President Constructions Pty Ltd v KE [No 2]

[2016] WADC 18

JURISDICTION     :   DISTRICT COURT OF WESTERN AUSTRALIA

IN CHAMBERS

LOCATION:   PERTH

CITATION:   PRESIDENT CONSTRUCTIONS PTY LTD -v- KE [No 2] [2016] WADC 18

CORAM:   DEPUTY REGISTRAR HEWITT

HEARD:   8 FEBRUARY 2016

DELIVERED          :   9 FEBRUARY 2016

FILE NO/S:   CIV 1710 of 2015

BETWEEN:   PRESIDENT CONSTRUCTIONS PTY LTD

Plaintiff

AND

YAN SU KE
Defendant

Catchwords:

Objection on taxation - GST component in the Bill

Legislation:

Nil

Result:

Although in appropriate circumstances a reduction to represent the GST component of a Bill might be made such a deduction was not appropriate in regard to the Bill under consideration - Objection not allowed

Representation:

Counsel:

Plaintiff:     Mr Fletcher

Defendant:     Mr Garrsworthy

Solicitors:

Plaintiff:     Robertson Hayles Lawyers Pty Ltd

Defendant:     Fletcher Law

Case(s) referred to in judgment(s):

Gagner Pty Ltd t/as Indochine Café v Canturi Corp Pty Ltd [2009] NSWCA 413

1. DEPUTY REGISTRAR HEWITT:  On 19 January 2016 a bill of costs pursuant to the order of the principal registrar made on 1 September 2015 was listed before me for taxation.  At the conclusion of the taxation counsel representing the paying party advanced an argument that the amount which I have proposed to allow on the bill should be reduced by that proportion of which represented GST payable on solicitor's fees.  I held open the certificate and gave the paying party the opportunity to bring an objection.  An objection was duly received and I re‑listed the taxation to hear that objection.  The gist of the argument is that the party entitled, is registered for the purposes of GST.  It is said therefore that the component of the bill which represents a proportion of GST is claimable by it as an input credit and as such should not be allowed on the bill.

2. The argument derives from the fact that the costs committee when publishing its costs scale on various occasions but including a publication on 20 June 2014 in The West Australian Government Gazette of that day referred to the fact that the maximum set out in the scale included GST.  That is to be found in par 9 of the determination to which I have referred.

3. In arguing the matter counsel referred me to the case of Gagner Pty Ltd t/as Indochine Café v Canturi Corp Pty Ltd [2009] NSWCA 413. At [151] and [152] the court had this to say:

   151In summary, as the GST legislation currently stands, if the plaintiff in an action for tort is registered for GST purposes, and stands to receive an input credit for any GST payments incurred in making good its damage, and there is no impediment to the plaintiff receiving the full benefit of the input credit, that GST amount should be excluded from the quantum of damages recoverable.

   152There have been cases consistent with the analysis that I have given that concern the extent to which an entity registered for GST purposes is entitled to recover the GST component of legal costs and disbursements pursuant to an order for costs in its favour.  In courts where party‑party legal costs are payable in accordance with a court scale, and an order for party‑party costs has been made: the total amount of professional costs assessed in accordance with the scale can be recovered: Merringtons Pty Ltd v Luxottica Retail Australia Pty Ltd (VSC, Wood M, 16 June 2006, unreported) at [34]; Keen v Telstra Corporation Ltd [2006] FCA 834; (2006) 153 FCR 28 at 36‑7 [46] per Rares J; Hennessey Glass and Aluminium Pty Ltd v Watpac Australia Pty Ltd [2007] QDC 57; (2007) 69 ATR 374 at [138]‑[139]; ChongHerr Investments Ltd v Titan Sandstone Pty Ltd [2007] QCA 278 at [9] per de Jesery CJ, Keane JA and Philippides J. This is subject to a qualification that the costs actually paid by the party entitled to the costs order exceed the scale amount plus what the GST would be on that scale amount. If the costs actually paid do not exceed the scale amount plus what the GST would be on that scale amount, the principle of indemnity requires that the party with the benefit of the costs order should receive no more than the amount it has actually paid: Hennessy at [139] – [140], ChongHerr at [9]. That seems consistent with the position in England and South Africa, as discussed in Merringtons at [22]‑[26].

   If a disbursement has been paid in an amount inclusive of GST, the amount recoverable is the amount paid minus the GST component, because the entity with the benefit of the costs order has been entitled to the benefit of an input credit for that amount of GST: Merringtons at [35]‑[36], [41], Hennessey at [142]‑[143], ChongHerr at [9]. It is this situation that is most closely analogous to the present case.

   If a disbursement has been paid for an item that does not attract GST (such as court filing fees) the whole of that amount of disbursement is recoverable, because no question arises of any input credit having been received concerning that disbursement: Hennessey at [132], [143].

4. From that proposition it is argued on behalf of the paying party that from the amount at which I had taxed the bill a further deduction representing a component of GST should be made.

5. The first comment is that the bill of costs for taxation does not bear GST.  What does bear GST is the invoices which are rendered by the solicitors providing services to the plaintiff and to the extent that GST is included within those invoices, the client would be entitled to claim input credits.  I interpret the gist of the case which has been cited to stand for the proposition that a party should not on a taxation recover more than in fact it had to pay and if the effect of claiming a GST credit reduces the impact of the solicitor's bill that should be reflected in the taxation.  Again I consider that the case stands for the proposition that if the client pays more for the services rendered by the solicitor than is allowed on the taxation there is no such profit and as a consequence there is no basis for a deduction.  Such a deduction will simply enlarge the shortfall.

6. In the present case I have examined the solicitor's invoices to the client for the work the subject of the Bill and I am satisfied they are substantially in excess of the amount allowed on taxation.

7. My ruling is therefore that it is not appropriate for me to deduct a notional amount representing such monies as might be able to be claimed as a GST input and I should allow the bill in the amount reached at the taxation namely $5,330.57.  I shall sign my certificate on the delivery of this decision.