Commissioner of Taxation v Unilever Australia Securities Ltd

[1995] FCA 167

IN THE FEDERAL COURT OF AUSTRALIA )
  )
NEW SOUTH WALES DISTRICT REGISTRY )    No.  NG438  of  1994
  )
GENERAL DIVISION                 )

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:COMMISSIONER OF TAXATION

Appellant

AND:UNILEVER AUSTRALIA SECURITIES LIMITED

Respondent

COURT:  LOCKHART, BEAUMONT & HILL JJ.
PLACE:  SYDNEY
DATE:   30 MARCH 1995

MINUTE OF ORDERS
THE COURT ORDERS THAT:

1. Order 5 made by the Court on 24 February 1995 be discharged and there be substituted therefor an order in the following terms:

"5.There be no order with respect to the costs of either party of the proceeding at first instance or on appeal."

NOTE:     Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

.

IN THE FEDERAL COURT OF AUSTRALIA )
  )
NEW SOUTH WALES DISTRICT REGISTRY )    No.  NG438  of  1994
  )
GENERAL DIVISION                 )

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:COMMISSIONER OF TAXATION

Appellant

AND:UNILEVER AUSTRALIA SECURITIES LIMITED

Respondent

COURT:  LOCKHART, BEAUMONT & HILL JJ.
PLACE:  SYDNEY
DATE:   30 MARCH 1995

REASONS FOR JUDGMENT
LOCKHART J. and HILL J.
     On 24 February 1995 the Court gave judgment in this matter.

The Court ordered by majority (Beaumont J. dissenting) that:-

"1.  The appeal be allowed.

2.The matter be remitted to Spender J. or other judge of the Court to determine the quantum of the profit arising in the year ended 30 June 1987; but the operation of this order be suspended for 28 days to allow the parties to agree, if possible, the amount of the profit arising.

3.The objection decision of the Commissioner, in respect of the assessment for income tax for the year ended 30 June 1987, be set
aside, and in lieu thereof, the objection be allowed in part.

4.Subject to the determination by Spender J. or other judge of the Court, or as agreed, of the quantum of profit, the assessment be remitted to the Commissioner for reassessment in accordance with law.

5.The respondent pay the appellant's costs of the appeal and of the proceeding at first instance."

On 27 February 1995 counsel for Unilever Australia Securities Limited (UAS) requested the Court to hear submissions in support of an application that the Court vary its order number 5. relating to costs.  On the hearing of the appeal, no submissions were made by either party as to costs.

The Court's order of 24 February 1995 has not been entered.  The Court told the solicitors for the parties that it would be prepared to hear submissions with respect to the question of costs of the appeal and of the proceeding at first instance.  To that end directions were given by the Court to the parties to lodge written submissions on the question of costs, and directed that the matter be relisted for judgment or, if the Court so determines, further argument on a date to be notified to the solicitors for the parties by the Court.

Written submissions have been lodged by the parties.  In our opinion there is no need for further argument on the question of costs.  Hence the matter has been relisted for judgment today on that question.

It must not be assumed by litigants that if they choose not to make submissions on questions of costs during argument on an appeal that the Court will not determine costs when giving judgment on the appeal, and stand the matter over for further argument by the parties at a date later than the date of judgment.  Generally speaking the time for parties to argue costs is when the appeal is being heard; but we recognize that there are cases where costs cannot be suitably considered until judgment has been given.  The Court was not asked to defer dealing with costs in this appeal when argument proceeded before it.  Hence we made order 5. in the terms mentioned above.

The discretion to order costs must, of course, be exercised judicially.  We adopt the following passage from the judgment of Toohey J. when a judge of this Court in Hughes v Western Australian Cricket Association Inc. [1986] ATPR 40-748. Toohey J. said (at 48-136):

"The discretion [to award costs] must of course be exercised judicially.  There are decisions, both of Australian and English courts, that throw light on the way in which the discretion is to be exercised.  I shall not refer to those decisions in any detail; I shall simply set out in a summary way what I understand to be their effect.

1.Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order.  Ritter v. Godfrey [1920] 2 K.B. 47.

2.Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed.  Forster v. Farquhar [1893] 1 Q.B. 564.

3.A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party's costs of them.  In this sense, `issue' does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law.  Cretazzo v. Lombardi (1975) 13 S.A.S.R. 4 at p. 12.

There is no difficulty in stating the principles; their application to the facts of a particular case is not always easy."

Toohey J. cited with approval the following passage from the judgment of Jacobs J. of the Supreme Court of South Australia in Cretazzo v Lombardi (1975) 13 SASR 4 at 16:

"But trials occur daily in which the party, who in the end is wholly or substantially successful, nevertheless fails along the way on particular issues of fact or law.  The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case.  There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike.  I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to
anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues."

The observations of Toohey J. have been applied in a number of cases in this Court, for example, Queensland Wire Industries Pty Limited v Broken Hill Proprietary Co Limited (1987) 17 FCR 211 at 222 where the Court said that Toohey J. in the Hughes case had summarized "the well known guidelines within which the discretion as to costs is exercised".

We have considered the written submissions of the parties on the question of costs.

At the trial the learned primary Judge (Spender J.) held that no profit at all arose to UAS as a result of the relevant transaction.  His Honour proceeded to express the view that, if there had been a profit or gain arising to the taxpayer as a result of the arrangements, that gain would only have occurred at the time the debentures were in fact repaid to debenture holders.  This was in part in the year ended 30 June 1987 and in part in the taxation year 1989.  His Honour also held that costs and outlays would need to have been taken into account to determine the profit if it were to be included in the taxable income of UAS.  His Honour also found that, had there been a profit, that profit would have been on revenue account.
     On appeal his Honour's finding that no profit at all arose to UAS as a result of the arrangements was reversed, and his Honour's finding was not supported in argument by counsel for UAS.  We held that there was a profit or gain arising to UAS as a result of the transaction and that it was on revenue account.  We also held that the profit or gain occurred at the time the debentures were in fact repaid to debenture holders, namely, in part in the year of income ended 30 June 1987 and in part in the 1989 taxation year.  Hence the appeal was allowed, but the matter remitted to Spender J. or other judge of the Court to determine the quantum of the profit arising in the year ended 30 June 1987.  The objection decision of the Commissioner in respect of the assessment for income tax for that year was set aside and the objection allowed in part.

The Commissioner was successful both at trial and on appeal on the issue whether the profit or gain arising to UAS was on revenue account.  He succeeded on appeal on the question whether no profit at all arose to UAS, a question on which he had succeeded at trial; but on appeal UAS did not seek to support the primary Judge's finding on that question.  UAS succeeded throughout on the issue of when the profit or gain arose, and it was an important issue.  The resolution of that issue in favour of UAS led to the setting aside of the Commissioner's objection decision.

In all the circumstances in our opinion the proper order for costs is that there be no order as to the costs of either party of the proceeding at first instance or on appeal.  Order no. 5 made on 24 February 1995 should be discharged and that there be substituted therefor an order in the following terms:

"5.There be no order with respect to the costs of either party of the proceeding at first instance or on appeal."

I certify that this and the preceding six (6) pages are a true copy of the reasons for judgment herein of the Honourable Justice Lockhart and the Honourable Justice Hill.

Associate

Dated:  30 March 1995 

IN THE FEDERAL COURT OF AUSTRALIA  )
  )
NEW SOUTH WALES DISTRICT REGISTRY  )      No. G438 of 1994
  )
GENERAL DIVISION                 )

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT
  OF AUSTRALIA

BETWEEN:COMMISSIONER OF TAXATION

Appellant

AND:UNILEVER AUSTRALIA SECURITIES LIMITED

Respondent

CORAM:    LOCKHART, BEAUMONT AND HILL JJ.

DATE:     30 March 1995     

REASONS FOR JUDGMENT
                (On the question of costs)

BEAUMONT J.
         I have had the benefit of reading the reasons of Lockhart and Hill JJ. on this point.  Since I would have dismissed the appeal, it is not necessary that I address the question of costs in any specific sense.  However, I should express agreement with the general observations made by their Honours that, generally speaking, the time for arguing costs is when the appeal is heard.

I certify that this page is a true copy of the Reasons for Judgment herein of his Honour Mr. Justice Beaumont.

Associate

Dated:    30 March 1995