Snowy Hydro v Commissioner of State Revenue (No. 2)
[2010] VSC 289
•25 June 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
LIST F
No. 8853 of 2007
| SNOWY HYDRO LIMITED (ACN 090 574 431) | Appellant |
| v | |
| COMMISSIONER OF STATE REVENUE | Respondent |
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JUDGE: | Davies J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On written submissions | |
DATE OF JUDGMENT: | 25 June 2010 | |
CASE MAY BE CITED AS: | Snowy Hydro v Commissioner of State Revenue (No. 2) | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 289 | |
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COSTS – Whether costs should be of apportioned according to issues – Supreme Court Act 1986 (Vic) s 24 – Supreme Court (General Civil Procedure) Rules2005 r 63.04
COSTS – Indemnity costs – No reason justifying departure from usual party/party costs.
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APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr J W de Wijn QC with Mr M Richmond SC | Allens Arthur Robinson |
| For the Respondent | Ms H M Symon SC with Mr P Fox | Solicitor for the Commissioner of State Revenue |
HER HONOUR:
On 27 May 2010 I published my reasons for allowing the appellant’s appeal against the respondent’s determination disallowing the appellant’s notice of objection and proposed the following orders:
(a) the appeal is allowed;
(b) the objection decision is set aside;
(c) the objection should be allowed in full;
(d)subject to any argument on costs, the respondent is to pay the appellant’s costs, including reserved costs, such costs to be taxed in default of agreement.
The parties have filed written submissions on the costs orders for which they contend.
The parties also properly brought to my attention that order (b) should read:
The determination is set aside
in lieu of:
The objection decision is set aside.
The final orders proposed by the appellant to reflect the Court’s reasons are:
(a) The appeal is allowed.
(b) The determination is set aside.
(c) The objection is allowed in full.
(d) In default of agreement, the respondent is to pay the appellant’s costs:
(i)incurred up to the adjournment of the hearing on 22 April 2010 taxed on a party/party basis;
(ii)incurred from the final adjournment of the hearing on 21 April 2010 (or, alternatively, from the final adjournment of the hearing on 22 April 2010) to the conclusion of the hearing on 27 April 2010 taxed on an indemnity basis; and
(iii) incurred in relation to this application on a party/party basis.
The respondent contends that the following orders reflect the Court’s reasons:
(1)Leave is granted to the appellant pursuant to section 109 of the Taxation Administration Act 1997 to argue on the appeal in addition to the grounds of its objection that Contact Peaker Australia Pty Ltd had an equitable proprietary interest to the extent of 40% of the value of the power station such that Valley Power Pty Ltd was entitled to 60% of the value of the power station.
(2) The appeal is allowed on that ground.
(3) The determination is set aside.
(4) The objection is allowed in full.
(5)The respondent is to pay [x %] of the appellant’s costs to be taxed in default of agreement, including reserved costs but excluding the costs of and associated with the appellant’s application heard on 29 February 2008.
A. Costs of the Application on 29 February 2008
The application on 29 February 2008 was an application by the appellant for the production of three valuation reports commissioned by the respondent as part of his investigation into whether the appellant was “land-rich” for the purposes of the Duties Act 2000 (Vic).[1] Although the respondent relied on those valuations for the purpose of raising the assessment, the respondent opposed the application on the basis that the valuations were not necessarily relevant to the appeal. Mandie J stated that the valuation reports ought to have been produced “as a matter of fairness” and that the Commissioner was “being obstructive” in refusing to release copies. His Honour ordered their production but reserved costs, stating that “if it turns out that the valuations are irrelevant, as is suggested by the [respondent], then the question of costs might be dealt with at that point in one way”.[2]
[1]Taxation Administration Act 1997 (Vic) s 11(1).
[2]Transcript of Proceedings, Snowy Hydro v Commissioner of State Revenue (Supreme Court of Victoria, Mandie J, 19 February 2008), 19.
As it turned out, these valuations were not relied on by either party at the hearing of the appeal. For that reason the respondent submitted that the appellant should bear its own costs of its application.
In my view, the appellant is entitled to its costs of that application. The burden of proof lay with the appellant to show that the respondent’s assessment was excessive.[3] As the respondent relied on those valuations for the purposes of raising the assessment, the valuations were clearly relevant to the issues in dispute. It is not to the point that they were not relied upon at the hearing. The appellant was entitled to their production and costs should follow the event.
B. Is leave required under s 109 of the Taxation Administration Act?
[3]Taxation Administration Act 1997 (Vic) s 110.
The respondent submitted that the appellant succeeded on a ground not raised in the appellant’s objection (reflecting order (1) of the respondent’s proposed orders) and that the leave of the Court is required by virtue of s 109 of the Taxation Administration Act 1997 (Vic).
I agree with the submission that the grounds of the objection did not include the ground that the power station assets were owned by Valley Power Pty Ltd as to 60% and Contact Peaker Pty Ltd as to 40% under the joint venture arrangement. There was an umbrella claim in the objection that the landholder’s land holdings comprised less than 60% of the unencumbered value of all of its property, when calculated in accordance with s 71 of the Duties Act, but this umbrella claim was supported by “reasons” as to why that was so,[4] which did not include or allude to the specific point about Contact Peaker’s proprietary interest which was advanced at trial.
[4]Taxation Administration Act 1997 (Vic) s 97.
Accordingly leave is required.
Leave should be granted as proposed by the respondent. The respondent was on notice of that point before the hearing commenced and did not object to the point being raised or relied on at the hearing.
It is unnecessary in my view for the order specifically to provide that the appeal should be allowed on that ground. The reasons for decision reflect the basis upon which the appellant succeeded in the appeal.
C. Costs
For the respondent it was submitted that the Court should balance the following factors in exercising its discretion as to the award of costs:
(a) the appellant’s ultimate success in the appeal: that is, in setting aside the respondent’s determination;
(b) the appellant’s success on the 60:40 beneficial ownership issue;
(c) the appellant’s success on the other issues under headings E and F of the Court’s reasons for decision;
(d) the appellant’s entitlement to be compensated on a party/party basis accordingly;
(e) on the other hand, the significant cost incurred by the respondent in responding to the appellant’s chattels claim, which it was submitted occupied approximately half of the case;
(f) the three other claims that were abandoned late after the respondent had already incurred significant time and expense;
(g) the fact that the appeal succeeded on a point raised two and a half years after the appeal was instituted; and
(h) the appellant’s refusal to produce, in advance of the hearing and for the benefit of the respondent and the Court, a document setting out clearly the grounds that it sought to advance on the appeal.
In response, the appellant submitted that in considering the costs question the Court should also have regard to aspects of the way in which the respondent conducted his case that, it was submitted, unnecessarily protracted these proceedings. The appellant submitted that the respondent’s conduct of the case warrants an award of costs against the respondent on an indemnity basis in relation to part of the hearing.
The power of the Court to make an order for costs is contained in s 24 of the Supreme Court Act 1986 (Vic). An award of costs is at the discretion of the Court. However that discretion must be exercised judicially. Usually the party who wins has the costs paid by the other side but it will be a proper exercise of discretion to deny the successful party the whole or part of that party’s costs where the circumstances make it unreasonable for that party to be awarded all its costs. Considerations sufficient to justify a refusal of the whole or part of the successful party’s costs will depend on the particular case.
In my view the circumstances do not justify departure from the general rule that the appellant should be entitled to the whole of its costs on a party/party basis. Further, I do not consider that there is warrant for any part of those costs to be awarded on an indemnity basis.
First, I do not consider it appropriate that the respondent pay some proportion only of the appellant’s costs because the appellant was unsuccessful on the argument that the twin-pac units were chattels, not fixtures. Although the Court plainly has the power to award costs on an issue by issue basis[5] the fact that a successful party has not succeeded on all particular issues of fact or law in dispute does not mean that the party should be deprived of part of its costs relating to those aspects of the case on which is was unsuccessful. The relevant principles relating to an award of costs on this basis were reviewed recently by Robson J in GT Corporation Pty Ltd v Amare Safety Pty Ltd (No. 3).[6] Robson J observed that ordinarily, an award only of a proportion of the successful party’s costs will reflect some conduct of that party in the trial, such that the circumstances make it reasonable that the successful party bear the expense of litigating that portion upon which it failed.[7] That is not the case here. As I held, the question as to whether the twin-pac units were chattels or fixtures involved difficult questions of characterisation. It was reasonably open to the appellant to argue that the units should be classified as chattels. The argument was not without substance. I do not consider that there is any justification for depriving the appellant of its costs relating to this issue, despite being unsuccessful.
[5]Supreme Court (General Civil Procedure) Rules 2005 r 63.04.
[6][2008] VSC 296 (Unreported, Robson J, 12 August 2008).
[7]Forster v Farquhar [1893] 1 QB 564; Nolan v Nolan (No. 2) [2004] VSCA 134 (Unreported, Ormiston, Chernov and Eames JJA, 6 August 2004); Supreme Court (General Civil Procedure) Rules 2005 r 63.04.
Secondly, I do not consider that the fact that the appellant did not pursue certain arguments at the hearing, raised in its notice of objection, warrants the appellant being deprived of part of its costs. The objection was to the assessment and was required to be taken by statute to challenge the assessment.[8] As part of that process, respondent had to consider and form a view on all of the grounds raised in the objection and deal with the merits of those grounds in the Notice of Determination. The objection and Notice of Determination then constituted the “pleadings” on the appeal.[9] It was entirely proper and appropriate for the appellant to raise in the notice of objection all potential arguments supporting its claim that the assessment was excessive.[10] There is no warrant for depriving the applicant of a portion of its costs merely because some of the grounds of objection were not pursued on appeal.
[8]Taxation Administration Act 1997 (Vic) Part 10.
[9]Taxation Administration Act 1997 (Vic) s 109.
[10]Taxation Administration Act 1997 (Vic) s 109.
Thirdly, it was submitted for the respondent that the respondent had incurred costs in meeting a point that seemed to the respondent to be “new” which the respondent argued was not pressed and was “hopeless”: viz that Valley Power Pty Ltd’s ownership of the power station had been transformed into a 60% intangible interest in the joint venture and a reversionary interest, which was the only “land” interest. The appellant contended that the point was not abandoned but rather that it was “unnecessary to deal with” it in any detail by reason of the respondent’s concession that the appellant would succeed if the joint venture was not a linked entity. In view of the way in which the case was conducted by both parties, there is no warrant in the circumstances for the appellant to be deprived of its costs relevant to that claim.
Next it was argued that the point on which the appellant was successful was a point raised two and a half years after the appeal was instituted. It was not, however, a separate and discrete issue from the other grounds on which the appellant relied and, moreover, it is highly doubtful to me that the failure to raise this argument earlier occasioned unnecessary litigation and expense in light of the respondent’s stated position in the Notice of Determination.
Accordingly the appellant should get the whole of its costs.
D. Indemnity Costs
The appellant seeks indemnity costs against the respondent arising out of the recall of the appellant’s expert at the request of the respondent so that the respondent could pursue a further issue in cross examination. The appellant contended that the respondent’s conduct, with respect to the cross examination of the appellant’s expert witness, caused not only loss of time to the Court but also loss of time and significant additional expense to the appellant. It was submitted that this warrants an award of costs on an indemnity basis with respect to that part of the hearing.
Costs on this basis are exceptional and there must be some special reason that justifies departure from the ordinary rule as to costs, such as where a party has engaged in some improper conduct in the litigation[11] or where a party properly advised, should have known that there was no chance of success.[12]
[11]Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd& Ors (1988) 81 ALR 397.
[12]Bass Coast Shire Council v King & Vink Nominees Pty Ltd (1997) 2 VR 5, 29.
As it transpired I found against the respondent on the point which was the subject of the additional cross examination, but I do not consider that the respondent was unjustified in seeking to adduce the further evidence. It was unfortunate that there was a need for the appellant’s expert to be recalled, with the consequential additional hearing time and expense occasioned by the need for the expert and counsel to return from Sydney, but a full and proper explanation was provided to the Court by senior counsel for the appellant and the decision to pursue the further cross examination was not so unreasonable that it warrants an award of costs on an indemnity basis in the appellant’s favour.
E. Conclusion
Accordingly, the orders that I make are as follows:
(1) Leave is granted to the appellant pursuant to section 109 of the Taxation Administration Act 1997 (Vic) to argue on the appeal, in addition to the grounds of its objection, that the joint venture agreement conferred a proprietary interest in Contact Peaker Australia Pty Ltd in the joint venture assets.
(2) The appeal is allowed.
(3) The determination is set aside.
(4) The respondent is to pay the appellant’s costs of the proceeding, including the costs of the submissions on costs, on a party/party basis, such costs to be taxed in default of agreement.
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