Bartlett v Commissioner of Taxation; Falcetta v Commissioner of Taxation

REASONS FOR JUDGMENT 3 On 21 October 2003 I delivered judgment in the two applications before the Court relating to Mr Bartlett and Mr Falcetta. At the same time I made orders in each application that the objection decisions lodged by each applicant be set aside and in lieu thereof the objection decisions be allowed in part. The allowance contemplated the allowance to each applicant of a deduction in an amount set out in the orders. I directed that each matter be remitted to the respondent Commissioner to reassess in accordance with the orders I made. 4 The parties had requested during the course of argument that I not make cost orders but that they be given the opportunity to make submissions as to costs after my reasons for judgment had been published. Accordingly I directed that submissions be filed by each applicant and by the Commissioner on the question of costs, following which I would thereafter deliver a brief judgment dealing with costs in each application. The parties have now filed written submissions and this judgment explains my reasons for the cost orders I now propose to make. 5 Counsel for the applicants submitted that the applicants were successful in their applications and that costs should follow the event. It was submitted that, indeed, an indemnity cost order would be appropriate since the Commissioner had rejected entirely the allowance of any deduction and even after evidence had been concluded submitted that only a nominal deduction should be allowed. It was noted that the Commissioner had, only at the hearing, resiled from the position that a deduction could be granted only in the year costs were paid and had advanced at the hearing what was said to be a new argument dealing with the definition of "tax affairs", submitting that it should be narrowly construed and as so construed should not permit any deduction for accountancy work related to group tax and prescribed payment obligations. This new argument had been substantially rejected in my reasons. However, the submission proceeded, the applicants did not seek indemnity costs, but were content for an order to be made in their favour that costs be calculated on the normal party and party basis. 6 For the Commissioner it was submitted that the disallowance of the claims by the applicants for a deduction had been brought about "primarily" by the failure on the part of the applicants and the tax agent to provide information concerning the services which had actually been rendered and that information had only ultimately emerged in evidence at the hearing. Reference was made to paragraph 75 of my judgment where I had pointed out that much of the problem in the case stemmed from the failure of the tax agent and his staff to keep proper time sheets so as to enable the quantum of the deduction to be calculated. It was submitted that whilst the applicants had been partly successful only a minor percentage of the amount claimed had ultimately been held to be allowable. 7 Clearly the case was not one where an indemnity cost order could properly be made against the Commissioner. With respect to counsel for the applicants the appropriateness of such an order was not at all "strongly arguable". Hence there is no real concession in the submission of the applicants that the normal order that costs be assessed on a party and party basis should ultimately be accepted. In the alternative, counsel for the applicants submitted that the Court should order that the Commissioner pay a significant percentage of the applicants' costs. Reference was made to the order in Hughes v Western Australian Cricket Association (1986) ATPR 40-748 where Toohey J order that the successful party receive 75% of his costs and Australian Competition & Consumer Commissioner v Australian Safeway Stores Pty Ltd (No 2) [2003] FCAFC 163 where the order was that the successful party receive 80% of its costs. 8 While it is true that the Commissioner's case changed somewhat dramatically at the commencement of the hearing it is also true that much time and expense could have been saved had the evidence ultimately given orally by the tax agent as to the work which had actually been performed been provided to the Commissioner before the proceedings commenced. It is also relevant to note that this evidence on affidavit should have been filed and served upon the Commissioner in accordance with the case management directions made before the hearing but was not. 9 Having regard to the conduct of the parties in the litigation it seems to me that while the applicants have been partly successful in obtaining a deduction, the present is not a case where the applicants should be entitled to an order that the Commissioner pay all or even substantially all their costs. The choice is, it seems to me, between an order that each party bear his own costs or an order that the Commissioner pay only a proportion of the costs of the applicants. After considering the submissions of the parties I am of the view that the appropriate order in the circumstances is that the Commissioner pay one half of the costs of each applicant. 10 There is another matter which has arisen which I must deal with. 11 It has been pointed out by counsel for the applicant, Mr Bartlett, that the table in paragraph [78] setting out work done, who performed the work, how much time was involved and an amount, omitted an item of $9600 contained in Exhibit 2 relating to the preparation of financials for the year ending 30 June 1998 for The Bartlett Group Pty Ltd, including "workpapers, Bank Reconciliations, Journals & posting to Ledger." This was not work which Mr Cassaniti performed personally. It was performed by his staff. It did not relate to matters such as liquidations when it would be excluded from deductibility in accordance with the reasons I have already given. There was no cross-examination directed to this item suggesting that the work in question was not performed. In accordance with my reasons there is no reason why the amount should not be deducted. 12 Counsel for the Commissioner did not accept that this item was omitted inadvertently and, accordingly, refused to consent to an amendment to the orders made by me to take this item into account. 13 It is clear to me that this item was inadvertently overlooked when the table in paragraph [78] was prepared and accordingly was not taken into account in the calculation of the amount which was deductible and thus the orders made by me. This inadvertent mistake should be remedied. There was a slip made in the orders. The orders should be rectified to add to the amount referred to in order 3 of the orders made in the Bartlett application the sum of $9600. 14 The orders now made by me in the Bartlett matter should, accordingly, be as follows: 1 That order 3 of the orders made on 21 October 2003 be amended by deleting "$3,090" and substituting "$12690. 2. The Commissioner pay one half of the applicant's costs. 15 The orders to be made in the Falcetta case will simply be that the Commissioner pay one half of the applicant's costs.