New South Wales Supreme Court CITATION : TAB Ltd v Commissioner of Taxation (No 2) [2005] NSWSC 639 HEARING DATE(S) : 21/06/05 JUDGMENT DATE : 21 June 2005 JUDGMENT OF : Gzell J DECISION : Order defendant to pay plaintiff's costs of the proceedings save for any costs incurred by the prolongation of the hearing of the case beyond 11 April 2005 CATCHWORDS : PROCEDURE - Costs - Whether notice to admit essential facts after affidavit proving the facts filed and served enlivens entitlement to indemnity costs of proof under Supreme Court Rules 1970, Pt 52A r 19 - Whether refusal to agree upon statement of facts warrants order for indemnity costs - Whether costs of prolongation of hearing due to handing up submissions additional to those directed to be swapped and raising new arguments should be borne by plaintiff Totalizator Act 1997 LEGISLATION CITED : A New Tax System (Goods and Services Tax) Act 1999 Supreme Court Rules 1970 CASES CITED : Oshlack v Richmond River Council (1998) 193 CLR 72 TAB Ltd - Plaintiff PARTIES : Commissioner of Taxation - Defendant FILE NUMBER(S) : SC 4109/04 Mr M Robertson - Plaintiff COUNSEL : Mr S W Gibb SC - Defendant Ernest & Young Law SOLICITORS : Australian Government Solicitor LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION GZELL J TUESDAY 21 JUNE 2005 4109/04 TAB LTD v COMISSIONER OF TAXATION (No 2) EX TEMPORE JUDGMENT 1 I have before me an application with respect to the appropriate form of orders to be made consequent upon my publication of my reasons in this matter. TAB Ltd seeks a declaration in terms that it is not liable to pay GST in relation to amounts to which the plaintiff was entitled pursuant to s 75(1)(a) and s 75(2)(a) of the Totalizator Act 1997 in that for purposes of s 126-(10)-(1) of A New Tax System (Goods and Services Tax) Act 1999, total amounts wagered were to be determined in accordance with the proposed declaration and total monetary prizes were to be calculated in accordance with the proposed declaration. 2 The Commissioner tendered draft short minutes of orders in terms that the declaration state that in determining, for purposes of Div 126 of A New Tax System (Goods and Services Tax) Act 1999, the plaintiff's net amount for a tax period, the plaintiff is entitled in calculating its global GST amount to exclude from total amounts wagered any bets the subject of an event occurring in the tax period giving rise to an obligation to refund and to include in total monetary prizes any dividend declared in the tax period. 3 There was other verbiage in the Commissioner's proposed declaration but I have summarised its material structure. 4 It seems to me that the form of declaration proposed by the Commissioner is more precise and encapsulates more precisely my reasons for judgment than does the proposal of the plaintiff. The plaintiff sought the declaration in the more general form in case the Commissioner sought to raise against it a different ground for liability to GST. I am not prepared to make a declaration in general form to avoid that prospect. The only basis upon which a liability to GST was agitated before the Court in these proceedings was in relation to Div 126 of A New Tax System (Goods and Services Tax) Act 1999. I propose, therefore, to make the declaration suggested by the Commissioner. 5 The plaintiff seeks an order that the defendant pay the plaintiff's costs of the proceedings on the usual basis except for costs incurred by the plaintiff in proving unadmitted facts, the subject of the plaintiff's notice to admit facts, those costs to be paid by the defendant on an indemnity basis. 6 On 17 March 2005, a notice to admit facts was served on the Commissioner pursuant to the Supreme Court Rules 1970, Pt 18 r 2 and r 5. A notice disputing facts under Pt 18 r 2(2) was served on 1 April 2005. The facts sought to be admitted were proved in an affidavit of Warwick Smith sworn on 7 October 2004. Part 52A r 19 is in the following terms: "(1) Where a party to any proceedings (in this rule called the disputing party ) serves a notice disputing a fact under Part 18 rule 2(2) and afterwards that fact is: (a) proved in the proceedings, or (b) admitted for the purpose of the proceedings by the disputing party, unless the Court otherwise orders, the disputing party shall, after the conclusion of the proceedings, pay the costs of the party upon whom the notice is served, assessed on an indemnity basis, occasioned by: (c) proof of the fact, or (d) preparation for the purpose of proving the fact, as the case may be. (2) An entitlement to costs under this rule shall not be affected by any order as to costs unless that order refers to the notice by the disputing party giving rise to the entitlement. (3) This rule has effect notwithstanding rules 11A, 18, 21, 22, 23, 28, 29, and 30(4) and (5)." 7 It was submitted that the rule applied to costs incurred both before and after the service of the notice. I reject that submission. It cannot have been the purpose of the rule that a party might serve a notice shortly before trial requiring facts essential to its cause of action to be admitted. In my view, the affidavit of Mr Smith having been put on 7 October 20004 proving the necessary facts, there was no basis for the utilisation of the Supreme Court Rules 1970, Pt 52A r 19 to entitle the plaintiff to costs. 8 A second submission was put on behalf of the plaintiff. On 4 June 2004, it sought the agreement of the Commissioner to a set of facts ultimately established in Mr Smith's affidavit. The Commissioner declined to follow that course. At that time his investigation was incomplete. The request was made again and rejected by the Commissioner. It was submitted on his behalf that he was entitled to have facts proved under oath in the usual way and his rejection ought not to visit upon him an order for indemnity costs. 9 To be entitled to indemnity costs, a party must establish some delinquency or misconduct on the part of the party against whom the order is sought (Oshlack v Richmond River Council (1998) 193 CLR 72). It does not seem to me that the mere rejection of a suggestion that the parties might proceed by way of an agreed statement of facts is a matter of delinquency or misconduct. I decline to make an order for costs on an indemnity basis. 10 I reject the submission that I should make a special order with respect to costs incurred in proving the unadmitted facts, whether on an indemnity or an ordinary costs basis. 11 When this matter came before me on 11 April 2005, the plaintiff handed up an additional reply which raised matters that had not been raised in the written submissions, including a reply, that I had directed the parties to serve on each other and provide to my Associate. Counsel for the Commissioner sought an adjournment to enable him to consider the additional material. I acceded to that submission and gave directions for the delivery for further written responses and replies. I made an order that if either party wished to address the Court on the submissions, they should notify my Associate by a specified time. On 11 May 2005 I stood the matter over for further argument and on 3 June 2005, when submissions were made by both parties, I reserved my decision. I published my reasons for judgment in the matter on 14 June 2005 and stood the matter over to today for any further argument. 12 The purpose of the direction that written submissions be exchanged between the parties was to ensure that all the issues upon which reliance was to be placed were brought to the attention of the opposing party so that it was in a position to meet those submissions. The handing up of an additional reply containing new arguments defeated the purpose of those directions and prolongated the hearing. 13 In my view, it is appropriate that I order that the costs incurred by the prolongation of the hearing be excluded from the order that the defendant pay the plaintiff's costs. I propose to make an order in these terms: The defendant pay the plaintiff's costs of the proceedings save for any costs incurred by the prolongation of the hearing of the case beyond 11 April 2005. 14 I make orders in terms of the short minutes of order initialled by me, dated by me and placed with the papers. ********** 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.