Electricity Supply Industry Superannuation (Qld) Ltd v Deputy Commissioner of Taxation

REASONS FOR JUDGMENT 1 The substantive application was dismissed on 17 October 2002. At that time the applicant sought to make submissions on the question of costs. In the result both parties have filed written submissions on costs. 2 The subject matter of the proceedings before the Court were objections by the applicant to a private ruling made by the respondent pursuant to s 14ZAF of the Taxation Administration Act 1953 (Cth). The applicant sought rulings on six questions concerning the operation of an arrangement in the financial years 1997 to 2000 inclusive. Insofar as the financial years 1999 and 2000 were concerned, the respondent made the rulings on the assumption that the trustee of the Queensland Investment Corporation Investment Trust would exercise its powers under the Trust Deed in a particular way. The assumption was that the trustee would exercise the powers consistently with the manner of exercise of the powers in the previous financial years. 3 The applicant appealed the objection decision in respect of the answers to five of the six questions. The basis of the appeal with respect to each of the financial years was the same and concerned the possible application of Part IVA of the Income Tax Assessment Act 1936 (Cth) to the arrangement in each of the financial years. 4 The respondent opposed the application and contended that the grounds relied upon by the applicant did not entitle it to the relief claimed, namely to have the objections as lodged allowed in full. In respect of the answers to the questions concerning the 1999 and 2000 financial years, the respondent, in its written submissions filed on 18 January 2002, in opposition to the application, contended that it had erred in giving answers on the basis of assumed facts and that the objection decision in respect of those years ought to be set aside and the objections remitted for reconsideration by the respondent according to law. 5 On the afternoon of 4 February 2002, senior counsel for the respondent advised senior counsel for the applicant that the contention that the answers given in respect of the 1999 and 2000 financial years were made in error was no longer to be advanced on the hearing of the application. The application was heard on 5 February 2002. 6 The applicant submits that, having regard to the late abandonment of this ground of opposition, costs should not follow the event on the application and some other order should be made. The applicant submits that one of the following orders is appropriate to reflect the justice of the situation : (a) the applicant pay the respondent's taxed costs on the issue as to the application of Part IVA to the arrangement and that the respondent pay the applicant's taxed costs of the issue abandoned by the respondent and half of the taxed reserved costs; or (b) the applicant pay the respondent one-half of its taxed costs on the Part IVA issue, including reserved costs; or (c) the applicant pay the respondent one-third of its taxed costs of the application, including reserved costs. 7 The respondent submits that there is, in all the circumstances, no warrant to depart from the usual order that costs follow the event. If any allowance is to be given for the abandonment of part of the grounds relied upon prior to the hearing, then it submits some appropriate discount ought to be made in respect of its costs of the application, including reserved costs. 8 Ordinarily costs follow the event: Ritter v Godfrey [1920] 2 KB 47; Hughes v Western Australian Cricket Association (Inc) (1986) 8 ATPR 40-748 at 48,136; Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1987) 17 FCR 211 at 222; Cummings v Lewis (1993) 41 FCR 559 at 603. 9 However, where an otherwise successful litigant has failed on certain issues, or has by its conduct acted in such a way as to increase costs or to cause them to be thrown away, it may not be appropriate for costs to follow the event. In such a case, the Court may, in a proper exercise of its discretion, make such order as is just as between the parties to reflect those circumstances: see Cummings v Lewis at 602 - 604 and the cases cited there. But the discretion should not be exercised in such a way that litigants are dissuaded from canvassing all issues which might be material to the decision in the case: Cretazzo v Lombardi (1975) 13 SASR 4 at 12; Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 271- 272. 10 In the present case, the issue which was abandoned was not argued on the hearing of the application. It cannot be said to have prolonged the hearing in any way. Rather, the abandonment of it the afternoon before the hearing resulted in the costs of preparation on the part of both the applicant and the respondent in respect of that issue being thrown away. Other than the costs thrown away by the abandonment, it involved no other costs consequences to the parties. The abandonment has had no effect on the work the subject of an order for reserved costs. 11 It is not possible to make any estimate as to what percentage of the parties' respective costs of and incidental to the application were thrown away as a consequence of the abandonment of the issue. To pick a figure of one-half or one-third would, in my view, be arbitrary. It would also give to the issue thrown away, a substantially greater significance in the totality of the litigation than is justified. 12 The respondent should recover its costs of and incidental to the application, including reserved costs, other than its costs incurred and thrown away in respect of the issue abandoned on 4 February 2002. 13 The applicant should recover its costs of and incidental to preparation of the issue abandoned on 4 February 2002. 14 It would seem that the applicant, at least, has some records of the time spent in preparation of the issue abandoned and one would expect that the respondent is in a like position. Accordingly, it is likely that the parties can agree the quantum of the costs thrown away. If not, an assessment will be made by the District Registrar and the costs will follow such an assessment. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Cooper .