THE COURT:
1 On 6 May 2015, the Court delivered judgment in two related proceedings - VID 216 of 2014 and VID 218 of 2014. These reasons concern the disposition of costs in both of them.
2 In VID 216 of 2014, the Court made the following orders:
- The appeal be allowed.
- The whole of the judgment of Pagone J delivered on 25 March 2014 be set aside; and in lieu thereof order that the appeal against the appealable objection decision of 17 April 2012 be dismissed.
- On or before 15 May 2015, the respondent file and serve submissions dealing with the costs of the proceeding before the primary judge and the costs of the appeal.
- On or before 22 May 2015, the appellant file and serve submissions dealing with the costs of the proceeding before the primary judge and the costs of the appeal.
- On or before 27 May 2015, the respondent file and serve any reply to the appellant's submissions on costs.
3 The effect of order 2 was not only to set aside the primary judge's order (which set aside the appellant Commissioner's decision and remitted the matter for re-determination) but also to set aside a costs order in favour of the respondent taxpayer (Ausnet).
4 In VID 218 of 2014, the Court made the following orders:
- The appeal be allowed.
- The whole of the judgment of Pagone J delivered on 25 March 2014 be set aside.
- The proceeding be remitted to Pagone J for further hearing and determination in accordance with the reasons for judgment of the Full Court delivered on 6 May 2015.
- On or before 15 May 2015, the respondent file and serve submissions dealing with the costs of the proceeding before the primary judge and the costs of the appeal.
- On or before 22 May 2015, the appellant file and serve submissions dealing with the costs of the proceeding before the primary judge and the costs of the appeal.
- On or before 27 May 2015, the respondent file and serve any reply to the appellant's submissions on costs.
5 As in the case of VID 216 of 2015, the effect of order 2 in VID 218 of 2014 was also to set aside the primary judge's order (which set aside the appellant Commissioner's decision and remitted the matter for re-determination) and a costs order in favour of the respondent taxpayer (Ausnet Services).
6 As directed, the parties have filed written submissions on costs.
7 By s 43(2) of the Federal Court of Australia Act 1976 (Cth), the award of costs is in the discretion of the Court. Without limiting that discretion, by s 43(3)(e) the Court may award costs in favour of or against a party whether or not the party is successful in the proceeding.
8 In proceeding VID 218 of 2014, the parties agreed that the costs of the trial and the costs of the appeal should be the costs of the further hearing. We agree that this is the appropriate order to be made: cf. Electrolytic Zinc Co of Australasia Ltd v Cieslak [1969] Tas S R 50 (Burbury CJ, Crawford and Neasey JJ) and Knudsen v Kara Kar Holdings Pty Ltd (No 2) [2000] NSWSC 943, 52 NSWLR 254 at 256-257 (Austin J).
9 In proceeding VID 216 of 2014, the appellant (the Commissioner) seeks an order that Ausnet pay the Commissioner's costs of the appeal to the Full Court and the costs of the proceeding before the primary judge. Ausnet agrees that the Commissioner should have the costs of the proceeding before the primary judge and the costs of the appeal to the Full Court relating to the implied licence argument but contends it should have the costs of arguing the remaining issues.
10 In our opinion, the Commissioner's submission should be accepted. Ordinarily, a successful party is entitled to an award of costs in its favour in the absence of special circumstances justifying some other order: see Ruddock v Vadarlis (No 2) [2001] FCA 1865, 115 FCR 229 at [11] (Black CJ and French J); Oshlack v Richmond River Council [1998] HCA 11, 193 CLR 72 at [67] (McHugh J) and [134] (Kirby J); Seven Network Ltd v News Ltd [2009] FCAFC 166, 182 FCR 160 at [1100]-[1101] (Dowsett and Lander JJ, Mansfield J agreeing); and State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174 at [6]-[7] (Emmett, Kenny and Middleton JJ). Thus, where an appellant is successful on appeal, the Court would ordinarily order the unsuccessful respondent to pay the costs of the appeal and the proceeding at first instance unless there are special circumstances that warrant another order: see, for example, Ruddock v Vadarlis (No 2) 115 FCR 229 at [16] (Black CJ and French J); Armstrong v Boulton [1990] VR 215 at 223 (Kaye, King and Gobbo JJ), Pamamull v Albrizzi (Sales) Pty Ltd (No 3) [2011] VSCA 320 at [12] (Neave, Harper and Hansen JJA); and Summers v Repatriation Commission (No 2) [2015] FCAFC 64 at [13], [26] (Kenny, Murphy and Beach JJ).
11 Ausnet contended, in effect, that the circumstances in this case justified a different order from the "usual order as to costs". This was because, so Ausnet submitted, the Commissioner had challenged the judgment of the primary judge on three main grounds but had succeeded on only one of the sub-arguments of one issue. Ausnet argued that the Commissioner should not be awarded costs in respect of those issues on which it failed and that Ausnet should have the costs of the issues on which it succeeded. Ausnet further submitted that the Court should fix a percentage reflecting the extent to which each of the parties was successful. We reject these submissions for the following reasons.
12 We accept that, in an appropriate case, an appellate court may depart from the usual order as to costs. This much is confirmed by the following passage from the judgment of McHugh J in Oshlack v Richmond River Council 193 CLR 72 at [69], where his Honour said:
In Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [[1951] 1 All ER 873 at 874], Devlin J formulated the relevant principle as follows:
"No doubt, the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct."
"Misconduct" in this context means misconduct relating to the litigation [King & Co v Gillard & Co [1905] 2 Ch 7; Donald Campbell & Co Ltd v Pollak [1927] AC 732 at 812], or the circumstances leading up to the litigation [Bostock v Ramsey Urban District Council [1900] 2 QB 616]. Thus the court may properly depart from the usual rule as to costs when the successful party by its lax conduct effectively invites the litigation [Jones v McKie [1964] 1 WLR 960; [1964] 2 All ER 842; Bostock [1900] 2 QB 616 at 622, 625 and 627]; unnecessarily protracts the proceedings [Forbes v Samuel [1913] 3 KB 706]; succeeds on a point not argued before a lower court [Armstrong v Boulton [1990] VR 215 at 223]; prosecutes the matter solely for the purpose of increasing the costs recoverable [Hobbs v Marlowe [1978] AC 16; [1977] 2 All ER 241]; or obtains relief which the unsuccessful party had already offered in settlement of the dispute [Jenkins v Hope [1896] 1 Ch 278].
13 As Campbell JA (Macfarlan JA and Young JA agreeing) noted in Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256, 288 ALR 385 at [98], although McHugh J's judgment was in dissent, there is nothing in the joint judgment of Gaudron and Gummow JJ or in Kirby J's judgment that indicates that their Honours disagreed with this statement of principle.
14 We also accept that, as Campbell JA said in Tomanovic 288 ALR 385 at [98], the examples to which McHugh J referred are not an exhaustive statement of the circumstances in which a successful party may be deprived of its costs. Further, we emphasise that it falls to the court in each case to determine whether it is in fact appropriate to depart from the usual order as to costs even in a case that may appear, broadly speaking, to fall within the class of cases to which McHugh J referred. As Black CJ and French J said in Ruddock v Vadarlis (No 2) 115 FCR 229 at [16], "[t]he discretion conferred on the Court enables it to respond to the wide variety of circumstances that may arise in relation to the making of costs orders".
15 In our opinion, the appeal in VID 216 of 2014 does not fall within the ambit of the cases to which McHugh J referred in the above passage from Oshlack v Richmond River Council 193 CLR 72. Further, although it may be appropriate in some cases to apportion costs between an ultimately successful party and the other party or parties (as stated, for example, in Hughes v Western Australian Cricket Association (Inc) (1998) ATPR 40-748 at 48,136) we do not consider that the apportionment of costs would be appropriate in appeal VID 216 of 2014.
16 The appeal was allowed on the basis that no part of the purchase price was attributable to the acquisition of the ownership of the copyright or, alternatively, since the experts had failed to address the correct statutory question, Ausnet had failed to discharge its burden under s 14ZZO of the Taxation Administration Act 1953 (Cth) (TAA) of showing that the assessment was excessive: see Commissioner of Taxation v AusNet Transmission Group Pty Ltd [2015] FCAFC 60 at [38] per Kenny J and [188] per Greenwood J. We accept that, as the Commissioner submitted, these findings represented the gravamen of the Commissioner's case on appeal and, so far as we can discern, before the primary judge.
17 Indeed, whilst Edmonds J differed from the majority in holding that, by virtue of ss 175 and 177 of the Income Tax Assessment Act 1936 (Cth), it was not open to Ausnet to challenge the Commissioner's "nil" determination under s 124R(5) of that Act, his Honour also held that, if it had been open to Ausnet to contest the determination, then Ausnet had not discharged its burden under s 14ZZO because, under the Asset Sale Agreement, it was not possible to allocate any part of the Total Purchase Price to the drawings and documents: see Commissioner of Taxation v AusNet Transmission Group Pty Ltd [2015] FCAFC 60 at [69], Kenny J agreeing on this latter point at [38].
18 Secondly, the majority accepted that no amount of the total purchase price could be allocated to the copyright because Ausnet would have been entitled to the copyright under an implied licence: Commissioner of Taxation v AusNet Transmission Group Pty Ltd [2015] FCAFC 60 at [38] (Kenny J), [185]-[188] (Greenwood J). Even though not at the forefront of the Commissioner's case, the Commissioner had made a submission to this effect at both first instance and on appeal.
19 Thirdly, although the Commissioner raised the double counting issue and the Full Court ultimately did not find it necessary to determine it, the issue was not a focus of the Commissioner's case and not a great deal of time was devoted to it. It did not assume such significance at the hearing of the appeal as to warrant the Commissioner being deprived of costs.
20 Further, although the "discretion" analysis of s 124R(5) advocated by the Commissioner before the primary judge was mistaken, at the hearing of the appeal, the Commissioner apparently accepted that, as the majority has held, the Commissioner makes a factual determination under s 124R(5) that is open to challenge in Part IVC proceedings: Commissioner of Taxation v AusNet Transmission Group Pty Ltd [2015] FCAFC 60 at [33] (Kenny J) and [153] (Greenwood J). Both before the primary judge and on appeal, moreover, the Commissioner proceeded in conformity with the majority's understanding that ss 175 and 177 of the Income Tax Assessment Act 1936 (Cth) did not foreclose Ausnet's challenge to the Commissioner's determination under s 124R(5): Commissioner of Taxation v AusNet Transmission Group Pty Ltd [2015] FCAFC 60 at [36]-[38] (Kenny J), [154]-[155] (Greenwood J). As already noted, in this context, the majority accepted the Commissioner's fundamental submission that, in challenging the determination, Ausnet had failed to discharge its burden of showing that the assessment was excessive - a conclusion with which Edmonds J would have agreed but for his Honour's conclusion that it was not open to Ausnet to challenge the making of the s 124R(5) determination.
21 Finally, although the Commissioner may have contributed to the experts being asked the wrong question for the purposes of the experts' joint report, the nature of the copyright issue in fact arose because of the way Ausnet mounted its case, including the manner in which it sought to have selected valuation methodologies applied, in its unsuccessful attempt to discharge its burden of showing that the assessment was excessive.
22 We accept that, as the Commissioner submitted, it cannot be said that Ausnet was relevantly successful on any issue in the appeal.
23 There has been no misconduct on the Commissioner's part in relation to the conduct of the appeal or the case at first instance. No point was improperly taken or question unreasonably raised. The hearing of the case at first instance and on appeal was not improperly prolonged by the Commissioner's stance. Further, the fact that a court does not accept all of a successful party's submissions does not make it appropriate to deal with costs on an issue by issue basis. There is nothing disclosed in the circumstances of the case that would support the proposition that the Court should depart from the usual order as to costs.
I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Kenny, Edmonds and Greenwood.