Thiess Bros (Pacific) Pty Ltd v Chief Collector of Taxes [1982] PGLawRp 446; [1982] PNGLR 385 (3 December 1982)

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INCOME TAX - Appeals - Review Tribunal - Jurisdiction - Costs - No Power to award costs - No power in National or Supreme Court to order costs - Income Tax Act 1959 - National Court Act 1975, (Ch. 37), ss. 6(2), 8(e) - National Court Rules, O. 91 rr. 1-4 - Supreme Court Act 1975 (Ch. 37), s. 8 - Constitution, s. 184(1) and (2).

COSTS - Taxation Review Tribunal - Costs before - No power in Tribunal to award costs - No power in National or Supreme Courts to award costs before Tribunal.

A Review Tribunal constituted under s. 240 of the Income Tax Act 1959 has no power to award legal costs on matters heard before it.

The National Court and the Supreme Court have no power to award costs of the proceedings before the Review Tribunal.

On an appeal from the Review Tribunal to the National Court (or an appeal therefrom to the Supreme Court) those courts have power to award costs of the appeal.

Shell Co. of Australia Ltd. v. Federal Commissioner of Taxation [1931] A.C. 275.

Thiess Bros. (Pacific) Pty. Ltd. v. Chief Collector of Taxes [1977] P.N.G.L.R. 62.

Thiess Bros. (Pacific) Pty. Ltd. v. Chief Collector of Taxes [1978] P.N.G.L.R. 474.

This was an application by a successful appellant taxpayer for an order for costs incurred by it in proceedings before a Taxation Review Tribunal.

KIDU CJ: This is an application by Thiess Brothers (Pacific) Pty. Ltd. for costs incurred by it in proceedings before the Taxation Review Tribunal. These costs amounted to K12,400.

The appellant appealed to the National Court from a decision of the Review Tribunal. It was unsuccessful and appealed to the Supreme Court which upheld the appeal and ordered costs in its favour both for the proceedings, before it and before the National Court: (Thiess Bros. (Pacific) Pty. Ltd. v. Chief Collector of Taxes [1978] P.N.G.L.R. 474). Liberty was granted to either party to apply for costs of the proceedings before the Review Tribunal. For some unknown reason, it took four years for this application to be made.

The Income Tax Act 1959, does not empower the Review Tribunal to award costs. In fact, the practice has been one of parties (taxpayer and Chief Collector of Taxes) paying their own costs of proceedings before the Review Tribunal.

Mr. Fuller, for the appellant, submitted that the Supreme Court had the power to make orders for costs of proceedings before the Review Tribunal. He relied on s. 256 of the Income Tax Act, O. 91 of the National Court Rules and s. 8 of the Supreme Court Act 1975.

The National Court may, on the hearing of an appeal under this Division, make such order as it thinks fit and may by the order confirm, reduce, increase or vary the assessment.

For the purpose of this Act, the Supreme Court may, if it thinks it necessary or expedient in the interest of justice to do so:

(e) exercise in relation to the proceedings of the Court any other powers that may for the time being be exercised by the National Court on appeals or applications....

Mr. Geddes, for the Chief Collector of Taxes, argued that there were two questions to be determined:

N2>1. Whether an unsuccessful taxpayer who appeals from a decision of the Review Tribunal can ask for his costs of proceedings before the Tribunal from the National Court or the Supreme Court.

N2>2. If the answer to Q.1 is “Yes”, should the National Court or Supreme Court exercise its discretion.

The power to award costs is of statutory creation. A paper delivered at the 1975 Summer Judicial Conference in Canberra, Australia, sums up the history of how both the common law courts and courts of equity in England were vested with the power to award costs and I quote from the paper:

“Jurisdiction to award costs, and so to control them, is entirely the creation of statute. At Common Law neither the plaintiff nor the defendant was entitled to costs. The Statute of Gloucester, 6 Edw. I, C. 1, (1278) (so called because it was enacted at Gloucester) gave costs to a plaintiff who received damages in a real action, but only to a plaintiff. Subsequent statutes extended the plaintiff’s right to recover costs in any action. The defendant was left without any recourse for the expenses to which a plaintiff had put him until the passing of the statutes 23 Hen. 8, C. 15 and 4 Jac. 1. C. 3. The first restricted his right to certain specific actions but the later statute extended to every case where the plaintiff would have had costs if he had succeeded. For a more detailed history reference may be made to The Law of Costs, John Gray (1853).”

Lord Blackburn in Garnett v. Bradley (1878) 3 A.C. 944 at p. 962 summarized the position:

“The result was, that, as a general rule, in every case in courts of Common Law, the party who succeeded got his costs, whether he was plaintiff or defendant, whether he succeeded by a verdict or upon demurrer.... the general rule established by all those numerous statutes... was that the successful party got his ordinary taxed costs; in other words, that the costs followed the event, and that the party who was successful had them as a matter of right.”

In contrast to this rigid common law rule, the courts of equity exercised a discretion in awarding and in regulating costs, sometimes withholding, or reducing them, for good reason. These courts appear to have derived their discretionary jurisdiction from the statute 17 Ric. 2, C. 6. (In re Birkman; Ex parte Pickering (1860) 1 Q.S.C.R. 14.) See also the discussion of the foundation of this jurisdiction by Beams, Doctrine of the Courts of Equity with respect to Costs, (2nd ed., 1840) pp. 1-5. Both this Court and the National Court have the statutory power to award costs for proceedings before them. Section 184(2) of the Constitution provides, inter alia, as follows:

N2>(2) “Without limiting the generality of sub-section (1), the rules may make provisions for and in respect of:

(e) the costs of and relating to proceedings in the Supreme Court or the National Court;...”

The National Court Act does not provide for the award of costs. However, s. 14 thereof provides:

“All Rules of Court made under or continued in force by the pre-Independence law known as the Supreme Court Act 1949, as in force immediately before its repeal, or the Papua New Guinea Act 1949-1974 of Australia (other than Rules of Court in relation to the pre-Independence Full Court of the Supreme Court) are, by virtue of this section, adopted as Rules of Court of the National Court and apply, with the necessary modifications, to the extent to which they applied, or purported to apply, immediately before the repeal referred to above.”

“Subject to the provisions of the Judicature Act (which does not apply in Papua New Guinea) and these Rules, the costs of and incident to all proceedings in the Court, including the administration of estates and trusts, shall be in the discretion of the Court or Judge: Provided that nothing herein contained shall deprive an executor, administrator, trustee, or mortgagee who has not unreasonably instituted carried on or resisted proceedings of any right to costs out of a particular estate or fund to which he would be entitled according to the Rules heretofore acted upon in Courts of Equity: Provided also, that, subject to the next following Rule, when any cause, matter or issue is tried with a jury, the costs shall follow the event, unless the Judge by whom such cause, matter, or issue is tried, or the court, shall for good cause otherwise order.”

“If a cause is removed from an inferior court which has jurisdiction in the cause, the costs in the Court below shall be costs in the cause.” (Emphasis mine.)

There is no doubt then that the National Court has absolute power over costs, including costs in a lower court where a cause is removed therefrom to the National Court.

The present case was an appeal from the Income Tax Review Tribunal to the National Court. Rule 4 would be inapplicable. The Review Tribunal is not a court.

Rule 1 is also inapplicable. It relates to “the costs of and incident to all proceedings in the Court”—i.e. the National Court.

PRATT J: The other members of the court have set out quite adequately the background of the present appeal. At the very outset of the proceedings, the appellant chose to object to the assessment by the Chief Collector of Taxes by way of review before a tribunal appointed under s. 247(a) of the Income Tax Act and refrained from seeking a remedy through the alternate course of approaching the National Court in the first instance. I agree with counsel for the respondent that there may be many reasons which could influence a party in deciding to proceed before a tribunal rather than a court. One of the most relevant could be the question of legal costs. As I understand the practice, the Tax Review Tribunal does not award costs either against an unsuccessful applicant or in favour of a successful respondent. This certainly appears to be the practice in Australia whose Income Tax Act is cast in terms similar to our own Act. In the C.C.H. Australian Federal Tax Reporter, Vol. 4, the following comment is made at 81-988:

“In a case before a Board of Review, the taxpayer and the Commissioner each bears his own cost, i.e., costs are not awarded by a Board either against the Commissioner or against the taxpayer. In the case of an appeal to a Court, however, the Court may award costs either against the Commissioner if the taxpayer is successful, or against the taxpayer if the Commissioner is successful...”

It is trite law to say that a tribunal is bound strictly by the powers vested in it under the establishing Act. The major powers of the Review Tribunal are set forth with some detail in s. 253 of the Income Tax Act. Inter alia, the tribunal has “all the powers and functions of the Chief Collector in making assessments, determinations and decisions”. There is however no power to award costs to either side in respect of appearances before the Tribunal either in that section or in any other section of Pt. V Div. II of the Act. Likewise, although there is provision under reg. 39(4) of the Income Tax Regulations to award certain expenses as prescribed in the regulations for persons appearing before the Tribunal, other than a person requested so to do by or on behalf of the taxpayer, there is no mention made of any other costs of appearance before the Tribunal—be they legal or otherwise.

Under s. 255 of the Act either party may appeal to the National Court from a decision of the Tribunal on a question of law. The National Court may, under s. 256, on hearing the appeal “make such order as it thinks fit, and may by the order confirm, reduce, increase or vary the assessment”. Counsel for the appellant has laid considerable emphasis on the phrase “such order as it thinks fit”, and has submitted that although there may be no power under the Act or regulations for the Tribunal to award costs, there is, by virtue of the phrase just mentioned a power so to do in the National Court. If such a power exists in the National Court then a similar power exists in the Supreme Court by virtue of s. 8 of the Supreme Court Act which allows that court to do anything which may have been done by the National Court.

It is apparent from the wording of s. 253 that the Board of Review is really in the same position as the Commissioner. I agree with the authors of Australian Income Tax Law and Practice (Butterworths), p. 4103, par. 193/1, where they say that the Board “does not exercise judicial powers, but is merely in the same position as the Commissioner himself; namely, it is another administrative tribunal which reviews the determination of the Commissioner who admittedly is not judicial but executive”. (See Shell Co. of Australia Ltd. v. Federal Commissioner of Taxation [1931] A.C. 275 at p. 298.)

In Federal Commissioner of Taxation v. Mantle Traders Pty. Ltd. [1980] FCA 156; (1980) 49 F.L.R. 256 at p. 272, Brennan J. put the matter most aptly in the following terms:

“Of course proceedings before and a decision by a Board of Review are administrative in nature, and proceedings before and a decision of a Supreme Court on appeal from a Board of Review are judicial in nature (Federal Commissioner of Taxation v. Munro [1926] HCA 58; (1926) 38 C.L.R. 153 at 183). It is a feature of the difference in the nature of the proceedings that the appeal is conducted as an original cause in the court, and when the issues before the court involve the ascertainment of facts the court ascertains the facts for itself upon the evidence laid before it, and not by an appellate review of the findings made by the Board.”

His Honour clearly distinguishes between administrative functions of a tribunal and a cause of action which commences in a court by way of appeal. I also note in S. A. de Smith’s Judicial Review of Administrative Action, (4th ed., 1980) at p. 83, the learned author points out that one of the methods of identifying whether a matter is being dealt with either administratively or by court action, is to determine whether or not it has a power to award costs.

Returning now to the appellant’s argument that as the National Court on appeal may “do as it thinks fit” and thus award costs in the present case, it is obvious that this cannot be so for the court may only do that which it is permitted by law to do. There was some attempt to suggest that although the Tribunal may not have a power to award costs, once the matter entered into the court arena by way of appeal then the power to award such costs suddenly emerged merely because the matter was no longer before the Tribunal. I do not think this argument is supported by any authority or principle. I cannot see how the mere change of scenario from a tribunal to a court has any effect on the powers of the original tribunal and can by virtue of the change give a court power to award costs not only before itself but before the Tribunal. The court may certainly do what the Tribunal may do and where it considers the Tribunal has acted incorrectly, it will rectify such error or direct that certain things be done which the Tribunal failed to do. I cannot find in that power however any legal basis to support the suggestion that the court is permitted to do something over and above what the Tribunal could not do itself.

The appellant also sought to invoke the costs rules under O. 91 of the National Court Rules. For several reasons I would dismiss such submission. As I have already said, the Tribunal is not a court. The rules of court can have no application to the Tribunal and the mere fact that a case goes on appeal from a tribunal does not, in the absence of any specific legislation, mean that the court is permitted to award costs not only on the appearances before it but before the Tribunal as well. Secondly, the fact that by O. 91 r. 4 the court may remove a cause from an inferior court and in so doing take into account that the costs in the court below shall become costs in the cause, is again of no assistance to the appellant’s case. This particular rule is directed to such cases as removal by certiorari or where for various reasons it is discovered that the court of first instance is either not the appropriate tribunal or has insufficient jurisdiction to deal with all matters coming before it. Furthermore, I cannot see how the appellant can successfully argue that a hearing before the Board of Review or on appeal from that Board can be brought within the term “cause of action”.

I would therefore dismiss this application with costs awarded against the appellant.

BREDMEYER J: This is an application to the Supreme Court by Thiess Bros. (Pacific) Pty. Ltd. for an order that the costs incurred by it before the Review Tribunal in contesting an assessment of income tax by the Chief Collector of Taxes be paid by the Chief Collector. The dispute arose in this way. The Chief Collector issued an assessment of income tax against Thiess Bros.; the company objected to the assessment and elected to refer its objection to the Review Tribunal established by s. 240 of the Income Tax Act 1959. The Review Tribunal conducted a lengthy hearing which resulted in the Chief Collector’s assessment being upheld in relation to two years of income and varied in relation to a third year of income. The company was represented before the Tribunal by senior counsel and a junior barrister from Australia. The company then appealed to a single judge of the National Court. The case came before Williams J. who dismissed the appeal: Thiess Bros. (Pacific) Pty. Ltd. v. Chief Collector of Taxes [1977] P.N.G.L.R. 62 and confirmed the decision of the Review Tribunal. The company then appealed to the Supreme Court and won that appeal in a unanimous decision reported in [1978] P.N.G.L.R. 474. The order of the court was as follows (at p. 497):

“Appeal upheld. Respondent to pay the appellant’s costs of the appeal including the costs of the appeal to the National Court in the first instance. Liberty to either party to apply concerning the costs of the proceedings before the Review Tribunal and generally.”

The leading judgment in the Supreme Court was delivered by Pritchard J., and at p. 494 he said this on the question of costs:

“In my opinion, this appeal must be upheld with costs including the costs of the appeal to the National Court in the first instance. I do not know whether there are any problems concerning the costs of the proceedings before the Review Tribunal but in case there are, I would grant liberty to either party to apply in this regard.”

Clearly the question of costs before the Review Tribunal is open to this court sitting some four years later and constituted differently to decide.

What power does the Supreme Court have to order the Collector of Taxes to pay the legal costs incurred by Thiess Bros. before the Review Tribunal?

In partial answer to that question, two preliminary points are quite clear. First, the Review Tribunal established under Pt. V of the Income Tax Act has no power to award costs to a party before it. It is created by statute, its powers and functions are conferred by statute and there is no section giving it power to award costs. Secondly, the Supreme Court in hearing an appeal from the National Court has all the powers, authority and jurisdiction of the National Court—see s. 6(2) and s. 8(e) of the Supreme Court Act (Ch. No. 37).

So the question arises: What power does the National Court have to award costs incurred by a party before the Review Tribunal? By s. 256 of the Income Tax Act the National Court on hearing an appeal from the Review Tribunal may:

The power to “make such order as it thinks fit” would enable the court to make any order which the Tribunal could have made. It would include the power to make assessments, determinations and decisions under the Act—a power shared by both the Tribunal and the Chief Collector by virtue of s. 252 of the Act. It would include a power to give directions on the preliminaries and procedure to be followed in arguing the appeal. In my view the power is limited to make such orders as the Tribunal could have made or as are necessary for the proper arguing of the appeal and does not include, or it would not be proper for the court to use the power to award, costs incurred before the Tribunal when the Tribunal itself has no power to award costs.

This view is not, I think, unduly harsh on the taxpayer. The Review Tribunal is one which does not award costs. It is a one-man tribunal, normally constituted by a non-lawyer, by a businessman or accountant with wide commercial, accounting and taxation experience. In practice its procedures are informal. A taxpayer is not compelled to go to the Tribunal. If he wishes to object to an assessment he can choose to go to the Tribunal on review or to the National Court on appeal. In making his choice the prudent taxpayer should give some thought to costs.

If vast sums of money are at stake and complex points of law are in issue, so that a senior counsel needs to be engaged, there is a strong likelihood that whichever party loses before the Tribunal will appeal to the court. If the taxpayer wishes to avoid incurring legal costs before the Tribunal which are not recoverable he should opt for an appeal direct from the Chief Collector to the National Court.

I note too that the National Court’s power under s. 256 “to make such order as it thinks fit” is similar to s. 199(1) of the Australian Income Tax Assessment Act 1936, as amended. I can find no Australian case elucidating this section but both counsel have researched the law and are agreed that the Australian practice is that each party bears its own costs in the Income Tax Board of Review and that this position is not affected by appeals.

Next Mr. Fuller, for the company, relied on the general costs powers of the National Court, in particular, O. 91 r. 3 which provides that costs of facts and law shall, unless otherwise ordered, follow the event; that is, that the winning party shall, unless otherwise ordered, be awarded his costs. Does that power extend to costs not incurred in the National Court, but in a statutory tribunal such as the Income Tax Review Tribunal? By s. 184(1) of the Constitution, the National Court is empowered to make rules of court, not inconsistent with any statute, with respect to the practice and procedure in and in relation to the National Court. By s. 184(2)(e) without limiting the generality of s. 184(1), the rules may make provision for the costs of and relating to proceedings in the National Court. The rules of the National Court thus cannot stand against an inconsistent statute and are limited in general to matters of practice and procedure in the National Court and the costs rules in particular are limited to the costs of proceedings in the National Court. This is reinforced by the fundamental rule on costs, O. 91 r. 1, the relevant parts of which read, “the costs of and incidental to all proceedings in the court... shall be in the discretion of the court or Judge”. I consider then that the National Court when hearing an appeal from the Review Tribunal can award costs for the work done before the court —it can order the losing party to pay the winning party’s costs of preparing, lodging and arguing the appeal, but not the legal costs incurred by a party before the Review Tribunal as that is not a proceeding in the National Court nor within the scope of the practice and procedure of the National Court.

It is true that the National Court upon hearing an appeal does sometimes award costs “here and below” meaning the costs incurred before the National Court and the lower court appealed against. Its power to do so is given by statute. There is no rule in O. 91 allowing the National Court to do this, as there is in jurisdictions with more modern rules, e.g. England O. 62 r. 4(2) and New South Wales Pt. 52 r. 7. When the National Court hears an appeal from the District Court the National Court can make any order or exercise any power which the District Court could have made or exercised (s. 236 of the District Courts Act), the District Court has power to award costs (s. 267), and thus the National Court on an appeal can award costs “here and below”. Conversely in my view, when the National Court hears an appeal from the local court, it cannot award costs to a party incurred in the local court because the local court itself by s. 50 of the Local Courts Act is prohibited from awarding costs.

N1>4. If a cause is removed from an inferior court which had jurisdiction in the cause, the costs in the court below shall be costs in the cause.

This section does not apply to an appeal from the Review Tribunal for a host of reasons. First, I doubt if an objection lodged to the Collector’s assessment is a cause of action. According to Lord Justice Diplock a cause of action is simply a situation the existence of which entitles one person to obtain from the court a remedy against another person. Historically the means by which the remedy was obtained varied with the nature of the situation and causes of action were divided into categories according to the “form of action” by which the remedy was obtained in the particular kind of factual situation which constituted the cause of action, Letang v. Cooper [1964] EWCA Civ 5; [1965] 1 Q.B. 232 at pp. 242-243. Causes of action may be commenced by writ of summons, motion, petition, etc. Order 2 r. 1 is, I think, normally commenced by writ of summons.

Scores of examples of causes of action are given in Laws of New Guinea 1921-45 (Vol. 1), pp. 861ff but are different in kind to a taxpayer objecting to an income tax assessment. The taxpayer cannot sue the Chief Collector. I doubt whether the taxpayer’s right to object to an assessment and have his objection heard by the Tribunal is a cause of action.

I do not think that it can be said accurately that the Review Tribunal is an inferior court, nor can the process of appeal to the National Court be accurately described as a removal. The rule refers to removal by way of certiorari from a court which has jurisdiction to try causes of action used in the sense discussed above. Order 5 r. 10 refers to removal of a cause from an inferior court to the National Court and service of the order of removal. Certiorari is the appropriate way to “remove” a proceeding, judgment or order of an inferior court or tribunal, see O. 81 r. 7. The word “removed” in O. 91 r. 4 would include a cause of action transferred from the District Court to the National Court under s. 32 of the District Courts Act. The rule does not apply to an appeal from the District Court as an appeal is not the removal of a cause. In determining an appeal from the District Court the power to award costs incurred in that lower court, is, as I have stated, found in s. 236 of the District Courts Act.

I would dismiss this application and award the costs of arguing it to the Chief Collector.

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Papua New Guinea Law Reports

Thiess Bros (Pacific) Pty Ltd v Chief Collector of Taxes [1982] PGLawRp 446; [1982] PNGLR 385 (3 December 1982)

Papua New Guinea Law Reports - 1982