Bondi Beachside Pty Ltd v Chief Commissioner of State Revenue

Judgment 1BATHURST CJ: I agree with Ward JA. 2WARD JA: On 7 February 2014, this Court allowed an appeal by Bondi Beachside Pty Limited and related entities (collectively, "the Bondi entities") from a decision of Gzell J (Bondi Beachside Pty Limited v Chief Commissioner of State Revenue [2013] NSWSC 21). Orders were made setting aside the judgment and orders of Gzell J on 30 January 2013 and for judgment to be entered for the Bondi entities, the plaintiffs in the proceedings before his Honour. A cross-appeal by the Chief Commissioner of State Revenue was dismissed with costs. 3Order 4 of the orders made on 7 February 2014 was for the Chief Commissioner of State Revenue to pay the Bondi entities' costs of the appeal and the proceedings at first instance. 4By a notice of motion filed on 17 February 2014 pursuant to Uniform Civil Procedure Rules 2005 (NSW) 36.16, the Chief Commissioner seeks a variation of the orders made on 7 February 2014, namely the deletion from order 4 of the words "and the proceedings at first instance" and the making of a further order to the effect that there be no order as to the costs of the proceedings at first instance or, alternatively, such other orders as to costs as the Court thinks fit. (In written submissions on this application, the Chief Commissioner suggests that it would be open to the Court, if so minded, to order that the Bondi entities pay the Chief Commissioner's costs at first instance.) 5The basis for the Chief Commissioner's submission that he should not be required to pay the Bondi entities' costs of the proceedings before the primary judge is that the Bondi entities succeeded on appeal on a point not argued at first instance. That this was the case was common ground on the appeal. In those circumstances, it is submitted that it is in the interests of justice that there be a departure from what the Chief Commissioner accepts would otherwise be the ordinary course, namely that the successful appellant be awarded costs of both the appellate proceedings and the proceedings in the court below. 6The Bondi entities oppose any variation to the costs orders that have been made by this Court. 7There is no dispute that the Court has a wide discretion as to the making of orders for the costs of an appeal. Nor is there any dispute that the purpose of an order for costs is to indemnify or compensate the party in whose favour it is made, not to punish that party (Ohn v Walton (1995) 36 NSWLR 77 at 79 per Gleeson CJ as his Honour then was). 8The Chief Commissioner refers to various cases (including Snedden v Republic of Croatia (No 2) [2009] FCAFC 132 and Wickstead v Browne [1992] NSWCA 272; (1992) 30 NSWLR 1) by way of example of when a departure from the usual order has been found to be appropriate where the basis on which an appeal succeeded differed from the submissions put at trial (referring also to G E Dal Pont, Law of Costs (3rd ed 2013, LexisNexis Butterworths Australia) at [20.8], citing Great Gulf Company v Sutherland (1873) 4 AJR 164). 9The Bondi entities refer to the observation by McColl JA (with whom Handley and Tobias JJA agreed) in Brittain v Commonwealth of Australia (No 2) [2004] NSWCA 427 at [30] that departures from the general rule that costs follow the event are intended to deal with situations where the application of the general rule would lead to injustice. They submit that the fact that they were successful on a point not raised before the primary judge, when considered in light of all the relevant circumstances, does not make it unjust or unreasonable for them to be awarded their costs before the primary judge. The Chief Commissioner maintains that this is not the relevant test and that the question is whether it is in the interests of justice that he be required to pay the costs of the proceedings below when the appeal succeeded on a point not there argued. 10As outlined in the reasons below (Bondi Beachside Pty Limited v Chief Commissioner of State Revenue [2014] NSWCA 6), the Bondi entities' appeal was from the partial upholding by the primary judge of a determination of the Chief Commissioner that additional mortgage duty was payable on deeds of variation under which the time for payment by the Bondi entities of the purchase price for certain loan notes was extended. 11The submission on which the Bondi entities succeeded on appeal (but which had not been put to the primary judge) was that his Honour had erred in holding that the post-July 2009 deeds of variation fell within s 206(a)(iii) of the Duties Act 1997 (NSW) because there was no actual provision or obtaining of funds, as required by the opening words of the definition of "advance" in s 206 of the Act. It was contended, in the alternative that, even if the opening words of s 206 could encompass a constructive actual provision or obtaining of funds to satisfy the opening words of the definition, the forbearance must be one involving the creation or substitution of a new debt (such as where there is a novation of an existing debt obligation). 12What had been argued at first instance was that s 206(a)(iii) was limited to a non-contractual forbearance. That argument was ultimately not pressed on appeal (though it was repeated in the initial written submissions served for the Bondi entities). Reference was, however, made, in the context of the alternative contention as to there being at least the requirement for a constructive provision of funds, to the distinction drawn between treating an unperformed contractual obligation as not involving a breach of contract and cases where a contractual variation brings about a permanent change in the parties' obligations - a distinction not far removed from that between a contractual and non-contractual forbearance. 13The Bondi entities make a number of submissions as to why they say it is not unjust or unreasonable for them to recover their costs of the proceedings before the primary judge. 14First, they note that they were partially successful before the primary judge in that his Honour accepted their argument that duty was not payable on the capitalised interest and that his Honour took this into account in ordering them only to pay 80% of the Chief Commissioner's costs at first instance. It is submitted that even if some departure from the usual costs order on a successful appeal were to be made, the appropriate order would not be that the Chief Commissioner be awarded the whole of the costs below. 15The difficulty with that argument is that, had the capitalised interest question arisen for determination on the appeal, this Court would have concluded that the primary judge erred on that issue, for the reasons broadly submitted by the Chief Commissioner at first instance and on appeal. 16Second, it is submitted by the Bondi entities that the point not argued below was closely linked to (and not divorced from) the matters which were argued before the primary judge and that this is a point of distinction between the present case and those on which the Chief Commissioner relies for the proposition that there should be a departure from the usual costs order. 17Although the Chief Commissioner maintains that this is an irrelevant matter to take into consideration, it highlights the fact that the issues raised below and on appeal were limited to discrete points of statutory construction. It was not suggested that the hearing below would have been shortened, or that less costs would have been incurred, had the construction contended for on appeal been raised below. Nor was it said that, had the construction advanced on appeal been raised at first instance, the Chief Commissioner would have taken a different position in the proceedings below. Indeed, the Chief Commissioner maintained his stance that duty was payable even after the new construction point was advanced in the appellants' supplementary written submissions served with the Court's leave some two months prior to the hearing of the appeal. 18Third, it submitted by the Bondi entities that, although they were plaintiffs in the proceedings before the primary judge, for costs purposes their position was closer to that of defendants because it was the Chief Commissioner who had raised the notice of assessment which was before the Court and which had given rise to a debt payable on 14 January 2011 (together with interest). The Bondi entities refer to Griffiths v Australian Broadcasting Corporation (No 2) [2011] NSWCA 145 for the proposition that a more generous approach on costs should be taken in the case of a successful defendant than a successful plaintiff. There, Hodgson JA (with whom McClellan CJ at CL agreed) considered that where a successful defendant had been caused to incur the costs of defending a claim, which was ultimately wholly rejected, it might be appropriate that the defendant have costs including those associated with reasonable defences that had proved to be unsuccessful even though those unsuccessful defences were severable. His Honour noted that in such cases the rejection of the claim amounts to a determination that the case should not have brought about the incurring of any costs at all. 19The Chief Commissioner disputes that the Bondi entities were effectively in the same position as defendants to a money claim, arguing that Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2) [2011] NSWCA 171 (to which the Bondi entities referred in their submissions) is distinguishable in that there the plaintiff was in effect defending a claim of contractual breach (the defendant having taken possession of leased premises following the issue of notices of termination as a result of claimed contractual defaults, the existence of which was disputed by the plaintiff). 20There is a sense in which the position of the Bondi Entities can be seen as that of a party forced, if it wished to dispute the debt arising on the issue of the assessment notices, to commence proceedings challenging the determination made by the Chief Commissioner. Nevertheless, while that might have provided support for an argument that there should be no apportionment of the first instance costs based on the success or otherwise of severable issues in the proceedings at first instance, here the separate issue on which the Bondi entities succeeded is one not raised below. Therefore, little assistance can be drawn in the present case from the proposition that a party in the position of a successful defendant may be able to recover the whole of its costs, including costs of issues on which it was not successful. 21Fourth, the Bondi entities point to the lack of explanation by the Chief Commissioner for the fact that this costs issue was raised only after the costs orders made on 7 February 2014 were entered (on 11 February 2014). Reference is made to Aktas v Westpac Banking Corporation (No 2) [2010] HCA 47; (2010) 241 CLR 570, where the High Court refused an application by Westpac for variation of costs orders after judgment on the basis that there had been ample opportunity for Westpac to have foreshadowed that it wished to be heard in support of an application for special costs orders and it had not done so. The Bondi entities submit that, in the present case, there was ample opportunity for the Chief Commissioner to raise (or foreshadow) the question of costs, both at the time the Bondi entities obtained leave to put on their supplementary written submissions (in which the ultimately successful argument was first raised) on 26 August 2013 and at the hearing before this Court. 22The Chief Commissioner's response to this submission is that it was not unreasonable for him to assume, when there were various possible outcomes and orders which might be made in this Court, that he would have an opportunity to make submissions on costs once the ultimate outcome of the appeal and cross-appeal was known. 23In circumstances where the Chief Commissioner has regularly invoked the power of the Court to vary orders under Pt 36 r 16, the fact that no application was foreshadowed at the time of the appeal (or earlier, when leave to file supplementary submissions was granted) is not a matter that should determine whether or not in this case there should be a departure from the usual position in relation to costs orders following the appeal.