Chief Commissioner of State Revenue v Fitzpatrick Investments Pty Limited

NCAT Appeal Panel|2015-11-04|Before: Dr J

Ms Kerr, Crown Solicitor's Office (Appellant) Mr Clark, Clark McNamara Lawyers (Respondent) File Number(s): AP 15/39036 Decision under appeal Court or tribunal: Civil and Administrative Tribunal of New South Wales Jurisdiction: Administrative and Equal Opportunity Division Citation: [2015] NSWCATAD 103 Date of Decision: 19 May 2015 Before: A Verick, Senior Member File Number(s): 136006

Introduction

The essential questions for us are whether the Tribunal below: 1. erred in law in considering the Appellant's costs application under s 60 of Civil and Administrative Tribunal Act 2013 (NSW) (the Act), rather than under s 88 of the Administrative Decisions Tribunal Act 1997 (the former Act); and if not, did it err 2. in deciding not to make any order for costs.
For the reasons which follow, we answer each question 'no', and dismiss the appeal.

Grounds 1-7

We therefore turn to the remaining grounds of appeal, and to whether any error of law is there established. We note that all of the grounds assert an error of law, to the extent that leave to appeal was in passing during the hearing sought on (undefined) questions of fact, we see no reason to grant leave. Costs decisions are matters of practice and procedure, rarely raise matters of general principle and do not raise such issues here in relation to grounds 1-11.
It was asserted during the hearing that the following errors of law appear in relation to the following four grounds: 1. Appeal paragraphs [1]-[2] s60(3)(a-b) - having regard to irrelevant considerations; 2. [3]-[6] s60(3)(d) - having regard to irrelevant considerations; 3. [7]-[8] s60(3)(f) - manifest unreasonableness; and 4. [9]-[11] s60(3)(g) - failing to have regard to mandatory relevant considerations.

The Tribunal's Reasoning

It is convenient to now turn to the reasoning by the Tribunal below.
The Tribunal first noted that the subject land had, for some 50 years prior to the three challenged land tax years in question, been exempted from land tax on the basis that the respondent had conducted primary production activities on the land. However, there was then, in the relevant three years, primary production carried on by third parties, which the appellant characterised as either not being for the maintenance of cattle for the purposes of selling them, or that neither the applicant and the agistee were engaged in the necessary, significant, commercial primary production business for the purposes of profit.
The Tribunal correctly noted that determining the relevant questions for establishing a primary production exemption from land tax is a question of fact, depending upon a detailed consideration of all the circumstances of the case: see Leda Manorstead v Chief Commissioner of State Revenue (2010) 79 NSWLR 724, and that determining whether there is a "significant and substantial commercial purpose or character" requires consideration of the "size, depth, bulk, weight, seriousness, importance, quality, intensity and prominence" in determining the commercial nature of the relevant primary production activity: Maraya Holdings Pty Ltd v Chief Commissioner of State Revenue [2013] NSWCA 408. In short, such cases can be factually complex, and this one was.
Indeed, one of the notable features of the appellant's costs argument below was some tension between an acknowledgement that the matter was complex such that 52 folders of material were produced, and $483,000 in pre-hearing costs and disbursements was incurred; and, conversely, a submission that the respondent's case was always without merit.
We note that in Sakkara Investment Holdings Pty Ltd as trustee for Sakkara Landings Trust v The Residents Committee of The Landings Retirement Village [2016] NSWCATAP 52 an Appeal Panel which included the President stated at [226]: … The general position under s 60 is that each party is to bear its own costs, s60(1). Notwithstanding this, the Tribunal (including the Appeal Panel) may award costs but only if it is satisfied that there are special circumstances warranting such an award, s60(2). In this context "special circumstances" should be taken to refer to circumstances that are out of the ordinary; they do not have to be extraordinary or exceptional, see Cripps v G & M Mawson [2006] NSWCA 84 at [60] dealing with a very similar provision in s88(1) of the Administrative Decisions Tribunal Act 1997 (NSW) (as the Administrative Decisions Review Act 1997 (NSW) was previously entitled). A non-exhaustive list of circumstances that can amount to special circumstances for the purposes of subs (2) is found in s60(3).
It is appropriate here to note and adopt what was put by the respondent, namely, that it is of fundamental significance to the appeal as a whole, that the following findings of fact by the Tribunal below are unchallenged by the appellant: [48] … this matter follows what are the normal procedures of the jurisdiction, until the afternoon of Friday 28 November 2014. [49] … the conduct highlighted by the Chief Commissioner has not been out of the ordinary … there is in any case, no evidence that the conduct was "grossly unreasonable" in the circumstances highlighted by the Chief Commissioner. [57] … until the withdrawal of the application, this matter had followed normal and reasonable procedural stages involving a primary production exemption claim against its special facts.

Grounds of Appeal 1- 2

The Tribunal considered the appellant's claim under s60(3)(a) and (b) that the way the respondent conducted the proceedings unnecessarily disadvantaged the appellant, and unreasonably prolonged the time taken. The submissions of the parties were then set out in a detailed manner which neither party suggested was incorrect. Notably, although there was a large number of directions hearings, and some delay in complying with certain directions, either the delay did not disadvantage the appellant significantly, or the appellant consented to extensions of time, or on one occasion, the appellant sought and obtained his costs. One reason for delay in compliance with procedural directions was that the evidence to be relied on by the respondent necessarily involved evidence from the agistee, who was a third party. Finally, on no occasion was there any attempt to have the application summarily dismissed.
The Tribunal concluded at [47]-[49]: [47] In this matter, the Applicant was dealing with third parties to prepare the Applicant's case as the land was being used for agistment by them and not the Applicant. I accept the explanation provided that, as a result, there were delays and changes to the position that the Applicant took. I also accept the various explanations given by the Applicant's counsel as set out in paragraph 25 above. Whilst 16 directions hearings might seem too many, it is not unusual for proceedings to result in a number of directions hearings prior to the actual hearing of the principal matter. This depends, as was the case in this matter, on the nature of evidence and complexity of the facts. [48] On some occasions the timetable was adjusted by consent and on other occasions the timetable was adjusted with the approval of the Tribunal. Against the factual background, it would seem to me that this matter followed what are the normal procedures of the jurisdiction until the afternoon of Friday 28 November 2014. I should add, that with the exception of one occasion, the Chief Commissioner did not seek costs at the hearing of all other directions hearings. [49] Accordingly, in my view, the conduct highlighted by the Chief Commissioner has not been out of the ordinary. There is no evidence before the Tribunal that would suggest that the Applicant had followed a deliberate course of action designed to disadvantage the Chief Commissioner and prolong unreasonably time taken to complete the proceedings. I also think there is in any case no evidence that the conduct was "grossly unreasonable" in the circumstances highlighted by the Chief Commissioner.
Grounds of Appeal 1-2 state: 1. Senior Member Verick erred in law in finding that, for the purposes of having regard to s60(3)(a) & (b) Civil and Administrative Tribunal Act 2013 (NSW) ("the Act") in determining whether there exist special circumstances warranting the award of costs, it is necessary for a party to have followed a deliberate course of conduct designed to disadvantage another party which was grossly unreasonable and prolong unreasonably the time to complete the proceedings by reason of such conduct (paragraph [49]). 2. Senior Member Verick should have found that, for the purposes of s60(3)(a) & (b) of the Act, the relevant conduct engaged in by a party need not be deliberate, intentional or grossly unreasonably so long as it unnecessarily disadvantaged another party (s60(3)(a)) or prolonged unreasonable the time taken to complete the proceedings.
This ground fails as Tribunal did not, on our reading of the reasons, substitute any such gloss. It must be recalled that, earlier in its reasons the Tribunal, having considered relevant cases, including Cripps v G & M Dawson [2006] NSWCA 81 at [55]-[60]; Brian Lewis Groth v Secretary, Department of Social Security [1995] FCA 1708; Holpitt Pty Ltd v Varimu Pty Ltd [1991] FCA 269, concluded at [20]: In order to invoke s60 and award costs in a matter, it is accordingly necessary to be satisfied that there are circumstances relating to the conduct of the proceedings that are clearly out of the ordinary. The circumstances "do not have to be extraordinary or exceptional". In determining that there are special circumstances, grossly unreasonable conduct or a finding of "serious unfairness" are not prerequisites to such a determination, they are nonetheless highly relevant considerations.
The last sentence at [20] explains the relevance of the notions of "grossly unreasonable conduct" or "serious unfairness" in applying s60 and in reaching the conclusions set out at [49], but it does not substitute them as preconditions for the award of costs and it does not thereby apply a wholly irrelevant consideration. These grounds fail.

Grounds 3-6

These state: 3. Senior Member Verick erred in law in finding that, for the purposes of having regard to section 60(3)(d) of the Act in determining whether there exist special circumstances warranting the award of costs, proceedings are not factually complex if the Appellant has: (a) engaged in activity to defend the assessments "that would have been in the first place issued with some definite basis"; (b) incurred significant costs in defending the assessments; (c) made a submission under section 60(3)(c) of the Act that the Respondent has made a claim that has no tenable basis in fact or in law (paragraph [56]) 4. Senior Member Verick erred in law in finding that, on the one hand, the proceedings were not, in substance, factually complex (paragraph [56]) and, on the other hand, finding that the reason for the large number of directions hearings was the complexity of the facts (paragraph [47]). 5. Senior Member Verick should have found that, for the purposes of section 60(3)(d) of the Act, because: (a) the Appellant has engaged in detailed activity to defend the assessments; and (b) a party has incurred significant legal costs then the proceedings are factually complex. 6. Senior Member Verick should have found that, for the purposes of section 60(3)(d) of the Act, it is irrelevant that a party has or has not made a submission under section 60(3)(c) of the Act - i.e. that another party has made a claim that has no tenable basis in fact or in law.
These grounds raise no error of law.
In relation to the suggestion that there was never any tenable basis in fact and law in the respondent's case, the Tribunal correctly applied what was said by McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin [1997] HCA 6, namely, that in the absence of a hearing on the merits of a case, "a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order." His Honour, having then noted that reading the Tribunal's decision and the affidavit filed in support of the application for relief, he considered that the prosecutrix had an arguable case, but not strong prospects of success, and that if he had to make a prediction about the result of the application it would probably have failed, then said, "however, as I have said, it is not the function of the court on a costs application - in most cases at all events - to make a prediction as to the outcome of hypothetical case."
The Tribunal below correctly described that approach as the "general rule" and concluded that this was not such a case where it could be seen from the beginning that the challenge was untenable. Rather, in the absence of a final hearing, it was not possible to predict the likely result. We agree.
Secondly, it was noted that there was never an application to have the proceedings summarily dismissed by the appellant, and thirdly, at [52]-[53] it was said that: [52] On the contrary, the Chief Commissioner embarked on what can only be described as a very extravagant pursuit to defend his assessment, even though the onus was, under s 100(3) of the Taxation Administration Act 1996, on the Applicant to establish that it was entitled to the exemption. The Chief Commissioner's preparation of his case included, as highlighted by Mr Hamilton SC for the Applicant, engaging solicitors, counsel, a number of experts, 37 requests seeking production of documents, various inspections of the subject land and concluding with a case file which comprised 52 arch folders. And in the process incurring, as claimed by the Chief Commissioner, almost half a million dollars. [53] Against that background, it is difficult to understand the submission now made by the Chief Commissioner that the Applicant did not have a tenable claim and that the proceedings were lacking in substance.
Those are all findings of fact. They involve no errors of law.
As to the suggestion that the respondent had incurred significant legal costs because the proceedings were factually complex, the Tribunal correctly noted that because of the complexity in establishing such cases, the matter was bound to be somewhat complex, but nevertheless, concluded at [56]: … The legal principles involved in determining the principal issues are well settled and, ultimately, the onus was on the Applicant and not on the Chief Commissioner to establish the necessary facts to support its claim for exemption. It is, in my opinion, quite out of the ordinary for the Chief Commissioner to engage in such detailed activity to defend assessments that would have been in the first place issued with some definite basis. The assessments were not tentative assessments. (emphasis added)
There was no challenge to the findings in the italicised words.
Contrary to the assertions in these grounds of appeal, the Tribunal faithfully applied the correct legal tests, the real complaint by the appellant is with its factual conclusions which exhibit no legal error, and in particular did not involve a failure to have regard to mandatory relevant considerations.

Ground 7-8 - manifest unreasonableness

These grounds stated: 7. Senior Member Verick erred in law in finding that, for the purposes of having regard to section 60(3)(f) of the Act in determining whether there exist special circumstances warranting the award of costs, it is necessary for a party to engage in deliberate or grossly unreasonable conduct to frustrate or prevent the just, quick and cheap resolution of the real issues in the proceedings, before, in substance, a party would be found to have breached s 36(3) of the Act (paragraph [57]). 8. Senior Member Verick should have found that, for the purposes of section 60(3)(f) of the Act, the relevant conduct engaged in by a party need not be deliberate or grossly unreasonable so long as it is conduct which has the effect of preventing the just, quick and cheap resolution of the real issues in the proceedings.
In relation to the reliance on s60(3)(f), there is the statement in the last sentence of [57], which is not challenged, and which was a strong basis for failing to find that head made out, namely: Until the withdrawal of the application, this matter had followed normal and reasonable procedural stages involving a primary production exemption claim against its special facts.
As we noted above, where directions were not complied with there was good reason for that non-compliance and extensions were unopposed except on one occasion where costs were successfully sought.
Any assertion of manifest unreasonableness must take into account what was said by the High Court in Minister for Immigration and Citizenship v Li [2013] HCA 18, as helpfully summarised recently by a Full Court of the Federal Court in Minister for Immigration v Eden [2016] FCAFC 28 at [54]-[65], in particular: [58] First, the concept of legal unreasonableness concerns the lawful exercise of power. Legal reasonableness, or an absence of legal unreasonableness, is an essential element in the lawfulness of decision-making: Li at 350[26] and 351[29] (French CJ), 362[63] (Hayne, Kiefel and Bell JJ) and 370[88] (Gageler J); [59] Second, the Court's task in determining whether a decision is vitiated for legal unreasonableness is strictly supervisory (Li at 363[66]). It does not involve the Court reviewing the merits of the decision under the guise of an evaluation of the decision's reasonableness, or the Court substituting its own view as to how the decision should be exercised for that of the decision maker: Li at 363[66] (Hayne, Kiefel and Bell JJ); [60] Third, there are two contexts in which the concept of legal unreasonableness may be employed. The first involves a conclusion after the identification of a recognised species of jurisdictional error in the decision making process, such as failing to have regard to a mandatory consideration, or having regard to an irrelevant consideration. The second involves an "outcome focused" conclusion without any specific jurisdictional error being identified: Li at 350[27]-351[28] (French CJ), [72] (Hayne, Kiefel and Bell JJ); [62] Fourth, in assessing whether a particular outcome is unreasonable, it is necessary to bear in mind that within the boundaries of power there is an area of "decisional freedom" within which a decision-maker has a genuinely free discretion: Li at 351[29] (French CJ), 363[66] (Hayne, Kiefel and Bell JJ). Within that area, reasonable minds might differ as to the correct decision or outcome, but any decision or outcome within that area is within the bounds of legal reasonableness: Li at 363[66] (Hayne, Kiefel and Bell JJ) [63] Fifth, in order to identify or define the width and boundaries of this area of decisional freedom and the bounds of legal reasonableness, it is necessary to construe the relevant statute: Li at 349[24] (French CJ), 363[67]-364[67] (Hayne, Kiefel and Bell JJ). … [64] Sixth, where reasons for the decision are available, the reasons are likely to provide the focus for the evaluation of whether the decision is legally unreasonable: Singh at 446[45]-447[47]. Where the reasons provide an evident and intelligible justification for the decision, it is unlikely that the decision could be considered to be legally unreasonable: Minister for Immigration and Border Protection v Singh [2014] FCAFC 1 at [47].
Applying this test, a decision as to costs is a classic area of broad decisional freedom, here there are evident and intelligible reasons for the conclusions and it is not for us to substitute our own views (although in fact we would have come to the same decision for the same reasons). This ground must therefore be dismissed.

Grounds 9-11

These grounds of appeal state: 9. Senior Member Verick erred in law for the purposes of having regard to an other relevant matters in section 60(3)(g) of the Act in determining whether there exist special circumstances warranting the award of costs: (a) in failing to take into account the lateness of the Respondent's withdrawal of the proceedings at first instance - i.e. on the last business day before the commencement of a 2 week hearing (b) in finding that to award costs merely on the late withdrawal of the matter would create a precedent to encourage matters to be finalised by a full hearing rather than resolution by way of a settlement or a withdrawal of an application (paragraph [59]) 10. Senior Member Verick should have found that, for the purposes of section 60(3)(g) of the Act, it was relevant to take into account not just the fact of withdrawal of the proceedings but the time of the withdrawal and the reasons for the withdrawal. 11. Senior Member Verick should have found that, for the purposes of section 60(3)(g) of the Act, no "precedent" would be created to litigate matters to a full hearing if an award of costs was made in circumstances where an Applicant withdraws the proceedings the day before the commencement of a long hearing - such a finding would discourage late withdrawals and encourage early withdrawals.
It is difficult to logically accept that there has been a failing to have regard to mandatory relevant considerations where the provision in question permits regard to be had to "any other matter that the Tribunal considers relevant".
In relation to s60(3)(g), it was noted that withdrawal or settlement of applications was not a matter specifically mentioned, and that in fact, considering the "just, quick and cheap" aim of the Tribunal, the saving of considerable costs by avoiding a final hearing were reasons not to penalise the tax payer. There is no legal error in these conclusions. The grounds attack factual matters.
In conclusion, while we have dealt in great detail with all grounds asserted, we consider in substance that the Tribunal below was clearly right for the reasons given, but that in any event there are no legal errors in its decision.
The appeal must be dismissed.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 April 2016

Administrative Decisions Tribunal Act 1997(NSW)

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Judgment (9 paragraphs)

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