ACN 154 520 199 Pty Ltd (in liquidation) v Commissioner of Taxation

1. There be no variation to paragraph 4 of the orders dated 6 November 2020, by which it was ordered that the respondent pay the applicant's costs of the proceeding, as agreed or assessed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THE COURT: 1 On 6 November 2020, the Full Court gave judgment in relation to the applicant's appeal on a question of law from a decision of the Administrative Appeals Tribunal pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 (Cth): ACN 154 520 199 Pty Ltd (in liquidation) v Commissioner of Taxation [2020] FCAFC 190. These reasons, which deal with costs, should be read together with the 6 November 2020 reasons. The abbreviations used in the 6 November 2020 reasons are adopted in these reasons. 2 The orders of the Full Court dated 6 November 2020 included the following substantive orders: 1. The appeal be allowed. 2. The decision of the Administrative Appeals Tribunal made on 20 December 2019 be set aside. 3. The matter be remitted to the Administrative Appeals Tribunal (differently constituted) for determination according to law. 3 In relation to costs, the following orders were made: 4. Subject to paragraph 5, the respondent pay the applicant's costs of the proceeding, as agreed or assessed. 5. If either party wishes to seek a different costs order, the party may within 14 days file and serve an outline of submissions (of no more than three pages) on costs. In that event, the other party may within a further 7 days file and serve a responding submission (of no more than three pages). 4 Pursuant to paragraph 5 of the orders, on 20 November 2020 the Commissioner filed submissions seeking a variation of the costs order. On 27 November 2020, ACN 154 filed submissions in response. 5 The Commissioner submits, in summary, that ACN 154 was unsuccessful on many issues in the appeal, and only raised the issue of procedural fairness (which found favour with the Court) during the hearing. The Commissioner submits that ACN 154 should therefore not recover all of its costs of the appeal. The Commissioner submits that there are a number of different ways the Court's discretion as to costs could be exercised. For example, it is submitted that orders could reasonably be made that: (a) the Commissioner pay ACN 154's costs in relation to the "construction issue" and one half of ACN 154's costs in relation to the "Division 165 issue" and ACN 154 pay the Commissioner's costs in relation to the "penalty issue"; or (b) the Commissioner pay ACN 154's costs of and incidental to grounds 2, 4-6, 9, 10, 16, 23 and 30A and ACN 154 pay the Commissioner's costs of and incidental to grounds 1, 2A, 2B, 3, 8, 10A, 11, 12, 14, 15, 17, 19, 20, 21, 22, 22A, 25, 28-30 and 31 and there be no order as to costs for grounds 7, 13, 18, 24, 26 and 27; or (c) there be no order as to costs. 6 The Commissioner submits it can reasonably be inferred that attempting to either apportion or tax costs would be difficult, imprecise and potentially time consuming (for the taxing officer) and expensive for the parties. In light of this, the Commissioner submits that a fair, and more appropriate, outcome is simply that the Commissioner pay 50% of ACN 154's costs, as agreed or assessed. 7 ACN 154 submits, in summary, that there should be no variation to the costs order made by the Court on 6 November 2020. 8 In our view, for the reasons that follow, the appropriate costs order is that the Commissioner pay ACN 154's costs of the proceeding. 9 The applicable principles are well established. Section 43 of the Federal Court of Australia Act 1976 (Cth) provides that the Court has jurisdiction to award costs in all proceedings before it. The Court has an unfettered discretion in how that jurisdiction is exercised, save that it must be exercised judicially: Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 (Ruddock v Vadarlis) at [9] per Black CJ and French J. The approach usually taken is that costs follow the outcome of an appeal: see Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (2015) 327 ALR 192 at [6] per French CJ, Kiefel, Nettle and Gordon JJ. 10 In State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174 (Sportsbet), a Full Court of this Court (Emmett, Kenny and Middleton JJ) stated at [8]: We do not consider that the outcome of the issue [on which the appellants had failed] … justifies departure from the ordinary position. The outcome of this issue did not relevantly qualify the success of either appellant on its appeal. Both appellants were ultimately wholly successful. The mere fact that a court does not accept all of a successful party's arguments does not make it appropriate to deal with costs on an issue by issue basis. It cannot be supposed that the issue in question was unreasonably raised at trial or on appeal. There is nothing else disclosed in the circumstances of the case that would support the proposition that the court should depart from the usual order as to costs … . 11 In Queensland North Australia Pty Ltd v Takeovers Panel (No 2) (2015) 236 FCR 370 (Queensland North Australia), a Full Court of this Court (Dowsett, Middleton and Gilmour JJ), after referring to Ruddock v Vadarlis and Sportsbet, stated at [11] that these decisions treat the success or failure of the relevant party as being the starting point in consideration of the question of costs, but contemplate at least three distinct categories of situation in which a successful party might be deprived of costs, or even ordered to pay the costs of the other side. These were identified as follows (at [11]): One such category is where the applicant has been only partially successful in that it has not obtained all of the relief sought. The second category is where a party has succeeded in obtaining the relief sought, but has not succeeded on all bases (factual or legal) upon which it sought such relief. Of course, it is possible that a particular outcome will fall into both categories. A third category involves consideration of the successful party's conduct of the case. 12 In the present case, the starting point is that ACN 154 has been substantially successful in the outcome of the appeal: the decision of the Tribunal has been set aside and the matter has been remitted to the Tribunal for determination according to law. It is true that, in the notice of appeal, ACN 154 sought an order that its objection be allowed in full (rather than the matter being remitted to the Tribunal). However, it is nevertheless fair to say that ACN 154 has been substantially successful in the outcome of the appeal. 13 The issues before the Full Court were outlined in [14] of the 6 November 2020 reasons. Broadly, the issues fell into two groups: (a) The issues relating to the operation of the GST Act apart from Div 165; and (b) The issues relating to Div 165. Although reference was made in [14(c)] of the 6 November 2020 reasons to the issue of whether the Tribunal erred in law in relation to penalties, this occupied no time on the appeal and can be put to one side for present purposes. 14 In relation to the operation of the GST Act apart from Div 165, the main issue was the construction issue, in respect of which ACN 154 was successful: at [137], [139], [145], [149], [155], [158]. It followed from the conclusion on the construction issue that, subject to the operation of Div 165, ACN 154 was entitled to input tax credits totalling $122,112,065 in respect of its acquisitions of scrap gold from the suppliers: at [163]. It also followed that the decision of the Tribunal needed to be set aside. 15 It is true that ACN 154 did not succeed on several grounds relating to the operation of the GST Act apart from Div 165. In particular, ACN 154 did not succeed on the trade meaning point (at [135]), a challenge to certain findings (at [156]), and the calculation issue (at [162]). However, these were subsidiary points that occupied relatively little time during the hearing of the appeal, and it was not necessary to decide the calculation issue. ACN 154's lack of success on these arguments did not affect its overall success in relation to the operation of the GST Act apart from Div 165. 16 In relation to the Div 165 issues, ACN 154's success on the procedural fairness issue (at [177], [185], [189]) meant that the Tribunal's (alternative) conclusion that Div 165 operated needed to be set aside and the issue of the operation of Div 165 re-determined (at [189]). In these circumstances, it was strictly unnecessary to deal with the remaining grounds. However, we dealt with those grounds (briefly) for the sake of completeness (see [189]). 17 It is true that ACN 154 did not succeed on many of the other grounds relating to Div 165. These included the witness issue (at [195]), the no evidence issue (at [199], [201], [203]-[205]), the grounds relating to the "scheme" (at [210]) and the grounds relating to dominant purpose and principal effect (at [228]). However, as indicated, in view of ACN 154's success on the procedural fairness issue, it was not strictly necessary to determine these grounds. ACN 154's lack of success on these grounds did not affect the outcome, namely that the Tribunal's conclusion relating to Div 165 was set aside and the matter was remitted to the Tribunal for re-determination. In the circumstances, we do not consider ACN 154's lack of success on these grounds justifies a departure from the ordinary position that costs follow the outcome. 18 The Commissioner submits that the procedural fairness issue was raised late, and relies on this to contend that ACN 154 should not have all of its costs. The way in which the issue emerged is described in [166] and [167] of the 6 November 2020 reasons. However, the fact that the issue was developed in oral submissions, and the subject of a late amendment to the notice of appeal, does not appear to have caused any additional costs to be incurred. It is not suggested, and there does not appear to be any basis to suggest, that the late development of the issue in oral submissions constituted conduct falling into the third category of case referred to in Queensland North Australia at [11]. 19 We note for completeness that ACN 154 did not press two grounds of appeal. It does not appear that any significant costs were incurred in relation to these grounds, such as to justify as special order in relation to them. 20 For these reasons, we consider the appropriate order to be that the Commissioner pay ACN 154's costs of the proceeding, as agreed or assessed. Accordingly, we will order that there be no variation to paragraph 4 of the orders made on 6 November 2020. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Perram, Moshinsky and Thawley.