Supreme Court New South Wales Medium Neutral Citation: Leppington Pastoral Co Pty Ltd v Chief Commissioner of State Revenue (No 2) [2023] NSWSC 545 Hearing dates: On the papers Date of orders: 23 May 2023 Decision date: 23 May 2023 Jurisdiction: Equity - Corporations List Before: Williams J Decision: Application for indemnity costs dismissed. Catchwords: COSTS – plaintiff succeeded on the basis of submissions that first emerged in its reply submissions filed only days before the hearing and in oral submissions during the hearing – plaintiff sought indemnity costs on the basis of defendant's failure to accept Calderbank offer made by plaintiff four months earlier – application for indemnity costs dismissed. Legislation Cited: Duties Act 1997 (NSW) Taxation Administration Act 1996 (NSW) s 101 Cases Cited: Leppington Pastoral Co Pty Ltd v Chief Commissioner of State Revenue [2023] NSWSC 463 Texts Cited: N/A Category: Costs Parties: Leppington Pastoral Co Pty Ltd (Plaintiff) Chief Commissioner of State Revenue (Defendant) Representation: Counsel: C Peadon (Plaintiff) S Balafoutis SC with I Young (Defendant) Solicitors: Marsdens Law Group (Plaintiff) Crown Solicitor for NSW (Defendant) File Number(s): 2021/354398 Publication restriction: N/A Judgment 1. I delivered reasons for judgment in this matter on 4 May 2023: Leppington Pastoral Co Pty Ltd v Chief Commissioner of State Revenue [2023] NSWSC 463 (the principal judgment). I held that the plaintiff was entitled to orders revoking the assessment issued by the defendant on 20 February 2017 (as revised on 9 November 2021) under the Duties Act 1997 (NSW). 2. That revised assessment, which is now to be revoked, followed from the defendant's rejection (in part) of the plaintiff's objection to the defendant's initial assessment. In addition to seeking an order revoking the defendant's assessment, the plaintiff sought orders allowing its objection and setting aside the defendant's partial rejection of that objection. In paragraphs [137] and [138] of the principal judgment, I invited submissions from the plaintiff identifying the reasons why those additional orders were necessary or appropriate, if the plaintiff continued to press for those orders. I also invited submissions from the parties in the event that either of them contended for any costs order other than an order that the defendant pay the plaintiff's costs on the ordinary basis as agreed or assessed. I made directions for the parties to exchange the orders that they contend should be made to give effect to the principal judgment, including as to costs, together with short written submissions. The parties did not reach a consensus, and exchanged written submissions and competing proposed terms of orders on 18 May 2023. 3. The plaintiff has proposed a form of orders that include the additional orders referred to above allowing its objection and setting aside the defendant's partial rejection of that objection. The plaintiff's submissions are silent about why those additional orders are necessary or appropriate. 4. I accept the defendant's submissions that the additional orders are neither appropriate nor necessary because it is the assessment itself that was the subject of the review undertaken by this Court, and not the defendant's decision in relation to the plaintiff's objection: see principal judgment at [14]. An order under s 101 of the Taxation Administration Act 1996 (NSW) revoking the defendant's assessment is all that is required to dispose of the substantive issues in the proceedings. 5. That leaves the question of costs. 6. It is common ground between the parties that the defendant should be ordered to pay the plaintiff's costs of the proceedings up to delivery of the principal judgment. The plaintiff seeks an order that its costs be paid on the ordinary basis up to 3 May 2022 and on an indemnity basis thereafter on the basis of the defendant's failure to accept a Calderbank offer made by the plaintiff on 3 May 2022. The defendant opposes any order for indemnity costs, and seeks an order that the plaintiff pay (on the ordinary basis) the defendant's costs of the plaintiff's application for indemnity costs. 7. I reject the plaintiff's application for an order requiring the defendant to pay its costs on an indemnity basis from 4 May 2022. 8. The Calderbank offer was an offer by the plaintiff to pay an aggregate amount of $10 million to settle its disputes with the defendant about the assessment that was the subject of these proceedings and a separate assessment that was not the subject of these proceedings. 9. In submitting that its offer was a genuine offer of compromise of these proceedings and that the defendant's failure to accept that offer was unreasonable, the plaintiff asks the Court to accept its assertion that the separate assessment was issued on the basis of a development rights agreement between the plaintiff and an entity referred to as "GDC2" that was "in materially the same terms as" the Development Rights Agreement addressed in the principal judgment. That vague assertion is of no assistance to the Court for present purposes. The Development Rights Agreement addressed in the principal judgment was considered and construed as one of a suite of 23 agreements, which collectively comprised approximately four lever arch folders of material. 10. The plaintiff then asks the Court, to uphold the plaintiff's "challenge" to the interest component of the separate assessment that was not the subject of these proceedings. That challenge is purportedly made by a series of assertions contained in three paragraphs of the plaintiff's submissions concerning the costs of these proceedings, culminating in the contention that the interest charged should be remitted as to the premium component, thereby reducing the amount presently owing in respect of the separate assessment to less than the amount of the plaintiff's Calderbank offer. 11. I reject the plaintiff's assertion that: "[it] is open to the Plaintiff in this review to challenge the correctness of the amount and particulars of" the separate assessment. These proceedings concerned only the plaintiff's challenge to, and this Court's review of, the assessment referred to at [1] above. That review has been completed, subject only to the making of formal orders giving effect to the principal judgment and orders as to costs. It is not open to the plaintiff to use a costs dispute in these proceedings as a backdoor mechanism to seek a review of the separate assessment. 12. Moreover, the reasons why the Court held in these proceedings that the Development Rights Agreement did not effect or evidence a declaration of trust in respect of land in New South Wales, were first articulated as part of the plaintiff's case in its written submissions in reply filed on 16 September 2022 and in oral submissions made at the hearing on 20 September 2022. In its written submissions in chief, the plaintiff failed to articulate any available construction of the critical words in clause 16.1 of the Development Rights Agreement – "GDC has a beneficial and equitable interest in the Project Land" – other than a beneficial and equitable interest as beneficiary under a trust. I am referring in particular to paragraphs 52 to 58 of the plaintiff's written submissions in chief served prior to the hearing. Important features of the Development Rights Agreement and the suite of 23 agreement were identified by the plaintiff for the first time in its oral submissions during the hearing. 13. The plaintiff now seeks to obfuscate this unsatisfactory manner in which it conducted these proceedings by submitting that it consistently maintained its objection to the assessment on the ground that the Development Rights Agreement did not effect or evidence a declaration of trust. That ground of objection, by itself, was nothing more than a contention. Its merits and prospects of success depended wholly on the substance of the submissions that the plaintiff would advance at trial about the proper construction of clause 16.1 of the Development Rights Agreement in the context of that agreement as a whole, and in the context of the suite of 23 agreements entered into in connection with the same project. Neither the plaintiff's Appeal Statement, nor its written submissions in chief, informed the defendant of the substance of arguments that the plaintiff ultimately advanced. 14. The plaintiff's failure to articulate prior to the day of the hearing the substance of the case on which it ultimately succeeded is a further reason why the defendant's failure to accept the plaintiff's Calderbank offer made some four months earlier on 3 May 2022 cannot be characterised as unreasonable and does not warrant an order for indemnity costs in favour of the plaintiff. 15. The application for indemnity costs in all the circumstances above demonstrates a disturbing lack of insight on the part of the plaintiff and its legal representatives into the unfairness visited upon the defendant as a result of the plaintiff withholding its real submissions until the final hearing. The substantive unfairness was addressed by the defendant being granted leave to file supplementary written submissions after the conclusion of the hearing, responding to arguments that the plaintiff had made for the first time during the hearing. However, that did not overcome the unfairness of the defendant having been deprived of the opportunity to prepare for the hearing thoroughly and efficiently, properly informed of the substance of plaintiff's submissions. The plaintiff's conduct defeated the object of the direction made by the Court for filing and service of written submissions in advance of the hearing, being to provide advance notice to the defendant (and to the Court) of the substance of the arguments to be made by the plaintiff in support of its claims. I do not suggest that this reflected a deliberate strategy on the part of the plaintiff, as opposed to an apparent failure by its legal representatives to prepare for the hearing in a timely manner. However, I reject the notion that the defendant could or should have foreseen in May 2022 that the plaintiff was likely to succeed on the basis of arguments that it first articulated at the hearing four months earlier. 16. For all of those reasons, I am satisfied that it is appropriate to make the order proposed by the defendant that it pay the plaintiff's costs of the proceedings on the ordinary basis, save for the costs of this application for indemnity costs. I accept the defendant's submission that the plaintiff should pay the defendant's costs of this application. 17. For the foregoing reasons, the orders of the Court are as follows: 1. Order pursuant to s 101 of the Taxation Administration Act 1996 (NSW) that: 1. the defendant's assessment issued on 20 February 2017 (OSR Ref:8927239 / Assessment ID:1648387205); and 2. the defendant's reassessment issued on 9 November 2021 (Duties Assessment No. 8927239-005), be revoked. 1. Order that the plaintiff's costs of the proceedings, save for those costs that are the subject of order (3) below, are to be paid by the defendant on the ordinary basis, in such amount as may be agreed or assessed. 2. Order that the plaintiff is pay the defendant's costs of and incidental to the plaintiff's application for indemnity costs on the ordinary basis, in such amount as may be agreed or assessed. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 May 2023