Menashi & anor v Chief Commissioner of State Revenue [2003] NSWADT 23 (3 February 2003)

Last Updated: 3 March 2003

NEW SOUTH WALES ADMINISTRATIVE DECISIONS TRIBUNAL GENERAL DIVISION

CITATION: Menashi & anor v Chief Commissioner of State Revenue [2003] NSWADT 23 revised - 05/02/2003

PARTIES: APPLICANTS

Levon Menashi

Anwar Menashi

RESPONDENT

Chief Commissioner of State Revenue

FILE NUMBERS: 023252

HEARING DATES: 20 January 2003

SUBMISSIONS CLOSED: 20/01/2003

DECISION DATE: 03/02/2003

BEFORE: Needham J - Judicial Member

LEGISLATION CITED: First Home Owners Grant Act 2000

CASES CITED:

APPLICATION: first home owners grant - approval of application

MATTER FOR DECISION: Principal

APPLICANT REPRESENTATIVE: L and A Menashi, in person

RESPONDENT REPRESENTATIVE: G van Emmerick, agent

ORDERS: The Chief Commissioner's decision not to approve the applicant's application for a First Home Owner Grant is affirmed.

Reasons for Decision:

Facts

1 Mr Levon and Mrs Rita Menashi lodged an application for a grant under the First Home Owner Grant Act 2000 ("the Act") on 20 December 2001. Mr Anwar and Mrs Janet Menashi lodged an application for a grant under the Act on 17 December 2001. Each of the applications was in relation to land owned by Mr Levon Menashi, Mr Anwar Menashi and Dr William Menashi at Karabar Street, Fairfield Heights. I will refer in this decision, without meaning any disrespect, to each of the Menashi brothers by their first names.

2 On 2 July 2002 the brothers entered into a construction agreement with Ishtar Construction Pty Ltd to build a "triplex" on the land. The land consisted of three lots and, at the date of purchase of the lots, had an old house erected upon it. The land currently consists of three dwellings, one of which is occupied by Anwar, one by Levon, and the third has been sold. The land remains in the name of the three brothers.

3 The Act's long title shows a legislative intention to "encourage and assist home ownership, and to offset the effect of the Goods and Services Tax on the acquisition of a first home". Section 7 of the Act is headed "entitlement to grant" and provides, relevantly:-

"(1) A first home owner grant is payable on an application under this Act if:

(a) the applicant or, if there are 2 or more of them, each of the applicants complies with the eligibility criteria, and

(b) the transaction for which the grant is sought:

(i) is an eligible transaction, and

(ii) has been completed.

....

(4) Only one first home owner grant is payable for the same eligible transaction."

4 To qualify for a grant, applicants must fulfil all of the eligibility criteria unless there is a statutory exemption (none of which are here relevant).

5 The Office of State Revenue ("OSR") wrote to Mr Levon Menashi on 7 February 2002 advising that "only one grant can be paid" in relation to the Karabar Street development. The reason given was the effect of s 7(4), that is, that only one grant is payable for the same eligible transaction. That letter also stated that all "interested persons" must make application, and sought an application from Dr William Menashi, on receipt of which it was envisaged that one grant would be made.

6 Section 25 of the Act authorises an applicant to object to a decision of the Chief Commissioner if he or she is dissatisfied with that decision. Section 25(1) provides:-

"(1) An applicant who is dissatisfied with the Chief Commissioner's decision on the application (including a decision to reverse or vary an earlier decision) may lodge a written objection with the Chief Commissioner."

7 On 2 April 2002 Levon Menashi wrote to the Chief Commissioner of State Revenue objecting to the decision to refuse his application, and stated, in summary:-

- The construction agreement, although in form being one contract, was actually a contract to build three homes and the substance, not the form of the contract should be considered;

- Neither Anwar nor Levon Menashi had ever owned residential property before, nor had their spouses;

- Each of them lives in one of the constructed houses; and

- They had each paid GST on the building contract, and relied on the purpose of the Act.

8 On 13 August 2002 the officer dealing with the application within the OSR, Mr Lauricella, wrote to Levon Menashi and asked that an application be forwarded in the name of Dr William Menashi so that the application for one grant among the three brothers could be completed. Mr Lauricella then spoke to both Levon and William Menashi, and it appears from the correspondence that Mr William Menashi was reluctant to lodge an application for reasons not relevant here. No application in his name was received.

9 On 4 September 2002 the OSR wrote to the relevant local Council, Fairfield City Council, and ascertained that there was a house on the property which was demolished prior to the contruction of the triplex.

10 On 6 September 2002 the Chief Commissioner made a decision to disallow the objection. The ground given was that:-

"when you purchased the property at 42 Karabar Street, Fairfield Heights in November 1999 it was a residential property and had a house on it. Since you owned a residential property prior to 1 July 2000, we cannot offer you a grant".

11 In other words, the application was refused on the grounds that the applicants did not fulfil Eligibility Criterion 4, which is contained in s 11 of the Act. Section 11 provides (relevantly):-

"Criterion 4--Applicant (or applicant's spouse) must not have had relevant interest in residential property

(1) An applicant for a first home owner grant is ineligible for the grant if the applicant or the applicant's spouse has, before 1 July 2000, held:

(a) a relevant interest in residential property in New South Wales, or

(b) an interest in residential property in another State or a Territory that is a relevant interest under the corresponding law of that State or Territory."

12 Levon and Anwar Menashi lodged an application with the Tribunal on 13 November 2002 for review of the decision contained in the letter of 6 September 2002.

Jurisdiction

13 The Act authorises the applicants to apply to this Tribunal for a review of the decision. Section 28 provides:-

"(1) An objector may apply to the Administrative Decisions Tribunal for a review of the decision (the original decision) to which the objection was made if:

(a) the objector is dissatisfied with the Chief Commissioner's determination of the objection."

14 The application before the Tribunal is, in one sense, improperly constituted since not all interested persons have joined in either the application to the respondent for a grant or for review of the decision to this Tribunal. I raised this with the parties and although it was conceded that William, as a co-owner of the land at the time of the application for the grant, should have been a party to the application, the decision of the Tribunal on the issue of eligibility should be decided in any event. If the brothers are eligible, payment would depend on William also lodging an application; if they were not, the absence of William would not matter one way or the other.

15 Accordingly, since both Levon and Anwar were present and prepared to argue the matter, the matter was heard.

Time

16 Under s 28(4), an application for review must be filed within 60 days after the date of issue of the notice of determination. In this case the relevant date was 6 September 2002, and thus the 60 days after that date expired on 6 November 2002. The application lodged with the Tribunal was thus a week out of time, notwithstanding that the form for the Application and the covering letter were both dated 5 November 2002.

17 Section 28(5) provides that the Tribunal may extend time for the lodging of an application.

18 Mr Van Emmerik, who appeared at the hearing for the Chief Commissioner, did not object to an extension of time. Accordingly, the time for lodging of the application was extended up to and including 13 November 2002.

Applicants' Submissions

19 The applicants relied on their letter of 2 April 2002 to the Chief Commissioner, and on the letter (with annexures) dated 5 November 2002, which formed the basis of the application lodged with the Tribunal.

20 Levon, the spokesman for the applicants, was sworn and gave evidence in response to questions from the Tribunal as follows:-

- The house on the property was occupied prior to their purchase of the property.

- The house was an old cottage. He referred to a valuation which put the value of the land at $230,000 and the value of the cottage at $10,000.

- The previous owner of the land consented to the demolition of the cottage pin an application to Council prior to settlement of the purchase, which was 26 November 1999 (although the transfer was not registered until 4 February 2000.

- The house was demolished by 9 June 2000.

21 A sewer diagram was tendered (Exhibit "A") which showed that the house was located over blocks 9 and 10 while block 11 was vacant land.

22 In relation to the issue of eligibility under s 11 of the Act, the applicants submitted that:-

- They never intended to occupy the house and in fact regarded the purchase of the property as vacant land;

- The house was never in fact occupied during their ownership of the land;

- The intention of the Act is to relieve the burden of GST on purchases of land and building contracts and they paid GST on the construction of the three dwellings on the land; and

- They should not be in any worse position than someone who had bought vacant land and built a dwelling upon it, given that their intention was always to demolish the cottage.

23 It was not contested by the respondent that the intention was to demolish, nor was it contested that the house had not been occupied prior to demolition during the ownership of it by the brothers.

Respondent's Submissions

24 Mr Van Emmerik, in helpful written submissions, identified the house on the property as "residential property" as defined in s 3 of the Act, which provides:-

"residential property" --land in Australia is residential property at a particular time if there is, at that time, a building on the land lawfully occupied as a place of residence or suitable for occupation as a place of residence.

25 Thus, in his submission, the applicants held a relevant interest (being an estate in fee simple) in "residential property" prior to 1 July 2000, and do not fulfil the requirements of s 11.

26 Mr Van Emmerik further submitted orally that the intention of the Act was indeed to relieve the effect of GST, but that there was no GST payable on the purchase of the property (given that it was purchased prior to the commencement of GST). However, he accepted that the brothers paid GST on the construction costs.

27 He further submitted that, since Anwar was the principal of the construction firm who contracted with the brothers for the construction of the triplex, the "parties were not acting at arms length". Since Ishtar Constructions Pty Ltd is a company, and no cross-examination was directed at Anwar to test the prima facie position that a company is a separate entity from its office-holders, no inference adverse to the applicants can be drawn from the dual capacities in which Anwar signed the construction agreement.

Consideration of the Application

28 There do not appear to be any cases on this point heard by the Tribunal prior to this matter.

29 The issue to be considered is whether there is a subjective element to sub-s 11(1) of the Act. In other words, is the intention of the brothers to purchase the land for what was essentially land value, and to demolish the house without occupying it, sufficient to exempt their ownership of the property from being "a relevant interest in residential property in NSW" before 1 July 2000?

30 I am of the opinion that sub-s 11(1) does not include such a subjective element. The definition of "residential property" is "a building on the land lawfully occupied as a place of residence or suitable for occupation as a place of residence". The question of whether the cottage was "suitable" for occupation is answered by the fact that it was indeed occupied prior to purchase by the brothers. The question of whether they intended to occupy it or not is not relevant. The test is whether it could have been occupied, not whether they intended to occupy it.

31 Alternatively, the applicants could succeed if the words "other than the property to which the application relates" were to be implied into sub-s 11(1). Those words appear in sub-s 11(3), exempting from eligibility persons who hold an interest in property used after 1 July 2000 as the residence of the applicant or the applicant's spouse. There is no basis for including those words by implication into sub-s (1), and indeed the presence of those words in sub-s (3) would appear to indicate that Parliament did not intend to exempt the property the subject of the application from being a "relevant interest in residential property" for the purposes of sub-s (1).

Conclusion

32 Accordingly, the application is dismissed. I sympathise with the applicants, in that had they bought vacant land the eligibility criteria would have been fulfilled. However, s 11 is clear that an interest in residential property held prior to 1 July 2000 exempts the owner of that interest from eligibility. Neither the subjective intention of the parties, nor the fact that the interest in residential property is the same property as included in the application, suffices to bring the applicants within the eligibility criteria for the grant.

33 The Chief Commissioner's decision not to approve the applicant's application for a First Home Owner Grant is affirmed.