Russell Associates Limited v Commissioner of Taxation [2016] FCA 117

FEDERAL COURT OF AUSTRALIA

Russell Associates Limited v Commissioner of Taxation [2016] FCA 117 File number: QUD 737 of 2015

Judge: PAGONE J

Date of judgment: 2 February 2016

Catchwords: COSTS – discontinuance of application – liability to pay costs upon filing notice of discontinuance – whether applicant should pay respondent's costs – basis upon which costs payable PRACTICE AND PROCEDURE – discontinuance of application – leave to discontinue proceeding

Legislation: Federal Court Rules 2011 (Cth) rr 26.12(2), 26.12(7)

Date of hearing: 2 February 2016

Date of publication of reasons: 17 February 2016

Registry: New South Wales

Division: General Division

National Practice Area: Taxation

Category: Catchwords

Number of paragraphs: 5

Counsel for the Applicant: Mr J Hyde Page

Solicitor for the Applicant: Henry Davis York

Counsel for the Respondent: Ms E Whan of Australian Government Solicitor

ORDERS QUD 737 of 2015

BETWEEN: RUSSELL ASSOCIATES LIMITED Applicant

AND: COMMISSIONER OF TAXATION Respondent

JUDGE: PAGONE J DATE OF ORDER: 2 FEBRUARY 2016

THE COURT ORDERS THAT:

1. Leave is granted to the Applicant to discontinue the proceedings pursuant to r 26.12(2)(c). 2. The Applicant is to pay the Respondent's costs of the proceedings as taxed or agreed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(Revised from transcript)

PAGONE J: 1 The applicant in this proceeding has sought leave to discontinue pursuant to r 26.12(2)(c) and I see no reason not to grant the applicant leave to discontinue the proceedings. Parties should be encouraged to dispose of proceedings to maximise the efficient use of time, resources and expenditure and I grant leave to the applicant to discontinue. 2 It is next necessary to consider the question of the payment of costs. Rule 26.12(7) provides that unless the terms of a consent, or an order of the court, provides otherwise, a party who files a notice of discontinuance under sub-rule (2) is liable to pay the costs of each other party to the proceeding in relation to a claim or part of the claim that is discontinued. It is correct, as counsel for the applicant submitted, that the terms of r 26 do not impose a strict requirement, or possibly even a presumption, that upon the discontinuance of a proceeding, the party discontinuing the proceeding shall pay the costs of the other. The rule, however, provides a default basis upon which the cost of a proceeding will be decided where there is a discontinuance of proceedings. The discontinuation of a proceeding brings an end to a proceeding that had otherwise been commenced against a respondent who is likely to have incurred costs by reason of its commencement. All things being equal costs should ordinarily follow the event upon discontinuation of proceedings, although the parties may be heard, as I have done, about whether that should be the case in any given circumstance. 3 In this case I am mindful of the many strong reasons that Mr Hyde Page has raised about why costs should not follow the event unthinkingly, including the strong public policy consideration that litigants ought to be encouraged to discontinue proceedings that should properly be discontinued and that the risk of paying costs ought not to be a disincentive to the proper disposition of cases in an orderly fashion by discontinuance. That said, the fact of discontinuing proceedings will undoubtedly bring about a savings of costs also to the applicant, and that will be a factor in every case to be borne in mind. 4 Mr Hyde Page says with some justification that it is unlikely that the respondent will have incurred substantial costs given the relatively short period between the directions hearing in November and today. On the other hand, the fact that there may not be very many costs incurred on the part of the respondent may be a good reason why the applicant ought not feel overborne by the fact that some costs will have been incurred and ordered to be paid. The fact is that these are judge managed cases. The respondent did have obligations to prepare for the trial that the applicant had commenced against the respondent and the respondent would have been met with a very unsympathetic judicial officer had the respondent, the Commissioner of Taxation, sought to say that between November and today there had been nothing done to advance the preparation of the case. 5 In those circumstances, it seems to me that the appropriate order is that the applicant pay the costs of the respondent, although they should be at the usual party and party basis and not apply on any higher or punitive basis. I certify that the preceding five (5) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Pagone.