Kelly v Chief Commissioner of State Revenue (No 2)

[2010] NSWADT 52

CITATION:	Kelly v Chief Commissioner of State Revenue (No 2) [2010] NSWADT 52
DIVISION:	Revenue Division
PARTIES:	APPLICANT Francis Kelly and Joanne Seve RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	086114
HEARING DATES:	On the papers
SUBMISSIONS CLOSED:	28 October 2009
DATE OF DECISION:	19 February 2010
BEFORE:	Hirschhorn M - Judicial Member
CATCHWORDS:	Costs
LEGISLATION CITED:	Land Tax Management Act 1956 Administrative Decisions Tribunal Act 1997 Administrative Decisions Tribunal Amendment Act 2008 Victorian Civil and Administrative Tribunal Act 1998 Taxation Administration Act 1996
CASES CITED:	Australian Aqua Air Pty Ltd v Chief Commissioner of State Revenue [2009] NSWADT 239 Raethel v Director General, Department of Education and Training [2000] NSWADT 56 Macdonald Contractors (Australia) Pty Ltd v Chief Commissioner of State Revenue [2007] NSWADT 56 Blanch v Chief Commissioner of State Revenue [2008] NSWADT 24 Kyriacou v Chief Commissioner of State Revenue [2009] NSWADT 175 Affinity Health Ltd v Chief Commissioner of State Revenue [2005] NSWSC 663 Charteris v General Manager, Leichhardt Municipal Council (No2) (GD) [2001] NSWADTAP 39 Cachia v Hanes (1994) 179 CLR 403 Jonamill Pty Ltd v Alramon Pty Ltd (No2) (RLD) [2010] NSWADTAP 3 Murray v Bayside CC [1999] VCAT 1327
REPRESENTATION:	APPLICANT J Seve in person and as agent for Francis Kelly RESPONDENT I Young, barrister
ORDERS:	The Respondent to pay half of the Applicants *costs of or incidental to proceedings in the Tribunal and the costs of or incidental to the application (where *costs refers to the costs and disbursements payable by Mr Kelly to Ms Seve for professional legal services), as agreed or as assessed under the Legal Profession Act 2004.

REASONS FOR DECISION

Part A -Introduction

1 Following from the decision of the Tribunal in Kelly v Chief Commissioner of State Revenue [2009] NSWADT 253, the Tribunal received further written submissions from the parties in relation to the matter of costs as directed by the Tribunal. This decision in respect of costs has therefore been decided on the papers taking into account the written submissions of the parties and the brief written and oral submissions in respect of costs that were made by the Applicant at the hearing of the substantive matter.

2 The substantive matter involved an application by the Applicants for review of a decision of the Respondent dated 30 January 2008 to refuse to:

a. form an opinion under Section 65A(1) of the Land Tax Management Act 1956 (“LTMA”) that the proportional unit entitlement (as defined in Section 65A(2) of the LTMA) of Lot 1 the subject of strata scheme SP50870 is unfair or unreasonable; and

b. alter the proportional unit entitlement (as defined in Section 65A(2) of the LTMA) of Lot 1 the subject of the strata scheme SP50870 (for land tax purposes) as necessary to ensure that it is fair and reasonable:
i. in respect of the tax year in which the alteration is made (and any subsequent year to which it is applicable);
ii. in respect of the tax years before the tax year in which the alteration is made up to and including the 2000 tax year
under Section 65A(2) of the LTMA

3 Broadly, in respect of the substantive matter, the Tribunal revoked the decision of the Respondent on 30 January 2008 and remitted the matter to the Respondent for determination in accordance with its findings (including that the Respondent should notify the owners of Lot 2 of the original application under Section 65A(1) LTMA made by the Applicants and to take into consideration any response from the owners of Lot 2).

4 The Applicants submit that the Tribunal should award costs to the Applicant pursuant to Section 88 of the Administrative Decisions Tribunal Act 1997 (“ADT Act”).

5 Section 88 was amended by Administrative Decisions Tribunal Amendment Act 2008 which amendments commenced on 1 January 2009. Clause 43(2) in Part 11 of Schedule 5 of the ADT Act contains a transitional provision which confirms that the amendment to Section 88 also extends to applications and proceedings that were made or commenced, but not finally determined before the commencement of the amendment occurred.

6 In the present case, the Applicants made their application for review on 3 November 2008 and as the proceedings had not been finally determined as at 1 January 2009, the amended version of Section 88 ADT Act applies.

Part B - The Applicant’s case

7 The Applicants submit that the Tribunal should be satisfied it is fair to award costs in relation to the proceedings in favour of the Applicants having regard to;

a. the relative strength of claims made by each of the parties and that the claims made by the Respondent have no tenable basis in fact or law (s 88(1A)(c));

b. the Respondent conducting the proceedings in such a way that unnecessarily disadvantaged the Applicants by failing to comply with directions or orders of the Tribunal without reasonable excuse. (s 88 (1A)(a)(i));

c. the Respondent being responsible for prolonging unreasonably the time taken to complete the proceedings (s.88(1A)(b));

d. the matters specifically identified by the Applicants in submissions that may be considered pursuant to s 88(1A)(e) i.e. had the Respondent properly interpreted s65A of the LTMA and properly considered certain authorities, the Applicants would not have incurred the time and costs involved in the objection to the Chief Commissioner’s decision and in the proceedings in the Tribunal for the review of the Chief Commissioner’s decision.

8 The Applicants claim their costs and disbursements payable to one of the Applicants as a State Taxes Consultant of and incidental to proceedings in the Tribunal and, if the Tribunal concludes it is fair to award costs, also, pre-litigation costs of or incidental to the proceedings giving rise to the application as well as the costs of or incidental to the application (s.88(4)).

9 In relation to the matter of pre-litigation costs, the Applicant cited the decision of the Tribunal in Australian Aqua Air Pty Ltd v Chief Commissioner of State Revenue [2009] NSWADT 239 and essentially submitted that:

- If the Respondent had properly interpreted s.65A and properly considered earlier mentioned relevant authorities, the Applicants would not have incurred the time and costs in objection and up to and including commencement of the proceedings of the Tribunal for the review of the Respondent’s decision.

10 The Applicant provided for the consideration of the Tribunal a detailed time-line of events that led to their objection and the final objection decision of the Respondent on 4 September 2008 and some correspondence between the parties prior to the Applicants filing their application for review with the Tribunal.

Part C – The Respondent’s case

11 Following the same order as the Applicant’s submissions above, the Respondent’s case was as follows:

a. In respect, generally, of the construction of sub-section 88(1A):
i. the general/prima facie rule is that each party is to pay their own costs. This general presumption applies equally to the taxpayer and the Chief Commissioner.
ii. In the Tribunal, a taxpayer and equally the Chief Commissioner with a reasonably arguable case should not be at risk of costs.
iii. The above general rule can only be departed from if the Tribunal is satisfied it is fair to do so – such fairness must be established to the satisfaction of the Tribunal having regard to the criterion in ss88(1A)(a), (b), (c), (d) & (e).


b. Ss 88(1A)(c)-The Respondent did not propound a case that was untenable in fact or law (this requires a high level of untenability or weakness under the Victorian authorities relating to a similar provision). The Respondent also submitted that even though the decision under review had been revoked in the present case, the actual decision in relation to various matters in dispute between the parties was more evenly balanced.

c. Ss 88(1A)(a)(i) and (b)-The Respondent conceded there was some non-compliance with some directions of the Tribunal but submitted that this was not a case where the Applicants were unnecessarily disadvantaged. The matter proceeded without delay in the Tribunal. All litigation occasions stresses, strains, tensions and inconveniences but these do not found a claim that it is “fair” and that a party has been unnecessarily disadvantaged such that the prima facie rule is displaced and costs awarded.

d. Ss 88(1A)(e) – In relation to pre-litigation costs, the Respondent submitted that the reliance by the Applicant on an obiter comment by the Tribunal in the Australian Aqua Air decision was misplaced and directly inconsistent with another decision of the Tribunal in Kyriacou v Chief Commissioner of State Revenue [2009] NSWADT 175 at [39] and also with the approach taken in relation to a similar provision in the Victorian legislation: section 109 of the Victorian Civil and Administrative Tribunal Act 1998. Further, the Respondent submitted that the extent to which s88(4) permits the awarding of pre-litigation costs has been settled by the decision of the President of the Tribunal in Raethel v Director General, Department of Education and Training [2000] NSWADT 56.

e. Generally, in relation to conduct before the commencement of Tribunal proceedings, the Respondent submitted that the boundaries on the use of the costs power were set out by the President in the Raethel decision, that is, to use the costs power as some kind of sanction to punish agencies for poor administration would involve an error condemned frequently by the Courts of using the costs sanction for punitive rather than compensatory purposes.

Part D –Legislation

12 Section 88 ADT Act, as it pertains to the present case, is in the following terms:

88 Costs
(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.

(2) The Tribunal may:
(a) determine by whom and to what extent costs are to be paid, and
(b) order costs to be assessed on a basis set out in Division 11 of Part 3.2 of the Legal Profession Act 2004 or on any other basis.

(3) However, the Tribunal may not award costs in relation to proceedings for an original decision unless the enactment under which the Tribunal has jurisdiction to make the decision provides for the awarding of costs.

(4) In this section, costs includes:
(a) costs of or incidental to proceedings in the Tribunal, and
(b) the costs of or incidental to the proceedings giving rise to the application, as well as the costs of or incidental to the application.

13 There is no definition of “proceedings” in Section 88 ADT Act or elsewhere in the ADT Act.

Part E - Discussion and Reasons for Decision

14 As stated above, Section 88 ADT Act was the subject of substantive amendments commencing 1 January 2009. The explanatory note that accompanied the relevant bill stated the following in respect of the amendments:

Schedule 1 [33] amends Section 88 of the Principal Act
(a) to confirm that parties are to bear their own costs unless the Tribunal awards costs to a particular party, and
(b) to enable the Tribunal to award costs in proceedings before it having regard to an expanded set of circumstances.


Currently, section 88(1) provides that costs may be awarded only if the Tribunal is satisfied there are special circumstances.

The new provisions are based largely on the provisions of s109 of the Victorian Civil and Administrative Tribunal Act 1998 (Victoria).

15 The relevant second reading speech in respect of the bill stated the following:

The bill addresses a recommendation of the statutory review that concerns costs. It amends section 88 to confirm that the parties in the Tribunal are to bear their own costs unless the Tribunal orders otherwise, and incorporates an expanded range of matters to be considered in the making of an award for costs. The provision is modelled on the provision contained in the Victorian Civil and Administrative Tribunal Act 1998.

16 Given that both the explanatory note, second reading speech and submissions of the Respondent in this matter referred to section 109 of the VCAT Act, the terms of that provision are set out below:

109. Power to award costs

(1) Subject to this Division, each party is to bear their own costs in the proceeding.

(2) At any time, the Tribunal may order that a party pay all or a specified part of the costs of another party in a proceeding.

(3) The Tribunal may make an order under subsection (2) only if satisfied that it is fair to do so, having regard to-


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

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

(ii) failing to comply with this Act, the regulations, the rules or an enabling enactment;

(iii) asking for an adjournment as a result of (i) or (ii);

(iv) causing an adjournment;

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

(vi) vexatiously conducting the proceeding;

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

(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 proceeding;

(e) any other matter the Tribunal considers relevant.


(4) If the Tribunal considers that the representative of a party, rather than the party, is responsible for conduct described in subsection (3)(a) or (b), the Tribunal may order that the representative in his or her own capacity compensate another party for any costs incurred unnecessarily.

(5) Before making an order under subsection (4), the Tribunal must give the representative a reasonable opportunity to be heard.

(6) If the Tribunal makes an order for costs before the end of a proceeding, the Tribunal may require that the order be complied with before it continues with the proceeding.

17 In respect of the VCAT Act, there is a definition of “proceeding” in section 3 that confirms it means “proceeding in the Tribunal” ie. as opposed to matters arising before an application is filed in the Tribunal. It was also noted in Murray v Bayside CC [1999] VCAT 1327 that the VCAT “only has jurisdiction to deal with the costs in the proceeding at the Tribunal”.

Note See section 17D(1)(b) to (d) of the Supreme Court Act 1986 .

proceeding means a proceeding in the Tribunal, including-

(a) an inquiry conducted by the Tribunal, including an inquiry under section 159 of the Equal Opportunity Act 1995 ;

(b) a compulsory conference under section 83;

(c) a mediation under section 88; or

(d) a rehearing or reassessment under Part 6 of the
Guardianship and Administration Act 1986 - but, for the avoidance of doubt, not including a referral by the Tribunal to the Victorian Equal Opportunity and Human Rights Commission under section 156 (1) of the Equal Opportunity Act 1995 ;

18 It is clear in the present case, by virtue of s 88(1) ADT Act that in the ordinary course, parties are to bear their own costs in the proceedings, unless the Tribunal is satisfied it is fair, having regard to the factors in ss 88(1A)(a) –(e) inclusive, to award costs in relation to the proceedings.

19 In the present case, therefore, the issue before the Tribunal is whether or not it is satisfied that it is fair to award costs to the Applicants in relation to the proceedings having regard to the factors in ss 88(1A)(a)-(e)? As stated above, the parties made submissions in relation to the various factors and these are now considered in turn by the Tribunal.

Sub-section 88(1A)(a)

20 This factor looks at whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings by certain conduct listed in ss 88(1A)(a)(i)-(vi) inclusive.

21 In the present case, the Applicant complains under ss 88(1A), factor (a)(i) that the Respondent failed to comply with an order or direction of the Tribunal without reasonable excuse on three occasions and that each of these was unfair and disadvantaged the Applicants in the sense that it delayed planned work in relation to the case and necessitated alternative arrangements needing to be made.

22 The Applicant provided particulars as to the three occasions as follows:

a. At a directions hearing on 3 December 2008, the Respondent was directed to provide a copy of the Section 58 documents to the Applicants by 12 December 2008. Although this was done, the Applicant noted that one page of a document at Tab 16 was missing. The Applicant brought this to the attention of the Respondent on 17 December 2008 and a full copy of the document was received by the Applicants by facsimile at 10.36am on 19 December 2008. No excuse was offered to the Applicants as to why the full copy was not provided on 12 December 2008 as directed.

b. At the same directions hearing on 3 December 2008, the Tribunal directed the parties to file submissions by certain dates. The Applicants complied with the date set. The Respondent’s submissions were not filed by 13 March 2009 (a Friday) as directed but instead were filed on 16 March 2009 (Monday) and served to the Applicants by facsimile at 4.50pm the same day. The Respondent telephoned the Applicants on 13 March 2009 to advise the submissions would be late but no excuse was provided for the delay. This disadvantaged the Applicants in that Ms Seve, who had planned to begin work on the Applicants’ submissions in reply on the weekend of 14/15 March 2009 to save on costs and reduce interference with other work and commitments the following week, instead had to make alternative arrangements.

c. At the hearing of the substantive matter, the Tribunal had made orders that further submissions were to be filed by certain dates. The Respondent did not file its submissions by the due date of 3 April 2009 (Friday) but instead filed its submissions on 7 April 2009 (Tuesday) and they were served on the same day at 6.09pm. No explanation for the delay was offered by the Respondent. This disadvantaged the Applicants in that Ms Seve had planned to commence work on the Applicant’s submissions on the weekend of the 4/5 April 2009 and she was unable to do this and had to make alternative arrangements.

d. The Applicant also submitted that the three occasions also showed a consistent failure to comply with directions or orders of the Tribunal without reasonable excuse. These occasions disadvantaged the Applicants in that they had to cancel or postpone other commitments, incur additional costs and work under added time pressures. The Applicants still met their due dates for submissions however because they wished to have the matter resolved expeditiously.

23 In relation to the first matter of the incomplete document, the Tribunal notes that one page was missing from of a fairly significant bundle of Section 58 documents containing 25 tabs. It is of course regrettable that the complete two page document at Tab 16 (which related to an internal report of the Office of State Revenue concerning the relevant land and the comparative value of the two lots) was not provided in the first instance by the Respondent. However, once the fact of the missing page was identified by the Applicants on 17 December 2008, a full copy was provided by the Respondent promptly on the morning of 19 December 2009.

24 It is also noted that the missing page was provided at a time well before the date fell for any evidence or submissions to be filed by the Applicant and the Tribunal is not satisfied that this event unnecessarily disadvantaged the Applicants.

25 In relation to the second and third matters, however, it would appear that there was a failure to comply with the due dates for the filing of submissions by the Respondent and that there was an absence of any excuse (reasonable or otherwise) advanced by the Respondent for the delay.

26 Although the Respondent submits that the first set of submissions were only one working day late and the second set of submissions were only two working days late, they were late and the Applicant has indicated that she was disadvantaged because she was unable to use time on the weekend that she had set aside to consider the submissions and work on the Applicant’s submissions in response and had to make alternative arrangements which impinged on other work requirements and resulted in additional costs.

27 It is true that there was no direction for the Applicant to file submissions in reply prior to the hearing, but, nevertheless, it is reasonable to expect that parties will consider and prepare submissions in reply, if only for the purpose of presenting them orally at the hearing of the matter.

28 In light of there being no excuse offered by the Respondent for the failure to meet the directions and that the Applicants were unnecessarily disadvantaged, but at the same time having regard to the fact that the delays were not substantial and that the Applicants did manage to still meet their own timetable for submissions, this factor tends to weigh slightly in favour of the Applicants.

Section 88(1A)(b)

29 This factor looks at whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings.

30 Under this factor, the Applicant complains that the Respondent:

a. made submissions that disregarded the relevant authorities (relating to the broad nature of the discretion in question and that in the exercise of such a discretion, the facts of the particular case must be considered);
b. made submissions regarding the role of the Tribunal and had disregarded the decision of Gzell J in Affinity Health Ltd v Chief Commissioner of State Revenue [ 2005] NSWSC 663; and
b. made new oral submissions at the closing of the hearing that contradicted earlier written and oral submissions of the Respondent and which resulted in further written submissions having to be made after the hearing.

31 In respect of the first matter, the Tribunal is not persuaded that the Respondent’s submissions regarding s 65A were “untenable”. This is discussed further below and is properly considered under the factor in ss 88(1A)(c).

32 In written submissions and at the hearing, the Respondent did accept that s 65A contained a discretion but, based on the historical context of the provision and the fact that the explanatory memorandum for the “new” s 65A did not contain on its face any intention to jettison and rewrite the purpose, scope and operation of the section, maintained that the discretion ought to mainly be exercised or, even limited to, analogous situations referred to in the explanatory notes for the original s 65A (i.e. disproportionate unit entitlements, created by design, in staged developments).

33 Although the Tribunal ultimately decided against the construction advanced by the Respondent and there was some disparity in the “strength” of the arguments of the parties (to be addressed further below in respect of s 88(1A)(c)), the submissions of the Respondent were not in the category of “untenable”.

34 The Respondent noted at the outset of the hearing that despite the “new” s 65A having been inserted in the legislation in 1992, it had not been the subject of any consideration since that time by a Court or the Tribunal. The submissions of the Respondent in respect of what it saw as the proper construction of s 65A were put clearly and succinctly in written submissions and at the hearing.

35 The Tribunal is not persuaded that the proceedings were prolonged unreasonably by the Respondent advancing an alternative construction of s 65A despite the fact that ultimately the Tribunal preferred the construction advanced by the Applicant (to the extent that the text and structure of the “new” Section 65A indicated a broader discretion available to the Respondent [at paragraph [88]: Reasons for Decision).

36 In relation to the submissions that the Respondent made regarding the role of the Tribunal (distinguishing between a merits review by the Tribunal versus judicial review by a Court) these did not unreasonably prolong the hearing. The submissions were put clearly and succinctly in the written submissions and orally at the hearing.

37 Further, the Tribunal understood at the hearing that the above submissions were being put in response to the Applicant’s written submissions which contained a number of references to the actions taken by the Respondent prior to the objection decision and the application for review filed in the Tribunal. The Respondent appeared to be noting that the proceedings did not involve a review of the Respondent’s reasoning process or the material relied on by the Respondent (in contrast to judicial review, for example) but rather that the Tribunal would form its decision ab initio having regard to the material then before it.

38 In Affinity Health Ltd v Chief Commissioner of State Revenue [2005] NSWSC 66, Gzell J confirmed that the powers in 101(1)(b) of the TAA could also be exercised by a Court and the Court was not limited to a judicial review of the Chief Commissioner’s exercise of discretion. This case was not necessarily relevant to the point the Respondent appeared to make in its submissions which was directed to the fact that the Tribunal would make its decision ab initio and therefore the submissions of the Applicant about the Chief Commissioner’s reasoning and decision making process were not really relevant.

39 The Applicants also complain that the Respondent made new and contradictory submissions at the hearing that necessitated supplementary written submissions following the hearing.

40 In this regard, the Tribunal notes that whilst it is true that the Respondent acknowledged that the new s 65A was retrospective in operation in written submissions, the subject of the additional submissions focussed on the particular interaction between Section 9(3)(c) of the Taxation Administration Act 1996 (“TAA”) and Sections 65A(5) & (6) and the ability of the Respondent to make reassessments of land tax. The supplementary submissions were, in part, requested by the Tribunal and were of assistance in ensuring that the relevant submissions of both parties regarding this matter were properly considered.

41 The Tribunal notes that apart from the late filing of submissions already considered above under ss 88(1A) (a)(i), the proceedings before the Tribunal were completed without delay.

42 The hearing was completed within four months of the first directions hearing. The hearing was set down for one day and completed in one day. There were no adjournments sought by the Respondent at any stage in relation to the proceedings.

43 This was not a case where there was unreasonable prolongation of the proceedings by the Respondent for the purposes of ss 88(1A)(b). The Tribunal is therefore of the view that this factor does not weigh in favour of the Applicants in respect of an award of costs.

Section 88(1A)(c)

44 Under this factor, the Applicant complains that the submissions made by the Respondent referred to above at paragraph [30] together with its submissions concerning the construction of Section 65A LTMA had no tenable basis in fact or law. In particular the Applicant drew attention to the agreement by the Tribunal with the Applicants to the effect that s 65A was in the nature of a broad discretion and was not limited to those situations where the Chief Commissioner considers that land tax has been reduced or avoided and exercises the alteration power at his own volition.

45 The Applicants claim that but for such untenable interpretation, they would not have had to commence proceedings and incur legal costs.

46 The Respondent answers that the equivalent provision to ss 88(1A)(c) has been considered in the VCAT on a number of occasions where it has been held that a high level of untenability or weakness is required to justify an order for costs (Public Transport Corp v Borrondora CC [2002] VCAT 472 at [32], Hickey v Port Phillip CC [2001] VCAT 231 at [15]).

47 Recently however in Jonamill Pty Ltd v Alramon Pty Ltd (No 2) (RLD) [2010] NSWADTAP 3, the Appeal Panel considered the meaning of the words “the relative strengths of the claims made by each of the parties” in s88(1A)(c) which of course precede the reference in that section to “including whether a party has made a claim that has no tenable basis in fact or law”. In Jonamill, the Appeal Panel considered some other Victorian authorities in respect of the equivalent provision and then said the following at [42] and following:

42 For two reasons, we believe that we should not treat these decisions as controlling the interpretation of section 88(1A)(c), for the purposes of these proceedings, to such an extent that this subparagraph should only be considered applicable if Jonamill’s case in the appeal could properly be characterised as ‘unarguable, unreasonable or untenable’.

43 The first reason is that to apply the subparagraph in this way is to ignore that part of its wording that refers to ‘the relative strengths of the claims made by each of the parties’. The subparagraph refers to ‘a claim that has no tenable basis in fact or law’ only by way of exemplifying cases in which there is a very great disparity between these ‘relative strengths’.

44 Secondly, to take this approach would involve ignoring the authorities (cited above at [26 – 30]) establishing that under section 88 in its previous form costs were more readily awarded when either (a) the case arose in the Retail Leases Division or (b) costs were being sought against an unsuccessful appellant. The present proceedings fall into both these categories.

48 In the present case, clearly the reasoning in paragraph [44] is not relevant since the present case was heard in the Revenue division and does not involve an appeal. However paragraph [43] is relevant and seems to suggest that a disparity in the relative strength of the parties claims but something less than a great disparity i.e. an “unarguable, unreasonable or untenable” claim, might still be considered under this sub-section for the purposes of awarding costs.

49 In the present case, the Applicants’ claim in respect of the proper construction of s 65 was ultimately preferred by the Tribunal. This, of itself, would ordinarily be insufficient for an award of costs since costs do not “follow the event” in the Tribunal. However, in the present case, the Tribunal is also of the view that the Applicant had a significantly stronger claim in this regard for the reasons set out in the decision of the Tribunal in paragraphs 84-89 (in particular, the absence of any words in the “new” s 65A requiring the Chief Commissioner to form an opinion that a person’s liability to land tax has been reduced or avoided). The Tribunal notes that in the way in which the parties (in particular, the Respondent) framed their cases before the Tribunal, the construction point was fundamental and occupied much of the time spent at the hearing and also in the written submissions of the parties.

50 The parties enjoyed mixed success in relation to the other issues that arose in relation to the proceedings which, in aggregate, occupied less overall time at the hearing and in the initial written submissions.

51 The Tribunal found in favour of the Respondent in respect of a number of issues relating to the exercise of the discretion in s 65A (with references to paragraphs in the reason for decision):

a. that there must be consequential adjustments in the relative entitlement of another lot owner (at [106]);

b. the existence and extent of the consequential adjustment to the other Lot owners is a relevant consideration in the exercise of the discretion (at [107]).

b. the interests of other Lot owners ought to be taken into account (at [107] and [109]);

c. in forming an opinion under s 65A, the appropriate basis of valuation is market value (at [104]);

d. in respect of the discretion in s 65A(5), evidence as to current market value would not support the application of an altered unit entitlement in prior land tax years (at [111]).

52 In addition to the construction issue, the Tribunal found in favour of the Applicants in relation to:

a. That a decision maker must consider whether on the facts the discretion should be exercised in favour of a person (at [93])

b. Reassessments under s 65A(5)(b) may be made more than 5 years after the initial assessment (at [110])

c. Based on the evidence before it of the particular features of the Lot 1 versus Lot 2 and the uncontradicted expert opinion as to an 8% difference in improved market value of the lots, the Tribunal reached a “preliminary view” that the proportional unit entitlement was unfair or unreasonable (at [105]) – but that ultimately the interests of the owners of Lot 2 would need to be taken into account before reaching a final view that the proportional unit entitlement of Lot 1 is unfair or unreasonable.

53 In respect therefore of the factor in s 88(1A)(c), in weighing up the relative strengths of the claims made by the parties but having regard to the importance of the construction point in the application for review and the disparity in strength of claim regarding this particular point, the Tribunal has come to the conclusion that this factor tends to weigh slightly in favour of the Applicant in respect of an award of costs.

Section 88(1A)(e)

54 Under this factor, the Applicants complain that, had the Respondent properly interpreted s 65A and properly considered other authorities, the Applicants would not have incurred the time and costs involved in the objection to the Respondent’s decision and in the proceedings in the Tribunal for the review of the Respondent’s decision.

55 As the Tribunal stated in the AustralianAqua Air case at [17] which is relied on in the present case in other respects by the Applicant:

17 I should add, relevant to this matter, the new s 88 has, however, introduced a restrictive approach in awarding costs. The new s 88 only allows the Tribunal to have regard to matters directly associated with the proceedings. The matters set out in s 88(1A) are specific to matters relating to the proceedings. Section 88(1A)(e) allows the Tribunal to have regard to “any other matter that the Tribunal considers relevant” but that has to be in relation to the proceedings.

56 The pre-litigation conduct of the Respondent therefore would not appear to be a matter that should be considered even under s 88(1A)(e) because it does not concern the proceedings before the Tribunal.

57 In relation to the conduct of the Respondent during the course of the proceedings and the case that it put forward, this has already been separately considered under the factor in s 88(1A)(c) above.

Weighing up of the factors

58 In having regard to the factors above (in particular, s 88(1A)(a)(i) and s 88(1A)(c)), the Tribunal has concluded that, in this particular case, it is fair to award some costs to the Applicant. As indicated above, however, the factors only tend to weigh slightly in favour of the Applicant and the Tribunal has decided it is fair to reflect this in the extent of the costs to be awarded pursuant to s 88(2) ADT Act.

59 Having regard to both the time occupied by and the central importance of the construction issue in the proceedings before the Tribunal (but on the other hand having regard to the strength of the Respondent’s claims in respect of a number of other issues regarding the proper exercise of s 65A) and the slight delays that unnecessarily disadvantaged the Applicants, the Tribunal has decided that it is fair to award to the Applicants, half of their *costs of or incidental to proceedings in the Tribunal and the costs of or incidental to the application (where *costs refers to the costs and disbursements payable by Mr Kelly to Ms Seve (for professional legal services)).

60 In relation to “costs” for the purposes of s 88 (which definition was not amended in 2008), the President of the Tribunal stated the following in the Raethel decision:

35 References in the rules of court to ‘costs’ are ordinarily construed to cover those costs that are incurred by a party for professional legal services including fees and disbursements. Importantly, the personal costs of a litigant are not covered. See Oshlack v Richmond River Council (1998) 193 CLR 72 at 89 (per Gaudron and Gummow JJ), 120-3 (per Kirby J); Cachia v Hanes (1994) 179 CLR 403 at 409-410. That the costs order is designed to assist in reimbursing a successful litigant for the expense incurred in obtaining legal representation has also been held to apply in some Tribunals in New South Wales: see, for example, the Medical Tribunal ( Ohn v Walton (1995) 36 NSWLR 77) and the now superseded Commercial Tribunal ( Building Services Corporation v Buckett , Commercial Tribunal, 23 December 1997, unreported).

Pre-litigation costs

61 The Applicant has also made a claim for pre-litigation costs and cites the decision in Australian Aqua Air Pty Ltd v Chief Commissioner of State Revenue [209] NSWADT 239 where the Tribunal stated the following:

17 I should add, relevant to this matter, the new s 88 has, however, introduced a restrictive approach in awarding costs. The new s 88 only allows the Tribunal to have regard to matters directly associated with the proceedings. The matters set out in s 88(1A) are specific to matters relating to the proceedings. Section 88(1A)(e) allows the Tribunal to have regard to “any other matter that the Tribunal considers relevant” but that has to be in relation to the proceedings.

18 This outcome is in part due to the specific matters that are set out in the new s 88(1A), which has been really a “cut and pasted” job, by the draftsman. The draftsman has taken these matters from the Victorian legislation which, as was noted by the Victorian Civil and Administrative Tribunal in Murray v Bayside CC [1999] VCAT 1327 “only has jurisdiction to deal with the costs in the proceeding at the Tribunal”. Under the Victorian legislation there is no provision to award any pre-litigation costs incurred by an applicant. The new s 88 in introducing the factors to be considered, however, retained the old definition of “costs”. The definition allows the Tribunal to award “costs of or incidental to proceedings in the Tribunal” and “the costs of or incidental to the proceedings giving rise to the application, as well as the costs of or incidental to the application”. The definition includes pre-litigation costs of a party.

19 There is, therefore, this anomaly in the new s 88, which only allows the Tribunal to take into account factors and matters arising from the proceeding in a particular matter without any regard to pre-litigation conduct of a party. But if the Tribunal concludes in a particular case on the basis that it is fair to award costs, the Tribunal can under the new s 88 also award pre-litigation costs incurred by a party. But this new approach clearly discriminates against a party that makes an application to the Tribunal to redress a decision made by an incompetent administrator, costing the applicant large legal expense through that process, before the benefit of a fair hearing at the Tribunal. The pre-litigation conduct of the incompetent administrator will not be a relevant matter to be taken into account in awarding costs.

62 The Applicant says that if the Tribunal concludes that it is fair to award costs to the Applicants, the Tribunal can and should also award pre-litigation costs to the Applicants. The basis for this is that if the Respondent had properly interpreted s.65A in the first place, the Applicants would not have needed to incur time and costs from the objection stage up to and including commencement of the proceedings in the Tribunal. Further, the Applicant’s submit that the detailed time-line of the pre-litigation conduct of the Respondent indicates it was protracted and in many instances, unfair and unreasonable.

63 The Respondent, on the other hand, submitted that there are other authorities of the Tribunal that are contrary to the AustralianAqua Air decision. In particular, the Respondent pointed out that although a “new” version of s 88(1) and s 88(1A) were introduced, the definition of what is included in “costs” remained the same in s 88(4) and accordingly prior decisions of the Tribunal regarding the meaning of s 88(4) need to be considered.

64 In respect of s 88(4), the Respondent cited the decision of the President sitting at first instance in Raethel v Director General, Department of Education and Training [2000] NSWADT 56 (and as cited in subsequent decisions of the Tribunal: Blanch v CCSR [2008] NSWADT 24 at [19] and Macdonald Contractors (Australia) Pty Ltd v CCSR [2007] NSWADT 56).

65 In Raethel, commencing at paragraph [37], the President noted that ordinarily costs orders are limited to costs in the proceedings before the court or tribunal. His Honour then referred to the terms of s 88(4) and noted the contention that:

Ordinarily the discretion to award costs is confined to costs incurred in relation to the proceeding before the court or tribunal. But in the Tribunal Act there is an extended definition of ‘proceedings.’ Section 88(4) provides:

“(4) In this section, costs includes:
(a) costs of or incidental to proceedings in the Tribunal, and
(b) costs of or incidental to the proceedings giving rise to the application, as well as the costs of or incidental to the application.”
38 The main thrust of the applicant’s submission is to argue that the Tribunal is entitled to cover in a costs order not merely the costs of the proceedings before the Tribunal but also the cost of the ‘proceedings’ that occurred between the applicant and the agency at agency level.

66 The above submission did not appear to have been accepted by his Honour who then stated at paragraphs [49]-[54]:

49 In approaching the question of the meaning of ‘proceedings giving rise to the application’, the Tribunal considers it useful to look to the object of s 88. The object is to set a rule as to ‘costs’. That expression (as already noted) refers to costs connected with obtaining legal representation. With that as background, the term ‘proceedings’ when used to refer to events antecedent to the proceedings in the Tribunal should be construed as referring to procedures of a kind where legal representation might be reasonably likely to play a part.

50 That approach lends support to the interpretation suggested by counsel for the agency, that the term ‘proceedings’ refers to a process with characteristics of strict formality. The example he gives is, I consider, a good one.

51 In the disciplinary context, the proceedings that occur at the prior stage to any action being taken in a public tribunal are usually affected by a high degree of formality, and are acknowledged to have significant implications for the member of the profession under investigation and inquiry. A formal procedural framework is laid down by statute and subordinate instruments. Principles of natural justice apply. Legal representation would be permitted unless unequivocally ousted by statute.

52 If a broader interpretation of the kind advocated by the applicant were to be attached to ‘proceedings’ then s 88(4)(b) would cover any decision-making procedure which is undertaken by an agency before a matter reaches the Tribunal. Counsel for the applicant sought to confine his submission to the context of the FOI Act, but it is difficult to see what distinction could reasonably be invoked to prevent the logic which supports his position in that regard being extended to all agency procedures that involve the making of decisions subject to review by the Tribunal. The objectives of the FOI Act and those of the Tribunal Act, as they seek to impact on government administration, are similar.

53 I am satisfied that the expression ‘proceedings giving rise to the application’ does not cover the entire administrative process that occurs in agencies leading to the making of decisions that are capable of being the subject of an application for review to the Tribunal.

54 I consider that a narrower view of the expression ‘proceedings giving rise to the application’ along the lines that I have indicated is more appropriate. It is an expression that, at most, embraces a process of such formality that considerations of natural justice would permit a person to seek and be granted legal representation. In its merits review work the Tribunal has encountered instances of that kind, typically in relation to regulation of occupations or professional discipline.

67 In respect of the previous s 88(1), in Charteris v General Manager, Leichhardt Municipal Council (No2) (GD) [2001] NSWADTAP 39, the Appeal Panel of this Tribunal reiterated another view expressed by the President in the above case “that caution must be observed in allowing costs applications to become a vehicle for the general scrutiny of the conduct of one of the parties prior to the commencement of the litigation”. The Appeal Panel went on to make the following observations as to what circumstances may warrant costs for pre-litigation conduct of one of the parties:

“26. On the other hand, as acknowledged in Raethel and in the decision under appeal, there may be circumstances where it is appropriate to have regard to the pre-litigation conduct of one of the parties. We agree with the comments of McHugh J in Re the Minister for Immigration and Ethnic Affairs; Ex parte Lai Quin (1997) 186 CLR 622 at 624-625, albeit made in relation to cases disposed of without hearing (citations omitted):
‘In some cases … the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence litigation.’

68 In the present case, as the Tribunal noted in AustralianAqua Air decision, the factors to be considered by the Tribunal in s88(1A) do not include any reference to pre-litigation conduct and instead are concerned with the proceedings before the Tribunal. The fact that there was no inclusion of a factor requiring consideration of pre-litigation conduct in the amendments to s 88 and at the same time, no change to the definition of “costs” in s 88(4) (as the Respondent highlighted) is suggestive that “proceedings” in s 88(4) ought to still be interpreted in accordance with the principles in the Raethel case.

69 In Raethel, the Tribunal concluded that the words “proceedings” in s 88(4) “embraces a process of such formality that considerations of natural justice would permit a person to seek and be granted legal representation” (eg instances encountered by the Tribunal in the regulation of occupations or professional discipline). There is of course a statutory process in the TAA for objections by a taxpayer and decisions on objection by the Respondent (as well as the timing and requirements of such a decision eg. provision of reasons) but the procedures are perhaps not quite of the same “formality” as that in the professional discipline area (eg Legal Profession Act 2004).

70 The Respondent also drew the Tribunal’s attention to the decision in Kyriacou v Chief Commissioner of State Revenue [2009] NSWADT 175 at [39] in respect of the new s 88(1A) where Deputy President Handley stated:

I note that section 88(1A) gives the Tribunal a discretion to “award costs in relation to proceedings before it”. Thus, costs incurred prior to the commencement of proceedings are not included.

71 Another further matter worthy of consideration is that the “new” s 88(1A) provides that costs may be awarded where it is “fair” to do so having regard to the statutory factors (which factors relate to the proceedings before the Tribunal). If the interpretation of “proceedings” in s 88(4)(b) was to ordinarily encompass legal costs incurred by a taxpayer at the decision-making stage in revenue matters this might result in real disparity in treatment between:

a. a taxpayer who incurs legal costs, receives an unfavourable objection decision but then ultimately succeeds in the Tribunal (which taxpayer, on the construction advanced by the Applicant in this case, might thereby become entitled to recover pre-litigation costs pursuant to s 88(1A) and 88(4)(b)); and

b. a taxpayer who incurs legal costs but ultimately receives a favourable objection decision at the decision-making stage but would be unable to recover its costs (there being no provision in the TAA to do so).

72 Nevertheless, in light of what the Appeal Panel said in Charteris, the Tribunal has considered the time-line provided by the Applicant in respect of the pre-litigation history of the matter. Although the time-line together with the Section 58 documents reveal a process that was not perfect (ie. there was a failure to comply with s 93(2) and (2A) TAA and provide reasons for the initial objection decision although this was rectified by the Respondent one week later after notification by the Applicants. Further, the course of the correspondence from the time of the initial decision to the final objection decision does tend to indicate there was a changing reasoning process of the Respondent in relation to the nature and purpose of s 65A and the relevant considerations to apply in respect of its exercise which appears to have led to much of the concern of the Applicants).

73 Nevertheless, the correspondence also shows that the Respondent responded fairly promptly to the concerns noted by the Applicants and attended a meeting with them to discuss the matter. The Respondent also offered to and did review its initial decision on objection and issued a replacement decision on objection (albeit with some new reasons not previously raised). The entire process was quite lengthy which perhaps arose in part because this was the first application by a taxpayer for the exercise of the discretion in s 65A (this was acknowledged by Counsel for the Respondent at the hearing of the matter) and in part because of the considerations of valuation evidence.

74 Although the process was certainly not perfect, the Tribunal is satisfied that this was not a case of the type referred to in Charteris, where the Respondent acted so unreasonably that the other party (i.e. the Applicants) should obtain the costs of the action.

75 In the present case, on the basis of the abovementioned authorities regarding the construction of s 88(4) and having regard to the fact that this section was not amended in 2008 and also having regard in any event to the pre-litigation history provided by the Applicants, the Tribunal has concluded that there should be no award to the Applicants of pre-litigation costs of or incidental to the Respondent’s decision.

76 For the reasons above, the Tribunal makes the following order:

a. The Respondent pay half of the Applicants *costs of or incidental to proceedings in the Tribunal and the costs of or incidental to the application (where *costs refers to the costs and disbursements payable by Mr Kelly to Ms Seve (for professional legal services)), as agreed or as assessed under the Legal Profession Act 2004.