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Damon and Commissioner of Land Tax (Vic.).

Members:
G Gibson P

Tribunal:
Administrative Appeals Tribunal of Victoria

Decision date: 2 December 1985.

G. Gibson (Presiding Member)

The applicant for review in this reference is Mrs Florence Louisa Damon. The Commissioner of Land Tax issued a notice of assessment against the applicant on 26 April 1983 in the sum of $7,177.04. The notice referred to four items of property. Only two were in issue at the hearing of this reference. The parties referred to them, and I shall refer to them, as the Hallam Road property and the South Gippsland Highway property. The assessment was for the calendar year 1983. The applicant objected to the assessment by letter of her solicitors dated 5 May 1983. The Commissioner issued a notice of disallowance on 13 May 1985. By letter of her solicitors dated 10 July 1985 the applicant requested the Commissioner to refer that decision to the Victorian Taxation Board of Review. That decision comes to this Tribunal for review under sec. 75(3) of the Administrative Appeals Tribunal Act 1984 (``the A.A.T. Act'').

2. The applicant relies on the exemption contained in sec. 9(1)(ha) of the Land Tax Act 1958 which exempts from land tax:

``land comprised in one parcel which is wholly or partly within the metropolitan area (within the meaning of the Town and Country Planning Act 1961) and which is wholly or partly within an urban zone under a planning scheme in force under the Town and Country Planning Act 1961 and which is used solely or primarily by the owner for the business of primary production if -

  • (i) the owner of the land is normally engaged in a substantially full-time capacity in the business of primary production of the type carried on on the land...''

Before this Tribunal it was common ground that each of the properties referred to above was land comprised in one parcel within the metropolitan area, as defined, and wholly or partly within an urban zone, as defined. It was also common ground that the land was used for primary production. That left two matters in issue:

  • (1) whether the land was used solely or primarily by Mrs Damon for the business of primary production; and
  • (2) whether Mrs Damon was normally engaged in a substantially full-time capacity in the business of primary production of the type carried on on the land.

In support of her application, Mrs Damon and two of her sons gave evidence. The Crown led no evidence.

3. Mrs Damon is 83. She was born on 4 January 1902. She has six children. The oldest is 63 and the youngest is 44. There is only one daughter. Mrs Damon married in 1921. At that time her husband was employed at a market garden. He subsequently acquired property at Mount Waverley which he worked as a market gardener together with Mrs Damon. The property was about 60 acres. As the children left school, they went to work on the property. It was subdivided and, for the most part, sold in about 1956. A property at Noble Park was

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acquired. This too was used as a market garden. The family substantially managed the property from shortly after the time of its acquisition. Mr Damon bought the Hallam Road property (about 78 acres) in about 1957 - the transfer was registered on 2 August 1960. In it Mr Damon was described as ``Retired Market Gardener''. This property was then and has since been used for grazing cattle. Mr Damon acquired the property partly as a hobby and partly for business. It was from the time of its acquisition substantially managed by his sons.

4. Mr Damon died in 1963, aged 64. Under his will, Mrs Damon has a life interest - a right of use and enjoyment until her death or remarriage - and the five sons and the children of the daughter are entitled to the residue. Two of the sons are trustees of the estate.

5. The estate sold the Noble Park property in about 1970 - the transfer was registered on 9 August 1972. The estate bought the South Gippsland Highway property. That property is about 94 acres, of which 60 have been devoted to market gardening and the remainder to the grazing of cattle. Some rent is received from some cottages on the Hallam Road property. Mrs Damon receives income from the primary production carried on at each of the properties.

6. On 31 October 1982 Mrs Damon entered into an agreement with three of her sons in relation to the South Gippsland Highway property. On its face the agreement records that the sons have from that day yielded up possession of the property to Mrs Damon and that they had totally ceased to carry on the business of market gardeners on the property. The recitals said that Mrs Damon (then in her eighty-first year) wished to carry on the business of market gardening on the property. The document then effected a sale of plant and equipment on the property to Mrs Damon for the sum of $2,113. On about 1 November 1982 Mrs Damon signed an application for the registration of a business name ``F.L. Damon Farms'' for the business of a grazier and market gardener at the two properties.

7. Mrs Damon is now a little frail. Her health has deteriorated over the past few years, although the evidence does not allow me to say with any relevant accuracy when each incident leading to her decline took place. She does take an interest in each property. Each is connected with her family. The family keeps her informed as to what is going on. She goes up to the properties every two weeks or so. Mostly she goes by way of a Sunday outing. She is apparently in the habit of ringing one son about the business each Wednesday at about tea-time. She also has a bank account in respect of the two properties. She signs cheques on that account. She does not write the cheques. Some or many of the cheques she signs in blank. It is plain from the evidence that the properties are in fact run by the children. In evidence, Mrs Damon said that all of the cattle at the Hallam Road property belonged to her oldest son. An item for rent from him for that property appeared in her relevant income tax return, although cross-examination of the eldest son revealed cause for serious concern as to the information on which that return was completed. In evidence Mrs Damon also indicated that she believed that her sons have responsibility for the South Gippsland Highway property and that she could not tell them what to do on that property. According to the profit and loss statement for 1 November 1982 to 30 June 1982 contained in the income tax return of Mrs Damon for the relevant period, ``management fees'' of $10,500 were paid to ``Damon Bros'', a partnership of three of the sons. For the same period, wages of $13,930 were paid. The wages were paid to labourers who worked less hours than the sons. The three sons split the management fees equally. One of them said that the fees were paid out to Damon Bros when there was enough in the kitty for that purpose. For the period in which the three sons drew $10,500 from the business, Mrs Damon received a net profit of $1,345.45.

8. On the evidence put to this Tribunal, I find that it was the sons who at the relevant time decided how much they should take from the business. On any view it is plain that the sons made and make the principal decisions relating to the properties. It is I think clear that they made the decision resulting in the agreement of 31 October 1982 and the registration of the business name. In evidence, Mrs Damon could not recall entering into an agreement with her sons. Her eldest son said that the whole family instructed the solicitor to set up ``F.L. Damon Farms'' because ``we had been paying land tax and if we had kept going we would have gone broke''. He said that that was one of the reasons why ``we are

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appealing''. The other son who gave evidence agreed that the business of the two properties was put into the name of their mother in order to get an exemption from land tax.

9. The Crown disclaimed any reliance on the provisions of sec. 71 of the Land Tax Act 1958 which relate to ``contracts to evade tax''. It did not seek to rely on the doctrine of fiscal nullity put forward in the House of Lords in
W.T. Ramsay v. I.R. Commrs (1982) A.C. 300. It argued that the agreement of 31 October 1982 was a sham. A number of decisions in relation to wording similar to that in sec. 9(1)(ha) were referred to me but it was acknowledged that the decisions referred to me were not directly in point and that sec. 9(1)(ha) had to be considered on its own terms.

10. It is in my view clear that the mere fact that the parties to the agreement of October 1982 had the purpose of avoiding tax when they entered into that agreement does not mean that they did not intend to carry that agreement into effect and to have it operate according to its tenor. On the other hand, the mere fact that the parties entered into a form of agreement does not mean that everything relevantly done by them after the execution of that agreement must be regarded as having been done pursuant to that agreement. Rather, the evidence as a whole must be looked at to see whether or not the facts as found fit the language of the statute.

11. In the result, I do not think that I need make any finding about whether or not Mrs Damon was a party to a sham or whether or not the land was used solely or primarily by Mrs Damon for the business of primary production. This is because I have come to the clear view that she does not satisfy the requirement of sec. 9(1)(ha)(i). On the evidence before this Tribunal, I am quite unable to find that at the relevant time Mrs Damon was ``normally engaged in a substantially full-time capacity in the business of primary production of the type carried on on the land''. As I followed the argument, it was put on her behalf that she had been on and lived off the land all her life and had no other income except that derived from the business on the two properties. But the connection that she had with the business was very limited. Some of the moneys going in and out of the business went through a bank account in her name. She operated the account by signing cheques, but that is about the only way in which she could be said to have operated the account. From time to time she discussed aspects of the business with those of her family who managed it. From time to time she visited the sites where the business was carried on. Whatever contribution she may have made to the business was very little and took very little of her time. The relevant part of sec. 9(1)(ha)(i) - ``engaged in a substantially full-time capacity'' - is a compound phrase and some heed must be paid to the warnings against considering each word of a compound phrase in isolation: see, for example,
Lloyd v. F.C. of T. (1955) 93 C.L.R. 645 at pp. 660 (Dixon C.J.) and 667 (Fullagar J.). This is particularly so where the phrase contains a word like ``engaged'', which was once castigated as ``deplorably ambiguous'' (
Benninga (Mitcham) v. Bijistra (1946) 1 K.B. 58 at p. 62, MacKinnon L.J.). In my view, in its present context, the phrase connotes regular participation in the business for a considerable part of the time of the owner: compare the construction of a similar phrase by O'Bryan J. in
Buntine v. Hume (1943) V.L.R. 123 at p. 128 where his Honour said in respect of a regulation that required a person to be ``engaged in war service'' in the context of war time landlord and tenant legislation that the word ``engaged'' ``excludes mere casual or intermittent employment and rather connotes such a degree of employment as occupies the whole or at least a substantial part of the person's time''. I am quite unable to find any reasonable view of the evidence which would enable the Tribunal to find that Mrs Damon comes within any reasonable interpretation of the relevant words. If anything, the position appears to me to be the contrary: on the evidence before me it appears that the business on each property has continued after November 1982 substantially as it had been before except that Mrs Damon was installed at the apex of the business in a nominal capacity for reasons relating to revenue, and for no other reason.

12. Since in my view Mrs Damon cannot satisfy the requirements of sec. 9(1)(ha) for the relevant time, this appeal by way of reference must be dismissed and the assessment under review must be confirmed.

13. At the conclusion of the argument, I invited submissions from each counsel as to costs. The Crown submitted that costs should follow the event, whether it won or lost. It referred to sec. 50 of the A.A.T. Act and reg. 9

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of the Administrative Appeals Tribunal (Taxation Division) Regulations 1985 (``the Regulations''). The applicant submitted that she should get her costs if she won but that the Crown should not get its costs if it won. It was said that Mrs Damon should not have to pay the costs if she lost because she had a right to come to this Tribunal to test the exemption in sec. 7(1)(ha), that there was no precedent relating to that exemption, that the reference was not frivolous or vexatious and that her financial position was not that strong. The argument was short and conducted in ignorance of the findings that have now been made. Nevertheless, and in order to avoid putting the parties to the expense of returning to argue the matter, I think that I should deal with the question of costs now. To that extent it will, unfortunately, be necessary briefly to consider matters that I regard as relevant background to the argument.

14. It is necessary first to consider the relevant legislation. Section 50 of the A.A.T. Act provides as follows:

``(1) Subject to and in accordance with the regulations, the Tribunal may make such orders (if any) as to costs in respect of a proceeding relating to a decision under a taxing Act as it thinks fit.

(2) In relation to any other proceeding, if the Tribunal is of opinion in a particular case that there are circumstances that justify it in doing so, the Tribunal may make such orders as to costs as the Tribunal thinks just.''

Regulation 9 of the Regulations provides as follows:

``(1) In the making of any order as to costs the Tribunal may take into account any default or failure of a party to the Reference with respect to the -

  • (a) lodging in the Registry; or
  • (b) serving upon another party -

of any document as required by these Regulations.

(2) Where a party to a Reference is represented at a hearing by a legal practitioner (whether or not such legal practitioner is employed under the Public Service Act 1974) the Tribunal may make such order as to costs at an appropriate scale as prescribed for a proceeding in the County Court.''

Although sec. 29(2) of the Land Tax Act 1958 makes specific reference to the power of the Court in relation to costs of appeals to the Court, there is nothing in sec. 28 (which deals with references to the Tribunal) relating to costs: the position appears to be the same in the Pay-roll Tax Act 1958 (sec. 33B and 33C) and in the Stamps Act 1958 (sec. 33E and 33F). In the case of an appeal directly to the Supreme Court, the Rules of the Supreme Court Ch. II O. 8 r. 24 apply, in the following terms:

  • ``Subject to the Act the Court shall in respect of the costs of an appeal or reference under this Order or any proceedings in relation thereto have the same power and discretion as to the party by whom the costs are to be paid and the account'' (sic) ``of the costs and the taxation thereof as in an action.''(Supreme Court (Victorian Taxation Appeals) Rules 1973 S.R. 1973 No. 368, r. 2.)

15. Section 50(1) of the A.A.T. Act suggests that the discretion of the Tribunal as to costs is subject to the Regulations. The Regulations give little assistance in determining how that discretion may be exercised. The nature of any constraints upon the discretion must be derived from a consideration of the matter, scope and purpose of the relevant legislation as a whole:
The Queen v. Australian Broadcasting Tribunal; Ex parte 2HD Pty. Ltd. (1979) 144 C.L.R. 45.

16. The general position relating to the award of costs in matters determined by courts of law is broadly as follows. The costs are in the discretion of the court which may determine who shall pay them and to what extent. That discretion must be exercised judicially and not arbitrarily. The general rule is that the court orders that costs follow the event, except where facts are found by the court from which it appears that some other order should be made. The discretion should not be exercised against a successful party except for a reason connected with the case: see, for example, 37 Halsbury (4th ed.) para. 714, 716. These rules are very generally followed in ordinary courts, and when a new court is established: see, for example,
Trade practices Commission v. Nicholas Enterprises Pty. Ltd. & Ors (1979) ATPR ¶40-141; (1979) 28 A.L.R. 201.

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17. In the very earliest days, fees to lawyers, as opposed to outgoings, were not recoverable from an unsuccessful party under this general indemnity rule. The older rule survives to a large extent in the United States where attorneys' fees are not generally recoverable. Experience would suggest that this difference in procedural rules has resulted in a profound difference in attitudes to litigation and access to the courts between that country and this. But, at an early time, courts in England were authorised and then required to award fees to attorneys. The justification for the indemnity rule is said to be that the unsuccessful party in litigation should not have brought or defended the action and should therefore pay the costs of the successful party: see Civil Justice Committee - Report Concerning the Administration of Civil Justice in Victoria (1983) vol. 1, para. 7.11 to 7.13. The case there cited is
London Scottish Benefit Society v. Chorley (1884) 13 Q.B.D. 872. In that case Brett M.R. said (at p. 875):

``I should have thought that a person wrongfully brought into litigation ought to be indemnified against the expenses to which he is unjustly put; but there cannot be a perfect indemnity, because it is impossible to determine how much of the costs is incurred through his own over-anxiety.''

Bowen L.J. said (at p. 876):

``A great principle, which underlies the administration of English law, is that the Courts are open to everyone, and that no complaint can be entertained of trouble and anxiety caused by an action begun maliciously and without reasonable and probable cause; but as a guard and protection against unjust litigation, costs are rendered recoverable from an unsuccessful opponent. Costs are the creation of statute. The first enactment is the Statute of Gloucester, 6 Edw. 1 c. 1, which gave the costs of the `writ purchased'.''

There are, I suppose, some who would be reminded of another observation attributed by some to another Lord Justice about courts being open to all, namely, ``that in England, justice is open to all - like the Ritz Hotel'' (Megarry, Miscellany - Act - Law (1955) at p. 254). At first instance in Chorley (at 12 Q.B.D. pp. 452, 459-460), Watkin Williams J. referred to the Statute of Gloucester (which dealt with the costs of the plaintiff) and to 23 Hen. 8 c. 15 and 4 Jac. 1 c. 3, which dealt with the costs of the defendant. The last Act referred to 23 Hen. 8 and recited that ``this law hath been found to be very good and beneficial for the commonwealth, and thereby many have been discouraged from bringing frivolous and vexatious and unjust suits, because such parties are to make recompense to the party unjustly vexed by the said unjust vexation''.

18. The rationalizations offered for the indemnity rule in Stuart and Victorian England must be considered in the light of the provisions of Australian legislation enabling subjects to test their rights against the government in the year 1985 as part of a legislative scheme that has been described, and not just outside Parliament, as ``the new administrative law'' (see Victorian Parliamentary Debates, L.A. 1984 at p. 663). The object of the A.A.T. Act is to open up to the subject review on the merits of government action, otherwise than by recourse to the courts. Section 4(a) of the A.A.T. Act discloses that the primary object of the Act is ``to establish an independent tribunal to review administrative decisions upon their merits in an informal and expeditious manner''. In my view an obligatory application of the indemnity rule may well frustrate a prime object of the Act. It is true that in a number of respects applications for review under taxing Acts are dealt with differently to applications to the general division of the Tribunal. Some of those differences were considered by this Tribunal in Nadenbousch & Anor and Commr of Pay-roll Tax (Vic.) (850545, 26 November 1985 [86 ATC 2011]) and I need not further rehearse them here. But it is not possible to ignore the fact that, for whatever reason, applications for review under taxing Acts now fall to be determined by this Tribunal by the application of a process (represented at least by sec. 35, 39, 44 and 45 of the A.A.T. Act) that governs review of administrative action in other areas of controversy between the Crown and its subjects. Although sec. 50 of the A.A.T. Act differentiates between reviews under taxing Acts and reviews under other Acts, I am not prepared to attribute to the legislature an intention to discriminate against the subject merely because the interests of the revenue of the Crown are involved. Rather, in my view, any difference between the treatment of the

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general administrative appeals and applications in tax cases must appear from a consideration of the legislation as a whole, and the Tribunal should approach the question of costs in respect of applications under taxing Acts with the objects of the A.A.T. Act firmly in view and then see whether the provisions specifically dealing with costs suggest that the Tribunal should adopt a practice followed by courts of law: it is a matter of determining by reference to the legislation any constraints which may be imposed upon the discretion given to the Tribunal. The issue of possible discrimination arises, in my view, because in applications for review under revenue statutes the respondent will effectively be the Crown in right of the State of Victoria. There will therefore be very few occasions if any where the applicant for review will have the economic capacity of the respondent. A blanket application of the indemnity rule would, I think, be likely to result in there being an imbalance between the strength of position of the parties on either side of a reference under a taxing Act. In
Director-General of Social Services v. Chaney (1980) 3 ALD 161, the Full Court of the Federal Court gave a restricted meaning to the word ``decision'' in sec. 44(1) of the federal A.A.T. Act, which deals with rights of appeal to the Federal Court from the federal A.A.T. The Crown had sought to appeal from a preliminary ruling. Deane J. (while still a member of the Federal Court) said (at pp. 180-181):

``It may be suggested that the proliferation of opportunities to appeal should be seen as a safeguard of the rights of the individual subject. Such a suggestion would, in my view, be misconceived. Indeed, if the view propounded on behalf of the Director-General in the present matter, namely, that an appeal lies as of right from every intermediate decision of a question of law in the course of the hearing by the Tribunal of an application to review, be accepted, the result would be that the individual subject who challenged a decision of the Executive before the Tribunal would not only have no assurance of an orderly and reasonably prompt resolution of his or her case by the Tribunal but that, in confronting the Executive, even if only to claim a widow's mite, he or she would be stepping into a maze in which the financial ruin of a myriad of possible appeals awaited at the whim of those who fund their enthusiasm for the fray, not from their own purses but from the long purse of Government.''

The matter then being considered by his Honour was of course very different from that which is now before this Tribunal, but I refer to the observations of his Honour as an example of a judicial recognition of the potentially adverse effects of there being a discrepancy in litigating power between parties before a Tribunal such as this. This Tribunal must bear steadily in mind its overriding obligation to act fairly, exemplified in the express statutory injunction (in sec. 44 of the A.A.T. Act) to ``ensure that each party to a proceeding before the Tribunal is given a reasonable opportunity to present the case''. In spite of the many distinctions made in the A.A.T. Act in respect of taxing Acts, there is not the slightest ground for suggesting that this Tribunal is in any way relieved of that obligation because the interests of the revenue are involved.

19. As indicated above, the relevant taxing Act is completely silent on the question of the costs of a reference to this Tribunal. Section 50(1) of the A.A.T. Act confers the discretion. Section 50(2) indicates that in applications for review other than under taxing Acts, particular circumstances need be shown before the Tribunal is to make an order as to costs. Regulation 9(1) shows a desire to ensure that the forms prescribed are duly completed; reg. 9(2) appears to make provision for solicitors employed by the Crown and shows a preference for the County Court scale of costs, if costs are to be awarded. None of those provisions, in my view, carries the implication that this Tribunal is bound to follow or apply the indemnity rule, at least if such a course would be contrary to the perceived objects of the A.A.T. Act. It would not, after all, have been difficult for the legislature to have evinced a preference for the indemnity rule. That could, for example, have been done by an adaptation of or reference to the rule of the Supreme Court relating to costs in tax appeals (O. 8 r. 24 of Ch. II) referred to above; it could also have been done by following the model for land valuation appeals referred to below.

20. Apart from the scheme and objects of the A.A.T. Act, there is in my view another reason why the indemnity rule need not be

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applied by this Tribunal in the same way that it is applied in courts of law. It is simply that this Tribunal is plainly not a court. In relation to tax appeals, this Tribunal is an alternative to the court. It is an administrative body. As presently advised, it appears to me that this Tribunal, at least in its taxation division, does not exercise the judicial power of the State. For the purposes of this reference, sec. 25(4) and 31(7) of the A.A.T. Act and sec. 28(1) and (3) of the Land Tax Act make it clear that this Tribunal in reviewing the assessment of land tax has been exercising an administrative function. It must act judicially (that is, fairly) and it has some of the powers of a court. But it does not exercise judicial power as such: see
Shell Co. of Aust. Ltd. v. F.C. of T. (1931) A.C. 275;
F.C. of T. v. Munro (1926) 38 C.L.R. 153;
The Queen v. Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty. Ltd. (1969-1970) 123 C.L.R. 361;
Cain, F.C. of T.; ex parte Evatt 75 ATC 4254; (1975) 133 C.L.R. 37;
Dalton v. D.F.C. of T. 85 ATC 4476; (1985) 60 A.L.R. 783; and compare, now,
R. v. Murphy (1985) 61 A.L.R. 139 at pp. 148-149. The Full Court of the Federal Court has held that the federal A.A.T. does not exercise the judicial power of the Commonwealth: Drake v. Minister for Immigration & Ethnic Affairs (1979) 2 ALD 60. That decision was influenced by federal constitutional considerations. But the weight of authority clearly shows that the same result follows in a unitary state: see, for example,
Attorney-General v. B.B.C. (1981) A.C. 303 at pp. 358-360 (Lord Scarman).

21. Because of those considerations relating to the structure of this Tribunal and of the A.A.T. Act, I presently conclude that the Tribunal is not bound to follow or apply the indemnity rule in the way in which it is applied by the courts. There are some other considerations which in my view are relevant to the determination of the argument about costs presently before the Tribunal.

  • (1) The discretion given to the Tribunal must, of course, be exercised fairly. An element of fairness is predictability. The application of the indemnity rule does give predictability. If the indemnity rule were to be wholly abandoned and no principles put in its place, parties going before or considering coming to this Tribunal may have no guide as to the possible conduct of this Tribunal in relation to costs. But, if any guidelines are to become current, they cannot, in my view, be the subject of any large pronouncement, except by the legislature, or, perhaps, the executive pursuant to its rule-making power; rather, any such guidelines will fall to be developed on a case by case basis. In the end, consistency is a means to the end of fairness; if consistency is pursued to the point of unfairness, it is likely that there has been a confusion between means and ends.
  • (2) The tax references considered by this Tribunal should be considered in their overall context.
    • (a) The taxpayer generally has the option of going to the Supreme Court or this Tribunal. The relevant provisions of the Supreme Court Rules, set out above, contemplate that costs in tax appeals to the court will follow the event and this is the general practice. It is, I think, clear that the legislature contemplates that references to this Tribunal will involve less formality, less expense and, perhaps, greater expedition than may be the case in appeals to the court. A taxpayer may appeal on a point of law to a single judge of the Supreme Court from a decision of this Tribunal. The Regulations show a preference for costs on the County Court scale if costs are to be awarded in this Tribunal.
    • (b) References to this Tribunal may involve an issue relating to the valuation of land. For example, sec. 25 to 27 of the Land Tax Act provide for references to the Land Valuation Board of Review in respect of the amount at which the unimproved value of land has been assessed. It is I think worth remarking upon the difference in the statutory provisions relating to such appeals. Section 43(3) and (4) of the Valuation of Land Act 1960 are as follows:
  • ``(3) The costs of and incidental to an appeal may be awarded to the party in whose favour an appeal is determined or, upon proof of notice of any appeal having been made under the provisions hereinbefore contained where the party giving such notice has not afterwards prosecuted such appeal, to the rating authority.

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  • (4) Costs referred to in sub-section (3) shall be in the discretion of the Court or Board and shall be paid respectively by the party against whom such appeal is determined or by the party so giving notice and not prosecuting such appeal (as the case may be).''
  • (c) On the other hand, the Commonwealth Taxation Board of Review, as I understand it, makes no order as to costs in respect of references to it. The Income Tax Assessment Act 1936 makes no provision for such costs. The functioning of that tribunal in relation to costs is therefore plainly distinguishable from that of this Tribunal.
  • (d) The relevant legislation here provides no basis for discriminating between the Crown and the taxpayer in terms of potential liability to costs: the position is otherwise in respect of proceedings under the Freedom of Information Act 1982: see sec. 58 of that Act.
  • (3) If a matter raised before the Tribunal involves questions of law, the parties should not be discouraged from having legal representation. The Crown will, I suppose, almost always wish to have legal representation. The Crown is likely to regard many matters as having more importance to it than they may have to the individual objectors. But there does not seem to me to be any reason a priori why a taxpayer who wishes to press an objection on a particular matter should be compelled to support the revenue by paying for the legal services availed of by the Crown in an endeavour by it to protect its interests on a scale wider than that involved in the bringing of the reference by the individual taxpayer. For all I know, a revenue authority may in some cases wish to obtain a determination on a point and may do so in a particular case where but for that wish the objection would otherwise have been allowed. Further, it must be recalled that sec. 35(1) of the A.A.T. Act provides not only that there be some expedition and only little formality in proceedings before this Tribunal, but that the Tribunal is not bound by the rules of evidence. There can of course be no compulsion on any party to be legally represented. It is, in my view, noteworthy that sec. 34 of the A.A.T. Act distinguishes proceedings under a taxing Act by expressly allowing general representation as of right, under sec. 34(2), a party requiring representation by someone other than a lawyer needs the consent of the Tribunal.
  • (4) In very many cases, the Tribunal itself will be materially assisted in its deliberations if parties are legally represented. Such representation is likely to promote an orderly definition and presentation of issues in a detached manner. The requirement of detachment will, I think, be even greater where a taxpayer appears alone and unrepresented against the Crown. But again I see no reason a priori why the taxpayer should as a matter of course be called on to pay for something that benefits the Tribunal. The obligation to fund the Tribunal is, I think, on taxpayers at large, and not on the minority of them who for one reason or another find themselves in a dispute with a revenue authority.
  • (5) While I have formed the view that the indemnity rule should not be applied in the same way as it is applied in the courts, it is my view that the rationale of the indemnity rule cannot be entirely forgotten and that the rule itself cannot be completely ignored. In my view, it is not to be peremptorily applied; it is not even a rule of last resort; but it does offer a guide. Otherwise there might be trouble at either end - the Crown might be subjected to baseless appeals and taxpayers might be left unfairly out of pocket although they have succeeded on an application for review. This tension does, I think, relate to what I regard as the critical proposition, namely, that the thrust of the A.A.T. Act generally is to enable citizens to explore or enforce rights against government agencies generally without being penalised or intimidated by orders as to costs. In a paper entitled A Fresh Approach to Dispute Resolution? Part II (12 Federal Law Review 95 at p. 110), Mr R.K. Todd, a Deputy President of the federal A.A.T., said:
  • ``But across the broad sweep of the Tribunal's jurisdiction, I firmly believe

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    that the possibility of an award of costs would kill the Tribunal for the ordinary citizen. With the Tribunal, as with the Taxation Board of Review, the citizen may come to it knowing that he can limit costs. He may engage senior or junior counsel, or a solicitor or a lay advocate, or he may present the case himself.''
  • It is perhaps significant that immediately prior to those observations, Mr Todd indicated that experience showed that Australian Capital Territory rating applications could well constitute an exception to the general rule. To some extent, I think, the provisions of sec. 50 of the A.A.T. Act reflect this tension and show a distinction as to the susceptibility to costs between the working of the Tribunal in its general division and the working of the Tribunal in its taxation division.

22. While I have found it necessary to consider the matters referred to above for the purposes of this particular decision, I have heard only the most brief and general argument about those matters and for future purposes the observations expressed above should be regarded as nothing more than the merest of hints as to the direction in which the breeze may possibly be blowing the next time that an argument arises in relation to costs of a reference before the taxation division of this Tribunal.

23. Before deciding the issue of costs, I must refer to one other matter. The Crown was represented by counsel instructed by a solicitor who is, I gather from the documents filed in this reference, employed by the respondent. I have heard no argument at all as to whether the Crown should be allowed legal costs in respect of legal services rendered by its employees. There is some authority on the matter which I need not now pursue. I note that in
Registrar of Titles v. Watson (1954) V.L.R. 111 at p. 112 the Full Court echoed the dislike expressed by Sir Samuel Griffith in
Irving v. Gagliardi (No. 2) (1895) 6 Q.L.J. 200 at p. 201 of the possibility that the Crown might make a profit out of its litigation with private litigants. On at least one view, reg. 9(2) of the Regulations appears to be designed to overcome those sorts of qualms and may be said to be consistent with the desire to preserve the independence of State Crown solicitors in the giving of legal advice: see now
Attorney-General (Northern Territory) v. Kearney (1985) 61 A.L.R. 55 at p. 65, Mason and Brennan JJ. But in the circumstances of this particular reference, I need not, I think, determine the right of the Crown to legal costs in respect of its own employees. For all I know, the potential liability of an applicant to such costs may in some cases be a matter that the Tribunal may take into account in determining whether or not any order should be made as to costs at all.

24. I accept the submissions on behalf of the applicant that this reference was not frivolous or vexatious and that there was no precedent relating to the relevant exemption. I am not able to make any finding about the means of Mrs Damon. But on no view of the evidence could this reference be characterised as an instance of oppression by the revenue in an endeavour to extract ``a widow's mite'', to refer to the Biblical allusion of Deane J. in Chaney, above. Rather, it is clear on the evidence that the sons managed the properties and took most of the gross profits derived from the properties; I think also that they were responsible for the bringing of this reference. It was, I think, the children of Mrs Damon who embarked on a course which culminated in the inedifying spectacle of their aged mother being cross-examined by the Crown about family arrangements about which she knew little or nothing. Any liability for costs is, I think, likely to be borne by those who took the profits from the land the subject of this reference. The Crown was, in my view, clearly entitled to retain counsel, if for no other reason than that the cross-examination of an 83 year old widow on behalf of the revenue is likely to be at once delicate and dangerous. The two sons who gave evidence said that they had set up the agreement of October 1982 and the registration of the business name on the advice of lawyers and accountants in an endeavour to avoid tax. It is still, of course, clearly the law that a subject is entitled to arrange his affairs in such a way as to reduce the liability to tax: see, for example, Ramsay, above, at p. 323, Lord Wilberforce. But in my view the present reference was a contest between two parties legally represented on equal terms which arose because the Damon family decided to chance its arm on the issue of liability to land tax and which was determined when this Tribunal found that the family had by a very considerable margin failed to arrange its affairs so as to attract the relevant exemption.

ATC 2011

In light of all of those circumstances, it is my view that the applicant should pay costs to the respondent in respect of this reference. In accordance with normal practice, those costs will not be a full indemnity. Again, rather than putting the parties to further expense by requesting further submissions, I think that rough justice would be done if I fixed a figure for costs in this matter which I do, in the sum of $650, having had regard to what I view as the appropriate County Court scale and to items in respect of brief to counsel, conference and one refresher. The application went for the best part of two days.

25. For the reasons given, the decision of the Tribunal is:

  • (1) that the assessment under review be confirmed;
  • (2) that the applicant pay to the respondent $650 costs of this reference; and
  • (3) that the reference be otherwise dismissed.


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