Argus Industrial Group Holdings Ltd v Chief Commissioner of State Revenue

Casey v. Repatriation Commission (1995) 22 AAR 234 Silver Fox Company Pty Ltd v Lenards Pty Ltd [2004] FCA 1570 ACCC v Black On White [2002] FCA 1605 Australian Aqua Air Pty Ltd v CCSR [2009] NSWADT 239 Kyriacou v Chief Commissioner of State Revenue [2009] NSWADT 175 CASES CITED: Re Murray and Bayside Council [1999] VCAT 1327 Raethel v Director General, Department of Education and Training [2000] NSWADT 56 ;v Chief Commissioner of State Revenue (No 2) [2010] NSWADT 52 Macdonald Contractors (Australia) Pty Ltd v CCSR [2007] NSWADT 56 Blanch v CCSR [2008] NSWADT 24 Peng v Chief Commissioner of State Revenue [2009] NSWADT 295 Heyward v Minister for Immigration and Citizenship [2009]FCA 313

APPLICANT C Camillin, solicitor REPRESENTATION: RESPONDENT M Robertson, barrister

ORDERS: The application for costs is refused and there is no order as to costs

1 The Applicant seeks an order for costs in respect of its application (withdrawn in the circumstances set out later in these reasons) for corporate reconstruction relief.

2 The Tribunal had before it the documents lodged pursuant to section 58 of the Administrative Decisions Tribunal Act 1997 ("the Act") and referable to the application referred to in clause 1. The section 58 documents are in themselves large; however the volume of documentation before the Tribunal increased considerably in consequence of the application for costs made after the withdrawal of that application... The Tribunal notes at this early stage of these reasons that although this matter has raised a number of difficult issues, it does not believe that this is so in respect of the costs application proper.

3 In addition to the section 58 documents the Tribunal has received two sets of submissions by each of the parties and a third set from the Applicant... The fact that each party filed additional submissions arose because of a disagreement between them at the hearing on 16 March 2010. The Tribunal at that point in time had before it written submissions by each of the parties, and which are referred to respectively as "AS' in the case of the Applicant and "RS" in the case of the Chief Commissioner. During the course of his oral submissions, Dr Robertson sought to refer to without prejudice correspondence which had passed between the parties. Mr Camillin objected to any such references. Dr. Robertson did not at that time remember off-hand references to the authorities and which are relevant in support of the proposition that in costs applications without prejudice correspondence can be admitted. It was then determined, having regard to the fact that much of the time period allotted to the hearing had been utilised, (and in the main by Mr. Camillin's opening) that the matter would thenceforth proceed through written submissions. Directions were given pursuant to which the Applicant was directed to file written submissions within three weeks, followed by written submissions by the Chief Commissioner within a further three weeks and with a right of reply available to the Applicant, but only if it wished to avail itself of this right, within a further period of two weeks thereafter.

4 In the result the Applicant's submissions as referred to in the preceding clause were filed within the period specified; they are referred to as "AS2". They were accompanied by a large bundle of documents ("the bundle") which although furnished to the Tribunal was not served on the Chief Commissioner. The Applicant alleged that the Tribunal had agreed that the Applicant need not serve the bundle on the Chief Commissioner. The Tribunal did not grant any such dispensation and indeed considers that to have done so would have been in breach of the rules of natural justice. On 20 April 2010 the Registrar of this Tribunal wrote to the Applicant's legal representatives (and wrote similarly to the Chief Commissioner's legal representatives) advising that the bundle must be served on the Chief Commissioner within one week and advising also that the three-week time period within which the Chief Commissioner would be obliged to serve his second set of submissions would run from the date of receipt of the bundle. In the result the Chief Commissioner's second set of submissions ("RS2) was served on for about 21 May 2010. The Applicant did indeed utilise the right of reply which had been granted to it and its final set of submissions "(AS3") were served on or about about 28 May 2010 and thus completing the documentation to be considered by the Tribunal for the purposes of this costs application.

5 I commence by including clauses 1 to 7 (both inclusive) of AS as follows: 1. On 24th January 2010 the Applicant purchased 100% of the issued shares of Dickinson Autocon Holdings Pty Ltd ('Holdings') in order to acquire it's trading subsidiary Dickinson Autocon Systems Pty Ltd ('Systems'). The purchase was negotiated by private treaty for $4.1m (Bundle page 117) and the Applicant paid $26,400 to the Chief Commissioner in Duty. During the due diligence process it was discovered that although it was incorporated in the year 2000, Holdings had never traded, had no bank account and had never filed any tax returns. In a peculiar disregard of tax and corporations law Systems had declared dividends in favour of the ultimate owners of Holdings and behaved in every way as though they were its' shareholders instead of Holdings. 2. In order to rectify this irregularity the Applicant requested that Holdings file it's outstanding tax returns before settlement took place. The returns (which appear at pages 20 et seq of the bundle) reflected Holdings notional entitlement to receive the dividends declared by Systems even though it had never done so. The Applicant wished Holdings to transfer Systems shares to itself so that Holdings could be wound up. This would mirror how the Applicant holds it's 2 other Australian trading subsidiaries (respectively based in Victoria and WA). 3. The Applicant applied for exemption from duty (Bundle pages 91-96) based on the proposed transfer being a proposed corporate reconstruction. A copy of the letter dated 20th March refusing the application is attached. The application was refused with the words: "… (sic) and that a company that has at any time operated and engaged in commercial transactions has "traded". Therefore, this application is disallowed as it does not meet the guidelines." 4. The Chief Commissioner also advised the Applicant it had a statutory right of objection and used the following words: "Please note that if you do not agree with this decision, you have the right to object under s. 86 of the Taxation Administration Act 1996…" 5. The Applicant sought clarification from the Chief Commissioner of the reference to 'trading' by letter dated 7th April 2009 (Bundle pages 124 et seq) but none was forthcoming. 6. The Applicant tendered an objection in proper form (Bundle pages 122-123) and this was considered by the Chief Commissioner and by letter dated 8th July 2009 (copy attached) he again rejected the application for exemption saying: "Accordingly the under the guidelines (sic) the requirement that the company has 'been dormant since its registration' is essential to the application of the guideline in your client's instance. As the company in question has previously traded it cannot be considered to be dormant." 7. By this letter the Chief Commissioner then advised the Applicant it had a right to have this refusal reviewed by this Tribunal. See the penultimate paragraph and leaflet attached. 6 The terms "Holdings" and "Systems" when used in these reasons have the meanings assigned to them in AS.

7 It will be noted that in respect of the proposed transaction whereby Holdings would sell the issued shares in Systems to the Applicant, the Applicant made application for corporate reconstruction relief under Ruling DUT20 (:the Ruling"). .. Put in other words the transaction had not been entered into at the time; the Applicant plainly wished to know that the transaction if entered into would receive the corporate reconstruction relief. sought,

8 I also include the content of RS2 under the head of "History of proceedings" and contained in clause 21 to 40 (both clauses inclusive but without the footnotes contained in it, as follows: -- 21. On 17 March 2009, the Applicant applied for exemption from duty in respect of a proposed corporate reconstruction transaction ("the First Proposal") under s. 281 of the Duties Act. 22. On 20 March 2009, the Chief Commissioner disallowed the claim for exemption from duty ] . 23. The Chief Commissioner considered that the proposed transaction would not meet the exemption guidelines approved by the Treasurer as set out in Revenue Ruling DUT 26 because the relevant members of the corporate group would not: (1) in fact have been members of that group for at least 12 months before the time for the proposed transaction; or (2) be deemed to have been members of that group for at least 12 months before the time for the proposed transaction because the holding company has not been dormant since its registration 24. It is common ground between the parties that (i) did not apply; the Applicant disputes only paragraph (ii). 25. On 14 April, the Applicant objected to the Chief Commissioner's decision ] . 26. On 8 July 2009, the Chief Commissioner disallowed the Applicant's objection ] . 27. On 21 July 2009 the Applicant filed an application for review of the Chief Commissioner's decision in the Tribunal ] . 28. On 30 July 2009, a Notice of Appearance was filed in the Tribunal for the Chief Commissioner and on 12 August 2009, documents were filed and served pursuant to s.58 of the Administrative Decisions Tribunal Act 1997. 29. On 1 September 2009, the Applicant's submissions were served on the Crown Solicitor's Office. 30. On 2 September 2009, the application was listed for Directions before Deputy President Needham. The application was set down for hearing on 23 October 2009. 31. On 6 October 2009, the Chief Commissioner's submissions were filed and served on the Applicant in accordance with orders made on 2 September 2009. The Chief Commissioner's primary submissions were consistent with its earlier position set out in paragraph 7 above, however, at this time the Chief Commissioner also made a submission to the effect that the Chief Commissioner's decision was not a decision under a taxation law but a decision made merely in the general administration of revenue laws. As such it was arguably not one to which the objection and review process in Part 10 of the Taxation Administration Act 1996 would apply. 32. On or about 8 October 2009, the Applicant sought the Chief Commissioner pay its costs and offered to withdraw its application on this basis. 33. On 19 October 2009, the Applicant notified the Tribunal that the hearing should be adjourned and the application listed for further directions pending an alternative transaction structure being submitted to the Chief Commissioner. 34. On or about 26 October 2009, the Applicant submitted a second application to the Chief Commissioner for exemption from duty under s. 281 of the Duty Act in respect of an alternative and different transaction structure ("the Second Proposal") 35. On 2 November 2009, the Chief Commissioner denied an exemption from duty under s. 281 of the Act in respect of the Second Proposal. 36. On or about 6 November 2009, the Applicant submitted a third application to the Chief Commissioner for exemption from duty under s. 281 of the Duty Act in respect of a further alternative and different transaction structure ("the Third Proposal"). 37. On 25 November 2009, the Applicant wrote to the Chief Commissioner indicating that an exemption from duty under s. 281 of the Act had been granted in respect of the Third Proposal. 38. On 15 December 2009, the Applicant made an application in the Tribunal for costs in the proceedings relating to the review of the First Proposal. 39. Also on 15 December 2009 the Applicant filed submissions in relation to its Costs application. 40. On 19 January 2010, the application was listed for directions before Deputy President Needham. Orders were made for filing and service of the Chief Commissioner's evidence and submissions and the application was listed for hearing. 9 The terms "First Proposal", "Second Proposal" and "Third Proposal" have the meanings assigned to them in RS2 That content appeared in similar form in RS.

10 The fact that the Tribunal has included clauses 1 and 2 of AS in these reasons should not be construed as indicative of the fact that the Tribunal necessarily agrees with its content. The Tribunal was informed that, within that period of 12 months referred to in the Ruling, Systems distributed a dividend to Holdings, which in turn distributed that dividend to the Applicant. Holdings did not have a bank account and accordingly the relevant payment was made directly by Systems to the Applicant The derivation of and distribution of that dividend by Holdings was, so the Tribunal was informed, recorded in the books of Holdings. Of course Systems could not have distributed a dividend directly to the Applicant because the Applicant was not then a shareholder in Systems. The Chief Commissioner contended that on this basis Holdings could not aptly be described as dormant and so that the application by the Applicant for corporate reconstruction relief (and referred to as the First Proposal) would not (and leaving aside for the moment the jurisdiction issue referred to later in these reasons) have succeeded,. It is unnecessary for the Tribunal to express any firm view as to the prospects of success of the application for corporate reconstruction relief given that it was withdrawn; however its prospects of success or otherwise are relevant in relation to the question of costs and the Tribunal notes that it inclines to the view that the application for corporate reconstruction relief (and referred to as the First Proposal) would have failed. That this is so arises from the terms of the Ruling itself and the fact that a company which receives and distributes a dividend is not on the face of it one which is dormant,

11 The content of RS2 under the head of "history of proceedings" referred to previously in these reasons appears to the Tribunal to be accurate. Similarly the content of AS recited previously in these reasons as to the fact that in respect of the application for corporate reconstruction relief the Applicant was informed that it had a right of objection (as referred to in AS) and also as to its right to seek a review by the Tribunal (also as referred to in AS") appears to be accurate.. .

12 It is clear then that after the Applicant had sought review of the application for corporate reconstruction relief, and after section 58 documents had been filed, the Chief Commissioner raised the question of whether (having regard to the terms of the Ruling), and in respect of a proposed transaction (as opposed to an actual transaction) the Tribunal was possessed of jurisdiction to rule on the application. In the result the application was withdrawn. The Applicant at first sought to withdraw its application conditionally upon payment of costs by the Chief Commissioner but the Chief Commissioner did not agree. Subsequently the Applicant submitted another proposal (the Second Proposal) which was unsuccessful, and thereafter a further proposal (the Third Proposal) which was successful and in consequence of which the Applicant obtained the relief which it had sought in the first place

13 The Applicant's case reduced to its essential details is that the Chief Commissioner, when he invited the Applicant to object and then to seek review by the Tribunal, and thereafter raised the jurisdiction issue, acted in a manner which entitles the Applicant to an order for its costs pursuant to section 88 of the Act.

14 There is a difficult legal issue as to whether if the original application for corporate reconstruction relief had not been withdrawn the Tribunal would or would or would not have had jurisdiction. Although the Tribunal considers that a contention that the Tribunal did not have jurisdiction is arguable, and indeed considers, having regard to the wording of the Ruling that the Tribunal might have come to the conclusion that it did not have jurisdiction, it is not necessary for it to determine the issue. The Tribunal notes in this context that if the application had not been withdrawn it might itself have raised the jurisdiction issue at a hearing of the application.

15 The jurisdiction issue in turn raises another difficult issue and that is as to whether, if the Tribunal did not have jurisdiction to determine the application for corporate reconstruction relief, it nevertheless has the power to grant an application for costs and which is referable to an application in respect of which it did not have jurisdiction. Without determining (on a final basis) this equally difficult issue, the Tribunal proposes to assume that, regardless of whether or not it had jurisdiction to entertain the substantive issue, it does have power to determine the costs application, more particularly having regard to the fact that section 88 of the Act refers to "proceedings before the Tribunal", and on the basis that the application, whether or not it would have succeeded and whether or not there was an adverse jurisdiction finding, may constitute "proceedings before the Tribunal". The Tribunal emphasises that it is making an assumption without attempting to resolve this difficult question of law.

16 Section 88 of the Act reads as follows: -- (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."

17 .In an application for costs by the Chief Commissioner against Mr and Mrs Peng in Peng's case (Peng v Chief Commissioner of State Revenue [2009] NSWADT 295) Mr B. Jones, who was counsel for Mr and Mrs Peng, conceded that the Tribunal could have regard to the without prejudice correspondence and it was not in the circumstances necessary to consider the authorities which are relevant in this regard and which had been referred to in the submissions by the Chief Commissioner in that case. The Applicant in referring to Peng stated (in clause 10 of AS3 and quoted in full below) (incorrectly) that the without prejudice material in that case had been admitted in consequence of a waiver of privilege by Mr. Jones on behalf of his clients...

18 The Applicant's reference in AS3 to Peng included a footnote which in turn referred to clause 10 of the decision in that case and reading.: 10.Mr. Jones conceded that the without prejudice correspondence (and including a letter dated 9 July 2009 and which is included in RK3) is admissible in respect of the Respondent's application for costs.. It is surprising that the Applicant could refer in terms to clause 10 of the decision in Peng and nevertheless contend that the without prejudice material in that case was admitted in consequence of a waiver of privilege. As clause 10 of the decision in Peng demonstrates, the material in question was admitted because its admissibility was conceded and not in consequence of a waiver. The question of waiver did not arise in Peng.

19 Clauses 10,11 and 12 of RS2 read as follows: 10, The affidavit evidence should be received by the Tribunal because it is relevant to the issues before it. It is regrettable that the Applicant alleged that the Chief Commissioner had conducted these proceedings vexatiously yet objected to adduction of evidence that showed how the Chief Commissioner (and the Applicant) conducted the proceedings. The Tribunal is not bound by the rules of evidence (s 73 Administrative Decisions Tribunal Act 1997 ("the ADT Act")) and given the grave allegations should not dwell on this technical rule of adjectival law raised by the Applicant but should consider, if the Applicant wants to make good its allegations, in fact how the proceedings have been conducted in all their aspects. As Hill J observed in Casey v. Repatriation Commission (1995) 22 AAR 234 at p 238: "The criterion for admissibility of material in the Tribunal is not to be found within the interstices of the rules of evidence but within the limits of relevance." 11. In this regard, it is the fact of the communications and conduct, not any admissions of substantive liability that the communications might contain that are relevant to the costs issues.

12. In any event, the Applicant's objection is incorrect as a matter of the rules of evidence in NSW. There is an express provision removing, for costs proceedings, the bar to admissibility of "without prejudice" communications - section 131(2)(h) Evidence Act 1995 (NSW). Accordingly, the touchstone for admissibility of such communications is, as with all evidence, merely relevance to the issues. See Silver Fox Company Pty Ltd v Lenards Pty Ltd [2004] FCA 1570; ACCC v Black On White [2002] FCA 1605, which cases concern the equivalent Commonwealth provision. (It was the ACCC case that Counsel for the Chief Commissioner had in mind on the point and it is regrettable that his memory lapse has been criticised by the Applicant in its written submissions). The Applicant, rightly, does not object to the material on the grounds of relevance 20 The Applicant referred to the Respondent's submissions as to the admissibility of the without prejudice evidence at some length; I include clauses 3 , 4 and 5 of AS3 (and clause 5 relates as set out previously specifically to Peng) as follows:: 3. .In paragraph 10 of the Respondent's submissions reference is made to the privilege accorded to without prejudice communications as a '…technical rule of adjectival law…' although, also in that paragraph the Respondent says that the Tribunal is not bound by the rules of evidence (quoting s.73 of the ADT Act). 4. There is thus an apparent inconsistency between a rule of law (whether adjective or substantive) and the statement in s. 73 ADT Act that the Tribunal is '…is not bound by the rules of evidence …. However the fact that the Tribunal is not bound by the rules of evidence does not mean that it should not follow them insofar as it is just and convenient to do so in conducting the business before it. Given the adversarial nature of the questions it must determine, the Tribunal needs to receive evidence from the parties before it and hear arguments as to the interpretation of such evidence. It would be unnecessarily difficult and complicated if the Tribunal sought to develop rules of evidence and procedure different to those that have developed in the courts. 5. It seems that in the Peng case (that was referred to by the Judicial Member at the costs hearing in this matter), counsel for Peng waived the privilege attaching to without prejudice communications to enable the Tribunal access to privileged materials. This shows that the Tribunal acts in accordance with the rules of evidence in the ordinary course of its business. There is no reason why it should not do so in this case and none has been advanced by the Respondent in his submissions. 21 Sections 131(1) and 131(2) of the Evidence Act 1995 (the "Evidence Act") read as follows: 131 Exclusion of evidence of settlement negotiations (1) Evidence is not to be adduced of: (a) a communication that is made between persons in dispute, or between one or more persons in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute, or (b) a document (whether delivered or not) that has been prepared in connection with an attempt to negotiate a settlement of a dispute. (2) Subsection (1) does not apply if: (a) the persons in dispute consent to the evidence being adduced in the proceeding concerned or, if any of those persons has tendered the communication or document in evidence in another Australian or overseas proceeding, all the other persons so consent, or (b) the substance of the evidence has been disclosed with the express or implied consent of all the persons in dispute, or (c) the substance of the evidence has been partly disclosed with the express or implied consent of the persons in dispute, and full disclosure of the evidence is reasonably necessary to enable a proper understanding of the other evidence that has already been adduced, or (d) the communication or document included a statement to the effect that it was not to be treated as confidential, or (e) the evidence tends to contradict or to qualify evidence that has already been admitted about the course of an attempt to settle the dispute, or (f) the proceeding in which it is sought to adduce the evidence is a proceeding to enforce an agreement between the persons in dispute to settle the dispute, or a proceeding in which the making of such an agreement is in issue, or (g) evidence that has been adduced in the proceeding, or an inference from evidence that has been adduced in the proceeding, is likely to mislead the court unless evidence of the communication or document is adduced to contradict or to qualify that evidence, or (h) the communication or document is relevant to determining liability for costs , or (i) making the communication, or preparing the document, affects a right of a person, or (j) the communication was made, or the document was prepared, in furtherance of the commission of a fraud or an offence or the commission of an act that renders a person liable to a civil penalty, or (k) one of the persons in dispute, or an employee or agent of such a person, knew or ought reasonably to have known that the communication was made, or the document was prepared, in furtherance of a deliberate abuse of a power. (Emphasis added by the Tribunal) 22 Specifically as regards section 131(2)(h) of the Evidence Act, the Applicant in clause 10 of AS3 contended: that 10."The common thread that runs through the cases cited is the argument that the Court may receive evidence in appropriate cases to show that the usual order for costs may be rendered inappropriate by intransigence in negotiations. That is not the case in this matter. Neither do these cases support the unconditional statement by the Respondent says in para 12 of his submissions that s. 131(2)(h) Evidence Act 1995 (NSW) removes the privilege accorded to without prejudice correspondence in costs proceedings. It is clearly a matter for the discretion of the Court whether to receive such evidence - whilst still respecting the underlying reasons for the privilege. 23 . Section 131(2)(h) of the Evidence Act sets out that without prejudice material is admissible in applications for costs. It is clear then that whereas material of this type is not ordinarily admissible that rule does not apply in costs applications. Under section 73 of the Act the Tribunal has the powers set out therein as to the admission of evidence. It can for example admit evidence which would not be admissible in a court of law. Superior courts have ruled (in relation to a similar section in the Administrative Appeals Tribunal Act 1975) that the law of evidence which has been developed over a long period should not be lightly disregarded. See for example clause 63 of the judgment by Emmett J in Heyward v Minister for Immigration and Citizenship [2009]FCA 313 reading:' [63] Finally, and this is significant, under s 33(1)(c), the Tribunal is not bound by the rules of evidence, but may inform itself on any matter in such manner as it thinks appropriate. The effect of s 33 is that the rules of evidence do not apply to a proceeding before the Tribunal. That is not to say that the rules of evidence may be totally ignored. The rules of evidence have been developed over the centuries and represent an attempt to evolve a method of inquiry best calculated to prevent error and elicit truth. No Tribunal can, without grave danger of injustice, set the rules of evidence on one side and resort to methods of inquiry that necessarily advantage one party and necessarily disadvantage the opposing party (see R v War Pensions Entitlement Appeal Tribunal (1933) 50 CLR 228 at 256).

24 Where a tribunal admits evidence which would not be admissible in a court of law (and one obvious example would be hearsay evidence) it must be wary as to the weight to be attributed to evidence of that kind.. It is possible that a tribunal has, at least in theory, the power to reject evidence which would be admissible in a court of law, but it is likely that a tribunal will seldom if ever act in such a manner, and indeed to do so might well amount to a denial of natural justice to the party .who has sought to tender admissible relevant evidence and where admission is refused. It is relevant to note that the powers set out in section 73 of the Act must be exercised subject to the rules of natural justice; section 73(2) provides: The Tribunal is not bound by the rules of evidence and may inquire into and inform itself on any matter in such manner as it thinks fit, subject to the rules of natural justice. The Tribunal notes, as did the Respondent in clause 7 of RS2, that it is surprising that the Applicant should seek to exclude such evidence while accepting that it is relevant. The Applicant has, it would seem, confused the manner in which the law of evidence operates in relation to section 73 of the Act. In general terms the law of evidence will often be followed for precisely the reasons referred to in the superior court authority to which I have referred. Hearsay evidence will sometimes be excluded, or will be admitted but with a reservation as to weight, and for the same reason a lawyer representing a party will usually not be allowed to lead a witness. Section 73 allows the Tribunal to depart from the strict rules of evidence when it consider that it is proper to do so. But that said, I repeat that a tribunal is hardly likely to reject evidence which is both relevant and admissible. The Applicant has not advanced cogent reasons as to why the without prejudice material should be excluded. This is in itself surprising; where the Evidence Act specifically allows for the use of material the Tribunal would be very unlikely to exclude it except upon good cause shown.

25 The relevant provisions (of the Evidence Act) were considered in the context of a mediation agreement which specifically provided that settlement proposals in the course of the mediation were "privileged". In The Silver Fox Company Pty Ltd v Lenards Pty Ltd [2004] FCA 1570, Mansfield J in the Federal Court at paragraph [34] and [35] considered the earlier decision of Goldberg J in Australian Competition and Consumer Commission v Black On White [2002] FCA 1605. In that case, Goldberg J "determined that the designation of the communications as 'without prejudice' did not amount to an agreement that they were not relevant so as not to be probative evidence, and so [were] admitted into evidence on the issue of costs." Mansfield J quoted the following passage at [35]: "The policy lying behind section 131 of the Evidence Act is twofold. First, it is to lay down a statutory basis for excluding evidence of communications relating to attempts to settle disputes. Secondly, it is to provide specific exceptions to such exclusion. The exception found in section 131(2) (h) relates to the probative value or probative nature of the contents of the communication and not to the manner in which the communication came initially to be subjected to the protection from being adduced into evidence found in subsection 1 of section 131. Although a consensual arrangement or agreement underlines the basis or part of the basis upon which 'without prejudice' communications are protected from admissibility, that consensual aspect does not determine the issue of relevance for purposes of section 131(2)(h) of the Evidence Act. The relevance there provided for is to be judged and determined by reference to legal principle rather than the decision of the parties." 26 Such 'without prejudice' correspondence is generally not admissible for the purposes of the substantive proceedings as to liability. But it is admissible, if relevant, on the separate and distinct question of liability for costs. That distinction is made clear by Mansfield J at paragraph [36] of his decision in The Silver Fox as follows: "I think those words [in section 131(2) (h)] are quite clear. Moreover, the relevance to be addressed is relevance to determining liability for costs. Section 131(1), subject to its exceptions, gives effect to the policy of ensuring the course of negotiations - whether private or by mediation - are not adduced into evidence for the purpose of influencing the outcome on primary matters in issue. Clearly, it is in the public interest that negotiations to explore resolution of proceedings should not be inhibited by the risk of such negotiations influencing the outcome on those primary issues. It is equally in the public interest that negotiations should be conducted genuinely and realistically. The effect of section 131(2) (h) is to expose that issue to inspection when costs issues only are to be resolved. There is no apparent public interest in permitting a party to avoid such exposure by imposing terms upon the communication, whether by the use of the expression 'without prejudice' or by a mediation agreement." The relevant subsection in the Evidence Act was considered in the context of a mediation agreement which specifically provided that settlement proposals in the course of the mediation were "privileged". 27 The Tribunal has no doubt that the without prejudice material should be admitted....

28 In clause 12 of RS2 the Chief Commissioner noted with regret that the Applicant had seen fit to criticise Dr. Robertson for his failure at the hearing to recollect references to decided cases which are relevant in this context. The Chief Commissioner may have first referred to the without prejudice material in RS but RS (filed in February 2010) was accompanied by an affidavit to which was attached without prejudice correspondence, RS did not include authority as to the admissibility of the without prejudice material and no doubt because under the Evidence Act there was no need to do so. Put in other words the Chief Commissioner could not reasonably be expected to come to the hearing prepared to defend the admissibility of admissible evidence.

29 I should perhaps note that I deal with the question of pre-litigation costs in some detail because the submissions of the parties contain such detailed references to the question and although it is in this particular matter, academic. (The Tribunal acknowledges a debt to RS2 in respect of some of the content of this Part C).

30 The starting point in this Tribunal as to costs is that as a general rule there should be no order as to costs and on the basis that each party should bear its own costs. It has long been an established rule in the Tribunal that a party is entitled to litigate a case which is weak without fear that an adverse decision will result in an order for costs against it. That general rule is not altered by the comparatively recent legislative amendments to section 88. Section 88(1A) spells out the types of (reprehensible) conduct which could give rise to a costs order. It is likely that costs will not be ordered in consequence of conduct falling within section 88(1A) unless that conduct is of a serious nature and such that there is significant prejudice to the other party in consequence .

31 I deal in the first instance with the question of whether an order for costs can include pre-litigation costs. This question is, in view of the conclusion to which I have come, and I have said, academic, but it is dealt with for reasons of completeness.

32 The Applicant relies on the decision in Australian Aqua Air Pty Ltd v CCSR [2009] NSWADT 239 in support of its submission that the Tribunal can award pre-litigation costs. There is however substantial authority to the contrary.

33 The Tribunal in Australian Aqua Air referred to the "new s 88". Sections 88(1) and (1A) are, in that sense, "new". However, the definition of what is included in "costs" in sec 88(4), was not amended when s. 88 and s. 88(1) were amended.

34 Australian Aqua Air can be contrasted with the decision in Kyriacou v Chief Commissioner of State Revenue [2009] NSWADT 175, where the Tribunal excluded costs incurred prior to commencement of proceedings: "39 I note that section 88(1A) gives the Tribunal discretion to "award costs in relation to proceedings before it". Thus, costs incurred prior to the commencement of proceedings are not included…"

35 Australian Aqua Air could also be considered in relation to the approach taken by the Victorian Civil and Administrative Tribunal (the "VCAT") to the construction of s. 109 of the Victorian Civil and Administrative Tribunal Act 1997 upon which the "new" s. 88(1A) is based The Victorian Tribunal commentary says at [V4038]: "The VCAT only has the jurisdiction to deal with the costs of the proceeding before it. Put another way, the VCAT cannot award costs in relation to a matters that occurred before a proceeding was commenced."

36 In the decision of the VCAT in Re Murray and Bayside Council [1999] VCAT 1327 at [49] it was held that: "However, under Section 109 of the VCAT Act, the Tribunal only has jurisdiction to deal with the costs in the proceeding at the Tribunal, not the costs of the entire permit application" 37 Whether s. 88(4) permits the awarding of pre-litigation costs was dealt with by the President of the Tribunal in Raethel v Director General, Department of Education and Training [2000] NSWADT 56. Commencing at [37] the President noted that ordinarily costs orders are limited to costs in the proceedings before the Court or Tribunal, concluding at [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." . 38 Raethel was considered by the Tribunal in Macdonald Contractors (Australia) Pty Ltd v CCSR [2007] NSWADT 56. At paragraph [14] the Tribunal concluded that the decision in Raethel was authority for the proposition that: "A further important "boundary" in awarding costs is that costs have to be confined to the application and the proceedings of the matter."

39 The decision in Raethel was again referred to in Blanch v CCSR [2008] NSWADT 24 at [19] as authority for an almost identical proposition as follows: "In awarding costs, costs have to be confined to the application and the proceedings of the matter."

40 It would seem that the weight of authority favours the view that section 88 does not permit an order for pre-litigation costs.

41 In respect of any application for costs the Tribunal must have regard to the criteria contained in section 88. Section 88(1A) (c) requires the Tribunal to have regard to the relative strengths of the parties. I consider that the Applicant's prospects of success in respect of the application for corporate reconstruction relief were not strong and that it is more likely than not that the Applicant would have been unsuccessful had it proceeded with that application. I think that it is likely that even if the Tribunal had taken the view that it has jurisdiction (and this too is open to doubt) the Tribunal might well have found that Holdings was not dormant at the relevant time and thus precluding the relief sought...

42 I consider that the Chief Commissioner, when he raised the jurisdiction issue was doing no more than his duty as a model litigant and that he was acting properly in the circumstances. Having realised that this was an issue it would have been wrong not to raise it... It is relevant to note that when he raised the issue he did not in terms contend that the Tribunal would or would not find that it has jurisdiction; on the contrary the issue was raised because it was relevant and it was proper for the Chief Commissioner to raise it when he became aware of it.

43 It would seem that the Applicant is seeking in effect to contend that the Chief Commissioner should have been aware of the jurisdiction issue before he invited the Applicant to object and to seek review before the Tribunal. Such a contention is, in the view of the Tribunal, at best double edged; the Applicant was at all times legally represented (by Mr. Camillin) and it is at least arguable that the Applicant's solicitor could equally, on a consideration of the legislation and the Ruling have recognised and raised the issue just as the Chief Commissioner did. The issue is after all one which is purely a matter of law. It is surely not open to the solicitor for one party to say, as in effect the Applicant says, that the legal representatives of the Chief Commissioner but not the legal representatives of the Applicant should have realised that there was such an issue. In an issue of this kind. and which, as I have said is complex, neither side is at a particular advantage or at a particular disadvantage, The issue turns on whether a proposed transaction is a transaction for the purposes of the Ruling. There is no suggestion that the Chief Commissioner acted wilfully in the sense that it invited the Applicant's objection and review actions at a time when it was aware of the issue.

44 The documentation before the Tribunal indicates that the Chief Commissioner raised the issue when he first became aware of it, Moreover it was (as I have said) raised as a possibility only and by no means as a certainty and moreover not in any way as a matter which is capable of easy resolution, It is of course possible (again as noted previously) that if the application had been proceeded with the Tribunal would itself have raised it, and it is by no means inconceivable that the Tribunal would have dismissed the application for this reason and notwithstanding objections by both parties. There can never be an estoppel against the operation of a statute. Moreover the Tribunal is perfectly entitled of its own accord to raise an issue as to jurisdiction, .and indeed should do so if it considers that there is an issue which should be raised and regardless of whether the parties or either of them do so..

45 In fact the raising of the issue brought about a resolution which, it might be thought, would have been pleased the Applicant. Having withdrawn the original application, and having failed in respect of the Second Proposal, it succeeded in respect of the Third Proposal and received precisely the relief which it sought. Had the original application been proceeded with and failed (an outcome which is altogether possible given that it could have failed on its merits or in accordance with the jurisdiction issue) the Applicant would have incurred a much larger costs liability.

46 There are aspects of AS and AS2 which might fairly be described as regrettable. For example Mr Camillin made a particular point of the fact that the Applicant is a foreigner who has invested considerably in Australia. It was raised in AS, repudiated in RS and repeated in AS2. The clear inference to be drawn is that the Applicant believes that it is entitled for this reason to special treatment. That allegation is demonstrably without any basis in that the Chief Commissioner must treat all taxpayers, regardless of whether they are residents or foreigners, alike...

47 The Applicant contends that the actions of the Chief Commissioner were vexatious within section 88 of the Act and referred the Tribunal to a dictionary definition of that word. It is a word of potentially wide import, but one thing is clear and that is that it does on any basis require conduct which in broad terms can be categorised as reprehensible...I refer in this context to clauses 42 and 43 of Kyriacou as follows: 42.With regard to the second ground, the allegation of vexatious conduct, as the parties are aware, the term 'vexatious' is not defined in the ADT Act. I note the discussion of the meaning of 'vexatious' in, for example, Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 (see Deane J at 247: "'vexatious' should be understood as meaning productive of serious and unjustified trouble and harassment"), Commissioner of Police, NSW Police v LZ (GD) [2008] NSWADTAP 22, and the recently enacted Vexatious Proceedings Act 2008, where, at section 6, the following (non-exclusive) definition appears: 6 Meaning of " vexatious proceedings" In this Act, "vexatious proceedings" includes: (a) proceedings that are an abuse of the process of a court or tribunal, and (b) proceedings instituted to harass or annoy, to cause delay or detriment, or for another wrongful purpose, and (c) proceedings instituted or pursued without reasonable ground, and (d) proceedings conducted in a way so as to harass or annoy, cause delay or detriment, or achieve another wrongful purpose. The proceedings were not "productive of serious and unjustified trouble and harassment" 43 I also note the decision in Falconbridge , where, at [11], VCAT referred to the need: "to produce evidence of motive other than the fact that the parties are in dispute and that the applicant has taken advantage of proceedings available under relevant legislation which are open to the applicant in the circumstances." 48 In my view the actions of the Chief Commissioner in raising the jurisdiction issue when he did and in the circumstances which obtained when he did so did not offend in terms of section 88 of the Act and in fact there were no acts by the Chief Commissioner which could be said to have done so

49 The documentation before the Tribunal is very large indeed although much of it is of marginal relevance in relation to this costs application. In summary; the Applicant made the application to this Tribunal after the application for corporate reconstruction relief had been rejected, and it did so after receiving an invitation to do so by the Chief Commissioner. The Chief Commissioner thereafter came to realise that there might be a difficulty as regards jurisdiction and advised the Applicant accordingly... That advice resulted in the withdrawal of the First Proposal and the application connected with it, followed by the Second Proposal, which failed, and the Third Proposal which succeeded. The Applicant claims costs, some of which may be pre-litigation costs (although the quantum of pre-litigation costs is academic) on the basis that the conduct of the Chief Commissioner in making the invitations or in raising the jurisdiction issue was conduct which offends in accordance with section 88. As these reasons demonstrate there is no basis for that claim and it must fail.

50 In my view this application for costs was misconceived. Accordingly the application for a costs order is refused and there is no order as to 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.