Taxpayers loses costs application
2007 case note - taxpayer was unsuccessful is seeking indemnity or increased costs from the Commissioner.
The taxpayer was unsuccessful is seeking indemnity or increased costs from the Commissioner.
The taxpayers had commenced judicial review proceedings against the Commissioner of Inland Revenue in respect of the application of the disputes process at Part IVA TAA 1994.
Upon receiving the proceedings the Commissioner conceded the case and agreed to pay the taxpayer's costs of the proceedings. The taxpayers sought to recover a large sum of costs purportedly incurred in the course of the litigation. The Commissioner refused to pay the large sum and offer instead to pay $5,200 based upon the High Court Rules schedule of costs for a moderately difficult case (scale 2B).
The taxpayers filed an interlocutory application seeking indemnity costs (full repayment of all costs associated with the matter) or increased costs for a more difficult case (scale 3C in the schedule to the HCR).
MacKenzie J concluded that there were no grounds for indemnity or increased costs.
His Honour said:
"Category 3 applies to proceedings that because of their complexity or significance require counsel to have special skill and experience ... These proceedings were quite straightforward.... As to banding, because of the Commissioner's prompt acknowledgement of the position, and admission of the claim, the only substantive step undertaken was... [the] commencement of proceedings" (par -)
The Commissioner's reliance on category 2B was appropriate. No award of increased costs was made.
As to indemnity costs (under r 48C(4) HCR) His Honour concluded:
In claiming indemnity costs, counsel for the [taxpayers] refers to the extensive interaction with the Commissioner over the tax affairs of the applicants and associated entities, prior to the proceedings being issued.Those matters are not properly taken into account in determining whether indemnity costs should be awarded. Costs are awarded for steps taken in the proceedings, not for the interactions of the parties which have preceded the issue of proceedings. Tax proceedings are no different from any other proceedings in that respect." (at par ).
His Honour also dismissed as irrelevant reference to a "without prejudice" offer to resolve the taxpayer's tax position as it pre-dated the proceedings (par ).
The taxpayers received costs of $5,200 less the Commissioner's costs due to his success opposing the taxpayer's application ($480)
Judicature Amendment Act 1972; High Court Rules