//
[2016] WASAT 40
General information, not legal advice.
State Administrative Tribunal (WA)
2016-04-20
Original judgment source is linked above.
The applicant had applied to the Tribunal for a review of a decision by the respondent. The decision was that a previously given exemption from land tax was no longer to apply. The parties ultimately settled the matter on the basis that there was no land tax payable.
However, the applicant said that the respondent ought to meet his costs of his application on the basis that the respondent unnecessarily prolonged the proceedings and in any event never had any prospect of succeeding. The applicant also pointed out that the respondent only conceded the application a matter of days before the final hearing was due to take place, thus putting the applicant to more expense than he would have incurred had the respondent conceded the application at the outset.
The Tribunal considered the relevant provisions of the State Administrative Tribunal Act 2004 (WA), under which parties are ordinarily to bear their own costs. The Tribunal also considered the various matters which should be taken into account before exercising its discretion to award costs.
The Tribunal could find no good reason to depart from the principle that the parties should pay their own costs. In particular, the Tribunal concluded that the respondent's case was not in fact without merit and that the lateness in conceding the application could be explained. The Tribunal also concluded that if the proceeding had been protracted in any way then the applicant by his conduct was responsible, at least for a substantial part.
Chew and Director General of the Department of Education and Training [2006] WASAT 248
Hibben & Ors and Commissioner of State Revenue [2012] WASAT 234
Ivankovic and Commissioner of State Revenue [2013] WASAT 21
Pearce & Anor and Germain [2007] WASAT 291 (S)
Teissier and Commissioner of State Revenue [2015] WASAT 8
Western Australian Planning Commission v Questdale Holdings Pty Ltd [2016] WASCA 32
1 The applicant, Franck Phillippe Teissier, has applied to the Tribunal for costs following the substantive finalisation of a proceeding commenced by the applicant in the Tribunal.
2 The proceeding arose in the following way. The applicant is the registered proprietor of certain land (Land) in a nonrural zone as defined in the Land Tax Assessment Act 2002 (WA) (LTA Act). Up to and including the 2012/2013 assessment year, the respondent (Commissioner) had exempted the Land from land tax under s 29(3) of the LTA Act, on the basis that it was used by the owner of the Land for a rural business.
3 In November 2012, following an audit by the Commissioner, the Commissioner concluded that the Land ought not to be exempted. This was because, while the owner of the Land was the applicant, the Land was being used for a rural business by a company named Livestock Express Pty Ltd (Livestock Express).
4 Accordingly, on 16 January 2013, the Commissioner issued a land tax notice of reassessment for the 2011/2012 and 2012/2013 assessment years, noting that the Land was subject to land tax.
5 On 24 January 2013, the applicant lodged an objection to the land tax notice of reassessment and on 21 March 2013, the objection was disallowed by the Commissioner.
6 On 20 May 2013 the applicant applied to the Tribunal for a review of that decision.
7 On receipt of the applicant's application, the matter was listed for a directions hearing on 4 June 2013. The parties agreed that the matter should be referred for mediation, with the applicant requesting that the mediation be no earlier than September 2013.
8 The mediation commenced on 16 September 2013 and was adjourned for further mediation to a date late in November 2013. It was adjourned again to 6 December 2013.
9 The mediation was finalised and the matter was referred to a directions hearing on 11 February 2014.
10 The applicant then in January 2014 lodged an appeal with the Minister under s 20(3) of the LTA Act and requested a further adjournment of the directions hearing until 6 May 2014.
12 At the directions hearing on 6 May 2014, the Tribunal made certain programming orders and on 13 June 2014, in compliance with the first of those orders, the Commissioner filed with the Tribunal the respondent's statement of issues, facts and contentions and the respondent's bundle of documents.
13 The applicant had been ordered by the Tribunal to file his statement of issues, facts and contentions by 18 July 2014. That date was extended to 19 September 2014 at the request of the applicant. However, the order as amended was not complied with. Accordingly, at a directions hearing on 26 September 2014, the Tribunal made a further order that the applicant must file his statement of issues, facts and contentions by 17 October 2014. Again at the request of the applicant, that date was extended to 24 October 2014.
14 Once more, the applicant failed to comply with those orders, but in November 2014, the applicant sought orders from the Tribunal that the Commissioner provide additional documents and information 'about the Commissioner's past practices and interpretation in relation to exemptions granted under s 29(3) of the LTA Act where the owner and the user of land are different entities or persons'; applicant's application for costs at paragraph 11. What the applicant was seeking was those documents for a period from the assessment year 1993/1994 to the assessment year 2012/2013.
15 In a decision delivered on 30 January 2015 (Teissier and Commissioner of State Revenue [2015] WASAT 8) (Teissier)), the President of the Tribunal, Curthoys J, declined to make the orders sought by the applicant on the basis that the orders sought were too onerous. His Honour instead made an order that the parties should confer in an attempt to reach agreement on the issue.
16 Following the decision in Teissier, the date for filing by the applicant of his statement of issues, facts and contentions was further extended to 28 April 2015.
17 The applicant then sought two further extensions of this date, to 15 May 2015 and to 30 June 2015. The document was eventually received by the Tribunal on 9 July 2015.
18 The matter was listed for a final hearing on 24 and 25 September 2015. However, shortly before the first day of the final hearing, the parties informed the Tribunal that the matter had been settled between them save only a question of the applicant's costs.
19 The Tribunal proposed that the matter be finalised by way of an invitation to the Commissioner to reconsider her decision, following which the applicant would withdraw his application. However, the parties pressed instead for an order that the Commissioner must refund the tax paid with interest. They filed a minute of proposed consent orders to this effect. The applicant made it known that unless those orders were made in the terms proposed then he intended to proceed to a final hearing.
20 The orders as proposed were in the Tribunal's opinion within its power to make as required by s 56(2) of the State Administrative Tribunal Act 2004 (WA) (SAT Act), and the orders were made on 15 September 2015.
21 Specifically, the orders made by the Tribunal provided that the Commissioner must make a reassessment under s 16(1) of the Taxation Administration Act 2003 (WA) (TA Act) for the 2011/2012 and 2012/2013 assessment years to zero and refund to the applicant the sum of $59,111 being the overpaid land tax for those two assessment years, plus interest on that amount.
22 The parties were also ordered to file submissions in respect of the applicant's costs application.
23 Submissions were filed by both parties and the applicant's application for costs was listed to be heard on 6 November 2015. However, the hearing was adjourned at the request of the parties to 12 February 2016. The matter was then only part heard on that date and the final day of the hearing was not until 19 February 2016. The Tribunal reserved its decision.
24 To put the applicant's application for costs into context, it is necessary to consider the background facts in some further detail.
25 At all relevant times, and since at least 2005, the applicant was the registered proprietor of the Land. It was not in dispute that the Land was used for a rural business. It is also not in dispute that the operator of that business was Livestock Express; applicant's application for costs at paragraph 4(i).
26 Livestock Express is a company of which the applicant is the sole shareholder and director; respondent's bundle of documents at page 101, paragraph 4.
27 The applicant indicates that he is aware of two relevant decisions of the Tribunal, Hibben & Ors and Commissioner of State Revenue [2012] WASAT 234 (Hibben) and Ivankovic and Commissioner of State Revenue [2013] WASAT 21 (Ivankovic); respondent's bundle of documents at page 101, paragraph 7.
28 In both of those decisions, Chaney J, the then President of the Tribunal, concluded that the exemption under s 29(3) of the LTA Act does not apply when the owner of the land is a different legal entity from the operator of the business, even if the business operator is a company wholly owned by the owner of the land.
29 However, in the applicant's view, his application turns on its own facts. The applicant said that it was his intention to argue before the Tribunal that Livestock Express operated the business as agent of the applicant and not on its own part, an argument which the applicant understands was not put to the Tribunal in either Hibben or Ivankovic; respondent's bundle of documents at page 101, paragraph 8.
30 The Commissioner received from the applicant and provided to the Tribunal copies of tax returns for both the applicant and the Livestock Express; respondent's bundle of documents at page 106. The Commissioner noted at the time of the objection that the income from the business was returned by Livestock Express, not the applicant; respondent's bundle of documents at page 162.
31 The applicant in response says that his personal income tax had been amended 'to show farm income for 2010-2011 and 2011-2012 that was previously not included to rectify any errors'. The applicant informed the Commissioner of this on 6 September 2015; applicant's application for costs at paragraphs 51 and 52.
32 During the course of this proceeding, the applicant disclosed that he had made the following offers to the Commissioner to settle this matter.
33 On 14 January 2015, the applicant offered to settle the Commissioner's claim on the basis that the applicant would pay $30,000 by six equal instalments paid every 90 days.
34 On 17 March 2015, the applicant offered to settle the Commissioner's claim with a payment of $50,000 by four equal payments every four months.
35 On a subsequent undisclosed date, the applicant offered to settle the Commissioner's claim with a payment of $45,000 by two equal payments every six months.
36 Finally, on 15 May 2015, the applicant offered to settle the Commissioner's claim on the basis that the applicant would pay $52,500, by way of an immediate instalment of $25,000 and an instalment of $27,500 to be made six months later.
37 These offers were all rejected by the Commissioner.
(1) Unless otherwise specified in this Act, the enabling Act, or an order of the Tribunal under this section, parties bear their own costs in a proceeding of the Tribunal.
(2) Unless otherwise specified in the enabling Act, the Tribunal may make an order for the payment by a party of all or any of the costs of another party or of a person required to produce a document or other material on the application of the party under section 35.
(3) The power of the Tribunal to make an order for the payment by a party of the costs of another party includes the power to make an order for the payment of an amount to compensate the other party for any expenses, loss, inconvenience, or embarrassment resulting from the proceeding or the matter because of which the proceeding was brought.
(4) Without limiting anything else that may be considered in making an order for the payment by a party of the costs of another party where the matter that is the subject of the proceeding comes within the Tribunal's review jurisdiction, the Tribunal is to have regard to
(a) whether the party (in bringing or conducting the proceeding before the decisionmaker in which the decision under review was made) genuinely attempted to enable and assist the decisionmaker to make a decision on its merits;
(b) whether the party (being the decisionmaker) genuinely attempted to make a decision on its merits.
(5) The rules may deal with the effect of certain offers to settle, and responses, if any, to the offer, on the making of an order for the payment by a party of the costs of another party.
(6) The Tribunal may order that the representative of a party, rather than the party, in the representative's own capacity compensate that or any other party for costs incurred because the representative acted in, or delayed, the proceeding in a way that resulted in unnecessary costs.
39 Section 16 of the TA Act relevantly provides as follows:
(1) The Commissioner must make a reassessment
(a) if specifically required to do so under a taxation Act; or
(b) if specifically required to do so under a direction given in the course of review proceedings; or
(c) if a taxation Act provides for a rebate or refund of tax in particular circumstances, and the circumstances were not taken into account when the previous assessment was made.
(2) Subject to subsection (5), the Commissioner may also make a reassessment
(a) on his or her own initiative, if it appears that a previous assessment is or may be incorrect for any reason; or
(5) If an assessment is based on a particular interpretation of the applicable law or a particular practice of the Commissioner that was generally applied to assessments of that kind when the assessment was made, then the Commissioner cannot make a reassessment based on the ground that the interpretation or practice is or was erroneous.
40 The effect of s 87(1) of the SAT Act is, relevantly, that each party in proceedings before the Tribunal is to bear its own costs, unless the Tribunal otherwise orders.
41 The power to make an order for one party to pay another party's costs is contained in s 87(2). In exercising the discretion in its review jurisdiction, the Tribunal is bound, by virtue of s 87(4), to take into account the considerations therein specified. However, other things may be considered in addition.
42 As Martin CJ notes in Western Australian Planning Commission v Questdale Holdings Pty Ltd [2016] WASCA 32 (Questdale) at [9]:
... s 87 requires the Tribunal to exercise the discretion [to make an order for the payment by a party of the costs of another party] which it confers taking into account all the circumstances of the particular case, including the nature of the jurisdiction which the Tribunal has been called upon to exercise, and any rules which have been promulgated by the Tribunal, but starting from the presumption that no order for costs will be made. ...
43 There are rules in Div 5 and Div 6 of the State Administrative Tribunal Rules 2004 (WA) which deal with the effect of certain offers to settle, and responses, if any, to the offer, on the making of a costs order. However, those Rules only apply when the Tribunal is exercising its discretion within its original jurisdiction. The proceeding in this case fell within the Tribunal's review jurisdiction.
44 The factors which the Tribunal will be bound to take into account and precluded from taking into account will be determined by implication from the subject matter, scope and purpose of the SAT Act properly construed; Questdale at 48.
45 Although s 87(2) does not in terms say that the discretion is to be exercised if it is fair and reasonable in all the circumstances of the case to do so, the judicial nature of the exercise and the scheme of the SAT Act indicates that, broadly speaking, that is the legislative intention; Questdale at 49.
46 Section 87(2) is to be construed in the context that the legal rationale for an order for costs is not to punish the person against whom the order is made, but to compensate or reimburse the person in whose favour it is made. That is evident in s 87(3) of the SAT Act; Questdale at 51.
47 The onus of showing in the particular circumstances of the case that it is fair and reasonable that a party should be reimbursed for the costs it incurred is on the party seeking an order in its favour; Questdale at 51.
48 In exercising its review jurisdiction, the Tribunal is to deal with a matter in accordance with the SAT Act and any relevant provisions of the enabling Act, in this case, the TA Act. The TA Act makes no mention of costs.
49 Although the Tribunal has a broad discretion to award costs, it is clear that it needs a good reason to depart from the general principle that the parties will bear their own costs.
50 In Pearce & Anor and Germain [2007] WASAT 291 (S), Chaney J, the then President of the Tribunal, considered the exercise of the discretion in s 87(2) of the SAT Act at [22] and noted that the Tribunal has most commonly made costs orders in circumstances where a party has conducted itself unreasonably or inappropriately, particularly where that conduct gives rise to unnecessary costs being incurred by the other party.
51 In Chew and Director General of the Department of Education and Training [2006] WASAT 248 at [85], the Tribunal stated:
We take the view that in proceedings under the [SAT Act], the Tribunal should not generally make an award for costs unless a party has conducted itself in such a way as to unnecessarily prolong the hearing; has acted unreasonably or inappropriately in its conduct of the proceedings, has been capricious; or the proceedings in some other way constitute an abuse of process. The Tribunal might also make an order as to costs where a matter has been brought vexatiously or for improper purposes.
52 The applicant first points out that there were 'two legs to the original review application'; T:11; 19.02.16. The first was the applicant's argument that the Land is exempt from land tax under s 29(3) of the LTA Act. The second is that the Commissioner was precluded from assessing the Land for land tax by s 16(5) of the TA Act.
53 The applicant says that the Commissioner has not provided him with an explanation as to why the Commissioner ultimately agreed to settle the matter and that there was no new information which had come to light and which would have led the Commissioner to concede the review application. The applicant says that it can therefore be reasonably inferred that:
54 The applicant says (applicant's application for costs paragraph 19) that, as a consequence of:
the applicant had to engage accountants to advise on and implement the necessary restructuring so that the applicant would in the future, for land tax exemption purposes, be the owner of the Land and the operator of the rural business conducted on the Land.
55 The applicant says that this action 'had the effect that the applicant was forced to stop using Livestock Express as the operator of the rural business and in the process forego the goodwill which had attached to the Livestock Express business name and brand over a period of 21 years'; applicant's application for costs at paragraph 20.
56 The applicant notes that the Commissioner's concession was made less than three weeks before the date of the final hearing. The Commissioner until then had been 'vigorously' opposing the application and had served on the applicant 'opposing papers running into approximately 470 pages'; applicant's application for costs at paragraph 62.
57 Further, the applicant says that the Commissioner refused to provide the applicant with the information and documents which he ultimately had to seek by way of summons.
58 The applicant contends that the Commissioner's conduct was unreasonable and led to unnecessary costs to the applicant.
59 The applicant submits that he was entirely successful and has been burdened with significant legal costs. He says that an injustice would result in not allowing costs to the applicant in the present circumstances; applicant's application for costs at paragraph 63.
60 Finally, the applicant points out that he had made at least four offers to settle the Commissioner's claim and says on this ground alone that the Tribunal ought to exercise its general discretion and award costs; applicant's application for costs at paragraph 67.
61 I am not satisfied that the respondent should pay the applicant's costs. The appropriate outcome is that each party should bear their own costs incurred in relation to the proceeding, including the costs of the applicant's application for costs.
Did the Commissioner genuinely attempt to make a decision on its merits?
62 It cannot be said that the Commissioner did not genuinely attempt to make a decision on its merits (s 87(4)(b) of the SAT Act). While I do not consider that it is necessary or appropriate to speculate on the possible outcome had the matter proceeded to a final hearing, based on the Tribunal's decisions in Hibben and in Ivankovic, it is my view that the Commissioner was perfectly entitled to proceed on the basis that s 29(3) of the LTA Act did not apply in this case.
63 Further, the Commissioner was also entitled to test the other 'leg' of the applicant's argument, namely that because of s 16(5) of the TA Act it was not open to the Commissioner to change her existing practice and issue a land tax notice of reassessment. As I understand the applicant's argument on this point, the Commissioner in all previous years had treated the Land as exempt and therefore could not now withdraw that exemption. However, I do not necessarily understand s 16(5) as precluding the Commissioner from reviewing exemptions granted in the past and deciding not to apply them for future years. Section 16(5) refers to reassessments and while the decision under review was a reassessment, the decision was applied from and included the year during which the audit was conducted, not past years. Of course, I did not have the benefit of argument from counsel on this point and I do not know how it would have been decided. It is sufficient to say that there is an arguable case on both sides.
Was the matter unnecessarily prolonged by the respondent's conduct?
64 If the matter can be regarded as having been unnecessarily prolonged then, even if this was not entirely due to the conduct of the applicant, the applicant must bear the responsibility for at least the major part of any delay. As I have set out earlier, the numerous adjournments and extensions of time for filing documents were almost entirely instigated by the applicant. While some of that delay on the part of the applicant might be attributed to the fact that the applicant changed solicitors four times at various stages of the proceeding (applicant's application for costs at paragraphs 6, 7 and 14), that does not explain or justify all of the delays.
65 I have considered the matter of the applicant's offers to settle this matter by way of, in each case, payment of amounts less that the assessment amount and by instalments. However, the issue between the parties was not the amount of tax to be paid but whether or not the Land was exempt from land tax for the relevant assessment years. The amount of tax payable if the exemption did not apply was never in issue and therefore the differences between the parties could not be resolved by a payment of anything less that the amount assessed. Accordingly, I do not consider that the fact that the applicant made offers of payment earlier in the proceeding has any bearing on the outcome of his application for costs.
66 It follows that the issue is entirely whether or not the Commissioner acted unreasonably in allowing the matter to proceed towards the final hearing, then failing to settle the matter when the opportunities presented themselves and then conceding her position entirely.
67 The reasons for the Commissioner, having decided to resist the application and then subsequently conceding, were set out in the witness statement of Mr Clayton Mark Cox dated 3 December 2015.
68 Mr Cox is the Assistant Director Review of the review branch of the Office of State Revenue. The review branch, Mr Cox says, is primarily responsible for the administration of objections and review proceedings under the TA Act.
69 Mr Cox says that his reasons for recommending to the Commissioner that she agree to settle the matter included:
70 The applicant contends that there were no 'new facts' being asserted. This is based on his understanding that the 'new fact' the Commissioner is referring to is the applicant's claim that the applicant is the one conducting the business on the Land; T:3; 19.02.16. The applicant has said that this is not new and that the applicant since the outset has maintained that argument.
71 However, as I understand Mr Cox's evidence, the 'new fact' was that the applicant had amended his tax returns and those of Livestock Express in such a way so as to reflect the applicant's ongoing assertion as to the identity of the business operator; T:34; 12.02.16. Up to that point, the flaw in the applicant's argument, from the Commissioner's perspective, if I have understood the Commissioner's case correctly, had been that the income from the business was being returned by Livestock Express, not the applicant. That was certainly a problem for the applicant and it was not resolved by the applicant demonstrating that immediately upon receipt of funds by Livestock Express the applicant would transfer those funds to his personal account; T:1516; 19.02.16. However, if the tax returns had been prepared incorrectly and the applicant had instructed them to be corrected and re-lodged, then in my view, when the Commissioner became aware of this, it was reasonable for the Commissioner to reconsider her position.
72 The applicant has asserted that the Commissioner already knew this and had known as early as the time when the original audit of the exemption was conducted. The applicant directs me to the relevant page of the audit report, which is at page 53 of the respondent's bundle of documents. What was said there, the accuracy of which the applicant does not dispute, is as follows:
... The client expressed that he believed that the Office had been negligent and that he would have changed his business set up had he received the correct advice. I explained that the [sic] even with the incorrect advice the Commissioner could still reassess the erroneous exemption.
The client claimed that the [sic] he had already spoken to his accountant about changing his business practices for the financial year ending 2012 to reflect that he personally ran the rural business and not Livestock Express Pty Ltd for capital gains tax reasons. I offered the client an extension of time to complete his financial statement for the year ending 2012 and submit it to be [sic] so I could see if the Wilkinson Rd properties would be eligible for exemption. The client said to issue the reassessment and he would object. I told the client that once he can provide financial statements for 2012 and evidence of a change in licensee that reflects that the client carried out the rural business and not Livestock Express Pty Ltd at 30/6/2012 he can reapply for the exemption. The client told me that he no longer uses the licence as he does not export sheep.
73 I do not consider that this supports the applicant's argument that the Commissioner was aware that the tax returns had been amended. I accept that the Commissioner knew that this was one of a number of options being considered by the applicant. He was then offered time and the opportunity to provide evidence that these steps had been taken and instead he challenged the Commissioner to issue the reassessment. The Commissioner was only advised of the fact that the returns had in fact been amended as contemplated on 6 September 2015; applicant's application for costs at paragraphs 51 and 52. Until then, as Mr Cox said, 'we didn't know what the amended tax returns were going to show'; T:34; 12.02.16.
74 The Commissioner has submitted that once she became aware that it was now the applicant's contention that his tax returns had been amended, she realised that she should reconsider her decision. She also submits that the applicant was still intending to press the second 'leg' of his argument under s 16(5) of the TA Act. In addition, she says that the applicant was also intending to lead evidence that he was being treated differently to other landowners in the same circumstances; T:35; 12.02.16. At that stage, the Commissioner says that two days would be insufficient time to argue the matter, particularly as the applicant had suggested that he intended to lead evidence from numerous witnesses and seek production of further documentation.
75 In my opinion, this is a satisfactory explanation as to why the Commissioner conceded at that stage and not sooner.
76 In those circumstances, I cannot conclude that it is fair and reasonable that the Commissioner should bear any of the applicant's costs in this matter, including the applicant's costs of making the costs application.
I certify that this and the preceding [76] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________