The trend of litigants raising arguments based on the Model Litigant Policy when involved in litigation against government departments or agencies continued in a recent New South Wales decision before the Administrative Decisions Tribunal – Western City Developments Pty Ltd v Chief Commissioner of State Revenue (No 2) [2010] NSWADTAP 72. At issue was whether an alleged breach of the Model Litigant Policy rendered an order for costs fair in the circumstances.

Western City Developments Pty Ltd (WCD) made an application for costs following its successful appeal from the decision of Member Hirschhorn in Western City Developments Pty Ltd v Chief Commissioner of State Revenue [2008] NSWADT 293 (the original proceedings). The Appeal Panel ordered that the determination of the value of the property be remitted to the learned Tribunal member to allow further evidence of value to be brought. The remitted proceedings did not proceed to a hearing since the parties resolved the matter by negotiation. The present decision relates to an application for costs by WCD following their success on appeal. They sought the costs of the appeal to the Appeal Panel and the costs of the remitter to the learned Tribunal member.

WCD owns land located at Gosford. It paid duty on the purchase of that property and sought a return of part of the amount of duty paid pursuant to section 21 of the Duties Act 1997. The Chief Commissioner of State Revenue assessed duty on a dutiable value of $3,400,000 being the price shown on the contract as being the consideration paid for the property. However, a reduced sum of $2,420,000 actually changed hands between the vendor and WCD as the vendor was keen to sell.

The issue before the Tribunal member was what the correct “dutiable value” of the property was for the purposes of section 21 of the Act upon which duty should have been calculated. According to the Tribunal member, it was necessary for WCD to show not just that the consideration had been reduced, but also prove the unencumbered value of the property at the time the consideration was reduced. In addition, the Tribunal member found that as WCD did not provide evidence of the unencumbered value of the property, apart from two 1 page expressions of opinion of value from local real estate agents, there was no evidence as to the unencumbered value of the property. Therefore, despite the finding that the consideration was reduced from that shown on the contract for sale, the Commissioner’s decision under review was affirmed. However, the appeal was successful and the question of costs was reserved which was the subject of the present proceedings.

Costs in any proceedings before the Administrative Decisions Tribunal are governed by section 88 of the Administrative Decisions Tribunal Act 1977 (NSW). Section 88 provides that each party to the proceedings before the Tribunal is to bear their own costs in the proceedings except as provided in section 88 such that the Tribunal may award costs in relation to proceedings only if it is satisfied that it is fair to do so having regard to the factors outlined in (a) (e).

WCD submitted that the Chief Commissioner did not act in compliance with his obligations to act as a model litigant in that:

  1. knowing that the question of the value of the property was a central issue, he objected to the evidence as to value
  2. he failed to agree to an adjournment notwithstanding there was no prejudice to him, given that the duty had been paid, and
  3. he failed to have regard to the fact that the appellant was not represented at first instance, particularly “in the face of its highly specialised knowledge of the issues of fact and law involved in the assessment of [WCD’s] liability for stamp duty on the transaction”.

The Chief Commissioner contended that while the Appeal Panel had jurisdiction to determine the costs of the appeal, it had no jurisdiction to order costs of the remitted proceedings. In any event, if any power in relation to the remitted proceedings existed, the Chief Commissioner submitted that it must be exercised by the Tribunal member who determined the original review proceedings. The Chief Commissioner also submitted that the factors in section 88(1A)(a) are not exhaustive but an indicative list of the kind of factors which go toward showing an unfairness that should be remedied by way of a costs order and that the matters set out by WCD did not sit comfortably within that list. The Chief Commissioner also submitted that the objections to evidence taken were not objections which were untenable and that the findings of the Appeal Panel supported that contention. The Chief Commissioner further submitted that the factors relating to an adjournment were “finally balanced”. As a result, the Chief Commissioner submitted that no costs order should be made because it was WCD’s failure to present its case at first instance, the paucity of the evidence was such that the Tribunal could not have made a determination on that evidence at all and the decision to rely to on the evidence was a “considered commercial decision”.

The Appeal Panel-Internal (comprising of Needham J SC, Verick A and Barnes M) referred to the Court of Appeal’s decision in AT v Commissioner of Police, NSW [2010] NSWCA 131 where Justice Basten stated in relation to s88(1A) (with whom the other members of the Court agreed):

“The condition of engagement of the power to order costs … must be the satisfaction of the Court exercising the power that the circumstances for an order have arisen. Nor is the criterion of fairness qualitatively different from the exercise of an unfettered discretion.”

As the Appeal Panel noted, the “unfairness” identified by WCD was an alleged breach of the Model Litigant Policy. According to the Appeal Panel, the objection by the Chief Commissioner to the evidence of value cannot have constituted a breach of the Model Litigant Policy as the Appeal Panel who heard the appeal found that the evidence was properly rejected and the letters that had been used to support a finding of the unencumbered value of the property could not have formed the basis of any finding as to value. Further, the Appeal Panel stated that WCD was on notice of the kind of evidence required and had chosen, due to the cost of the valuer, to not seek proper evidence of value. As a result, WCD’s submission that the Chief Commissioner, in objecting to the evidence as to value was “pressing the application of strict rules concerning expert evidence” could not be upheld given the fact that the evidence was insufficient in itself.

In addition, the Appeal Panel stated that there was no duty on the Chief Commissioner, by reason of the Model Litigant Policy or otherwise, to insist that his opponent seek an adjournment. The Appeal Panel stated that in “seeking that the matter be determined on the date that it had been set down for hearing, the State was acting ‘firmly and properly’”. The Appeal Panel stated that in seeking to have an issue determined does not constitute taking unfair advantage of an unrepresented litigant, particularly since the Chief Commissioner had sought to bring to WCD’s attention the difficulty with its claim. As a result, the Appeal Panel found that by not insisting that WCD seek an adjournment in the circumstances of this case was not a breach of the Model Litigant Policy.

According to the Appeal Panel, the Chief Commissioner gave WCD sufficient information to enable it to make a decision as to the kind of evidence it would bring and the Chief Commissioner was entitled to seek to have the review heard on the day on which it was listed. While the Appeal Panel found that the Tribunal member should have offered and then allowed an adjournment, the Tribunal Member was certainly not coerced into not adjourning the matter by any submission of the Chief Commissioner that the matter should continue. As a result, the application for costs of the Appeal was dismissed.

Finally, the Appeal Panel found that it had jurisdiction to consider the costs of the remitted proceedings but, in accordance with its views outlined in the case, dismissed that application for costs.

This case demonstrates yet another example of where a litigant in proceedings involving a government department or agency raised issues associated with the Model Litigant Policy in an attempt to succeed in a costs application. In this case, WCD attempted to demonstrate that the agency’s conduct was unfair in a number of respects and that this was inconsistent with the Model Litigant Policy. The Appeal Panel found that the agency was entitled to have the matter set down for hearing and was acting “firmly and properly” in doing so and that it did not take any unfair advantage of an unrepresented litigant. This case provides us with further insight into the scope of the Model Litigant Policy and the constraints within which government departments and agencies must act to ensure adherence to the Model Litigant Policy. The importance of government departments and agencies acting “fairly” should be at the forefront of those acting for government departments or agencies in any dispute or legal proceedings. It is not difficult to contemplate how the result in this case could have been different if, for example, the Chief Commissioner had not brought to WCD’s attention the difficulty with its claim. Once again, government departments and agencies should take note of this decision in terms of the conduct of litigation in a government context.