Gashi v Commissioner of Taxation

REASONS FOR JUDGMENT 1 On 22 June 2012, I gave judgment in these tax appeals, and required the parties to file and serve their written submissions as to costs according to a particular timetable. That has now been done, and these reasons deal with the subject of those submissions. 2 I should first consider a submission which has been made by the applicants to the effect that the Commissioner should pay the applicants' costs on an indemnity basis, to the extent that they related to each assessment upon which the Commissioner relied, but which was "held not to be extant". That quoted expression was a reference to para 8 of my reasons of 22 June 2012. However, counsel for the applicants have misunderstood what was then decided. It was not decided that the Commissioner was relying upon non-extant assessments. Rather, and to the contrary, it was held that each amended assessment replaced the one which it succeeded, and then became the only extant assessment with respect to the year in question. Further, it was not for the Commissioner to "rely" upon assessments of his choice in this proceeding. The proceeding was constituted by reference to the assessments to which the applicants had objected. It was the Commissioner's decision in the disposition of those objections which formed the basis of each applicant's proceeding in the court. In the case of Mr Gashi, subject only to the concession to which I referred in para 59 of my reasons of 22 June 2012, there was no assessment upon which he succeeded. I consider that there is nothing in the applicants' point that a special costs order ought to be made because of the Commissioner's reliance on assessments which were not extant. 3 In other respects, Mr Gashi did not resist the submission that he should pay the Commissioner's costs on the conventional basis. 4 In the case of Mrs Gashi, subject to an adjustment to reflect her failure to displace the Commissioner's conclusion on the matter of penalties, to which I shall refer below, the Commissioner accepted that, as the successful party, she would have the conventional entitlement to her costs. He submitted, however, that the court should, in effect, draw a line on 29 June 2011, on which date Mr Kelly's report was served upon him. Prior to that service, Mrs Gashi had not disclosed to the Commissioner the receipt of income at anything like the levels set out in Mr Kelly's report. It would, it was submitted, be unjust for Mrs Gashi to have her costs with respect to a period during which she withheld from the Commissioner details of the income receipts by reference to which she proposed to conduct her case in court. Indeed, it was submitted that, for the period before 29 June 2011, Mrs Gashi should pay the Commissioner's costs. 5 In ordinary civil litigation on pleadings, an applicant will have made his or her allegations in the statement of claim. If such an applicant ultimately succeeds by making good those allegations, his or her conventional entitlement to costs will not be defeated by the circumstance that the evidence which sustains the allegations is filed only subsequently to the service of the statement of claim. By resisting the allegations and insisting that they be made good by evidence, the respondent is taking the conventional risk that, if they are made good, he or she will pay the applicant's costs. 6 Tax appeals are, of course, in a slightly different category. As I explained in my reasons of 22 June 2012, an applicant's case (on an income tax appeal at least) must be that the relevant assessment was excessive, and such a case will be made good only by proving the actual level of taxable income which the applicant had in the year in question. But there are no pleadings, and no formal procedure for the applicant to notify the Commissioner of the income levels upon which reliance will be placed, nor of the evidence proposed to be led in that behalf. The first formal occasion upon which it might be said that an applicant has the obligation to place the Commissioner on notice of these things is the service upon the Commissioner of his or her appeal statement. Until then, the applicant in a tax appeal appears to be under no obligation to inform the Commissioner of the factual details upon which his or her case would be based. 7 In the present case, Mrs Gashi's appeal statement was filed on 23 June 2011, that is, prior to the Commissioner's suggested cut-off date by a few days only. In that appeal statement, Mrs Gashi disclosed that she proposed to rely upon Mr Kelly's report. Until then, the Commissioner knew that Mrs Gashi took the position that his assessment was excessive, but he did not know the figures which would be advanced by Mrs Gashi in support of her case, nor the evidence on which those figures would be based. 8 Although one might feel sympathy for the position in which the Commissioner found himself faced with a taxpayer whose disclosures, at the time of the assessment and objections, were manifestly inadequate, nonetheless the Commissioner took an approach to assessment which, while perfectly regular in the circumstances, has been displaced after court proceedings. In order to secure that displacement, Mrs Gashi was obliged to take the usual steps of a litigant: instructing her solicitor, causing the court documents to be prepared and lodged, and so forth. In the light of the considerations referred to above, I do not think it would be correct to make the judgment - implicit in the orders for which the Commissioner seeks - that Mrs Gashi ought not to have done these things. The fact that the Commissioner was not aware until the filing of Mrs Gashi's evidence exactly what would be her factual case in the proceeding is, in my opinion, not a circumstance proper to stand in the way of her conventional entitlement to costs, as the successful party. 9 The Commissioner also sought a qualification of what would otherwise be a costs order in favour of Mrs Gashi by reference to the circumstance that she had failed on the matter of penalties. No response to that submission was received from counsel for Mrs Gashi, and I think it should be accepted. In the view I take, it would be appropriate if Mrs Gashi's otherwise entitlement to costs were reduced by 15% to reflect this factor. 10 In the circumstances, I shall order that Mr Gashi pay the Commissioner's costs, and that the Commissioner pay 85% of Mrs Gashi's costs. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup.