Commissioner of Taxation v Bosanac

The first respondent's submissions 5 The first respondent submitted that he did not take any active part in the hearing of the appeal, and that there was no basis for an order against him, noting that he had informed that Court that he would appear but not otherwise participate. 6 In relation to the proceeding below, the first respondent noted that he had not filed any evidence or submissions concerning the declaration sought by the Commissioner, and had notified the primary judge that he would "merely be appearing and would otherwise be bound by the Court's orders". While the first respondent acknowledged that he, with the second respondent, had opposed the Commissioner's application for leave to amend his originating application "to add the request for the property declaration back in 2016", he submitted that, in the context of the actual hearings of the application, these costs were minimal and would "be naturally and appropriately addressed within those underlying proceedings (WAD 291 of 2015)". As an alternative, the first respondent added: To the extent that the position of the First Respondent has any relevance to the underlying procedural steps that pre-date the hearing of the application before the primary judge, it is respectfully submitted that such costs should be a matter for determination by the primary judge within the underlying proceedings (WAD 291/2015).

The second respondent's submissions 7 The second respondent's primary contention was that the appellant should pay 50% of the second respondent's costs of the appeal and that the order as to costs made by the primary judge should not be disturbed. In the alternative, the second respondent contended that there should be no order as to the costs of the appeal and that the matter should be remitted to the primary judge to determine the disposition of costs. 8 In support of the second respondent's contention, the second respondent argued that such an order would reflect the fact that she succeeded on the 'Cummins inference' ground (see below), although she ultimately failed on the appeal. The second respondent argued that the error identified by the Court at [15] of its reasons for judgment (and on which the Commissioner succeeded) had not been identified by the Commissioner in his submissions, and that the appellant did not provide the Court with the evidence before the primary judge relating to the relevant issue until the Court requested that evidence on the morning of the hearing. The second respondent argued that "[t]he closest the [Commissioner] came to articulating the argument that the Court ultimately accepted was in Part C at 10 [44] where the [Commissioner] made a related, but different, argument". In the circumstance , so the second respondent submitted, there should be no order as to the costs of the appeal, citing Australian Postal Corporation v Botany Municipal Council [1989] FCA 747; 69 LGRA 86 at 95; National Australia Bank Ltd v KDS Construction Services Pty Ltd [1987] HCA 65; 163 CLR 668 at [22]-[25]; Conder v Silkbard Pty Ltd [1999] NSWCA 459 at [37]; and Malick v Lloyd [1913] HCA 37; 16 CLR 483 at 492. 9 The second respondent submitted that the Commissioner, although successful on the appeal, had failed, both on appeal and at first instance, on his 'Cummins inference' argument. This was, so the second respondent submitted, the central issue that occupied most of the time at the hearing below and a significant amount of time at the hearing of the appeal. In this regard, the second respondent drew attention to the fact that a successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered to pay the other party's costs of those issues, citing Hughes v Western Australian Cricket Association (Inc) [1986] FCA 511; (1986) ATPR 40-748 ('Hughes v Western Australian Cricket') at 48,136; Ruddock v Vadarlis (No 2) [2001] FCA 1865; 115 FCR 229 ('Ruddock v Vadarlis (No 2)') at [11]. The second respondent maintained that an award of 50% of her costs was appropriate in the circumstances, citing Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 3) [2007] FCAFC 119 at [11]-[12]. 10 As to the proceeding at first instance, the second respondent's primary position was that the primary judge's costs order should not be disturbed. In the alternative, the second respondent submitted that since the primary judge made interlocutory orders reserving some residual discretion on costs, a reasonable alternative would be to remit the matter to the primary judge for determination.

Costs of the appeal 11 The disposition of costs is in the Court's discretion; and of course that discretion must be exercised judicially, having regard to the applicable principles and the justice of the case in all the circumstances: s 43 of the Federal Court of Australia Act 1976 (Cth) ('the Act'), discussed in Ruddock v Vadarlis (No 2) at [9]-[10]. As Black CJ and French J said in that case at [11]: Within the general discretion of the courts to award costs it is accepted by decisions in both Australian and English jurisdictions that: • Ordinarily costs follow the event and a successful litigant receives costs in the absence of special circumstances justifying some other order. • Where a litigant has succeeded only upon a portion of the claim, the circumstances may make it reasonable that the litigant bear the expense of litigating that portion upon which he or she has failed. • A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other parties' costs of them. In this sense "issue" does not mean a precise issue in the technical pleading sense but any disputed question of fact or law. In support of these propositions their Honours referred to Hughes v Western Australian Cricket at 48,136. 12 As indicated above, where an appeal is successful, ordinarily a respondent will be ordered to pay the costs of the appeal and of the first instance proceeding but this is not an invariable rule. The discretion, which is conferred on the Court by s 43 of the Act, "enables it to respond to the wide variety of circumstances that may arise in relation to the making of costs orders": Ruddock v Vadarlis (No 2) at [16]. 13 The issue in the appeal was whether, as the appellant Commissioner argued on the appeal, the first respondent held an equitable interest in residential property purchased in the name of the second respondent. The first ground of the Commissioner's case was that the primary judge was wrong to find to the contrary by reason of what the appellant called the Cummins inference. The Court rejected this ground: Reasons at [10]-[11]. The appellant Commissioner's second ground was that, apart from any Cummins inference, the Court should infer from the evidence that the first respondent intended to retain a 50% beneficial interest in the property. The Court accepted that this was indeed what the first and second respondents had intended: Reasons at [27]. 14 The outcome of the appeal indicates that the appellant Commissioner is entitled to his costs of the appeal and the costs of the proceeding at first instance. 15 There may be some force in the second respondent's submission that what the Court identified as an error in the primary judge's reasons could have been more clearly identified by the appellant as such. We do not consider, however, that there was so little clarity in the appellant's argument that the appellant should be deprived of the costs of the appeal. As the second respondent properly noted, the Commissioner's submissions on the appeal included a contention that the presumption of advancement was rebutted by evidence as to the actual intention of the first respondent, including that "the contribution of the first respondent to the purchase of the matrimonial home … was secured by mortgage against the matrimonial home itself … [which] could be lost if there was a mortgagee sale of the matrimonial home": see appellant's outline of submissions at [44]. Further, in answer to the Court's questions at the hearing of the appeal, senior counsel for the Commissioner submitted that "the fact that Mr Bosanac assumed a substantial liability without getting any benefit would further support an inference that he intended to [obtain a] beneficial [interest]"; and further submitted that the primary judge had erred, in consequence, by failing "to take that into consideration": see transcript at p 7; also pp 18-19. The point was, furthermore, clearly raised with counsel for the second respondent, who did not express any surprise when the point was raised. Nor did counsel for the second respondent indicate that he had any difficulty in addressing point: transcript pp 33, 34. We conclude that there was not such a failure on the appellant's part "to properly articulate an argument before the Court" as to justify a departure from the ordinary rule that, as the successful party, the appellant is entitled to the costs of the appeal. In so far as the second respondent suggested that the appellant had not raised the ground "at all", this submission must also be rejected: see second respondent's submissions on costs at [2], [4]. 16 Of course, a successful appellant who has failed on some issues may be deprived of the costs of the issues on which the party failed or ordered to pay the costs of them to the other party. The determination of costs on an issue by issue basis is ordinarily not desirable, however; and the fact that a court does not accept all of a successful party's submissions does not necessarily make it appropriate to deal with costs on an issue by issue basis: see Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2015] HCA 53; 90 ALJR 270; 327 ALR 192 at [6] and Commissioner of Taxation v AusNet Transmission Group Pty Ltd (No 2) [2015] FCAFC 124 at [23]. We do not consider that the justice of the case warrants the determination of costs on an issue by issue basis in this case. As already noted, the Commissioner succeeded on a ground identified in his Notice of Appeal and argued in the proceeding below. The point at issue was specifically addressed at the hearing of the appeal, without objection or complaint. Further, in our view, while the failure by the primary judge to include in his consideration the fact that the first respondent had "assumed a substantial liability without acquiring any beneficial interest" was critical in the Court's reasons, it was not the sole basis on which the Court departed from the primary judge's determination of the issue: see, e.g. Reasons at [24]-[26].

Costs of the proceeding below 17 In our opinion, there is also no sufficient basis to depart from the ordinary position with respect to the costs of the proceeding at first instance. In conformity with the general rule that costs follow the event, the primary judge made an order that the Commissioner, the unsuccessful party at first instance, pay the costs of the second respondent "to be assessed if not agreed". Given the outcome of the appeal, this order would ordinarily be set aside: see [11] above. There is no justification, so far as we can see, to depart from the usual order as to the costs of the first instance proceeding in an appeal such as this, where the same issue was before the primary judge; his Honour's determination with respect to the issue was specifically challenged, as identified in the appellant's notice of appeal; and, on an appeal by way of rehearing, the Court has come to a contrary conclusion to that of the primary judge and upheld the appellant's case: see Commissioner of Taxation v Bosanac (No 7) [2021] FCA 249 at [213]-[231] ('Bosanac (No 7)') and ground 2 of the appellant's notice of appeal filed 16 April 2021. 18 We accept the first respondent's submission that he played no active part in the hearing of the appeal and that no costs order should be made against him in connection with the appeal. We also accept that the first respondent did not play a significant role in the first instance proceeding, notwithstanding that he joined with the second respondent in opposing the Commissioner's application for leave to amend [3] of his amended originating application to include a declaration in the terms set out by the primary judge in his reasons: see Bosanac (No 7) at [5]. It is not disputed that, as the first respondent submitted, he did not file any evidence or submissions relating to whether the declaration should be made and instead informed the primary judge that he would "merely be appearing and would otherwise be bound by the Court's orders". Our conclusion that there is but a slight, and ultimately immaterial, basis for any costs order against the first respondent as regards the proceeding below is fortified by the fact that the primary judge did not see fit to mention the first respondent in the disposition of costs when he made the final orders in the proceeding below. 19 The second respondent also referred to the fact that the primary judge had reserved costs on occasion in the proceeding at first instance. Reserved costs are addressed in r 40.03 of the Federal Court Rules 2011 (Cth). This does not provide a basis in this case to depart from the ordinary rule as to the disposition of costs in favour of a successful party to an appeal. 20 We note at this point that the primary judge has retired from the Court, and if there were any order remitting a costs issue, it could only be to another single judge. For the above reasons, however, we do not consider that an order remitting cost issues to the primary judge would have been appropriate even if it had been possible. 21 There is nothing disclosed in the circumstances of this appeal that would lead us to depart from the usual orders as to costs. Accordingly, we would order that the second respondent pay: (a) the appellant's costs of the appeal, as agreed or assessed; and (b) the appellant's costs of the proceeding below, as agreed or assessed. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Kenny, Davies and Thawley.