Advanced Holdings Pty Limited as trustee for The Demian Trust v Commissioner of Taxation

AND: COMMISSIONER OF TAXATION Respondent

order made by: DAVIES J DATE OF ORDER: 18 nOVEMBER 2020

1. The respondent pay the applicant's costs of the proceeding, such costs to be taxed in default of agreement. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

AND: COMMISSIONER OF TAXATION Respondent

order made by: DAVIES J DATE OF ORDER: 18 nOVEMBER 2020

1. The respondent pay the applicant's costs of the proceeding, such costs to be taxed in default of agreement. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

AND: COMMISSIONER OF TAXATION Respondent

order made by: DAVIES J DATE OF ORDER: 18 nOVEMBER 2020

1. The respondent pay the applicant's costs of the proceeding, such costs to be taxed in default of agreement. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

AND: COMMISSIONER OF TAXATION Respondent

order made by: DAVIES J DATE OF ORDER: 18 nOVEMBER 2020

1. The respondent pay the applicant's costs of the proceeding, such costs to be taxed in default of agreement. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

BETWEEN: ADVANCED HOLDINGS PTY LIMITED AS TRUSTEE FOR THE DEMIAN TRUST ON BEHALF OF EVE VALESKA VONO Applicant

AND: COMMISSIONER OF TAXATION Respondent

order made by: DAVIES J DATE OF ORDER: 18 nOVEMBER 2020

1. The respondent pay the applicant's costs of the proceeding, such costs to be taxed in default of agreement. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

BETWEEN: ADVANCED HOLDINGS PTY LIMITED AS TRUSTEE FOR THE DEMIAN TRUST ON BEHALF OF BROOKE DEMIAN Applicant

AND: COMMISSIONER OF TAXATION Respondent

order made by: DAVIES J DATE OF ORDER: 18 nOVEMBER 2020

1. The respondent pay the applicant's costs of the proceeding, such costs to be taxed in default of agreement. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

BETWEEN: ADVANCED HOLDINGS PTY LTD Applicant

AND: COMMISSIONER OF TAXATION Respondent

order made by: DAVIES J DATE OF ORDER: 18 nOVEMBER 2020

1. The applicant pay eighty-five per cent (85%) of the respondent's costs of the proceeding referrable to the 2013 income year, such costs to be taxed in default of agreement.
2. The respondent pay the applicant's costs of the proceeding referrable to the 2014 income year, such costs to be taxed in default of agreement. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

DAVIES J: 1 On 15 October 2020, the Court handed down judgment in these proceedings which were "appeals" by the applicants under pt IVC of the Taxation Administration Act 1953 (Cth) against assessments and amended assessments issued by the Commissioner of Taxation (Commissioner): Advanced Holdings Pty Limited as trustee for The Demian Trust v Commissioner of Taxation [2020] FCA 1479. The appeals were heard together and the issues overlapped to a significant extent. The parties are now in dispute over the appropriate costs orders to be made. 2 In NSD 599 of 2019 (the principal proceeding), the Commissioner seeks an order that the applicant (Advanced Holdings) pay 90% of his costs, reflecting his substantial success on the issues that arose for determination with respect to the 2013 income year. The Commissioner accepted that Advanced Holdings is entitled to its costs with respect to the 2014 income year, which the Commissioner did not press at trial. The Commissioner submitted, however, that Advanced Holdings' costs associated with that aspect of the proceeding are insignificant because of the Commissioner's early decision not to press the 2014 assessments so that the issues relating to that year were not addressed in the parties' opening submissions and did not take up any time at trial. 3 Advanced Holdings has submitted that the appropriate costs orders in the principal proceeding are for it to pay 60% of the Commissioner's costs with respect to the 2013 income year, and for the Commissioner to pay its costs with respect to the 2014 income year. Advanced Holdings argued that a 60% apportionment with respect to the 2013 year is appropriate on the basis that a substantial portion of the applicants' evidence and submissions in chief went to addressing factual issues which the Commissioner either did not press at trial or on which he mostly failed at trial. It was submitted that the costs order proposed by Advanced Holdings recognised the Commissioner's success but included a discount for the costs involved on those factual issues. 4 Generally the costs of a trial follow the event: Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; 234 CLR 52 at 62-3 [25] per Gleeson CJ, Gummow, Hayne and Crennan JJ. Where there is a mixed outcome in the proceeding, the Court can apportion costs between the parties by taking into account the success, or lack of success, of the parties on an issues basis so as to do substantial justice between the parties, reflecting the compensatory purpose of a cost order. Such an apportionment is done on a broad basis as a matter of impression and evaluation rather than arithmetic precision. 5 In the principal proceeding, I consider there should be a discount for the Commissioner's lack of success on the factual claim concerning the date of creation of the November 2006 documents which did take up court time and argument at trial. However, I consider that the applicants' assessment of 60% of the costs is an excessive reduction in view of the multitude of issues that arose for determination on which the Commissioner did succeed, which also took up a substantial portion of the hearing both in terms of presentation of the evidence and in written and oral submissions. Overall, the Commissioner's case prevailed and, in my view, an appropriate apportionment is that Advanced Holdings be ordered to pay 85% of the Commissioner's costs referrable to the 2013 income year. Generally it would be appropriate for the apportionment also to reflect a discount for Advanced Holdings' costs in relation to the 2014 income year and to make only one costs order in the principal proceeding, but as I have no material before me upon which to judge the reliability of the Commissioner's assertion that Advanced Holdings' costs with respect to the 2014 income year are negligible and what an appropriate discount might be, there should be an order that the Commissioner pay Advanced Holdings' costs with respect to the 2014 income year. 6 In each of the other proceedings, the applicants succeeded in establishing the excessiveness of the assessments that issued to them. The Commissioner had issued those assessments on an alternative basis in the event that Advanced Holdings had succeeded in establishing that it did not hold the units in the Lewisham Estates Trust in its own right but in its capacity as trustee of the Demian Trust. The Commissioner submitted that the parties should bear their own costs in relation to the alternative assessments for the 2013 income year and there should be no order as to costs in those remaining proceedings, save for the proceedings relating to the 2014 assessments against Bankstown Developments Pty Ltd and the trustee of the Demian Trust, the subject of proceedings NSD 1172 of 2019 and NSD 1173 of 2019 respectively, which the Commissioner accepted he should pay. Costs orders in respect of those proceedings were made on 5 November 2020. In my view, the fact that the assessments were issued to the other applicants in the alternative does not justify an order that those applicants should bear their own costs. I consider that costs should follow the event in the usual way and the appropriate order is that the Commissioner should pay the costs of those applicants on a party-party basis. I certify that the preceding six (6) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Davies.