In the matter of Border Express Pty Ltd (No 2)

[2024] VSC 41

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL COURT

CORPORATIONS LIST

S ECI 2022 04387

IN THE MATTER OF BORDER EXPRESS PTY LTD (ACN 000 533 880)

BORDER EXPRESS PTY LTD (ACN 000 533 880)	Plaintiff
and
MAXWELL JAMES LUFF & ORS (according to the attached Schedule)	Defendants
and
COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA	Intervener

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JUDGE:	Attiwill J
WHERE HELD:	Melbourne
DATE OF HEARING:	9 February 2024
DATE OF RULING:	21 February 2024
CASE MAY BE CITED AS:	In the matter of Border Express Pty Ltd (No 2)
MEDIUM NEUTRAL CITATION:	[2024] VSC 41

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COSTS – Plaintiff’s proceeding was dismissed – Appropriate order for costs where there was an intervener who also took on the role as a contradictor on all issues – Where intervention was also necessary to protect the intervener’s interests – Plaintiff to pay intervener’s costs on a standard basis - Supreme Court Act 1986 (Vic) s 24 – Mandalinic v Stone (Liquidator) (No 2) [2023] FCAFC 176, City of Burnside v Attorney-General of South Australia (1994) 63 SASR 65, and Motor Trades Association of Australia Superannuation Fund Pty Ltd v Rickus [2007] FCA 1878 considered.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff and Defendants	Mr C Tsang	HWL Ebsworth Lawyers
For the Intervener	Mr S A Linden	Hall & Wilcox

HIS HONOUR:

Introduction

1. On 19 December 2023, I delivered judgment in this proceeding. I dismissed the proceeding subject to the determination of the issue of costs. On 1 December 2022, the Commissioner of Taxation of the Commonwealth of Australia was granted leave to intervene in these proceedings and in that role to take any step authorised or permitted by the Supreme Court (General Civil Procedure) Rules 2015 (Vic) to be taken in the proceeding by a party to the proceeding.

1. The Commissioner seeks costs of the proceeding on a standard basis. The plaintiff submitted that there should be no order as to costs and each party should bear their costs, alternatively, that it should pay 50% of the Commissioner’s costs on a standard basis as the intervention was not necessary but the Commissioner did play a role as a contradictor. The Commissioner and plaintiff relied upon written submissions and made oral submissions at the hearing of the issue of costs. In summary, the plaintiff submitted:

(a)   the general rule is that a costs order will not ordinarily be made in favour of a successful intervener even if their intervention proved to be of assistance. The Commissioner’s intervention was not justified because the intervention was not necessary to protect his interests;

(b)  the Commissioner’s participation in the proceeding caused the plaintiff to incur greater costs than it would have otherwise incurred;

(c)   while the Commissioner was ultimately successful in the proceeding, the Commissioner’s success and assistance to the Court should not be overstated.

Applicable law

1. Pursuant to s 24 of the Supreme Court Act 1986 (Vic), the costs of and incidental to the proceeding are in the discretion of the Court, and the Court has full power to determine by whom and to what extent the costs are to be paid. The discretion must be exercised judicially. The applicable principles concerning the costs of an intervener were not in dispute and may be relevantly summarised as follows:

(a)   an intervener has the rights, duties and liabilities of a party to a proceeding, but an intervener’s interests are in no way the same as those of other parties to a proceeding;[1]

[1]See Motor Trades Association of Australia Superannuation Fund Pty Ltd v Rickus [2007] FCA 1878 [34] (‘Motor Trades’) and Johnston v Cameron [2002] FCAFC 301 [18]–[19] (‘Johnston’), citing Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 [53].

(b)  as a general rule an intervener neither pays nor receives costs;[2]

[2]Mandalinic v Stone (Liquidator) (No 2) [2023] FCAFC 176 [4] (‘Mandalinic’).

(c)   there is no “usual practice” of ordering costs in an intervener’s favour when the outcome of a proceeding accords with submissions advanced by the intervener.[3] This is in contrast to the position of a party to a proceeding, such as a plaintiff or a defendant;

[3]Johnston (n 1) [18]–[19].

(d)  an intervener cannot expect, as a matter of course, that an unsuccessful party to the proceeding in which the intervener has intruded should bear the extra burden of the intervener’s costs even if the intervention was well intentioned and proved to be of assistance to the court;[4]

[4]City of Burnside v Attorney-General of South Australia (1994) 63 SASR 65, 67 (‘Burnside’).

(e)   private litigants should not have to pay additional sums in legal fees for the general good of the administration of justice and in the elucidation of a statute of particular concern to an intervenor;[5]

[5]Tonto Home Loans Australia Pty Ltd v Tavares (No 2) [2012] NSWCA 129 [7].

(f)    there are instances in which courts have made a costs order in favour of an intervener where the intervention was necessary to protect the interests of the intervener.[6] In City of Burnside v Attorney-General of South Australia, Debelle J observed that “generally speaking, a successful intervener will recover costs only if the intervention was necessary to protect his interest”;[7]

(g)  there are instances in which courts have made an order for costs in favour of an intervener in circumstances in which the intervener had a “special interest”[8] or a “legitimate interest”[9] or an “interest” in the proceeding[10] where those interests were different to a parties’ interests;[11] and

(h)  an order for costs either in favour or against an intervener must also take into account the role the intervener assumed and the intervener’s participation in the proceeding.[12]

[6]Mandalinic (n 2) [4]–[5].

[7]Burnside (n 4) 67.

[8]Xat Ky v Australvic Property Management Pty Ltd (No 2) [2007] FCA 1785 [22].

[9]Motor Trades (n 1) [34]–[35], [38].

[10]Queensland North Australia Pty Ltd v Takeovers Panel (2014) 100 ACSR 358 [235].

[11]Motor Trades (n 1) [38].

[12]Ibid [34].

Analysis

1. I have decided to exercise my discretion and order the plaintiff to pay the Commissioner’s costs of the proceeding on a standard basis. This is just and appropriate in the circumstances.

1. First, the Commissioner played a significant and important role in the proceeding. The Commissioner was an intervener and was the only contradictor. The plaintiff did not oppose leave being granted to the Commissioner to intervene.[13] The plaintiff also did not object to the intervener’s role as a contradictor on all issues. The plaintiff accepted that the Commissioner acted as a contradictor in the proceeding.[14] The Commissioner played a significant and important role as a contradictor without objection. I accept the Commissioner’s submissions at paragraph 10:[15]

In the absence of the Commissioner’s intervention, there would have been no contradictor to the Plaintiff’s application and the Court would only have had the benefit of submissions from the Luff family interests.

[13]Mandalinic (n 2) [4].

[14]See plaintiff’s submissions filed 1 February 2024 [12].

[15]Commissioner’s submissions filed 1 February 2024 [10].

1. I accept that the plaintiff was fulsome and comprehensive in presenting its application before the Court and that the plaintiff would have fulfilled its duties and obligations in the absence of a contradictor. The presence of a contradictor, however, was of significant assistance to the Court given the complex issues of law involved, including concerning common mistake at common law and common mistake in equity.

1. I accept that, generally speaking, a successful intervener will recover costs only if the intervention was necessary to protect the intervener’s interest. In this case, however, it is relevant that the Commissioner played a significant and important role in the proceeding as the only contradictor and a contradictor on all issues. This is a significant factor in favour of the Commissioner’s application for costs.

1. Secondly, the Commissioner’s submissions were presented efficiently and were of considerable assistance to the Court. I accept the plaintiff’s submission that the Commissioner’s participation in the proceeding caused it to incur greater costs than it would have otherwise incurred. For example, the plaintiff filed reply submissions and responded to oral submissions of the Commissioner at the trial. These costs, however, were not wasted nor did the Commissioner engage in any conduct that was inappropriate or productive of wasted costs. The proceeding was conducted efficiently by all parties.

1. Thirdly, the Court substantially accepted the Commissioner’s submissions. The plaintiff’s application was unsuccessful and the proceeding was dismissed. The plaintiff submitted that the Commissioner’s success in the proceeding and assistance to the Court should not be overstated. I accept the plaintiff’s submissions that some of the plaintiff’s legal submissions were accepted by the Court, that the plaintiff’s evidence was almost entirely accepted by the Court and the Commissioner’s objections to evidence were rejected. The Court did not allow the Commissioner’s objections to parts of the plaintiff’s evidence but did substantially accept the Commissioner’s submissions and dismissed the proceeding. The Commissioner’s objections to evidence were confined and did not take up much time in submissions.

1. Fourthly, the Commissioner had an interest in the outcome of the proceeding. The plaintiff accepted that the Commissioner had an interest in the outcome of the proceeding. The plaintiff submitted:

Insofar as the Intervener had an interest in the proceeding, that interest was limited to its outcome – namely, whether the Court ultimately determined the issue of shares was void ab initio or should be rescinded ab initio, and therefore whether the holders of those shares would be subject to Capital Gains Tax (CGT). Put simply, the Intervener’s interest was narrow and limited to ascertaining whether Max, Lynn and MJ Luff Pty may be subject to CGT liability.

1. The determination of the outcome depended upon the issues raised in the proceeding. The potential future CGT liability was significant.[16]

   [16]Re Border Express Pty Ltd [2023] VSC 769 [57].

1. Fifthly, the plaintiff, for the first time in this proceeding, submitted on this costs application, that the Commissioner’s intervention was not necessary to protect the Commissioner’s interest. The plaintiff had otherwise not previously sought to impugn the intervention. In my view, the Commissioner’s intervention was necessary to protect the Commissioner’s interests. There was a risk that the Commissioner’s interest in the outcome of the proceeding may have been affected if the Commissioner did not intervene. The Commissioner submitted that  Sifris J in HWG Holdings Pty Ltd v Fairlie Court Pty Ltd[17] observed that the lack of involvement of the Commissioner in that case, despite being on notice, had some importance in the Court’s determination of the proceeding.[18] The plaintiff, prior to the intervention, had informed the Court that it intended to rely upon this decision.[19] I accept that the present case may be distinguished from cases in which courts have made an award of costs in favour of an intervener in which the intervener addressed the construction or application of a statute in which the intervener had a particular interest. This proceeding did not involve clarifying the construction of any statute administered by the Commissioner or resolving any complex questions in taxation law.

   [17]HWG Holdings Pty Ltd v Fairlie Court Pty Ltd [2015] VSC 519.

   [18]Ibid [17].

   [19]Transcript of Proceedings, In the Matter of Border Express Pty Ltd (Supreme Court of Victoria, S ECI 2022 04387, Attiwill J, 15 November 2022) 7.11-7.17 (Mr Collinson KC).

1. Finally, I do not accept the plaintiff’s alternate submission that if the Court was minded to order the plaintiff to pay the Commissioner’s costs the Court should do so on the basis that the plaintiff pay 50% of the Commissioner’s costs. I do not consider this to be just or appropriate for the significant and important role the Commissioner played in this proceeding.

1. In the event that I am incorrect, and the Commissioner’s intervention was not necessary to protect the Commissioner’s interests, I would still have ordered the plaintiff to pay the Commissioner’s costs of the proceeding on a standard basis given the matters I have addressed in this ruling at paragraphs 1-9 and 13 above. In particular, I would have ordered the plaintiff to pay the Commissioner’s costs of the proceeding on a standard basis given that the Commissioner played a significant and important role in the proceeding as the only contradictor and a contradictor on all issues.

1. As a result, I will order:

The plaintiff pay the costs of the proceeding of the Commissioner of Taxation of the Commonwealth of Australia on a standard basis.

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SCHEDULE OF PARTIES

BORDER EXPRESS PTY LTD (ACN 000 533 880)	Plaintiff
And
MAXWELL JAMES LUFF	First Defendant
LYNN ELIZABETH LUFF	Second Defendant
MJ LUFF PTY LTD (ACN 001 001 850)	Third Defendant
And
COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA	Intervener