Background
The underlying proceeding concerned an application by the Plaintiff pursuant to s. 97(1)(a) of the Taxation Administration Act 1996 (NSW) (“TAA”) for a review of certain decisions dated 4 February 2019 of the Chief Commissioner in relation to payroll tax assessments issued for the periods from 1 July 2012 to 30 June 2017.
By summons filed 23 December 2019, the Plaintiff contended that the Assessments should be revoked because the Plaintiff had been wrongly grouped with another company, Kagua Pty Ltd (in liq) (“Kagua”), and was thereby wrongly assessed as jointly and severally liable for its payroll tax liabilities.
On 15 December 2020, Ward CJ dismissed the proceedings by consent, and without a hearing on the merits, after the Chief Commissioner amended the grounds for grouping the two entities based on s.72(2) of the Payroll Tax Act 2007. Ward J reserved the question of costs because the plaintiff invoked the rule that an amending party should pay the costs thrown away by reason of the amendments. The Plaintiff argued that the costs thrown away are the whole of the costs of the proceeding
The Tribunal decided to determine the issue on the papers. Both parties filed written submissions as to costs. An issue arose as to whether there was a materially misleading statement contained in an affidavit lodged by the Plaintiff regarding the Chief Commissioner’s awareness prior to the commencement of the proceeding that Kagua’s employed truck drivers were employed solely or mainly to perform duties for or in connection with the Plaintiff’s business.
The Statutory Framework
Rule 42.1 of the UCPR provides as follows:
Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs.
Rule 42.2 of the UCPR provides as follows:
Unless the court orders otherwise or these rules otherwise provide, costs payable to a person under an order of the court or these rules are to be assessed on the ordinary basis.
Submissions
Plaintiff’s Submissions
The Plaintiff submitted that all the Plaintiff’s costs up to 5 November 2020 were wasted by reason of the Chief Commissioner’s “belated” reliance upon s. 71(2) of the Payroll Tax Act 2007 (NSW) (“PTA”). The Plaintiff argued that departing from the general rule in rr 42.1 and 42.20(1) of the UCPR is justified by the late change in the Chief Commissioner’s case on 5 November 2020, which was undisputed by the Plaintiff and was known to the Chief Commissioner prior to the commencement of the proceeding.
The Plaintiff also sought costs for the costs proceedings, on an indemnity basis, or alternatively on an ordinary basis. because the Chief Commissioner failed to accept detailed without prejudice offers made by the plaintiff on 24 November 2020 and 9 December 2020, by which the plaintiff offered to pay $25,000 and $30,000, respectively, towards the Chief Commissioner’s costs of the review proceedings.
Chief Commissioner’s Submissions
The Chief Commissioner noted there were four alternative factual bases for initialling grouping the plaintiff and Kagua, and the plaintiff only disclosed that employee truck drivers of Kagua were employed solely or mainly to perform duties for or in connection with the plaintiff’s business in answer to a subpoena issued in the course of this proceedings.
The Chief Commissioner pointed to the general rule applicable on the dismissal of proceedings as set out in UCPR r 42.20(1). The Chief Commissioner submitted that this provision should be read in the context that costs follow the event (UCPR r 42.1), the event being the dismissal of the Plaintiff’s summons and not the amendment of the Chief Commissioner’s Appeal Statement, for which leave was granted. The Chief Commissioner submitted that the Plaintiff must pay its own costs of the costs proceedings unless there is proper justification for departing from the general rule.
Decision
Her Honour held that the appropriate order is that the Plaintiff pay the Chief Commissioner’s costs of the proceedings on the basis of the general rule under r 42.20 of the UCPR, and the Plaintiff’s claim for indemnity costs of the costs application itself could not be maintained. In coming to this decision Her Honour cited the following reasons:
- the Plaintiff’s invoking of a special rule applicable to the responsibility of costs thrown away by the amendment of pleadings pursuant to Beoco Ltd v Alfa Laval Co Ltd [1995] QB 137 at 154, is misconceived. In Her Honour’s opinion such a rule was not apt to cover the situation at hand where, after the amendment of the Chief Commissioner’s Appeal Statement, the Plaintiff has conceded in effect that its application for review of the relevant payroll tax assessments would inevitably be bound to fail;
- not only has there been a dismissal of the proceedings, it would ordinarily require good reason to depart from the general rule that the Plaintiff must pay the Defendant’s costs (Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365 per Bryson JA with whom McColl JA agreed at [54]). Where a matter has not been heard on the merits, ordinarily for there to be a costs order in favour of one party it is necessary to show that the other party’s conduct has been “so” unreasonable as to warrant such an order (Ex Parte Lai Qin (1997) 186 CLR 622 at 624-625;
- Her Honour remained of the view expressed in Freelance International Pty Ltd v O’Kane [2019] NSWSC 159 (at [70]), that it was difficult to see why the same kind of considerations would not be relevant when deciding whether to depart from the “starting position” in rr 42.19 and 42.20 of the UCPR;
- in noting the observations in Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 at [30], of Payne JA, with whom Meagher JA agreed and at [8]-[9] of Basten JA, Her Honour stated that the exercise of determining whether the conduct of the Defendant has been “so” unreasonable would inevitably require a factual enquiry which is quite inappropriate to entertain; and
- the emphasis placed by the Plaintiff on “dispositive” grounds assumed by the Plaintiff, that the Chief Commissioner would not have succeeded but for the amendment of the Appeal Statement, could not be determined here since the merits had not been tested. Her Honour was not persuaded that the Chief Commissioner’s conduct in filing an Amended Appeal Statement, after obtaining leave to do so, was so unreasonable as to warrant the making of a costs order against the Chief Commissioner.
Her Honour also noted that it was inappropriate to enter into any debate as to whether there was any potential liability arising out of the matters asserted in the Chief Commissioner’s submissions, including non-disclosure by the Plaintiff.
Orders
The Plaintiff is to pay the Defendant’s costs of the proceeding on the ordinary basis.
https://www.caselaw.nsw.gov.au/decision/177ec1e309b4a2ab16550811
