Mawland Quarantine Station Pty Ltd atf the Mawland Quarantine Station Unit Trust v Chief Commissioner of State Revenue

These proceedings were commenced by way of Summons on 28 January 2022 following the defendant’s disallowance of the plaintiff’s objection to a land tax assessment for the 2021 land tax year (the Assessment) in respect of land located in Sydney Harbour National Park comprising North Head Quarantine Station and surrounds. An Amended Summons was filed on 31 January 2022, correcting a minor typographical error.

The Amended Summons sought a review of the decision of the Chief Commissioner of State Revenue (Chief Commissioner) to issue the Assessment on two grounds:

On 15 February 2022, the plaintiff filed and served its appeal statement, in which it set out contentions in support of both grounds. In relation to the second ground, the plaintiff said:

On 18 March 2022, the Chief Commissioner filed and served an appeal statement which set out contentions as to why the first ground was incorrect. In relation to the second ground, the Chief Commissioner said:

It is clear, as the Chief Commissioner submitted, that this contention regarding the part of the land the subject of the Assessment on which the Wharf is located (Wharf land) was not made in the plaintiff’s objection and was made for the first time in the plaintiff’s appeal statement. From the time that the Chief Commissioner was made aware of the position regarding the Wharf land, the Chief Commissioner acknowledged that land tax was not payable in respect of that land.

The plaintiff did not file any evidence in the proceedings. Instead the proceedings were adjourned on several occasions on the basis that the plaintiff was challenging the underlying valuation of the land subject to the Assessment in proceedings brought in the Land and Environment Court (which still had not concluded by the time these proceedings were resolved) and also that the parties were in settlement negotiations.

Ultimately, on 28 October 2022, I made orders by consent including relevantly:

Order 1 relates to the Wharf land and order 2 relates to the balance of the land subject to the Assessment comprising the Quarantine Station and its surrounds (Q Station land).

I accept the Chief Commissioner’s submission that the orders made on 28 October 2022 did not involve a compromise or settlement in relation to the Q Station land, which the Chief Commissioner has maintained throughout is subject to land tax. In effect, the plaintiff has accepted that, rather than seek to progress its original claim that the Q Station land is exempt, it would submit to an order dismissing the Amended Summons in respect of that land.

The orders made on 28 October 2022 required the Chief Commissioner to remit to the plaintiff $5,306.55 or 2.3% of the total amount assessed.

The Court has a wide discretion in making orders as to costs: Civil Procedure Act 2005 (NSW), s 98(1). This discretion must be exercised judicially. The usual order is that costs follow the event: Uniform Civil Procedure Rules 2005 (NSW), r 42.1.

In this case, the parties resolved the proceedings prior to any contested hearing. Therefore, there is some dispute as to what the ‘event’ is, or whether it is appropriate for the Court to determine who was successful in that ‘event’. The plaintiff submitted that the relevant enquiry is not a “prediction as to the outcome of a hypothetical case”, but is whether the applicant has acted reasonably in the proceedings, citing Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 624, 626; [1997] HCA 6. The plaintiff submitted that, because it acted reasonably in commencing, continuing and resolving the proceedings, the Court should therefore order each party to pay their own costs.

The Chief Commissioner disagreed with the application of Lai Qin in the present case, and submitted that these proceedings fell into a different category, being a case where one party “effectively surrenders to the other”, citing ONE.TEL Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548; [2000] FCA 270 at [6], and Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 at [5] (Davies AJA with Mason P and Meagher JA concurring). The declaration primarily sought by the plaintiff in the Amended Summons would have resulted in the remission of $227,462.65 (the total amount of land tax assessed). The alternative position, which was the declaration ultimately made relating only to the Wharf land, required the Chief Commissioner to remit $5,306.65, representing 2.3% of the land tax assessed. The Chief Commissioner contended that the success in retaining almost 98% of the land tax assessed demonstrates that the plaintiff capitulated, rather than compromised. Further, the plaintiff’s change of position in relation to the Q Station land was not due to any supervening factor or change of position by the Chief Commissioner, but rather its own decision not to continue to challenge the Assessment of the Q Station land.

The Chief Commissioner also submitted that, in relation to the only issue that was still in dispute after pleadings were filed, the Chief Commissioner was successful and had acted reasonably in acknowledging in the appeal statement filed on 18 March 2022 that the plaintiff’s claim for a partial remission of land tax was correct, given that the Chief Commissioner had not previously been made aware of the circumstances surrounding the Wharf land.

Finally, the Chief Commissioner argued that the plaintiff did not act reasonably. The plaintiff brought proceedings asserting an exemption under s 10(1)(p1) of the Land Tax Management Act for land “subject of a conservation agreement under the Biodiversity Conversation Act 2016 or the National Parks and Wildlife Act 1974, being an agreement that remains in force in perpetuity (that is, an agreement that remains in force for an indefinite period and that cannot be unilaterally terminated by the owner of the land)”. The plaintiff failed to identify any agreement which properly came within the ambit of s 10(1)(p1). Furthermore, the plaintiff did not serve any evidence in the proceedings, contrary to the directions to do so by 16 September 2022. This direction was not complied with before 28 October 2022, when the orders were made by me finalising the Amended Summons.

The Chief Commissioner submitted that the appropriate order was that the plaintiff pay the Chief Commissioner’s costs of the proceedings or, alternatively, at least 98% of the Chief Commissioner’s costs to reflect the balance of success in the proceedings.

In my opinion, the Chief Commissioner is correct in submitting that the plaintiff has capitulated in respect of the Q Station land: see [13] above and the authorities there cited. I refer also to Zhao v Suzhou Haishun Investment Management Co Ltd [2020] VSCA 34 where Tate, McLeish and Hargrave JJA said at [12]:

The observations of McHugh J in Lai Qin referred to at [12] above on which the plaintiff relied are inapplicable because the plaintiff has not achieved the relief sought in the Amended Summons in relation to the Assessment of the Q Station land. Further, as pointed out by the Chief Commissioner, the arguments advanced by the plaintiff to support the conclusion that the Q Station land is exempt under s 10(1)(p1) of the Land Tax Management Act are subject to the fundamental difficulty identified at [15] above. As a result, I consider that the general principle referred to in Zhao is applicable subject to the qualification that some recognition should be given for the plaintiff’s success in relation to the Assessment of the Wharf land. In all the circumstances I consider that the appropriate way to do this is to reduce the Chief Commissioner’s cost recovery to 98% of the costs.

For these reasons, the Court will order that the plaintiff pay 98% of the Chief Commissioner’s costs of the proceedings, as agreed or assessed.