Perpetual Trustee Company (Canberra) Limited, Terence Mark Snow, Richard G Kemp and John Tilley v Robert Lewis As Delegate of the Commissioner of the Australian Capital Territory Revenue [1996] ACTSC 19 (3 April 1996)

SUPREME COURT OF THE ACT

PERPETUAL TRUSTEE COMPANY (CANBERRA) LIMITED, TERENCE MARK SNOW, RICHARD G.
KEMP AND JOHN TILLEY v. ROBERT LEWIS as delegate for THE COMMISSIONER FOR THE
AUSTRALIAN CAPITAL TERRITORY REVENUE
No. SCA 76 of 1994
Number of pages - 8
Costs

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
MILES CJ

CATCHWORDS

Costs - application for indemnity costs by party in whose favour orders made for setting aside of statutory notices - counter application by opposing party - several issues at trial, each party successful on some issues - pretrial offer and counter-offer of settlement - neither offer made any real concession or conferred any advantage on opposing party - special order as to costs refused - order costs to follow event on party and party basis.

Costs - Federal Proceedings (Costs) Act 1981 (Cth) - case not reached on day listed for hearing - adjournment to later date - whether discontinued within s.10(3) - it is.

Administrative Decisions Judicial Review Act 1989

Taxation (Administration) Act 1987
Supreme Court Act 1933, s.23, s.32
Federal Proceedings (Costs) Act 1981 (Cth), sub-s.10(3)

Quirk v. Bawden [1992] ACTSC 118; (1992) 112 ACTR 1
Re Palmdale Insurance Ltd (19 October 1994, unreported)
Coulson v. Gosford Meats Pty. Ltd (1985) 7 FCR 106
Lindner v. Lindner (1985) FLC 80, 153
Re Morris and Another (1986) 66 ALR 699
Marriage of Redshaw (1989) 13 Fam.LR 495

HEARING

CANBERRA, 14 December 1994
3:4:1996

Counsel for the applicants : Mr. J. Topfer

Solicitors for the applicants : Mallesons Stephen Jaques

Counsel for the respondent : Mr. M.R. Bayliss

Solicitors for the respondent : ACT Government Solicitor

ORDER

THE COURT ORDERS THAT:
1. The respondent pay the costs of the applicants up to and
including 7 October 1994 and that thereafter all parties bear
their respective costs.

2. In accordance with sub-s.10(3) of the Federal Proceedings
(Costs) Act 1981 a costs certificate in respect of the proceedings
limited to the costs thrown away by reason of the attendance of
two counsel for the hearing listed on 5 October 1994 be granted.

DECISION

Application and cross-application for orders for costs
MILES CJ On 3 November 1994 in an application for judicial review under the Administrative Decisions Judicial Review Act 1989, I made a declaration that certain notices issued by the respondent pursuant to sub-s.18(2) of the Taxation (Administration) Act 1987 were invalid. I also ordered that those notices be set aside. I stated that unless the parties wished to be heard I proposed to order that the respondents pay the costs of each of the applicants. The order I proposed was what might be regarded as the usual order, on the principle that costs would follow the event. It was implicit in the proposal that such costs would be assessed or taxed on a party and party basis.

2. Mr. Topfer, for the applicants, however, sought an order that costs incurred by his clients after 5 October and payable by the respondent be assessed or taxed on an indemnity basis.

3. Conversely, Mr. Bayliss for the respondent sought an order that the parties bear their own respective costs up to 4 October 1994 and that costs incurred after that date be paid by the applicants on an indemnity basis. Both counsel sought support for their submissions in letters written by their respective instructing solicitors in the following exchange.

Respondent's solicitor to applicants' solicitor - 4 October 1994:
"I refer to previous correspondence in this matter and in
particular to your facsimile transmission of 14 September 1994.
It appears to the writer that there are two crucial issues
between our respective clients.
The first issue is whether the Notices under s.18 of the Taxation
(Administration) Act 1987 are defective as to form in that they
do not identify a taxpayer in respect of whom the inquiry is
made.
The second issue is whether the respondent has jurisdiction to
issue notices for the purpose of obtaining evidence or material
which may be used by the Commissioner in pending proceedings in
the ACT Administrative Appeals Tribunal.
It is (the) writer's opinion that the real issue between the
parties is the second issue. Even were the applicants to be
successful in relation to the first issue all that would result
is that further notices would be issued in proper form by the
respondent. Only an answer to the second issue will allow the
parties to resolve the substantive issue between the parties
concerning the relevant Notice of Assessment to Stamp Duty. An
answer to the first issue without an answer to the second issue
really places the parties in no different position than where
they are now.

Accordingly, I am instructed to offer that my client would issue
further notices in a form which identifies a taxpayer or
taxpayers. It would be conditional upon this offer of the
present notices being withdrawn and replaced with further notices
that your client would concede that in these circumstances my
client is entitled to issue such notices and serve those upon the
second applicants in circumstances where the information which is
provided pursuant to those notices may or may not be used for the
purposes of proceedings before the AAT between the first
applicant and the Commissioner for Revenue.

If your client, however, does not accept the above offer and is
only successful upon the first issue referred to in this letter,
but not successful on the second issue, then I shall seek costs
of these proceedings from the time of this letter on the basis
that you could do no better than what has been offered.

I would be obliged if you would advise the writer of attitude to
this offer at the earliest possible point in time."

Applicants' solicitor to respondent's solicitor - 5 October 1994
"We refer to the discussions which took place at court today.

The following issues are raised in these proceedings:

1. The validity of the delegation pursuant to which the notices
were issued.

2. Whether or not the notices which were issued are defective in
form.

3. Whether or not the issuing of notices for the purposes of
defending an assessment in the Administrative Appeals Tribunal
is a valid exercise of the power under section 18(2) of the
Taxation Administration Act 1987.

4. Whether it is a valid exercise of the power conferred by
section 18(2) of the Taxation Administration Act to issue
notices for the purpose of enquiring as to whether unidentified
persons are liable to the payment of stamp duty.

It seems to us that if the court determines either of issues 1
and 2 in favour of the applicant then issues 3 and 4 will not
arise in these proceedings. This is because the court will not
determine hypothetical questions.
Further there seems to us little doubt having regard to the
decision of the High Court in Federal Commissioner of Taxation v.
Australian and New Zealand Banking Group Limited [1977] HCA 57; (1979) 143 CLR
499 that a court will determine the issue of the formal validity
of the notice in the applicant's favour.

In these circumstances we confirm our suggestion to you that the
existing notices be formally withdrawn. If that is done our
client would be prepared to discontinue these proceedings
providing an order for costs was made in its favour and provided
such discontinuance was without prejudice to its rights to
challenge any subsequent notice which may be issued either on
formal or substantive grounds. In the event that this course is
acceptable to you, our clients will of course co-operate in an
endeavour to have the substantive matters dealt with by a court
as quickly as possible in proceedings where a court is able to do
so.

To avoid any further costs being incurred in this matter we look
forward to your prompt reply.

Please note that if the proposals which we suggested are not
acceptable to you we propose to tender this letter on the
question of costs in the proceedings."

4. The letter of 5 October referred to events earlier that day at court. The proceedings had been listed for hearing in the ordinary way, along with other matters. Owing to the state of the list the present proceedings were treated as not reached and adjourned to 7 October 1994. For Mr. Topfer or his firm, the adjournment had a special significance because counsel, both senior and junior, had to attend court on two days instead of one (with senior counsel coming from the Sydney Bar).

5. Both Mr. Topfer and Mr. Bayliss relied on the outcome of the case, having regard to the issues raised and referred to in the exchange of letters. However, there were no pleadings and the issues are to be identified at this stage, not only by reference to the correspondence before the hearing, but also to the text of the judgment. That is a matter to which I shall return.

6. Applications for "special" costs orders are now made with greater frequency than in earlier days. It could hardly be clearer that since its creation this Court had the power to make orders as to costs which do not impose liability on the losing party to pay the winning party's costs on a party and party basis, or at all. Section 23 of the Supreme Court Act 1933 gives an unfettered discretion to the Court to determine the amount of costs of and incidental to proceedings in the court, by whom and to what extent such costs are to be paid. That discretion is subject to other laws of the Territory including rules of court. No other law of the Territory or rule of the court, however, is relevant to this case.

7. It would have been consistent with s.23 of the Supreme Court Act for a practice to have been established whereby costs are normally borne by the respective parties. As a matter of history, that did not occur and for generations the conventional practice has been to make orders with the effect that costs follow the event. That is a sensible and convenient approach in most cases and allows the parties a yardstick by which to measure some of the financial implications of pending litigation. But there is nothing sacrosanct about the practice. Every case depends on its circumstances and the allocation of costs as between parties by a court order does not depend upon the application of any formula.

8. As was pointed out by the Full Court in Quirk v. Bawden [1992] ACTSC 118; (1992) 112 ACTR 1 (not unreported), courts encourage offers of settlement, particularly at an early stage of litigation, in order to reduce the delay and cost of litigation and to improve what is now called access to justice. A party who, as it turns out, unreasonably refuses an offer before trial may have to accept a greater share of the cost of trial than would be imposed by a simple order to the effect that costs follow the event. The unreasonableness or otherwise of a refusal may often be measured by comparing the offer with the outcome of the case. However, in order to attract a costs advantage at the end of the case, offers and counter-offers of settlement must be genuine and relate to real issues in the case. They are not to be indulged in as threats or mere gestures.

9. In the present case the decision of the Court was given on three distinct issues. They were, one, whether the respondent had authority to issue the notices, two, whether the notices were invalid by reason of the failure of all notices to identify the person in respect of whom information was sought, and three, whether the notices were invalid because assessments had already issued to each of the taxpayers concerned whilst proceedings were pending in relation to those assessments in the Administrative Appeals Tribunal. As to the first and second issues, the applicants succeeded as to all notices. As to the third issue, the applicants succeeded only as to some of the notices in question.

10. Neither of the letters between the solicitors identified the issues with complete accuracy. The respondent's solicitor's letter failed to address the third issue at all. It wrongly identified the second issue as a matter of formal defect only. The applicants' solicitor's letter wrongly identified the second issue as going to the purpose of the notices. It added a fourth and false issue of formal defect.

11. The offer made on behalf of the respondent was to withdraw the notices in question without prejudice to the respondent's rights to issue further notices which identified the person in respect of whom information was sought. It was, in my view, an offer which conferred no advantage on the applicants, who would have been left to contest by reference to the second issue the validity of any substituted notices issued by the respondent. By implication the offer conceded the issue of failure to identify the person but ignored the consequences as far as the costs of the proceedings were concerned. It also ignored, whether deliberately or not, the issue of authority to issue the notices. It gave away nothing. No wonder it was rejected.

12. The offer made on behalf of the applicants was to discontinue the proceedings on condition that the respondent withdrew the existing notices without prejudice to the applicants' right to contest the validity of any further notices that might be issued. The offer proposed the further condition that the respondent pay the applicants' costs. This offer too was an offer that conferred no advantage on the other side and, in the light of the implied concession by the respondent on the issue of authority, gave away nothing on the matter of costs.

13. Mr. Bayliss, for the respondent, submitted that "the real issue" was whether the notices were issued for a proper purpose when assessment had already issued and proceedings were pending in the Administrative Appeals Tribunal. That might have been an issue which the respondent was interested in having determined, having regard to its general importance. It could have been of hardly more than academic interest to the applicants. The applicants' solicitor's letter indicates that it was of no interest to them in the event of their succeeding on another issue unless and until notices were issued that were otherwise valid. Mr. Bayliss was correct in pointing out that the issue of proper purpose has now been determined and determined favourably to his client, the respondent. He was also correct in pointing out that the cost of further notices and further proceedings on the issue of proper purpose has been avoided. However, I cannot see how that in any way justifies the orders he seeks. It is the question of the allocation of costs in the present proceedings that need to be determined. I am not convinced by Mr. Bayliss' submission that the present proceedings have ended in a "draw" simply because the respondent may now issue notices which identify the person in respect of whom the information is sought and which are not liable to be declared invalid on that issue. Mr. Bayliss' submission also avoids the difficulty created by the finding that in relation to some of the notices the respondent lacked authority to issue them.

14. On the other hand, the offer of the applicants made no concessions either. Furthermore the applicants have received a result less favourable than the offer they made, in that there is now a ruling of law adverse to them on the issue of proper purpose. I do not see why the respondent should have to indemnify them as to their costs beyond the date of offer. If the respondent had withdrawn the notices and paid the applicants' costs, in accordance with the applicants' solicitor's offer, and then proceeded to issue further notices, the issue of proper purpose would have remained. Further litigation with further delay and increased cost would have resulted inevitably in the issue being determined as it has been, in favour of the respondent. There was no advantage to either party, nor was it in the interests of the administration of justice, that a real issue between the parties be simply postponed to a later date and that further proceedings follow in order to have that issue determined. Basic to this Court's jurisdiction is the requirement of s.32 of the Supreme Court Act 1933 that in the exercise of its jurisdiction the Court shall, so far as practicable, ensure that all matters in issue between the parties are finally determined and all multiplicity of legal proceedings concerning those matters is avoided.

15. It follows that the appropriate order is that the costs of and incidental to the proceedings up to and including the hearing on 7 October 1994 ought to follow the event, that is to say, that the respondent pay the applicants' costs on a party and party basis.

16. However, as far as this application (and cross-application) for costs is concerned, no party emerges as the victor and all parties should bear their respective costs. It should be understood that making an offer before trial in a letter marked "Without Prejudice Except as to Costs" or describing such a letter as "a Calderbank letter" is no guarantee that a special order for costs will be made. It is not the label that matters, but the circumstances.

17. One final aspect arises from the concern of Mr. Topfer as to the liability to pay counsel for attending court on 5 December when the case was not reached. The Federal Proceedings (Costs) Act 1981 (Cth) provides in sub-s.10(3):

"(3) Subject to this Act, where:

(a) the hearing of any proceedings in a court to which
this section applies is discontinued and a new hearing is
ordered; and

(b) the discontinuance and new hearing are not
attributable to the neglect, default or improper act of
any party to the proceedings;

the court may, on the application of a party to the
proceedings, grant to that party a costs certificate in
respect of the proceedings."

18. In this Court Higgins J decided in Re Palmdale Insurance Ltd (19 October 1994, unreported) that where a hearing is listed for a particular date, and a judge is unavailable to hear it, it is discontinued within sub-s.10(3) of the Federal Costs (Proceedings) Act. In reaching this conclusion his Honour followed persuasive authority, for example, Coulson v. Gosford Meats Pty. Ltd (1985) 7 FCR 106 (Gray J), Lindner v. Lindner (1985) FLC 80, 153 (Family Court of Australia, Purdy J), both cases on the unavailability of a judge. Higgins J also acknowledged decisions to the contrary in Re Morris and Another (1986) 66 ALR 699 (Federal Court of Australia, Muirhead J) where an adjournment was granted by a judge when a party was taken by surprise and in the Marriage of Redshaw (1989) 13 Fam.LR 495 (Family Court of Australia, Mullane J) where no judge was available for a period of several days, including the two days in which the matter was listed for hearing.

19. In the present matter the proceedings were listed before me and notice given to the parties in the ordinary way, for a hearing on 5 October 1994. In accordance with the ordinary practices of the Court and in anticipation of settlements and applications for adjournment, several matters including the present proceedings were listed for hearing. The present matter had no priority and it awaited its turn on the day. As it transpired, the business of the Court on that day was such that the hearing in the sense of opening addresses, the reading of affidavits and the like, could not commence and the matter was, during the course of the day, treated as if not reached and stood over until 7 October 1994. The hearing had been commenced on 5 October only in the sense that the matter had been called on. The priority of other matters was such that the hearing could proceed no further that day and the hearing was in that sense discontinued. The case was not part-heard by me and could have been heard on the adjourned day by any Judge.

20. In Palmdale Insurance Limited Higgins J said at 6:

"Section 10(3) is intended to provide compensation to a party
deprived of a hearing and put to the expense of a new hearing due
not to the default of any party but the failure of the court
system or other adventitious cause whereby a hearing has to be
aborted and recommenced. That abortion may be at the very outset
of the hearing or part-way through."

21. Accordingly, I grant to the applicants in accordance with sub-s.10(3) of the Federal Proceedings (Costs) Act 1981 a costs certificate in respect of the proceedings limited to the costs thrown away by reason of the attendance of two counsel for the hearing listed on 5 October 1994. In accordance with sub-s.10(4) I state that in my opinion it would be appropriate for the Attorney-General to authorise a payment under that Act to the applicants in respect of such part as the Attorney-General considers appropriate of the costs incurred by the applicants by reason of the attendance of two counsel for the hearing on 5 October 1994.