B & L Linings Pty Ltd & anor v Chief Commissioner of State Revenue [2004] VCAT 2188 | Case summary

REASONS FOR DECISION Introduction 1 This is the fourth judgment to be given by us in the present appeal. It deals with questions of penalty tax in respect of tax assessed under the Payroll Tax Act 1971 ('the PT Act') and with questions of costs, for which an order has been sought under section 88 of the Administrative Decisions Tribunal Act 1997 ('the ADT Act'). 2 Under section 104 of the Payroll Tax Act 2007, the PT Act was repealed. But it continues to apply to the assessment of payroll tax on taxable wages paid before 1 July 2007: see clause 3 of Schedule 3 of the Act of 2007. 3 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. 4 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 its 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. 5 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. 6 This matter came to the Revenue Division of the Tribunal by way of review of a decision by the Respondent, the Chief Commissioner of State Revenue ('the Commissioner'), to disallow objections by the two Appellants against assessments to payroll tax, penalty tax and interest under the PT Act. 7 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. 8 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. 9 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 spanned the tax years 2000-2003, but it was agreed between the parties that the 2002 tax year should be treated as a sample year. 10 During October 2003, following expressions of dissatisfaction with the assessments conveyed by the Appellants to the Commissioner, a Senior Compliance Officer employed by the Commissioner conducted a review of the assessments. Apart from finding that the remuneration paid to one entity was not 'taxable wages', he confirmed the correctness of the assessments. 11 The Appellants delivered detailed objections ('the Objections') to the Commissioner on or about 30 October 2003. On 4 March 2004, having considered the Objections, the Commissioner ruled that they should be wholly disallowed. The Appellants then commenced the proceedings in the Tribunal. 12 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. 13 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. 14 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. The proceedings within the Tribunal 15 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. 16 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. 17 The decision of the Tribunal, constituted by Acting Judge J Block, Judicial Member, 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 Tribunal's 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. 18 In this judgment, the Tribunal also held that the Appellants had not made out a case for any reduction of the penalty tax that had been included in the assessments. 19 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 this decision of the Tribunal regarding the status of the entities. 20 In a judgment 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 decision 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. 21 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 Tribunal's decision. It followed that we would 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'. 22 On 28 June 2006, we delivered our second judgment (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. 23 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. 24 Before doing this, we acceded, in circumstances outlined below, 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. 25 In 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. 26 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. 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. The scope of this judgment 27 The present judgment deals with two subsisting matters, penalty tax and costs. Pursuant to directions given on 10 July 2007, the parties filed written submissions on these matters. In a letter dated 10 December 2007 to the Registry, they gave their consent to these matters being determined by us without a hearing, under section 76 of the ADT Act. 28 The submissions filed by the Appellants claimed also that the 'premium component' of the interest chargeable on the payroll tax for which the Appellants remained liable should be remitted under section 25 of the TA Act. But we do not need to decide this question, since the Commissioner indicated in response that this component would be remitted. 29 We will deal separately with the issues of penalty tax and costs. PENALTY TAX The questions to be resolved 30 According to figures contained in the Appellants' submissions and not disputed by the Commissioner, the amount of pay-roll tax assessable against them with respect to the taxable wages paid during the 'sample year', 2001-02, to the five entities not falling within any exemption was $12,830.96. This was the 'adjusted' figure, calculated with reference to our conclusions in the third appeal judgment. 31 Under section 27(1) of the TA Act (which forms part of Division 2 of that Act), the rate of penalty tax, which is levied under section 26 in respect of a 'tax default', is '25 percent of the amount of tax unpaid, subject to this Division'. 32 In section 3(1), a 'tax default' is defined to mean 'a failure by a taxpayer to pay, in accordance with a taxation law, the whole or part of tax that the taxpayer is liable to pay'. 33 Under section 29, an amount of penalty tax determined under section 27(1) is to be reduced by 20 percent (resulting in a rate of 20 percent) if the taxpayer, having been informed by the Commissioner that an investigation in relation to the taxpayer is to be carried out, discloses in writing to the Commissioner, before the investigation is completed, 'sufficient information to enable the nature and extent of the tax default to be determined'. 34 In their submissions, the Appellants argued that during the investigation that the Commissioner conducted between 6 June and 29 August 2003, they furnished sufficient information in writing to comply with this requirement. The Commissioner's submissions included a concession that this was in fact the case. 35 In consequence of this concession, the penalty tax claimed by the Commissioner is reduced from $3,207.74 (25 percent of $12,830.96) to $2,566.19. 36 The Appellants contended further that no penalty tax at all should be payable. They sought exemption under two separate provisions within Division 2 of the TA Act, section 27(3)(a) and section 33. These state: Section 27(3) The Chief Commissioner may determine that no penalty tax is payable in respect of a tax default if the Chief Commissioner is satisfied that: (a) the taxpayer (or a person acting on behalf of the taxpayer) took reasonable care to comply with the taxation law … Section 33 The Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit penalty tax by any amount. 37 The Commissioner opposed these contentions. The parties' submissions 38 The 'reasonable care' ground of exemption. In the Appellants' submissions, which were prepared by Mr Eager, the principal emphasis was placed on this ground of exemption. In arguing that they 'took reasonable care to comply with the taxation law', Mr Eager dealt with both (a) the circumstances surrounding their concession that the remuneration paid to the entities labelled C17 and C33 was subject to tax and (b) the grounds for their claim, ultimately disallowed by us in the third appeal judgment, that the remuneration paid to seven other entities was exempt from payroll tax under section 3A of the PT Act. 39 With regard to the first of these matters, he pointed out that the Appellants conceded as early as 17 July 2004 (in an affidavit admitted in the proceedings at first instance) that they could not establish any of the statutory grounds of exemption under section 3A with respect to entities C17 and C33. They did not (as inaccurately stated by us in the third appeal judgment at [8]) concede that these two entities were employees. 40 Mr Eager's submissions on the second matter were lengthy and detailed. The three principal arguments advanced were these. First, despite our adverse conclusions regarding the seven entities concerned, documents accompanying the Objections and the affidavits admitted into evidence by the Tribunal at first instance showed, at the very least, that the Applicants had had reasonable grounds for believing that the amounts of remuneration made to these entities were exempt under section 3A from payroll tax, and had communicated these grounds to the Commissioner. Secondly, if in relation to five of these entities (dealt with in the third appeal judgment as the 'team cases': see the judgment at [122 - 127]) all the admitted evidence and the supporting arguments actually available to the Appellants had been drawn specifically to our attention, we would have been persuaded that the remuneration paid to them was exempt. Thirdly, our conclusions regarding the remaining two entities, set out at [128 - 129], were based primarily on evidence obtained from them through questionnaires distributed late in the proceedings by the Commissioner (the circumstances in which this occurred are outlined below), this being evidence that could not be properly tested in the appeal hearing. 41 The Commissioner's relatively brief submissions, prepared by Mr Latham, argued first that those of the Appellants failed to address adequately the purposes of penalty provisions. Referring to the Tribunal's judgment in Silverbrook Research Pty Ltd v Chief Commissioner of State Revenue [2004] NSWADT 65 at [25], Mr Latham suggested that those purposes were to 'ensure that taxpayers comply with taxation laws and provide some balance between those who comply and those who do not'. 42 Secondly, Mr Latham submitted that Mr Eager, in his submissions, was attempting to overturn the findings within the third appeal judgment that were adverse to the Appellants and indeed to 'create an entirely new case' on their behalf. 43 Remission under section 33. In relatively brief submissions on this question, Mr Eager relied on the arguments raised in relation to the 'reasonable care' exemption. He argued also that since at an early stage the Appellants had engaged professional advisers at significant expense, in order to assemble the evidence that they needed to contest the Commissioner's assessments, and had included the 'evidential foundation' of their whole case within their Objections despite having only 60 days in which to prepare them, this was pre-eminently a case justifying complete remission of any penalty tax under section 33. 44 The Commissioner's submissions did not address this ground of remission. Our conclusions 45 We note first that under subsections (3) and (4) of section 100 of the TA Act, the Appellants bear the onus of proving their case in review proceedings in the Tribunal, including proceedings (such as these) in which an Appeal Panel has granted leave for an appeal to extend to a review of the merits. 46 Our own researches have unearthed a passage in a Tribunal decision, RVO Enterprises Pty Ltd as trustee for the R M O'Mara Family Trust v Chief Commissioner of State Revenue [2004] NSWADT 64 at [23], in which 'reasonable care' under section 27(3)(a) of the TA Act is discussed. Referring to an equivalent provision in Commonwealth income tax legislation and to an Australian Taxation Office ruling explaining this provision, the Tribunal said: In each case, it is essentially a question of fact whether the taxpayer has taken reasonable care in attending to its tax obligations. Factors that would indicate that a taxpayer took reasonable care include attempts to comply with the tax law, reasonable professional and other inquiries to ensure compliance, reliance on professional advice or on official published views of the tax law. Factors which indicate that a taxpayer failed to take reasonable care include oversight or forgetfulness to meet with obligations, failure to maintain adequate records and procedures to prevent errors from occurring, not seeking professional advice and errors in complying with the law. 47 We see this case as one in which the Appellant taxpayers, in ways well outlined in Mr Eager's submissions, sought to discharge appropriately their obligations under the PT Act in a number of relevant ways. They obtained and relied on professional advice throughout their dealings with the Commissioner. During the investigation conducted by the Commissioner, they furnished (as he indeed conceded) sufficient information to enable the nature and extent of what he claimed to be their tax default to be determined. As appears from the third appeal judgment, the evidence and arguments on which they relied in seeking to stave off our ruling (in relation to seven of the 36 contentious entities) that they had indeed committed a 'tax default' constituted a case of some merit. In this regard, their 'error' in complying with the taxation law (as we have determined it to be) was not an unreasonable one. 48 For these reasons, we consider that the Appellants have discharged the onus of establishing that they (or a person or persons acting on their behalf) 'took reasonable care to comply with the taxation law' with respect to the tax default that we identified in the third appeal decision. 49 It would appear that under section 27(3)(a) the Commissioner has a discretion as to whether or not penalty tax should be levied if 'reasonable care' is established (though cf a suggestion that no discretion may exist, made in Chief Commissioner of State Revenue v The Ettamogh Mob Australia Pty Ltd & Ors (RD) [2005] NSWADTAP 53 at [39]). If such a discretion exists, we are authorised by subsections 63 and 115(2) of the ADT Act to exercise it. 50 In our judgment, the Appellants, by virtue of the provisions of section 27(3)(a) of the TA Act, should not be required to pay penalty tax on the amount of payroll tax which we have held them liable to pay in the third appeal decision. 51 In view of this conclusion, we do not need to determine the Appellants' alternative claim to remission from penalty tax under section 33 of the TA Act. COSTS The Appellants' application for costs 52 The Appellants applied under section 88 of the ADT Act for an award of costs within the following three categories: (a) fees paid to Mr C J Bevan of counsel for services rendered in relation to the proceedings at first instance between 12 May and 6 October 2004; (b) out-of-pocket expenses incurred in relation to the preparation of the Objections and the conduct of the proceedings at first instance and on appeal; and (c) fees paid or payable to Byrons, chartered accountants, for their services in relation to the preparation of the Objections and the conduct of the proceedings at first instance and on appeal. A substantial component of the fees within this last category is attributable to the work done by Mr Eager in his capacity as the Appellants' agent during a substantial proportion of these proceedings. The source of the Tribunal's power to award costs 53 It is well accepted that subject to rare exceptions, courts and tribunals have no inherent jurisdiction to award costs. Any power to do so must be founded in statute. 54 With respect to these proceedings, which are proceedings for the review of a reviewable decision, section 88 of the ADT Act confers such a power on the Tribunal. It states: 88 Costs (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. (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 the basis set out in Division 6 of Part 11 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. 55 No 'other Act or law' bears upon the Tribunal's power under section 88 in this case. The concept of 'special circumstances' 56 According to the extensive case-law on section 88(1) (see example Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81, Gizah Pty Ltd v AXA Trustees Ltd (No 2) [2001] NSWADT 164, Citadin Pty Ltd (No 2) v Eddie Azzi Australia Pty Ltd & General Pants Pty Ltd (RLD) [2001] NSWADTAP 31 and Commissioner of Police, NSW Police v Snape (No 2) (GD) [2006] NSWADTAP 35), the requirement of 'special circumstances' applies both to decisions made by the Tribunal at first instance and to Appeal Panel decisions. 'Special circumstances' have been defined as 'circumstances that are out of the ordinary, but without having to be extraordinary or exceptional'. It is not enough that the circumstances are 'special': they must also 'warrant' an order for costs. They may include factors connected with the specific nature of Appeal Panel proceedings and with the specific nature of the Division of the Tribunal in which the relevant proceedings are heard. 57 Amongst the various types of situation that have been held to constitute 'special circumstances', the following are relevant to this case. 58 First, 'special circumstances' may exist where the proceedings instigated, or the grounds of defence raised, by the party against whom a costs order is sought are found to have lacked any real prospect of success and therefore to have been unmeritorious. This includes, but is not limited to, cases where an appeal has suffered a 'threshold rejection' because no 'sufficiently arguable question of law' was disclosed. 59 Secondly, where a party has filed an application, sought to defend proceedings or raised a line of argument (whether in pursuing or defending an application), thereby causing the opposing party to incur costs or further costs in preparing for a hearing, but subsequently has withdrawn the application, the defence or the line of argument without any sufficient justification for so doing, this may constitute 'special circumstances': see example Yee Kwong Wah Pty Ltd v Hawach & Anor [2003] NSWADT 151. 60 Thirdly, as stated in the Tribunal's Practice Note No. 12 (October 2006), 'special circumstances' may be discernible through an examination of the way in which the case has proceeded in the Tribunal. The matters that the Tribunal may take into account include the following: (a) whether a party has conducted the proceeding in a way that disadvantaged another party to the proceeding by conduct such as: (i) failing to comply with an order or direction of the Tribunal without reasonable excuse; (ii) failing to comply with this Act, the regulations, the rules or an enabling enactment; (iii) asking for an adjournment as a result of (i) or (ii); (iv) causing an adjournment; … (b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceeding. 61 It is useful also to refer here to three authorities relating to 'special circumstances' that received significant emphasis in the parties' submissions. 62 First, in Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81, the appellant, a property owner, refused to recognise the existence of a retail shop lease that had been granted to the respondent by the previous owner, failed to register the lease and refused to consent to the assignment of the lease. The Court of Appeal upheld an award of damages granted to the respondent by the Tribunal. In addition, it held that the respondent should have its costs of the Tribunal proceedings. It concluded, contrary to the decision of an Appeal Panel, that there were 'special circumstances warranting an award of costs under section 88 of the ADT Act. 63 In his judgment at [60], Santow JA (with whom Mason P and Brownie AJA agreed) explained the grounds for this conclusion as follows: 60 It is not necessary to determine whether in the circumstances the appellant committed equitable fraud. In my view it suffices that the conduct of [the appellant], in relying upon their status as the registered proprietors of the freehold and doctrine of indefeasibility of title to wrongly deny registration and consequently assignment of the lease, so acted as by their conduct to give rise to special circumstances; that is, circumstances that were clearly out of the ordinary and grossly unreasonable so far as the respondent tenant was concerned. On the one hand, the Tribunal correctly concluded that the respondent, through no fault of its own, has been placed in the situation where it has been forced to pursue this litigation. Yet it still failed to find special circumstances. With respect, I consider that the Tribunal was in error in failing to conclude that special circumstances here applied. For this purpose, it suffices that the circumstances are out of the ordinary. They do not have to be extraordinary or exceptional. While a finding of " serious unfairness " is not prerequisite to determining that there are special circumstances, it is nonetheless a highly relevant consideration. 64 Secondly, in Raethel v Director-General, Department of Education and Training [2000] NSWADT 56 at [57], the Tribunal, constituted by its President, O'Connor DCJ, made the following observations on the use of costs orders in cases of poor administration by government agencies: 57 To use the costs power as some kind of sanction to punish agencies for poor administration would, I consider, involve the error condemned frequently by the courts of using costs sanction for punitive rather than compensatory purposes: Latoudis v Casey (1990) 170 CLR 534 at 542-3 per Mason CJ; and at 567 per McHugh J. The oversight body for bad administration in government is the Ombudsman's office. This Tribunal only becomes involved in the issue of bad administration to the extent that statutory procedures pertinent to an application may not have been observed. 65 Thirdly, in Director-General, Department of Education and Training v Simpson [2001] NSWADTAP 6, an Appeal Panel of the Tribunal considered whether the respondent should be awarded costs when the appellant, a government agency, had withdrawn its appeal on the morning of the hearing. In declining to make a costs order, the Panel attributed significant weight to the fact that the respondent had not obtained legal representation. It said, at [17], that but for this fact the respondent would have had a strong claim for an award under section 88. At [11], it stated: We are disinclined in respect of applications of this kind to explore the history of an application for a review of a decision prior to the time of its lodgment in the Tribunal, unless there is substantial material placed before us which might plainly demonstrate for example that the decision put in issue by the application was wholly unmeritorious - and that was known to be or should have reasonably been understood to be so by the Department prior to the making of the application. Or that there was some other defect of a similar magnitude. 66 We will refer here to two further decisions on 'special circumstances' that have direct relevance to the salient features of this case. 67 In Charteris v General Manager, Leichhardt Municipal Council (No2) (GD) [2001] NSWADTAP 39, a freedom of information case, the Appeal Panel upheld the Tribunal's decision declining to award costs to the successful applicant. At [22 - 23] and [26], the Panel said: 22 This is not the first time that an aggrieved applicant has sought to have the Tribunal focus on the pre-litigation conduct of the agency in dealing with the matter before it reached the Tribunal. We reiterate the view expressed by the President at first instance that caution must be observed in allowing costs applications to become a vehicle for the general scrutiny of the conduct of one of the parties prior to the commencement of the litigation: Raethel v Director-General, Department of Education and Training [2000] NSWADT 56. 23 The appellant referred to Raethel. The difference between the application in that case and the one made on this occasion, according to counsel for the appellant, was that Raethel involved allegations of obstructionist behaviour rather than outright instance of non-compliance with statutory requirements. We do not regard that as a crucial distinction … 26 On the other hand, as acknowledged in Raethel and in the decision under appeal, there may be circumstances where it is appropriate to have regard to the pre-litigation conduct of one of the parties. We agree with the comments of McHugh J in Re the Minister for Immigration and Ethnic Affairs; Ex parte Lai Quin (1997) 186 CLR 622 at 624-625, albeit made in relation to cases disposed of without hearing (citations omitted): 'In some cases … the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence litigation.' 68 The second decision that we mention here was delivered after submissions closed in these proceedings. In Blanch v Chief Commissioner of State Revenue [2008] NSWADT 24, an application for review of a land tax assessment made by the Commissioner was settled by the parties when part heard. The applicant filed an application for costs, based on the Commissioner's conduct in dealing with her case prior to the application. She argued that the Commissioner had failed 'unreasonably' to accept her objection. The Tribunal found, however, that on the facts before the Commissioner at the objection stage, the conclusion that he reached was open to him. In rejecting the application for costs, the Tribunal said (at [37]): There was no suggestion before the Tribunal that the respondent had acted in a vexatious manner in dealing with the applicant's objection. The applicant's principal grievance was that the respondent could have, on the facts supplied, decided the objection in her favour. That may go to the competency of the respondent but certainly does not give rise to "special circumstances". There is no evidence before the Tribunal that the respondent's conduct was out of the ordinary and grossly unreasonable. There was also no suggestion that the respondent had acted dishonestly in dealing with the objection, as would be the case where maladministration is alleged. In any case, costs cannot be awarded "as a general remedy for perceived maladministration"(see Raethel ). 69 At this stage, we make no comment on these statements of principle other than to record that they provide sound and, evidently so far as the observations in Cripps v Dawson are concerned, authoritative guidance. The meaning of 'proceedings giving rise to the application' 70 As indicated above, section 88(4)(b) of the ADT Act provides for awards of 'the costs of or incidental to the proceedings giving rise to the application, as well as the costs of or incidental to the application'. 71 The meaning of the phrase 'proceedings giving rise to the application' received extended consideration in the judgment of the Tribunal, constituted by President O'Connor, in Raethel v Director-General, Department of Education and Training [2000] NSWADT 56. At [39], his Honour held, referring to sub-section. 4 and 142 of the ADT Act, that the term 'application' must mean the application to the Tribunal. At [49 - 54], he stated the following conclusions regarding the phrase as a whole: 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 section 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 section 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. 72 Neither this case, nor any other authority directly relating to this question, was cited in the parties' submissions. We respectfully accept these observations as representing the law. The meaning of 'costs' 73 As indicated above at [52], the costs included in the Appellants' application include a substantial sum paid or payable by them for services rendered by Byrons, chartered accountants. This firm employs Mr Eager, the agent who appeared for the Appellants in these proceedings. Before the parties' submissions on costs were filed, Mr Eager requested notification from Mr Latham as to whether he would argue on the Commissioner's behalf that an order under section 88 could not embrace such costs, on the ground that they were not costs payable to a legal practitioner. As Mr Latham's response was that he would indeed argue along these lines, this issue of principle was addressed in the submissions on both sides. 74 In submitting that the term 'costs' in section 88 could include costs of this nature, Mr Eager sought to distinguish a High Court case that at first sight might seem to rule out this proposition. In this case, Cachia v Hanes (1994) 179 CLR 403, the Court upheld by majority a decision of the Court of Appeal of New South Wales confirming the rejection of a claim by an unrepresented litigant who had succeeded in Supreme Court proceedings for the loss of his time spent in the preparation and conduct of his case and for travelling expenses. 75 At 409, the majority judgment of Mason CJ, Brennan, Deane, Dawson and McHugh JJ stated that the '"costs"' provided for in the rules … are confined to money paid or liabilities incurred for professional legal services'. Their Honours reiterated this proposition at 410, saying as follows: 'Costs, within the meaning of the Rules, are reimbursement for work done or expenses incurred by a practitioner or practitioner's employee'. Further down on the same page, they said: It has not been doubted since 1278, when the Statute of Gloucester introduced the notion of costs to the common law, that costs are awarded by way of indemnity (or, more accurately, partial indemnity) for professional legal costs actually incurred in the conduct of litigation. 76 As Mr Eager pointed out, however, both in the context of these pronouncements and earlier in their judgment (notably at 408-409), their Honours referred to the fact that the costs with which the case was dealing were awarded under section 76(2) of the Supreme Court Act 1970 and would be assessed in accordance with the Rules of the Supreme Court. These Rules provided, amongst other things, for the taxation of costs, usually on a party-party basis. 77 Mr Eager relied also on the fact that section 88(2)(b) of the ADT Act provides that the Tribunal, in awarding costs, may stipulate that they be assessed either under the Legal Profession Act 2004 or 'on any other basis'. This provision for an alternative basis of assessment showed, in his submission, that Parliament intended the term 'costs' to have a broader scope of operation than it has under the Legal Profession Act 2004. It also furnished an entirely legitimate reason for treating the decision in Cachia v Hanes as inapplicable to costs orders under section 88. 78 In their submissions, both parties cited in the present context a further decision of the High Court, Oshlack v Richmond River Council (1998) 193 CLR 72. On examining it, we have found, however, that it does not deal at all with the question that we are now discussing. 79 The parties' submissions also referred to some Tribunal decisions, relating specifically to costs under section 88 of the ADT Act, in which the limitation imposed by the High Court in Cachia v Hanes was held to be applicable. The following dicta of the Tribunal are to this effect: References in the rules of court to 'costs' are ordinarily construed to cover those costs that are incurred by a party for professional legal services including fees and disbursements. Importantly, the personal costs of a litigant are not covered … The submissions in this case do not challenge those propositions: Raethel v Director-General, Department of Education and Training [2000] NSWADT 56 at [35 - 36]. … the purpose of the award of costs is to assist parties in respect of the engagement of legal representation. There is clear authority that costs orders cannot be made in favour of unrepresented applicants in respect of (what might be described as) the inconvenience and loss of income associated with their attendance at proceedings to represent themselves: Cachia v Hanes (1994) 179 CLR 403 … : Director-General, Department of Education and Training v Simpson [2001] NSWADTAP 6 at [7] It seems to me that the word "costs" when used in the context of Section 88 and in particular sub-section (2)(b) (which permits an assessment pursuant to the Legal Profession Act 2004) means costs of legal representation, which are capable of assessment pursuant to the ordinary rules of assessment of legal costs. Absent cogent and persuasive argument to the contrary, which was not advanced to me in this case, I am not persuaded that "costs" within Section 88 provide an entitlement to an unrepresented successful party, no matter what otherwise might be the merits of that party's claim. It seems to me that Section 88 is directed to legal costs in the accepted use of that term … : Dingwall v Matar & Anor [2002] NSWADT 52 at [13]. In my view this definition [of costs in section 88(4) of the ADT Act] should be interpreted in the conventional sense, that is remuneration for work performed by a solicitor or barrister … [T]he right of a litigant to appear in person was never intended to be a means by which litigants could earn fees or charge for remuneration … .: Sawires v Commissioner of Police, NSW Police [2006] NSWADT 34 at [5]. 80 The parties also referred to Macdonald Contractors (Australia) Pty Ltd v Chief Commissioner of State Revenue [2007] NSWADT 56. In that case, which like the present one involved a review of pay-roll tax assessments by the Commissioner, the Tribunal declined to award costs to the successful applicant, finding that no 'special circumstances' were present. As a further ground for this ruling, it relied on the fact that the applicant had not engaged legal representation. At [42 - 43], it said: 42 Following the decision of the majority of the High Court in Cahia v Hanes … it is now well settled law that costs can only be awarded for fees and disbursements incurred in engaging legal representation in a court proceeding. As indicated in Raethel by the President of the Tribunal, that rule applies also to costs that can be awarded under section 88 of the ADT Act. 43 The applicant was not legally represented in this matter. The costs claimed by the applicant were largely made up of fees paid to their external accountant and the time spent on this matter by the managing director. The claim would, notwithstanding the other findings in this matter, fail as the costs claimed do not fall within the category of costs allowed under section 88 of the ADT Act. 81 We are however aware of two decisions, neither of which was cited to us by the parties, that suggest a significantly different approach to this question. The first of them, to which we have already referred, is Blanch v Chief Commissioner of State Revenue [2008] NSWADT 24. As indicated above, the claim by the unrepresented applicant for costs in this case was rejected because no 'special circumstances' were present. But the Tribunal considered whether costs might have been awarded if this condition had been satisfied. It expressed the following opinions, at [21 - 25]: 21 Essentially, costs are awarded to litigants to indemnify them fully or partially for the expenses incurred for engaging counsel or being represented by a solicitor. There is no power under section 88 of the ADT Act to make an award of costs in favour of an unrepresented person in respect of time spent by the person in relation to the proceedings at the Tribunal. But as suggested by the Appeal Panel in Simpson an unrepresented applicant may be indemnified for outgoings actually incurred, like travelling expenses, directly related to the proceedings at the Tribunal. 22 An applicant may, however, be entitled to costs in cases where the applicant is represented by an agent. In cases before the Tribunal a party can be represented under section 71(1)(b) of the ADT Act by an agent who is not an Australian legal practitioner as was held very recently in The Law Society of New South Wales v Stephen Gary Spring and Another [2007] NSWSC 1273. 23 In Spring's case, Mr Spring who was not at the relevant time an Australian registered legal practitioner, was a director of a company that advertised on the web and Mr Spring had provided advice and appeared before the Tribunal in relation to a retail lease matter for an applicant. The applicant was charged a fee for Mr Spring's and the company's services. The Law Society of New South Wales brought an action in the Supreme Court upon the assertion that Mr Spring and the company did certain work in proceedings at the Tribunal which they were prohibited from doing because Mr Spring was not an Australian Legal Practitioner and sought declaration against Mr Spring and the company that they had contravened section 14(1) of the Legal Profession Act 2004 (NSW). Section 14(1) of the Legal Profession Act 2004 provides that a person must not engage in legal practice in New South Wales unless the person is an Australian legal practitioner. 24 In dismissing the action, Barr J held as follows: "74. In my opinion the Law Society's submissions should not be accepted. Section 71 Administrative Decisions Tribunal Act 1997 means what it says. It is a statutory authority for a party in proceedings in the Tribunal to be represented for all purposes in the proceedings by an agent, including an agent who is not an Australian legal practitioner. Section 14(2) Legal Profession Act 2004 makes express exceptions for compliance with its requirements. Section 71 is such an exception. There is no conflict between the sections and no warrant for reading down the plain meaning of section 71 and section 77C Retail Leases Act 1994. " 25 In Spring , the Court was not required to consider if a successful applicant before the Tribunal was entitled to claim as costs, fees and other outgoings incurred in engaging an agent to advise and appear before the Tribunal on behalf of the applicant. The question therefore remains whether a successful applicant who can identify "special circumstances" is entitled to the costs incurred in engaging an agent to represent the applicant at the Tribunal. The better view would be that a successful applicant who incurs expenses in engaging an agent to represent him or her is entitled to an award for costs having regard to the special circumstances of the case. 82 In order to explain further this reasoning, it is useful to reproduce relevant portions (sub-sections (1) - (3) and (5)) of section 71 of the ADT Act: 71 Representation of parties (1) A party to proceedings before the Tribunal may: (a) appear without representation, or (b) be represented by an agent, or (c) if the party is an incapacitated person - be represented by such other person as may be appointed by the Tribunal under sub-section (4). (2) Despite sub-section (1), the Tribunal may order that the parties to the proceedings before it may not be represented by an agent of a particular class for the purpose of the presentation of oral submissions to it (whether in relation to the whole proceedings or any part of the proceedings) if the Tribunal considers it appropriate to do so. (3) In making an order under sub-section (2), the Tribunal is to have regard to the following matters: (a) the complexity of the matter and whether it involves a question of law, (b) whether each party has the capacity to present the party's case by oral submissions without representation, (c) the stage that the proceedings have reached, (d) the type of proceedings, (e) such other matters as the Tribunal considers relevant. (5) Sub-section (2) does not apply to proceedings before an Appeal Panel of the Tribunal. 83 The second decision that has come to our notice is Aussie Invest Corporation Pty Ltd v Hobsons Bay CC [2004] VCAT 2188, a decision of the President of the Victorian Civil and Administrative Tribunal (Morris J). In this case, an objector to a planning decision applied for a costs order covering her lost wages and travelling expenses incurred in attending a hearing, which, through the fault of the applicant, had been adjourned. Under section 109 of the Victorian Civil and Administrative Tribunal Act 1998, costs might be awarded subject to requirements of a broadly similar nature to the 'special circumstances' requirement. This Act did not define the term 'costs'. 84 In deciding that the Victorian Civil and Administrative Tribunal did have power to award costs of the type being applied for, the President made the following observations of relevance to the present discussion (at [7 - 10], [13 - 17]: 7 Section 62 of the Victorian Civil and Administrative Tribunal Act is significant. This provides that in a proceeding a party may appear personally or may be represented by a professional advocate in certain circumstances. The expression "professional advocate" includes a legal practitioner, but also includes other persons who are legally qualified (though not admitted as legal practitioners); and, also, it includes persons who, in the opinion of the tribunal, have had substantial experience as an advocate in proceedings of a similar nature to the proceedings before the tribunal. It is important to note that the right to be represented by a professional advocate is not absolute. It can be inferred from section 62 that the Parliament intended VCAT to operate without legal representation being the norm. 8 Indeed, this conclusion is reinforced by the Second Reading Speech of the then Attorney-General, Mrs Wade, on 9 April 1998. In the course of her remarks in support of the Bill Mrs Wade said: Concerns are often raised that the participation of legal representatives in cases before tribunals results in the proceedings becoming unnecessarily legalistic, adversarial and can prolong and complicate matters - adding to the costs of the decision making process. The Bill provides for parties to be represented by a professional advocate in appropriate cases. The Bill will allow professional advocates, including legal practitioners and also people with specialist expertise, such as town planners, to appear before the tribunal where this is deemed appropriate. In limited circumstances, the Bill allows representation as of right. In this way the Bill recognises that in some cases the involvement of professional advocates can assist in the settlement of matters. 9 It is also proper to interpret the Victorian Civil and Administrative Tribunal Act in the context of the practice of the various tribunals, which were brought together by that Act. The practice of those various tribunals has largely continued in the respective lists of the tribunal since 1998. Thus in the Residential Tenancies List landlords are usually represented by estate agents and tenants usually appear in person. In the Guardianship List it is common for parties to appear in person or by a social worker, medical practitioner or other health professional. In the Civil Claims List, claims for less than $10,000 (which constitutes about 90 percent of all claims in that list) are heard without legal representation. In the Planning and Environment List a recent survey, the results of which were published in the September 2004 edition of Victoria's "Planning News", showed that less than 15 percent of all parties were represented by a lawyer. Indeed, that survey showed that only a third of permit applicants are represented by a lawyer. The most common form of representation in the Planning and Environment List is by a planning advocate; with over 90 percent of objectors appearing in person. 10 Having regard to the matters set out in the previous three paragraphs, it would be odd if the Parliament intended that the word "costs", where used in the Act and particularly in section 109 of the Act, was confined to money paid to, or a liability incurred for, professional legal services … . 13 The decision of the High Court of Australia in Cachia v Hanes [1994] HCA 14; (1994) 179 CLR 403 has sometimes been regarded as an obstacle to the tribunal awarding costs to an unrepresented party. However, in my opinion, this decision has been applied without a proper understanding of the facts upon which the decision was made, which are fundamentally different than those, which apply to this tribunal. Certainly, for the reasons which follow, I do not regard the decision of the High Court in Cachia as preventing the tribunal making an order that a party pay the costs of an unrepresented party in respect of lost wages and travelling costs incurred in attending a hearing of a proceeding … . 14 In Cachia the High Court was concerned with circumstances where the appellant had been awarded costs in proceedings in the Supreme Court of New South Wales in which the appellant had not been legally represented. On taxation of the appellant's bill of costs he claimed compensation for the loss of his time spent in the preparation and conduct of his case and for out of pocket expenses, being travelling expenses. These claims were disallowed. Ultimately the High Court confirmed the decision disallowing these costs. The principal judgment of the Court made the following comment in the context of the Rules of the Supreme Court of New South Wales: It is fundamental to the appellant's argument that the time he lost in preparing and conducting his case constitutes "costs" within the meaning of this rule. He is, however, unable to sustain that proposition. The "costs" provided for in the rules do not include time spent by a litigant who is not a lawyer in preparing and conducting his case. They are confined to money paid or liabilities incurred for professional legal services. It is only in that sense that the rule speaks of "costs". 15 In Cachia the High Court observed that since the introduction of the Statute of Gloucester in 1278 the notion of cost was intended to apply to only professional legal costs actually incurred in the conduct of litigation. The High Court noted that Coke had observed of the Statute of Gloucester that the costs which might be awarded to a litigant extended to the legal costs of the suit, "but not to the costs and expenses of his travell and losse of time". 16 But costs are ultimately a matter that turns on the interpretation of a statute. And it might be thought that things have moved on since 1278. 17 Whatever may be the case in the Supreme Court of New South Wales, it does not automatically apply to proceedings before the Victorian Civil and Administrative Tribunal. The circumstances of the tribunal are clearly much different. Hence it is necessary to consider the matter by reference to the constitution, purpose and practices of the tribunal. Applying this method, the decision of the High Court in Cachia is inapplicable. 85 As the foregoing review of the authorities shows, there appears to have been no prior decision directly addressing the question that we are now discussing. This is a matter of some surprise to us. 86 In our opinion, the proposition suggested by way of dictum in Blanch v Chief Commissioner of State Revenue is correct. As argued by Mr Eager, the costs awarded under section 88(1) of the ADT Act may include the costs incurred by a successful party in engaging an agent, who is not an Australian legal practitioner, to represent him or her. 87 We base this conclusion in particular on the following matters: (a) the existence of the phrase 'on any other basis' at the end of section 88(2)(b), providing a sound reason for distinguishing Cachia v Hanes; (b) the Supreme Court's holding, in Law Society v Spring, that section 71 of the ADT Act endorses representation, on a remunerated basis, of parties in the Tribunal by agents who are not Australian legal practitioners; and (c) the reasoning, including broad considerations of legislative policy, adopted by Morris J in Aussie Invest Corporation Pty Ltd v Hobsons Bay CC. 88 The Appellants' submissions on this matter included the suggestion that, if we held that costs could and should be awarded in respect of Mr Eager's services as their agent, the President of the Institute of Chartered Accountants might be asked to nominate an expert to conduct an assessment of the fees charged to the Appellants by Byrons. The Commissioner's submissions contained a request, in which the Appellants acquiesced, that if matters reached this stage, the Commissioner would wish to be heard on the procedure to be adopted in assessing these costs. We return to this question at the conclusion of the present judgment. The 'special circumstances' allegedly constituted by pre-litigation conduct of the Commissioner 89 In a lengthy section of his submissions, Mr Eager contended that the Commissioner had failed manifestly to conduct properly each of three separate tasks undertaken by him before the Appellants filed their application in the Tribunal. These were the investigation of the Appellants' liability to payroll tax (between 6 June and 29 August 2003), the review by a Senior Compliance Officer (during October 2003) and the disposal of the Objections (between 31 October 2003 and 4 March 2004) 90 Mr Eager relied on emphatic pronouncements by Barwick CJ (in Kolotex Hosiery (Australia) Pty Ltd v Federal Commissioner of Taxation [1975] HCA 5 at [19]) and the Full Federal Court (in Lighthouse Philatelics Pty Ltd v Federal Commissioner of Taxation (1991) 91 ATC 4,942 at 4,948-4,949) to the effect that the Federal Commissioner of Taxation, being possessed of broad powers of investigation, is under a strict duty, when initially assessing the tax payable by a taxpayer, to ensure that a correct assessment is made. Barwick CJ emphasised also the likelihood that provisions in tax legislation (such as section 110 of the TA Act) imposing the burden of proof on taxpayers would become a 'scourge' if assessments were not properly conducted. 91 Mr Eager argued that the Chief Commissioner of State Revenue, when assessing payroll tax or dealing with objections by a taxpayer, was bound by similar obligations. Yet the Commissioner had failed to comply with them in numerous respects during each of the three procedures leading up to the commencement of Tribunal proceedings. 92 These contentions by Mr Eager were backed up by a detailed analysis of documents (principally, notices and other correspondence passing between the Commissioner and the Appellants' advisers) forming part of the bundle of documents filed in the Tribunal by the Commissioner pursuant to section 58 of the ADT Act. 93 In consequence of these deficiencies in the conduct of the Commissioner, Mr Eager submitted, we should find that this conduct was both extraordinary and unreasonable, that it had caused 'extreme unfairness' to the Appellants and that applying the criteria laid down by the Court of Appeal in Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81 at [60], we should conclude that it amounted to 'special circumstances warranting an award of costs' under section 88 of the ADT Act. 94 Mr Eager relied on these alleged features of the Commissioner's conduct as the basis for the Appellants' claim for their costs of or incidental to their preparation of the Objections and the Commissioner's disallowance of the Objections. Without expressly referring to the discussion of section 88(4)(b) of the ADT Act in Raethel v Director-General, Department of Education and Training [2000] NSWADT 56 (see above at [71]), he argued that during these stages of the pre-litigation interaction between the parties it was entirely reasonable and appropriate for the Appellants to engage professional assistance and that therefore these stages were 'proceedings giving rise to the application' within the meaning of that provision. 95 Mr Eager appeared also to rely on these features of the Commissioner's conduct as part of the Appellants' case for the costs of or incidental to the proceedings in the Tribunal. 96 In both of these contexts, Mr Eager also made the point that any award of costs based on these matters would not be by way of punishment of the Commissioner but would operate as legitimate compensation to the Appellants for the substantial expense to which they had been put. 97 In responding to these contentions, Mr Latham placed significant reliance on the Tribunal's observations, in cases such as Raethel v Director-General, Department of Education and Training and Director-General, Department of Education and Training v Simpson [2001] NSWADTAP 6, to the effect that the costs power should not be used as a deterrent to poor administration and that the Tribunal should be reluctant when dealing with costs to scrutinise the pre-litigation conduct of the agency concerned. 98 Mr Latham also contested, on evidentiary and other grounds, a number of the specific allegations about the behaviour of individual staff of the Commissioner contained in Mr Eager's submissions. 99 On reviewing these allegations, we incline to the view that, prima facie at least, the relevant employees of the Commissioner did not take proper account during the pre-litigation period of the evidence and arguments put forward by the Appellants and their advisers in contesting the Commissioner's assessments. But, as Mr Latham contended, even if there were failures of this nature on the Commissioner's part, it does not follow, in our opinion, that they amounted to grossly unreasonable conduct such as to warrant a finding of 'special circumstances' and an award of costs pursuant to the criteria stated in Cripps v Dawson. 100 In order to explain this conclusion we will quote for a second time, adding emphasis, a passage reproduced above from Director-General, Department of Education and Training v Simpson at [11]: We are disinclined in respect of applications of this kind to explore the history of an application for a review of a decision prior to the time of its lodgment in the Tribunal, unless there is substantial material placed before us which might plainly demonstrate for example that the decision put in issue by the application was wholly unmeritorious - and that was known to be or should have reasonably been understood to be so by the Department prior to the making of the application. Or that there was some other defect of a similar magnitude . 101 This passage was indeed cited in Mr Eager's submissions. We interpret the passages cited above from Charteris v General Manager, Leichhardt Municipal Council (No2) (GD) [2001] NSWADTAP 39 and from Blanch v Chief Commissioner of State Revenue [2008] NSWADT 24 (see [67 - 68]) as conveying a similar message. We note in particular that in the former case, at [23], the Appeal Panel regarded both 'obstructionist behaviour' and 'non-compliance with statutory requirements' during the pre-litigation period as insufficient of themselves to amount to special circumstances. 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. 103 It may well be that during the pre-litigation stage the Commissioner failed, to an extent that could be called 'unreasonable', to give proper consideration to the evidence and arguments put forward by the Appellants. But even after a thorough, careful and entirely 'reasonable' examination of this material, the Commissioner could properly have concluded that the amount of pay-roll tax for which he actually assessed the Appellants was the correct amount. For this important reason, it cannot be said that any 'unreasonableness' in the Commissioner's treatment of the assessments was the factor compelling the Appellants to institute proceedings in the Tribunal in order to vindicate their rights. 104 By virtue of this view of the proceedings as a whole, and of the relevant authorities, we consider that the Appellants have not shown, with respect to the pre-litigation conduct of the Commissioner, that it fell within the criteria outlined in Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81 at [60]. Even if this conduct was 'clearly out of the ordinary and grossly unreasonable', it was not by virtue of these features of it that the Appellants were 'forced to pursue' this litigation in the Tribunal. Wholly reasonable conduct on the Commissioner's part might well have produced the same outcome. 105 We did not discern in Mr Eager's submissions any other ground on which this conduct was claimed to constitute 'special circumstances'. It was not argued, for instance, that it 'unreasonably prolonged' the time taken to resolve the dispute between the parties. The 'special circumstances' allegedly constituted by the conduct of the Commissioner during the Tribunal proceedings 106 The purpose of a significant proportion of the content of the Appellants' submissions in the present context was to establish that, at various stages of the first instance and appellate proceedings, the Commissioner's staff and legal representatives showed that they had not fully come to grips with all the matters of evidence and argument being advanced by the Appellants or had not (for instance, with regard to the Commissioner's obligation to state the reasons for his decision under section 58 of the ADT Act) complied fully with Tribunal procedural requirements or directions. 107 Whether or not this is the case, we cannot treat this of itself as constituting 'special circumstances', unless it caused the proceedings to be unnecessarily prolonged (to invoke the terminology of the Tribunal's Practice Note Number 12, quoted above at [60]) and the Appellants to be thereby put to extra expense. In so deciding, we take account of the fact that, 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. 108 Various events of this nature, occurring before the Tribunal's hearing at first instance, are described in the Appellants' submissions. Examples are a failure by the Commissioner to comply with a Tribunal direction to file all his evidence and submissions by 16 August 2004 and a request by the Commissioner to vacate a hearing set down for 23 and 24 September 2004. But we agree with a submission by Mr Latham that merely to describe them in submissions does not constitute sufficient evidence that the Commissioner's conduct was unreasonable, even though the inference may be drawn that extra expense was incurred by the Appellants. According to Mr Latham's submissions, there were, it may be added, a few similar instances of departures from Tribunal directions on the part of the Appellants and their representatives. 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. 110 Having regard, however, to the propositions that abandoning without sufficient reason a line of argument that was previously advanced and unreasonably prolonging proceedings may both constitute 'special circumstances' (see above at [58 - 59]), three aspects of the Commissioner's conduct of the appeal proceedings (each of which is referred to in Mr Eager's submissions) require further consideration. Our own awareness of the circumstances enables us to make judgments as to whether or not the Commissioner's conduct was reasonable. 111 First, in submissions made on 20 January 2005, at the conclusion of the Tribunal hearing, the Commissioner contested the Appellants' claim that remuneration paid to 19 of the entities was exempt from tax because they had worked for L & B for less than 90 days in the tax year 2002. The Commissioner at this stage had the Appellants' evidence in support of its claim. On 13 September 2006, however, the Commissioner conceded with respect to 18 of these entities that the 90-day exemption applied. No reason for first maintaining, then abandoning, this line of argument was provided. Provided that during the intervening period the Appellants in fact incurred extra costs on account of the Commissioner's continuing to contest this issue, we find that there are 'special circumstances warranting an award of costs'. 112 We will commence our outline of the second and third aspects of the Commissioner's conduct by quoting paragraphs [18 - 21] of the third appeal judgment: 18 At a directions hearing on 9 October 2006, the parties advised the Tribunal that 19 of the formerly contentious entities were no longer contentious by virtue of a concession by the Commissioner that they fell within an exemption set out in section 3A(1)(e)(iii) of the Act ('the 90-day exemption'). A timetable was laid down for the filing of further evidence relating to the issue of exemption for the remaining 17 entities under section 3A(1)(f) ('the two-person exemption'). The appeal was set down for further hearing on 10 December 2006. 19 At this hearing, however, Mr Latham, representing the Commissioner, sought leave, in the light of evidence that the Commissioner had recently obtained, to reargue before the Appeal Panel the question that we had determined in the second appeal judgment, in addition to addressing the matter of exemptions under section 3A(1). He drew attention to the fact that our order at the conclusion of this judgment was not a final order determining the rights and liabilities of the parties. Mr Eager, who appeared for the Appellants, conceded this point. 20 We made orders granting the leave sought by Mr Latham and adjourning the hearing. A consequence of these orders was that the number of 'contentious entities' reverted to 36. 21 At the adjourned hearing, which took place on 2 April 2007, further evidence was admitted (mostly on the tender of the Commissioner) and written and oral submissions were made relating to (a) the correctness of our decision in the second appeal judgment that the contentious entities were independent contractors, not employees of L & B, and (b) whether, in the event that we reaffirmed our decision, the Appellants could claim the benefit of the two-person exemption in section 3A(1)(f) of the Act with regard to any or all of their payments that they had made for services rendered by the entities. In the present judgment, we deal with those two issues. 113 What we are calling the second aspect of the Commissioner's conduct in the appeal proceedings is his failure to obtain the further evidence referred to in this passage in time for us to receive it at the hearing of the appeal fixed for 10 December 2006. The result of this delay in obtaining evidence, for which no justification was advanced, was that this hearing was vacated. In our opinion, this unreasonable prolonging of the proceedings, involving the adjournment of a hearing for which the Appellants must be assumed to have made preparations, constitutes 'special circumstances'. The Appellants' costs of and incidental to the hearing of 10 December 2006 are to be paid by the Respondent. 114 The third aspect of the Commissioner's conduct that we consider here is his request on 10 December 2006, which we granted, for the issue of the status of the entities (that is, whether they were employees or independent contractors) to be reargued at the subsequent 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. To the extent, if any, that this increased the costs incurred by the Appellants, there are in our opinion 'special circumstances warranting an award of costs'. 115 For reasons that we have already given (at [86 - 87]), these costs are recoverable even to the extent that they include the costs charged by Byrons for the work done by Mr Eager (who is not an Australian legal practitioner) in his capacity as the Appellants' agent in these proceedings. 116 It may be noted that these costs do not include any of the fees charged by Mr Bevan of counsel, since the services that he rendered all related to an earlier stage of the proceedings (see [52]). 117 We include in the costs to which these rulings relate any additional out-of-pocket expenses incurred by the Appellants in relation to these specific aspects of their conduct of the proceedings. 118 We order that the extra costs incurred by the Appellants by virtue of the three matters that we have just outlined should be paid by the Respondent. 119 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 determining the mode of assessment and for any other order required to give effect to this decision regarding their application for costs.

B & L Linings Pty Ltd & anor v Chief Commissioner of State Revenue

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