Appeal Panel - Internal CITATION: B & L Linings Pty Ltd v Chief Commissioner of State Revenue (No 5) (RD) [2010] NSWADTAP 21 FIRST APPELLANT B & L Linings Pty Ltd PARTIES: SECOND APPELLANT L & B Linings Pty Ltd RESPONDENT Chief Commissioner of State Revenue FILE NUMBER: 059044 HEARING DATES: 4 December 2009 SUBMISSIONS CLOSED: 14 January 2010 DATE OF DECISION: 6 April 2010 BEFORE: Chesterman M - Deputy President; Hole M - Judicial Member; Bennett C - Non-Judicial Member CATCHWORDS: Costs – review proceedings – Taxation Administration Act 1996 – 'fairness' – meaning of 'proceedings' DECISION UNDER APPEAL: B & L Linings Pty Ltd and L & B Linings Pty Ltd v Chief Commissioner of State Revenue [2005] NSWADT 129 FILE NUMBER UNDER APPEAL: 046025 DATE OF DECISION UNDER APPEAL: 03/31/2010 Administrative Decisions Tribunal Act 1997 Anti-Discrimination Act 1977 Dust Diseases Tribunal Act 1989 LEGISLATION CITED : Pay-roll Tax Act 1971 Retail Leases Act 1994 Taxation Administration Act 1996 Taxation Administration Act 1996 (Cth) Victorian Civil and Administrative Tribunal Act 1998 (Vic) Amaca Pty Ltd v Cremer [2006] NSWCA 164 B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2009] NSWCA 55 B & L Linings Pty Ltd & Anor v Chief Commissioner of State Revenue [2008] NSWCA 187 B & L Linings Pty Ltd & Anor v Chief Commissioner of State Revenue [2008] NSWCA 208 B & L Linings Pty Ltd & Anor v Chief Commissioner of State Revenue (RD) [2006] NSWADTAP 2 B & L Linings Pty Ltd & Anor v Chief Commissioner of State Revenue (No 2) (RD) [2006] NSWADTAP 32 B & L Linings Pty Ltd & Anor v Chief Commissioner of State Revenue (RD) (No 3) [2007] NSWADTAP 32 B & L Linings Pty Ltd and anor v Chief Commissioner of State Revenue (No 4) (RLD) [2008] NSWADTAP 14 B & L Linings Pty Ltd and L & B Linings Pty Ltd v Chief Commissioner of State Revenue [2005] NSWADT 129 Baulderstone Hornibrook Engineering Co Pty Ltd v Gordon Runoff Ltd (No 2) [2009] NSWCA 12 Blanch v Chief Commissioner of State Revenue [2009] NSWADT 24 Chand v Rail Corporation of New South Wales (No 3) [2010] NSWADTAP 11 CASES CITED: Comcare v Labathas (1995) 61 FCR 149; [1995] FCA 1702 Corrigan & Gibson v Watson [2009] NSWADT 110 Dalton v NSW Crime Commission (2006) 227 CLR 490; [2006] HCA 17 Director-General, Department of Education and Training v Simpson [2001] NSWADTAP 6 Federal Commissioner of Land Tax v Jowett (1930) 45 CLR 115 In re Gibson's Settlement Trusts, Mellors v Gibson [1981] 2 WLR 1 Jonamill Pty Ltd v Alramon Pty Ltd (No 2) (RLD) [2010] NSWADTAP 3 Kelly v Chief Commissioner of State Revenue [2010] NSWADT 2010 Kolotex Hosiery (Australia ) Pty Ltd v Federal Commissioner of Taxation (1975) 172 CLR 535 Mahenthirarasa v SRA (No 2) (2008) 72 NSWLR 273; [2008] NSWCA 201 Raethel v Director-General, Department of Education and Training [2000] NSWADT 56 Salon Today Pty Ltd v MMIR Pty Ltd [2009] NSWADT 71 Societe Pecheries Ostaises v Merchants Marine Company [1929] 1 KB 750 Winky Pop Pty Ltd v Hobsons Bay CC [2008] VCAT 1512 APPELLANT T Thawley, barrister REPRESENTATION: RESPONDENT I Latham, barrister 1. The Respondent is to pay the Appellants' extra costs occasioned by the following aspects of its conduct in the course of these proceedings:-(a) Contesting, in submissions made to the Tribunal on 20 January 2005, the Appellants' claim that remuneration paid to 18 of the entities was exempt from pay-roll tax on the ground that they had worked for the second Appellant for less than 90 days in the tax year 2002, but subsequently (on 13 September 2006) conceding this claim (b) Causing the hearing of the appeal fixed for 20 December 2006 to be vacated ORDERS: (c) At the hearing of the appeal on 2 April 2007, rendering it necessary for the Appellants to reargue, with reference to evidence recently tendered by the Respondent, the issue already determined by the Appeal Panel in its decision of 28 June 2006 2. The Respondent is to pay 75% of the remainder of the Appellants' costs of the proceedings, both at first instance and on appeal 3. These costs are to include amounts in respect of (a) fees paid or payable by the Appellants to Byrons, Chartered Accountants, for work done by its employees as agents of the Appellants in these proceedings and (b) any additional out-of-pocket expenses incurred by the Appellants in consequence of the conduct identified in Order 1 4. If the parties cannot agree as to the amount of these costs, the Appellants have liberty (within 42 days of the date of these reasons) to apply to the Tribunal for an order to be made by the Appeal Panel determining the mode of assessment and for any other order required to give effect to this decision regarding their application for costs. REASONS FOR DECISION The progress of this litigation 1 This is the fifth decision given by us in the present appeal. It deals with the question of costs, for which an order has been sought by the Appellants under section 88 of the Administrative Decisions Tribunal Act 1997 ('the ADT Act'). 2 Our fourth decision also related to the question of costs. This was B & L Linings Pty Ltd and anor v Chief Commissioner of State Revenue (No 4) (RLD) [2008] NSWADTAP 14 (hereafter 'our costs judgment'). 3 In circumstances set out below, the Court of Appeal has set aside in part the orders that we made in our costs judgment and remitted the matter of costs to us, within specified limits, for reconsideration and decision according to law. 4 The ensuing outline of relevant aspects of this case repeats, with minor variations, and brings up to date an outline contained in our costs judgment at [3 – 26]. 5 The first Appellant in these proceedings, B & L Linings Pty Ltd ('B & L'), was established in 1987 to supply and install linings made of plasterboard (sometimes called gyprock) and cornices in dwelling houses and apartments. It acted as a principal contractor to home building companies. 6 In 1992, the two directors and shareholders of B & L established the second Appellant, L & B Linings Pty Ltd ('L & B'), in which they were again the sole directors and shareholders. During the relevant period L & B's principal function was to fulfil B & L's contracts with home building companies, chiefly by subcontracting with various sole traders, partnerships and companies. It also operated a maintenance/service division. In 2001-02, the people working for it comprised a small full-time staff and the 'entities', which it described as subcontractors. The 'entities' were a mixture of companies, partnerships and sole traders. 7 During the 2002 tax year, L & B maintained a list, or 'stable', of 53 entities amongst which it would subcontract these tasks after its tender had been accepted by the contract builder. 8 This case commenced in the Revenue Division of the Tribunal when the two Appellants sought review of a decision by the Respondent, the Chief Commissioner of State Revenue ('the Commissioner'), to disallow objections by them against assessments to payroll tax, penalty tax and interest under the Pay-roll Tax Act 1971 ('the PT Act'). 9 Under section 96 of the Taxation Administration Act 1996 (hereafter 'the TA Act'), the Tribunal has jurisdiction to review a decision of the Commissioner at the instance of a taxpayer who is dissatisfied with the Commissioner's determination of his/her objection to an assessment. When exercising this review jurisdiction, the Tribunal is required by section 63(1) of the ADT Act to 'decide what the correct and preferable decision is having regard to the material then before it'. By virtue of section 63(2), it may 'exercise all of the functions that are conferred or imposed by any relevant enactment' on the Commissioner. 10 The assessments in question, dated 29 August 2003, were made against the two Appellants under 'grouping provisions' in the Act. They followed an investigation conducted by the Commissioner under Division 2 of Part 9 of the TA Act between 6 June and 29 August 2003. 11 According to these assessments, the Appellants were liable to pay-roll tax, penalty tax and interest on the 'taxable wages' paid to 36 so-called 'contentious entities' that had been engaged by L & B to perform work on various building projects. The assessments were for substantial sums, amounting in all to $514,283.33. Although they related to four tax years, from 2000 to 2003, it was agreed between the parties that the 2002 tax year should be treated as a sample year. 12 During October 2003, following expressions of dissatisfaction with the assessments conveyed by the Appellants to the Commissioner, two Compliance Officers employed by the Commissioner conducted a review of the assessments. In their report ('the Audit Report'), apart from finding that the remuneration paid to one entity was not 'taxable wages', they confirmed the correctness of the assessments. 13 The Appellants delivered lengthy and detailed objections ('the Objections') to the Commissioner on or about 30 October 2003. 14 On 4 March 2004, having considered the Objections, a Senior Review Officer in the employ of the Commissioner ruled that they should be wholly disallowed. 15 On 29 April 2004, the Appellants filed an application in the Tribunal seeking review of the Commissioner's decision. 16 On 25 May 2004, the Commissioner filed a Statement of Reasons as required by section 58 of the ADT Act. 17 Before this occurred, 15 of the initially contentious entities were agreed by the Commissioner to have been independent contractors. The Appellants conceded that the amounts of remuneration paid to two other entities (numbered C17 and C33) were taxable wages. The remaining 36 were the 'contentious' entities with which this litigation has been concerned. They were identified by numbers within the range from C1 to C38, excluding C17 and C33. They are labelled 'contentious' because, in contrast to a number of other entities also engaged by L & B, the proper characterisation of their relationship with L & B remained a matter of dispute between the parties. 18 In our judgments, we have used the term 'entity', even though in some contexts it refers to an individual (usually if not invariably a man, it would seem) who was working on one of these building projects, rather than to the company, which employed him to do so, or to the partnership of which he was a member. 19 The first issue of substance dealt with in the proceedings before the Tribunal was whether the 36 contentious entities, during the specified tax year, were L & B's employees according to common law principles, not independent contractors. 20 If these entities were properly to be characterised as employees, the Appellants were indisputably liable for payroll tax. The remuneration paid to the entities would be taxable wages, to be included in its tax base by virtue of section 3AA of the PT Act. If however they were independent contractors, an exemption from this tax would be available if either or both of two sets of further conditions, set out in section 3A(1) of this Act, were satisfied. 21 The decision of the Tribunal at first instance was delivered on 10 June 2005 (B & L Linings Pty Ltd and L & B Linings Pty Ltd v Chief Commissioner of State Revenue [2005] NSWADT 129 – hereafter 'the first instance judgment'). The Tribunal ruled that the entities were employees of L & B. It therefore did not have to determine whether any of the exemptions set out in section 3A(1) were available to the Appellants. 22 B & L and L & B then filed an appeal under Part 1 of Chapter 7 of the ADT Act. Pursuant to directions given before the hearing of the appeal, the first issue to be determined was as to the correctness of the Tribunal's ruling regarding the status of the entities. 23 In a decision delivered on 9 January 2006 (B & L Linings Pty Ltd & Anor v Chief Commissioner of State Revenue (RD) [2006] NSWADTAP 2 – hereafter 'the first appeal judgment'), we set aside the first instance judgment on the ground that the Tribunal had erred in three respects. In broad terms, our conclusion was that the Tribunal, in deciding that the Appellants had failed to discharge an onus of proof imposed on them, had given insufficient consideration to a substantial quantity of documentary evidence adduced by them and had attributed undue significance to their failure to call any of the entities to give oral evidence. 24 In this judgment at [111], we granted leave under section 113(2)(b) of the ADT Act for the appeal to extend to a review of the merits of the first instance judgment. It followed that we were required to decide, pursuant to section 115(1), what was 'the correct and preferable decision'. Under section 115(2), an Appeal Panel 'may exercise all the functions that are conferred or imposed by or under any relevant enactment on the Tribunal at first instance'. 25 On 28 June 2006, we delivered our second decision (B & L Linings Pty Ltd & Anor v Chief Commissioner of State Revenue (No 2) (RD) [2006] NSWADTAP 32 – hereafter 'the second appeal judgment'). We held, having reviewed the evidence that had been placed before the Tribunal and considered relevant common law principles, that the entities were independent contractors, not employees. 26 In order to dispose fully of the appeal, it remained for us to determine whether the Appellants were entitled to claim the benefit of any of the exemptions from payroll tax set out in section 3A(1) of the PT Act. 27 Before doing this, we acceded to requests by the Commissioner (a) to admit new evidence, comprising the answers to questionnaires that the Commissioner had distributed among the contentious entities and (b) to hear further argument, based in part on this evidence, relating to the question that we had determined in the second appeal judgment: namely, whether the 36 contentious entities were independent contractors or employees. In so determining, we vacated a hearing set down for 20 December 2006 and set a new hearing date on 2 April 2007. 28 In what we will call 'the third appeal judgment', delivered on 2 July 2007 (B & L Linings Pty Ltd & Anor v Chief Commissioner of State Revenue (RD) (No 3) [2007] NSWADTAP 32), we reaffirmed our ruling in the second appeal judgment that these entities were independent contractors, not employees. 29 We held further that, except in relation to five of these entities (C1, C6, C10, C29 and C31), the Appellants could indeed claim one or more of the exemptions from payroll tax contained in section 3A(1) of the PT Act. In determining this claim, we took into account aspects of the new evidence that the Commissioner had tendered. We accordingly upheld the Appellants' objections to assessments for payroll tax, penalty tax and interest on remuneration paid by the Second Appellant to the remaining 31 entities. 30 Two matters – penalty tax relating to the five entities and costs – remained to be determined. The Appellants applied for costs within three categories, which are set out in our costs judgment at [52]. The parties filed submissions and gave their consent to these two matters being determined by us without a hearing, under section 76 of the ADT Act. 31 In our costs judgment, delivered on 27 March 2008, our decision regarding penalty tax was that the Appellants should not be required to pay penalty tax on the amount of payroll tax which we had held them liable to pay in the third appeal judgment. 32 In that judgment, our decision regarding costs – which is the decision of importance in the present context – was embodied in the following orders:- 1. The Respondent is to pay the Appellants' extra costs occasioned by the following aspects of its conduct in the course of these proceedings:- (a) Contesting, in submissions made to the Tribunal on 20 January 2005, the Appellants' claim that remuneration paid to 18 of the entities was exempt from pay-roll tax on the ground that they had worked for the second Appellant for less than 90 days in the tax year 2002, but subsequently (on 13 September 2006) conceding this claim. (b) Causing the hearing of the appeal fixed for 10 December 2006 to be vacated. (c) At the hearing of the appeal on 2 April 2007, rendering it necessary for the Appellants to reargue, with reference to evidence recently tendered by the Respondent, the issue already determined by the Appeal Panel in its decision of 28 June 2006. 2. These costs are to include amounts in respect of (a) fees paid or payable by the Appellants to Byrons, Chartered Accountants, for work done by its employee, Mr John Eager, in his capacity as the Appellants' agent in these proceedings and (b) any additional out-of-pocket expenses incurred by the Appellants in consequence of the conduct identified in Order 1. 3. If the parties cannot agree as to the amount of these costs, the Appellants have liberty (within 42 days of the date of these reasons) to apply to the Tribunal for an order to be made by the Appeal Panel determining the mode of assessment and for any other order required to give effect to this decision regarding their application for costs. 33 We note here that the date given in paragraph (b) of Order 1 is incorrect. The date of the vacated hearing was in fact 20 December 2006 34 The Appellants appealed to the Court of Appeal against that part of the third appeal decision in which we held with respect to five entities (C1, C6, C10, C29 and C31) that the exemptions from payroll tax contained in section 3A(1) of the PT Act did not apply. As stipulated in section 119(1) of the ADT Act, that appeal was confined to questions of law. In a decision handed down on 11 August 2008 (B & L Linings Pty Ltd & Anor v Chief Commissioner of State Revenue [2008] NSWCA 187), the Court dismissed this appeal. 35 The Appellants also applied to the Court of Appeal for leave to appeal from the costs orders that we made in our costs judgment. On 28 August 2008, by consent, the Court granted leave (B & L Linings Pty Ltd & Anor v Chief Commissioner of State Revenue [2008] NSWCA 208). 36 On 13 March 2009, the Court of Appeal, again by consent, allowed the Appellants' appeal against our costs orders, set them aside in part, and remitted the matter of costs to us, within specified limits, for reconsideration and decision according to law: see B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2009] NSWCA 55. The Court's orders (as amended on 31 March 2009) were:- 1. The appeal be allowed. 2. That part of the decision of the appeal panel in refusing to award costs except to the extent set out in orders 1, 2 and 3 of the decision of 27 March 2008 be set aside and be remitted to the Appeal Panel for reconsideration and decision according to law. 3. The respondent pay the appellant's cost of the appeal. Such costs to include costs of the application for leave to appeal. 37 In each of the two decisions just mentioned, the Court of Appeal gave brief reasons. Relevant parts of these reasons are reproduced below. 38 On 4 December 2009, having received written submissions from both parties, we heard oral argument on the matter remitted to us. We directed that on a particular question raised during the hearing the parties should file and serve supplementary submissions. The last of those submissions was filed on 14 January 2010. Principles governing the award of costs 39 Section 101(2)(b) of the TA Act expressly indicates that questions of costs arising in applications to the Tribunal for review of decisions of the Commissioner pursuant to section 96 are governed by section 88 of the ADT Act. 40 At the time of our costs judgment, section 88 had four subsections. Subsection (1) stated:- (1) 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 there are special circumstances warranting an award of costs. 41 As a result of amending legislation coming into force on 1 January 2009, the section was amended. A new version of subsection (1) was enacted, together with a wholly new subsection (1A). By virtue of transitional provisions (see ADT Act, Schedule 5, clause 43(2)(i)), the amended version of section 88 applies to the costs of the present proceedings even though these proceedings were commenced, and the substantive decisions were made, before 1 January 2009. In its decision allowing the Appellants' appeal against our costs orders, the Court of Appeal agreed with the parties that 'the old s 88 will not apply to any re-consideration of the matter by the Appeal Panel' (B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2009] NSWCA 55 at [2]). 42 The 'new' version of section 88 is as follows:- 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. 43 The Appellant's written submissions, prepared by Mr Thawley and Mr Livingston of counsel, contained a number of propositions regarding the interpretation of the 'new' section 88. Mr Latham, counsel for the Commissioner, did not expressly contest any of these propositions. Subject to a few matters noted below, we believe them to be correct. 44 The Appellants' propositions regarding the broad approach to be adopted in interpreting section 88 included the following: (a) since the section is based largely on section 109 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic), decisions of that Tribunal ('VCAT') provide guidance in interpreting it; (b) the normal requirement, stated in subsection (1), is that the parties bear their own costs; (c) in exercising its discretion under subsection (1A), the Tribunal should take into account the objects of the ADT Act, which are set out in section 3; (d) the 2008 amendments to section 88 reflected a recognition by Parliament of 'a need for this Tribunal to be more flexible and widen the scope of a litigant's entitlement to costs' (Salon Today Pty Ltd v MMIR Pty Ltd [2009] NSWADT 71 at [72]). 45 Section 3 of the ADT Act, to which the third of these propositions refers, states:- 3 Objects of Act The objects of this Act are as follows: (a) to establish an independent Administrative Decisions Tribunal: (i) to make decisions at first instance in relation to matters over which it is given jurisdiction by an enactment, and (ii) to review decisions made by administrators where it is given jurisdiction by an enactment to do so, and (iii) to exercise such other functions as are conferred or imposed on it by or under this or any other Act or law, (b) to ensure that the Tribunal is accessible, its proceedings are efficient and effective and its decisions are fair, (c) to enable proceedings before the Tribunal to be determined in an informal and expeditious manner, (d) to provide a preliminary process for the internal review of reviewable decisions before the review of such decisions by the Tribunal, (e) to require administrators making reviewable decisions to notify persons of decisions affecting them and of any review rights they might have and to provide reasons for their decisions on request, (f) to foster an atmosphere in which administrative review is viewed positively as a means of enhancing the delivery of services and programs, (g) to promote and effect compliance by administrators with legislation enacted by Parliament for the benefit of the citizens of New South Wales. 46 In its decision dismissing the Appellants' appeal against the third appeal decision ((B & L Linings Pty Ltd & Anor v Chief Commissioner of State Revenue [2008] NSWCA 187) at [15], the Court of Appeal reproduced all of this section except paragraphs (b) and (c) and observed that the objects stated in the reproduced provisions were 'directed to the better conduct of the administration within the Government of New South Wales'. Relying on this observation, the Appellants' written submissions contended that the objects stated in paragraphs (b), (c) and (g) 'may all be advanced by an award of costs in favour of a successful litigant in an appropriate case'. 47 In this context, the Appellants relied also on a passage in the judgment of the Court of Appeal (B & L Linings Pty Ltd & Anor v Chief Commissioner of State Revenue [2008] NSWCA 208 at [2]) granting them leave to appeal against our costs decision. This passage contains the only statement by the Court as to why it agreed with the parties that leave should be granted and the appeal should be allowed. It is as follows:- 2 In the light of the grant of leave, it is not appropriate to give any detailed reasons. It is sufficient (and indeed appropriate) to say that some aspects of the reasons complained of (see especially [2008] NSWADTAP 14 at [99], [100], [101] and [103]) may possibly betray an approach in which regard was not paid to the standard of conduct to be expected of the Executive: cf Mahenthirarasa v SRA (No 2) (2008) 72 NSWLR 273; [2008] NSWCA 201. 48 In the later judgment allowing the appeal by consent, B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2009] NSWCA 55, the Court of Appeal added at [1] that the error in our costs judgment occurred 'at least in relation to the construction of the phrase "special circumstances"' in what it referred to as 'the old s 88'. 49 Relying on the Court's reference to the Mahenthirarasa case, the Appellants submitted that when exercising our discretion to award costs we should be mindful of the duty incumbent on statutory bodies representing the Crown – such as the Commissioner – to act, and to be seen to act, as a 'model litigant'. 50 In expanded form, the Appellants' arguments on this matter can be depicted by quoting the following passage from the judgment of Basten JA, with whom Giles and Bell JJA agreed, in Mahenthirarasa at [16 – 22]. In that case, the order made by the Court of Appeal was that the State Rail Authority ('SRA'), being a statutory authority representing the Crown, should pay the costs of the appellant in the proceedings below:- 16 In this State, the relevant principles as to the proper role of the executive government were succinctly stated by Mahoney J in P & C Cantarella Pty Ltd v Egg Marketing Board (NSW) [1973] 2 NSWLR 366 at 383 in the following terms: "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." 17 As his Honour noted, that principle was not novel, but was to be derived from long-standing authority applied to the Crown in the United Kingdom and reflected in this country in the remarks of Griffiths CJ in The Melbourne Steamship Company Ltd v Moorehead [1912] HCA 69; 15 CLR 333 at 342. In more recent years, the obligation of the government has been described as an expectation that it will act and be seen to act as a "model litigant": see Yong v Minister for Immigration and Multicultural Affairs (1997) 75 FCR 155 at 166E (Beaumont, Burchett and Goldberg JJ). 18 In Scott v Handley [1999] FCA 404; 58 ALD 373, the Full Court of the Federal Court (Spender, Finn and Weinberg JJ) considered the appropriateness of a refusal to grant an adjournment to litigants in person who claimed they were not ready to proceed to a final hearing, in circumstances where the respondent Minister had served affidavits with new material only six days before the hearing and three months outside the time permitted at a directions hearing: at [39]. One factor considered relevant by the Full Court was that the appellants were unrepresented litigants. The second factor was that the active respondent was an officer of the Commonwealth. Their Honours continued at [43]: "As such he properly is to be expected to adhere to those standards of fair dealing in the conduct of litigation that courts in this country have come to expect – and where there has been a lapse therefrom, to exact – from the Commonwealth and from its officers and agencies." 19 After referring to Moorehead and Cantarella , their Honours noted that the principles were stated at a level of broad generalisation, and that "the burden of this fair dealing standard is best appreciated in its particular exemplifications in individual cases": at [45]. They continued: "[46] In the present instance the second respondent (i) was in a position of obvious advantage in relation to unrepresented litigants; (ii) was significantly in default in complying with procedures designed to secure the fair and orderly preparation of the matter for hearing; (iii) served the affidavits on the appellants at an extremely late date with a consequential likely impairment of their capacity to prepare properly for a final hearing; (iv) did not inform his Honour of the default and of its possible consequences; and (v) took advantage of the inability of the appellants to articulate properly the basis for, and to secure, an adjournment. In our view the conclusion is inescapable that the second respondent has fallen considerably short of the standard properly to be expected of the Commonwealth… 20 These principles have for some years been recognised by express statements of the executive government. At the Commonwealth they are to be found in Legal Service Directions issued by the Attorney-General issued under s 55ZF of the Judiciary Act 1903 (Cth). Similar principles were promulgated by the Government in this State in 2004. As explained by Mahoney JA in Logue v Shoalhaven Shire Council [1979] 1 NSWLR 537, the principles apply to a statutory corporation. Although in dissent as to the outcome, his Honour considered the approach adopted by the respondent Council in seeking to uphold a compulsory sale of property to recover unpaid rates, pursuant to a defective notice. His Honour noted that, "the council is a corporation constituted by statute, and discharging public functions": at 558F. He continued at 558-559: "It is well settled that there is expected of the Crown the highest standards in dealing with its subjects: see Melbourne Steamship Co Ltd v Moorehead …, per Griffiths CJ. What might be expected from others would not been seen as in full accord with the principles of equity and good conscience to be expected in the case of the Crown: see P & C Cantarella …. In my opinion, a standard of conduct not significantly different should be expected of a statutory corporation of the present kind." 21 When proceedings were commenced in the Common Law Division in the present case, challenging the refusal of the Registrar to allow the appeal to go ahead in the Commission, the SRA, as the beneficiary of the ruling in the Commission, should, and no doubt did, give proper consideration to whether the proceedings had merit and whether it should defend the order which it had obtained in the Commission. If it had been of the view that the order could not fairly be defended, it should have advised the Court of that fact and its reasons for reaching that conclusion. It was inappropriate for the SRA as a statutory corporation to stand by and in effect require the appellant to persuade the Court of the correctness of his position. 22 On the appeal, this Court expressly invited the SRA to reconsider its position and provide assistance to the Court. It declined to do so. Again, it should be assumed that, upon the institution of the appeal, the SRA gave consideration to whether it should actively defend the benefit it had obtained in the lower Court or concede that the judgment should fairly be set aside. Whatever view was formed, on appropriate advice, this Court did not have the assistance which might have been offered consistently with the view adopted by the SRA. The principles applicable to a model litigant required it to deal with claims promptly, not to cause unnecessary delay, to endeavour to avoid litigation wherever possible, not to resist relief which it believes to be appropriate and not to decline to provide appropriate assistance to the court or tribunal whether expressly sought or not. It is probable that those principles were not applied. 51 The Appellants' written submissions also contained propositions specifically bearing upon paragraphs (c) and (e) of section 88(1A) of the ADT Act. 52 The Appellants argued, citing Salon Today Pty Ltd v MMIR Pty Ltd [2009] NSWADT 71 at [75], that the terms of paragraph (c) 'expand considerably the factors that the Tribunal may take into account' in awarding costs. In our opinion, this may be overstating matters, since a number of decisions on the 'old' criterion of 'special circumstances' in section 88 drew guidance from a phrase in the then-extant Practice Note of the Tribunal on Costs (Practice Note No 12) which was in the same terms as paragraph (c). 53 It is sufficient for present purposes to take account of two passages in recent Tribunal decisions relating to paragraph (c) of section 88(1A). Both of them refer directly or indirectly to decisions of VCAT relating to the corresponding paragraph in section 109 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic). 54 In Corrigan & Gibson v Watson [2009] NSWADT 110, a case cited by the Appellants, the Tribunal said at [29]:- When considering a costs application, the Tribunal may also have regard to the relative strengths of the claims made by each of the parties: ADT Act , s 88(1A)(c). The comparative strength of each party's case has been said by the VCAT to mean 'a substantial disparity between the strength of one claim and the weakness of its competitor': Beasley v Department of Education and Training [2006] VCAT 2044 at [20]. In these circumstances it may be fair to make an award of costs to the stronger side. However, having a weak case does not, of itself, justify an order for costs. A high level of weakness is required: Re Public Transport Corporation and Boroondara CC [2000] VCAT 472 at [32] (See Jason Pizer, Pizer's Annotated VCAT Act (2001) at p 250). 55 In Jonamill Pty Ltd v Alramon Pty Ltd (No 2) (RLD) [2010] NSWADTAP 3, an Appeal Panel decision published since the hearing on 4 December 2009, the Panel rejected, putting forward two reasons, a submission that paragraph (c) should only be considered applicable if the case brought by Jonamill Pty Ltd, the unsuccessful appellant case in the appeal, could properly be characterised as 'unarguable, unreasonable or untenable'. This submission was primarily based on a decision of VCAT (Winky Pop Pty Ltd v Hobsons Bay CC [2008] VCAT 1512). At [43], the Appeal Panel said:- The first reason is that to apply the subparagraph in this way is to ignore that part of its wording that refers to 'the relative strengths of the claims made by each of the parties'. The subparagraph refers to 'a claim that has no tenable basis in fact or law' only by way of exemplifying cases in which there is a very great disparity between these 'relative strengths'. 56 At [47], the Panel treated its opinion that there was a 'substantial disparity between the relative strengths of the parties' claims' as an important consideration in favour of its decision to make a costs order against Jonamill Pty Ltd. 57 The Appellants' arguments regarding paragraph (e) of section 88(1A) of the ADT Act commenced with the following description of the paragraph in the Tribunal's judgment in Salon Today Pty Ltd v MMIR Pty Ltd [2009] NSWADT 71 at [77]:- These are very, very wide words, quite deliberately chosen by the Parliament, which quite clearly enjoin this Tribunal to look very carefully at the concept/principle of fairness and to widen the scope, without restriction, of the various aspects of the litigation – indeed, all the aspects of the litigation – that may result in a finding that the Tribunal is satisfied that it is fair to award costs. 58 The Appellants went on to contend that the matters to which the Tribunal should have regard under paragraph (e) included the following: (i) whether the party against whom a costs order was sought had abided by the obligation of all litigants, referred to in Salon Today at [52], to 'carefully analyse the issues and the evidence at all times during the course of the proceedings' and reassess their position when evidence on a particular issue was overwhelming and (ii) the following statement of principle by the Court of Appeal in Baulderstone Hornibrook Engineering Co Pty Ltd v Gordon Runoff Ltd (No 2) [2009] NSWCA 12 at [18]:- Parties to litigation are expected to act reasonably in the running, and the resolution by compromise, of litigation. Stubbornness, intransigence and unrealistic and unreasonable expectations and demands can lead to unnecessary and unreasonable demands on scarce public resources… [P]arties are obliged to exhibit co-operation and openness in the conduct of litigation… 59 In his written submissions filed on behalf of the Commissioner, Mr Latham emphasised the breadth of the notion of 'fairness' in section 88(1A), the need to apply moral rather than legal principles in a commonsense fashion when determining 'fairness', and the dangers of endeavouring to formulate 'rigid guidelines'. These contentions were not opposed by Mr Thawley and appear to us to be correct. 60 We now turn to three separate questions that arise regarding the scope of costs orders that we may make under section 88. The first of these questions requires only some brief comments, as it has implicitly been resolved authoritatively by the Court of Appeal's decision in the appeal against our costs judgment. The second and third call for more extended discussion. The costs payable to a party's agent who is not an Australian legal practitioner 61 In our costs judgment at [73 – 88], we held, after examining relevant authorities at some length, that the costs awarded under section 88 could include the costs payable to an agent appearing for a party even though the agent was not an Australian legal practitioner. As indicated above at [32], Order 2 in this judgment was that the Commissioner should pay to the Appellants costs representing the fees that were paid or payable by them to a firm of chartered accountants for work done by its employee, Mr John Eager, in his capacity as their agent in these proceedings. 62 Although the Court of Appeal allowed the Appellants' appeal against this judgment, it left our Order 2 intact (see its own Order 2, reproduced at [36] above). It made no comment about this question of interpretation of section 88. 63 As Mr Thawley submitted without opposition from Mr Latham, the Court of Appeal must be taken to have implicitly endorsed this ruling in our costs judgment. Since the changes made to section 88 in 2008 do not bear upon this issue, we must follow this ruling in the present decision. The costs of the Tribunal proceedings at first instance 64 Before discussing the second and third questions, it is useful to reproduce here the provisions of section 88 of the ADT Act that relate directly to them. These provisions are as follows:- (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… (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. 65 The application by the Appellants for a costs order that we determined in our costs judgment included an application for all their costs of the Tribunal proceedings at first instance in addition to their costs of the appeal proceedings. For reasons set out in that judgment at [106 – 114], the costs that we ordered to be paid was for payment of only part of these costs. 66 As set out above at [32], paragraph (a) of Order 1 in our judgment required payment of costs defined as follows:- … the Appellants' extra costs occasioned by the following aspects of its conduct in the course of these proceedings:- (a) Contesting, in submissions made to the Tribunal on 20 January 2005, the Appellants' claim that remuneration paid to 18 of the entities was exempt from pay-roll tax on the ground that they had worked for the second Appellant for less than 90 days in the tax year 2002, but subsequently (on 13 September 2006) conceding this claim. 67 The Commissioner's submissions referred to in this order were written submissions filed in the Tribunal on 20 January 2005 for the purpose of the hearing at first instance. There were three later hearing days (29 March, 13 May and 2 June 2005) and submissions closed on 2 June 2005. It is therefore apparent that the costs to which this part of our order referred included costs of or incidental to the proceedings at first instance. 68 It is useful to add here that in the first instance judgment (B & L Linings Pty Ltd and L & B Linings Pty Ltd v Chief Commissioner of State Revenue [2005] NSWADT 129) no order regarding costs was made. The Tribunal stated as follows at [108] and in its Orders: 'Either party is entitled to seek a hearing on costs after the expiry of a reasonable time after the issue of this decision and, where relevant, any appeal process has been completed.' No application for costs was made. 69 Neither in the written submissions on which our costs judgment was based (there was, as stated above at [30], no hearing preceding this judgment) nor in the submissions put to us in this redetermination on the matter of costs was it suggested that we lacked the power to make a costs order with respect to the proceedings at first instance. We did not address this question in our costs judgment. The Court of Appeal also did not refer to it when allowing the Appellant's appeal. As indicated above, Order 2 of the Court's orders in the appeal did not disturb that part of our order which awarded costs relating to the proceedings at first instance. 70 We are bound to refer here, however, to a very recent Appeal Panel decision to the effect that an Appeal Panel hearing an internal appeal (such as the present appeal) under Part 1 of Chapter 7 of the ADT Act does not have power under section 88 to award costs relating to the first instance proceedings from which the appeal is brought. This decision (Chand v Rail Corporation of New South Wales (No 3) [2010] NSWADTAP 11) was delivered on 2 March 2010, after submissions relating to this redetermination by us had closed. 71 The Panel's reasoning in this case, set out at [8 – 19], was as follows. Undoubtedly, the term 'Tribunal' in the ADT Act includes an Appeal Panel. This is apparent from section 24(1), which commences with the words 'In exercising its functions in relation to an internal appeal, the Tribunal is to be constituted by an Appeal Panel…' But it does not follow that when 'proceedings' take place before an Appeal Panel, the Panel can award costs with respect to the whole of the proceedings in the Tribunal. The reason for this is that under section 88(1A), an Appeal Panel may only award costs 'in relation to proceedings before it' (the Panel emphasised this phrase when quoting from this subsection at [13]). The proceedings before an Appeal Panel hearing an internal appeal are appeals commenced under section 113 of the ADT Act on a question of law or, if leave is granted, on the merits of the decision under appeal. Accordingly, apart from any aspect of the merits of the decision at first instance with which the Appeal Panel deals after granting leave for the appeal to extend to the merits, the first instance proceedings will never be 'before' the Appeal Panel. This outcome is not affected by the statement in section 88(4)(a) that in this section, 'costs' includes 'costs of or incidental to proceedings in the Tribunal' because, as the Panel expressed it at [16], 'the Tribunal's power to award costs, however defined, is a power which is confined to the proceedings before it'. Finally, the terms of the Practice Note currently dealing with costs in the Tribunal (Practice Note 22 – Costs: Guideline) do not bear on this issue. 72 We respectfully differ from this reasoning on the ground that it fails to take account of the terms of paragraph (b) of subsection (4) of section 88. When this provision is read in conjunction with the opening words of subsection (1A), it becomes apparent that the phrase 'costs in relation to proceedings' in the latter subsection includes the costs of and incidental to proceedings other than those which are 'before' the Tribunal as well as proceedings which are 'before' the Tribunal. This is because it is stated to include the costs of and incidental to 'the proceedings giving rise to the application'. 73 As the Tribunal held in Raethel v Director-General, Department of Education and Training [2000] NSWADT 56 at [39], referring to sections 4 and 142 of the ADT Act, the term 'application' in paragraph (b) of section 88(4) naturally means the application to the Tribunal, when (as was the case in Raethel) costs are being considered at the conclusion of proceedings at first instance. But when costs are being considered at the conclusion of appeal proceedings, the term 'application' seems most naturally to us to mean the application instigating the appeal (which is actually a notice of appeal under section 113, as the Appeal Panel in Chand pointed out). This interpretation conforms with the opinion expressed in Chand as to the scope of proceedings that are 'before' an appeal panel. On this interpretation, paragraph (b) of section (4) must refer to the first instance proceedings from which the appeal is brought. These are 'the proceedings giving rise to the application'. 74 If, in the alternative, the term 'application' in paragraph (b) is thought to mean the initial application to the Tribunal even when costs are being awarded by an appeal panel at the conclusion of appeal proceedings, it must surely follow that the costs of and incidental to the first instance proceedings, as well as those of and incidental to the appeal proceedings, are embraced by the phrase 'costs of or incidental to proceedings in the Tribunal' in paragraph (a). Otherwise, an anomalous result ensues. The appeal panel will have power to make orders relating to the costs of or incidental to the appeal proceedings (under paragraph (a)), the costs of or incidental to any proceedings that 'gave rise to' the initial application to the Tribunal (under the first limb of paragraph (b)) and the costs of or incidental to this application (under the second limb of paragraph (b)). But it will not have power to make any order relating to the costs of or incidental to the first instance proceedings, even though they will have taken place between 'the proceedings giving rise to the application' and the appeal proceedings. 75 For these reasons – which are somewhat convoluted because the legislative provisions are themselves far from straightforward – we conclude that we do indeed have power under section 88(1A) to include in any costs order that we make the costs of and incidental to the first instance proceedings in this case. 76 It does not follow, however, that in the ordinary course of events the costs of first instance proceedings will fall for determination by an appeal panel in any case where a notice of appeal is filed. As the Tribunal's Practice Note 22 states, the preferred approach is that these costs should be determined by the 'Divisional Tribunal', i.e., the Tribunal as it was constituted for the first instance proceedings. It will remain open for any party to challenge that determination by appealing against it. But if, as occurred in this case, appeal proceedings are commenced and concluded without any determination of the costs at first instance being made by the Divisional Tribunal, the Appeal Panel will, on our reading of section 88, have a 'reserve power' to determine these costs. This may well be preferable to leaving them to be determined – potentially a long time after the conclusion of the first instance proceedings – by the Divisional Tribunal. The costs of the 'pre-litigation administrative processes' 77 The costs for which the Appellants applied, both when the matter of costs first came to be determined by us and in this redetermination, included the costs incurred by it in 'the pre-litigation period', commencing with the day on which they received the Commissioner's assessments to payroll tax, penalty tax and interest dated 29 August 2003. Specifically, they sought their costs of and incidental to two 'pre-litigation administrative processes' outlined above at [12 – 14]. These are the review of the assessments by two Compliance Officers during October 2003, resulting in the Audit Report, and the Senior Review Officer's determination, between 31 October 2003 and 4 March 2004, of the Appellants' Objections to the assessments. 78 The Commissioner contended, however, that the Appellants were not entitled to any costs of or incidental to these two 'pre-litigation administrative processes'. One of the grounds for this contention was that because these processes were not 'proceedings' within the meaning of the term in section 88(4)(b) of the ADT Act, costs of this nature fell outside the range of costs that could be awarded under section 88(1A). 79 These competing contentions raise squarely the issue of how the term 'proceedings', as used in section 88(4)(b), is to be interpreted. We discussed this issue in our costs judgment at [70 – 72], but for reasons explained at [89 – 105] we considered that we did not have to determine whether or not the 'two pre-litigation administrative processes' that we have just described were 'proceedings' under section 88(4)(b). 80 The parties' submissions. The starting-point of the Appellants' claim that these administrative processes were 'proceedings' was a proposition stated by the Tribunal in a case to which we have already referred, Raethel v Director-General, Department of Education and Training [2000] NSWADT 56. In this case, the Tribunal, constituted by its President, O'Connor DCJ, rejected an applicant's claim for costs incurred by her before she filed her application in the Tribunal. This application was for the review of a decision by the respondent agency not to release certain information to her under freedom of information legislation. She incurred the costs when applying to the agency itself. 81 At [40 – 54], the Tribunal discussed in the following terms the meaning of 'proceedings' in section 88(4)(b):- 40… the applicant draws attention to that part of s 88(4)(b) which refers to the possibility that a costs order may relate to 'the proceedings giving rise to the application' as well as those 'incidental' to the application. 41 Counsel argues that 'the proceedings giving rise to the application' are 'those events and circumstances that bring about or cause the application.' He refers to a dictionary definition from the New Shorter Oxford Dictionary (1993) dealing with the use of the term 'rise' in the context of the expression 'give rise to' which includes as a meaning, 'cause'. In this instance, he argues, the applicant's original application to the agency and the refusal constitute the 'proceedings giving rise to the application'; therefore it is open to the Tribunal to award costs in respect of those 'proceedings' if special circumstances were established. 42 He submitted: "It follows that the Tribunal, when an application is made for an award of costs in proceedings before it, is not restricted to a consideration of the matters a Court considers when it makes an order for costs in litigation. Since the Tribunal may award costs of the proceedings giving rise to the application to the Tribunal, a party is entitled to request the Tribunal to consider those matters for the purpose of determining whether or not the Tribunal is satisfied that there are special circumstances warranting an award of costs." 43 As to what is meant by 'proceedings giving rise to the application', the agency in reply submits that the term carries the connotation of a formal legal proceeding. 44 Counsel for the agency refers to the construction placed on the use of the term in the Service and Execution of Process Act 1901 by the High Court in Cheyney v Spooner (1929) 41 CLR 532. There Isaacs and Gavan Duffy JJ said at 536-7, "A 'proceeding' used broadly as it is used in [section 16 of the Act under consideration] …, is merely some method permitted by law for moving a Court or judicial officer to some authorised act, or some act of the Court or judicial officer." A similar connotation was attached to the meaning of proceedings in a family law case in England dealing with the difference between a divorce obtained by a solemn religious act and recognised by the relevant religion and one obtained through a secular court: Chaudhary v Chaudhary [1984] 3 All ER 1017 distinguishing Quazi v Quazi [1980] AC 744. 45 In Quazi Lord Ormond at 788 commented that the terms 'proceeding' and 'proceedings' are so 'general and imprecise that the dictionary definitions do not carry the matter any further.' 46 The agency nonetheless submits that the core meaning of 'proceedings' has to do with formal proceedings of a court-like character. Applying this approach to the context of administrative decision-making it gives an example of a prior administrative process which is sufficiently court-like to be covered. The example involves a formal procedure, one governed by detailed statutory provisions, the outcome of which may give rise to significant adverse consequences for the reputation and standing of the individual. The example is that of the operation of the Veterinary Surgeons Investigating Committee in the context of veterinary surgeons discipline. In that instance the Committee constituted by statute (the Veterinary Surgeons Act 1986, s 24) must undertake formal investigations including a form of hearing prior to formulating charges of professional misconduct. Those charges are then heard by the Tribunal and sanctions include deregistration. 47 The agency submits that an individual's FOI application to an agency or Minister does not have the formal indicia necessary to constitute a 'proceeding' in that sense. 48 While accepting the reservations expressed by Lord Ormond in Quazi , the agency's submission does gain support from the definition contained in the Macquarie Dictionary (1st ed 1981) where the meaning attributed to 'proceeding' as used in the law is 'a. the instituting or carrying on of an action at law' or 'b. a legal step or measure: to institute proceedings against a person.' 49 In approaching the question of the meaning of 'proceedings giving rise to the application', the Tribunal considers it useful to look to the object of s 88. The object is to set a rule as to 'costs'. That expression (as already noted) refers to costs connected with obtaining legal representation. With that as background, the term 'proceedings' when used to refer to events antecedent to the proceedings in the Tribunal should be construed as referring to procedures of a kind where legal representation might be reasonably likely to play a part. 50 That approach lends support to the interpretation suggested by counsel for the agency, that the term 'proceedings' refers to a process with characteristics of strict formality. The example he gives is, I consider, a good one. 51 In the disciplinary context, the proceedings that occur at the prior stage to any action being taken in a public tribunal are usually affected by a high degree of formality, and are acknowledged to have significant implications for the member of the profession under investigation and inquiry. A formal procedural framework is laid down by statute and subordinate instruments. Principles of natural justice apply. Legal representation would be permitted unless unequivocally ousted by statute. 52 If a broader interpretation of the kind advocated by the applicant were to be attached to 'proceedings' then s 88(4)(b) would cover any decision-making procedure which is undertaken by an agency before a matter reaches the Tribunal. Counsel for the applicant sought to confine his submission to the context of the FOI Act, but it is difficult to see what distinction could reasonably be invoked to prevent the logic which supports his position in that regard being extended to all agency procedures that involve the making of decisions subject to review by the Tribunal. The objectives of the FOI Act and those of the Tribunal Act, as they seek to impact on government administration, are similar. 53 I am satisfied that the expression 'proceedings giving rise to the application' does not cover the entire administrative process that occurs in agencies leading to the making of decisions that are capable of being the subject of an application for review to the Tribunal. 54 I consider that a narrower view of the expression 'proceedings giving rise to the application' along the lines that I have indicated is more appropriate. It is an expression that, at most, embraces a process of such formality that considerations of natural justice would permit a person to seek and be granted legal representation. In its merits review work the Tribunal has encountered instances of that kind, typically in relation to regulation of occupations or professional discipline. 82 The Appellants' written submissions advanced the proposition, derived from the paragraph just quoted, that 'proceedings' in section 88(4)(b) include any pre-litigation process that is 'of such formality that considerations of natural justice would permit a person to seek and be granted legal representation'. 83 In written submissions in reply and in oral argument, however, Mr Thawley pointed out that this test for identifying 'proceedings' requires adaptation to take account of the fact that, for reasons outlined above at [61 – 63], the costs that may be awarded under section 88(1A) include costs incurred through engaging an agent who is not an Australian legal practitioner. He maintained also, departing from the Appellants' initial submissions, that 'to require formality, or a duty of natural justice, is to introduce into the legislation conditions or restrictions that are not expressed therein'. 84 Mr Thawley argued, however, that in any event the facts of the present case satisfied the test stated in Raethel. He pointed out that the assessments challenged by the Appellants were for a total sum exceeding $500,000, the material assembled by the Appellants for consideration by the Commissioner was both voluminous and detailed and the legal issues raised under the PT Act were complex and difficult. In these circumstances, he claimed, it was entirely reasonable, and indeed to be expected, that the Appellants would engage legal representation, even though in fact they relied primarily on the services of an appropriately skilled accountant who was not an Australian legal practitioner. 85 A further authority to which Mr Thawley drew our attention was Blanch v Chief Commissioner of State Revenue [2009] NSWADT 24. In that case, decided in the Revenue Division under the 'old' version of section 88 of the ADT Act, the applicant taxpayer succeeded in her application for review of the Commissioner's disallowance of her objection to an assessment to land tax. The Tribunal dismissed an application by her for costs, ruling that the criterion then applicable under section 88, 'special circumstances', had not been satisfied. In the final paragraph of its decision, paragraph [41], it said by way of dictum:- In awarding costs subsection 88(4) is wide enough to include the respondent's conduct in dealing with the applicant's objection. Under subsection 88(4)(b) costs include "the costs of or incidental to the proceedings giving rise to the application, as well as the costs of or incidental to the application". In this matter the respondent's conduct in dealing with the applicant's objection was a relevant factor requiring the applicant to make an application to the Tribunal. In that sense it was incidental to the proceedings giving rise to the application within the provisions set out in subsection 88(4)(b). 86 Mr Thawley argued also that for reasons set out above at [45 – 50], based on the objects of the ADT Act stated in section 3, the meaning of 'proceedings' in section 88(4)(b) should include pre-litigation administrative processes. This would better serve the object stated in paragraph (g): 'to promote and effect compliance by administrators with legislation enacted by Parliament for the benefit of the citizens of New South Wales'. With this in mind, he said, the question whether such processes were 'proceedings' should be decided following consideration of each case on its merits. 87 The salient points of Mr Latham's submissions were as follows. He accepted that the meaning of 'proceedings' might be broader than a proceeding in a court or tribunal. Citing Dalton v NSW Crime Commission (2006) 227 CLR 490; [2006] HCA 17, he acknowledged that coercive investigations by an investigative statutory body might constitute proceedings. He pointed out, however, that the terms being construed in this case were 'process' and 'civil and criminal process'. 88 As examples of 'proceedings giving rise to' an application to the Tribunal, Mr Latham suggested conciliation proceedings that take place in the Anti-Discrimination Board before proceedings are commenced in the Equal Opportunity Division of the Tribunal under the Anti-Discrimination Act 1977. He also suggested, as did the Tribunal in Raethel at [46], investigations by professional authorities preceding the institution of disciplinary proceedings. He submitted that these processes comprised formal proceedings of a court-like character, in which parties were involved and might be required compulsorily to attend and give evidence. 89 In his oral submissions, Mr Latham indicated that the Commissioner relied on the relevant passage in Raethel, reproduced above at [81]. He relied also on a passage in the recent Tribunal decision in Australian Aqua Air Pty Ltd v Chief Commissioner of State Revenue [2009] NSWADT 239. In this case, the Commissioner assessed the applicants to payroll tax and initially disallowed their objections, in consequence of which they applied to the Tribunal for a review of this decision. The Tribunal remitted the matter to the Commissioner under section 65 of the ADT Act. The Commissioner then acceded to the applicants' objections, after which the applicants applied to the Tribunal for an order that the Commissioner pay their pre-litigation costs. In dismissing this application, the Tribunal said, at [17 – 19]:- 17 I should add, relevant to this matter, the new s 88 has, however, introduced a restrictive approach in awarding costs. The new s 88 only allows the Tribunal to have regard to matters directly associated with the proceedings. The matters set out in s 88(1A) are specific to matters relating to the proceedings. Section 88(1A)(e) allows the Tribunal to have regard to "any other matter that the Tribunal considers relevant" but that has to be in relation to the proceedings. 18 This outcome is in part due to the specific matters that are set out in the new s 88(1A), which has been really a "cut and pasted" job, by the draftsman. The draftsman has taken these matters from the Victorian legislation which, as was noted by the Victorian Civil and Administrative Tribunal in Murray v Bayside CC [1999] VCAT 1327 "only has jurisdiction to deal with the costs in the proceeding at the Tribunal". Under the Victorian legislation there is no provision to award any pre-litigation costs incurred by an applicant. The new s 88 in introducing the factors to be considered, however, retained the old definition of "costs". The definition allows the Tribunal to award "costs of or incidental to proceedings in the Tribunal" and "the costs of or incidental to the proceedings giving rise to the application, as well as the costs of or incidental to the application". The definition includes pre-litigation costs of a party. 19 There is, therefore, this anomaly in the new s 88, which only allows the Tribunal to take into account factors and matters arising from the proceeding in a particular matter without any regard to pre-litigation conduct of a party. But if the Tribunal concludes in a particular case on the basis that it is fair to award costs, the Tribunal can under the new s 88 also award pre-litigation costs incurred by a party. But this new approach clearly discriminates against a party that makes an application to the Tribunal to redress a decision made by an incompetent administrator, costing the applicant large legal expense through that process, before the benefit of a fair hearing at the Tribunal. The pre-litigation conduct of the incompetent administrator will not be a relevant matter to be taken into account in awarding costs. 90 In response to this particular aspect of Mr Latham's submissions, Mr Thawley pointed out that the Tribunal did not appear to have been referred to the decision in Raethel. 91 Ultimately, the proposition for which Mr Latham contended was that pre-litigation administrative processes would not constitute 'proceedings' unless they involved both some degree of 'formality' and a situation in which one party 'moved' an independent decision-maker to 'do something', presumptively against the wishes of the other party. There would, he said, be no proceedings if one party merely 'moved' the other party. 92 A response made by Mr Thawley to this part of Mr Latham's submissions was to point out that the determination of the Objections lodged by the Appellants had been made by a person within the Commissioner's staff who had not been involved with the original assessments. 93 Finally, Mr Latham suggested the process of compulsory examination as a further example of 'proceedings'. He pointed out also that if the Appellants could obtain their costs relating to the two identified pre-litigation administrative processes in this case on the ground that they had had to engage legal representation (or other equivalent professional representation), the Commissioner in another similar case could seek costs against a taxpayer if the Commissioner had been compelled to engage such representation. 94 Our conclusions. Taking into account these submissions and the results of some additional research that we have conducted relating to the term 'proceedings', our conclusions on this difficult question along the lines ultimately advocated by Mr Latham. We agree with him that the presence of an independent person who reaches a decision after considering matters put to him or her by contending parties in accordance with some recognised (though not necessarily formal) procedure is a key ingredient of 'proceedings' in this context. 95 An important reason why we do not accept Mr Thawley's line of argument on this issue is that it would involve, as he indeed said, consideration of individual cases according to their 'merits'. We can exemplify this by referring to his submission that a reason for characterising the two relevant processes in the present case as 'proceedings' is that they involved tax assessments for large sums of money and called for consideration of substantial quantities of written material and difficult and complex questions of law. The corollary to this submission seems to be that the same two processes – a review of initial assessments by two Compliance Officers and the determination of objections under section 96 of the TA Act by a Senior Reviewing Officer – should not be classified as 'proceedings' when the amounts of the assessments involved are relatively small and/or the documentation considered is insubstantial and/or the legal questions raised are relatively straightforward. To treat the definition of 'proceedings' as depending significantly on factors such as these – that is, on matters of degree – would inject a high level of uncertainty into the application of section 88(4)(b). As we see it, it is the nature of the relevant 'pre-litigation process' that should determine whether it constitutes 'proceedings', not the nature of the particular case which has been dealt with according to this process. 96 Our view of the matter essentially involves adapting the definition of 'proceedings' developed within the context of curial proceedings strictly so-called to an environment in which decisions are made by 'administrators' (to use the term appearing frequently in the ADT Act). If the intent of section 88(4)(b) had been to indicate that the Tribunal's power to award costs could extend, where the criterion of 'fairness' was satisfied, to the costs of and incidental to any administrative process resulting in a administrator's decision that was brought before the Tribunal for review, clearer language would have been necessary. This would have resulted in a massive extension of the scope of the costs power beyond the costs of proceedings within the Tribunal. Instead, the term 'proceedings', which is used several times elsewhere in section 88 to refer to the 'court-like' proceedings of the Tribunal, was the term chosen in section 88(4)(b). 97 The authorities associating the term 'proceedings' with a process answering the specifications suggested by Mr Latham include the observation of Isaacs and Gavan Duffy JJ in Cheyney v Spooner (1929) 41 CLR 532 that was quoted by the Tribunal in Raethel at [44]. This observation is quoted also in the following passage in the judgment of McColl JA (with whom Basten JA and Brereton J agreed) in Amaca Pty Ltd v Cremer [2006] NSWCA 164. The topic addressed by her Honour here is the meaning of the term 'proceedings' in section 12B of the Dust Diseases Tribunal Act 1989:- 75 It is clear that "[t]he word 'proceedings is one of great generality" and "takes its precise meaning from the context in which it appears" Clarence v Electricity Commission of New South Wales (1990) 20 NSWLR 1 (at 4) per Kirby P, citing Quazi v Quazi [1980] AC 744 (CA); 800 (HL) at 808, 809 and 811-812. In Blake v Norris (1990) 20 NSWLR 300 (at 306) Smart J observed that Stroud's Judicial Dictionary, 5th ed, vol 4 at 2029-2035 gave "some fifty-five instances … of the use of the words 'proceeding' or 'proceedings' in legislation, rules of court or documents having legal significance". 76 The jurisdiction the Tribunal exercises is, in effect, the common law jurisdictions of the Supreme and District Courts vested in it by s 10 which gives the Tribunal jurisdiction to "hear and determine proceedings" referred to in ss 11 and 12. While the Act is beneficial in nature, nothing indicates that words in it referring to the invocation of the jurisdiction which would otherwise be exercised by those courts, are used other than in their primary sense as terms of legal art: see Herbert Berry Associates Ltd v Inland Revenue Commissioners [1977] 1 WLR 1437 (at 1446) per Lord Simon of Glaisdale (with whom Viscount Dilhorne, Lord Morris of Borth-y-Gest and Lord Scarman agreed). 77 The word "proceedings" ordinarily refers to the "method permitted by law for moving a court or judicial officer to some authorised act" ( Cheney v Spooner [1929] HCA 12; (1929) 41 CLR 532 (at 536-537) per Isaacs and Gavin Duffy JJ), or "any application by a suitor to a court in its civil jurisdiction for its intervention or action" ( Cheney v Spooner at 538-539, per Starke J) or to "the invocation of the jurisdiction of the court by process other than writ" ( Herbert Berry Associates Ltd v Inland Revenue Commissioners at 1446). 98 We would point out that even if this relatively confined, indeed traditional, meaning is given to 'proceedings' in section 88(4)(b), the potential range of operation of this paragraph is still significant. As we held above, it provides the basis for an Appeal Panel, in a situation such has arisen in this case, to award costs of and incidental to the first instance proceedings from which the appeal was brought. It would seem to empower an Appeal Panel hearing an external appeal under Part 1A of Chapter 7 of the ADT Act, to do likewise. It may provide the basis for a costs order relating to the costs incurred in prior proceedings in a court from which the case has been transferred to the Retail Leases Division of the Tribunal under section 75 of the Retail Leases Act 1994. Further possible instances have already been suggested, such as the costs of an inquiry into a complaint conducted by the Anti-Discrimination Board under the Anti-Discrimination Act 1977. 99 The question now to be addressed is whether the two pre-litigation administrative processes to which the Appellants' application for costs relates fall within the scope of 'proceedings' in section 88(4)(b) as we would define it. 100 The first of these processes was a review of the initial assessments by Mr David Morse, a Senior Compliance Officer, together with Mr Michael Sofiak, a Principal Compliance Officer. This apparently occurred between 29 August 2003, when the Appellants indicated in a letter to the Commissioner that they were dissatisfied with the assessments that the Commissioner had made, and a date in October 2003, when the two Compliance Officers in question issued their report headed 'Audit Report'. There was nothing in the nature of a referral of the dispute between the parties to an independent third party. Indeed, Mr Morse had previously been involved in the preparation of the assessments. According to the criteria that we have just outlined, this set of events clearly did not amount to 'proceedings' under section 88(4)(b). 101 The second of these processes was the Commissioner's determination of the Objections that the Appellants lodged on 31 October 2003. The process of objecting to an assessment to payroll tax is governed by Division 1 of Part 10 of the TA Act. The first section within this Division, section 86, states in subsection (1):- 86 Objections (1) A taxpayer who is dissatisfied with: (a) an assessment that is shown in a notice of assessment served on the taxpayer, or (b) any other decision (within the meaning of section 6 of the Administrative Decisions Tribunal Act 1997 ) of the Chief Commissioner under a taxation law, may lodge a written objection with the Chief Commissioner. 102 Section 87(1) requires that the grounds of an objection must be stated fully, in detail and in writing. Section 88 states that on an objection the onus of proof lies on the objector. Under section 91(1), the Commissioner must 'consider' the objection and must either allow it in whole or in part or disallow it. Section 93 provides as follows:- 93 Notice of determination (1) The Chief Commissioner must give notice to the objector of the determination of the objection. (2) The Chief Commissioner must, in the notice, give the reasons for disallowing an objection or for allowing an objection in part only. (2A) The reasons for a determination of an objection in respect of an assessment or other decision that the Administrative Decisions Tribunal has jurisdiction under Division 2 to review must set out the matters referred to in section 49 (3) of the Administrative Decisions Tribunal Act 1997 in respect of the determination. (2B) The notice must also inform the objector of the objector's right to make an application for review under Division 2 in the case of a determination to disallow the objection or to allow the objection in part only. (3) The notice is to be in a form approved by the Chief Commissioner. 103 It is useful here to quote also relevant parts of section 96 of the TA Act. This section, which forms part of Division 2 of Part 10, confers on objectors the right to seek review by the Tribunal of a determination under section 93:- 96 Review by Administrative Decisions Tribunal (1) A taxpayer may apply to the Administrative Decisions Tribunal for a review of a decision of the Chief Commissioner that has been the subject of an objection under Division 1 if: (a) the taxpayer is dissatisfied with the Chief Commissioner's determination of the taxpayer's objection, or (b) 90 days (not including any period of suspension under section 92) have passed since the taxpayer's objection was served on the Chief Commissioner and the Chief Commissioner has not determined the objection…. (5) For the purposes of section 58 (1) (a) of the Administrative Decisions Tribunal Act 1997 : (a) the obligation of the Chief Commissioner under that paragraph to lodge a statement of reasons with the Tribunal in respect of an application is limited to providing the Tribunal with a statement of reasons only in respect of the matters arising from the grounds specified in the application, and (b) if one of the grounds specified in the application relates to a matter raised in an objection determined by the Chief Commissioner—the Chief Commissioner may rely on reasons previously given to the taxpayer by the Chief Commissioner under section 93 for the determination of the objection in explanation of that part of the assessment or decision to which the objection related. 104 As far as we are aware, there are no further provisions in acts or regulations regulating the making or determination of objections. 105 On 31 October 2003, the Appellants forwarded the Objections, comprising 14 lengthy paragraphs and many pages of annexures, to the Commissioner. They had been prepared by Byrons, Chartered Accountants. In a letter dated 6 January 2004 to Byrons, Ms Christine Puckering, a Senior Review Officer employed by the Commissioner, requested certain information. Byrons supplied this information to her in a letter dated 13 January 2004. On 3 March 2004, Ms Puckering sent to an Approving Officer a written recommendation that the Objections be disallowed. Following approval, Ms Puckering sent a letter to Byrons on 4 March 2004, notifying them of the Commissioner's determination. This letter outlined in six short paragraphs the 'main reasons' for the determination. 106 Once again, we do not believe that this process of receiving, considering and determining the Objections amounted to 'proceedings' within the meaning of section 88(4)(b) of the ADT Act. Even though, as Mr Thawley pointed out, Ms Puckering was a person within the Commissioner's staff who had not been involved with the original assessments, she made her decision on behalf of the Commissioner, not as an independent arbiter. Furthermore, no established procedure (let alone one possessing some degree of formality) would appear to have applied to the decision-making process. 107 At this point, we should draw attention to a High Court decision, Federal Commissioner of Land Tax v Jowett (1930) 45 CLR 115 that was not mentioned in either of the parties' submissions. In this case, a taxpayer appealed successfully to the High Court against a decision of the Federal Commissioner of Land Tax. The relevant legislation enabled a taxpayer who objected to an assessment to require the Commissioner to treat the notice of objection as an appeal to be transmitted to the High Court. The Court held that costs relating to matters such as notices of objection for various years, requests for transmission, letters refusing amended assessments and insisting on transmission instead and attendances on the Commissioner and his officers were costs 'incidental to' the appeal. In its joint judgment, the Court explained this as follows:- … once the taxpayer receives a decision under sub-clause 2, and is still dissatisfied, he may institute an appeal by requiring the Commissioner to transmit his objection as an appeal. As from that moment at the earliest, the objection acquires the character of an appeal, and the successful party may according to circumstances be justly allowed not only subsequent costs, but also the costs of prior proceedings, which on taxation or review are considered sufficiently connected with the appeal as to be incidental to it. 108 If this ruling applied to the present case, the Appellants could argue that the costs incurred by them in making their Objections to the Commissioner were costs 'incidental to' their application to the Tribunal. They would not have to persuade us that the process of lodgement and determination of the Objections amounted to 'proceedings'. But nothing in the provisions of the TA Act just outlined indicates that an objection lodged under section 86 can 'acquire the character of' an application to the Tribunal under section 96. Such an application is an entirely new process. For this reason, the reasoning endorsed by the High Court in Jowett is not applicable to the present situation. 109 We have also considered a discussion of section 88(4) in Kelly v Chief Commissioner of State Revenue [2010] NSWADT 52 at [61 – 75]. For reasons explained by the Tribunal, it did not have to resolve the question confronting us here. 110 It follows that the Appellants cannot recover the costs 'of and incidental to' these two administrative processes that preceded their application in the Tribunal. These costs fall outside the scope of our power to award costs under section 88 of the ADT Act. The relevance of pre-litigation events 111 It does not follow from the ruling just made that events – such as the two administrative processes that we have just discussed – occurring before the lodgement of the Appellants' application in the Tribunal are of no significance for our decision on their application for costs. Such events may well have a bearing on this decision, for at least two reasons. 112 In the first place, it may be open to the Appellants to argue as follows: (a) the process of lodging written Objections with the Commissioner required them to prepare substantial documentation; (b) after disallowance of the Objections, they made significant use of this documentation in applying to the Tribunal; (c) the costs of preparing this documentation should accordingly be viewed as 'costs incidental to' (if not also 'costs of') their application to the Tribunal. An argument along these lines receives support, at the level of general principle, from a number of cases establishing that if costs incurred before action were 'necessary or proper for the attainment of justice', they may be included in an award of costs 'of an incidental to' the relevant proceedings: see for example Societe Pecheries Ostaises v Merchants Marine Company [1929] 1 KB 750; In re Gibson's Settlement Trusts, Mellors v Gibson [1981] 2 WLR 1; Comcare v Labathas (1995) 61 FCR 149; [1995] FCA 1702. 113 Secondly, in so far as aspects of the Commissioner's conduct during this pre-litigation phase enlarged unnecessarily the scope of the case that, in the reasonably held opinion of the Appellants, they were compelled to bring to the Tribunal in order to vindicate their rights, they may argue that this conduct should be taken into account by us in determining the question of 'fairness' under section 88(1A) of the ADT Act. 114 In this context, the statements of the Court of Appeal quoted or referred to above at [46 – 50] are directly relevant. We accept a submission by Mr Thawley, based on these statements, that when pre-litigation conduct by a statutory body representing the Crown falls below the standard of a 'model litigant', thereby increasing the costs incurred by the opposing party, this must be taken into account when awarding costs. The Court of Appeal's observations act as a corrective to statements by the Tribunal in Raethel v Director-General, Department of Education and Training [2000] NSWADT 56 at [56 – 59] and in Director-General, Department of Education and Training v Simpson [2001] NSWADTAP 6 at [11]. Our own statements on this topic in our costs judgment at [99 – 101] and [103] were based on these two decisions. They were the subject of disapproval by the Court of Appeal: see [47] above. The Appellants' claim that it would be 'fair' to award costs 115 We turn now to specific aspects of the Appellants' claim that it would be 'fair' to award the costs of these proceedings (at first instance and on appeal) to them under section 88(1A) of the ADT Act. 116 In their submissions, the Appellants' primary argument was that these costs should be awarded to them in full on an indemnity basis. An order of this nature is within the scope of our powers by virtue of subsection (2)(b) of section 88. In the alternative, the Appellants sought costs on a party/party basis. 117 In addressing this issue, we have found it useful to consider separately the factors listed in the provisions within subsection (1A) of section 88 that have received specific attention in the parties' submissions. These paragraphs are paragraphs (a)(ii), (b), (c), (d) and (e). We will, however, deal with them in a different order to that adopted in the subsection. The 'relative strengths' of the parties' claims (paragraph (c)) 118 The Appellants acknowledged in their submissions that the Commissioner's case in these proceedings could not be described as 'wholly unmeritorious' or (to invoke the terms of paragraph (c)) as having 'no tenable basis in fact or law'. But they argued that the Commissioner's case was in fact 'very weak' and that there was a sufficient disparity between the relative strengths of the two parties' cases to justify a costs order based on this paragraph. 119 As indicated above in our outline of the proceedings within the Tribunal, the two principal issues in contention were whether the 36 contentious entities were employees or independent contractors and, if the latter, whether payments to any of them fell within the exemptions to payroll tax set out in section 3A(1) of the PT Act. The Appellants were successful on the former issue and, except as to five of the entities, on the latter issue. 120 A further subsidiary issue in contention was whether and if so to what extent the Commissioner was justified in assessing the Appellants to penalty tax. On this matter, the Appellants were successful. 121 Our costs judgment included the following evaluations of the merits of the parties' cases with respect to these matters. For reasons explained earlier, they were made in the context of the requirement in the 'old' version of section 88 that a party applying for costs should establish that there were 'special circumstances warranting an award of costs':- 102 In the present proceedings, the position adopted by the Commissioner on the two questions requiring closest attention in the Tribunal proceedings – whether the 'contentious entities' were employees or independent contractors and whether the remuneration paid to a number of them was not taxable by virtue of the 'two-person exemption' – was far from 'wholly unmeritorious'. Our decision in the Appellants' favour on the former question, differing from that of the Tribunal at first instance, required careful weighing up of a number of competing considerations. On the latter question, our decision was only partly in the Appellant's favour, and in so far as it was in their favour it was based on our resolution of a distinctly difficult question: namely, what type of evidence of the work practices of the relevant entities could and should be regarded as sufficient to discharge the Appellants' onus of proving the facts required to attract the exemption. 107… for the reasons outlined at [102], the case mounted by the Commissioner in these proceedings clearly had merit, so far as the two issues requiring closest attention were concerned. 109 We reject also a submission by Mr Eager that 'special circumstances' are constituted by the Commissioner's adherence, persisting until he filed the submissions on penalty with which we have dealt earlier in this judgment, to the proposition that the Appellants should pay penalty tax. It was, in our opinion, reasonable for the Commissioner to maintain this stance until we had delivered the third appeal judgment finally disposing of the substantial issues in this case. 114 … [With reference to the rearguing of the question whether the entities were employees or independent contractors at the hearing on 2 April 2007] As may be seen from the third appeal judgment, the further evidence, which he tendered at that hearing, did not, in our opinion, provide arguable grounds for reversing what we had already decided. This part of his case before us was not meritorious…. 122 As explained above at [44] and [52 – 56], the criterion of 'fairness' established in the 'new' version of section 88 requires us to adopt a more liberal approach when awarding costs. But if a costs order is to be based on paragraph (c) of section 88(1A) there must still, as we understand the law, be a 'substantial disparity' between the strengths of the parties' claims. 123 Referring to specific paragraphs in the second and third appeal judgments (for example, paragraphs [141 – 142] in the second appeal judgment, where we summarised our reasons for concluding that the contentious entities were independent contractors), Mr Thawley urged us to find now that there was indeed a 'substantial disparity' between the strengths of the parties' cases. 124 Having reconsidered the matter, we do not believe that this finding should be made. Even though the criterion is different, the factors that underpinned the assessment that we made in our costs judgment warrant the same outcome. Although the Commissioner was predominantly unsuccessful in this litigation, the Appellants' case was not so substantially stronger as to call for a costs order based on section 88(1A)(c) alone. 125 As outlined below, one of the 'other matters' that according to the Appellants' submissions we should take into account under section 88(1A)(e) was the public interest. In developing that submission, the Appellants maintained in their written submissions that the litigation 'has advanced the public interest in the determination of clear principles governing the administration of taxation law generally and the scope and operation of specific exemptions to liability in the PT Act' and that for this reason it was beneficial both to taxpayers and to the Commissioner. In our opinion, this passage implicitly acknowledges that the legal questions resolved in the proceedings had some substance. This argument would not be sustainable if the Commissioner's defence of the application filed by the Appellants had been without significant merit. 126 In this context, it is useful also to deal with submissions made by the Appellants regarding a particular proposition of law put forward by the Commissioner during the first instance proceedings. This was that because the Appellants bore the onus of proof when challenging the assessments to payroll tax that the Commissioner had made, their failure to call any of the entities to give evidence was 'fatal' to their case. 127 We agree that this proposition did not withstand close scrutiny. But even if, seen in isolation, it was unmeritorious, it was for the Tribunal, assisted by submissions made at the time on behalf of the Appellants, to determine its validity. We do not believe that the requirement in section 88(1A)(c) to have regard to the relative strengths of the parties' claims requires us to take account of the strength of every proposition put forward by counsel for an unsuccessful party in the course of the proceedings. Prolonging unreasonably the time taken to complete the proceedings (paragraph (b)) 128 We will commence our discussion of this topic by pointing out that the three specific orders for payment of costs that we made in the three paragraphs of Order 1 in our costs judgment (see [32] above) were all based, to different degrees, on findings that conduct by the Commissioner had unreasonably prolonged the proceedings. Although the Court of Appeal allowed an appeal by the Appellants against our costs judgment, these orders still stand. 129 Failure to exercise powers to obtain evidence in a timely fashion. One aspect of the Appellant's claim that the Commissioner's conduct prolonged the proceedings unreasonably related to the second specific costs order that we made. This was for payment of the Appellants' extra costs occasioned by the conduct that caused the vacating of the hearing of the appeal fixed for 20 December 2006 (this is the correct date, not 10 December 2006 as originally stated). The conduct in question was the tender of new evidence, comprising the answers to questionnaires that the Commissioner had distributed among the contentious entities. 130 This new evidence, which is described in the third appeal judgment at [28 – 36], comprised (a) income tax returns (or in some instances a note indicating that no return had been filed) filed by all but one of the 36 contentious entities and (b) verified answers (or in some instances a note indicating that no answer had been furnished) furnished by 17 of the contentious entities to questions contained in a questionnaire distributed by the Commissioner. This material was tendered as bearing both on the question whether the entities were independent contractors or employees and on the Appellants' claim to exemptions under section 3A(1) of the PT Act. 131 The Commissioner obtained the income tax returns from the Australian Taxation Office, pursuant to section 13J of the Taxation Administration Act 1996 (Cth) and a Memorandum of Understanding between it and the Taxation Office. The verified answers to questions were obtained through the exercise of a power conferred on the Commissioner by section 72 of the TA Act. 132 The Appellants maintained in their written submissions that the Commissioner delayed unreasonably in exercising these statutory powers in order to obtain this information. They pointed out that they could not themselves obtain such information, which was derived from business records of the entities to which they had no access. They argued that if the Commissioner had genuinely wished to reach the correct and preferable decision on their liability to payroll tax, these powers would have been exercised during the period of investigation or when determining the Objections. The delay in exercising them had the effect of enlarging unnecessarily both the scale and the duration of the proceedings. 133 Mr Thawley cited in this context the following passage in the judgment of Barwick CJ, dissenting, in Kolotex Hosiery (Australia ) Pty Ltd v Federal Commissioner of Taxation (1975) 172 CLR 535 at 544:- The reading of transcripts of proceedings at first instance in this court in appeals against assessment of income tax provokes the thought that all too often the time of the court is taken up by endeavours on the part of the Commissioner to establish by admission facts easily to be otherwise conclusively established, and to endeavour to build up a case in defence of the assessment by eliciting facts of which he might have been, but he is not, aware. I have had occasion to indicate the very considerable width of the Commissioner's power of investigation for the purposes of assessment (see Southwestern Indemnities Ltd v Bank of New South Wales and Federal Commissioner of Taxation (1973) 129 CLR 512). This power, in my opinion, rather than the time of the court, should be used before the assessment is made so as to ascertain the facts necessary to be considered in order that a proper assessment should be made. Failure on the part of the Commissioner to ascertain and verify the facts before the assessment is made, and where, as here, his state of mind is critical to the propriety of the assessment, failure both to form and unambiguously to record his relevant state of mind, and its basis, will inevitably lengthen the hearing of an appeal against the assessment. It may lead to an unacceptable waste of the court's time and may create a risk that s 190 becomes a scourge for the citizen rather than a proper protection for the revenue which is both its function and its justification. 134 In response, Mr Latham referred to a passage in a letter dated 19 June 2003 from the Commissioner to Byrons, in which the Commissioner declared a willingness to obtain directly from individual entities any information relating to the exemptions under section 3A(1) of the PT Act that they did not wish to disclose to the Appellants. Mr Latham pointed out that this offer was not taken up and submitted that accordingly the Appellants had not depicted the evidence correctly. 135 Replying to this submission, Mr Thawley maintained that this 'offer' was not relevant to their argument, which concerned the Commissioner's delay in exercising relevant statutory powers. 136 To some extent, the second specific costs order that we made in our costs judgment reflected the considerations being urged by the Appellants. But it related only to the extra costs occasioned by vacating one of the hearing dates in the appeal. We agree with them that if what we have called the 'new evidence' had been obtained by the Commissioner before the Tribunal proceedings commenced and made available to the Appellants, the scale and duration of the proceedings would probably have been reduced. Accordingly, we treat this aspect of the Commissioner's conduct as a matter to be taken into account under paragraph (b) of section 88(1A). 137 Refusing to take proper account of material furnished by the Appellants. A very important component of the Appellants' submissions was an assertion by them that the Commissioner behaved in a manner that compelled them to compile and bring before the Tribunal a much larger quantity of evidence than was reasonably necessary to resolve the dispute between the parties. In consequence, the hearings required were more protracted and the proceedings as a whole took significantly longer to reach completion than they should have done. 138 Some of the instances of behaviour by the Commissioner to which this argument was directed occurred before the proceedings commenced. The Appellants' submissions focused chiefly on failures by the Commissioner at this stage to take account of evidence furnished by them that established important factual matters that were advantageous to their case. 139 The documentation relied on by the Appellants does indeed establish failures of this nature. They are discernible in the Audit Report, in the letter (dated 4 March 2004) notifying the Appellants of the determination disallowing their Objections and in the Statement of Reasons under section 58 of the ADT Act that the Commissioner filed in the Tribunal on 20 May 2004. In outline, they are as follows. 140 In the Audit Report, three relevant findings were recorded, based on notes of a meeting on 18 June 2003 between representatives of the Commissioner and of the Appellants and ignoring clear evidence to the contrary subsequently furnished by the Appellants. These findings were as follows: (a) remuneration for the entities was calculated by L & B 'on a linear metre' (in fact, there was scope for negotiation); (b) an employee of L & B did 'supervised' the entities (in fact, he merely checked whether the jobs done by them were completed adequately); and (c) the entities suffered 'very little risk' (in fact, if their work was defective, they were 'back-charged' for the cost of remedying the defects). 141 In the reasons given in the letter of 4 March 2004 for disallowing the Objections, the first of these three findings was, in effect, repeated and three further findings contrary to the Appellants' evidence were made, as follows: (i) the activities of the entities were directly related to the 'core activities' of the Appellants (in fact, the Appellants did not engage in lining operations, but relied wholly on the entities for this purpose); (ii) the only materials provided by the entities were 'in the form of nails or glue' (in fact, these materials included a van or utility, a generator and power tools); and (iii) there was 'no evidence' that the entities who were sole traders engaged other persons to assist them (in fact, they were contractually entitled to engage such persons and many of the operations that they had to perform could not be performed by one person alone). 142 In the Statement of Reasons, all of these six findings that took no account of the Appellants' evidence to the contrary were repeated. In addition, for reasons set out below, we consider that the Commissioner failed to comply with the requirements of sections 49(3) and 58(1)(a) of the ADT Act regarding statements of reasons. 143 In our judgment, this consistent record of failure by the Commissioner to give proper consideration to evidence made available by the Appellants before proceedings began justifiably led the Appellants to believe that they had no choice but to bring to the proceedings the very substantial quantity of documentary evidence that they did in fact bring. 144 A particularly significant aspect of this failure was that in the letter of 4 March 2004 and the Statement of Reasons filed on 20 May 2004, both of which were sent to the Appellants, the Commissioner relied on the same grounds for rejecting their arguments as had been set out in the notes of the meeting on 18 June 2003. This inflexibility on the Commissioner's part gave the Appellants good grounds for thinking that the Commissioner would make no significant factual concessions at any stage and that in order to succeed they would have to prove affirmatively every factual allegation on which their case was founded. 145 Furthermore, we agree with a submission by Mr Thawley that if the Commissioner during this pre-litigation phase had shown a greater readiness to take careful account of the material being provided to him by the Appellants and indeed had been prepared to accept that proof by the Appellants of the requisite matters regarding a sample number (such as 10) of the 36 contentious entities would be sufficient to establish their exemption from payroll tax with regard to all the entities, the Appellants might well have called this small group of entities as witnesses. This would have considerably reduced the scope and duration of the proceedings. 146 In our opinion, this conduct of the Commissioner did not comply with the standards of a 'model litigant', as explained in the passage from the Court of Appeal's judgment in Mahenthirarasa v SRA (No 2) (2008) 72 NSWLR 273; [2008] NSWCA 201 that we have reproduced above at [50]. Indeed, it also contravened the following principles stated by the Court in Baulderstone Hornibrook Engineering Co Pty Ltd v Gordon Runoff Ltd (No 2) [2009] NSWCA 12 at [18] (see above at [58]):- Parties to litigation are expected to act reasonably in the running, and the resolution by compromise, of litigation. Stubbornness, intransigence and unrealistic and unreasonable expectations and demands can lead to unnecessary and unreasonable demands on scarce public resources… [P]arties are obliged to exhibit co-operation and openness in the conduct of litigation… 147 In reaching these conclusions, we have taken account of submissions by Mr Latham to the effect that the Commissioner, when corresponding with Byrons during the pre-litigation phase, did make some concessions and did say that the Appellants should have every opportunity to supply information to support their case. A concession to which Mr Latham referred, made by the Commissioner in a letter to Byrons dated 19 June 2003, was that the so-called '90-day exemption' would apply, without further evidence being required, to any incorporated entity that received less than $20,000 from the Appellants in any financial year. But these limited concessions and expressions of a willingness to co-operate did not, in our opinion, detract significantly from the impression being conveyed to the Appellants that the Commissioner was not, at this stage, prepared to come to grips with the documentation being put forward by them or to grant them the exemptions that they claimed unless all factual elements of their claim were affirmatively proved. 148 The overall impact of this stance adopted by the Commissioner was, in our judgment, that the scale and duration of the Tribunal proceedings were enlarged significantly beyond what should have been necessary. Failure to comply with the ADT Act (paragraph (a)(ii)) 149 The Appellants maintained that the Commissioner failed to comply with both paragraph (a) and paragraph (b) of subsection (1) of section 58 of the ADT Act. These provisions are as follows:- 58 Duty of administrator to lodge material documents with Tribunal where decision reviewed (1) An administrator whose reviewable decision is the subject of an application for review to the Tribunal must, within 28 days after receiving notice of the application, lodge with the Tribunal: (a) a copy of any statement of reasons given to the applicant under section 49 (or, if no such statement was given to the applicant, a statement of reasons setting out the matters referred to in section 49 (3)), and… (b) a copy of every document or part of a document that is in the possession, or under the control, of the administrator that the administrator considers to be relevant to the determination of the application by the Tribunal. 150 Section 49(3) states:- (3) The statement of reasons is to set out the following: (a) the findings on material questions of fact, referring to the evidence or other material on which those findings were based, (b) the administrator's understanding of the applicable law, (c) the reasoning processes that led the administrator to the conclusions the administrator made. 151 Failure to provide adequate statement of reasons. The scope of the requirements of section 49(3) was the subject of brief supplementary submissions by both parties, filed after the hearing on 4 December 2009. 152 The Appellants argued that the Statement of Reasons filed by the Commissioner in purported compliance with section 58(1)(a) failed to comply with the requirements of section 49(3) for the following reasons: (i) it substantially replicated a document prepared by an employee of the Commissioner more than two months earlier; (ii) it did not refer to any evidence; (iii) it did not refer to any principle of law; (iv) it contained numerous factual assertions that were known, or should have been known, to be wrong; (v) it did not refer to the Appellants' claim to 'the 90-day exemption' with respect to their payments to some of the entities; and (vi) it did not deal with the Appellants' claim to remission of penalty tax or the premium component of interest. 153 Mr Latham made submissions contesting the first four of these grounds. 154 We incline to the view that the Statement of Reasons was deficient in at least three respects: (i) although it mentioned two relevant provisions (section 3A and 3AA) of the PT Act, it failed to state how these were interpreted or applied by the Commissioner to the facts outlined; (ii) no structured 'reasoning processes' were outlined; (iii) it did not deal with the Objections regarding penalty and premium interest. We are not persuaded by the other arguments advanced by the Appellants. 155 We consider, however, that a finding on this issue is not of major significance in this context. Our reason is that these deficiencies in the Statement of Reasons were simply one aspect of the conduct of the Commissioner that we have held (at [137 – 148]) to have enlarged the scale and duration of the Tribunal proceedings significantly beyond what should have been necessary. The Commissioner is open to criticism for failing to comply with section 58(1)(a), but this failure does not add a great deal of weight to the Appellants' case under section 88(1A). 156 Failure to file all the required documents. The Appellants drew our attention to a failure by the Commissioner, noted during the hearing at first instance, to file certain documents falling within the scope of section 58(1)(b). They comprised a ledger of the First Appellant which constituted Attachment 1 to the Objections, some of the financial statements that the Appellants had furnished to the Commissioner and a letter dated 1 October 2003 from the Commissioner to Byrons. The Appellants argued that this failure was important because it was essential that the Tribunal, when exercising its jurisdiction to review the Commissioner's determination, should have access to all relevant documents. 157 Mr Latham pointed out, however, that (a) the Appellants always had these documents; (b) the Commissioner provided them to the Tribunal as soon as the error was realised; and (c) according to the transcript of the first instance hearing, the employee of Byrons (Mr Eager) who appeared for the Appellants provided copies in order to 'complete the section 58 file'. 158 In the light of these points made by Mr Latham, we do not treat the Commissioner's failure to comply (which Mr Latham acknowledged) as one of significance in this context. The nature and complexity of the proceedings (paragraph (d)) 159 The Appellants submitted that these were proceedings of considerable scale and complexity because of the conduct of the Commissioner that we have discussed above at [128 – 148]. In oral submissions, Mr Thawley argued that because the amount at stake was substantial (the total amount of tax assessed, including interest and penalties, was $514,283.33) and the factual and legal issues were particularly complex, these factors alone were sufficient to warrant an order for costs in favour of the successful parties. 160 We agree that the implication conveyed in paragraph (d) is that, other things being equal, the Tribunal should be more prepared to award costs in substantial and complex cases than in cases that are relatively small-scale and simple. But we do not accept the more extreme submission made by Mr Thawley. Other matters that the Tribunal considers relevant (paragraph (e)) 161 The Appellants referred in this context to three matters not already dealt with: (i) the significance of the proceedings for the public interest; (ii) an allegation that the Commissioner, by requiring the Appellants during the pre-litigation period to lodge monthly self-assessment payroll tax returns under a threat of being required to pay 75% penalty tax and interest, placed unreasonable pressure on them; and (iii) a claim that in submissions made to the first instance proceedings, the Commissioner unwarrantably alleged that the Appellants advisers had been uncooperative and belligerent. 162 Because the last of these three matters was the subject of an express apology at the appeal hearing on 20 December 2006, it does not need further discussion. We will now briefly address the first two matters. 163 Public interest. As mentioned above at [125], the Appellants argued that these proceedings had 'advanced the public interest in the determination of clear principles governing the administration of taxation law generally and the scope and operation of specific exemptions to liability in the PT Act' and for this reason was beneficial both to taxpayers and to the Commissioner. They put forward these matters as factors that we should take into account in their favour when dealing with the question of costs. 164 The Appellants did not cite any authority in support of this reasoning. We do not find it persuasive. 165 Exerting unreasonable pressure on the Appellants. In a letter dated 29 August 2003 to Byrons, the Commissioner stated that the Appellants had 'an ongoing obligation to lodge and pay monthly payroll tax returns'. In a letter of reply dated 18 September 2003, Byrons argued that because the Appellants asserted that their payroll tax obligations fell below a statutory threshold applying to this obligation, they were not obliged to 'register' for payment under this procedure. They added that if the Appellants lodged self-assessed returns, they could not subsequently object to the assessments even though according to their view of the situation they were being assessed to excessive amounts of tax. In replying on 24 September 2003, the Commissioner reiterated that they were liable to pay tax monthly and stated that if they did not begin doing so they would be liable for 75% penalty tax on the ground of 'intentional disregard of the law'. 166 The Appellants' submission to us on this matter was that Byrons had correctly stated the position and that the 'threat' conveyed by the Commissioner amounted to unreasonable behaviour by a statutory authority, giving further weight to their claim that it would be 'fair' to make a costs order in their favour. 167 In response, Mr Latham submitted, referring to section 86 of the TA Act (see [101] above), that the lodgement of monthly returns did not deprive a taxpayer of the right to object. 168 It appears to us, having considered the terms of section 86(1), that monthly self-assessments are not within the range of decisions against which objections may be lodged, because they are not decisions of the Commissioner. 169 We therefore agree with the Appellants' submission on this matter and consider that this conduct of the Commissioner should be given some weight in our decision on costs. Our conclusions 170 An important outcome of this lengthy analysis is that while we do not find that there was a 'substantial disparity' between the strengths of the parties' cases in these proceedings – let alone that the case of the Commissioner was unmeritorious – we do find that unreasonable conduct of the Commissioner before and during the proceedings enlarged their scale and duration significantly beyond what should have been necessary. Under paragraph (b) of section 88(1A), and taking particular account of the Commissioner's duty to act as a 'model litigant', we regard this as a significant factor towards concluding that it would be 'fair' to make a costs order in favour of the Appellants. We have also found that the failure of the Commissioner to comply with section 58(1)(a) of the ADT Act, the scale and complexity of the proceedings and the unreasonable exertion of pressure on the Appellants by the Commissioner amount to factors of varying significance under paragraphs (a)(ii), (d) and (e) of section 88(1A) respectively. 171 In our judgment, the Appellants have not made out a case for an award of indemnity costs. But they have satisfied us that, in addition to the three specific orders made by us in our costs judgment, they should receive a substantial proportion of their remaining costs of the proceedings at first instance and on appeal. 172 We order as follows:- 1. The Respondent is to pay the Appellants' extra costs occasioned by the following aspects of its conduct in the course of these proceedings:- (a) Contesting, in submissions made to the Tribunal on 20 January 2005, the Appellants' claim that remuneration paid to 18 of the entities was exempt from pay-roll tax on the ground that they had worked for the second Appellant for less than 90 days in the tax year 2002, but subsequently (on 13 September 2006) conceding this claim. (b) Causing the hearing of the appeal fixed for 20 December 2006 to be vacated. (c) At the hearing of the appeal on 2 April 2007, rendering it necessary for the Appellants to reargue, with reference to evidence recently tendered by the Respondent, the issue already determined by the Appeal Panel in its decision of 28 June 2006. 2. The Respondent is to pay 75% of the remainder of the Appellants' costs of the proceedings, both at first instance and on appeal. 3. These costs are to include amounts in respect of (a) fees paid or payable by the Appellants to Byrons, Chartered Accountants, for work done by its employees as agents of the Appellants in these proceedings and (b) any additional out-of-pocket expenses incurred by the Appellants in consequence of the conduct identified in Order 1. 4. If the parties cannot agree as to the amount of these costs, the Appellants have liberty (within 42 days of the date of these reasons) to apply to the Tribunal for an order to be made by the Appeal Panel determining the mode of assessment and for any other order required to give effect to this decision regarding their application for costs. 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.