Lamesa Holding BV v Commissioner of Taxation

REASONS FOR JUDGMENT 1 In the judgment delivered on 12 May 1999, I invited the parties to make submissions on costs. The parties have responded to that invitation by filing detailed written submissions. 2 The cross-respondent ("Mr King") seeks an order that the cross-claimant ("the Commissioner") pay his costs on an indemnity basis. Mr King submits that such an order is appropriate because the cross-claim was instituted and continued in circumstances where the Commissioner, properly advised, should have known that he had no cause of action against Mr King: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 (Woodward J), at 401; Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 (Sheppard J), at 232-233. 3 In my opinion, the Commissioner's case against Mr King was not strong and the lack of strength became apparent within a short time after the cross-examination of Mr Worthington commenced. Nonetheless, the case as pleaded required factual issues to be determined. While these were resolved against the Commissioner, I do not think it can be said that the case was so manifestly weak from the outset that it warrants an order for costs being made against the Commissioner on an indemnity basis. 4 Subject to the Commissioner's submission that a "Bullock" order should be made, I think that justice will be done as between the Commissioner and Mr King if the Commissioner is ordered to pay Mr King's costs on the usual basis. This order adequately reflects the fact that Mr King would have succeeded on the cross-claim even if the claim of the applicant ("Lamesa") against the Commissioner had succeeded. 5 Next, the Commissioner submits that, on the assumption that Mr King is entitled to an order for costs on a party and party basis, it is appropriate that Lamesa be ordered to pay Mr King's costs. This is said to be a "Bullock" order (Bullock v London General Omnibus Co [1907] 1 KB 264). However, a Bullock order is a term "used to describe an order requiring an unsuccessful defendant to pay the costs which have been awarded in favour of a successful defendant": Gould v Vaggelas (1985) 157 CLR 215, at 246, per Wilson J. The Commissioner has not explained why the Bullock principles should apply to a case where it is not the applicant who has joined two respondents (one successful and the other unsuccessful), but the respondent who has elected to pursue a cross-claim and has been unsuccessful. 6 In any event, I do not consider it appropriate to order Lamesa to pay Mr King's costs of the cross-claim. The Commissioner decided to join Mr King and to pursue a cross-claim which, as I have held, would have failed regardless of the outcome of Lamesa's claim against the Commissioner. There is no valid reason why Lamesa should be required to pay for the decision of the Commissioner to institute and continue with such a cross-claim. 7 Lamesa submits that the following orders should be made in respect of its claim against the Commissioner: (a) Lamesa pay the Commissioner's costs of the amended application on a party and party basis, other than the costs on the issues raised by the Commissioner's affirmative defences; (b) the Commissioner pay Lamesa's costs on a party and party basis in respect of the issues raised by the Commissioner's affirmative defences; and (c) the Commissioner pay Lamesa's costs on an indemnity basis in respect of the travel expenses of Mr Gregory Annick and Mr Frederick Schneider. 8 The discretion of the Court on costs extends to depriving a successful party of its costs on issues upon which it has failed and to requiring that party to pay the other party's costs in respect of these issues: Hughes v Western Australian Cricket Association (Inc) [1986] ATPR 40-748, at 48,136; Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1987) 17 FCR 211 (FC), at 222. In these proceedings I concluded that, had it been necessary to address the Commissioner's affirmative defences, they would have failed. 9 In my view, the Commissioner, in substance, should bear the costs of the affirmative defences pleaded by him. They covered similar ground to that raised in the cross-claim and, like the cross-claim, they would have failed had the case not been disposed of on other grounds. The Commissioner was invited by Lamesa to withdraw the defences, but persisted with them. The affirmative defences took up time at the hearing but, more importantly, required not inconsiderable preparation on the part of Lamesa (as well as by Mr King). I think it would be unfair if some allowance were not made in the costs order for the pursuit by the Commissioner of affirmative defences shown to be ill-founded. 10 Likewise, I think that some allowance should be made in respect of the costs of bringing Messrs Annick and Schneider from the United States to give evidence at the hearing. Lamesa's motion for them to give evidence by video-link was dismissed, largely because it was said by the Commissioner that their credit was likely to be in issue. As events turned out, the Commissioner did not seriously seek to impugn the credit of either Mr Annick or Mr Schneider and their evidence could conveniently have been taken by video-link. Again the evidence shows that the Commissioner was invited to reconsider the decision to require the witnesses to attend in person, but that he declined to do so. However, while I think some allowance should be made for the matter in the costs order, I do not think it should be by way of the Commissioner being required to meet travel costs on an indemnity basis. 11 I think that the appropriate course, as between the Commissioner and Lamesa, is that Lamesa should be ordered to pay two-thirds of the Commissioner's costs of the amended application. This order takes account of the matters to which I have referred and limits the occasion for further disputation in respect of the assessment of costs. 12 I make the following orders: 1. Lamesa pay two-thirds of the Commissioner's costs of the amended application, as agreed or taxed. 2. The Commissioner pay Mr King's costs of the cross-claim, as agreed or taxed.