FCT v Normandy Finance and Investments Asia Pty Ltd (No 2) – Full Court: Commissioner awarded only partial costs for “inefficient” running of appeals
Following the decision of the Full Federal Court in FCT v Normandy Finance and Investments Asia Pty Ltd & Ors [2016] FCAFC 180, in favour of the Commissioner, the Full Court has now ordered the taxpayers to pay 80% of the Commissioner’s costs in the matter. (In that case, the majority found that it was not open to the judge at first instance to find that payments of around $4m made from a foreign company to its Australian subsidiary and other related companies were genuine loans (and not “shams”) essentially because it was not appropriate to find that the taxpayers had discharged the onus of proving that the assessments were excessive in circumstances where the taxpayers had made inconsistent or “alternative” arguments about the nature of the payments.)
In awarding the Commissioner only 80% of his costs of the appeal, the Full Court stated that despite the Commissioner having effectively succeeded on most of the important issues, the taxpayers should be ordered to pay only 80% of the Commissioner’s costs essentially “because the Commissioner’s conduct of the appeals, in common with the conduct of the hearing below, imposed a substantial burden on the Court (and thus, inevitably, the taxpayers) which was unnecessary”. It also stated that “[H]ad the Commissioner focused on the real issues in the appeals, the appeals would not have extended over 3 days and would not have placed such a burden on the Court or the taxpayers”.
In these circumstances, the Court concluded that it could see no reason why the Commissioner should obtain an order for the whole of his costs in circumstances where, by his own lack of focus and inefficiency, the Commissioner expended and incurred more costs than the appeals reasonably warranted.
(FCT v Normandy Finance and Investments Asia Pty Ltd (No 2) [2017] FCAFC 46, Full Federal Court, Logan, Jagot and Davies JJ, 21 March 2017.)
[LTN 56, 24/3/17]