Chief Commissioner of State Revenue v Tasty Chicks Pty Ltd

Judgment 1THE COURT: In its orders made on 21 June 2012 this Court gave directions for the making of written submissions concerning the costs of the proceedings before Gzell J and in this Court: Chief Commissioner of State Revenue v Tasty Chicks Pty Ltd [2012] NSWCA 181. 2The respondents sought leave to appeal to the High Court from that decision and those orders. That application was dismissed on 16 November 2012: Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue [2012] HCATrans 293. Accordingly, it is necessary to address the costs of the proceedings before Gzell J and in this Court. 3The proceedings concerned a challenge by the respondents to the Chief Commissioner's assessments of payroll tax for a six-year period in which three different legislative regimes applied. The primary judge set aside those assessments and ordered the Chief Commissioner to pay the costs of the proceedings before him: Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue [2009] NSWSC 1007; 77 ATR 394. 4The outcome of the appeal to this Court and to the High Court has been that the orders of the primary judge have been set aside and there has been remitted to the Equity Division the review of the Chief Commissioner's decision as to the exercise of the de-grouping discretion for the first period. If the respondents are successful in relation to that question, they will have succeeded in their review of the Chief Commissioner's determination to disallow their objections to the assessments for the first period ending 30 June 2003. However, the position will remain that they have failed in their review of the Chief Commissioner's determinations for the second and third periods from 1 July 2003 to 30 June 2005 and 1 July 2005 to 30 June 2007. 5Before the primary judge, the Chief Commissioner unsuccessfully argued that the respondents had to show that its determination was vitiated by error of the kind referred to in Avon Downs Pty Ltd v The Federal Commissioner of Taxation [1949] HCA 26; 78 CLR 353. That argument was upheld in the first hearing of the appeal to this Court (Chief Commissioner of State Revenue v Tasty Chicks Pty Ltd [2010] NSWCA 326; 80 ATR 205) and rejected by the High Court (Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue [2011] HCA 41; 85 ALJR 1183). 6Thus, by reference to the final determination of the proceedings, the respondents had success before the primary judge on the discrete argument as to the nature of the review by the Supreme Court. In relation to the remaining issues determined by the primary judge, the respondents have been unsuccessful in their challenge to the disallowance of their objections to assessments for the second and third periods. Whether they are unsuccessful in relation to their challenge for the first period remains to be decided on the remitter. 7In their written submissions, the parties are diametrically opposed as to the costs orders which they contend should be made. 8The Chief Commissioner submits that the respondents should pay its costs of the proceedings before the primary judge and of the two hearings in this Court. That submission seemingly ignores two matters. First, it does not take account of the respondents' success before the primary judge on the issue as to the jurisdiction and powers of the Supreme Court on a review. Nor does it take account of the respondents' success on that issue in the High Court which not only meant that this Court was wrong in its earlier decision, but also required that the remaining issues in the appeal be addressed afresh by this Court. That occurred in the second hearing. 9As their primary position, the respondents submit that the Chief Commissioner should pay their costs of the proceedings before this Court and before the primary judge. Alternatively, the respondents submit that the Chief Commissioner should pay the costs of the first hearing of the appeal and the costs of the second hearing but only insofar as the latter concern issues as to how this Court was to treat the conclusions in its earlier decision on the issues other than as to jurisdiction and power. They also maintain that the Chief Commissioner should pay the costs of the proceedings before the primary judge. 10In our view the Chief Commissioner should pay the respondents' costs of the first hearing in this Court. Ultimately they were successful in relation to the issue as to the Supreme Court's jurisdiction and powers on a review. That issue was at the forefront of the Chief Commissioner's argument in the first hearing in this Court and informed the approach which it was said this Court should take to an appeal from a review of a discretionary decision of the Chief Commissioner. The respondents' success on that issue required that the remaining grounds of appeal be addressed again. The Commissioner's argument that the respondents should pay those costs does not take account of the respondents' success on this discrete issue and its consequence that a second hearing was required. 11However, the respondents should pay the Chief Commissioner's costs of that second hearing. In that hearing, the Chief Commissioner succeeded in establishing error on the part of the primary judge in relation to each of the three periods to which the assessments related. Except for the first period, the result was that the applications for review were dismissed. In relation to the first period, it was necessary to remit the exercise of the de-grouping discretion to the Equity Division because the primary judge had not addressed whether that discretion could and should be exercised. 12The respondents argue that they should not have to pay the costs of that second hearing because the Chief Commissioner's success, in relation to the second and third periods, was based on new ground of appeal 12A which was not the subject of a grant of leave to amend until the day the appeal was heard. That argument is rejected. Although leave to amend was not granted until then, the amended ground reflected the substance of the argument put in writing and orally by the Chief Commissioner. That argument asserted House v The King errors of principle on the part of the primary judge of the kind described by Handley AJA in this Court's earlier judgment at [109] and [111]. Leave to amend was not opposed. 13The respondents also argue that some allowance should be made in their favour in relation to costs of the second hearing incurred because the Chief Commissioner took the position that this Court should apply the reasoning in the earlier judgment and not allow the respondents to "re-litigate" any questions as to the application of the grouping and de-grouping provisions in the Pay-roll Tax Act 1971. That argument is also rejected. Although the Chief Commissioner initially took that position in its written submissions, it did not maintain that position in oral argument. Its written and oral submissions went on to address the issues remaining in the appeal. It had substantial success on those issues. The fact that it rightly abandoned that argument at the commencement of the oral argument is not sufficient to require any adjustment to the costs which follow from that success. 14There remains the question as to the costs of the proceedings before the primary judge. In dealing with those costs, some allowance should be made for the respondents' ultimate success on the question as to the Supreme Court's jurisdiction and powers on a review. There was no consideration in the written submission to this Court addressed to what that allowance should be. How the discretion as to those costs should be exercised also depends in part on the outcome of the question which has been remitted for further hearing. If the Chief Commissioner is successful on that question the respondents' application for review will have been unsuccessful for each of the three periods. On the other hand, if the respondents are successful on that question it may be appropriate to make some allowance for that success. In these circumstances, although it is not completely satisfactory that we do so, we think that the costs of the proceedings before Gzell J should be determined by the Equity Division of the Court at the same time as it finally determines the matter remitted for further hearing. 15Accordingly, the orders of the Court are: (1)The appellant pay the respondents' costs of and incidental to the first hearing of the appeal to this Court. (2)The respondents pay the appellant's costs of and incidental to the second hearing of the appeal to this Court, such costs not to include costs within order 1. (3)The costs to date in the Equity Division of the Court be determined by that Court on its final determination of the matter remitted for further hearing.