//
[2021] VSC 409
General information, not legal advice.
Supreme Court of Victoria
2021-07-07
DELANY J
Original judgment source is linked above.
INTEREST - Interest payable on refund of Stamp duty - Whether appropriate to have regard to the interest rate payable to refunds under Part 10 of the Taxation Administration Act 1997 (Vic) when determining the interest rate to be applied pursuant to s 58 of the Supreme Court Act 1986 (Vic) - 'Good cause' not shown to depart from maximum penalty rate applicable pursuant to s 58 of the Supreme Court Act 1986 (Vic) - (Vic), - (Vic), , (1), - ; ; ; ; ; referred to.
COSTS - Indemnity costs - Issue maintained by Commissioner until trial abandoned without explanation - Overarching obligation to narrow the issues in dispute - Indemnity costs of the abandoned issue to be paid by the Commissioner - Calderbank offer was a genuine offer to compromise - Commissioner's refusal to accept the offer unreasonable - Civil Procedure Act 2010 (Vic), s 23 - Hazeldene's Chicken Farms (2005) 13 VR 435 applied; North West Melbourne Recycling [2017] VSC 726; Commissioner of State Revenue v Challenger Investments Ltd (No 2) [2011] VSCA 398 referred to.
1 On 17 March 2021, reasons were delivered in two related proceedings, proceeding 04306 of 2019 ('the Lonsdale proceeding') and proceeding 04304 of 2019 ('the South Melbourne proceeding').[1] In both proceedings, the plaintiffs sought restitution of money paid as stamp duty, alternatively, an order the Commissioner of State Revenue ('the Commissioner') refund, within 14 days of the order, duty previously paid on the basis that the transactions brought to tax were exempt from duty under Chapter 3 of the Duties Act 2000 (Vic) ('the Act').
2 The substantive issues in the related proceedings having been determined in favour of the plaintiffs, three issues remain for determination. The first concerns the quantification of the refund in each case. The second concerns interest on the amounts to be refunded. The third concerns costs of the South Melbourne proceeding.
3 The parties are agreed as to the amount of the refund to be paid in each case. In the Lonsdale proceeding, the Commissioner is to refund $475,523 to the first plaintiff, Lonsdale Investment CD Pty Ltd as trustee for the Lonsdale Unit Trust. In the South Melbourne proceeding, the Commissioner is to refund $558,562 to the first plaintiff, Razzy Australia Pty Ltd as trustee of the South Melbourne Unit Trust.
4 As to interest, the plaintiffs in both proceedings seek an order that the Commissioner pay interest on the refund amounts pursuant to s 58 of the Supreme Court Act 1986 ('SCA') at the rate of 10% per annum from the date of payment to the date of refund. In the case of the South Melbourne Unit Trust, payment occurred on 19 March 2018. In the case of the Lonsdale Unit Trust, payment occurred on 20 March 2018.
5 The Commissioner does not oppose an order for payment of interest, but submits that interest should be fixed at a rate that reflects the market rate under s 25(1)(a) of the Taxation Administration Act 1997 (Vic) ('the TAA').
6 The submissions filed on behalf of the Commissioner do not specify the rate for which the Commissioner contends. Sections 25(1) and (2) of the TAA are in the following terms:
25 Interest rate
(1) The interest rate is the sum of -
(a) the market rate, being -
(i) unless an order is in force under subparagraph (ii), the Bank Accepted Bills rate; or
(ii) the rate specified for the time being by order of the Minister published in the Government Gazette; and
(b) the premium rate, being 8% per annum.
(2) The Bank Accepted Bills rate in respect of any day is the average of the daily yields for 90 day Bank Accepted Bills published by the Reserve Bank of Australia for the month of May in the financial year preceding the financial year in which the day occurs.
7 The 'interest rate' generally payable under s 25(1) of the TAA is the combination of the market rate in s 25(1)(a) and the premium rate referred to in s 25(1)((b), being 8% per annum. However the rate for which the Commissioner contends is the market rate only, as defined in s 25(1)(a), and not an 'interest rate' that includes the 8% premium. The Commissioner advances that contention on the basis that the 'market rate' specified in s 25(1)(a) is the rate to be applied in proceedings to which Part 10 of the TAA has application.[2]
8 As to costs, in the Lonsdale proceeding, the parties are agreed that the plaintiffs are entitled to their costs, including reserved costs, on a standard basis to be paid by the Commissioner. In the South Melbourne proceeding, the plaintiffs seek an order that the Commissioner pay the plaintiffs' costs on an indemnity basis for the whole of the proceeding. Alternatively, on a standard basis up to 11 October 2019 and on an indemnity basis thereafter, or alternatively, on a standard basis up to 4 February 2020 and on an indemnity basis thereafter.
9 In support of an indemnity costs order for the whole of the South Melbourne proceeding, the plaintiffs in that proceeding submit the Commissioner should never have defended the proceeding. They submit the Commissioner's argument that s 89D(a) of the Act did not apply to redemptions was always 'hopeless' and the argument that the unit redemption was not 'in connection' with the rollover was, 'if not hopeless, strained and at odds with the hard evidence'.[3]
10 The plaintiffs made five offers to the Commissioner to settle the proceedings, all such offers being made well before the hearing.[4] The two dates that mark the alternative costs orders sought by the plaintiffs in the South Melbourne proceeding are explained by the making of a Calderbank offer on 11 October 2019 and by the making of an offer of compromise on 31 January 2020 ('Offer of Compromise').
11 The Commissioner opposes an order for indemnity costs whether for the whole of the costs of the South Melbourne proceeding, or from the date of the Calderbank offer, or from the date of the Offer of Compromise.
12 There have been a series of detailed submissions filed by the parties in relation to contested questions of interest and costs.[5]
14 Section 58 of the SCA provides:
Interest to be allowed when debts or sums certain recovered
(1) If in a proceeding a debt or sum certain is recovered, the Court must on application, unless good cause is shown to the contrary, allow interest to the creditor on the debt or sum at a rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 (Vic) or, in respect of any bill of exchange or promissory note, at 2% per annum more than that rate from the time when the debt or sum was payable (if payable by virtue of some written instrument and at a date or time certain) or, if payable otherwise, then from the time when demand of payment was made.
15 The Commissioner does not contend that s 58 of the SCA has no application to the two cases. The Commissioner argues for a rate other than the maximum rate for which s 58 provides.
16 Section 58 specifies that the Court must allow penalty interest under that provision 'unless good cause is shown to the contrary'. The question for determination is whether the Commissioner has shown 'good cause' why interest should not be paid at the maximum rate fixed under s 2 of the Penalty Interests Rates Act 1983 ('the PIR Act').
17 Both proceedings are proceedings to which s 18 and Part 4 of the TAA have application. Section 18 of the TAA relevantly provides:
18 Application of Part
(1) Proceedings for the refund or recovery of tax paid or purportedly paid under a taxation law, whether before or after the commencement of this section, must not be brought, whether against the Commissioner or otherwise, except as provided in this Part.
(2) This Part has effect despite the provisions of another taxation law.
(3) ...
(4) In this Part, proceedings includes -
(a) seeking the grant of any relief or remedy in the nature of certiorari, prohibition, mandamus or quo warranto, or the grant of a declaration of right or an injunction; or
(b) seeking any order under the Administrative Law Act 1978.
(5) For the avoidance of doubt, it is declared that an amount by which tax is overpaid is taken to be tax for the purposes of this Part.
19 The Commissioner refers to Part 10 of the TAA as containing a comprehensive regime for objections to assessments, the determination of objections, and appeals from or reviews of disallowances of objections. In disputes governed by Part 10, where a taxpayer is successful and is entitled to a refund of tax paid, the Commissioner must pay interest on the amount refunded at the market rate referred to in s 25(1)(a)(i).[8]
20 The Commissioner submits the main difference between Part 4 and Part 10 of the TAA is that Part 4 applies where no assessment has been issued,[9] and Part 10 applies where there has been an assessment.[10] It is submitted that as both Parts of the TAA allow a taxpayer to dispute its tax liability and, if successful, to receive a refund of any overpaid amount, that a consistent approach is called for. On that basis the Court is urged to fix the rate of interest under s 58 of the SCA at the equivalent rate that would have applied if the proceedings were proceedings to challenge a tax liability under Part 10.
21 The Commissioner relies on the decision of Mandie J in Landrow Properties Pty Ltd v Commissioner of State Revenue.[11] In that case both parties agreed there was an entitlement to interest under the SCA. His Honour determined the disputed question as to the applicable rate as follows:
It seems to me that the Court is entitled to take into account what interest rate would be applicable to the Commissioner under the Administration Act in determining what rate of interest should be applied [under the SCA].[12]
22 Opposing such an approach, the plaintiffs refer to the decision of Croft J in North West Melbourne Recycling Pty Ltd v Commissioner of State Revenue (No 2),[13] where, after setting out s 58 of the SCA, his Honour said:
In this case, the Taxpayer demanded the refund of the land tax from the Commissioner under cover of a letter dated 29 April 2016. Interest should therefore be payable from this date. The rate of interest under s 2 of the Penalty Interest Rates Act 1983 has been fixed at 10% since 1 February 2017 ... Interest should therefore be payable on the refund amount of $244,486.87 at the rate of 9.5% ... and at the rate of 10% from 1 February 2017 to the actual date of payment.[14]
23 The plaintiffs refer to a number of decisions where the importance of awarding interest pursuant to ss 58 and 60 of the SCA at the maximum rate determined under the PIR Act has been emphasised.
24 In Hosking v Ipex Software Service Pty Ltd (No 2),[15] Habersberger J said the purpose of statutory interest under the SCA was to:
(a) compensate a plaintiff for the loss or detriment which he or she has suffered by being kept out of his or her money and deprived of its use during the relevant period; and
(b) to encourage the early resolution of litigation.[16]
25 Concerning the maximum rate, in Hartley Poynton Ltd v Ali,[17] Ormiston JA observed:
The pattern in Victoria has been that, unless good cause be shown, successful plaintiffs are ordinarily awarded interest at the rate prescribed under the Penalty Act without too fine a regard for these distinctions.
26 In Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (No 3),[18] Gillard J said:
'The practice has evolved in this State to apply as a general rule the rate fixed pursuant to the Penalty Interest Rates Act ...'[19]
27 More recently in Hodgson v Amcor Ltd (No 9),[20] Vickery J said:
'... and indeed, in a rare case, the Court should refuse to allow interest at all or allow interest on terms which are less onerous to the judgment debtor than those prescribed by the sub-section ...
...
However, the settled practice in Victoria is that, unless good cause to the is shown, the statutory maximum rate is used. ... The statutory rate was described as a "benchmark" by Fullagar, Marks and J.D Phillips JJ in Clarke v Foodland Stores Pty Ltd[21] and in Kalenik v Apostolidis (No. 2),[22] Hargrave J said to like effect: "As a general rule, the starting point is the penalty rate ... the penalty rate is routinely awarded by the Court".'[23]
28 The plaintiffs submit there is no reason for the Court not to award interest at the maximum rate. They submit that unless penalty interest is awarded in full, unsuccessful litigants, such as the Commissioner, will not have the same incentive to engage in early and earnest attempts to resolve litigation. They submit their claims were claims at general law that complied with the procedural requirements of Part 4 of the TAA where there has been no assessment. They submit that whatever Part 10 of the TAA may provide about interest is irrelevant. Further, that if the proceeding is properly regarded as one under Part 4 of the TAA, North West Recycling[24] supports the position for which they contend.
29 The Commissioner submits that s 58 of the SCA leaves open awarding interest at a rate lower than the prescribed rate. It is contended that it is appropriate to have regard to the interest rate applicable under Part 10 of the TAA so as not to discriminate between those taxpayers who pay the disputed amount of duty pursuant to an assessment rather than, as here, making a voluntary payment of tax and bringing a proceeding under Part 4 seeking a refund.[25]
30 I do not consider the arguments advanced on behalf of the Commissioner provide good cause to depart from the settled practice that interest be paid pursuant to s 58 of the SCA on the amounts to be refunded at the maximum rate under the PIR Act.
31 The authorities referred to above, including Johnson Tiles[26] and Hodgson,[27] establish the settled practice to which I have referred. To award interest pursuant to s 58 at the maximum penalty rate is consistent with the purpose identified by Habersberger J in Hosking,[28] of seeking to encourage early resolution of disputes, by all litigants, including the Commissioner. There is, in my opinion, another reason, one of statutory construction of the TAA, that tells against the position for which the Commissioner contends.
32 In cases to which Part 10 of the TAA has application, Parliament has seen fit to expressly state that rather than the interest rate for which s 25(1) of the TAA provides, the Commissioner must pay interest calculated at the 'market rate' as defined in s 25(1)(a)(i).[29] Parliament has not seen fit to specify that the 'market rate' is also to apply in the case of Part 4 proceedings.
33 The Commissioner asks the Court to look to the TAA as a whole, and for consistency, to adopt the 'market rate' when applying s 58 of the SCA. However, when Parliament intended the interest provisions in the TAA should be taken into account when determining applicable rates of interest under other statutory provisions, it said so:
27 Interest rate to prevail over interest otherwise payable on a judgment debt
If judgment is given by, or entered in, a court for an amount of unpaid tax (or an amount that includes an amount of unpaid tax), the interest rate determined in accordance with this Division continues to apply, to the exclusion of any other interest rate, until the tax is paid.
34 The effect of s 27 of the TAA, where applicable, is to override other inconsistent interest provisions, no matter in what statute they are found, including the SCA.
35 I accept the submission on behalf of the plaintiffs that there is nothing in the TAA that 'cuts down' the jurisdiction of the Court to award interest at the maximum rate under s 58. Section 27 of the TAA does that directly where it has application. There is nothing in the TAA that supports the approach for which the Commissioner contends.
36 The reasons in Landrow Properties[30] upon which the Commissioner placed reliance do not disclose what arguments were advanced that led Mandie J to have regard to the rate applicable under the TAA. With due respect to his Honour, a very experienced Judge in this area, in light of the interest provisions of the TAA to which I have referred, I do not consider it appropriate to have regard to the interest rate applicable under Part 10 of the TAA when determining the rate of interest to be applied to Part 4 proceedings under s 58 of the SCA. Even if it were appropriate to have regard to Part 10 and s 25(1)(a) of the TAA, I do not consider those provisions provide 'good cause' to depart from the usual practice of awarding interest at the maximum rate so as to give full effect to the policy that underpins s 58 of the SCA.
37 Interest is to be paid on all outstanding amounts until refunded in full at the rate of 10% per annum.
38 Under s 24 of the SCA, the costs of and incidental to all matters in the Court are in the discretion of the Court. The Court has full power to determine by whom and to what extent the costs are to be paid.
Section 24 adopts a flexible test. There is plainly no costs matrix or formula that can be applied in determining whether the parties have met their obligations. Rather, the court must weigh the legal costs expended against the complexity and importance of the issues and the amount in dispute, in order to determine whether the parties used reasonable endeavours to ensure those costs were proportionate.[31]
40 Under s 65C(1) of the Civil Procedure Act 2010 (Vic) ('CPA'), the Court has power to make any order as to costs it considers appropriate to further the overarching purpose of the CPA, namely, to facilitate the just, efficient, timely and cost‑effective resolution of the real issues in dispute.
41 Under the Supreme Court (General Civil Procedure) Rules 2015 (Vic) ('the Rules'), costs are awarded either on a standard basis or on an indemnity basis.
42 In PSC RZ investments Pty Ltd v The National Golf Holdings Ltd,[32] the Court of Appeal discussed the circumstances in which indemnity costs orders might appropriately be made, noting that those circumstances are not closed:
43 The plaintiffs in the South Melbourne proceeding relied on three grounds, said to operate independently of one another in support of an indemnity costs order:
(a) the first, that where a defence has been relied on that should not have been raised, the Court may order indemnity costs against the losing party for the whole of the proceeding;[39]
(b) the second, where a Calderbank offer has been served and has been unreasonably rejected, the Court may order indemnity costs from the date of the offer;[40] and
(c) the third, where an offer of compromise has been served under r 26 of the Rules and the party making the offer has achieved an outcome more favourable than the Offer, the Court must order costs on an indemnity basis from the second business day after the date of the offer, "unless the Court otherwise orders".[41]
The contention that defences should not have been raised
44 The basis relied upon by the plaintiffs in the South Melbourne proceeding in support of an indemnity costs order for the whole of the proceeding is what is said to be the hopelessness of the Commissioner's case and the refusal on the part of the Commissioner to recognise that to be so when, on repeated occasions, the plaintiffs drew attention to flaws in the Commissioner's case.
45 In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd,[42] Woodward J said that a 'special' costs order may be warranted when:
... it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established laws.[43]
47 In North West Melbourne Recycling,[54] Croft J found the Commissioner had inexplicably failed to address an obviously critical legislative provision, such that properly advised the Commissioner should have known that there was no chance of success.[55] Indemnity costs were ordered in that case, both because properly advised, the Commissioner should have known there was no chance of success, and also for failure to accept an offer of compromise.[56]
48 The plaintiffs in the South Melbourne proceeding submitted there were two obvious weaknesses in the Commissioner's case, both of which were drawn to the Commissioner's attention from an early stage which warrant a 'special' costs order. The first concerned the Commissioner's contention that s 89D(a) of the Act did not apply to the redemption of units. The second concerned the Commissioner's contention that the requirement in s 40 of the Act that the redemption of units be 'in connection with' Paul De Lutiis ceasing to be a member of one complying fund and becoming a member of or otherwise being entitled to benefits in another such fund, was not satisfied.[57]
49 By letter dated 19 July 2019, the Commissioner refused to pay the refund sought by the plaintiffs. In that letter, the Commissioner stated, concerning the redemption of units:
'[I]n order for section 40 to apply to a relevant acquisition by virtue of section 89D(a), it is still necessary that the relevant acquisition arises from a transfer from one complying superannuation fund to another. In this case there was no transfer of units between relevant superannuation funds. Rather, there was a redemption of the units ...'.[58]
50 When making the 11 October 2019 Calderbank offer, the plaintiffs asserted that:
'[T]he redemption was tantamount to a direct transfer of the units ... There is, therefore, no doubt on the plaintiff's part that redemption in s 40 of the Duties Act 2000, through s 89D(a) applies to exempt the acquisition ...'.[59]
51 The Commissioner, in his defence dated 4 November 2019, repeated and confirmed the position previously articulated in his letter of 19 July 2019 as to the redemption of units.[60] The same position was maintained in submissions filed and served on 13 July 2020. Those submissions followed earlier correspondence from the solicitors for the plaintiffs on 26 March 2020 which asserted that the plaintiffs' case concerning the application of s 89D of the Act to acquisitions made as a result of a redemption of units was 'very strong'.
52 The trial took place on 29 September 2020. Contrary to the position that had been maintained by the Commissioner consistently since 19 July 2019, during the hearing, the Commissioner accepted that s 89D(a) of the Act does not exclude an acquisition resulting from a redemption of units.[61] No reason was given why that argument, that until the trial formed a central plank in the Commissioner's case, was abandoned.
53 The Reasons include the following in relation to the redemption of units and s 89D(a) of the Act:
[44] The Commissioner accepted as a matter of construction that a notional transfer arising as result of an acquisition caused by a redemption of units in a landholder could be exempt under s 89D(a).
...
[58] ... The Commissioner accepted during the hearing that s 89D(a) does not exclude an acquisition resulting from a transfer, redemption or cancellation of units.[62] ...
...
[72] For the reasons discussed, and noting that during the hearing the Commissioner accepted it to be so,[63] an acquisition of an interest made as a result of a redemption of units falls within s 40 and is imported into Chapter 3 by s 89D(a).[64]
54 The plaintiffs submit the position previously advanced by the Commissioner in relation to the redemption of units was not open on the terms of s 89D(a) of the Act, and was not supported by the legislative history. In substance they submit that the Commissioner, properly advised, should have known that the redemption argument was bound to fail.
55 Opposing indemnity costs, based on the persistence with and then the late abandonment of the 'redemption' argument, it was submitted the Commissioner should not be criticised for making a concession. It was submitted the concession should not be mischaracterised as an admission that the point, let alone the whole of the Commissioner's case, was hopeless.[65]
56 The Commissioner did not elaborate upon why, at trial, the Commissioner accepted that as a matter of construction a notional transfer arising as a result of an acquisition caused by a redemption of units in a landholder could be exempt under s 89D(a) of the Act.[66] As submitted on behalf of the plaintiffs in support of an indemnity costs order, both the proper construction of the section and the complex legislative history was found to support the construction of s 89D(a) of the Act, importing s 40, for which the plaintiffs contended.[67]
57 I do not accept that the Commissioner's persistent pursuit of the redemption argument, and late abandonment of it without any explanation, necessarily means that the position previously contended for was 'hopeless'. However, in abandoning what was undoubtedly a central plank of the case for the Commissioner at trial without explanation, the Commissioner did nothing to explain why the 'concession' was made. Was it made because the Commissioner had formed the view that the argument was 'hopeless' or was the concession made for some other and if so what reason?
58 As the person having responsibility for the administration of taxation law for the State of Victoria, and, as the Commissioner submits, a person having an interest in obtaining the guidance of the Court as to the correct construction and application of relevant provisions of the Act, the failure to explain the very belated 'concession' and to elaborate upon the construction arguments that led to the point being abandoned was, to say the least, unhelpful.
59 The costs submissions on behalf of the Commissioner contended that as the Reasons devoted 29 paragraphs to 'explaining why the concession was rightly made', the redemption argument could not properly be characterised as 'hopeless'. I do not agree. The fact that 29 paragraphs of the Reasons are occupied with a consideration of s 89D(a) of the Act, of its text, purpose, context and its detailed legislative history is not a matter that assists the Commissioner in resisting an award of indemnity costs, at least in connection with the redemption of units issue.
60 Of more relevance to the indemnity costs application is the fact that having maintained that a redemption of units did not satisfy the requirements of s 89D(a) of the Act from mid-2019 and, having caused the plaintiffs to prepare their case, and no doubt to incur substantial costs on the basis this was a critical issue, at the very last moment, without explanation, the Commissioner changed course. That conduct, in the absence of explanation, while not sufficient to support an order for indemnity costs of the whole of the proceeding, is conduct that supports the making of an order for indemnity costs from the outset in relation to that issue.
61 That is the case not because of a finding of bad faith or because to maintain the argument was necessarily hopeless. It is appropriate to make an order for indemnity costs of that issue because the Commissioner put the plaintiffs to very considerable trouble and expense in relation to the issue. The Commissioner did so and then abandoned the argument without explanation. The overarching obligation to narrow the issues in s 23 of the CPA is not a duty that only applies once the case gets to trial. It is a duty that applies throughout the whole of the proceeding.
62 The Court found the argument, upon which the Commissioner for so long relied, flawed both as a matter of construction and having regard to the detailed legislative history. The pursuit and then the abandonment of the argument in such unexplained circumstances is not conduct for which the plaintiffs should bear any part of the costs. While conduct falling short of the language employed by Tadgell J in AGC v de Jager,[68] it is nevertheless conduct for which the innocent party should not be out of pocket. In that case his Honour said:
The Court may order costs on a solicitor/client basis, or on an indemnity basis, whenever a party has been subjected to high handed and unmeritorious conduct and it is just that the innocent party not be out of pocket thereby.[69]
63 The plaintiffs submit that the Commissioner's second (and only other) reason for refusing the refund was that the redemption of the units was not 'in connection with' Paul De Lutiis ceasing to be a member of one eligible fund and becoming entitled to additional benefits in another eligible fund as provided for in s 40 of the Act.[70] That submission oversimplifies the reasons for refusal upon which the Commissioner relied and which framed the questions for trial.
64 As submitted on behalf of the Commissioner, the Reasons[71] identified five questions for determination in the proceedings.[72] The first two questions arose only in the Lonsdale Proceeding and were disposed of in the Commissioner's favour. Question 3 concerned the late abandoned redemption of units issue. Question 5 was concerned with the second issue identified in the plaintiffs' costs submissions in the South Melbourne proceeding: namely, whether the exemption was not available because, as submitted on behalf of the Commissioner, any notional transfer was not 'in connection with' a member ceasing to be a member of one complying superannuation fund and becoming a member of another. There was a fourth question. Whether it was the case as contended on behalf of the Commissioner that there was no exemption because there was no transfer of dutiable property from one complying superannuation fund to another.
65 Question 4 was also resolved against the Commissioner. While accepting at the hearing that the acquisition of an interest arising from a redemption of units was capable of giving rise to a notional transfer, the Commissioner persisted with the argument that the redemption of units in this case was not a transfer a transfer of property between complying funds. Question 4, the 'no transfer' argument, was dealt with at paragraphs 73-83 of the Reasons.[73] I accept the submission on behalf of the Commissioner that the transfer argument, while not accepted, was not 'hopeless'.
66 Question 5, the asserted absence of the required 'connection', was a matter specifically raised in the Commissioner's defence. It was alleged the exemption in s 40 of the Act could not could apply because the redemption of the units was 'separate to the rollover of the entitlements' and the interest in the South Melbourne Trust was not acquired 'in connection with' Paul De Lutiis ceasing to be a member of one fund and acquiring additional entitlements in the recipient fund.
67 As the chronology annexed to the plaintiffs' costs submissions in the South Melbourne proceeding shows, the Commissioner relied upon this argument from as early as 19 July 2019. The Commissioner maintained the argument at trial and was unsuccessful in relation to it.
68 The plaintiffs' Calderbank letter of 11 October 2019 asserted:
The redemption of units under the SMT Deed of Redemption ... was, respectfully, one that was clearly in connection with Paul ceasing to be a member of the [superannuation funds] and him becoming entitled to (additional) benefits ... This is because the redemption generated the very monies to fund the rollover of Paul's benefits ... There is therefore no doubt on the plaintiffs' part that the exemption in s 40 applies to exempt the acquisition of the increased interest.[74]
69 The Commissioner's written submissions dated 13 July 2020 repeated the argument that the redemption was 'separate and anterior to the rollover'.[75] In reply submissions, and repeated in oral argument, the plaintiffs asserted that such an argument was contrary to the transactions required to be completed by clause 11 of the Deed, all of which were inter-dependent.[76]
70 In support of indemnity costs, concerning the 'in connection with' issue, the plaintiffs in the South Melbourne proceeding submit that in light of clause 11 of the Deed,[77] and the transaction documents, it 'could not be seriously suggested' that the redemption of the units was not 'in connection with' the rollover of benefits to the DLF Superannuation Fund.[78]
71 The contention on behalf the Commissioner that it will be a question of fact and degree whether the necessary connection exists so as to satisfy the statutory description was accepted as correct.[79] However each of the arguments upon which the Commissioner relied in support of an absence of the required connection on the facts of the case concerning question 5 were rejected.[80]
72 Although each of those arguments was unsuccessful, I do not consider the position adopted by the Commissioner concerning 'in connection with' was 'hopeless' or was a position which, if properly advised, the Commissioner ought not to have maintained. I do not consider that there was anything inappropriate in relation to the Commissioner's conduct concerning this issue which would warrant an order for indemnity costs. That is so even though in earlier correspondence the Commissioner had been 'warned' that this issue, if pursued at trial, would be lost.
73 In seeking to resist an indemnity costs order for all or any part of the South Melbourne proceeding, the Commissioner also contended that because the issues in the South Melbourne proceeding overlap with those in the Lonsdale proceeding in which the Commissioner was partly successful, there should be no order as to indemnity costs. In a letter dated 30 March 2021, the Commissioner asserted that indemnity costs should not be ordered in the South Melbourne proceeding because it was heard together with the Lonsdale proceeding.[81]
74 I do not consider the outcome in the Lonsdale proceeding or the overlap of issues in the two proceedings of particular relevance to the plaintiffs' application for indemnity costs for the South Melbourne proceeding. The costs of each party are separate costs of that party and must be considered separately. The plaintiffs' application for costs on an indemnity basis in the South Melbourne proceeding must be considered on the merits concerning that proceeding. The existence of the Lonsdale proceeding does not mean the plaintiffs in the South Melbourne proceeding should be deprived of indemnity costs concerning the redemption of units issue and question 3. That point was abandoned by the Commissioner in both proceedings.
75 Separately, in opposition to the indemnity costs orders, the Commissioner contended there was a reasonable basis on which to defend the proceeding and as a consequence, indemnity costs should not be ordered. It was submitted the inter-relationship between s 40 and s 89D of the Act raised serious questions to be tried in circumstances where, as noted in the Reasons,[82] there was little or no prior judicial guidance on the application of those provisions. Reliance was placed upon the decision of the Court of Appeal in Commissioner of State Revenue v Challenger Investments Ltd (No 2).[83]
76 In Challenger,[84] the Court of Appeal refused an application for indemnity costs based on the rejection of a Calderbank offer made in respect of the appeal. The Court said that although the Commissioner faced substantial obstacles, 'it cannot be contended that the appeal was hopeless or conducted in bad faith'.[85] It was submitted the present cases were in the same category, and that the Commissioner's arguments could not be characterised as hopeless, let alone conducted in bad faith.
77 I accept that submission is relevant to the Commissioner's conduct of the South Melbourne proceeding in relation to questions 1, 2, 4 and 5 and the issues with which those questions were concerned. However, the submission cannot assist the Commissioner in relation to indemnity costs concerning the pursuit and then abandonment by the Commissioner of the redemption of units issue the subject of question 3.
78 I accept the Commissioner's explanation that as the person having responsibility for State taxation matters, the correct construction and application of provisions of the Act is a matter of importance to the Commissioner. However, the fact the Commissioner seeks clarification of such matters does not displace the Commissioner's obligations under the CPA. The Commissioner is a person bound by the overarching obligations in the CPA including the s 23 obligation to narrow the issues in dispute. In addition, the Commissioner is a person bound by the model litigant guidelines. If there is a matter of statutory construction upon which the Commissioner seeks guidance, it is open to the Commissioner, as submitted on behalf of the plaintiffs, to offer to pay the costs of the taxpayer so that the matter might be properly tested in court. That did not happen in this case.
79 However the fact the Commissioner did not offer to pay the costs of the taxpayer and abandoned one issue and lost in relation to the other does not mean that an indemnity costs order should be made against the Commissioner for the whole of the proceeding. The appropriate order is that the Commissioner pay the plaintiffs' costs in the South Melbourne proceeding concerning the redemption of units issue and question 3 on an indemnity basis.
The second basis for indemnity costs: The Calderbank offer: from 11 October 2019
80 The costs consequences of the unreasonable refusal to accept a Calderbank offer are well-established. In Hazeldene's Chicken Farms Pty Ltd v Victorian Workcover Authority (No 2),[86] the Court of Appeal confirmed the reasons for special costs orders where reasonable offers had been made but rejected:
'(1) To encourage the saving of private costs ... by promoting early offers of compromise by defendants ...
(2) to save the public costs ...; and
(3) to indemnify the plaintiff who has made the offer of compromise, later found to have been reasonable, against the costs thereafter incurred. ...'[87]
81 The rejection of a Calderbank offer does not give rise to a presumption in favour of an indemnity costs order.[88] If the offer is properly characterised as an offer to capitulate, to refuse such an offer will not generally amount to an unreasonable refusal so as to result in an order for indemnity costs.[89]
82 Although supplementary submissions were filed by both parties in relation to the recent decision of the Court of Appeal in Bensons Property Group Pty Ltd v Key Infrastructure Australia Pty Ltd (No 2),[90] that decision confirms the approach to be taken in the case of an offer requiring capitulation rather than establishing any new principle.[91]
83 The critical question is whether the failure to accept a Calderbank offer was unreasonable in the circumstances. That is, having regard to matters such as the stage of the proceedings at which the offer was received, the time allowed to consider the offer, the extent of the compromise offered, the offeree's prospects of success (assessed at the date of the offer), the clarity with which the terms of the offer were expressed, and whether the offer foreshadowed an application for indemnity costs.[92]
84 The plaintiffs identified the following matters, as relevant to the discretion to award indemnity costs, by reference to the rejection of the 11 October 2019 Calderbank offer:
(a) The offer was made at an early stage: the proceeding was commenced on 20 September 2019 and the offer was made less than 2 months later. ...
(b) The Commissioner was allowed ample time to consider the offer ... the letter allowed 21 days (to 10 November 2019) but the Commissioner made numerous requests for extensions of time to consider the offer - which the plaintiffs granted - and the Commissioner was given until 19 December 2019 to respond (an additional 39 days). During the time that the Commissioner was considering the Calderbank offer, the Commissioner filed his Defence in the matter - in which he denied that s 89D(a) could apply to redemptions. That Defence was filed on 4 November 2019. ... 45 days after filing his Defence (and 69 days after receiving the offer), the Commissioner eventually responded to the offer - by rejecting it. ...
(c) The extent of the compromise: Under the offer, the plaintiffs was [sic] to waive all their costs, and would waive all interest.[93] .... The interest alone (to be foregone) would, at the time of the offer, have been in the order of $55,000, ... and the plaintiffs' legal costs were also at that point significant ... It may be inferred that the total amount being foregone was, at that time, well in excess of $100,000.
(d) The Commissioner's prospects of success were poor, at best. ... The strength of the plaintiffs' case was made clear to the Commissioner in the plaintiffs' earlier (Calderbank) letter, ... The Court's Reasons ... support this submission ...
(e) The offer ... was expressed in the clearest possible terms.
(f) The plaintiffs' offer did foreshadow an application for indemnity costs should the Commissioner reject the offer and lose the case.[94]
85 The Commissioner relied upon six matters in opposing an order for indemnity costs based on the failure to accept the Calderbank offer. The Commissioner submitted:
(a) First, it is artificial and inappropriate to treat the South Melbourne proceeding and the Lonsdale proceeding as separate and unrelated proceedings in assessing whether it was unreasonable for the Commissioner to refuse to accept the offer in the South Melbourne proceeding (in circumstances where it is not in dispute that it was reasonable for the Commissioner to reject the Calderbank offer in the Lonsdale proceeding).[95]
(b) Second, taking the two offers together, the Plaintiffs have not obtained an outcome more favourable than the amount of the offers.
(c) Third, even if the South Melbourne proceeding is looked at separately from the offer in the Lonsdale proceeding, the offer did not represent a genuine compromise, and was in substance an invitation to capitulate by paying the full amount of the refund claimed.
(d) Fourth, the proceedings raised novel and complex issues of statutory construction on which there was no directly applicable judicial authority.[96] In the circumstances, it was reasonable for the Commissioner, as the person responsible for the administration of the Act, to defend the proceedings.
(e) Fifth, as is often the case in taxation appeals, the proceedings raised a question concerning the applicability of an 'all-or-nothing' statutory exemption by which the transaction either attracts duty or is exempt. Such proceedings are not necessarily amenable to compromise by offer and acceptance of a partial payment of an amount of duty which is not referable to or justifiable by a principled application of the taxation laws. Among other things, the Commissioner must ensure the consistent application of the taxation laws to all taxpayers, which requires an ascertainment of the basis on which litigation is to be settled and its application to other affected cases.
(f) Sixth, an order for indemnity costs in the South Melbourne proceeding, but not in the Lonsdale proceeding would give rise to difficulties and uncertainties in its application, as it is not feasible to attribute costs between the two proceedings.
(g) Finally, the Commissioner has accepted that the Plaintiffs' costs should be paid in the Lonsdale proceeding on the standard basis, without any reduction to reflect the measure of the Commissioner's partial success in that proceeding. To order costs in both proceedings on the standard basis can be seen as recognising and appropriately balancing the Plaintiffs' success in the South Melbourne proceeding and the Commissioner's success on a significant issue in the Lonsdale proceeding.
86 While it is necessary and appropriate to consider each of the six matters relied upon by the Commissioner, I do not consider that any of the six matters, whether taken individually or together, are effective to establish that the rejection of the offer was other than unreasonable:
(a) I do not accept it is artificial and inappropriate to treat the two proceedings separately for cost purposes. As the Commissioner was aware, the proceedings concerned duty in respect of transactions designed to separate the business interests of the two brothers. The offers made by each brother in respect of their respective potential liability for duty were separate offers. The fact there was a common solicitor and representation in the proceedings, that the proceedings were conducted together and that separate offers were made in both cases does not detract from the requirement to treat each offer separately. There is a further problem with the Commissioner's submission. I do not consider it appropriate to have any regard to a Calderbank offer made by another party in a separate proceeding which is a communication subject to without prejudice privilege. There is no suggestion in the Commissioner's submissions that the privilege has been waived by the author of the Calderbank letter in the Lonsdale proceeding. No submissions were advanced on behalf the Commissioner concerning any implied waiver. The submissions simply assume it was permissible and appropriate to refer to the Calderbank offer in the Lonsdale proceeding. I do not agree.
(b) It is not appropriate to take into account the without prejudice offer made by the plaintiffs in the Lonsdale proceeding. Even if it were appropriate to do so, each offer requires separate and independent consideration. There are two additional issues in the Lonsdale proceeding which did not arise in the South Melbourne proceeding.
(c) The question of whether the offer amounted to a genuine compromise is the issue of substance on this aspect of the costs application and is discussed separately below.
(d) I agree with the submission on behalf of the plaintiffs that if the Commissioner considered the proceeding raised serious questions of public importance that are novel and complex, it was open to the Commissioner to offer to pay the costs of both parties in order that the Commissioner could obtain a judicial determination. The Commissioner did not adopt that course.
(e) The submission that taxation appeals such as the present are 'all or nothing' proceedings and that the Commissioner must ensure consistent application of taxation laws to all taxpayers is not supported by reference to legislation that requires a different approach to Calderbank offers, or offers of compromise under the Rules in light of those circumstances. The proposition that for the reasons given the Commissioner should be treated differently to other parties was argued in Landrow Properties[97] in the context of offers of compromise, and was rejected. Mandie J stated:
'... It seems to me that it was suggested in the written submissions of the Commissioner that he had no power in the circumstances of this case to enter such a compromise but [counsel for the Commissioner] has disavowed that contention which makes it difficult for me to understand exactly what is being put.
It seems to me that the Commissioner has power to compromise a proceeding even if the only question is liability and that liability depends upon the proper interpretation of the relevant statutory provisions. Simply because the Commissioner considers that either the plaintiff is liable or it is not and is of the belief that the plaintiff is liable, that does not mean that the Commissioner cannot compromise the proceeding, looking at the risks involved and determining that it would be appropriate to save the time and costs of the litigation by settling the case and that is the whole point of Order 26 and if the plaintiff does better than the offer, the Rules provide for the appropriate result.
... [S]o I cannot see that the position of the Commissioner here was such that he was unable, either as a matter of power or as a matter of administrative discretion, to reach a compromise on the terms put forward by the plaintiff.[98]
Leave to appeal in relation to this and other issues was refused by the Court of Appeal, who dismissed both appeals.[99] In North West Recycling,[100] Croft J confirmed the practice of the Federal Court to award indemnity costs against the Federal Commissioner of Taxation, under comparable rules in that jurisdiction dealing with offers of compromise.[101]
(f) The fact that indemnity costs may be ordered in the South Melbourne proceeding and standard costs ordered in the Lonsdale proceeding may give rise to some difficulty in calculating the cost between the two proceedings. However any such difficulty is readily dealt with in the taxation of costs, if costs are not otherwise agreed. To the extent difficulty may arise, the prospect or existence of any such difficulty is not a basis to refuse to make an order for indemnity costs if it is otherwise appropriate to do so.
(g) The fact the Commissioner accepted the obligation to pay the plaintiff's costs in the Lonsdale proceeding on a standard basis is not relevant to the reasonableness or otherwise of the refusal by the Commissioner to accept the Calderbank offer in the South Melbourne proceeding.
87 Turning to the substantive issue, whether the Calderbank offer was an offer to capitulate, the offer by the plaintiffs involved foregoing interest, the equivalent of 10% of the tax in question, in addition to foregoing legal costs. Whether it is appropriate to infer that the total amount that would have been foregone had the offer been accepted was, at the time, well in excess of $100,000 may be open to question. However what is clear is that legal costs as at 11 October 2019 would have been substantial and the offer to forego interest of $55,000 was itself substantial.[102]
88 While each case depends on its own facts and circumstances, in Landrow Property[103] and North West Recycling,[104] the offers to compromise were regarded as a 'genuine compromise' where the offer amounted to 85 - 90% of the claimed refund.[105] It would not be inconsistent with those decisions to view the present Calderbank offer both as a genuine compromise, and as an offer that did not amount to requiring the Commissioner to capitulate.
89 Whether an offer amounts to capitulation is not necessarily to be assessed only by reference to the sum of money forgone as stated in the offer itself. The amount of money offered by the plaintiffs, when assessed at the time, was itself substantial and represented 10% of the claim. However, interest could be expected to run until the hearing and determination of the proceeding. What was being offered was a saving, if the offer were to be accepted, of more than 10% of the amount claimed as at the date of the offer. In addition, the Commissioner was to be spared the burden of the plaintiffs' costs to date, which were not insubstantial. Further, if the offer were to be accepted the Commissioner would no longer be exposed to the risk of ongoing interest, the risk of having to pay the plaintiffs' costs following a trial and the need for the Commissioner to incur its own solicitor and own client costs of taking the proceeding through to trial.
90 In this case the offer was made at the time when there was no contest about the facts and the legal issues that would frame the case at trial. The plaintiffs communicated their views concerning the arguments upon which the Commissioner at that time placed reliance. The Commissioner sought and was granted additional time to consider the Calderbank offer before rejecting it. Within that timeframe the Commissioner filed and served defences to the claims.
91 The amount of interest and costs forgone, the fact that if accepted, future costs and interest would not be incurred at all, and the timing of the offer in circumstances where the legal and factual issues had crystallised have the consequence that this offer was not simply an offer to capitulate. It was a genuine offer to compromise the proceeding. The refusal on the part of the Commissioner to accept the offer at the time that it was made and in the circumstances outlined was unreasonable.
92 It is appropriate to order that the Commissioner pay the plaintiffs' costs of and incidental to the South Melbourne proceeding, including any reserved costs, from 1 November 2019 on an indemnity basis.
93 1 November 2019 is the date originally specified in the Calderbank offer as the date by which the Commissioner was to respond. Twenty-one days from the date of the Calderbank offer was a reasonable time to require the Commissioner to respond, and included the period within which the Commissioner file and serve its defence in that proceeding.
The third basis for indemnity costs: The Offer of Compromise: From 4 February 2020
94 Given my findings in relation to the Commissioner's refusal to accept the Calderbank offer, it is unnecessary to deal with the third basis relied upon by the plaintiffs for indemnity costs. However, in deference to the detailed submissions that were advanced in relation to that topic and in case I am found to be wrong in relation to the Commissioner's rejection of the Calderbank offer, it is appropriate to also deal with the Offer of Compromise made by the Plaintiffs in the South Melbourne proceeding.
95 Under r 26.08(2) of the Rules, where the plaintiff obtains a judgment no less favourable than an offer of compromise in accordance with the Rules, the plaintiff is entitled to its costs, taxed on a standard basis until 11.00 am on the second business day after the offer is served, and on an indemnity basis thereafter, 'unless the Court otherwise orders'.[106]
96 The application of rule 26.08(2) is subject to rule 26.08(8), which provides:
(8) Where the plaintiff obtains judgment for the recovery of a debt or damages, and the amount of the debt or the damages was not in dispute, but only the question of liability, paragraph (2) shall not apply unless the Court is satisfied that the plaintiff's offer was of a genuine compromise.[107]
97 The Commissioner contends that the Offer of Compromise did not represent a genuine compromise so that that rule 26.08(2) is not engaged and the usual costs consequences of failure to accept an offer of compromise do not flow in this case.[108] Further that in any case, the Court should 'otherwise order'.
98 As to a 'genuine compromise', in Gamboni v Bendigo and Adelaide Bank Ltd [No 2],[109] Tate JA and Kyrou AJA said:
The question of whether an offer is 'of a genuine compromise' does not depend simply on the magnitude of the discount embodied in the offer. While that is clearly a relevant consideration - in the sense that a trivial, contemptuous or derisory discount would not involve a genuine compromise[110] - other factors are also relevant. They include the apparent strength of the defendant's case at the time the offer was made,[111] whether the case is an 'all or nothing' case which makes it difficult to select a discount based on an assessment of particular aspects of the case,[112] and the stage at which the offer was made.[113]
In Enerka Apex Belting Pty Ltd v Vickers Systems Pty Ltd [No 2],[114] Habersberger J concluded that the onus of proof is on the plaintiff to satisfy the Court that the offer was 'of a genuine compromise'.[115] That case was described as an 'all or nothing' case. There were serious questions as to liability, and it was by no means clear that the plaintiff would succeed in its claim.[116] His Honour stated that the purpose of rules relating to offers of compromise such as r 26.08(2) of the CC Rules is not achieved by 'rewarding' a plaintiff in respect of costs when in all the circumstances, its offer of compromise did not represent a genuine or reasonable attempt at settlement, and therefore did not hold any real attraction for the defendant as it did not make a sufficient reduction in the claim.[117][118]
99 The Offer of Compromise was for the sum of $502,705.80, exclusive of costs. The offer represented a discount of 10% on the claim and, in addition, gave up an entitlement to interest on the amount of the refund sought. That is, a discount of approximately $55,000 on the sum of $558,562 and a further discount of interest at 10% per annum. The offer represented, in effect, reduction of at least 20% in what the Commissioner would otherwise have been required to pay if the refund were ordered on or about the date the offer was made.
100 The timing of the offer occurred after the filing of the defence and after exchanges of views between the parties concerning the Commissioner's prospects in the proceeding.
101 The Offer of Compromise corresponded in substance to the reduction in the claim and interest made by the plaintiffs in Landrow Properties,[119] when, in defending the rejection of an offer of compromise under the rules, the Commissioner argued that the discount was not a 'genuine compromise'. Mandie J did not agree:
Given that I am satisfied that the plaintiff's offer was of a genuine compromise, I see no reason to otherwise order under Rule 26.08(2) and I think that an order for indemnity costs, from the day after the offer was served, should be made.[120]
102 As was found in Landrow Properties,[121] I do not accept that the Offer of Compromise made by the plaintiffs in the South Melbourne proceeding was not an offer of a genuine compromise
In [Simonovski], Ashley J stated that while the Court retains a discretion under s 26.08(2)(b) of the [County Court Civil Procedure Rules 2008], an "order otherwise" should not be lightly made, and that the prima facie position established by the rule "is a strong one, not easily displaced".[124]
104 In PCCEF Pty Ltd v Geelong Football Club (No 3),[125] the Court of Appeal observed that:
'Whether the Court will "otherwise order" depends on whether doing so advances the purpose of [r 26 of the Rules].[126] That purpose, broadly speaking, is to encourage the compromise of litigation and the saving of the private and public costs associated with it'.[127] The reasonableness of the rejection or non-acceptance of an offer is one matter that may be taken into account, but is not of itself determinative.[128][129]
105 In urging the Court to 'otherwise order' the Commissioner sought to rely upon the decision in Bensons.[130] In that case the Court of Appeal concluded that it was not unreasonable for the respondent to have rejected an offer of compromise under r 26 which would have required the respondent to pay approximately 90% of the appellant's counterclaim and to capitulate on its own claim. The Court refused the appellant's application for a special costs order, and 'otherwise ordered' that the appellant's costs be paid on the standard basis.
106 The circumstances in Bensons[131] were very different to this case. It involved a claim and counterclaim that were interconnected. The plaintiff sued for $1.76 million in unpaid fees and the defendant made a counterclaim for $400,000, seeking reimbursement of fees previously paid. The Offer of Compromise was to accept $360,000 (plus interest) in settlement of both proceedings. This required the defendant to forgo all of its $1.76 million claim and to pay 90% of the counterclaim.[132]
107 Like most decisions concerning costs, Bensons[133] largely turns on its own facts. There is no real comparison between those facts which involved both a claim and counterclaim and required the defendant to forego its claim and pay 90% of the claim and the present case involving claim for a refund of duty paid. Here, in monetary terms and having regard to its timing, the offer to compromise was a genuine compromise.
108 The Commissioner relied on the same arguments put in relation to the refusal to accept the Calderbank offer as reasons why the Court should 'otherwise order' as provided for in rule 26.08(2). None of those arguments, whether taken alone or considered collectively provide a proper basis for the Court to 'otherwise order'.
109 Had it been necessary to do so, I would have ordered that the Commissioner pay the plaintiffs' costs of and incidental to the South Melbourne proceeding, including any reserved costs, on an indemnity basis from 4 February 2020 by reason of the Commissioner's failure to accept the Offer of Compromise.
110 For the reasons previously stated I order that the Commissioner pay interest on the refund of duty in both proceedings at the maximum rate provided for under s 58 of the SCA.
111 I order that the Commissioner pay the plaintiffs' costs in the South Melbourne proceeding of and incidental to the question of whether s 89D(a) of the Act applied to acquisitions as a result of a redemption of units and of question three of the questions for determination at trial on an indemnity basis.
112 Separately I will order that the Commissioner otherwise pay the plaintiffs' costs of and incidental to the South Melbourne proceeding, including any reserved costs, on a standard basis up to and including 1 November 2019 and thereafter on an indemnity basis.
113 I will order that the Commissioner pay the plaintiffs' costs of and incidental to the Lonsdale proceeding, including any reserved costs, on a standard basis.
[1] Razzy Australia Pty Ltd &Anor v Commissioner of State Revenue [2021] VSC 124 ('Reasons').
[2] See Taxation Administration Act 1997 (Vic), s 116(7).
[3] Plaintiffs' submissions in the South Melbourne proceeding dated 9 April 2021 ('Plaintiffs' South Melbourne Submissions on Costs and Interest'), [25].
[4] Plaintiffs, Affidavit of Felicity Nogare dated 9 April 2021 ('Nogare Affidavit'), [8], [19], [21], [23], [29].
(a) Plaintiffs' submissions in the Lonsdale proceeding dated 9 April 2021.
(b) Plaintiffs' South Melbourne Submissions on Costs and Interest.
(c) Commissioner's submissions in the South Melbourne proceeding dated 21 April 2021 ('Defendant's Submissions on Costs and Interest').
(d) Commissioner's submissions in the Lonsdale proceeding dated 21 April 2021.
(e) Plaintiffs' reply submissions in the Lonsdale proceeding dated 30 April 2021.
(f) Plaintiffs' reply submissions in the South Melbourne proceeding dated 30 April 2021 ('Plaintiffs' Reply Submissions on Costs and Interest').
(g) Plaintiffs' further submissions dated 19 May 2021 in the South Melbourne proceeding concerning the decision of the Court of Appeal in Bensons Property Group Pty Ltd v Key Infrastructure Australia Pty Ltd [No 2] [2021] VSCA 116 ('Bensons') at [16]-[21] concerning costs and concerning the decision in YWCA Australia v Chief Commissioner of State Revenue (No 2) [2021] NSWSC 102 ('YWCA').
(h) Commissioner's further submissions dated 19 May 2021 following the decision of the Court of Appeal in Bensons [2021] VSCA 116 at [16]- [21] concerning costs.
[6] Plaintiffs, Statement of Claim dated 20 September 2019 in the South Melbourne proceeding, [92]; Plaintiffs, Statement of Claim dated 20 September 2019 in the Lonsdale proceeding, [93]. The plaintiffs are not pursuing compound interest at general law but, rather, interest under s 58 of the Supreme Court Act 1986 (Vic).
[7] Defendant's Submissions on Costs and Interest, [16].
[10] Defendant's Submissions on Costs and Interest, [15].
[11] [2009] VSC 108 ('Landrow Properties').
[13] [2017] VSC 726 ('North West Recycling').
[15] [2004] VSC 343 ('Hosking').
[21] [1993] VicRp 81; (1993) 2 VR 382, 389, 391.
[22] [2009] VSC 410, [78].
[25] Defendant's Submissions on Costs and Interest, [18].
[31] Yara Australia Pty Ltd v Oswal [2013] VSCA 337; 41 VR 302, [13].
[33] Bass Coast Shire Council v King [1997] 2 V.R. 5, [29].
[34] See, to similar effect, NMFM Property Pty Ltd v Citibank Ltd (No 11) [2001] FCA 480 at [53] per Lindgren J.
[35] See, for example, Spencer v Dowling [1996] VSC 51; [1997] 2 VR 127 at 147 per Winneke P, at 163-4 per Callaway JA; Bass Coast Shire Council [1997] 2 V.R. 5, 29 per Winneke P; MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd [1996] FCA 862; (1996) 70 FCR 236 at 240; Colgate-Palmolive Company v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225 at 232-233; Fountain Select Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397 at 400-401 per Woodwood J.
[36] Such as unduly prolonging the case, or pleading fraud knowing it to be false, or making assertions of fact which are patently groundless, or making wild and contumelious allegations.
[37] As, for example, where the claim is patently hopeless.
[38] PSC RZ investments Pty Ltd v The National Golf Holdings Ltd [2002] VSCA 24. [33]-[34], [36].
[39] See, for example, North West Recycling [2017] VSC 726, [9] (Croft J), citing Auswest Timbers Pty Ltd v Secretary, Department of Sustainability and Environment (No 2) [2010] VSC 513; Gann v Hosny (No 2) [2017] VSCA 318.
[40] Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298 ('Hazeldene's Chicken Farm'), at [23]; Amcor v Barnes (No 2) [2021] VSCA 87 (8 April 2021), [39]-[43].
[41] Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 26.08(2).
[42] [1988] FCA 202; (1988) 81 ALR 397 ('Fountain Selected Meats').
[43] Ibid, 401. This passage has been cited with approval in many subsequent decisions, including J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers Western Australia (unreported, Federal Court of Australia, 9 February 1993); Murdaco v Maisano [2004] VSCA 123, [40]; Aljade and MKIC v OCBC [2004] VSC 351; Macedon Ranges Shire Council v Thompson [2009] VSCA 209 ('Macedon Ranges Shire Council'), [15].
[45] [1988] FCA 202; (1988) 81 ALR 397.
[46] [2001] VSC 189 ('Ugly Tribe').
[47] [1988] FCA 202; (1988) 81 ALR 397.
[50] [1988] FCA 202; (1988) 81 ALR 397.
[53] [2021] VSCA 57, [12]-[17].
[57] Plaintiffs' South Melbourne Submissions on Costs and Interest, [45].
[58] Court Book dated 22 September 2020, 1788.
[59] Nogare Affidavit, [8], exhibit FDN-1.
[60] Defendants, Defence in the South Melbourne Proceeding dated 4 November 2019, [66(c)], [66(e)(i)].
[61] Transcript of the proceeding heard on 29 September 2020 ('Transcript'), 75 (Horan QC).
[62] Ibid. While the Commissioner accepted this to be the case, the Court was not informed how, as a matter of construction of s 89D(a), the Commissioner contended that such an outcome was within the section.
[64] Reasons [2021] VSC 124, [44], [58], [72].
[65] Defendant's Submissions on Costs and Interest, [32].
[66] Reasons [2021] VSC 124, [44]; Transcript, 75.
[70] Plaintiffs' South Melbourne Submissions on Costs and Interest, [16].
[75] Defendant, Commissioner's submissions dated 13 July 2020, [44].
[76] Plaintiffs' Reply Submissions on Costs and Interest, [21]. See also the evidence cited in footnotes 45 and 46 of the plaintiffs' submissions in the South Melbourne proceeding dated 1 May 2020.
[77] As defined in the Reasons, [2021] VSC 124, [1].
[78] Plaintiffs' South Melbourne Submissions on Costs and Interest, [21].
[79] Reasons, [2021] VSC 124, [92].
[82] Reasons, [2021] VSC 124, [5].
[83] [2011] VSCA 398 ('Challenger').
[86] [2005] VSCA 298; (2005) 13 VR 435.
[89] Berrigan Shire Council v Ballerini (No 2) [2006] VSCA 65, [17] (Calloway JA), [20] (Chernov J), [39] (Nettle J); Challenger [2011] VSCA 398, [13], [17] (Buchanan and Tate JJA, Sifris AJA).
[90] [2021] VSCA 116 ('Bensons').
[92] Hazeldene's Chicken Farms (2005) 13 VR 435, 441-442 [23]-[25].
[94] Plaintiffs' South Melbourne Submissions on Costs and Interest, [28].
[95] On 11 October 2019, the Plaintiffs in each proceeding made a separate without prejudice offer to settle the proceeding to which that plaintiff was a party.
[96] Reasons [2021] VSC 124, [5].
[99] Commissioner of State Revenue v Landrow Properties Pty Ltd [2010] VSCA 197; (2010) 79 ATR 800, 819 [81]-[82].
[102] Plaintiffs' South Melbourne Submissions on Costs and Interest, [28(c)].
[105] Landrow Property [2009] VSC 108, [7], [11]; North West Recycling [2017] VSC 726, [18]. In both of these cases, the plaintiff(s) offered a discount on the refund amount (being 10% and 15% respectively of the total), together with an offer to forego interest on the discounted amount. In the latter decision, the offer was made subject to the plaintiff's costs being paid.
[106] Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 26.08(2).
[108] Defendant's Submissions on Costs and Interest, [61].
[109] [2013] VSCA 282 ('Gamboni').
[110] Enerka Apex Belting Pty Ltd v Vickers Systems Pty Ltd (No 2) [2002] VSC 409, [14] ('Enerka'); Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368, [26], [30] ('Regency').
[111] Enerka [2002] VSC 409, [14]; Regency [2009] NSWCA 368, [34].
[112] Enerka [2002] VSC 409, [13]; Regency [2009] NSWCA 368, [29].
[113] Regency [2009] NSWCA 368, [30].
[118] [2013] VSCA 282, [41]-[42].
[125] [2019] VSCA 191 ('PCCEF').
[126] Stevens v Spotless Management Services Pty Ltd (No 2) [2016] VSCA 311 [19] ('Stevens') (Kyrou and McLeish JJA and Elliott AJA); citing Grbavac v Hart [1996] VSC 37; [1997] 1 VR 154 , 164-5 (Hayne JA).
[127] See Grbavac v Hart [1996] VSC 37; [1997] 1 VR 154, 164 (Hayne JA). [2013] VSCA 282.
[128] Stevens [2016] VSCA 311, [26]; citing Nakos v Serdaris [2016] VSC 179, [39], [42] (Zammit J); Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 40, [11] (Tamberlin, Finn and Sundberg JJ).
[129] PCCEF [2019] VSCA 191, [25].
Razzy Australia Pty Ltd & Anor
Commissioner of State Revenue [2021] VSC 409
(2005) 13 VR 435
(1993) 2 VR 382
(1996) 70 FCR 236
(1993) 46 FCR 225
(1988) 81 ALR 397