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[2019] FCA 114
Federal Court of Australia
2019-02-12
Mr P, Greenwood J
Original judgment source is linked above.
GREENWOOD J: 1 On 31 August 2015, the principal judgment was delivered in Thomas v Commissioner of Taxation [2015] FCA 968. That judgment concerned seven appeals under Pt IVC of the Taxation Administration Act 1953 (Cth) by which the respective taxpayers, a trustee (Thomas Nominees) and two beneficiaries (Martin Thomas and MAPL) of the Thomas Investment Trust (the trust), challenged objection decisions issued by the Commissioner of Taxation concerning questions going to their respective primary tax liability for the tax years 2006, 2007, 2008, as well as penalty assessments for those years, and the trustee's tax liability for the 2009 tax year. 2 In the relevant tax years the trustee carried on an exchange-traded option trading business. In 2011 an audit of the trustee for the tax years ending 30 June 2006 to 20 June 2009 was completed. Notices of amended assessment were issued to Martin Thomas for each of the relevant tax years; to MAPL for the year ending 30 June 2008; and to Thomas Nominees for the tax years 2006 to 2008. Notices of Assessment were also issued in 2011 to the applicants in respect of penalty assessments as follows: to Martin Thomas for each of the relevant tax years; to MAPL for the year ending 30 June 2008; and to the trustee for each of the tax years 2006 to 2008. 3 The applicants lodged taxation objections in respect of each of these assessments in 2011. The Commissioner disallowed each of the relevant objections on 18 April 2012. 4 The history of the filing in the Federal Court was explained in the principal judgment from paragraphs [47]-[54]: 47 The applicants challenged the objection decisions of 2012 concerning their primary tax assessments for the tax years 2006, 2007 and 2008 by filing applications in the Federal Court of Australia on 8 June 2012. Those appeals are proceedings QUD 274, 275 and 276 of 2012 by Martin Thomas, Thomas Nominees and MAPL respectively. The applicants also challenged the objection decisions of 2012 concerning their penalty tax assessments for the tax years 2006, 2007 and 2008 by filing appeals in this Court on 15 June 2012. Those appeals are proceedings QUD 283, 284 and 285 of 2012 brought by Thomas Nominees, Martin Thomas and MAPL respectively. The applicants also challenged the decision not to remit the penalties by filing the Applications for Review before the AAT. 48 In mid-2012, however, after the making of the April 2012 objection decisions, the Commissioner issued further Notices of Amended Assessment to the beneficiaries concerning their primary tax liabilities in respect of the relevant tax years. On 2 November 2012, consequent upon a review of the Applicants' Appeal Statement filed on 20 September 2012, the Commissioner advised the applicants that he now accepted one of the grounds relied upon in each of the relevant objections to the effect that all premiums paid by the trustee as part of its ETO options trading business were deductible under s 8-1 of the 1997 Act. 49 This change of position is described as the "options concession". 50 It seems that this concession led to an agreement between the parties that the net income of the trust estate pursuant to s 95 of the 1936 Act in each of the relevant tax years was that set out in the table at [27] of these reasons. 51 Having made the options concession, the Commissioner then contended that the expenses of the trust exceeded its income with the result that it had made a net loss for the 2009 tax year and that no beneficiary was presently entitled to a share of the trust income in that tax year. However, the net income of the trust for the purposes of s 95 of the 1936 Act for the 2009 tax year was $173,743, as agreed. 52 The Commissioner issued the trustee with a Notice of Assessment dated 25 January 2013 for the 2009 tax year imposing upon it liability to tax in respect of the whole of the s 95 net income of the trust estate, in reliance upon s 99A of the 1936 Act. 53 On 28 February 2013, Thomas Nominees lodged a taxation objection in respect of the 2009 assessment to the trustee. The Commissioner disallowed that objection and gave notice of his objection decision on 17 April 2013 together with reasons for his decision. The trustee challenged the objection decision by filing an application in this Court on 17 June 2013. That appeal is QUD 325 of 2013. 54 The Commissioner no longer seeks to rely upon the assessments issued to the trustee in each of the 2006, 2007 and 2008 tax years as alternative assessments and does not now oppose the trustee's appeal against the Commissioner's objection decision in relation to those assessments. That appeal is proceeding QUD 275 of 2012. Moreover, the Commissioner no longer opposes the appeals in relation to the penalty assessments in respect of MAPL or the trustee. Those appeals are proceedings QUD 283 and QUD 285 of 2012 respectively. The Commissioner no longer opposes the related Applications for Review before the AAT. Those matters are the application by the trustee for the 2007 and 2008 tax years (2450/2012) and the application by MAPL for the 2008 year (2453/2012). 5 In summary, the proceedings at first instance were these: No. Assessment Year Taxpayer Federal Court No.
6 The orders contained in the principal judgment given on 31 August 2015 reserved the question of costs for all seven of the proceedings and the parties were given three weeks to submit proposed orders that the parties considered ought to be made by the Court in the disposition of each proceeding. On 21 September 2015, the time for the parties to submit orders for all seven proceedings was extended to 4.00pm 28 September 2015. 7 On 9 October 2015, the Court made the following orders in proceedings QUD275/2012, QUD325/2013, QUD285/2012, QUD283/2012, QUD284/2012: 1. The applicant's appeal is allowed. 2. The objection decisions in respect of the income years ending 30 June 2006, 2007, 2008 and 2009 are set aside. 3. Each party bear their own costs of and incidental to the appeal. 8 On 26 November 2015, judgment was delivered in Thomas v Commissioner of Taxation (No 2) [2015] FCA 1339. That judgment concerned QUD274/2012 and QUD276/2012. Order 8 of the orders in QUD274/2012 was that "each party bear their own costs of and incidental to the proceeding". Order 7 of the orders in QUD276/2012 was "each party bear their own costs of and incidental to the proceeding". 9 Four appeals were filed in the Full Court of the Federal Court as follows: Federal Court File Number Full Court of the Federal Court Appeal File Number QUD274/2012 QUD72/2016 (Appeal 72) QUD276/2012 QUD78/2016 (Appeal 78) QUD325/2013 QUD79/2016 (Appeal 79) QUD284/2012 QUD80/2016 (Appeal 80)
10 The Full Court of the Federal Court published its decision in Thomas v Commissioner of Taxation [2017] FCAFC 57 on 12 April 2017. The Full Court ordered in QUD72/2016 and QUD78/2016 that the appeals be allowed with costs and that the parties submit to the Court a form of agreed orders giving effect to the published reasons. The Full Court dismissed the appeals in QUD79/2016 and QUD80/2016. 11 On 27 June 2017, Justice Perram, on behalf of the Full Court, made an order remitting to the primary judge "any question of what costs order should have been made at trial" having regard to the reasons of the Full Court. In QUD78/2016, Justice Perram, on behalf of the Full Court, also made an order remitting to the primary judge any question of what costs order ought to have been made at trial having regard to the reasons of the Full Court. 12 On 3 August 2017 the Full Court made final orders in QUD79/2016 and QUD80/2016. In those two appeals, Order 5 in each case remitted to the primary judge the resolution of the issue of the costs of the trial. 13 On 15 September 2017, orders were made by consent in QUD274/2012 (referable to the remitter order in Appeal 72) that the parties file written submissions on the disposition of costs in the trial proceedings, as well as the disposition of the costs of and incidental to proceedings QUD276/2012, QUD284/2012 and QUD325/2013 by 6 October 2017 (referable to the remitter orders in Appeals 78, 80 and 79 respectively). 14 The Commissioner and the taxpayers in each proceeding filed submissions on 6 October 2017. The Commissioner and the taxpayers both filed submissions in reply on 12 October 2017. Those submissions were predicated upon the Full Court having upheld the appeals in QUD72/2016 and QUD78/2016. The taxpayers submitted that the successful appellants were either entitled to the costs of the proceedings below on the basis that costs follow the event, or were entitled to their costs on an indemnity basis due to offers to compromise or Calderbank offers which have been made. 15 On 20 October 2017, the High Court of Australia granted special leave to appeal from the orders of the Full Court. The High Court delivered judgment on 8 August 2018 upholding the appeal from the orders of the Full Court. The High Court set aside the orders of the Full Court in QUD72/2018 and QUD78/2016 apart from Order 5 of the Full Court's orders which remitted the question of costs of the trial to the primary judge. 16 The question of the costs of the trial of each proceeding now falls to be decided in light of the substantive determination of the issues by the High Court (and, in consequence, the orders of the High Court). I have had regard to the orders and reasons of the Full Court and the submissions lodged by the parties and the reasons and orders of the High Court. Since the High Court has reinstated the orders of the Court made by the primary judge, there is no basis for departing from the position reflected in the costs orders that were made on 9 October 2015 or 26 November 2015 in QUD274/2012, QUD276/2012, QUD284/2012 and QUD325/2013. The orders made in each of those proceedings were orders that "each party bear their own costs of and incidental to the appeal". The reference to "the appeal" in those orders, of course, is a reference to the appeal from the Commissioner's objection decision. 17 Accordingly, the order to be made in QUD274/2012 and QUD276/2012 upon remitter by orders of the Full Court having regard to the judgment and orders of the High Court of Australia is that each party bear their own costs of and incidental to the proceeding. The Court so orders. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood.
Thomas
Commissioner of Taxation