Hart v Commissioner of Taxation

1. The appellant pay the respondent's costs of the appeal, as agreed or assessed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THE COURT: 1 On 18 October 2019, the Court published reasons for judgment in these appeals and made orders in each matter that the appeal be dismissed: Hart v Commissioner of Taxation [2019] FCAFC 179. The appellants sought an opportunity to be heard on costs, and orders were made for the parties to file and serve written submissions, with the issue of costs to be determined on the papers. These reasons, which deal with the issue of costs, should be read together with the reasons dated 18 October 2019. We adopt the abbreviations used in those reasons. 2 The appellants submit that special circumstances exist in the present case, such as to justify a departure from the usual order that costs follow the event. The appellants submit that the case raised a novel question of general importance and some difficulty: see Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 (Ruddock v Vadarlis) at [11]-[17]; Federal Commissioner of Taxation v AusNet Transmission Group Pty Ltd (No 2) [2015] FCAFC 124 (AusNet) at [10]. In particular, the appellants rely on the following matters: (a) As far as the appellants are aware, there are no authorities on the application of the discount capital gain provisions in Subdiv 115-A of the ITAA 1997 in the context of a series of rollovers - none were drawn to the attention of the Court by either party at first instance or on appeal. That is, this is a test case arising from a genuine uncertainty about the interpretation of provisions that were amended with retrospective effect, and are materially different to the provisions that were extant at the time of the transactions. (b) The use of a series of rollovers is not unique to the appellants and the decision has consequences extending beyond this particular case. The Full Court's reasons on appeal are of importance for the clarification of the law for the Commissioner and also for the community more generally. (c) The questions before the Court were difficult - the provisions involved were detailed and complex. The difficulty was compounded by the retrospective effect of the provisions, and the fact that whether the result in this case is contrary to the underlying policy of the law is difficult to assess - for instance, the Explanatory Memorandum stated that the relevant amendments were to "give effect to a suggestion made through TIES 0042-2009" but the TIES document did not provide any additional useful information. (d) The primary judge observed that the outcome was in some ways an unpalatable/harsh result. In all of the circumstances, it was reasonable for the appellants to bring the appeal. 3 The appellants submit that there should be no order as to costs. In the alternative, they submit that the appellants should be ordered to pay only part of the Commissioner's costs. 4 The Commissioner submits that there are no special circumstances justifying a departure from the usual order as to costs, and seeks a costs order in his favour in each proceeding. 5 The principles regarding the award of costs are well established. 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 at [11] per Black CJ and French J; Oshlack v Richmond River Council (1998) 193 CLR 72 at [67] per McHugh J, at [134] per Kirby J; Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174 at [6]-[7] per Emmett, Kenny and Middleton JJ; and AusNet at [10] per Kenny, Edmonds and Greenwood JJ. There is authority for the proposition that where an appeal raises a novel question of general importance and some difficulty, the appeal court may decline to order costs against an unsuccessful appellant: see Re Mersey Railway Co (No 1) (1888) 37 Ch D 610 and Liversidge v Anderson [1942] AC 206 (both cited in Ruddock v Vadarlis at [17]); see also Sea Shepherd Australia Ltd v Western Australia [2014] WASC 66 (Sea Shepherd) at [25]-[38] per Edelman J. 6 We do not consider the matters raised by the appellants, whether considered individually or together, to justify a departure from the usual order as to costs. The fact that it may be beneficial for there to be an appellate authority on a disputed issue of statutory construction is generally not sufficient to justify a departure from the usual order as to costs. While it is true that the issue of statutory construction in the present case was novel (at least at the appellate level) and of some difficulty, and that it may have a wider application, we do not consider these matters to be sufficient in the circumstances of the present case to justify a departure from the usual order as to costs. The issue did not have the same significance, in human or political terms, as the issues considered in, for example, Ruddock v Vadarlis and Liversidge v Anderson: see Ruddock v Vadarlis at [28]-[29] and the discussion of Liversidge v Anderson in Sea Shepherd at [26]-[27]. 7 Nor does the retrospective operation of the provisions provide a basis to depart from the usual order as to costs. The appellants were well aware that it was the construction of the legislation as so amended that was in issue, both at first instance and on appeal. Further, in deciding whether or not to appeal, the appellants had the benefit of the judgment of the primary judge, with which we essentially agreed. Finally, unlike the applicants in Ruddock v Vadarlis, who brought the proceedings on behalf of others rather than for themselves, the appellants in the present case stood to gain if successful on the appeal. 8 For these reasons, it is appropriate to order in each proceeding that the appellant pay the Commissioner's costs of the appeal, as agreed or assessed. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Kenny, Kerr and Moshinsky.