Bennelong Medical Pty Ltd v Commissioner of Taxation

1. By originating application filed 16 January 2023, Bennelong Medical Pty Ltd sought the following relief: Ruling pursuant to the High Court ruling in the Yager v Queen (1977) 139 CLR 28, 43 and Quach v Butt [2016] ACTSC 153 at [13], There is, therefore, no legitimate foundation for resorting to the definitions [expense] contained in the [Taxation Administration Act 1953 (Cth)] for the purpose of modifying or qualifying another statutory definition [R&D expenses] contained in [Income Tax Assessment Act 1997 (Cth)] a different Act of Parliament.

2. The originating application was annotated on the cover sheet as having been filed for the plaintiff corporation by Dr Michael Quach, who is its sole director.

3. A corporation may start and carry on a proceeding in this Court only by a solicitor unless the Court grants leave to an officer or employee of the corporation authorised by the corporation to represent it: r 30(4) of the Court Procedures Rules 2006 (ACT). Dr Quach authorised himself to act on behalf of the plaintiff. In early 2023, he sought leave under r 30(4) to represent it in the proceedings. The Senior Deputy Registrar refused leave. An appeal from that decision was dismissed by Mossop J on 11 April 2023: Bennelong Medical Pty Ltd v Commissioner of Taxation [2023] ACTSC 74.

4. Undeterred, Dr Quach made a further application dated 18 April 2024 for leave to represent the company. On 18 June 2024, Loukas-Karlsson J refused that application: Bennelong Medical Pty Ltd v Commissioner of Taxation (No 4) [2024] ACTSC 190. The judgment sets out in careful detail the unhappy procedural history of the matter. Her Honour held at [90] that the further application for leave for Dr Quach to represent the corporation should be dismissed as an abuse of process.

5. At the time the application was dismissed, the Commissioner of Taxation foreshadowed an intention to seek a “more beneficial order in relation to costs”. The bench sheet records that, although Dr Quach had been granted leave to appear by AVL on that occasion, he appeared in person.

6. On 21 June 2024, Loukas-Karlsson J made the following directions in chambers: 1. The defendant is to file and serve any evidence with respect to an order for costs in connection with the application in proceeding of 18 April 2024 (18 April 2024 application) together with written submissions of no more than 2 pages by 4pm on Friday, 28 June 2024. 2. The plaintiff and Mr Quach are to file and serve any evidence seeking to oppose the defendant’s orders for costs in connection with the 18 April 2024 application, together with written submissions of no more than 2 pages, by 4pm on Friday, 12 July 2024. 3. The decision on the proposed order for costs in connection with the 18 April 2024 application be determined on the papers, to be published at the Court’s convenience.

7. On 15 December 2025, Loukas-Karlsson J retired as a judge of the Court for medical reasons. Accordingly, I re-allocated the defendant’s costs application to myself, to be determined on the papers. This judgment determines that application.

The defendant’s submissions

8. The defendant’s written submissions seek the following orders: (1) The plaintiff is to pay the defendant’s costs of the application in proceeding on a party and party basis until 5pm on 8 May 2024; and (2) The plaintiff and Mr Quach are to pay the defendant’s costs of the application in proceeding on an indemnity basis, jointly and severally, thereafter.

9. The “application in proceeding” referred to is the application dated 18 April 2024. To the extent that costs are sought on an indemnity basis, the defendant invokes the court’s power under r 1752(1)(b) of the Court Procedures Rules. To the extent that costs are sought against Dr Quach personally, the defendant invokes the court’s power to award costs against a non-party under r 1703 of the Court Procedures Rules.

10. Rule 1703(1) prohibits the making of an order for costs against a non-party, except in accordance with subrule (2). The defendant relies on subrule (2)(c), which provides: (2) The court may make an order— … (c) for payment, by a person who has committed contempt of court or an abuse of the court’s process, of all or part of the costs of a party to a proceeding that were caused by the contempt or abuse of process; or …

11. The rule confers a discretion which, as for any discretion conferred on the court, must be exercised judicially and having regard to the purpose for which it was conferred.

12. The defendant relies on an affidavit annexing a letter to Dr Quach dated 8 May 2024 setting out the defendant’s position as to costs in the clearest terms. The letter noted that the application dated 18 April 2024 was in substantially the same terms as the previous application rejected by Mossop J and that the Court had on three previous occasions refused Dr Quach leave under r 30(4) to represent the corporation in substantive proceedings. The letter contended that the application was, among other things, an abuse of process. It invited Dr Quach to discontinue the application and warned that, if successful in defeating the application, the defendant would seek an order for indemnity costs against both the plaintiff and Dr Quach in his capacity as a non-party.

13. The defendant’s written submissions addressed the reasons such an order should be made. The defendant noted that relevant factors in determining whether to order costs against a non-party include the connection of the non-party with the proceedings, citing the decision of the Supreme Court of Victoria in Bischof v Adams [1992] 2 VR 198. In that case, Gobbo J explained that connection is not the only factor, as there may be cases where the connection is slender but there may be seen to be a causal connection between the non-party and the incurring of costs: at 204-205.

14. Here, both factors are strong. Dr Quach is intimately connected with the proceedings. The plaintiff corporation can act only through him; the corporation’s every act in the proceedings was his act on its behalf. The causal factor is also strong. Had Dr Quach not proceeded to make a further application for leave to represent the company, his first application having been dismissed, the further costs would not have been incurred.

15. Secondly, the defendant submitted that notice or warning to the non-party is relevant, citing the South Australian decision of Vestris v Cashman (1998) 72 SASR 449 at 468. While Lander J there listed a series of potentially relevant factors (including whether a warning had been given), his Honour concluded, after reviewing relevant authorities, that an order will be made against a non-party “only if the justice of the case requires that an order be made”. Here, as already noted, clear warning was given that the defendant would seek indemnity costs against both the corporation and Dr Quach personally. The order sought would impose liability for those costs only from the date of the warning letter.

16. As to the justice of the case, the letter warned that the second application, which in effect replicated the first, was an abuse of process. Justice Loukas-Karlsson was satisfied that it was: Bennelong Medical Pty Ltd v Commissioner of Taxation (No 4) at [90].

17. Neither Dr Quach nor the plaintiff filed any evidence or submissions in accordance with the directions made by Loukas-Karlsson J on 21 June 2024.

18. Having considered her Honour’s reasons, the defendant’s submissions and the letter dated 8 May 2024, I respectfully agree with her Honour’s conclusion that the application in proceeding dated 18 April 2024 constituted an abuse of process. I note that the letter was sent only shortly before the hearing of the application on 10 May 2024. I am satisfied that the plaintiff and Dr Quach should pay the defendant’s costs on an indemnity basis from and including that date.

Orders

19. The orders of the Court are: (1) The plaintiff is to pay the defendant’s costs of the application in proceeding dated 18 April 2024 on a party and party basis until 5pm on 9 May 2024; and (2) The plaintiff and Dr Quach are to pay the defendant’s costs of the application in proceeding dated 18 April 2024 on an indemnity basis, jointly and severally, thereafter, including the costs of the hearing of the application on 10 May 2024.

I certify that the preceding nineteen [19] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Chief Justice McCallum. Associate: Date: