On 10 January 2013, the Applicant filed an application at the Administrative Decisions Tribunal to seek a review of land tax assessments issued by the Chief Commissioner for the land tax years 2010, 2011 and 2012 in respect of land situated at Erskine Park, constituting some 98 hectares ("the subject land"). The Applicant sought to challenge the assessments on the basis that the subject land was exempt from land tax under s 10AA of the Land Tax Management Act 1956 (NSW) ("LTMA").
On 1 January 2014, the Administrative Decisions Tribunal ("the ADT"), with a number of other Tribunals in New South Wales, were abolished and their jurisdiction and functions integrated into the Civil and Administrative Tribunal of New South Wales ("the Tribunal") established under the Civil and Administrative Tribunal Act 2013 ("the Act"). Because the proceedings in this matter were "unheard proceedings" on 1 January 2014 as defined in clause 6(1) of Schedule 1 to the Act, they were on that date taken to have duly commenced in the Tribunal (Clause 7(1)).
The matter proceeded through various procedural stages both at the ADT and the Tribunal, which included 16 directions hearings. The matter was listed for hearing commencing on Monday 1 December 2014 for two weeks. However, the Applicant withdrew the application for review on the afternoon of Friday 28 November 2014.
The Chief Commissioner now seeks an order for the costs incurred in responding to the application and preparing his case for the hearing. The making of such an order is governed by the principles set out in s 60 of the Act, which provides as follows:
1. Each party to proceedings in the Tribunal is to pay the party's own costs.
2. The Tribunal may award costs in relation to proceedings before it only if it is satisfied that there are special circumstances warranting an award of costs.
3. In determining whether there are special circumstances warranting an award of costs, the Tribunal may have regard to the following:
1. whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings,
2. whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings,
3. the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law,
4. the nature and complexity of the proceedings,
5. whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance,
6. whether a party has refused or failed to comply with the duty imposed by s 36(3),
7. any other matter that the Tribunal considers relevant.
1. If costs are to be awarded by the Tribunal, the Tribunal may:
1. determine by whom and to what extent costs are to be paid, and
2. order costs to be assessed on the basis set out in Division 11 of Part 3.2 of the Legal Profession Act 2004 or on any other basis.
1. In this section: costs includes:
1. The costs of, or incidental to, proceedings in the Tribunal, and
2. The costs of, or incidental to, the proceedings giving rise to the application or appeal, as well as the costs of or incidental to the application or appeal.
The subject land and some surrounding land had been owned by the Applicant and had, for some 50 years prior to the 2010 land tax year, been exempted from land tax. The Applicant had, during those years, conducted primary production activities on the land.
However, during the land tax years in issue, the primary production activities were carried on by third parties: up to November 2010 by Jeff Ferrif, and from November 2010 by an entity, L & M Rodeo, a partnership whose partners were Matthew Besant and Lisa Cooper.
In order to succeed in the principal matter, the Applicant was required to establish that the dominant use of the subject land during the relevant land tax years was the maintenance of cattle for the purpose of selling them or their natural increase or bodily produce under s 10AA(3)(b) of the LTMA ("the dominant use test"). As the subject land was not relevantly zoned "rural" in the relevant land tax years, the Applicant also had to establish that the primary production use was of a significant and substantial commercial purpose or character and was engaged in for the purpose of profit on a continuous or repetitive basis (whether or not a profit was actually made) pursuant to s 10AA(2) of the LTMA ("the commerciality test").
The reference in s 10AA(3)(b) to "a dominant use presupposes that land may be used for more than one purpose and requires a determination of which use of the land is the main, chief or paramount use" and that the use must be "sufficiently substantial to prevail over the proposition that the land is primarily to be regraded as unused land". This is a question of fact and depends upon a detailed consideration of all of the circumstances in each case, which should be determined "as an objective matter of impression having regard to the facts". (see: Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue (2010) 79 NSWLR 724).
The inquiry to satisfy the "significant and substantial commercial purpose or character" test set out in s 10AA(2)(a) requires a consideration of the following matters, "size, depth, bulk, weight, seriousness, importance, quality, intensity and prominence" to determine the commercial nature of the relevant primary production activity. (see: Maraya Holdings Pty Ltd v Chief Commissioner of State Revenue [2013] NSWCA 408)
The original application related to the 2010, 2011 and 2012 land tax years. But in the written submissions filed on 19 July 2013, the Applicant withdrew its application for the 2010 land tax year on the following grounds -
As at 31 December, 2009, the taxing date for the 2010 Assessment, cattle were agisted on the 2010 land by Jeff Ferrif. Having regard to the dicta of His Honour Justice Gzell in Maraya Holdings Pty Ltd v Chief Commissioner of State Revenue [2013] NSWSC 23 it is conceded that the evidence in the Statement of Jeff Ferrif dated 10 August 2010 is not sufficient to establish that the primary production use of the 2010 Land as at the taxing date satisfied the requirements of s 10AA(2)(a) of the Act. Fitzpatrick does not rely on the Statement of Jeff Ferrif and discontinues its Application in so far as it relates to the 2010 Assessment only.
The Chief Commissioner's case was that the subject land in the relevant land tax years was used "not for the maintenance of cattle for the purpose of selling them" but "land awaiting imminent industrial development as evidenced by the significant industrial development that had occurred on the adjoining lands over many years prior to the relevant land tax years". The Chief Commissioner's alternative argument was that the dominant use of the subject land "was the maintenance of bucking bulls for the purpose of supplying them to rodeos and not for the purpose of selling them". In addition, the Chief Commissioner's case was that "the commerciality test in section 10AA(2) LTMA was not satisfied as the financial evidence disclosed that neither L&M Rodeo nor the Applicant was engaged in a significant and substantial commercial primary production business nor was such a business engaged in for the purpose of profit".
The Chief Commissioner in his submission indicated that the matter was "factually complex" and, as a result, his solicitors' "file was voluminous and consisted of approximately 52 folders of materials". It was claimed that the costs incurred by the Chief Commissioner "were approximately $483,000 (including counsel's costs)" prior to the hearing of the matter.
The Applicant's costs incurred in these proceedings were approximately $458,000.
The Tribunal may only make a costs order under s 60 of the Act, as an exception to the general principle that each party to proceedings in the Tribunal is to pay the party's own costs, if the Tribunal "is satisfied that there are special circumstances warranting an award of costs".
In order to be awarded costs in this matter, the Chief Commissioner has to establish, having regard to the matters set out in s 60(3), that there are "special circumstances" warranting an award of costs. The phrase "special circumstances" is not given any meaning in the legislation but the phrase has been considered judicially.
In Cripps & Another v G & M Dawson [2006] NSWCA 81, the Court of Appeal (Mason J, Santow JA and Brownie AJA) in considering an appeal by the owners of business premises against the award of damages in favour of the tenants, also were required to consider a cross-appeal by the tenants against the refusal to award costs by the Appeal Panel of the Administrative Decisions Tribunal. The cross-appeal was in relation to the refusal of the Appeal Panel to award costs under s 88(1) of the Administrative Decisions Tribunal Act, which provided that "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 satisfied that there are special circumstances warranting an award of costs".
The principal judgment was handed down by Santow JA. His Honour, in allowing the cross-appeal, provided the following guidance as to when circumstances would constitute "special circumstances" -
55 While determination of costs is a discretionary matter and moreover a matter of practice and procedure, as the Tribunal itself recognised, unreasonable conduct that is out of the ordinary and conduct which is grossly unreasonable can attract exercise of the Tribunal's power under s88 to award costs.
56 Here, the special circumstances relied upon by Dawson, said to be out of the ordinary, are twofold. First, Cripps failed to recognise the existence of Dawson's lease, refusing to register it without proper cause.
57 Second, taking advantage of that failure, and being fully on notice of Dawson's need for the lease to be registered and consent to its assignment given so that the sale of his business could proceed, in breach of the Act and of the lease Cripps withheld consent to that request for assignment of the lease. This was notwithstanding that Dawson had complied with the requirements of the Act, including in particular s41 thereof, covering consent to assignment. The result was the lost sale to Kilbane and the consequent damage.
58 Thus the commencement of the proceedings was prompted by the need to ensure that the lessor recognised both the existence of the lease and the obligation to consent to its assignment.
59 There followed five hearing days before the Tribunal at first instance, with further hearing days before the Appeal Panel, strenuously contested.
60 It is not necessary to determine whether in the circumstances the appellant committed fraud. In my view it suffices that the conduct of Cripps and Jones, in relying upon their status as the registered proprietors of the freehold and the 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.
The expression "special circumstances" is also found in other legislation and a similar interpretation has been suggested. For example, in Brian Lewis Groth v Secretary Department of Social Security [1995] FCA 1708 in considering whether there were "special circumstances" in Mr Groth's case which rendered it appropriate to disregard the whole or part of certain compensation payments he had received in the assessment of his pension entitlement under s 1184 of the Social Security Act 1991, Kiefel J agreed that the phrase "special circumstances" although imprecise is sufficiently understood not to require judicial gloss and that, for purposes of the appeal before her Honour, the only inquiry to be undertaken was whether there were special circumstances "to distinguish Mr Groth's case from others, to take it out of the usual or ordinary case".
In two other decisions, Burchett J in the Federal Court took the same approach, although in different contexts. In Minister for Community Services and Health and Medicare Participation and Review Committee v Chi Keong Thoo [1988] FCA 54, Burchett J expressed the view that "the core of the idea of 'special circumstances' is that there is something unusual or different to take the matter out of the ordinary course". And in Holpitt Pty Ltd v Varimu Pty Ltd & Others [1991] FCA 269; (1991) 103 ALR 684, his Honour made a similar observation that the expression requires some circumstance which takes the matter out of the ordinary course but also cautioned that -
As far as the expression "special circumstances" is concerned, it is an expression which is liable to be misunderstood unless care is taken to ask and answer the question, special in relation to what? "Special" is one of those words which derive almost all their meaning from the context. In relation to animals generally, any man is special; but when you are speaking of poets, he may need to be Milton.
In order to invoke s 60 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.
It is necessary to consider all the matters set in s 60(3), although some may not apply in a particular case. Finding special circumstances is not sufficient to exercise the discretion; it can only be exercised if the special circumstances identified by a party warrant the award of costs. Essentially, the Chief Commissioner in his claim for costs relies on all the matters set out in s 60(3) of the Act. The Chief Commissioner submits that on these various bases there are special circumstances warranting an award of costs.
The Applicant on the other hand contends "that this application appears to be motivated by a desire to punish the Applicant for withdrawing from the proceedings, rather than being a real basis of claim on the unreasonable behaviour of the Applicant". The Applicant also contends that in any case there are no special circumstances warranting an award of costs.
The Chief Commissioner's first base is that "the Applicant conducted the review proceedings in a way that unnecessarily disadvantaged the Respondent and prolonged unreasonably the time taken to complete the proceedings: s.60(3)(a) & (b)".
In this regard, the Chief Commissioner referred to the following conduct of the Applicant:
1. There were 16 directions hearings in the proceedings from February 2013 until November 2014 because of "the Applicant's failure to comply with Tribunal directions and the Applicant's conduct in obstructing the Respondent's efforts to obtain relevant documents for the purpose of preparing the Respondent's evidence";
2. The Applicant failed to comply with some seven Tribunal orders "concerning the service of its evidence or submissions";
3. On three occasions, "the Applicant either wrote to the Tribunal or sought the Respondent's consent concerning the extension of Tribunal timetables for the service of its evidence or submissions";
4. The "evidence in chief and submissions served by the Applicant on 18 June 2013 and 19 July 2013 were approximately 5-6 months after the application for review was filed" and was "in any event, incomplete and, in material respects, admitted by the Applicant to be subsequently incorrect".
5. On 11 February 2014, the Applicant indicated that "the Applicant would be seeking to adduce new evidence in relation to the dominant use issue". This resulted in further directions and this "suspended the Respondent's preparation of its evidence".
6. The expert evidence served by the Applicant on 16 September 2014 "contained new evidence" which required the Chief Commissioner "to re-brief its expert to address, inter alia, these issues". Further costs were incurred as a result.
7. In "Mathew Besant's further supplementary statement dated 28 August 2014 (served 16 September 2014) and Ms Cooper's further affidavit sworn 30 September 2014, both witnesses withdrew paragraphs in their earlier statements about cattle numbers on the Subject Lands during the relevant land tax years". This required the Chief Commissioner to "re-instruct" his experts and serve evidence in "counter-reply" and further costs were therefore incurred.
8. The Applicant withdrew its objection to the 2010 land tax year some "6 months after the commencement of the proceedings". The Chief Commissioner had already sought information and evidence from the Penrith City Council and "other third parties about Mr Ferrif's cattle operation". These were costs wasted.
9. The Applicant took "frivolous objections to the voluntary production of documents sought by the Respondent and to production of documents pursuant to summonses to produce issued by the Respondent". "These objections necessitated a number of directions hearings being listed where discussions occurred concerning the production of documents" and the "respondent incurred further costs".
10. The Applicant only provided the Chief Commissioner "a plan of the actual Subject Lands as late as 13 November 2013 and only after requested by the Respondent" and as a result the Chief Commissioner's "preparation of its evidence in chief was delayed".
11. When "the Applicant served its expert evidence 'in-reply' on 16 September 2014" it failed to comply "with the NCAT Procedural Directions 3: Expert Witnesses".
12. "The Applicant withdrew the whole of the proceedings very late on the afternoon of 28 November 2014 - being the last business day before the commencement of the hearing of the proceedings. As the hearing was set down for 2 weeks, the Respondent's counsel had already commenced preparation for hearing on 17 November 2014".
The Applicant rejects the Chief Commissioner's submission "that the Applicant conducted the proceedings in a way that unnecessarily disadvantaged the Respondent and prolonged the time taken to complete the proceedings" on various grounds. In response to the various matters drawn to the attention of the Tribunal by the Chief Commissioner in relation to s 60 (3)(a) and (b) of the Act, the Applicant submits:
1. The Applicant rejects the Chief Commissioner's submission "that the principal reason for the large number of directions hearings was the Applicant's failure to comply with Tribunal directions". The Applicant concedes that the Applicant failed "with the Tribunal's directions made on 13 February 2013 and 10 April 2013 for the filing of its evidence however (as it explained to the Tribunal at the time) the land the subject of the proceedings (the Subject Land) was used by a third party agistee, L&M Rodeo Co". "Similarly non compliance by the Chief Commissioner with the Tribunal's directions made on 19 June 2013 and 30 August 2013 were explained to the Tribunal and a variation to the timetable was sought and granted by the Tribunal".
2. The Applicant's case in relation to the use of land was dependent on the information and evidence obtained from L&M Rodeo Co, a third party and, if the Applicant had been the user, "then the adducing of this evidence would have been directly within its control". In any case, "there is no evidence of any prejudice suffered by the Chief Commissioner as a result of the delay in the Applicant serving its evidence which was the subject of the Tribunal's directions on 13 February 2013 and 10 April 2013 (i.e. over a year before the hearing was scheduled)". The Chief Commissioner consented to the extensions to the timetable for the Applicant to serve this evidence.
3. At the directions hearing on 22 May 2013, the Applicant provided an explanation to the Tribunal for the delay in the filing of the Applicant's evidence. The Chief Commissioner sought and obtained his costs for appearing at that directions hearing.
4. The parties agreed that the evidence to be filed by each party, as directed at the directions on 19 June 2013 be extended by one week for both parties. This did not affect the next directions held on 30 August 2013 and "there was no prejudice suffered by either side and no unnecessary costs incurred".
5. At the directions hearing on 11 February 2014, the Applicant was ordered to file its evidence and submissions on "Dominant Use" test by 11 March 2014. By agreement between the parties the evidence and submissions were filed on 14 March 2014 and 18 March 2014. The "slight delay did not prolong the time taken to complete the proceedings nor did it disadvantage the Chief Commissioner".
6. The parties agreed "that the timetable directed on 20 May 2014 for the submission of evidence by both parties would be extended by one month" and the Tribunal "on 15 August 2014 agreed to this adjustment to the timetable".
7. The Applicant rejects the Chief Commissioner's submission "that the evidence served by the Applicant on 18 June 2013 was largely a replication of the evidence received by the Chief Commissioner during the objection process". The Applicant concedes that whilst "the statement of Mr Cottle dated 13 June 2013 annexed his statement submitted to the Chief Commissioner during the objection process, the same cannot be said for the statements of Lisa Cooper dated 17 June 2013 or of Matthew Besant dated 16 June 2013".
8. The Applicant rejects the submission made by the Chief Commissioner that "he was disadvantaged" as a result of a request by the Applicant at the directions hearing on 11 February 2014 to file additional evidence and submissions in the relation to the "dominant use" issue. The Chief Commissioner, on 5 August 2013, "sought the Applicant's consent to an extension to time for him to file and serve his evidence and submissions because he wished to obtain expert evidence". The Applicant consented to the Chief Commissioner's request and the proposed timetable but the Applicant "put the Chief Commissioner on notice that the Applicant 'may need to obtain its own expert evidence'". At the directions hearing on 11 February 2014, "the Chief Commissioner did not raise any issue of being disadvantaged" when orders were made by the Tribunal to allow the Applicant to file additional evidence and submissions in relation to the "dominant use" issue.
9. The evidence of the experts filed by the Applicant on 16 September 2014, "went to the issue of the 'Dominant Use' of the Subject Land being for the maintenance of cattle for the purposes of sale and were clearly within the contemplation of the orders made by Deputy President Seiden on 11 February 2014 for the filing of additional evidence and submissions on Dominant Use by the Applicant".
10. The further supplementary statement made by Mathew Besant dated 28 August 2014 and Ms Cooper's further affidavit sworn on 30 September 2014 merely contained corrections "of a relatively minor nature made by the third party agistees such as changing the number of cattle in a minor way on the Subject Land at particular times".
11. The withdrawal by the Applicant on 19 July 2013 of its application for review in relation to the 2010 land tax year was made "as soon as it realised that based on the available evidence, the activities of the previous agistee, Mr Ferrif, were unlikely to satisfy the relevant tests of commerciality" and, at the time of the withdrawal, the Chief Commissioner's own evidence is that the Chief Commissioner had only "made enquiries of the Penrith City Council and the Valuer General as to the zoning of the land and the folio identifier". "The Applicant rejects the Chief Commissioner's submissions that costs were thrown away as a result of the Applicant's withdrawal on 19 July 2013 of its application for review in relation to the 2010 land tax year".
12. The Applicant "rejects the Chief Commissioner's submission that it took frivolous objections to the voluntary production of documents and access to documents sought by the Respondent".
13. The Applicant further rejects the Chief Commissioner's submission "that it refused to provide documents referred to in its expert reports" filed on 16 September 2014. All relevant documents were subsequently furnished to the Chief Commissioner.
14. Finally, in relation to the late withdrawal, the Applicant's submits that the "withdrawal not only saved the Chief Commissioner considerable costs but also gave the Chief Commissioner the result he sought". If costs are awarded "where a citizen withdraws its application before the hearing would create a perverse incentive for parties to push ahead through the hearing process for fear of an adverse costs order if they were to withdraw". "This is not conducive to a just, quick and cheap determination and is not what the legislature clearly intended."
The second basis on which the Chief Commissioner relies is that "the Applicant made a claim under section 10AA LTMA that had no tenable basis in fact or in law and the proceedings were lacking in substance: s.60(3)(c) & (e)".
The Chief Commissioner, in his written submissions, refers in some detail to the relevant legislation and case law dealing with the "dominant use" of land test and submits that for "the purposes of section 60(3)(c) & (e), the Tribunal does not need to consider the whole of the evidence previously filed and served in the proceedings". But that "the Respondent's Written Submissions filed 28 April 2014 ("RWS") as showing clearly that the dominant use of the Subject Lands during the relevant tax years was for the purpose of industrial subdivision and development". "In particular, the Respondent submits that:
1. it is clear that the Applicant's subdivision and industrial development use of the Subject Lands has been intense and conducted continuously throughout the relevant land tax years;
2. photos of adjoining properties clearly show the extensive industrial use of adjoining lands that consist of large industrial warehouses and commercial offices - the Subject Lands were awaiting similar future development;
3. the Subject Lands were continuously subdivided throughout the relevant land tax years. There was an active use for subdivision, some of which included easements for the right to drain water and carriageway burdening the Subject Lands.
4. The Applicant's use of the Subject Lands for subdivision and industrial development was of a very large scale and magnitude both in terms of devotion of labour, resources, expenditure and consistency. Having regard to all the facts, matters and circumstances, this use overshadowed any other use of the Subject Lands and imparted the land with the character industrial development. The dominant "use" of the Subject lands during the relevant land tax years was clearly not for the "maintenance of cattle for the purpose of selling them … or their natural increase or bodily produce": s10AA(3)(b) LTMA"
The Chief Commissioner further submits that it "was more difficult for the Applicant to have succeeded on the commerciality test than the dominant test". The Chief Commissioner, refers in his written submissions, to the principles settled by courts to determine this test and submits that the relevant primary production activity in the relevant years "clearly fell short of the high thresholds imposed by the commerciality test under s 10AA(2) LTMA". Reliance was placed on the Respondent's expert evidence, which "clearly showed that the primary production business of L & M Rodeo was haphazard, patchy and, to some extent, chaotic".
In response, the "Applicant rejects this submission noting that the Chief Commissioner made no mention of this during the proceedings". And that, as a matter fact, "the Chief Commissioner went ahead with extensive preparation and management of his case which included:
1. Engaging and adducing evidence in the form of extensive expert reports from:
1. A financial expert, Mr Mark Bryant from Korda Mentha;
2. A cattle expert, Mr Peter Schuster;
3. A town planning expert, Mr Harvey Sanders and
4. A rodeo expert, Mr Stephen Bradshaw.
1. 3 Inspections of the Subject Lands (by a different solicitor from the Crown Solicitor's Office on each occasion accompanied by Ms Bishop of counsel) on:
1. 22 August 2013, Mr Woodward, solicitor of the Crown Solicitor's Office and Ms Bishop of Counsel attended a roadside inspection of the Subject Lands;
2. 3 and 4 February 2014, Mr Wixted, solicitor, of the Crown Solicitor's Office and Mr Mescher and Ms Bishop of Counsel, together with Messrs Bryant, Schuster and Bradshaw (and representatives of the Applicant) inspected the Subject Land at Erskine Park and other lands at Catherine Field, Bringelly, The Oaks and Running Stream from which the agistees conducted their business; and
3. 12 November 2014, Ms Kerr, solicitor, of the Crown Solicitor's Office and Mr Mescher and Ms Bishop of Counsel attended a further roadside inspection of the Subject Land at Erskine Park;
1. 37 requests for voluntary production of documents to assist in the preparation of the Chief Commissioner's case;
2. 15 summonses issued by the Tribunal on the application of the Chief Commissioner, including 3 summonses to Penrith City Council;
3. a case file which comprised approximately 52 arch folders and
4. instructing Counsel to appear at 10 of 16 directions hearings."
The Applicant submits that the conduct of the Chief Commissioner as set out above, "particularly the number of site inspections and many requests for production of documents, is not consistent with the Chief Commissioner's claim that the Applicant's case 'for the primary production exemption for the subject lands was a weak one'".
The Applicant further submits that if, "after the numerous inspections, expert reports, documents produced and a file which comprised approximately 52 arch folders, the Chief Commissioner had had the view that he now has, namely there was no tenable basis in fact or law for the Applicant's position, he could have, and should have, moved under s.55 of the NCAT Act to dismiss the Applicant's application, but no such complaint was ever made by the Chief Commissioner".
The Applicant further notes that the Chief Commissioner "knew the Applicant's case well ahead of the hearing, by over a year".
The Applicant also submits that "the Applicant was reliant for a considerable part of its case on evidence from parties who agisted cattle on the Subject Land as part of their business" and the "Applicant's position was only as good as the agistees could make it as to the use of the land, and the substance and significance of the commercial aspects of the agistees' business".
The Applicant further submits that "the Subject Land has been owned and used for primary production since shortly after the Second World War" and "had been treated as exempt from land tax prior to 2009". And further submits, that relatively small portions of the Applicant's land had been developed, leaving approximately 98 hectares of paddocks used by the agistees for their cows and calves, which "was not marked for 'imminent' development as submitted by the Chief Commissioner and there has been no evidence adduced by the Chief Commissioner in support of this proposition".
The Applicant also submits that "where there has been no hearing on the merits, the Tribunal is not able to have regard, as is required by s60(3)(c), to the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law". In support, the Applicant cited the High Court decision in Re Minister for Immigration and Ethnic Affairs, ex part Lai Qin [1997] HCA 6; (1997) 186 CLR 622 where his Honour McHugh J noted 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 went on to say:
Having read the Tribunal's decision and the affidavit filed in support of the application for the grant of an order nisi, it seems to me that, although the prosecutrix had an arguable case, she did not have strong prospects of success. If I had to make a prediction about the outcome of her application, I would think that it would probably have failed. However, as I have said it is not the function of a court on costs application - in most cases at all events - to make a prediction as to the outcome of a hypothetical case.
As a third base, the Chief Commissioner relies on s 60(3)(d) and submits that the "proceedings were factually complex and, as a result, the Respondent, in defending the proceedings incurred significant legal costs". The Chief Commissioner drew attention to the following factual aspects in support of his submission:
1. The Chief Commissioner had to brief a town planning expert to confirm the boundaries of the Subject Lands and to identify the relevant lots that were the subject of the numerous development applications lodged by the Applicant over the years. In addition, the town planning expert was required to give his opinion on the development plans, council approval of the development and the general history of the subdivision and development of lands surrounding the Subject Lands;
2. In addition to the Subject Lands, the agistee, L&M Rodeo conducted its primary production business on a number of other properties, which had to be inspected by the Respondent's legal representatives and his experts;
3. "A large amount of the evidence contained in the statements of Mr Besant and Ms Cooper consisted of the various genetic methods used by them to ensure the breeding of prize-winning bucking bulls. Accordingly, it was necessary for the Respondent to brief a rodeo expert, Mr Bradshaw, to give his opinion concerning the rodeo business and the supply of bucking bulls to rodeos"; and
4. "The large volume of material served by each party in its evidence in chief and reply shows the factual complexity of the proceedings".
In response, the "Applicant rejects the Chief Commissioner's submission that the proceedings were factually complex". The Applicant submits that because the subject land was not used in the relevant years by the Applicant as the landowner, "made the preparation of both parties' evidence more time consuming and more dependent on obtaining information from the agistee who was not a party to the proceedings" but "that was a procedural issue, it did not, …. make the matter or issues more complex".
The Applicant also submits that the "proceedings did not involve complex legal issues" and only "involved one section of one Act, namely s 10AA of the Land Tax Management Act 1956 (LTMA Act)."
As a fourth base, the Chief Commissioner submits that "the Applicant has failed to comply with the duty imposed under section 36(3) (section 60(3)(f)".
The "guiding principle" for the Act "is to facilitate the just, quick and cheap resolution of the real issues in the proceedings": s 36(1). Section 36(3) provides that a party to proceedings in the Tribunal and/or an Australian legal practitioner or other person who is representing a party in proceedings in the Tribunal -
…. is under a duty to co-operate with the Tribunal to give effect to the guiding principle and, for that purpose, to participate in the processes of the Tribunal and to comply with directions and orders of the Tribunal
The Chief Commissioner relies on matters referred to in relation to s 60(3)(a) and (b) and submits that the matters "show that the course of conduct by the Applicant from commencement of the proceedings until their withdrawal does not amount to conduct that can be characterised as the just, quick and cheap resolution of the real issues in dispute in the proceedings". Additionally, the Chief Commissioner submits that "the Applicant breached section 36(3) by failing to comply with the directions and orders of the Tribunal" made on seven occasions.
The Applicant rejects the Chief Commissioner's submission but "does acknowledge that the existence of agistees, the standard of their business record keeping and the multiple sites from which they conducted their business inevitably meant that the preparation of both parties' case for trial could never be cheap'".
The Applicant further submits that the "Challenges and objections by the Applicant to requests for voluntary production of information and documents and to summons were made in a timely and detailed manner and, where applicable, in accordance with the published guidelines of NCAT".
Finally, the Chief Commissioner relies on s 60(3(g) and submits that the "late withdrawal of an application on the business day before the hearing is a relevant factor to take into account for the purpose of awarding costs".
The Applicant submits that it is not a matter that the Tribunal should take into account because the "Applicant's withdrawal not only saved the Chief Commissioner considerable costs but also gave the Chief Commissioner the result he sought".
The Chief Commissioner's first base was that "the Applicant conducted the proceedings in a way that unnecessarily disadvantaged the Respondent and prolonged unreasonably the time taken to complete the proceedings: s.60(3)(a) & (b)". This was on the basis that there were 16 directions hearings, failure by the Applicant to comply with the Tribunal's orders on seven occasions, delay in filing the Applicant's evidence, submissions, taking frivolous objections to voluntary production of documents and various other matters as set out in paragraph 24 above.
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.
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.
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.
In this matter, Mr Mescher, counsel for the Chief Commissioner next laid a great deal of reliance on s 60(3)(c) and (e) to contend that the Applicant made a claim for the primary production exemption which had "no tenable basis in fact and law" and "lacking in substance".
The Tribunal notes that there were 16 directions hearings, counsel for the Chief Commissioner appearing at 10 of them, but on no occasion did the Chief Commissioner raise this contention or independently seek to have the matter struck out on this basis. The Chief Commissioner could have sought to have the matter dismissed by the Tribunal pursuant to s 55(1)(b). Section 55(1) allows the Tribunal to dismiss at any stage any proceedings before it in the circumstances set in paragraphs (a) to (d). Section 55(1)(b) allows the Tribunal to dismiss proceedings that the Tribunal considers "are frivolous or vexatious or otherwise misconceived or lacking in substance".
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.
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.
The real difficulty with this contention is that the matter was not heard by the Tribunal and what counsel was seeking to establish was a hypothetical basis on which for the Tribunal now to conclude that the Applicant's case was simply not tenable and lacking in substance. Counsel submitted that, because various industrial developments had occurred on adjoining land also owned by the Applicant, the Tribunal should conclude that the subject land was awaiting similar development. That might have been the case in the long term, but the real question of fact for determination required an objective analysis, having regard to all the facts, to determine whether the primary production activities on the subject land in the relevant years was "sufficiently substantial" and had a "significant and substantial purpose or character". This exercise required a very careful examination of all the facts which, unfortunately, were not all before the Tribunal.
I agree with counsel for the Applicant that "where there has been no hearing on the merits, the Tribunal is not able to have regard, as is required by s 60(3)(c), to the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law". I think, Lai Qin, cited by counsel in support of this submission, confirms that it is not the function of a Tribunal "on costs application - in most cases at all events - to make a prediction as to the outcome of a hypothetical case". As suggested in Lai Qin by the High Court, this is the general rule. In some cases, where the facts are brief and not in dispute, the matter can be considered on the "papers". But this was not such a case. In this matter there was a great volume of evidence including several expert reports on various aspects of the land. Against that background, the Tribunal was, in any case, really not in a position to determine in a conclusive manner whether the Applicant's claim had no tenable basis in fact or law or lacking in substance.
Next, the Chief Commissioner, relying on s 60(3)(d), submitted that the "proceedings were factually complex and, as a result, the Respondent, in defending the proceedings, incurred significant legal costs". This submission was made by the Chief Commissioner notwithstanding his strong view that the Applicant did not have a tenable case. 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.
In respect of the fourth basis for his claim for costs, the Chief Commissioner relied on s 60(3)(f) of the Act and submitted that the Applicant failed "to facilitate the just, quick and cheap resolution of the real issues in the proceedings". This, it was submitted, occurred because the conduct highlighted by the Chief Commissioner in relation to the criteria set out for his claim under s 60(3)(a) and (b) equally applied to the basis under s 60(3(f). But, as indicated above, in the absence of any evidence of deliberate or "grossly unreasonable" conduct to frustrate or prevent the "just, quick and cheap resolution of the real issues in the proceedings", it is difficult for the Tribunal to find that the Applicant breached s 36(3) of the Act. I am of the opinion that, 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.
The final basis on which the Chief Commissioner placed some reliance was the late withdrawal of the application by the Applicant. This was a matter, the Chief Commissioner submitted the Tribunal was required to take into account when considering any other matter the Tribunal considers relevant pursuant to s 60(3)(g). The Tribunal notes with a great deal of interest that matters set in s 60(a) to (f) relate to the procedural aspects of proceedings before the Tribunal but make no mention of withdrawals or settlement of applications.
On one view, a withdrawal of a claim or settlement of a claim would, in a real sense, lead to a just, quick and cost effective resolution of the matter. I agree with the submission of the Applicant that the "Applicant's withdrawal not only saved the Chief Commissioner considerable costs but also gave the Chief Commissioner the result he sought". I also think that to award costs merely on the late withdrawal of a 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.
There will accordingly be no order as to costs.
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
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Decision last updated: 19 May 2015