QUEENSLAND CIVIL AND 
ADMINISTRATIVE TRIBUNAL

CITATION:	Aurizon Operations Limited v Commissioner of State Revenue; Australian Eastern Railroad Pty Ltd v Commissioner of State Revenue; Aurizon Network Pty Ltd v Commissioner of State Revenue [2022] QCAT 340	
PARTIES:	In GAR165-19:

aurizon operations limited	
	(applicant)	
	v	
	COMMISSIONER OF STATE REVENUE
(respondent)	
	
In GAR166-19:

AUSTRALIAN EASTERN RAILROAD PTY LTD
(applicant)
v
COMMISSIONER OF STATE REVENUE 
(respondent)

In GAR167-19:

AURIZON NETWORK PTY LTD
(applicant)
v
COMMISSIONER OF STATE REVENUE 
(respondent)
	
APPLICATION NO/S:	GAR165-19;  GAR166-19;  GAR167-19	
MATTER TYPE:	General administrative review matters	
DELIVERED ON:	15 September 2022	
HEARING DATE:	15 April 2021	
HEARD AT:	Brisbane	
DECISION OF:	A/Senior Member Howe	
ORDERS:	In GAR165-19, GAR166-19 & GAR167-19:
The respondent pay the applicants’ costs of the proceedings fixed in the sum of $31,826.66.	
CATCHWORDS:	ADMINISTRATIVE LAW – ADMINISTRATIVE TRIBUNALS – QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL – COSTS – on applications to review assessments of payroll tax – where the applicants were successful on one of two arguments – where the applicants had made a formal offer of settlement pursuant to s 105 of the Queensland Civil and Administrative Tribunal Act and r 86 of the Queensland Civil and Administrative Tribunal Rules – where the offer of settlement, had it been accepted, would have provided an advantage to the Commissioner – whether the Commissioner had acted unreasonably in not accepting the offer of settlement – where the taxpayers were entitled to indemnity costs in respect of the successful issue but not the dominant separate issue  
Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 105
Taxation Administration Act 2001 (Qld), s 60
Queensland Civil and Administrative Tribunal Rules 2009 (Qld), r 86
Commissioner of Taxation v Clark (No 2) (2011) 197 FCR 251
Hazeldene’s Chicken Farm Pty Ltd v Victorian Work Cover Authority (No 2) (2005) 13 VR 435
J & D Rigging Pty Ltd v Agripower Australia Limited & Ors [2014] QCA 23
McGee v QBCC [2018] QCATA 124
Monie v Commonwealth of Australia (No.2) [2008] NSWCA 15
Norbis v Norbis [1986] HCA 17
Orica IC Assets Pty Ltd & Anor v Commissioner of State Revenue [2011] QSC 1
Resolute Mining Ltd v Commissioner of State Revenue (No 2) [2020] QSC 302
	
APPEARANCES & REPRESENTATION:	This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld)	
REASONS FOR DECISION
[1]	On 30 September 2021, the Commissioner’s payroll tax notices of reassessment were confirmed but the unpaid tax interest was remitted by exercise of the discretion under s 60 of the Taxation Administration Act 2001 (Qld).
[2]	The review proceedings commenced in the Tribunal on 3 May 2019.
[3]	On 3 September 2019 the applicants made a written offer of settlement of the proceedings on the following terms:
(i)	the Commissioner agrees to exercise the discretion in s 60 of the Taxation Administration Act 2001 (Qld), to remit the amount of unpaid tax interest comprising the 8% uplift that has been included in the calculation of the disputed assessments;
(ii)	the Commissioner issues reassessments to give effect to that remission;
(iii)	the Commissioner refunds to the applicants the difference between those reassessments and the amounts originally assessed and paid;
(iv)	after receiving that refund, the applicants will discontinue the review proceedings;
(v)	this offer is made pursuant to s 105 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld), and Rule 86 of the Queensland Civil and Administrative Tribunal Rules 2009 (Qld); and
(vi)	this offer is made by the applicants without prejudice, except as to costs.
[4]	The offer remained open for 14 days but was not accepted. There is no time stipulated for that in the Rules, but the time must be reasonable in the circumstances applying, and I find 14 days was reasonable here.
[5]	The letter stated that if the offer was not accepted it would be relied on for an award of costs as provided by the said s 105 of the QCAT Act and r 86 of the QCAT Rules.
[6]	The applicants submit that the reference in r 86(2) to the tribunal awarding a party making a written offer to settle a dispute all reasonable costs means that the cost orders available extends to indemnity costs, and the applicants seek that, fixed initially at $104,280.
[7]	A written offer pursuant to r 86 does not give the offeror an entitlement to costs on an indemnity basis where the offer proves better than the final result. Rather, after such an offer (regardless whether it is pursuant to the Rules or a Calderbank offer) the question arises for address, was it reasonable for the offeree to continue the litigation in light of the offer? If the answer is no, then an award of indemnity costs against the latter may be appropriate on the basis that the primary purpose of any costs order is to protect a successful party from undue depletion of its resources and an award of costs on the standard basis may be insufficient protection.
[8]	Some relevant factors to consider in determining whether it was reasonable not to accept an offer include those identified in J & D Rigging Pty Ltd v Agripower Australia Limited & Ors [2014] QCA 23 namely, the stage of the proceedings at which the offer was made, the time allowed the offeree to consider the offer, the extent of the compromise offered, the offeree’s prospects of success assessed as at date of offer, the clarity of the terms of offer and whether an application for indemnity costs was foreshadowed in the event of rejection.
[9]	Prior to the date of the written offer the Commissioner had already considered and dismissed the applicants’ arguments in its objection decision of 6 March 2019. The same arguments were then put forward by the applicants in their preliminary submissions in the Tribunal dated 24 July 2019, and the same arguments were addressed at hearing in large part.
[10]	There were essentially two aspects to the applicants’ reviews, one a legalistic technical argument, the other concerning the exercise of a discretion to remit the unpaid tax interest (‘UTI’).
[11]	The parties engaged in a compulsory conference at the Tribunal on 2 September 2019. That process has the purpose of identifying and clarifying the issues in dispute and the questions of fact and law to be decided in a matter and to promote settlement. 
[12]	The applicants’ position and argument about both the technical and the exercise of the discretion grounds of review were therefore well known to the Commissioner when, the day after the compulsory conference on 3 September 2019, the applicants made the written offer of settlement.
[13]	As at 2 August 2018, the date of reassessment notices issued by the Commissioner to the applicants, the UTI rate was 9.96%. The UTI rate is subject to annual change. The UTI for the tax periods relevant for the reviews were 11.66%, 10.82%, 10.69% and 10.15%. The offer of settlement allowed the Commissioner the difference between the UTI charged and 8%. Neither party has put a figure to the difference, but I consider it is not to be regarded as a trifle. 
[14]	As at date of offer there were already costs accrued by the applicants which they would have to bear if the offer was accepted. The applications for review had been filed and served, the applicants had filed and served preliminary submissions and the parties had attended a compulsory conference.
[15]	I determine the offer of settlement was more favourable to the Commissioner, had it been accepted, than the final outcome of the proceedings.
[16]	The applicants say it was unreasonable for the Commissioner to refuse the offer of settlement. Reliance is placed on the Federal Court decision of Commissioner of Taxation v Clark (No 2) (2011) 197 FCR 251 where it was said that the fact that the ultimate outcome was less favourable to the Commissioner than the offers made, it was to be inferred that it was unreasonable for the Commissioner to reject them, at least in the absence of any countervailing consideration.
[17]	There are other factors to be considered here. The dominant argument between the parties was the technical argument. The bulk of time and effort was expended on that, both in written submissions and at hearing, rather than the exercise of discretion argument. The Commissioner succeeded on the technical argument with the notices of reassessment being confirmed. The applicants succeeded on the exercise of discretion.
[18]	In the primary reasons for decision I referred with approval to the following comments of McMurdo J in Orica IC Assets Pty Ltd & Anor v Commissioner of State Revenue:
[93] Within the Taxation Administration Act, there are no expressed considerations for the exercise of the discretion under s 60. The relevant considerations are confined only by the subject-matter, scope and purpose of the relevant legislation. The respective arguments agree that it is relevant and indeed necessary to consider the facts and circumstances which contributed to an assessment which had to be the subject of a reassessment. If the fault had been completely that of the Commissioner, there would be the strongest case for remission. If the taxpayer was at fault, by misstating the facts or not stating all of the relevant facts up to the time of the original assessment, then the case for remission would be weaker. In turn, it would be relevant to consider whether that misstatement or non-disclosure was made knowingly, or was instead inadvertent. It would also be relevant to consider whether it was made by the taxpayer in reasonable reliance upon professional advice.
[19]	In the matter at hand there was no element of fault on the part of the Commissioner, the mistake was entirely that of the taxpayers. However the circumstances were novel, not only that the wrong taxpayers paid payroll tax, but also in the fact that all payroll tax had been fully paid. The circumstances were not those of the “strongest case” suggested by McMurdo J, warranting exercise of the discretion, where the error was the Commissioner’s, but near such. At no time was the Commissioner out of pocket in respect of payment of payroll tax.
[20]	Accordingly I find the Commissioner’s failure to accept the offer of settlement of 3 September 2019 unreasonable in the circumstances, despite the decisive issue being exercise of a discretion and acknowledging that in the exercise of discretions, reasonable minds may legitimately differ. The Commissioner should have recognised that the Tribunal was given a broad and unfettered discretion to remit UTI in reviews, and taken that into account and the novel circumstances that applied here when considering the offer of settlement made by the applicants. 
[21]	An award of costs on the indemnity basis is appropriate.
[22]	Before turning to fix those costs (as requested by the applicants), the applicants’ failure to succeed on the dominant argument, the technical argument, cannot be ignored. Costs are not normally apportioned between issues but rather determined by outcome of the proceedings as a whole. However, that is not a fixed rule. As stated in Monie v Commonwealth of Australia (No.2) [2008] NSWCA 15:
The usual circumstance in which a court will deprive the successful party of the costs relating to an issue on which the successful party lost, is when that issue is clearly dominant or separable. 
[23]	The technical argument here was both. It was entirely separate to the exercise of discretion argument. The applicants describe their arguments as at the time of the offer of settlement in the following terms:
At that time the applicants had advanced two arguments, one based on technical merit, and the other based on the Commissioner’s unfettered discretion and published ruling allowing the full remission of UTI.
The basis for the tribunal’s finding on technical merit (which was not determinative of the case) had not been conveyed before the hearing, and therefore was not relevant to the evaluation of prospects at the time of the Offer.
On the other hand, the applicants’ successful argument had been exchanged between the parties, involved no technicality, was consistent with the Commissioner’s own published ruling, and was determinative of the case.
It is the prospects of this argument at the time of the Offer that are relevant to this application for costs.
[24]	The technical argument consumed the majority of submissions and argument. The claim for exercise of discretion could have been addressed simply, in its own right, without the technical argument.
[25]	The applicants are entitled to their costs in respect of the discretion argument on an indemnity basis. I decline to make any cost orders concerning the technical argument.
Fixing costs
[26]	The applicants ask the Tribunal to fix costs. Indeed the QCAT Act encourages that course of action if it is possible to do so. The matter could be sent for assessment, but that would incur more costs and delay. The fee notes submitted by the applicant’s solicitors are broad brush, and therefore any fixing of costs is necessarily similarly broad brush. 
[27]	Legal representation, including briefing Counsel at hearing, was reasonable (and as of right) regardless of issue.
[28]	The applicants concede any award of indemnity costs are those costs incurred after the date of offer, 3 September 2019. They concede the costs incurred on that basis are $95,480.
[29]	Taking into account the dominance of the failed technical argument in both submissions and at hearing, I fix costs on an indemnity basis in favour of the applicants in respect of the exercise of discretion argument at one third the costs incurred by the applicants overall, which totals $31,826.66.