Haddad v Chief Commissioner of State Revenue (No 2)

[2011] NSWADT 215

Administrative Decisions Tribunal

New South Wales

Medium Neutral Citation:

Haddad v Chief Commissioner of State Revenue (No 2) [2011] NSWADT 215

Hearing dates:

On the papers

Decision date:

06 September 2011

Jurisdiction:

Revenue Division

Before:

A Verick, Judicial Member

Decision:

(1) The Applicant's application for costs is dismissed.

(2) The Respondent's application for costs is dismissed.

Catchwords:

Costs

Legislation Cited:

Administrative Decisions Tribunal Act 1997
Taxation Administration Act 1996
Vexatious Proceedings Act 2008

Cases Cited:

Haddad v Chief Commissioner of State Revenue [2011] NSWADT 17
Haddad v Chief Commissioner of State Revenue (RD) [2011] NSWADTAP 35
AT v Commissioner of Police, NSW [2010] NSWCA 131
Attorney-General v Wentworth (1988) 14 NSWLR 481
Crewsdon v Niland & Ors (EOD) [2002] NSWADTAP 5
EP v Commissioner for Children and Young People [2003] NSWADTAP 227

Category:

Costs

Parties:

Sally Haddad (Applicant)
Chief Commissioner of State Revenue (Respondent)

Representation:

Counsel
A H Rider (Respondent)
J Haddad (Agent- Applicant)
I V Knight Crown Solicitor (Respondent)

File Number(s):

096068

Reasons for Decision

1. Soon after the Tribunal handed down its decision in Haddad v Chief Commissioner of State Revenue [2011] NSWADT 17, both the Applicant and the Respondent filed applications for costs. The applications were held over until the outcome of an appeal by the Applicant against the Tribunal's decision. On 12 August 2011, the Appeal Panel handed its decision ( Haddad v Chief Commissioner of State Revenue (RD) [2011] NSWADTAP 35) dismissing the Applicant's case.

Relevant law

1. Section 88 of the Administrative Decisions Tribunal Act 1997 (the ADT Act) regulates the issue of costs in the Tribunal. The primary rule as to costs in a proceeding before the Tribunal under s 88 (1) of the ADT Act is for each party to bear the party's own costs in the proceedings. There is an exception to this rule permitting an award of costs to be made, but 'only if the Tribunal is satisfied that it is fair to do so'.

1. Section 88 relevantly provides:

(1) Each party to proceedings before the Tribunal is to bear the party's own costs in the proceedings, except as provided by this section.

(1A) Subject to the rules of the Tribunal and any other Act or law, the Tribunal may award costs in relation to proceedings before it, but only if it is satisfied that it is fair to do so having regard to the following:

(a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings by conduct such as:

(i) failing to comply with an order or direction of the Tribunal without reasonable excuse, or

(ii) failing to comply with this Act, the regulations, the rules of the Tribunal or any relevant provision of the enactment under which the Tribunal has jurisdiction in relation to the proceedings, or

(iii) asking for an adjournment as a result of a failure referred to in subparagraph (i) or (ii), or

(iv) causing an adjournment, or

(v) attempting to deceive another party or the Tribunal, or

(vi) vexatiously conducting the proceedings.

(b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings,

(c) the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law,

(d) the nature and complexity of the proceedings,

(e) any other matter that the Tribunal considers relevant.

1. Section 88 was considered by the Court of Appeal in AT v. Commissioner of Police NSW [2010] NSWCA 131 and Basten J (with whom the other members of the Court agreed) made, in relation to its scope, the following instructive observations:

" [26] The condition of engagement of the power to order costs ... must be the satisfaction of the court exercising the power that the circumstances for an order have arisen. Nor is the criterion of fairness qualitatively different from the exercise of an unfettered discretion.

...

[32] The appellant's submissions ... should be accepted: they strongly favour the individual appellant obtaining reimbursement for part of her legal expenses so far. The fact that the appellant has been successful at both levels of appeal is a matter which can be taken into account under subs (1A)(e). A further factor to be taken into account is that the respondent, being a State agency, was also required to act as a model litigant: Mahenthirarasa v. State Rail Authority of NSW (No 2) [2008] NSWCA 201; 72 NSWLR 273 (Basten JA, Giles and Bell JJA agreeing). That is not to say that the Commissioner was not entitled to insist that statutory procedures be complied with. However, where the statutory scheme was entirely unclear, and the Commissioner's construction was not accepted, it is a factor which militates in favour of the Commissioner bearing the costs of the member of the public seeking to avail herself of a statutory right of review.

[33] That approach does not diminish the force of the general principle that each party bear its own costs in the Tribunal, a principle applicable at both first instance and before the Appeal Panel. Although an order varying the general rule may be made "only if" the relevant criterion is satisfied in a particular way, there is a relatively low hurdle for an applicant seeking an order. The criterion of 'fairness" will take into account the compensatory purpose of an award of costs, which will generally favour the successful party. The circumstances in which fairness may be identified are indicated by the specific attributes listed in subs (1A), but subject to the generality of para (e), read in its context. Other considerations will no doubt include the nature of the jurisdiction of the Tribunal which is invoked and the objects identified in s 3(b)-(g) of the Tribunal Act.

1. The President of the Tribunal has also issued a Practice Note (ADT Practice Note Number 22) to provide information about the Tribunal's practice in relation to costs. Relevant to this matter are clauses 6 and 7 of the Practice Note which provide as follows:

6. Self Represented Party

The Tribunal has ruled that a self represented party cannot apply for costs for loss of income or general inconvenience that the party has incurred in bringing or defending a case.

7. Non Lawyer Professional Agents

The ADT Act allows a person to be represented by an agent or an Australian legal practitioner. The Tribunal has ruled that an order for costs extends to the costs charged by a professional agent who is not a legal practitioner.

Submissions

1. The Applicant's claim was that she was entitled to "her costs of this matter, as a result of the improper conduct by respondent in this matter". A lengthy written submission, prepared by her agent, was filed by the Applicant. With some difficulty, the Tribunal is able to identify the following as matters that raise issues as to the way the Respondent conducted his case:

1. An investigation commencing sometime in April 2008 was conducted without the knowledge of the Applicant.

2. The Crown Solicitor's request for further and better particulars on 25 march 2010, were "unprecedented in its broadness and content". It "was a 'fishing expedition' in the guise of wanting to know addresses that the applicant used". The "huge amount of evidence produced"... "restricted the applicant in being able to obtain legal opinions on the matter because of cost" and complicated the matter. The Crown Solicitor "formed incorrect conclusions from this evidence and presented it as factual evidence in the respondent's submission".

3. "The jurisdictional issue was never clarified by the respondent." The "potential jurisdiction issue ... took up months of tribunal and applicant's time to deal with". It was never "presented to the tribunal or the applicant" and no "application was filed on this issue as requested by the tribunal".

4. The appointment by the Crown Solicitor on 20 July 2010 of "a private investigator to conduct investigations without ADT notification or approval and with no notification to the applicant". By allowing the private investigator to question the applicant's neighbours, the Respondent "knowingly caused irreparable harm to the applicant and her parents". The private investigation "resulted in very little usable evidence".

5. The Respondent in his written submission filed on 20 September 2010 introduced "a threshold issue" that the land owned by the Applicant was not residential land in the land tax years because the principal building on the land was rented to tenants. This issue "could have been introduced at the origin of the matter".

1. The Applicant also made several assertions, including the following:

1.The Applicant has not failed to comply with directions of the Tribunal. On the contrary, the Respondent "failed to comply with Tribunal directions and failed to solicit directions and approval for conduction of investigations while the matter was before the ADT".

2. The Applicant "was not able to give evidence at the hearing, because of the harm caused to her as a result of the investigation".

3. The respondent did not produce as witnesses for "questioning Matt from Energy Australia or the unidentified neighbours that were questioned as part of the private investigation".

4. The Applicant "did not attempt to deceive the respondent or the tribunal that Wadalba was her PPR. She provided objective evidence that she lived at Wadalba".

5. "The applicant has not acted vexatiously in these proceedings. The applicant was forced to apply to the ADT as the applicant was of the opinion that OSR's objection report was flawed with errors."

1. In support of his application, the Respondent submitted "that the Applicant conducted these proceedings in a manner which necessarily disadvantaged the Respondent in terms of:

(a) s.88(1A)(a)(i) of the ADT Act - by failing to comply with the directions of the Tribunal without reasonable excuse to provide adequate responses to the respondent's request for particulars;

(b) s.88(1A)(a)(ii) - by failing to comply with s.100(3) of the Taxation Administration Act 1996 and provide evidence which discharged her onus of proof that Wadalba was her PPR during the Tax Years;

(c) s.88(1A)(iv) - by causing the Tribunal to adjourn the matter to give the Applicant the opportunity to reconsider her position and to appear on another hearing date;

(d) s.88(1A)(a)(v) - by attempting to deceive the Respondent and the Tribunal that Wadalba was PPR during the Tax Years and that Telopea was not her PPR; and

(e) s.88(1A)(vi) - by vexatiously conducting these proceedings.

1. The Respondent further submitted "that the Applicant 'vexatiously' (in the objective legal sense) conducted these proceedings by:

(a) claiming that Wadalba was her PPR and disclaiming that Telopea was her PPR without providing any corroborative evidence to support her claims;

(b) claiming that she lived at her mother's house in West Pennant Hills;

(c) obscuring her banking records;

(d) changing her story about living at Wadalba after July 2007;

(e) failing to adequately respond to the Respondent's request for particulars;

(f) objecting to the Respondent issuing summonses and accessing the documents produced;

(g) seeking to rely on the Statutory Declaration, Affidavit and Statement without making herself available for cross-examination or providing any independent medical evidence that she was unfit to do so; and

(h) failing to discontinue the proceedings after being given the opportunity to reconsider her position."

1. The Respondent noted that "the ADT Act does not define the word 'vexatiously', but proceedings have been held to be conducted 'vexatiously':

(a) if they are so obviously untenable or manifestly groundless as to be utterly hopeless ( Attorney-General v Wentworth (1988) 14 NSWLR 481 at 491);

(b) if they are conducted in a way so as to harass or annoy, cause delay or detriment, or achieve another wrongful purpose (See s.6 of the Vexatious Proceedings Act 2008 );

(c) where they have no foundation ( Crewsdon v Niland & Ors (EOD) [2002] NSWADTAP 5); and

(d) where a party fails to comply with the Tribunal's directions ( EP v Commissioner for Children and Young People [2003] NSWADTAP 227 at [11])."

1. The Respondent also submitted that "the Applicant conducted these proceedings in a way that unnecessarily disadvantaged the Respondent in terms of s.88(1A)(b) by prolonging unreasonably the time taken to complete the proceedings by failing to provide adequate particulars, objecting to the Respondent's summonses and electing to continue the proceedings after being given the opportunity to reconsider her position.

1. The Respondent further submitted that the Respondent conducted the proceedings "in a way that unnecessarily disadvantaged the Respondent in terms of s.88(1A)(c) in making a claim that had no tenable basis in fact or law based on the Tribunal's findings".

1. Finally, it was submitted that the conduct of the Applicant "disadvantaged the Respondent because it caused him to incur substantial time and expenses in:

(a) requiring him to summons material from numerous third parties and engaging an inquiry agent to determine the actual facts in this matter;

(b) requiring him to appear and be legally represented at numerous directions hearings dealing with the Applicant's concerns about the Respondent issuing summonses and accessing the documents produced;

(c) requiring him to prepare a thorough cross-examination of the Applicant in the reasonable expectation that she would make herself available for cross-examination; and

(d) requiring him to appear and be legally represented at a further hearing date after the Applicant was given the opportunity to reconsider her position."

Consideration

1. Both parties made allegations that the opposing party had vexatiously conducted the proceedings in terms of s. 88(1A)(a)(vi). The term 'vexatiously' is undefined. In the absence of any definition, the approach expressed by Roden J in Attorney-General (Vic) v. Wentworth (at 491) provides guidance in determining whether an application is vexatious. His Honour first noted that proceedings may properly be regarded as vexatious on either objective or subjective grounds. His Honour then proceeded to express the test, three alternative bases, in the following terms:

1. Proceedings are vexatious if they are instituted with the intention of annoying or embarrassing the person against whom they are brought;

2. They are vexatious if they are brought for collateral purposes, and not for the purpose of having the court adjudicate on the issues to which they give rise;

3. They are also properly to be regarded as vexatious if, irrespective of the motive of the litigant, they are so obviously untenable or manifestly groundless as to be utterly hopeless.

1. In the present matter on a simplistic approach, the Applicant's application to the Tribunal was made to have a large land tax bill reduced or completely eliminated. The Respondent was at the Tribunal essentially to collect revenue on behalf of the New South Wales Government. In that sense, it is difficult to conclude that either party was there for any improper purpose to cause annoyance or embarrassment to the other party.

1. The Applicant, without proper legal advice, took the view that, as she had used the one bed room corrugated iron building on some occasions, the land should be regarded as her principal place of residence. In that sense, it is difficult to conclude that the Applicant's case was groundless as to be utterly hopeless. The Respondent took that claim quite seriously. I should add that whilst the application was determined by the Tribunal and confirmed by the Appeal Panel on the threshold issue, the threshold issue was not raised by the Respondent at the assessment or objection stages of this matter. The Respondent's action to engage a private investigator and issue several summonses to obtain evidence to support his case were actions undertaken by the respondent to ensure his assessments would be affirmed by the Tribunal on the basis that the Applicant had not used the land in the relevant land tax years as her principal place of residence. These actions were not really necessary because the Applicant in her own statement in writing to the Respondent had stated that the three bedroom house on the land was rented out and that she merely used the one bedroom iron corrugated building as her principal place of residence. The Tribunal raised this issue on the facts and it was the basis of the decision ultimately handed down by the Tribunal.

1. Against that background, it is difficult to conclude that the Applicant had vexatiously conducted the proceedings. Similarly, there are no grounds to suggest that the Respondent had vexatiously conducted the proceedings.

1. The other grounds of the Applicant's claim for costs cumulatively were directed against "the improper conduct by the Respondent" in particular his "relentless pursuit of evidence". I agree that the Respondent undertook a wide-ranging "pursuit" to obtain information and evidence in this matter. And that he might have, if properly advised, only pursued the 'threshold issue' in this matter on the basis of the evidence provided to him by the Applicant. But I find nothing improper to warrant an order for costs against the Respondent on that basis.

1. At this stage I should, however, mention that the Respondent is given vast statutory powers under the Taxation Administration Act 1996 (the TA Act) to obtain information and evidence to assist the Respondent to administer the various revenue laws that he is responsible for. These powers are necessary but they should be exercised when making an assessment or at the objection stage to ensure that the final liability in each case is properly due under the law. In this matter, the Respondent sought to use an investigator when the matter was before the Tribunal to gather information. Whilst the law does not prohibit the Respondent using his statutory powers to obtain information and evidence at any particular stage, those powers should I think be exercised prior to determining the final liability of a taxpayer, and when an application is at the Tribunal, the Respondent should properly use the processes available under the ADT Act to obtain any further information or evidence.

1. I should also mention that the Applicant was not represented by a legal practitioner. She was represented by her husband, a medical practitioner, as her agent. No claim was made that he was a professional agent representing the Applicant for a fee. Accordingly, the Applicant, if successful in her claim for costs, would have only been entitled for an order that covers reasonable out of pocket expenses ('disbursements') such as photocopying and travel expenses.

1. Finally, I should deal with the Respondent's other grounds.

1. Firstly, it was submitted by the Respondent that the Applicant had conducted the proceedings in a manner which unnecessarily disadvantaged the Respondent in terms of s.88(1A)(a)(i) because the Applicant failed to comply with the directions of the Tribunal without reasonable excuse to provide adequate responses to the Respondent's request for particulars.

1. The Respondent did not provide any details of the alleged failures. But there was some evidence that the Applicant had lost her records in a fire that destroyed the iron corrugated building. There was also no evidence of any blatant disregard of orders or directions given by the Tribunal.

1. Secondly, the Respondent submitted that the Applicant had conducted the proceedings in a manner which unnecessarily disadvantaged the Respondent in terms of s.88(1A)(a)(ii) by failing to comply with s 100(3) of the TA Act to provide evidence which would have discharged her onus of proof that Wadalba was her PPR during the Tax Years.

1. There is no direction in s 100(3) of the TA Act or in any provision in the ADT Act that an applicant must discharge the onus by giving evidence. Whilst it is often better discharged by the applicant giving sworn evidence, it is ultimately a choice to be made by the applicant as to the manner in which the applicant would go about to establish his or her case.

1. Thirdly, the respondent claimed that the Applicant had conducted the proceedings in a manner which unnecessarily disadvantaged the Respondent in terms of s.88(1A)(a)(iv) because the Applicant caused the Tribunal to adjourn the matter to give the Applicant the opportunity to reconsider her position and to appear on another hearing date.

1. Adjournments often occur at the Tribunal when a party is not legally represented to allow the party to reconsider his or her position. Although the Applicant did not take advantage of the adjournment to reconsider her position properly, her ultimate reason in pursuing with her claim is understandable.

1. Fourthly, the Respondent claimed that the Applicant conducted the proceedings in a manner which unnecessarily disadvantaged the Respondent in terms of s.88(1A)(a)(v) by attempting to deceive the Respondent and the Tribunal that Wadalba was her PPR during the Tax Years and that Telopea was not her PPR.

1. I do not think there was any deliberate attempt to conceal the fact that she only stayed at the Wadalba property on some occasions. It was her erroneous understanding of the law that encouraged her to pursue with the claim.

1. Fifthly, it was submitted that the Applicant conducted the proceedings in a way that unnecessarily disadvantaged the Respondent in terms of s.88(1A)(b) by prolonging unreasonably the time taken to complete the proceedings by failing to provide adequate particulars, objecting to the Respondent's summonses and electing to continue the proceedings after being given the opportunity to reconsider her position.

1. Clearly, the matter could have been resolved expeditiously if the Applicant had been represented and had the advantage of legal advice. But, at the Tribunal, applicants are given every opportunity to establish their cases and an adjournment to allow an unrepresented applicant to reconsider his or her case is often useful to resolve a matter. As indicated above, the Applicant had an erroneous view of the law, and was ultimately not prepared to change her strong view that she was entitled to the principal place of residence exemption. I do not think there was any deliberate attempt by the Applicant to prolong unreasonably the time taken to complete the proceedings

1. Finally, it was the Respondent's case that the Applicant conducted these proceedings in a way that unnecessarily disadvantaged the Respondent in terms of s.88(1A)(c) in making a claim that had no tenable basis in fact or law based on the Tribunal's findings.

1. The Tribunal's findings were against the Applicant and resulted in an adverse outcome for the Applicant. But it is difficult to conclude that the Applicant, who was not legally represented, had knowingly made a claim that had no tenable basis in fact or law. The Respondent's pursuit to obtain evidence by the issue of summonses to various persons and authorities and the engagement of a private investigator did not give the Applicant the impression that she was pursuing a claim that had no tenable basis of success. If the Respondent had pursued with the threshold issue at all stages of this matter, this claim might have been justified.

1. Having considered the various submissions, I do not consider appropriate to depart from the presumption in s.88(1) of the ADT Act that each party bears its own costs of the proceedings for the reasons I have provided above. Although a successful litigant at the Tribunal has "a relatively low hurdle" when seeking a costs order, the discretion given to the Tribunal must be exercised in each case by a careful consideration of all the facts and circumstances.

1. Accordingly, both applications are dismissed.

Order

1. The Tribunal makes the following orders:

(1) The Applicant's application for costs is dismissed.

(2) The Respondent's application for costs is dismissed.

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Decision last updated: 06 September 2011