Haritos v Commissioner of Taxation (No 2)

The case of Haritos v Commissioner of Taxation (No 2) involved the Haritos family, appellants in the Federal Court of Australia, challenging a decision of the Commissioner of Taxation regarding their tax affairs. The appellants had successfully appealed to the Full Court against the primary judge's decision, and the Commissioner had conceded to pay the appellants' costs of the appeal. The matter before the court was whether, given the circumstances, the appellants should also be ordered to pay the Commissioner's costs of the proceeding before the primary judge.

The court had to consider whether the appellants, having successfully defended the appeal, should be held liable for the Commissioner's costs incurred in the primary proceedings. The legal principle involved was the general rule that costs follow the event, which means that the losing party usually pays the winning party's costs. However, the court also recognised the principle that costs should be proportionate to the nature and complexity of the litigation and the conduct of the parties.

The court concluded that, while the appellants were successful on appeal, the primary judge's decision was not so clearly wrong as to warrant an order for costs. The court found that it would be unjust to require the appellants to pay the Commissioner's costs of the primary proceedings, given the complexity of the case and the appellants' conduct throughout. Therefore, the Full Court ordered that the Commissioner pay the appellants' costs of the appeal, but made no order as to the costs of the proceeding before the primary judge. This decision balanced the need for parties to bear the costs of litigation they initiated or prolonged with the fairness of the outcome in light of the overall proceedings.