Western City Developments Pty Ltd v Chief Commissioner of State Revenue (No 2)

[2010] NSWADTAP 72

Appeal Panel - Internal

CITATION:	Western City Developments Pty Ltd v Chief Commissioner of State Revenue (No 2) [2010] NSWADTAP 72
PARTIES:	APPELLANT Western City Developments Pty Ltd RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	089078
HEARING DATES:	On the papers
SUBMISSIONS CLOSED:	17 September 2010
DATE OF DECISION:	9 November 2010
BEFORE:	Needham J SC - Deputy President; Verick A - Judicial Member; Barnes M - Judicial Member
CATCHWORDS:	Costs – whether alleged breach of Model Litigant Policy rendered an order for costs fair in the circumstances – no breach of Policy – application for costs of Appeal dismissed.Costs – whether Appeal Panel can order costs of proceedings below – costs order sought encompassed part of hearing which was determined by agreement – held that Appeal Panel had jurisdiction to make order in relation to such costs – application for costs of remitted proceedings dismissed.
DECISION UNDER APPEAL:	Western City Developments v. Chief Commissioner of State Revenue [2008] NSWADT 293
FILE NUMBER UNDER APPEAL:	086009
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Duties Act 1977 Taxation Administration Act 1996
CASES CITED:	Western City Developments v. Chief Commissioner of State Revenue [2009] NSWADTAP 54 Western City Developments Pty Ltd v. Chief Commissioner of State Revenue [2008] NSWADT 293 B&L Linings Pty Ltd & anor v. Chief Commissioner of State Revenue [2006] NSWADTAP 32 and [2008] NSWCA 187 Salon Today Pty Ltd v M M I R Pty Ltd [2009] NSWADT 71 T & C Canterella Pty Ltd v. Egg Marketing Board (NSW) [1973] 2 NSWLR 366 B& L Linings Pty Ld v. Chief Commissioner of State Revenue (No 5) (RD) [2010] NSWADTAT 21 AT v Commissioner of Police, NSW [2010] NSWCA 131 Mahenthirarasa v State Rail Authority of NSW (No 2) [2008] NSWCA 201 O'Neill v Henry (No. 2) (Costs) (RLD) [2010] NSWADTAP 54
REPRESENTATION:	APPELLANT S Phillips, barrister (submissions on costs by PJ Mylott, solicitor, Mulally Mylott) RESPONDENT P Singleton, barrister
ORDERS:	1.Application for costs dismissed.

REASONS FOR DECISION

1 These reasons for decision relate to an application for costs by the appellant, who was successful on an appeal which remitted a question back to the learned Tribunal member at first instance. The costs in question are:_:-

a)the costs of the appeal to the Appeal Panel; and
b)the costs of the remitter to the learned Tribunal member

in proceedings Western City Developments v. Chief Commissioner of State Revenue [2009] NSWADTAP 54 (“the appeal proceedings”) and for the consequential remission of the proceedings to the Tribunal below (“the remitted proceedings”).

2 The appeal proceedings were an appeal from the decision of Member Hirschhorn in Western City Developments Pty Ltd v. Chief Commissioner of State Revenue [2008] NSWADT 293 (“the original proceedings”). The Appeal Panel ordered that the determination of the value of the property be remitted to the learned Tribunal member to allow further evidence of value to be brought. The remitted proceedings did not proceed to a hearing, since the parties resolved the matter by negotiation.

3 The facts which gave rise to the litigation are set out in paragraphs [1] to [15] of the reasons in the appeal proceedings, as follows:-

Facts
4 The appellant owns land located at West Gosford. It paid duty on the purchase of that property and sought a return of part of the amount of duty paid pursuant to s 21 of the Duties Act 1997.

5 The Chief Commissioner of State Revenue (“the Commissioner” or “the respondent”) assessed duty on a dutiable value of $3,400,000, being the price shown on the contract as being the consideration paid for the property.

6 However, it is common ground that a reduced sum of $2,420,000 changed hands between the vendor and the purchaser, the vendor being keen to sell and giving a “rebate” off the purchase price pursuant to clause 53 of the contract, and a “further discount” of $180,000 which discount was reflected in the settlement schedule.

Question for the Tribunal
7 The learned Tribunal member identified, correctly, the question in the case as being “what the correct “dutiable value” of the property was for the purposes of s 21 of the [Act] upon which duty should have been calculated”.

The findings of the Tribunal below
8 The learned Tribunal Member found that:-
a)the Commissioner was wrong in treating the “consideration” for the purchase as the sum shown on the contract as the “purchase price” of $3,400,000;
b)the rebate of $800,000 represented a reduction in the consideration for the property;
c)there was insufficient explanation as to the $180,000 for the Member to be able to find that it was a reduction in consideration, and the Applicant (here, the appellant) did not discharge its onus of proof in relation to that sum; and
d)despite the finding in (b) above, the test in s 21 of the Act was that the dutiable value was the greater of consideration and the unencumbered value of the dutiable property. Section 31 of the Act requires the Commissioner to reassess duty only where the consideration is reduced to not less than the unencumbered value of the property at the time the consideration is reduced.

9 The learned Tribunal member found that as the appellant did not provide evidence of the unencumbered value of the property, apart from two one-page expressions of opinion of value from local real estate agents, there was no evidence as to the unencumbered value of the property.

10 Relying on the onus on the applicant for review to prove its case (see s 100(3) of the Taxation Administration Act , B&L Linings Pty Ltd & anor v. Chief Commissioner of State Revenue [2006] NSWADTAP 32 and [2008] NSWCA 187), the learned Tribunal member held that it was necessary for the Applicant to show, not just that the consideration had been reduced but also to prove the unencumbered value of the property at the time the consideration was reduced.

11 Accordingly, despite the finding that the consideration was reduced from that shown on the contract for sale, the decision under review was affirmed.

4 As noted above, the appeal was successful. The question of costs was reserved. The Appellant seeks the costs of the appeal, as well as of the remitted proceedings.

5 Submissions in relation to costs were filed by each of the parties; the appellant on 13 August 2010 and the respondent on 15 September 2010.

6 Costs in any proceedings are governed by s 88 of the Administrative Decisions Tribunal Act 1977 which provides:-

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.

7 The current version of s 88 incorporates a test of “fairness” in sub-s 1A, rather than the previous incarnation of the section, which incorporated a criterion that there should be ‘special circumstances warranting an award of costs’. The current version became operative on 1 January 2009.

8 Section101 of the Taxation Administration Act 1996 provides for the Tribunal to exercise similar powers, including in par (e):-

“make any further order as to costs or otherwise as it thinks fit.”

9 In Salon Today Pty Ltd v M M I R Pty Ltd [2009] NSWADT 71 (a case decided under the Retail Leases Act 1994), the Tribunal stated at [72]:-

What the Parliament has done, in its 1 January 2009 amendments, is recognise that there is a need for this Tribunal to be more flexible and widen the scope of a litigant’s entitlement to costs. …[T]he result of this re-assessment by the Parliament is a different test, a test of fairness, having regard to a number of parameters/factors.

10 The appellant submitted that the respondent, the Chief Commissioner, did not act in compliance with his obligations to act as a model litigant in that:-

a)knowing that the question of the value of the property was a central issue, he objected to the evidence as to value;
b)he failed to agree to an adjournment notwithstanding there was no prejudice to him, given that the duty had been paid; and
c)he failed to take regard of the fact that the appellant was not represented at first instance, particularly “in the face of its highly specialised knowledge of the issues of fact and law involved in the assessment of the Appellant’s liability for stamp duty on the transaction”.

11 The appellant contended that the objection to the evidence as to value by the Commissioner “was unreasonable” and fell short of the model litigant duties and cited T & C Canterella Pty Ltd v. Egg Marketing Board (NSW) [1973] 2 NSWLR 366 at 383:-

“The duty of the executive branch of Government is to ascertain the law and obey it. If there is any difficulty in ascertaining what the law is, as applicable to the particular case, it is open to the executive to approach the Court, or afford the citizen the opportunity of approaching the Court, to clarify the matter. Where the matter is before the Court it is the duty of the executive to assist the Court to arrive at the proper and just result”.

See also B& L Linings Pty Ld v. Chief Commissioner of State Revenue (No 5) (RD) [2010] NSWADTAT 21 at paragraph [60].

12 The appellant submitted that the model litigant policy required the respondent to alert the Tribunal to the fact that the appellant was not legally represented and that an adjournment could be granted to it. A failure to do so, it was submitted, amounted to taking advantage of the appellant.

13 The appellant pointed throughout its submissions to the “highly specialised knowledge” of the respondent of the Duties Act and the various Revenue Rulings. It was submitted that as an “instrument of Her Majesty’s NSW Government, and as a model litigant, [the Commissioner had a duty] not to allow the Tribunal to make an error of law”.

14 It was further submitted that the respondent did not apply its own ruling, DUT 012, and that that failure to do so was a matter which could be considered as relevant on costs.

15 The submissions of the appellant note the various items of correspondence which dealt with putting the respondent on notice of the costs orders sought.

16 The appellant further submitted that the costs of the remitted proceedings are capable of being the subject of a costs order by the Appeal Panel because they are costs “incidental to, and a necessary consequence of”, the appeal, citing sub-s 88(4). It was submitted that any costs ordered would need to be agreed or assessed.

The respondent’s submissions on costs

17 The respondent contended that while the Appeal Panel had jurisdiction to determine the costs of the appeal, it had no jurisdiction to order costs of the remitted proceedings. The statutory power of the Appeal Panel to award costs incidental to the (appeal) proceedings did not include the costs of the remitted proceedings, particularly given that the appellant has not sought, and does not intend to seek, costs of the original review proceedings.

18 The respondent submitted that if any power in relation to the remitted proceedings existed, it must be exercised by the learned Tribunal member who determined the original review proceedings.

19 The respondent further submitted that while it is correct that the borders of the discretion to award costs should not be strictly delineated, it is nevertheless the case that the factors in sub-par 1A(a)(i) to (vi) do constitute a non-exhaustive, but indicative, list of the kind of factors which go towards showing an unfairness that should be remedied by way of a costs order. It was submitted that the matters set out by the appellant do not sit comfortably with that list.

20 The objections to evidence taken, it was submitted, were not objections which were untenable. The findings of the Appeal Panel on the worth and value of the evidence as to value supports that contention. The respondent submitted that the factors relating to an adjournment were “finely balanced” (see par [64] of the decision below).

21 No costs order should be made because it was the appellant’s failure to present its case at first instance, even though the objection to the evidence of value had been brought to the attention of the appellant prior to the hearing. It was submitted by the respondent that the paucity of the evidence was such that the Tribunal could not have made a determination on that evidence at all, and that the decision to rely on the evidence was a “considered, commercial decision”.

22 The Court of Appeal, in AT v Commissioner of Police, NSW [2010] NSWCA 131, at [26] said, in relation to sub-s 88(1A) (per Basten J, with whom the other members of the Court agreed):-

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

and at [32] to [33]:-

[32] The appellant’s submissions ... should be accepted: they strongly favour the individual appellant obtaining reimbursement for part at least of her legal expenses so far. The fact that the appellant has been successful at both levels of appeal is a matter which can be taken into account under subs (1A)(e). A further factor to be taken into account is that the respondent, being a State agency, was also required to act as a model litigant: Mahenthirarasa v State Rail Authority of NSW (No 2) [2008] NSWCA 201; 72 NSWLR 273 (Basten JA, Giles and Bell JJA agreeing). That is not to say that the Commissioner was not entitled to insist that statutory procedures be complied with. However, where the statutory scheme was entirely unclear, and the Commissioner’s construction was not accepted, it is a factor which militates in favour of the Commissioner bearing the costs of the member of the public seeking to avail herself of a statutory right of review.
[33] That approach does not diminish the force of the general principle that each party should bear its own costs in the Tribunal, a principle applicable at both first instance and before the Appeal Panel. Although an order varying the general rule may be made “only if” the relevant criterion is satisfied in a particular way, there is a relatively low hurdle for an applicant seeking an order. The criterion of “fairness” will take into account the compensatory purpose of an award of costs, which will generally favour the successful party. The circumstances in which fairness may be identified are indicated by the specific attributes listed in subs (1A), but subject to the generality of para (e), read in its context. Other considerations will no doubt include the nature of the jurisdiction of the Tribunal which is invoked and the objects identified in s 3(b)–(g) of the Tribunal Act.

23 The “unfairness” identified by the appellant is an alleged breach of the Model Litigant Policy. That policy, found at relevantly, provides:-

“The obligation
2. The State and its agencies must act as a model litigant in the conduct of litigation.
Nature of the obligation
3.1 The obligation to act as a model litigant requires more than merely acting honestly and in accordance with the law and court rules. It also goes beyond the requirement for lawyers to act in accordance with their ethical obligations. Essentially it requires that the State and its agencies act with complete propriety, fairly and in accordance with the highest professional standards.
3.2 The obligation requires that the State and its agencies, act honestly and fairly in handling claims and litigation by:
a) dealing with claims promptly and not causing unnecessary delay in the handling of claims and litigation;
b) paying legitimate claims without litigation, including making partial settlements of claims or interim payments, where it is clear that liability is at least as much as the amount to be paid;
c) acting consistently in the handling of claims and litigation;
d) endeavouring to avoid litigation, wherever possible. In particular regard should be had to Premier’s Memorandum 94-25 Use of Alternative Dispute Resolution Services By Government Agencies and Premier’s Memorandum 97-26 Litigation Involving Government agencies;
e) where it is not possible to avoid litigation, keeping the costs of litigation to a minimum, including by:
i) not requiring the other party to prove a matter which the State or an agency knows to be true; and
ii) not contesting liability if the State or an agency knows that the dispute is really about quantum;
f) not taking advantage of a claimant who lacks the resources to litigate a legitimate claim;
g) not relying on technical defences unless the interests of the State or an agency would be prejudiced by the failure to comply with a particular requirement and there has been compliance with Premier’s Memorandum 97-26;
h) not undertaking and pursuing appeals unless the State or an agency believes that it has reasonable prospects for success or the appeal is otherwise justified in the public interest. The commencement of an appeal may be justified in the public interest where it is necessary to avoid prejudice to the interest of the State or an agency pending the receipt or proper consideration of legal advice, provided that a decision whether to continue the appeal is made as soon as practicable; and
i) apologising where the State or an agency is aware that it or its lawyers have acted wrongfully or improperly.
3.3 The obligation does not require that the State or an agency be prevented from acting firmly and properly to protect its interests. It does not prevent all legitimate steps being taken in pursuing litigation, or from testing or defending claims made.

3.4 In particular, the obligation does not prevent the State or an agency from:
a) enforcing costs orders or seeking to recover costs;
b) relying on claims of legal professional privilege or other forms of privilege and claims for public interest immunity;
c) pleading limitation periods;
d) seeking security for costs;
e) opposing unreasonable or oppressive claims or processes;
f) requiring opposing litigants to comply with procedural obligations; or
g) moving to strike out untenable claims or proceedings.”

24 It is the Appeal Panel’s view that the objection by the respondent to the evidence of value cannot have constituted a breach of the model litigant policy. This Appeal Panel found (at [52]) that the evidence was :-

“... properly rejected. The terms of the letters make it clear that the agents had not been asked to value the property, much less to turn their minds to the statutory requirement of the “unencumbered value”, and they are the kinds of letters which agents, perhaps interested in taking a new listing, provide to prospective vendors. It is telling that one is couched as an “appraisal” (albeit by the agent who sold the property to the vendor) and the other lists “achievable” prices for the property with no mention of comparable sales. Even in a Tribunal not bound by the rules of evidence, as this one is, the letters cannot provide a proper foundation for a positive finding of unencumbered value.”

25 Certainly, as the appellant submitted, “the issue of the unencumbered value of the property was central to the issue of assessing the amount of stamp duty that was payable on the transfer of the property” (appellant’s submissions, par 6.2(a)). However, in the Appeal Panel’s view, the letters could not have formed the basis of any finding as to value. The appellant was on notice of the kind of evidence required, and had chosen, due to the cost of a valuer, not to seek proper evidence of value. The appellant’s submission that the respondent, in objecting to the evidence as to value, was “pressing the application of strict rules concerning expert evidence” cannot be upheld, given the fact that the evidence was insufficient in itself.

26 Further, there is no duty laid on the respondent, by reason of the Model Litigant Policy or otherwise, to insist that his opponent seek an adjournment. In seeking that the matter be determined on the date that it had been set down for hearing, the State was acting “firmly and properly”. So seeking to have an issue determined is not, in our view, taking unfair advantage of an unrepresented litigant; the respondent had sought to bring to the appellant’s attention the difficulty in its claim. Not insisting that the appellant seek an adjournment, in the circumstances of this case was not a breach of the Model Litigant Policy. It should be noted that no adjournment was sought by the appellant.

27 The fact that the respondent had “highly specialised knowledge” of the duties legislation and the ADT Act is irrelevant. The Appeal Panel is of the view that the respondent gave the appellant sufficient information to enable it to make a decision as to the kind of evidence it would bring, and that the respondent was entitled to seek to have the review heard on the day on which it was listed. While we found that the learned Tribunal member should have offered, and then allowed an adjournment, she was certainly not coerced into not adjourning the matter by the submission of the respondent that the matter should continue.

28 Accordingly, the application for costs of the Appeal is dismissed.

29 As to the jurisdiction of the Appeal Panel to determine the costs of the remitted proceedings, the question is whether the words “in relation to proceedings before it” extend to the costs of the appellant consequential upon the orders of the Appeal Panel. In conformity with the ruling on the question of the costs of the appeal, the Appeal Panel would, if it had jurisdiction, dismiss the application for costs of the remitted proceedings. The respondent has submitted that the question of the costs of the remitted proceedings should be in turn remitted to the learned Tribunal member to deal with.

30 Sub-section 114(2) deals with powers of the Appeal Panel and provides:-

(2) The orders that may be made by the Appeal Panel on any such appeal include, but are not limited to, any of the following:
(a) an order affirming or setting aside the decision of the Tribunal (as originally constituted),
(b) an order remitting the whole or any part of the case to be heard and decided again by the Tribunal (as originally or similarly constituted), either with or without the hearing of further evidence, in accordance with the directions of the Appeal Panel,
(c) an order made in substitution for an order made by the Tribunal.”

31 It seems to us that the powers given to the Appeal Panel extend by necessity to a power to deal with costs in the proceedings below. For example, had the learned Tribunal member been asked to award costs, and refused to do so, then an appeal could be taken from that refusal (as long as the other requirements for a question of law or an extension to the merits been satisfied). The Appeal Panel would be able to affirm or set aside that decision, or make an order in substitution for it. By analogy, the Appeal Panel would be able to make an order that if it were unfair that the appellant bear its own costs of the remitted proceedings, that the proceedings be remitted on the basis that the respondent pay those costs by way of sub-par 114(2)(b). The Appeal Panel in O'Neill v Henry (No 2) (Costs) (RLD) [2010] NSWADTAP 54 took the view that the section covered costs of both an Appeal and a first instance hearing (of which, in this case, the remitted proceedings would be part) and said:-

“often it will be better to dispose of the issue as part of the Appeal Panel's orders so as to bring an end to the case in the Tribunal and avoid any additional costs and delay for the successful party.”

32 Accordingly, the Appeal Panel has jurisdiction to consider the costs of the remitted proceedings, and in conformity with the views expressed above, dismisses that application for costs.