4.2 The Commissioner's costs
23 On the one hand, it is true to say that this is not a case where the liquidators had a vested interest in the outcome of the proceedings. It is not a case, for example, where the respondent was ultimately concerned with their own economic welfare, as in Kisimul Holdings where the costs of the appeal were awarded against the respondent despite the respondent having filed a submitting appearance on the appeal.
24 On the other hand, I accept the Commissioner's submission that the liquidators' conduct in maintaining that only a court order would change their position left the Commissioner with no real option in terms of enforcing the notices but to institute and maintain these proceedings: cf Develtor Property Group Pty Ltd v Newcastle City Council [2001] NSWLEC 47 at [46] (Bignold J). In this regard, it is no answer, in my view, for the liquidators to say that they were prepared, and communicated their preparedness, to consent to an order permitting access. As no court order is required for a s 264 notice, this could only have been a reference to an order under s 486 of the Corporations Act. As such, their position wrongly denied the Commissioner his right to require production under s 264 of the ITAA 1936, the purpose of which is to enable the Commissioner to undertake wide-ranging inquiries in the discharge of her or his obligation to administer the taxation laws. By contrast, an order under s 486 of the Corporations Act would be premised on the view that the Commissioner's purpose was a different one, namely, that of a creditor only, as the Commissioner pointed out in correspondence prior to instituting the proceedings. The case put for the liquidators in the correspondence relied only upon a bald assertion as to the more specific provision taking precedence over the more general. There is, with respect, little that could be said to commend that assertion without more. The amicus curiae was, however, ultimately able to put an available argument in an endeavour to support the liquidators' position but that complex, albeit unsuccessful, argument bore little resemblance to that put by the liquidators in correspondence.
25 Moreover, while in submissions the liquidators asserted a lack of funds and that it would not have been in the best interests of creditors to participate, no evidence was led as to why the liquidators, having insisted that the question be determined judicially, offered but then declined to take an active role in the proceedings. That was so notwithstanding the Commissioner's offer that the parties bear their own costs to address the concern expressed by the liquidators about the risk of an adverse costs order contained in correspondence to which no response was ever received.
26 The liquidators also contend that the case was a test case or public interest litigation and for this reason also they should not be liable for the Commissioner's costs. However, that submission overlooks the fact that the litigation was occasioned by the liquidators' conduct in refusing to comply with the notices on the basis that s 486 of the Corporations Act applied - a position which to the knowledge of the Commissioner had never been taken by any other liquidator. Notwithstanding that the parties agreed in correspondence that the issue needed to be resolved, it is apparent that that was only insofar as the issue was live between them. It was open to the liquidators at any time to comply with the notices thereby rendering the litigation moot.
27 Conversely, the position adopted by the liquidators did not relieve the respondent of the need to prove its case for the grant of declaratory relief. For example, Young J stated in Trust Co of Australia Ltd v Perpetual Trustees WA Ltd (1995) 36 NSWLR 654 at 660:
Courts of Equity have adopted a practice over a long period of time not to make certain types of orders on admissions or without proper examination. This practice manifests itself in many ways. For instance, equity does not make declarations without a proper contradictor. However, this is a discretionary rule as is made clear by Territory Insurance Office v Kerin (1986) 42 NTR 15; 89 FLR 257. Again, a declaration will not be made by consent, at least in a situation where rights other than the rights of the parties might be affected. An affectation will occur if the Court considers that other people might be induced by the fact that the Court has made a declaration in a particular matter to assume that that declaration has been made after full consideration: Myer Queenstown Garden Plaza Pty Ltd v Port Adelaide City Corporation (1975) 11 SASR 504 at 509-510.
28 It follows that the consequences of the liquidators' stance for the conduct of the litigation would have been no different if the liquidators had simply ignored the proceedings (see by analogy Kisimul Holdings at [16]).
29 In essence, therefore, notwithstanding the liquidators' lack of a financial interest in the outcome and submitting appearance, I consider that the liquidators' position in the proceedings was effectively adversarial, and that the proceedings are not properly characterised as public interest litigation or as a "test case" which the ATO had determined to run.
30 As to the latter, I also do not accept the liquidators' submission that, the fact that the Commissioner did not accept the liquidators' "offer" to institute proceedings seeking an order under s 486 of the Corporations Act, and instead commenced these proceedings, suggests that "[t]hese proceedings were for all intents and purposes a test case commenced by the Applicant to gain clarity on a previously untested point of law". Quite apart from the points already made, it was the liquidators' position that it was the Commissioner who should bring proceedings. Thus, on the first occasion when the liquidators made the so-called "offer" to bring proceedings, they also expressed the view that it was arguable that the Commissioner should make the application, and later that it was an application that "should properly be made by [the Commissioner]".
31 Furthermore, a party cannot avoid costs because she or he has acted on a mistaken view of the law, even if that view was not unreasonable or untenable as the liquidators submit. Once the Commissioner's position was explained to the liquidators, it was open to them to accept that view and avoid litigation. There was no need for declaratory relief aside from the need created by the position taken by the liquidators in response to the s 264 notice.
32 Finally, the liquidators appear to contend that the award of costs in this case would be punitive because the position taken by them in not complying with the notice was reasonable. The submission is misconceived. An award of costs is compensatory in the sense that it is intended to indemnify the successful party (Oshlack v Richmond River Council (1998) 193 CLR 72 at 89 [44] (Gaudron and Gummow JJ) and 122 [134(6)] (Kirby J); see also ibid at 75 [1] (Brennan CJ) and 97 [67] (McHugh J) (in dissent but not on this point)). There is nothing to suggest that the award of costs on a party-party basis would do more than achieve that end. The fact that the amicus curiae was ultimately able to put a tenable argument does not alter the character of the award of costs.
33 In all of the circumstances, I do not consider that the submitting appearance ought to insulate the liquidators against an award of costs in favour of the Commissioner whose position was wholly vindicated in the proceedings.