Rilak & Tsocas (No 2)

This matter concerned an application by the respondents, Rilak and Tsocas, for an order that the applicant, the Commissioner of Taxation, pay their costs of the proceeding. The dispute arose from the Commissioner's objection to a notice of assessment issued by the Australian Taxation Office. The parties had previously sought directions from the Court regarding the conduct of the proceeding, and the Court had made orders on 10 March 2023. The present application concerned the costs associated with those directions.

The primary legal issue before Gill J was whether the respondents were entitled to an order for their costs of the proceeding, notwithstanding that the Commissioner had not been ordered to pay their costs in the earlier directions hearing. The Court was required to consider the principles governing the award of costs in taxation matters, particularly in circumstances where a party seeks costs in relation to interlocutory proceedings that have not yet determined the substantive dispute.

Gill J reasoned that the general rule in taxation matters is that each party bears its own costs unless there are exceptional circumstances. His Honour noted that the earlier directions hearing had not resolved the substantive issues of the proceeding, and there was no indication that the Commissioner had acted unreasonably or vexatiously in relation to the directions sought. Applying the principles of proportionality and the usual practice in taxation appeals, Gill J concluded that there were no exceptional circumstances to justify departing from the general rule.

Consequently, Gill J ordered that each party was to bear its own costs of the application for costs.