Leppington Pastoral Co Pty Ltd v Chief Commissioner of State Revenue (No. 2)

HIS HONOUR: These proceedings concerned applications by the plaintiff taxpayer for the review of four land tax assessments. The plaintiff was successful in having two of the land tax assessments revoked. The Chief Commissioner was successful in having two of the assessments confirmed. The plaintiff submits the Chief Commissioner should pay its costs. It submits it was the successful party. The Chief Commissioner submits there should be no order as to costs in recognition of the fact both parties were partially successful and partially unsuccessful.

The Chief Commissioner also relies upon observations in my reasons (Leppington Pastoral Co Pty Ltd v Chief Commissioner of State Revenue [2017] NSWSC 9), in which I was critical of aspects of the plaintiff's case and its presentation (see in particular at [21], [98]-[100], [106] and [179]-[181]). The Chief Commissioner submitted that by reason of the conduct of the plaintiff unnecessary costs were incurred, and that in those circumstances, having regard to the equal success and lack of success of the parties, an order there be no order as to costs would be more than fair.

For its part, the plaintiff submitted that it substantially succeeded on a number of issues, as well as having succeeded on two of the four claims. It submitted that its success on particular issues should be reflected in the costs order. The plaintiff ultimately accepted that one of the issues it raised was a neutral consideration. The others were as follows:

Under r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW), the general rule is that costs follow the event. More specifically the rule provides that, subject to Pt 42, if the court makes any order as to costs, it:

I considered that rule in Priestley v Priestley (No 2) [2016] NSWSC 1259, and there noted what may be thought to be different approaches taken to the identification of the relevant “event” in the judgments of the Court of Appeal, in particular on the one hand in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (No 2) [2014] NSWCA 425 and Bartlett v Australia & New Zealand Banking Group Ltd [2016] NSWCA 30 at [96], and on the other hand Sze Tu v Lowe (No 2) [2015] NSWCA 91 at [39].

In Priestley v Priestley (No 2) I concluded:

The most recent statement from the Court of Appeal relevant to this question, of which I am aware, is what was said in Bartlett v Australia & New Zealand Banking Group Ltd at [96]. I consider I should continue to follow what I said at [49] of Priestley v Priestley (No 2), namely, that the relevant event for the purposes of the rule is primarily determined by reference to whether or not the plaintiff has obtained a judgment in its favour, even if the defendant has defeated some claims and has succeeded on others, or has succeeded on some issues.

On the other hand, I maintain my view there is considerable force in what was said by Finkelstein and Gordon JJ in Bowen Investments v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 (at [5]), that if an issue-by-issue approach or, I might add, a claim-by-claim approach, produces a result that is fairer than giving a successful party all of his or her costs, notwithstanding his or her failure on particular issues (and I would add claims), then an issue-by-issue (or claim-by-claim) approach should be adopted. The ultimate question is not where one starts but where one finishes, in assessing the fairness and justness of the costs order.

That having been said, it is clearly established by authority that where there are multiple issues, the court generally does not attempt to differentiate between issues on which a party was successful and those on which it failed, and that unless a particular group of issues is clearly dominant or separable, it would ordinarily be appropriate to award costs to the successful party without attempting to differentiate between issues on which it was successful or on which it failed (Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38]).

I do not think the particular issues advanced by the plaintiff, as set out earlier in these reasons, were dominant or separable issues within the meaning of this principle. It is true some costs would have been incurred before the hearing, particularly in relation to Mr Lidis' evidence in relation to the development consents, to which the plaintiff responded, which went to an issue as to whether land should be regarded as being used as part of the stock in trade of either Leppington or GDC. But I do not think that issue was materially separable from other issues, including the extent to which the land was used by consultants as part of the process of either obtaining or complying with development consents.

The question of whether there was a use of Farmland under the Development Rights Agreement was not an issue which occupied a particularly noteworthy amount of time. The question of whether fodder grown on land used to maintain animals on other land raised a question of construction, but that point was a short one. Factually, issues in relation to the growth of fodder were inextricably intertwined with other issues relating to the extent of the primary production use. There was no issue that LPC's use of the farmland satisfied the commerciality test under s 10AA(2).

But for the matters identified by the Chief Commissioner, which he submits resulted in the incurring of unnecessary costs due to the plaintiff's conduct of the case, I doubt it would be open to me simply to apply the principle that the relevant event must be understood as referring to the practical result of particular claims, and thus to conclude that as both parties succeeded on two claims and both failed on two claims, they had equal success such that the starting point is there should be no order as to costs, or perhaps partial orders for costs in favour of both parties.

But given that the question is a more general one as to what fairness dictates, I think it is open to consider more broadly the question of whether it is fair, having regard to the way the matter was prepared and conducted, including the mixed outcome, that either party should be required to pay the costs of the other.

I am not attracted to the plaintiff's submission that if a single costs order is not made, there should be orders for each party to pay some proportion of the other's costs. Such a course would result in undoubtedly long and probably complex costs assessments where it may be doubtful whether the ultimate result would justify the expenditures such a course would entail.

Having regard in particular to the matters to which I referred at [98] and [99] of my reasons and the costs incurred by the Chief Commissioner on the issues concerning the consultants’ activities and the matters referred to at [179]-[181], and having regard to the parties' mixed success, I think in this case the fair outcome is there should be no order as to costs, to the intent that each party pay its and his own costs. I so order.