Mortgage Force Service Pty Ltd and ANOR and Commissioner Of State Revenue
[2007] WASAT 53 (S)
•5 APRIL 2007
MORTGAGE FORCE SERVICE PTY LTD & ANOR and COMMISSIONER OF STATE REVENUE [2007] WASAT 53 (S)
| Link to Appeal : | [2009] WASCA 24 |
| STATE ADMINISTRATIVE TRIBUNAL | Citation No: | [2007] WASAT 53 (S) | |
| TAXATION ADMINISTRATION ACT 2003 (WA) | |||
| Case No: | CC:2618/2005 | 5 APRIL 2007 | |
| Coram: | JUSTICE M L BARKER (PRESIDENT) | 5/04/07 | |
| 20/04/07 | |||
| 11 | Judgment Part: | 1 of 1 | |
| Result: | No order as to costs | ||
| B | |||
| PDF Version |
| Parties: | MORTGAGE FORCE SERVICE PTY LTD MORTGAGE FORCE AUSTRALIA PTY LTD COMMISSIONER OF STATE REVENUE |
Catchwords: | State Revenue Applicants successful in review application Whether applicants entitled to an order for costs against the Commissioner under s 87(2) of the State Administrative Tribunal Act 2004 (WA) |
Legislation: | State Administrative Tribunal Act 2004 (WA), s 9, s 30, s 87, 87(1), s 87(2), s 87(4) Taxation Administration Act 2003 (WA), s 38 |
Case References: | Mortgage Force Service Pty Ltd and Commissioner of State Revenue [2007] WASAT 53 Summerville and Department of Education and Training [2006] WASAT 368(S) |
Orders | No order as to costs |
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL STREAM : COMMERCIAL & CIVIL ACT : TAXATION ADMINISTRATION ACT 2003 (WA) CITATION : MORTGAGE FORCE SERVICE PTY LTD & ANOR and COMMISSIONER OF STATE REVENUE [2007] WASAT 53 (S) MEMBER : JUSTICE M L BARKER (PRESIDENT) HEARD : 5 APRIL 2007 DELIVERED : Edited reasons delivered extemporaneously on 5 APRIL 2007 SUPPLEMENTARY
DECISION : 20 APRIL 2007 FILE NO/S : CC 2618 of 2005
- CC 2619 of 2005
- MORTGAGE FORCE AUSTRALIA PTY LTD
Applicants
AND
COMMISSIONER OF STATE REVENUE
Respondent
Catchwords:
State Revenue - Applicants successful in review application - Whether applicants entitled to an order for costs against the Commissioner under s 87(2) of the State Administrative Tribunal Act 2004 (WA)
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Legislation:
State Administrative Tribunal Act 2004 (WA), s 9, s 30, s 87, 87(1), s 87(2), s 87(4)
Taxation Administration Act 2003 (WA), s 38
Result:
No order as to costs
Category: B
Representation:
Counsel:
Applicants : Mr MJ McCusker QC, Mr CJ Munro and Ms MH Meegahage
Respondent : Mr RM Mitchell and Ms JM Jones
Solicitors:
Applicants : Munro Doig Lawyers
Respondent : State Solicitor's Office
Case(s) referred to in decision(s):
Mortgage Force Service Pty Ltd and Commissioner of State Revenue [2007] WASAT 53
Summerville and Department of Education and Training [2006] WASAT 368(S)
Uniting Church Homes (Inc) and City of Stirling [2005] WASAT 341
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Summary of Tribunal's decision
1 In Mortgage Force Service Pty Ltd and Commissioner of State Revenue [2007] WASAT 53, a decision handed down on 23 February 2007, the Tribunal allowed the review application of the applicants and set aside a decision of the Commissioner of State Revenue by which he had disallowed the objection of the applicants to his assessment that the applicants were liable to pay payroll tax in respect of the commissions paid to consultants during relevant periods.
2 In light of that decision the applicants applied for an order that the Commissioner pay their costs of the proceedings.
3 The primary contention made on behalf of the applicants was that, during the earlier objection proceedings conducted by the Commissioner before the review proceedings were commenced in the Tribunal, the Commissioner in effect failed generally to consider the objections made by the applicants.
4 The Tribunal refused the application for costs. It was not satisfied that a case had been made out to the effect that the Commissioner had failed to deal with the objection in an adequate manner.
5 The Tribunal also took the opportunity to emphasise that the procedures under which an administrative review of State revenue decisions is now undertaken, are different from the process that formerly applied when appeals were made following objection decisions, to the Supreme Court of Western Australia. The Tribunal emphasised that review proceedings in the Tribunal in all matters, including State revenue matters, should proceed expeditiously and if necessary with careful case management.
6 The Tribunal expressed the view that if the parties and their professional representatives had, under the supervision of the Tribunal, better case managed these proceedings before the Tribunal, some of the difficulties that led to the initial hearing being adjourned after its first day, to enable the parties to agree additional facts and reduce what otherwise looked like being a very long hearing, would have been avoided. The Tribunal also accepted that the process by which the Commissioner deals with objections, before a party finds it necessary to apply to the Tribunal for review of a decision is a very important one, but noted that the experience of the Tribunal is that the Commissioner takes the objection process seriously.
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7 In all the circumstances, the Tribunal declined to accept the submission made on behalf of the applicants that ordinarily in State revenue proceedings a successful taxpayer applicant aught to be entitled to its costs of the proceedings against the Commissioner. The Tribunal reaffirmed the importance of the legislative intent expressed in s 87 of the State Administrative Tribunal Act 2004 (WA) that in the usual case the Tribunal is a costs-free jurisdiction.
Issue
8 The issue in this case arose out of the decision in Mortgage Force Service Pty Ltd and Commissioner of State Revenue [2007] WASAT 53, in which the Tribunal allowed the review application of the applicants and set aside the decision of the Commissioner of State revenue by which he had disallowed the objection of the applicants to his assessment that the applicants were liable to pay payroll tax in respect of the commissions paid to consultants during relevant periods. As a result of that decision the applicants applied for an order that the Commissioner should pay their costs for the proceedings.
9 The simple issue in the follow up application then is whether, in the circumstances, the Tribunal should exercise its discretion under s 87(2) of the State Administrative Tribunal Act 2004 (WA) (the Act) and make an order for costs in favour of the applicants against the Commissioner.
Decision
10 The Tribunal received written submissions from the parties on the question of costs and then heard oral submissions in relation to the application on 5 April 2007. Immediately after receiving those oral submissions on 5 April 2007, the President of the Tribunal dismissed the application for costs and gave reasons orally for that decision. The reasons which follow are an edited version of the reasons given orally on 5 April 2007.
11 I have been aided by the detailed submissions from the parties. The question of costs was also flagged at the time the final submissions on the main review application were made, and so I have also had the opportunity to reflect on what a proper costs outcome might be in the meantime. In the end, I have decided that there will not be any order for costs.
12 Section s 87 of the Act undoubtedly gives the Tribunal discretion in the matter. The submissions that have been filed have referred to earlier decisions of the Tribunal about its costs powers. They also refer to decisions
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- in other jurisdictions under similar legislation. The Tribunal's recent decision in Summerville and Department of Education and Training [2006] WASAT 368(S) and its earlier decision in Uniting Church Homes (Inc) and City of Stirling [2005] WASAT 341 provide general guidance on the approach taken and principles applied in this Tribunal when costs applications are considered.
13 The starting position in the Tribunal under s 87(1) of the Act is that costs are not payable, but undoubtedly under s 87(2) of the Act, the Tribunal has a general discretion to award costs. As has been pointed out in relation to review proceedings, s 87(4) sets out some criteria. The first of those is whether the party, in bringing or conducting the proceeding before the decision-maker, in which the decision under review was made, genuinely attempted to enable and assist the decision-maker make a decision on its merits - that is not an issue here. But the second is, namely, whether the party, being the decision-maker, genuinely attempted to make a decision on its merits.
14 Mr McCusker in his submissions today has made reference to the notion of the model litigant, which one thinks covers not only the Commonwealth as a litigant, as Mr McCusker said, but also States and Territories which are involved in proceedings, and generally official decision-makers. As the submissions of the Commissioner in this case emphasised, a decision-maker is obliged by s 30 of the Act to assist the Tribunal.
15 So, without suggesting what range of factors may be taken into account in considering whether costs ought to be awarded against a decision-maker who is not successful, the primary question here is whether there was a genuine attempt by the Commissioner to make a decision on the merits during the objection stage. One might say the way the proposition has been put in favour of a costs order by the applicant is that constructively that was not done. The reason that this is said to be so is that the Commissioner should have, at the earlier objection stage, conducted a much more detailed audit and exercised investigative powers to deal with all of the sorts of issues that eventually came out at the hearing; for example, to do with the extent consultants engaged employees. I am not at all certain this would have resolved the range of issues that arose for determination in this case, but I accept the objection process is a very important one.
16 The coming into operation of the Act and related legislation, under which State revenue decisions became subject to review in this Tribunal, has brought about a new day. As I see it, many of the points that have been
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- raised on both sides in this costs application reflect the fact that we are still coming fully to understand and appreciate what the new day has brought with it. Attention has been drawn in the submissions of the applicants to the way the former system of review in the Supreme Court used to work. It is generally understood, I think, and certainly there have been criticisms in the past of that old system, that it could be attended with quite some delay.
17 In this Tribunal, delay really should not be a factor in proceedings. Undoubtedly, complex cases often take longer to work through. After the Tribunal commenced, the Commissioner found himself actually dealing with many more review applications than had been his experience under the old revenue regime. Counsel for the Commissioner mentioned around 25 review applications involving the Commissioner had been lodged since the Tribunal commenced. I have made it very clear as President that I expect all matters in the Tribunal, regardless of their particular nature or the enabling Act they arise under, and regardless of whether or not people are legally represented, to proceed expeditiously in accordance with the objectives in s 9 of the Act.
18 What this particular proceeding has demonstrated to me, and I think it is demonstrated by many of the documents I have been shown in support of or in opposition to this costs application and the varying accounts that I have been given of what happened in the getting up process, is that when a matter with some complexity such as a revenue matter comes before the Tribunal, it is usually going to be very important to have careful case management of the proceedings, from the Tribunal's point of view. In this case, I attempted to provide that at various stages. The parties' representatives came back before me on a number of occasions, as we tried to see whether facts could be agreed. It was always a matter of great regret to me that collectively we did not do better than we did before then final hearing started on 9 February 2006.
19 I think in the future many of the problems that have given rise to this costs application will be attended to through more exacting case management. To make a system of administrative review work, it is also very important that the professional representatives of the parties involved understand and really begin to share the Tribunal's objectives. The reason I often do not make prescriptive orders by way of direction about what is to be done, by whom and when - at least in cases where parties are legally represented by experienced practitioners who understand how the system works - is that I recognise that the sands can shift fairly quickly when one is trying to proceed to agree facts in a complex matter, and that it is sometimes
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- best left to senior representatives of the parties sensibly to agree what can be done and when. Mature professional management is required on all sides.
20 The parties and their representatives always need to bear in mind what the object of the exercise is and not to make technical responses as to whether or not the Tribunal "ordered" or "directed" or "suggested" or "requested" or whatever in relation to what needed to be done.
21 As I said, it was a matter of great regret when the hearing started that it seemed, as I said to Mr Mitchell during the course of his submissions on behalf of the Commissioner, that the hearing might be a very long one. There was no good reason to think, following the cross-examination of Mr Iannello by counsel for the Commissioner on the first day, that we were not going to run for many, many, many days. Again, I can see very little reason why any proceedings in this Tribunal need to go that long in prospect. If anyone ever tells me that this is a 10 day or a two week or a three week case, I am absolutely aghast because there is usually no proper justification for such an instruction, if the matter is properly managed; not that I have seen yet.
22 The only justification can be that parties might see the proceeding as something of an open-ended inquiry where witnesses can be paraded before the Tribunal and examined and cross-examined and re-examined at length without consideration to time constraints and costs. Well, obviously that sort of procedure will not be allowed; it will not happen. There was a fear that it might have happened in this case, especially after the first day of the hearing. In the event, we had an adjournment, much more work was done; not all the facts were agreed, but I think the parties did reasonably well, and we proceeded to a shorter hearing than was otherwise in store.
23 In the end, I put down the failure of the parties to be able to agree more facts sooner than they did, and well before the hearing commenced, to the fact that review proceedings like this in the Tribunal are relatively new, that perhaps there was a carry-over from the way proceedings were previously conducted in the Supreme Court, and to the fact that the way the Tribunal wants these matters to be dealt with began to be appreciated only slowly. Additionally, as I said in the main reasons for decision, the case obviously involved a lot of money and the proceedings were keenly contested. No doubt all sorts of things, and not the least of which might be instructions from one's client when one is a professional advisor, can make agreeing facts a difficult thing. But parties have to be told of the Tribunal's expectations.
24 The result is I really do not see any need to try to reconstruct all of the getting up process. I am not going to attempt to apportion blame to anybody
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- as to why more was not done to agree facts before the hearing started. It has perhaps been something of a learning exercise all round as to how complex matters like this ought to be organised. As I said at the outset, I have no doubt that if it becomes necessary in the future, the Tribunal will exert a more rigorous case management oversight of the proceedings than was finally achieved in this case, and usually may be expected to do so.
25 When it comes to what else the Commissioner might have done in the course of the earlier objection proceedings, with hindsight I think a lot might have been done. It is true - I remember the cross-examination by Mr McCusker of the auditor when she gave her evidence - that the auditor seemed to accept that the question of employment indeed could be an important matter. Obviously, it is. The point has been made that there are standard instructions and guidelines from the Commissioner for how these audits ought to be conducted, and in effect, this one was conducted in the usual way. There is also no doubt that, in some circumstances, not just in the area of State revenue, but in all areas of official decision-making, important issues come up that can affect a whole industry and that some decisions and proceedings tend to take on the character of a test case.
26 I do not think in State revenue matters any case is ever quite a definitive test case because every case has to be considered on its own facts, but in this case obviously the issue was important and may be expected to have had wider industry ramifications. There is also no doubt the whole question of State revenue is an important one, and perhaps by reason of the fact that it does involve money, parties tend to fight over it more keenly than other matters. But I do not think on all the materials before me that it can be said, as has been argued on behalf of the applicants, that the failure of the Commissioner in the objection process to have gone to the lengths suggested is so egregious that it ought to be visited with an order for costs in these proceedings.
27 The suggestion is that in this case, if not as a general matter of policy, a preparedness of the Tribunal to award costs in favour of the successful taxpayer applicant taxpayer in a State revenue matter would send a message to the Commissioner that he needs to pull his socks up in relation to the conduct of objection proceedings. I am not sure that it would necessarily do that. To my observation, indeed in other proceedings that come before the Tribunal, the Commissioner is well aware of the importance of the objection proceedings. I recently had before me - I appreciate it was not the applicant party, or counsel here who were representing the party concerned - an application under s 38 of the Taxation Administration Act2003 (WA) to give directions to complete objection proceedings so that decision could be made
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- without further delay. Those proceedings indicated to me that the objection proceedings were in fact being given very close consideration in an independent review process by a senior officer of the Office of State Revenue. That leads me to think that while we are still working out what this new day means under the new administrative review system in this State, perhaps some errors will be made, but we are, I think, all learning fast. The objection process is terribly important. I am sure the Commissioner appreciates that if there is a possibility of parties coming to the Tribunal afterwards, then it is important for him to do the hard yards during the objection process.
28 It also means I think, that applicants need to put up as much information as they can to the Commissioner during that objection process. In the Taxation Administration Act 2003, the onus is for that to happen in the objection process and the Commissioner really does not have to look beyond what he is given, even though he has the power to investigate further. Applicants should make frank disclosure to the Commissioner and not try to keep their powder dry until they reach the Tribunal.
29 So I do not think a failure to make a costs order in a case like this will, by any stretch of the imagination, result in the Commissioner treating objections in a cursory manner. A ruling in a case like this of course does not mean that successful applicants in other cases involving the Commissioner in the future might not make applications for costs and point, in the particular circumstances of the case, to reasons why they should have costs by reason of the conduct of the Commissioner. And so might the Commissioner seek costs in an appropriate case in the future. But, as I say, I am not at all satisfied in this case that a costs order ought to be made here.
30 Just to make some points clear that perhaps I have not finally clarified, I do not think the reference by the applicant to earlier appeal proceedings in the Supreme Court following the objections process is particularly relevant. As I have suggested, they highlight the fact that we do have a new day when it comes to administrative review of State revenue decisions in this Tribunal. They also highlight the fact that the Tribunal does not expect there to be any delay. There are not any valid reasons, when one has regard to the Act, why, when an application is made by a taxpayer to the Tribunal for review of a State revenue decision, it cannot proceed expeditiously.
31 When matters come here to the Tribunal, it is going to be important to carefully manage them. I think in the short and medium term, it is going to be important, given the Commissioner is a regular party in these sorts of proceedings in the Tribunal, that the Commissioner's representatives, and
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- professional representatives of applicants who often appear in such matters, have the opportunity to discuss with the Tribunal how matters can be most expeditiously advanced. There still seems to be a tendency for these various representatives to make their own rules up as they go along and tell the Tribunal what the practice and procedure is going to be and when things are going to happen.
32 I think we generally need to become more mindful of the obligations the Tribunal has to meet the objectives given to it by Parliament to deal with matters expeditiously. At the same time, the Tribunal recognises that sometimes extra time and extra care can be to everyone's benefit, including the Tribunal's, in making a final decision, and that there are resource implications for everybody in handling these matters.
33 Mr Mitchell, for the Commissioner, suggested that there was a countering policy point, if there was a point in Mr McCusker's argument that costs can send messages. I agree that by applicants not having an expectation that, if they are successful in a complex matter having been professionally represented they are likely to get an award for costs, it is on balance more likely to emphasise that the objection proceeding is important, because the parties typically will continue to bear their own costs in the Tribunal.
34 The Tribunal was set up with the very clear legislative policy in mind, as reflected in s 87 of the Act, that it is a costs-free jurisdiction. There have been some variations, I suppose, on that theme, as Mr McCusker mentioned in relation to vocational regulation proceedings in the Tribunal. The Tribunal has expressed its reasons why there ought to be costs when a professional regulatory body succeeds in an action, but otherwise I think the primary position of the Tribunal should be maintained. It would in fact be difficult to distinguish in principle a State revenue review proceeding from other review proceedings, if a special costs rule applied for successful applicants in State revenue matters. If successful taxpayer applicants could get costs orders, why should not every successful applicant in a complex matter. Mr McCusker suggested some reasons why not, but I must say for my part I think the Tribunal would be under great pressure in making the distinction generally.
35 The result is that the State, through the Actand related legislation, provides taxpayers with the opportunity to have administrative review of State revenue decisions in the Tribunal. The Act contemplates that these proceedings will be without costs orders. We have the power in appropriate cases, in effect, to make costs orders. I do not see any particular reason to
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- adopt the view, for example, that costs orders will ordinarily be made when the issues are complex or parties are professionally represented. That would not be in accordance with the objectives of the Act. I do not think that ordinarily the mere complexity of the matter should result in a costs order being made either. In any event, that was not the submission that was put to me in this case by the applicants.
36 Finally, then, dealing with the case on the basis it was put forward, I am not satisfied either by reference to the genuineness of the decision-making processes of the Commissioner, or the manner in which the case was got up or conducted, that the discretion that the Tribunal has to award costs has been enlivened. At the same time, I hope it is clear from what I have said today that I was far from satisfied with the manner in which the case was got up or the direction in which it was heading when it commenced, and I think I made my views in this regard very clear at the time.
37 There are times, I suppose, when a judge sitting in the position that I am sitting in, can be so disgruntled about something that if you were to ask for a costs order at the time, you might just get it; but on reflection, I do not think the costs basis is made out. But having ruled that way, as I have suggested, it is not to say that either the Commissioner or applicants should expect in the future to make their own arrangements about the way in which proceedings are to be conducted in the Tribunal. They are not to be conducted at their own leisure, according to their own rules. It is going to be important for the Tribunal to closely manage some of these cases so that we can develop an agreed process in the future.
38 I thank the parties, and particularly their instructing solicitors and counsel, for their written and oral submissions. The applicants' application for costs will be dismissed and just in case anyone is thinking about it, any application for costs in respect of the costs application will not be entertained.
Order
1. No order as to costs.
- I certify that this and the preceding [38] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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JUSTICE M L BARKER, PRESIDENT
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