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ΠΑΓΚΥΠΡΙΟΣ ΔΙΚΗΓΟΡΙΚΟΣ ΣΥΛΛΟΓΟΣ
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(1989) 3A CLR 965
1989 August 10
[SAVVIDES, J.]
IN THE MATTER OF ARTICLE 146 OF THE CONSTITUTION
ANDREAS SOFOCLEOUS,
Applicant,
v.
THE REPUBLIC OF CYPRUS, THROUGH THE MINISTER OF
FINANCE AND ANOTHER,
Respondents.
(Case No. 484/85)
Reasoning of an administrative act - It may be found either in the decision itself or in the official records relating thereto - What amounts to due reasoning is a question of degree depending upon the nature of the decision concerned.
Reasoning of an administrative act - Whether validity of sub judice decision can be upheld on the basis of a lawful reasoning different from the reasoning given by the Administration for reaching such decision - Question determined in the positive.
Taxation - Estate duty - The Estate Duty Laws 1962-1976, paragraph (v) of the proviso to section 7(d) - Dowry contract in consideration of marriage - The proviso speaks about valid and enforceable marriage contracts.
Taxation - Exemption or deduction - Onus on applicant to establish claim to such exception or deduction.
The deceased transferred by way of gift nearly all his immovable properties few days before he died. The applicant contended that certain immovable properties transferred as aforesaid should have been excluded from estate duty, because they had been transferred inconsideration of marriage (vide paragraph (v) of the proviso to section 7(d) of the Estate Duties Laws 1962-1976).
The contract for such a dowry had been made prior to applicant's marriage to the deceased's daughter and the relevant gift should have been executed within 10 days thereafter. In fact it was never given. The property was finally donated as aforesaid 8 years later and few days before the death of the deceased.
The Commissioner of Estate Duty thought that the contract is void and unenforceable as being vague.
Though the letter whereby he informed the applicant of his decision not to accept applicant's objection did not contain any reasons, the reasons in this case were known to the applicant and they can be found in the relevant administrative file. In any event, during the hearing, the pure legal point was taken that the contract in question was void, as being vague. In the light of the principle enunciated in the second of the aforesaid Headnotes and of the fact that, in the circumstances, such a conclusion about the aforesaid contract, was reasonably open to the Commissioner, the Court dismissed the recourse.
Recourse dismissed. No order as to
costs.
Cases referred to:
HadjiSavva v. republic (1972) 3 C.L.R. 174,
VassosEliades Ltd v. republic (1976) 3 C.L.R. 293,
Korai and Another v. C.B.C. (1973) 3 C.L.R. 546,
Ionides and Another v. republic (1982) 3 C.L.R. 1136,
Spyrou and Others v. Republic (No.1) (1973) 3 C.L.R. 478,
Voulpioti v. Republic (1974) 3 C.L.R. 313,
AkinitaAnthoupolis Ltd. and Another v. Republic (1980) 3 C.L.R. 296,
Paraskevopoulou v. Republic (1980) 3 C.L.R. 647,
Georghallides (1958) 23 C.L.R. 249.
Recourse.
Recourse against the assessment of the respondent of the estate duty on immovable property gifted by way of dowry to the applicant by his late father.
G. Polyviou, for the Applicant.
Y. Lazarou, Counsel of the Republic B, for the Respondents.
Cur. adv. vult.
SAVVIDES, J. read the following judgment. Applicant, by the present recourse, applies for the following relief:
A declaration to the effect that the assessment of the respondent of estate duty on immovable property gifted by way of dowry to the applicant by his late father, VikentiosSofocleous, who died on the 8th November, 1981, is unlawful and has been made in excess or abuse of power and it is, therefore, null and void and of no effect whatsoever.
The relevant facts are as follows:
Applicant's father, VikentiosSofocleous, died on the 8th November, 1981. The deceased, who was 75 years old at the time of his death, transferred practically the whole of his immovable property to his wife and children. No restrictions or any other limitations were imposed upon such transfer in respect of the items of immovable property transferred as aforesaid.
The applicant is one of the donees of the estate of the deceased.
Letters of administration of the estate of the deceased were granted to ChristodoulosVikentiou, by the District Court of Larnaca in Probate Application No. 125/83.
The administrator of the estate on 2nd October, 1983,submitted a declaration of property as required by s.32 of the Estate Duty Laws 1962 - 1976. In the declaration submitted by the administrator, the only property declared as taxable were the gifts made by the deceased and no claim for deduction was made in respect thereof. Such gifts were effected a few days before the death of the deceased and in fact between 13th October, 1981 and 17th October, 1981 as appearing on the aforesaid declaration of the administrator to the respondent. The administrator on the 2nd October, 1983 submitted also a supplementary declaration of property.
The respondent Commissioner of Estate Duty on 31st January, 1984, assessed the value of the relevant property at £350,000.- and the duty payable thereon as being £140,750.- and issued the respective notice of assessment to the administrator.
On the 9th February, 1984, an objection was made by the administrator and the donees including the applicant against the assessment raised on the grounds that, the valuation was excessive and that gifts made to Andreas Vikentiou, GeorghiosVikentiou and KalliopiVikentiou, were made in consideration of marriage and, therefore, they should be exempted from taxation. (Copies of the dowry contracts have also been attached and are before me as Appendices D, E, and F to the opposition).
However, on the 14th March, 1984, advocate acting on behalf of the administrator addressed another letter to the respondent Commissioner of Estate Duty whereby he informed him that the objection filed on the 9th February, 1984, against the assessment of the immovable property which passed on the death of the deceased was withdrawn in so far as it concerned the deceased's wife Avgousta and his children Christodoulos, Kalliopi, Georghios and Sofoclis and furthermore that the objection of the applicant A. Sofocleous would be based exclusively on the dowry contract of 27th December, 1973. This letter was countersigned by the wife and the other children of the deceased but not by the applicant.
Applicant's taxation consultant, Mr. Phanoslonides, on the 18th October, 1984, addressed a letter to the respondent Commissioner of Estate Duty on the question of the claim forexemption from estate duty of the immovable property gifted to the applicant pursuant to the dowry contract, requesting a personal interview to discuss the case with him.
Applicant's objection was examined and discussed by the respondent Commissioner with him and Mr. PhanosIonides on the 26th January, 1985, and as no agreement could be reached the respondent Commissioner proceeded with the determination of the objection and his decision was communicated to applicant by letters dated 18th February, 1985 and 5th April, 1985 (copies of which have been produced as Appendices G & H to the opposition).
The reasons given by the respondent Commissioner for rejecting applicant's objection as mentioned in his letter dated 5th April, 1985, are the following":
"1. The dowry contract mentioned is vague and uncertain.
2. Nowhere in the dowry contract mention is made of the properties which your late father undertook to transfer in your name.
3. The dowry contract was made on 27.12.73 and the properties were transferred in October, 1981 i.e. after the expiration of eight years.
4. Your father died on 8.11.81 i.e. a few days after the gifts.
5. The deceased VikentiosSofocleous transferred on the same date all his property to his children and his wife.
6. From the aforesaid facts it emanates that all donations made by your deceased father were made in contemplation of death and not on the basis of the dowry contract."
Learned counsel for applicant both by his application and by his written address advanced the following arguments in support of the recourse.
1. The assessment of estate duty of the property gifted in consideration of marriage to the applicant by his deceased father in pursuance and in execution of a legally valid and enforceable dowry contract, the genuiness and authenticity of which are not disputed by the respondent, is contrary to the provisions in paragraph (v) of the proviso to s.7(d) of the Estate Duty Laws 1962 -1976.
2. The determination on the 18th February, 1985, by the Commissioner, of the objection filed on the 9th February, 1984, on behalf of the administrator of the deceased's estate and the donees by the advocate of the administrator, was not duly reasoned and did not state precisely or at all the grounds on which the claim by the applicant to exemption from estate duty of property transferred to him in consideration of marriage was rejected.
3. The reasoning contained in the letter dated 5th April, 1985, cannot cure the absence of due reasoning at the time the determination was made and to render the determination of 18th February, 1985, a legally binding determination.
Learned counsel submitted in this respect that the Commissioner of Estate Duty according to the correspondence which is before the Court determined the objection already filed of behalf of the applicant and issued an amended notice of assessment on 18th February, 1985, without any covering letter setting out his reasoning. In his submission the subsequent letter of the respondent Commissioner dated 5th April, 1985, cannot cure the absence of adequate and/or sufficient reasoning in the amended notice dated 18th February, 1985.
4. In the alternative and without prejudice to his previous submission learned counsel submitted that the challenged assessment and determination are contrary to the law and were made in excess and abuse of power and under a misconception of law and fact and are, therefore, null and void and of no effect whatsoever and the reasoning contained in the letter of the Commissioner dated 5th April, 1985, is clearly erroneous and legally unsupported.
Learned counsel concluded that the dowry contract in question was a legally valid and enforceable document and,therefore, the transfer of immovable property made in pursuance thereof falls within paragraph (v) of the proviso to s.7(d) of the Estate Duty Laws 1962 - 1976 and the reasons that the respondent Commissioner did not subscribe to this position, as these are set out in his letter dated 5th April, 1985, are simply erroneous and/or misconceived and/or based on misconception of Law and/or fact.
The arguments of learned counsel for respondents raised by his opposition and his written address may be briefly summarized as follows:
1. Notwithstanding any omission of the respondent Commissioner to give adequate reasoning in his letter of determination to the applicant dated 18th February, 1985, the sub judice decision should be treated as duly reasoned as the material in the file and in particular the minutes prepared by the officer in charge, dated 26th January, 1985, and 1st February, 1985, state, quite clearly, the reasons for the decision; moreover, in addition, such minutes also show that the applicant was informed about the Commissioner's reasoning prior to the letter of determination and was thus properly acquainted about the fate of his affairs with the administration. Since, counsel submitted, in the instant case, the reasoning can be deducted from the official records of which the applicant had prior knowledge, the sub judice decision is duly reasoned despite the Commissioner's omission to include such reasoning in his letter of determination dated 18th February, 1985.
Learned counsel further submitted that the respondent Commissioner rightly exercised his discretion in arriving at the conclusion that the said contract was not a valid and enforceable contract within the ambit of paragraph (v) of the proviso to s.7(d) for the following two reasons:
(a) It was vague and uncertain in its terms. From what is mentioned in the contract that "I shall give to my son Andreas Sofocleous, what belongs to him from the whole of my estate" makes it impossible to ascertain from such words which property the deceased gifted to the applicant. Furthermore according to the terms of thedowry contract the property should have been transferred ten days before the marriage ceremony. In his submission the property transferred in October, 1981, was not the same as that described in the marriage agreement and, therefore, it was not a gift in pursuance to the marriage agreement but was gifted in contemplation of the deceased's death in the same manner as it was done in respect of all other legal heirs of the deceased.
(b) It was not a valid and enforceable dowry contract as it did not comply with the provisions of sub-section (2) of s.77 of Cap. 149 in that it was not signed in the presence of at least two witnesses who had to subscribe their names as witnesses. In the dowry contract in the instant case there appears the signature of only one witness. Consequently it is not a valid and enforceable contract and no gifts made thereunder are, in the circumstances, exempted from estate duty as they are part of the estate of the deceased.
In his written address in reply learned counsel for the applicant submitted that the formal invalidity of the dowry contract was never raised during the negotiations between the parties nor in respondent's letter dated 5th April, 1985, and this amounts to a new reasoning which was never raised before. In any event, counsel submitted that the contract as it appears on the face of it, was properly executed in the presence of two witnesses.
The issues which pose for consideration in the present case on the basis of the arguments advanced are the following:
1. The legal adequacy of the reasoning accompanying the Commissioner's determination and/or assessment.
2. Whether the Commissioner erred in treating the immovable property which the deceased gifted to the applicant a month prior to his death as forming part of the estate on which duty was imposed.
I shall deal first with the first question.
It is common ground that the letter sent on the 18th February, 1985, is a notice of assessment under the law giving no reasons as to the decision reached by the respondent Commissioner. Such notice of assessment, however, should be read together with the material in the file and in particular the relevant records of 26th January, 1985, and 1st February, 1985, (copies of which have been produced and are before me). The record of the 26th January, 1985, reads as follows:
"We discussed his objection in connection with his claim for exemption of the gifts made to him claiming that gifts were made in consideration of marriage.
I explained that the dowry contract as it is drafted cannot be accepted as an enforceable contract and therefore it cannot be considered that gifts were made in consideration of contract."
The record of the 1st February, 1985, reads as follows:
"Administrator and donees objected by their letter dated 9.2.84 against the assessment of the estate of the above deceased.
On a later day i.e. on 14.3.84 and before their objection being examined administrator and all the donees with the exception of Andreas V. Sofocleous sent a letter under which they withdrew their objection.
On 28.9.84 I addressed a letter to Andreas V. Sofocleous calling him to attend my office to discuss his objection, but he informed me that he has appointed Mr. Phanoslonides to handle his case.
Mr. Ph. Ionides accompanied by administrator and objector attended my office on 26.1.85 in order to discuss the objection.
We discussed the objection, but Mr. PhanosIonides insisted that the marriage contract should be accepted for the purpose of estate duty purpose and that all properties gifted to, should be exempted from taxation.
My view was that as the marriage contract does not specifically state which property is given to him, but only states ' ότι του ανήκει από ολόκληρον την περιουσίαν' cannot be considered as an enforceable contract and therefore cannot be accepted within the meaning of sect.7(v).
With my view agrees and Mr. YiannakisLazarou, legal officer of our Dept.
In the light of the above I suggest to proceed with the determination of the objection, please."
Such reasons are in fact affirmed by the letter dated 5th April, 1985, to the tax consultant of the applicant. From what appears from the said records both the applicant and his tax consultant were well aware of the reasons of the refusal of the decision of the respondent which led to his assessment of 18th February, 1985.
It is a well established principle of administrative law that the reasoning behind an administrative decision may be found either in the decision itself or in the official records relating thereto. In HadjiSavva v. The Republic (1972) 3 C.L.R. 174 at p.205 it was held:
"What amounts to due reasoning is a question of degree depending upon the nature of the decision concerned, but reasoning behind an administrative decision may be found either in the decision itself or in the official records related thereto."
The same principle was reiterated subsequently in a number of cases. (See, inter alia, VassosEliades Ltd. v. The Republic (1976) 3 C.L.R. 293; Korai and Another v. C.B.C. (1973) 3 C.L.R. 546; Ionides and Another v. The Republic (1982) 3 C.L.R. 1136).
In the instant case though the Commissioner omitted to include his reasoning in his letter of determination dated 18th February, 1985, such reasoning can be deduced from the official records. Considering also the fact that the applicant had full knowledge of such reasoning as it appears from the relevantrecords I agree with the submission of learned counsel for the respondents that the respondent Commissioner's reasoning is not, in the circumstances of the present case, inadequate to the extent of leading to the annulment of the sub judice decision.
It is also common ground in this case as it appears from the material before me that the main reason which led the respondent Commissioner to take his decision was that the contract was void and unenforceable due to its vagueness and uncertainty. It was only in the course of these proceedings that the additional ground of the formal validity of the contract was raised. I shall, therefore, have to examine whether an additional ground touching the validity of the contract, which was not raised before, could be raised in the course of the proceedings.
The question whether it is open to an administrative Judge to uphold the validity of an administrative decision on the basis of a lawful reasoning even though such reasoning is different from the reasoning given by the administration for reaching such decision has been considered by this Court in a number of cases.
In Savvas Chr. Spyrou and Others v. The Republic (Nod) (1973) 3 C.L.R. 478 at p. 484 we read the following:
"It is, however, open to an administrative judge-and I am dealing with these cases in such a capacity-to uphold the validity of an administrative decision on the basis of a lawful reasoning therefore even though such reasoning is different from the reasoning given by the administration for reaching such decision and even if the reasoning given by the administration is legally defective (see, inter alia, the decisions of the Greek Council of State in Cases 48/1968, 132/1969, 2 134/1969 and 2238/1970)."
In Alexia Voulpioti v. The Republic (1974) 3 C.L.R. 313 at pp.319-320 the following are stated:
"But even if we assume that the decision complained of could not be validly based on the above reasons but it is nevertheless valid in law for some other reason, the relevant administrative law jurisprudence has gone so far as to laydown that such act or decision should be judicially upheld. See in this respect Costas Pikis v. The Republic (1967) 3 C.L.R. 562 at page 575. In the present case there is another legal reason on which the decision complained of should be upheld."
In AkinitaAnthoupolis Ltd. and Another v. The Republic (1980) 3 C.L.R. 296 at p.303 it was stated:
"..there is ample authority that administrative decisions, valid in Law, for some other reasoning than the one given by their author could be judicially upheld on the basis of other lawful reasoning.
In support of this proposition reference may be made to the cases of Pikis v. The Republic(1967) 3 C.L.R. 562 at p.574 and the decision of the Greek Council of State. mentioned therein, Spyrou v. The Republic (1973) 3 C.L.R. 478 at p.484 and Yerasimou v. The Republic(1978) 3 C.L.R. 267 at p.275."
See also Paraskevopoulou v. The Republic (1980) 3 C.L.R. 647 at pp.661 - 662.
Therefore, the question whether an additional reasoning has been given does not make such reasoning unreasonable or unacceptable provided that it is a legally valid one. Therefore, the additional reasoning touching the formal validity of the dowry contract was properly raised.
This brings me to the second question which is before me i.e. the question whether the contract in question falls within the exemptions of paragraph (v) of the proviso to s.7(d) of the law which reads as follows:
"(ν) Ουδέν των εν τω παρόντι διαλαμβανομένων θα ισχύη αναφορικώς προς δωρεάς γενομένας λόγω γάμου, εάν αι τοιαύται δωρεαί εγένοντο κατ' εφαρμογήν και εν τη εκτελέσει εγκύρου και εκτελεστού συμφώνου. Διά τους σκοπούς της παρούσης υποπαραγράφου ως ημερομηνία εκτελέσεως παντός συμφώνου θα θεωρήται ούσα ή αληθής ημερομηνία εκτελέσεως αυτού άνευ περαιτέρω αποδείξεως, εάν το πρωτότυπον του συμφώνου, ή αντίγραφον αυτού πιστοποιημένον ως αληθές παρά τίνος Πρωτοκολλητού Επαρχιακού Δικαστηρίου, προσαχθή εις τίνα Πρωτοκολλητήν Επαρχιακού Δικαστηρίου εντός τριάκοντα ημερών από της ημερομηνίας της εκτελέσεως του συμφώνου, ή. εις την περίπτωσιν συμφώνου εκτελεσθέντος εκτός της Δημοκρατίας, εντός τριάκοντα ημερών από της ημερομηνίας της λήψεως του συμφώνου εν τη Δημοκρατία, και η ημερομηνία εκτελέσεως αυτού πιστοποιηθή παρά του Πρωτοκολλητού· η προσαγωγή δε του πρωτοτύπου του τοιούτου συμφώνου, ή παντός πιστοποιημένου αντιγράφου παρά του Πρωτοκολλητού ως προς την ημερομηνίαν εκτελέσεως ως εν τοις ανωτέρω, συνιστά διά τους σκοπούς της παρούσης υποπαραγράφου αμάχητον απόδειξιν περί την αληθή ημερομηνίαν εκτελέσεως του τοιούτου συμφώνου:
Νοείται ότι ουδέν των εν τη παρούση υποπαράγραφω διαλαμβανομένων θα ισχύη αναφορικώς προς δωρεάς γενομένας λόγω γάμου συνεστώτος προ της ημερομηνίας ενάρξεως της ισχύος του παρόντος Νόμου· αι τοιαύται δωρεαί θα εξακολουθώσι να διέπωνται υπό των οικείων διατάξεων του περί Φορολογίας Κληρονομιών Νόμου, Κεφ.319."
("(v) nothing herein contained shall apply to gifts made in consideration of marriage if such gifts have been made in pursuance and in execution of a valid and enforceable contract. The day of execution of any contract shall, for the purposes of this sub-paragraph, be deemed to be the true date of execution thereof without further proof if the original of the contract or a copy thereof certified to be a true copy by a Registrar of a District Court shall have been presented to a Registrar of a District Court within thirty days of the date of execution of the contract or, in the case of a contract executed outside the Republic, within thirty days of the date of receipt of the contract in the Republic, and the date of execution shall have been certified by the Registrar; and the production of the original of such contract or of any certified copy thereof bearing the certification of the Registrar as to the date of execution as aforesaid shall, for the purposes of this subparagraph, be conclusive evidence of the true date of execution of such contract.
Provided that nothing in this sub-paragraph shall apply to gifts in consideration of marriage made before the date of the corning into operation of this Law, which gifts shall continue to be governed by the relative provisions of the Estate Duty Law, Cap.319.")
The above proviso speaks about valid and enforceable marriage contracts. The objection of the respondent Commissioner to the marriage contract produced was that such contract was not valid and enforceable for the reasons already stated in this judgment. The respondent Commissioner has not raised any objection as to the day of execution of the contract and his decision was at no time based on such objection. Therefore, once such issue was not raised I shall not deal with the provision in paragraph (v) hereinabove as to certification of the original of such contract or copy thereof by the Registrar of the Court.
In the said dowry contract applicant's deceased father undertook to transfer in his name within ten days prior to the marriage the following property": "One half of the factory business and also what belongs to him from the whole of my property". It is to be borne in mind that this obligation should have been performed ten days before the marriage and was in fact never performed, that the property was transferred a few days prior to the deceased's death, eight years after the execution of the contract, that he donated practically the whole of his property to all his children and his wife without any reference that part of the property was donated to applicant in satisfaction of his claim under the dowry contract, and that no evidence has been adduced that the property the deceased owned and undertook to transfer by virtue of the dowry contract in 1973 was the same property that he owned in 1981 when he died.
Learned counsel for applicant had asked for repeated adjournments of the hearing of this recourse for the purpose of filing affidavit evidence in support of applicant's claim but no evidence whatsoever was adduced.
It is a well established principle of Income Tax Law that where a taxpayer claims any exemption or deduction form taxthe onus is on him to support such claim for exemption or deduction. This principle is very clearly expressed in the following passage in the judgment of the Supreme Court in the case of CharisGeorghallides(1958) 23C.LR. p. 249 at p.256:
"One dealing with fiscal legislation should carefully examine first, whether the taxpayer is clearly within the words of the provision by which he is charged that taxation and, secondly, if he claims any exemption or deduction from tax - to which liability is either admitted or established - whether such claim is clearly supported by the relevant provisions of the Law. In a disputed case the onus to satisfy the Court as to liability to pay tax is on the Tax Authorities and the onus to support a claim for exemption or deduction allowance is on the taxpayer."
In the circumstances of the present case it was reasonably open to the respondent to find that the agreement was vague and uncertain and as such not a valid and enforceable contract within the provisions of paragraph (v) of the proviso to s.7(d) of the law. I shall, however, proceed and examine the additional ground which touches the formal validity of the dowry contract in question. A copy of the contract which was before the Commissioner has also been produced in Court and is in a printed form and at the end the words "witnesses 1..., 2.." are printed on it. There is a signature of one witness on this part of the contract. However, further down at the end of the contract the following declaration appears:
"I, the undersigned priest of the Holy Church of Chrysopolitissa declare that I celebrated the betrothal of the aforesaid persons this 27th day of December, 1973."
and then the signature of the priest follows.
It is the contention of learned counsel for applicant that the dowry contract was duly signed by two witnesses treating the signature of the priest in his attestation of the celebration of the betrothal as attestation also of the dowry contract.
I find myself unable to accepts this contention of learned counsel for applicant. The attestation of the priest is as to thecelebration of the betrothal between the parties which is an entirely different matter and the fact remains that in the formal part of the dowry contract only the signature of one witness appears. Under the provisions of sub section (2) of s.77 of the Contract Law, Cap. 149, for a dowry contract to be valid and enforceable it should comply with the provisions thereof which read as follows:
"Contracts relating to obligations in consideration of marriage shall not be valid and enforceable unless-
(a) expressed in writing; and
(b) signed at the end thereof, in the presence of at least two witnesses themselves competent to contract who have subscribed their names as witnesses, by each party to be charged therewith or by a person who is himself competent to contract and who has been duly authorized to sign on behalf of such party."
As I said earlier in the text of the contract which embodies the dowry agreement the signature of only one witness appears and no evidence has been adduced that the attestation of the priest of the celebration of the betrothal was also an attestation by him of the execution of the dowry contract. Therefore, learned counsel of the respondents rightly raised this additional ground which touches the formal validity of the contract.
In the result I have come to the conclusion that in the circumstances of the present case it was reasonably open to the respondent Commissioner to reach the sub judice decision on the material before him and furthermore his decision may be upheld as a valid decision on the basis of the formal invalidity of the contract which was raised in the course of the proceedings.
For all the above reasons the recourse fails and is hereby dismissed. No order for costs.
Recourse dismissed. No order as
to costs.