Administrative Decisions Tribunal New South Wales Medium Neutral Citation: Perry Properties Pty Ltd v Chief Commissioner of State Revenue (RD) [2011] NSWADTAP 1 Hearing dates: On the papers Decision date: 21 January 2011 Jurisdiction: Appeal Panel - Internal Before: J Needham SC, Deputy President Decision: Order that the respondent pay the costs of the appellant of the Appeal Panel proceedings including of the application for costs (which itself includes the respondent's application for costs). The respondent's application for costs is dismissed. Catchwords: Costs - "fair" - compensatory principle - factors to be considered. Legislation Cited: Administrative Decisions Tribunal Act 1997 Land Tax Management Act 1956 Taxation Administration Act 1996 Retail Leases Act 1994 ADT Practice Note 22 - Costs Cases Cited: Salon Today Pty Ltd v M M I R Pty Ltd [2009] NSWADT 71 Minister for Immigration and Multicultural Affairs v. Bhardwaj (2002) 209 CLR 597 B&L Linings Pty ltd v. Chief Commissioner of State Revenue (No 5) [2010] NSWADTAP 21 Bull v. Lee (No 2) [2009] NSWCA 362 Notaras v. Waverley Council [2007] NSWCA 333; (2007) 161 LGERA 230 at [147] Peng v. Chief Commissioner of State Revenue [2009] NSWADT 295 AT v. Commissioner of Police, NSW [2010] NSWCA 131 Kelly v Chief Commissioner of State Revenue (No 2) [2010] NSWADT 52 Perry Properties Pty Ltd v. City of Sydney Council [2008] NSWLEC 1288 Category: Consequential orders Parties: Perry Properties Pty Ltd (Appellant) Chief Commissioner for State Revenue (Respondent) Representation: P Singleton (Appellant) A H Rider (Respondent) Crown Solicitors Office (Respondent) File Number(s): 099013 Decision under appeal Jurisdiction: 9108 Citation: Perry Properties Pty Ltd v. Commissioner of State Revenue [2009] NSWADT 48 Date of Decision: 2009-03-05 00:00:00 Before: M Hole, Judicial Member File Number(s): 086037 REASONS FOR DECISION 1The appellant (the applicant in the proceedings below) was successful in arguing that the learned Tribunal member who decided Perry Properties Pty Ltd v. Chief Commissioner of State Revenue [2009] NSWADT 48 erred in her analysis of the meaning of the word "accommodation". This Appeal Panel gave reasons in Perry Properties Pty Ltd v Chief Commissioner of State Revenue [2010] NSWADTAP 6 referring the proceedings back to the Tribunal for determination of whether, applying the definition of "accommodation" according to law, the taxpayer was entitled to the exemption from land tax provided for low-cost accommodation in s 10Q of the Land Tax Management Act 1956 ("the LTMA Act"). 2Accordingly, the appellant was successful on the main issue in the appeal, which was whether "accommodation" in s 10Q of the LTMA Act had a broader meaning than that of "room". 3Each party now seeks its costs of the Appeal. 4In relation to costs, the following submissions were made:- a)Submissions by the appellant on costs filed 18 March 2010; b)Respondent's submissions on costs filed 19 April 2010; c)Appellant's submissions in reply filedd 3 May 2010; d)Respondent's reply filed 7 May 2010; and e)Further submissions (by letter) filed 12 May 2010. 5The matter was reserved on 30 May 2010 and determined on the papers. The legislation 6Section 88 of the Administrative Decisions Tribunal Act 1997 ("the ADT Act") provides, relevantly, as follows:- 88Costs (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. 7The current version of s 88 incorporates a test of "fairness" in sub-s 1A, rather than the previous incarnation of the section, which incorporated a criterion that there should be 'special circumstances warranting an award of costs'. The current version became operative on 1 January 2009. 8Section 101 of the Taxation Administration Act 1996 provides for the Tribunal to exercise similar powers, including in par (e):- "make any further order as to costs or otherwise as it thinks fit." 9In Salon Today Pty Ltd v M M I R Pty Ltd [2009] NSWADT 71 (a case decided under the Retail Leases Act 1994), the Tribunal stated at [72]:- What the Parliament has done, in its 1 January 2009 amendments, is recognise that there is a need for this Tribunal to be more flexible and widen the scope of a litigant's entitlement to costs. ...[T]he result of this re-assessment by the Parliament is a different test, a test of fairness, having regard to a number of parameters/factors. The appellant's application for costs 10The appellant argued that the matters which made it "fair" for costs to be awarded to it included:- a)the appellant was successful. While not entitling the appellant to costs, it is a relevant consideration; b)a decision on costs is not restricted to consideration of factors in sub-paragraphs (1) to (d) of sub-s 88(1A) and all relevant matters can be taken into consideration (sub-par (e)). c)both sides were legally represented, which was necessitated by the complex legal and construction questions inherent in the appeal; d)the question at issue was a "monetary and commercial" question; and e)the question in issue was as to the proper construction of instruments (Revenue Ruling LT78 and LT79) that were drafted by the respondent's Office and the respondent failed properly to interpret those instruments. 11The respondent, in reply, submitted:- a)because the primary decision did not deal with costs, the Appeal Panel was functus officio and had no jurisdiction to decide the point now; b)if the respondent was wrong on this point, in any event the appellant should not have an order for costs on the following grounds:- i)the general rule is that each party bear their own costs and success is not an indicative factor for costs. In particular, the underlying assessment was not overturned by the Appeal Panel, merely remitted for further consideration; ii)the appellant has not identified any issues of "fairness" which would ground an award of costs under s 88(1A); iii)an award of costs was not punitive, but compensatory, and there were elements of a punitive nature in the submissions by the appellant; iv)the proper route for the appellant to take was to the Supreme Court for a declaration as to the meaning of "accommodation". 12The appellant said, in reply:- a)the Appeal Panel is not functus, given that the question of costs was foreshadowed during the hearing (see Minister for Immigration and Multicultural Affairs v. Bhardwaj (2002) 209 CLR 597); b)further, the practice of the Tribunal is to deliver its decisions in writing, without reconvening and for parties to indicate after receipt of the decisions as to whether an application for costs will be made; B&L Linings v. Chief Commissioner of State Revenue [2005] NSWADT 129 at [108], and B&L Linings v. Chief Commissioner of State Revenue [2010] NSWADTAP 21 at [68]; c)the appellant was indeed successful, demonstrated by the fact that the learned Tribunal Member was found to be in error and the matter was remitted for further consideration; d)the drafting of the Revenue Ruling under consideration was a real issue in the proceedings and this matter was put into evidence at the hearing; this was not a matter in which the respondent was merely a decision-maker whose decision was under review; e)the appellant had a choice of forum; it chose the Tribunal. The proposition that the Supreme Court should have been chosen is misconceived, but had that choice been made, the appellant would, on general principles, have been awarded its costs of the application; f)there is no evidence supporting the submission that an inference should be drawn that the appellant had a "punitive" motive and no evidence is referred to in support of that submission. 13The respondent replied to the appellant's reply as follows:- a)both parties applied for their costs at the conclusion of the hearing, and as the Appeal Panel did not deal with the costs issue in its reasons for decision, it implicitly determined the issue by refusing both applications. It is this analysis which gave rise to the functus officio submission. If this is so, then an appeal lies to the Court of Appeal from the "fundamental error of law" in failing to exercise its jurisdiction by not determining the issue of costs, which was properly before it; b)the applicant is out of time in its application for costs (see ADT Guideline on costs - Practice Note number 22 dated 10 January 2009); c)for all those reasons, the application for costs is misconceived and lacking in substance; d)further, the application has no merit, relying, as it does, on "the vagaries of "any other matter that the Tribunal considers relevant". 14The appellant submitted that the matters "in reply to the reply" went beyond the directions of the Tribunal, and raised new arguments in an inappropriate way. This was in breach of the principle that a party should not file further submissions after the close of submissions, but merely draw attention to relevant authorities: see Bull v Lee (No 2) [2009] NSWCA 362 at 10; Notaras v Waverley Council [2007] NSWCA 333; (2007) 161 LGERA 230 at [147]. The respondent's application for costs 15The respondent argued that he should be awarded costs on the following bases:- a)if the Commissioner was wrong on the question whether the Appeal Panel was functus officio, and the Appeal Panel had jurisdiction to decide the issue of costs, the Respondent should have his costs of both the "initial and Appeal proceedings" on the following grounds:- i)B&L Linings Pty Lotted v. Chief Commissioner of State Revenue (No 5) [2010] NSWADTAP21 at [75] provides that an Appeal Panel may order costs for an appeal and for the proceedings below; ii)the proceedings were not a bona fide application for a review, but rather an application for a declaration as to the meaning of "accommodation"; iii)the appellant did not satisfy the exemption criteria under s 10Q, regardless of the meaning of the word "accommodation", and should not have commenced proceedings on that basis. A failure to be able to satisfy the onus of proof had the effect of "prolonging unreasonably the time taken to complete the proceedings" and "had no tenable basis in fact or law" (see s 88(1A) (b) iv)and (c) of the ADT Act respectively); and failed to disclose a material fact (ie, that the land was used as a motel) to both the Respondent and to the Tribunal. 16The appellant submitted on the respondent's application for costs: a)the Appeal Panel had no jurisdiction to make an order for the costs in relation to the proceedings below, given that they had not been determined (at the time of the submissions, and at the time of giving this decision). There is a tension between the decisions in Chand and in B&L Linings (no 5) as to the way in which sub-sections 88(1) and (4) operate together; b)If it did have such jurisdiction, it would be inappropriate and wrong to make such an order, given that the proceedings below had not been determined. It is not appropriate to make an order for costs of what are effectively part-heard proceedings. Those costs should be left to Judicial Member Hole to determine; c)the application was not made within a reasonable time, given that no application was made prior to the appellant's application for costs (despite the appellant foreshadowing a costs application during the hearing); d)the grounds advanced by the respondent for costs were insufficient to ground an application as follows:- i)the argument that the appellant should have gone to the Supreme Court is irrelevant; ii)the fact that the appellant lost at first instance is irrelevant to questions of costs on a (successful) appeal; iii)in making the above argument, the respondent sought to traverse the ruling of the Appeal Panel; iv)there can be no finding that the appellant is "bound to fail" at the remitted hearing as a factor relevant to the costs of the Appeal; v)the "non-disclosure of a material fact" ground is unsupported by evidence and was not raised during the hearing. 17In reply, the respondent submitted:- a)as to the time point, the costs application was foreshadowed at the hearing; b)if indeed the respondent is out of time, then the appellant is likewise; c)any power to award costs applies to proceedings "at any stage of the proceedings" - see Peng v. Chief Commissioner of State Revenue [2009] NSWADT 295 at [21]; d)as to merits, the applicant cannot resile from the fact that the proceedings "has no tenable basis in fact or law", and it has failed to accept that it bears the onus of proof of showing that at least 80% of the occupants of the accommodation on the land were long-term residents and that the primary use and occupation of the land must be for low-cost accommodation (rather than as a motel); e)the respondent should have costs of this application on the basis of:- i)late filing of the Reply submissions on 3 May 2010, contrary to the direction that the submissions be filed and served by 23 April 2010 (see s 88(1A)(a)(i)); ii)in the proceedings below, the appellant was late filing and serving material directed by the Judicial Member to be filed; iii)the failure to disclose that the land was used as a motel. iv)various breaches of s 10 and s 101(3) of the Taxation Administration Act. Does the Appeal Panel have jurisdiction to deal with the costs application? 18The usual practice of the Appeal Panel is to give reasons for a decision and then to hear any question for costs. Only rarely are costs applied for during the hearing, and if they are, it usually takes the form of a party seeking to be heard at a later stage. 19It should be noted here that Practice Note 22 discourages this practice. Clause 9 of that Practice Note provides:- 9. Application for costs Parties should tell the Tribunal and the other party that they will be applying for a costs order as soon as they become aware of circumstances which justify an order for costs. If the matter goes to hearing and the application for costs is pursued, the person applying for costs should file and serve a precise statement of the amount of costs actually sought and its components. Parties are encouraged to advise the Tribunal at the conclusion of the hearing if they wish to make an application for costs. Any such application should be made at the time, even if that application is based on an assumption as to the outcome of the proceedings. The Tribunal will determine the application in the reasons for decision. Parties are not encouraged to apply for costs after receiving the reasons for decision. Such an application leads to unnecessary delays in the finalisation of the matter. If such an application is made, it should set out the reasons that an application for costs was not made at the conclusion of the hearing. The Tribunal may list the application for an oral hearing or determine the application 'on the papers' that is, without a hearing (see s 76 of the ADT Act). 20The factors to be considered in s 88(1A) are factors which must be determined, to some extent, by the Appeal Panel (or the Tribunal at first instance) in coming to a decision on the wider issues. It is appropriate in most cases to make an application for costs within the context of the Appeal Panel (or Tribunal) hearing, based on assumptions as to the outcome; otherwise, the Appeal Panel may determine any such application after the receipt of the reasons for decision. 21Both sides contend that applications for costs were made before the Appeal Panel (although there is an issue about whether an application was made, or merely foreshadowed). There is no note in the submissions or in the decision of any such application, but in our view the jurisdiction of the Tribunal does not depend on whether such an application was made at the time. While it is preferable to have the costs issue argued at the same time as the main proceedings, it does not mean that a failure to do so renders the Appeal Panel functus in relation to costs. Nor, if such an application was made, was a decision "implicitly" made to refuse it. The question of costs has not yet been determined; s 88 provides for an application for costs to be made to the Appeal Panel, and such an application has been made. 22Accordingly, the Appeal Panel has jurisdiction to hear the argument as to costs. Should the appellant have an order for its costs? 23The Court of Appeal in AT v. Commissioner of Police, NSW [2010] NSWCA 131 (per Basten JA, with whom the other members of the Court agreed) at [33] said:- ".. .the general principle that each party should bear its own costs in the Tribunal [is] a principle applicable at both first instance and before the Appeal Panel. Although an order varying the general rule may be made "only if" the relevant criterion is satisfied in a particular way, there is a relatively low hurdle for an applicant seeking an order. The criterion of "fairness" will take into account the compensatory purpose of an award of costs, which will generally favour the successful party. The circumstances in which fairness may be identified are indicated by the specific attributes listed in subs(1A), but subject to the generality of para(e), read in its context. Other considerations will no doubt include the nature of the jurisdiction of the Tribunal which is invoked and the objects identified in s3(b)-(g) of the Tribunal Act." 24Here the appellant relies, in seeking to surmount the "relatively low hurdle" of the s 88(1A) criteria, on the success of the appellant, the commercial nature of the proceedings, and the difficulties arising out of the construction of the Commissioner's Revenue Ruling. 25The respondent argues that the appellant was not, in fact, "successful", because the Appeal Panel decision merely referred the matter back for a re-determination without overturning the assessment. This is a fairly technical point; the person who "won" the appeal, in the sense of achieving the aim of having the question of "accommodation" revisited, was the appellant. The Appeal Panel is of the view that the appellant was indeed successful. 26In our view the factors relevant to the determination of costs in these proceedings are those in sub-ss 88(1A)(d) and (e). The proceedings involved a reasonably complex analysis of the meaning of s 10Q, which is a section which has not had much in the way of judicial attention, and no authorities were available as to the meaning of the word "accommodation" in this context (see par [47] of the decision below). The complicating factor of the application of the Revenue Ruling - an internal document of the respondent's - was not a particularly significant one, although it was dealt with to some extent in the Appeal Panel reasons. 27The Court of Appeal in AT v. Commissioner of Police (above) referred to the compensatory nature of an order for costs. The issue of compensation and fairness is a difficult one to determine. In our view, the mere fact of success is not quite enough to ground an order for costs; see Kelly v Chief Commissioner of State Revenue (No 2) [2010] NSWADT 52 at [49]. The appellant had to take the issue of the meaning of "accommodation" to the Appeal Panel in order to obtain a further hearing on the issue before the learned Judicial Member; this is, of course, a factor in jurisdictions where costs follow the event. 28In our view the lack of any decisions which bore directly on the issue is the deciding factor in determining that the appellant should have an order for costs. The matter was a difficult one of construction of a legislative instrument, and the respondent had made a determination of policy set out in the Revenue Ruling on a basis which was not found to be correct. Given the nature of the proceedings, the lack of binding authority and the success of the appellant, the respondent should pay the appellant's costs of the Appeal Panel proceedings, including of the application for costs. Should the respondent have an order for his costs? 29This question has been answered by the above determination for costs in favour of the appellant. However, some of the arguments raised by the respondent need to be dealt with. 30It is not appropriate to raise, in submissions on costs, and without any evidence in these proceedings, an allegation that the appellant (or more properly its director, Mr Perry) was lacking in frankness. The respondent relied upon a Land and Environment Court decision (Perry Properties Pty Ltd v. City of Sydney Council [2008] NSWLEC 1288). Whether that decision establishes the allegation or not, Mr Perry has not had the benefit of the allegation being put to him, and of being able to answer that allegation. It is most unsatisfactory for the Appeal Panel to be asked to make an award of costs against the appellant on the basis of such an untested allegation of a lack of honesty. 31The remaining question about the onus of proof (given the Occupation Records) was one specifically left by the Appeal Panel to the learned Tribunal Member, given the findings of facts which need to be made on the issues remaining to be determined. Those factual findings were not made by the Appeal Panel; accordingly, those issues remain with the Tribunal below for determination and for any costs issue to be determined accordingly. 32It is not appropriate for the Appeal Panel to make an order for costs in proceedings which are part-heard before the Tribunal; however it is fair to say that this application was made but faintly. 33As to the respondent's submission to the effect that the proper route for the appellant was to take apply to the Supreme Court for a declaration; the Appeal Panel is of the view that the taxpayer is entitled to seek review of certain decisions of the respondent in either the Tribunal or Supreme Court pursuant to s 96 and s 97 respectively of the Taxation Administration Act 1996. The Appeal Panel does not consider the taxpayer's choice between these forums as a factor relevant to the awarding of costs in these appeal proceedings, nor would it necessarily be relevant to any ultimate award of costs in the proceedings below. Orders 34Order that the respondent pay the costs of the appellant of the Appeal Panel proceedings including of the application for costs (which itself includes the respondent's application for costs). 35Respondent's application for costs dismissed. ********* DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 June 2011