) from an apparent purchaser to the real purchaser in a case where dutiable property or marketable securities are vested in an apparent purchaser upon trust for the real purchaser who provided the money for the purchase of the dutiable property or marketable securities.

The law

14 The exemption provided in s 34(1)(b) operates only where all the purchase moneys have been provided by the real purchaser: see Triantafilis v Commissioner of State Revenue (NSW) (1998) 39 ATR 56; 98 ATC 4484 and Commissioner of State Revenue (Vic) v Pattison (2001) 3 VR 520; 47 ATR 71; 2001 ATC 4232 per Hanson J.

15 Miss Williams submits that, in effect, the entire purchase money was provided by her and that all payments made by her co-proprietors were refunded by her. Unfortunately the law is not on her side. It is clear that where part of the purchase price of her property is raised and paid by means of a bank loan secured by a mortgage over the property, that contribution is attributable to the persons who are liable for repayment of the loan: see Calverley v Green (1984) 155 CLR 242; 59 ALJR 111; 56 ALR 483; Horesh v Comptroller of Stamps (Vic) (1991) 22 ATR 3083; 91 ATC 2016; Alter v Comptroller of Stamps (Vic) (1991) 22 ATR 3128; 91 ATC 2019.

16 Calverley v Green was a case involving a de facto relationship where the male partner had difficulty obtaining finance and told the female partner that the finance company required the purchase to be in their joint names. Money was raised on a mortgage under which the parties were jointly and severely liable to make the repayments. It was agreed between them that the man in fact would make the repayments and he did so. The parties were registered as joint tenants, the house was purchased, the man paying the deposit out of his own funds and the balance being raised by way of mortgage. Some years later the couple parted company and the female party brought an action seeking an order for sale of the property and a distribution of the proceeds equally between the parties. There were various costs claims but in the end the High Court (per Gibbs CJ, Mason Brennan and Dean JJ) held that the fact that the balance of the price was raised by a mortgage under which both parties were liable to the mortgagee constituted a contribution by the woman to the price and the arrangement between them that the man would make the repayments did not establish that he alone provided the whole of the price. Mason and Brennan JJ said (at CLR 257-258; ALJR 116-117; ALR 493):

The first question is whether the plaintiff was a contributor to the purchase price of the property, as the Court of Appeal found, or whether she was not, as Rath J found. The defendant's payment of the instalments due under the memorandum of mortgage, in accordance with the arrangement made between the parties, may be thought to be, or to be the equivalent of, the provision pro tanto of the purchase price of the property. After all, the only moneys which were actually paid out on what the parties had owned before settlement of the contract for the purchase of the Baulkham Hills property or out of what they had earned thereafter had come out of the defendant's pocket. The property was purchased on the basis that the purchasers should pay it off over 20 years, a basis familiar to many home buyers. It is understandable but erroneous to regard the payment of mortgage instalments as payment of the purchase price of a home. The purchase price is what is paid in order to acquire the property. The mortgage instalments are paid to the lender from whom the money to pay some or all of the purchase price is borrowed. In this case, the price was $27,250, of which $18,000 was borrowed from the mortgagee by the plaintiff and defendant jointly. The balance was paid by the defendant out of his own funds, being part of the proceeds of the sale of the Mount Pritchard property. Thus the plaintiff and defendant both contributed to the purchase price of the Baulkham Hills property. They mortgaged that property to secure the performance of their joint and several obligation to repay principal and to pay interest. The payment of instalments under the mortgage was not a payment of the purchase price but a payment towards securing the release of the charge which the parties created over the property purchased.

17 In Alter v Comptroller of Stamps (Vic) (1991) 22 ATR 3128; 91 ATC 2019, a house property registered in the name of the husband had been paid for by the wife's father providing the deposit and paying the instalments due under the mortgage which his daughter and her husband gave. The father was also a party to the mortgage. Following a breakdown in the marriage the property was transferred to the father, who claimed exemption on the ground that he had contributed the purchase money for the property. Mr Gibson, following Calverley v Green, held that since the daughter and her husband were each liable for repayment of the money advanced pursuant to the mortgage, it was not possible to regard the purchase price as having been provided by the father. Mr Gibson stated (at ATR 131; ATC 2022):

… In my view the decision of the High Court in Calverley v Green is authority for the proposition that if 2 people finance a purchase in party by way of moneys borrowed under a mortgage under which each is liable for repayment, the amount of money so provided is to be regarded as having been provided by each of the purchasers, and it is not possible to regard the money as having been provided by one of them alone simply because that person is the only person who in fact assumes the responsibility as between the purchasers for repayment of the mortgage.

18 Mr Boaden of counsel summarised this excellently by saying that in the case of a loan such as this, the fact that as between the several borrowers, one assumes the responsibility for servicing the loan and pays the whole of the instalments, does not means that he or she alone is regarded as having provided the purchase price. The purchase price is provided by all of the persons who joined in borrowing the money which was paid to the vendor.

19 It follows s 34 of the Duties Act 2000 (Vic) is not applicable because Sonia Williams did not provide the whole of the purchase price. This is so because Melanie Pavey and Adam Robbins joined in borrowing funds which were used to pay the purchase price; they were registered as co-owners, and they mortgaged their interests in the property. They, as well as Sonia Williams, assumed liability to the bank under the covenants to pay as set out in the mortgage.

20 Miss Williams submitted that I should have regard to the fact that the transfer on which duty has been levied, was never registered. Section 7(1)(a) of the Duties Act 2000 (Vic) imposes duty upon "a transfer of dutiable property".

21 The transfer in question was a transaction which altered the beneficial ownership of the land because it transferred to the applicant the 20% interest in the land which until then had been owned by the other 2 co-owners, Melanie Pavey and Adam Robbins.

22 Mr Boaden submitted that there is no basis on which the Commissioner can simply disregard the executed instrument and not assess it for duty. He submitted as follows:

An instrument which "fails its intended operation and becomes useless is not chargeable with duty under this Act" under s 260(1). But this was not a "failed instrument". Section 260 operates where the instrument fails because the underlying transaction itself fails. There is no suggestion that the transaction (being the transfer from Melanie Pavey and Adam Robbins to Sonia Williams) failed, or that she did not receive the whole of the proceeds of sale of the property. The fact that the parties chose not to register the transfer and were able to complete the disposition of the property without doing so, does not alter the fact that there was a transaction by which the ownership of the property was transferred from the 3 co-owners to Sonia Williams as sole owner.

Section 11(1) provides that a liability for duty arises when a dutiable transaction occurs; and when the instrument of transfer was executed and Sonia Williams became sole owner of the property, a dutiable transaction did take place.

23 I accept Mr Boaden's submission about the effect of non-registration.

24 It follows that the applicant is unable to avail herself of any of the exemptions provided in the legislation and the assessment of the respondent is affirmed.