Pratt Holdings Proprietary Limited v Commissioner of Taxation of the Commonwealth of Australia

REASONS FOR JUDGMENT 1 On 1 October 2012 substantive reasons for judgment were published: Pratt Holdings Proprietary Limited v Commissioner of Taxation of the Commonwealth of Australia [2012] FCA 1075 (the Substantive Decision). The parties were directed to bring in orders to give effect to those reasons for judgment. The parties agree that the Applicant's appeal should be dismissed. The parties disagree about costs. The Respondent seeks an order that the Applicant pay the Respondent's costs of the proceeding. The Applicant submits that it should be ordered to pay 80% of the Respondent's costs of the proceeding. 2 In Andrews v Australia and New Zealand Banking Group Limited (No 3) [2012] FCA 59 at [4], the relevant principles were summarised as follows: … The Court's discretion to order costs under s 43 of the Federal Court of Australia Act 1976 (Cth) (the FCA) is at large and ought not be read down otherwise than in accordance with accepted principle: Cirillo v Consolidated Press Property Ltd (No 2) [2007] FCA 179 at [3]. Costs ordinarily follow the event. An order for costs is intended to compensate the successful party, not to punish the unsuccessful party: Demetriou v Gusdote Pty Ltd (ACN 089 937 253) (2010) 78 ACSR 566 at 576, referring to Brennan CJ in Oshlack v Richmond River Council (1998) 193 CLR 72 at 75. Fairness should dictate how the discretion is exercised: Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [5]. Of course, the circumstances of each individual case must be considered. Those circumstances include an evaluation of the real degrees of success and failure. 3 What then about apportioning costs? A court may in appropriate circumstances apportion costs against a successful party: Hughes v Western Australian Cricket Association [1986] ATPR 40-748 at 48,136 and IFTC Broking Services Ltd v Commissioner of Taxation [2010] FCAFC 22 at [8]. There is no hard and fast rule. There are examples where apportionment was justified and examples where it was not: cf Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602 at [54]; Cretazzo v Lambardi (1975) 13 SASR 4 at 12 and 16; Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at [15]; Stena Rederi Aktiebolag v Austal Ships Sales Pty Ltd [2007] FCA 1141 at [10]-[12] and Esso Australia Resources Pty Ltd v Commissioner of Taxation (No 2) [2011] FCA 521 at [20]. Whatever order is made should not involve the parties in extensive and expensive work seeking to allocate particular costs to particular issues that a party won or lost: cf Andrews at [12]. 4 What then is the position here? The Applicant submitted that: … the Applicant was successful in relation to the Ruling Issue, and unsuccessful in relation to the Division 330 Issues. The Ruling Issue was argued separately and discretely from the Division 330 Issues. All submissions and oral argument relating to the Ruling Issue solely concerned the Ruling Issue. Paragraphs 113-166 of the [Substantive Decision] relate solely to the Ruling Issue. A review of the transcript reveals that approximately 21% of the time spent in argument related to the Ruling Issue. The Applicant submits that the time spent in argument represents a just and appropriate apportionment of the Respondent's costs of the proceeding. 5 The Respondent submitted that this was not an appropriate case for apportioning costs because: 1. the Applicant has not established that there is anything "special" about this case that justifies a departure from the usual orders; and 2. a departure from the usual orders on the basis outlined by the Applicant would not do justice between the parties having regard to the compensatory principles that underlie the usual order for costs. 6 In the present case, it is not appropriate to apportion the costs in the manner proposed by the Applicant. First, the Applicant was unsuccessful, not successful, in relation to the Ruling Issue. To take just one example, the Applicant contended that the Ruling continued to bind the Respondent because there had been no change in the law. That argument failed: see [129]-[144] of the Substantive Decision. Second, as the Respondent submitted, the issues addressed in the written submissions and during the course of oral argument were not the only issues addressed by the parties. 7 For those reasons, the Applicant should pay the Respondent's costs of the proceeding, such costs to be taxed in default of agreement. I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon.