Pike v Commissioner of Taxation

1. The respondent pay the applicant's costs, of and incidental to the appeal, to be taxed if not agreed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

LOGAN J: 1 As to costs, it is trite that, in the ordinary course, costs follow the event. The event here reflects a bifurcated outcome, in the sense that the appeal has been, for the reasons given in the principal judgment, allowed only in part: see: Pike v Commissioner of Taxation [2019] FCA 2185. The complicating factor is that, in respect of that allowance, much of the evidence which went to the reaching of conclusions in relation to the application of the Thai Double Tax Agreement (DTA) was also relevant in relation to the reaching of conclusions in respect of residence under ordinary concepts, as well as the domicile test, for which s 6 of the Income Tax Assessment Act (Cth) makes provision. 2 As to domicile, neither party enjoyed a particular success, in the sense that neither of the submissions of each as to when Mr Pike became domiciled in Australia, and, for that matter, where else, if ever, he was domiciled, apart from his domicile of origin in Zimbabwe, enjoyed forensic success. But Mr Pike did successfully resist, as it turned out, the Commissioner's contention that Mr Pike was domiciled in Australia as a matter of choice on and from 2005. 3 As to residence under ordinary concepts, this was a particularly difficult case to resolve on the facts, given that there was a varying pattern of length of time in Australia, albeit a consistent pattern of returning not as a visitor. For one of the income years in question, Mr Pike's time in Australia was as little as 32 days. It would, in my view, have been a very bold forensic value judgment for Mr Pike to have abandoned a contest as to residence. These are always cases of fact and degree, when one assesses residence under ordinary concepts, and I can well see how there was a view that he ought to be regarded as but a visitor, rather than a resident. Further, the cases on residence have a clarity in hindsight that, reasonably, they may not have in prospect. That is the nature of judicial decision-making. 4 As to the DTA, the Commissioner contested each and every paragraph in Article 4, cl (3), as to its application. Once again, I can well see how in prospect there was a reason for doing that, even though in hindsight there was an emphatic outcome against the Commissioner in respect of each of those paragraphs. It would be possible to order costs as to issues to be taxed, but there is much common sense, in my view, in relation to the Commissioner's submission that if there were to be any apportionment, it should be on a percentage basis, with the trial judge being the best placed to assess this. 5 I am also minded, though, that the applicant's submission was that the case would always have taken the length of time that it did, even if the issues had been confined to the DTA. It does strike me as inherently likely that it would have gone into a second day. 6 So while I accept that the taxpayer has not enjoyed complete forensic success, he has succeeded in massively reducing the amount of tax in dispute. So there are factors which tend both in favour of a percentage based approach, as well as a pragmatic realisation that this was always a case where the issues were going to be closely contested and only take the length of time that it did take. 7 It would be possible to make some allowance, in terms of submissions in advance, for those issues upon which Mr Pike did not succeed, but I rather doubt that I would come, in that regard, to the Commissioner's suggested 75% in his favour apportionment. 8 Overall, then, the view I have is that Mr Pike, notwithstanding that he did not wholly succeed, should have his costs, and that is because he has had to come to court to challenge the objection decision, he has largely succeeded and I doubt very much whether the case would have been any shorter, had he pressed the DTA issues. 9 Further, in relation to residence, where he has not succeeded, he has succeeded against the Commissioner, effectively, in relation to domicile for most of the years in question. And, moreover, he has served a very particular public interest in highlighting how even physical presence of relatively short duration can nonetheless constitute residence, under ordinary concepts, on singular facts. 10 For these reasons, then, the order is that the respondent pay the applicant's costs, of and incidental to the appeal, to be taxed if not agreed. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan.