Di Sipio & Anor v The Commissioner of State Revenue [2014] QCATA 301

CITATION: Di Sipio & Anor v The Commissioner of State Revenue [2014] QCATA 301 PARTIES: Christopher Silvio Di Sipio and Vanessa Mary Rotolone (Appellants) v The Commissioner of State Revenue (Respondent) APPLICATION NUMBER: APL169-14 MATTER TYPE: Appeals HEARING DATE: On The Papers HEARD AT: Brisbane DECISION OF: Senior Member Stilgoe OAM Member Hughes DELIVERED ON: 23 October 2014 DELIVERED AT: Brisbane ORDERS MADE: 1. The appeal is allowed; 2. The decision of the Tribunal dated 17 March 2014 is set aside; and 3. The Tribunal substitutes its own decision that the Commissioner’s decision to disallow each objection of Christopher Silvio Di Sipio and Vanessa Mary Rotolone to the reassessment of Transfer Duty, Unpaid Tax Interest and Penalty Tax are set aside and each objection of Christopher Silvio Di Sipio and Vanessa Mary Rotolone is allowed. CATCHWORDS: APPEAL – ASSESSMENT OF TRANSFER DUTY – whether principal place of residence concession – whether disposal removing concession – whether section 154 of the Duties Act 2001 determines whether a home owner ‘grants’ exclusive possession – where language of section 154(2) does not trigger disposal – where disposal triggers section -- 1 of 8 -- 2 154(2) – whether homeowner disposed of property – whether “leases” in section 154(2) of the Duties Act 2001 is wide enough to cover transferee of land with existing lease - where property sold - where existing lease –– where buyer continues possession by attornment - where seller assigns reversion to buyer – whether “otherwise” in section 154(2) widens scope of “grants” to taking title subject to existing lease – where interpretation of section 154(2) to include lease granted before transfer date would render section 154(2)(b)(ii) and (c)(ii) nugatory – where matter of construction to give full effect to provision – where “otherwise” widens “grants” by fettering it to “vested person” – where home owner therefore did not “dispose” of land for purposed of Duties Act 2001 Acts Interpretation Act 1954 (Qld), s 35A Duties Act 2001 (Qld), s 86, s 88, s 91, s 154, Schedule 6 Property Law Act 1974 (Qld), s 53, s 118 Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 3, s 146 Residential Tenancies and Rooming Accommodation Act 2008 (Qld), s 8, s 27, s 242 Attorney-General v. Brown [1920] 1 KB 773 Bishop v. Deakin [1936] Ch 409 Commissioner for Children and Young People and Child Guardian v. Eales [2013] QCATA 303 Gumland Property Holdings Pty Ltd v. Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237 In re Prince Blucher: Ex parte Debtor [1931] 2 Ch 70 Norton v. Long [1967] VR 221 P & A Swift Investments (a firm) v. Combined English Stores Group Plc [1989] AC 632 Spencer’s Case (1583) 5 Co.Rep. 16a APPEARANCES: This matter was heard and determined on the papers pursuant to section 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld). -- 2 of 8 -- 3 REASONS FOR DECISION Senior Member Stilgoe OAM [1] In this appeal, the Appeal Tribunal comprised Member Hughes and me. I have had the benefit of reading Member Hughes’ reasons in draft. I agree with his reasons, his conclusions and the orders he proposes. Member Hughes What is this appeal about? [2] Christopher Silvio Di Sipio and Vanessa Rotolone claim they are entitled to the Transfer Duty concession for first home owners. However, the Commissioner of State Revenue considered that Mr Di Sipio and Ms Rotolone had “disposed” of the property by renting the property to the existing tenants. The Commissioner therefore reassessed duty on the basis they were not entitled to the concession. [3] Mr Di Sipio and Ms Rotolone objected to the Commissioner’s reassessment. The Commissioner disallowed their objection. [4] Mr Di Sipio and Ms Rotolone applied to the Tribunal to review the Commissioner’s decision to disallow the objection. Mr Di Sipio and Ms Rotolone are appealing the Tribunal’s decision confirming the Commissioner’s decision disallowing their objection. What are the grounds of appeal? [5] Mr Di Sipio and Ms Rotolone contend that the Tribunal erred in law by citing s 154 of the Duties Act 2001 (Qld) (‘Duties Act’) as authority to determine whether there has been a transfer of exclusive possession and therefore a ‘disposal’. They claim that the Tribunal thereby incorrectly interpreted s 154 of the Duties Act. [6] Mr Di Sipio and Ms Rotolone also contend that the Tribunal erred in law by failing to resolve whether they could “grant” exclusive possession to existing tenants without an agreement with those tenants. Does s 154 of the Duties Act 2001 determine whether a home owner ‘grants’ exclusive possession? [7] A home owner is entitled to a concessional rate of transfer duty if the owner occupies land as the principal place of residence within one year after its transfer.1 However, the Commissioner must reassess transfer duty without the concession if the owner disposes of the land before commencing residence.2 1 Duties Act s 86 and s 91. 2 Duties Act s 154(1)(b)(i), (2)(a) and s 154(3) and see definition of “occupation date” in s 88. -- 3 of 8 -- 4 [8] Under s 154(2) of the Duties Act, an owner does not dispose of the land if a tenant has exclusive possession under a lease granted before the transfer date3 and the tenant vacates on its termination or within six months after transfer, whichever is earlier.4 [9] Words of an Act are construed according to their plain meaning.5 The phrase ‘other than if’ at the end of the first paragraph of s 154(2) plainly operates to presage excluding or limiting words to its preceding words. The phrase ‘other than if’ reads as ‘unless’ so that the succeeding subparagraphs exclude, modify or moderate the concept introduced by the preceding words. These subparagraphs therefore do not engender a disposal – they abridge it. [10] The words preceding ‘other than if’ conceptualise a disposal. Subparagraphs (a), (b) and (c) of s 154(2) then exclude, modify or moderate that concept of disposal. Subparagraphs (a), (b) and (c) of s 154(2) do not trigger a disposal. Rather, a disposal triggers subparagraphs (a), (b) and (c). [11] This means that subparagraphs (a), (b) and (c) of s 154(2) do not operate to determine whether a home owner “grants” exclusive possession. The original Tribunal determined: … the applicants did dispose of the property by granting exclusive possession of the property to the tenants prior to occupying the property. It is inescapable that the applicants, as owners of the property, did grant exclusive possession of the property to the tenants prior to the applicants occupying the property. The purchase of the property was subject to that condition. In order for the applicants to receive the concession, the tenants would have needed to vacate within six months from the date of transfer. The tenants did not vacate within the six months and so the applicants are not entitled to the concessional rate of stamp duty.6 [12] The Tribunal below therefore erred by relying upon s 154(2)(b)(ii) and (c)(ii) to determine whether the appellants granted exclusive possession and thereby “disposed” of the property to the tenants. Rather, the correct process under s 154(1)(b)(i), (2)(a), (b)(ii) and (c)(ii) is that an affirmative answer to all the below questions results in a reassessment of transfer duty without the concession: a) Is there a disposal? b) If there is a disposal: i) Did another person have exclusive possession of the property before the occupation date? 3 Duties Act s 154(2)(b)(ii). 4 Duties Act s 154(2)(c)(ii). 5 In re Prince Blucher: Ex parte Debtor [1931] 2 Ch 70 at 75. 6 Di Sipio and Anor v. Commissioner of State Revenue, 17/03/14 unreported at [12]. -- 4 of 8 -- 5 ii) Was exclusive possession granted to the other person under a lease before the transfer date? iii) Did the other person vacate the land on termination of the current term of the lease or within 6 months of the transfer date, whichever is earlier? [13] It is necessary for me to answer these questions in order to determine the appeal. Did Mr Di Sipio and Ms Rotolone ‘dispose’ of the property? [14] The Commissioner determined that Mr Di Sipio and Ms Rotolone disposed of the property by allowing the tenants to remain in exclusive possession beyond the permitted six months. The Commissioner claims this means that she had to reassess duty without the concession. Is the word ‘leases’ in s 154(2) wide enough to cover a transferee of land with an existing lease? [15] The Commissioner submits that the word ‘leases’ in s 154(2) of the Duties Act is wide enough to cover a transferee purchasing land subject to an existing lease. The Commissioner submits that Mr Di Sipio and Ms Rotolone fall within the definition of ‘lessor’ in s 8(1) of the Residential Tenancies and Rooming Accommodation Act 2008 (Qld) as the person who gives the right to occupy residential premises under a residential tenancy agreement.7 The Commissioner argues that because a ‘lessor’ includes successors in title and assigns,8 the appellants disposed of the property upon taking legal possession of the property from the seller. [16] Although Mr Di Sipio and Ms Rotolone become the ‘lessor’ for the purposes of the rights and obligations under the Residential Tenancies and Rooming Accommodation Act 2008, it does not mean they ‘lease’ the land for the purposes of a ‘disposal’ under the Duties Act. [17] This is because as buyer of the property, Mr Di Sipio and Ms Rotolone did not lease the land to the tenants. The only interest they have to give is the reversionary estate, not exclusive possession. Although exclusive possession is a covenant that touches and concerns the land9 and therefore runs with the land,10 the reversion is not ‘land’ to which exclusive possession can attach. 7 Residential Tenancies and Rooming Accommodation Act 2008 (Qld) s 8(1). 8 Acts Interpretation Act 1954 (Qld) s 35A. 9 P & A Swift Investments (a firm) v. Combined English Stores Group Plc [1989] AC 632 at 642, per Lord Oliver of Aylmerton, accepted in Gumland Property Holdings Pty Ltd v. Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237 at [74] to [78]. 10 Spencer’s Case (1583) 5 Co.Rep. 16a. The Property Law Act 1974 (Qld), ss 53 and 118 address this by providing that the seller grants exclusive possession on behalf of his successors in title. However, the Property Law Act 1974 does not apply to residential tenancy agreements – see Residential Tenancies and Rooming Accommodation Act 2008 (Qld) s 27. -- 5 of 8 -- 6 [18] Rather, the tenant’s right to continue in possession is by attornment.11 This is because the seller of the property did not assign the lease to the buyer. Rather, the seller had already disposed of the leasehold to the tenant. The seller then assigned the reversion (that part of the seller’s interest not disposed of) to the buyer. [19] Because the tenant already had exclusive possession and no privity of contract exists between buyer and tenant, Mr Di Sipio and Ms Rotolone did not ‘lease’ the land to the tenant within the meaning of the Duties Act. [20] The tenant occupied by lease with the seller. The tenant continues to occupy by attornment with the buyer. Mr Di Sipio and Ms Rotolone as buyer do not therefore ‘lease’ the land to the tenant for the purposes of a ‘disposal’ under the Duties Act. Does the word ‘otherwise’ in section 154(2) widen its reach to cover a transferee of land with an already existing lease? [21] The Commissioner further submits that the word ‘otherwise’ preceding ‘grants exclusive possession’ in s 154(2) of the Duties Act is wide enough to cover a transferee taking title subject to an already existing lease. [22] This effectively means reading ‘including under a lease granted before the transfer date’ into the first paragraph of s 154(2). This means replicating wording that expressly follows in s 152(b)(ii). Section 154(2) combined with s 154(2)(b)(ii) and (2)(c)(ii) would then read (replicated wording in bold): … a transferee, lessee or vested person… disposes of land if the transferee, lessee or vested person… transfers, leases or otherwise grants exclusive possession [including under a lease granted before the transfer date]… other than if the occupier has exclusive possession… under a lease granted before the transfer date… and the occupier vacates the land on the earlier of termination of the lease or within 6 months of transfer. [23] The Commissioner’s interpretation of s 154(2) is therefore problematic because it would render nugatory s 154(2)(b)(ii) and in turn, s 154(2)(c)(ii). It effectively renders s 154(2)(b)(ii) and (2)(c)(ii) meaningless. [24] An interpretation that gives meaning and effect to a provision is preferred to an interpretation that would render a provision inoperative or inept.12 The below reasoning gives proper meaning and effect to s 154(2)(b)(ii) and (2)(c)(ii). [25] As a rule of construction, the otherwise wide meaning of general words is restricted to the same class as the preceding specific words.13 The specific words ‘transfers’ and ‘leases’ precede the word ‘otherwise’. Their 11 Residential Tenancies and Rooming Accommodation Act 2008 (Qld) s 242. 12 Norton v. Long [1967] VR 221, per Winneke CJ at 221-4. 13 Attorney-General v. Brown [1920] 1 KB 773 at 787, 789-91 and 797-800. -- 6 of 8 -- 7 meaning comes from the type of grantor, not the timing of the grant. This suggests that ‘otherwise’ does not widen ‘grants’ in a temporal sense but merely according to the type of grantor. [26] It is also a maxim of statutory construction that a provision reads as if the word “respectively” appears at its end.14 Applying this to the first paragraph of s 154(2) so that the word “respectively” appears after “another person”, the first paragraph of s 154(2) reads: If… a transferee… transfers… part or all of the land… If… a lessee… leases… part or all of the land… If…a vested person… otherwise grants exclusive possession of… part or all of the land… [27] This means that the phrase ‘otherwise grants’ does not relate to a transferee, lessee or vested person but only to a ‘vested person’. The Schedule circuitously defines a ‘vested person’ to mean a person in whom the property is vested.15 The descriptor of the interest vested by that person in s 154(2) must therefore use correspondingly general language. [28] ’Otherwise’ in s 154(2) therefore simply operates as a grammatical device to match the general description of the interest to the general description of the grantor. This interpretation leaves room for section 154(2)(b)(ii) and (2)(c)(ii) to operate. [29] Section 154(2) combined with s 154(2)(b)(ii) and (2)(c)(ii) then reads (operative words in bold): … a transferee… disposes of land… if the transferee… transfers… the land, to another person, other than if… the other person (the occupier) has exclusive possession of the land under a lease granted before the transfer date and the occupier vacates the land on the termination of the current term of the lease or within 6 months of transfer, whichever is the earlier. … a lessee… disposes of land… if the lessee… leases… the land, to another person, other than if… the other person (the occupier) has exclusive possession of the land under a lease granted before the transfer date and the occupier vacates the land on the termination of the current term of the lease or within 6 months of transfer, whichever is the earlier. … a vested person… disposes of land… if the vested person… otherwise grants exclusive possession to another person, other than if… the other person (the occupier) has exclusive possession of the land under a lease granted before the transfer date and the occupier vacates the land on the termination of the current term of the lease or within 6 months of transfer, whichever is the earlier. [30] The word ‘otherwise’ widens ‘grants’ only by fettering it to a ‘vested person’. Mr Di Sipio and Ms Rotolone therefore did not ‘otherwise grant’ exclusive possession by taking the property with an existing lease. 14 Bishop v. Deakin [1936] Ch 409 at 412-15. 15 Duties Act, Schedule 6 definition of “vested person”. -- 7 of 8 -- 8 Conclusion [31] Mr Di Sipio and Ms Rotolone as buyers of the reversionary interest did not ‘dispose’ of the existing lease within the meaning of the Duties Act. [32] Mr Di Sipio and Ms Rotolone did not ‘otherwise grant’ exclusive possession within the meaning of the Duties Act. [33] Because Mr Di Sipio and Ms Rotolone did not dispose of an interest in the land, s 154 does not apply for the Commissioner to reassess duty without the concession.16 What are the appropriate Orders? [34] Because this is an appeal on a question of law, the Appeal Tribunal may make any order it considers appropriate,17 including to confirm the decision18 or set aside the decision and substitute its own decision.19 [35] The Appeal Tribunal can and has clarified the interpretation of s 154 of the Duties Act, consistent with the Tribunal’s mandate to enhance the quality and consistency of decisions.20 [36] The Appeal Tribunal finds that the appellants did not, as a matter of law, dispose of the property. Mr Di Sipio and Ms Rotolone became registered owners of the property on 18 August 2011. Mr Di Sipio and Ms Rotolone purchased the property subject to a lease commencing on 28 April 2011 and ending 27 April 2012. The tenants vacated on 6 April 2012. This means that the lease ended in time for Mr Di Sipio and Ms Rotolone to move in and be entitled to the concession.21 [37] Therefore, the appropriate orders are: a) The appeal is allowed; b) The decision of the Tribunal dated 17 March 2014 is set aside; and c) The Appeal Tribunal substitutes its own decision that Commissioner’s decision to disallow each objection of Christopher Silvio Di Sipio and Vanessa Mary Rotolone to the reassessment of Transfer Duty, Unpaid Tax Interest and Penalty Tax are set aside and each objection of Christopher Silvio Di Sipio and Vanessa Mary Rotolone is allowed. 16 Duties Act s 154(3). 17 Queensland Civil and Administrative Tribunal Act 2009 s 146(d). 18 Ibid s 146(a). 19 Ibid s 146(b). 20 Ibid s 3(d) and see Commissioner for Children and Young People and Child Guardian v. Eales [2013] QCATA 303 at [49]. 21 Duties Act s 86 and s 91. -- 8 of 8 --