FEDERAL COURT OF AUSTRALIA

PTTEP Australasia (Ashmore Cartier) Pty Ltd v Commissioner of Taxation (No 2) [2014] FCAFC 96

THE COURT ORDERS THAT:

1.    The appeal be allowed.

2.    Paragraphs 1 and 3 of the orders made below in proceeding VID294 of 2013 be set aside.

3.    The objection decision dated 13 February 2013 be varied to the following extent:

(a)    by allowing the Appellant’s objection to the inclusion of the amount of $677,551 as assessable petroleum receipts in the year ended 30 June 2006;

(b)    by making such consequential variations to the objection decision as are necessary as a result of the variation set out in sub-paragraph (a) above.

4.    The Respondent pay the Appellant’s costs of this appeal.

5.    The Respondent pay the Appellant’s costs of proceeding VID 294 of 2013 in relation to grounds 1 and 2 of the Appellant’s Notice of Appeal Against Appealable Objection Decision dated 17 April 2013 filed in the said proceeding, including reserved costs as follows:

(i)    from and including 29 August 2013 to 20 September 2013 on a party and party basis;

(ii)    from 21 September 2013 on an indemnity basis;

(iii)    the amount to be agreed between the parties and in the event agreement cannot be reached, taxed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THE COURT ORDERS THAT:

1.    The appeal be allowed.

2.    Paragraphs 1 and 3 of the orders made below in proceeding VID295 of 2013 be set aside.

3.    The objection decision dated 13 February 2013 be varied to the following extent:

(a)    by allowing the Appellant’s objection to the inclusion of the amount of $1,637,979 as assessable petroleum receipts in the year ended 30 June 2007;

(b)    by making such consequential variations to the objection decision as are necessary as a result of the variation set out in sub-paragraph (a) above.

4.    The Respondent pay the Appellant’s costs of this appeal.

5.    The Respondent pay the Appellant’s costs of proceeding VID 295 of 2013 in relation to grounds 1 and 2 of the Appellant’s Notice of Appeal Against Appealable Objection Decision dated 17 April 2013 filed in the said proceeding, including reserved costs as follows:

(i)    from and including 29 August 2013 to 20 September 2013 on a party and party basis;

(ii)    from 21 September 2013 on an indemnity basis;

(iii)    the amount to be agreed between the parties and in the event agreement cannot be reached, taxed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THE COURT ORDERS THAT:

1.    The appeal be allowed.

2.    Paragraphs 1 and 3 of the orders made below in proceeding VID296 of 2013 be set aside.

3.    The objection decision dated 13 February 2013 be varied to the following extent:

(a)    by allowing the Appellant’s objection to the inclusion of the amount of $1,376,688 as assessable petroleum receipts in the year ended 30 June 2008;

(b)    by making such consequential variations to the objection decision as are necessary as a result of the variation set out in sub-paragraph (a) above.

4.    The Respondent pay the Appellant’s costs of this appeal.

5.    The Respondent pay the Appellant’s costs of proceeding VID 296 of 2013 in relation to grounds 1 and 2 of the Appellant’s Notice of Appeal Against Appealable Objection Decision dated 17 April 2013 filed in the said proceeding, including reserved costs as follows:

(i)    from and including 29 August 2013 to 20 September 2013 on a party and party basis;

(ii)    from 21 September 2013 on an indemnity basis;

(iii)    the amount to be agreed between the parties and in the event agreement cannot be reached, taxed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    The Full Court has delivered its reasons for allowing each of the appeals: PTTEP Australasia (Ashmore Cartier) Pty Ltd v Commissioner of Taxation [2014] FCAFC 71. The parties have been unable to agree upon all aspects of the form of order reflecting and resulting from those reasons.

2    Three orders have been substantially agreed between the parties:

    The appeals be allowed.

    Paragraphs 1 and 3 of the orders made by the primary judge in each of the proceedings be set aside.

    The relevant objection decisions dated 13 February 2013 be varied reflecting the agreed position of the parties.

3    We say substantially the above orders have been agreed, because the second order above was not accepted as being appropriate by the taxpayer. However, the orders the taxpayer sought in place of that second order (dealing with the subject matter of costs of the proceedings before the primary judge up to and including 28 August 2013) have the same effect as the second order referred to above. In other words, the orders sought by each party in this appeal recognise that any cost orders are only to be paid from and including 29 August 2013.

4    The real dispute between the parties was whether the Commissioner was required to pay indemnity costs, both in respect of the proceedings before the primary judge and on appeal.

5    The taxpayer submitted that it was entitled to an award of costs in accordance with the Federal Court Rules 2011 (‘the Rules’) r 25.14 for the period 29 August 2013 to 20 September 2013 on a party and party basis, and from 21 September 2013 to the date of the final orders on an indemnity basis, following it making an offer of compromise with respect to each proceeding before the primary judge (‘the Offer’). In particular it was submitted that:

(i)    as the judgment in the appeal was more favourable than the Offer, a presumption in favour of indemnity costs is raised in favour of the taxpayer, and there were no exceptional circumstances to rebut that presumption; and

(ii)    the cost consequences prescribed by r 25.14 of the Rules apply notwithstanding the fact the Offer was made prior to the commencement of the appeals.

6    Alternatively, the taxpayer submitted that if the Court was of the view that the Offer was limited to the proceeding before the primary judge, it was submitted that the taxpayer was entitled to an award of costs in accordance with r 25.14 of the Rules as follows:

(i)    for the period 29 August 2013 to 20 September 2013 on a party and party basis;

(ii)    for the period from 21 September 2013 to 19 November 2013 on an indemnity basis; and

(iii)    from 20 November 2013 to the date of the making of orders in the appeals on a party and party basis.

7    In our view, indemnity costs should be awarded in relation to the proceedings before the primary judge from 21 September 2013, but that the costs of the appeal should be on a party and party basis.

8    The proceedings before the primary judge, whilst dealing with the Petroleum Resource Rent Tax Assessment Act 1987 (Cth), did not require consideration of important points of principle. The main and determinative issue was the construction of the particular contract in question. The dispute in these proceedings was about the payment of particular sums of money to the Commissioner, and the appropriate amendments of the assessments in each proceeding.

9    The Offer was timely, clear and reasonable, and was not responded to by the Commissioner. The taxpayer ultimately obtained a judgment more favourable than the terms of the Offer.

10    The fact that the primary judge accepted the Commissioner’s contentions does not in itself rebut the presumption of indemnity costs under r 25.14 of the Rules. The position should be viewed as if the primary judge had found in favour of the taxpayer on the basis found by the Full Court. It was, in all the circumstances, unreasonable for the Commissioner not to accept the Offer.

11    As to the costs of the appeals, the taxpayer relies solely on the Offer made in respect of each proceeding before the primary judge in support of indemnity costs orders in the appeals. However, the Offer only referred in its terms to compromising “this proceeding” by reference to VID 294 – 296 of 2013. No offer was made in relation to the appeals, being different proceedings to those heard by the primary judge at first instance. If a party wished to make an offer of compromise in an appeal it could do so - an appeal being in itself a “proceeding” as defined in the Federal Court of Australia Act 1976 (Cth). The considerations relevant to the making and acceptance of any offer of compromise would necessarily be different in the case of an appeal than in a matter at first instance.

12    Therefore, we see no basis for ordering costs of the appeals on an indemnity costs.

13    In light of the foregoing reasons, it is ordered as follows:

PTTEP Australasia (Ashmore Cartier) Pty Ltd – VID 1327 of 2013

(1)    The appeal be allowed.

(2)    Paragraphs 1 and 3 of the orders made below in proceeding VID294 of 2013 be set aside.

(3)    The objection decision dated 13 February 2013 be varied to the following extent:

(a)    by allowing the Appellant’s objection to the inclusion of the amount of $677,551 as assessable petroleum receipts in the year ended 30 June 2006;

(b)    by making such consequential variations to the objection decision as are necessary as a result of the variation set out in sub-paragraph (a) above.

(4)    The Respondent pay the Appellant’s costs of this appeal.

(5)    The Respondent pay the Appellant’s costs of proceeding VID 294 of 2013 in relation to grounds 1 and 2 of the Appellant’s Notice of Appeal Against Appealable Objection Decision dated 17 April 2013 filed in the said proceeding, including reserved costs as follows:

(i)    from and including 29 August 2013 to 20 September 2013 on a party and party basis;

(ii)    from 21 September 2013 on an indemnity basis;

(iii)    the amount to be agreed between the parties and in the event agreement cannot be reached, taxed.

PTTEP Australasia (Ashmore Cartier) Pty Ltd – VID 1328 of 2013

(1)    The appeal be allowed.

(2)    Paragraphs 1 and 3 of the orders made below in proceeding VID295 of 2013 be set aside.

(3)    The objection decision dated 13 February 2013 be varied to the following extent:

(a)    by allowing the Appellant’s objection to the inclusion of the amount of $1,637,979 as assessable petroleum receipts in the year ended 30 June 2007;

(b)    by making such consequential variations to the objection decision as are necessary as a result of the variation set out in sub-paragraph (a) above.

(4)    The Respondent pay the Appellant’s costs of this appeal.

(5)    The Respondent pay the Appellant’s costs of proceeding VID 295 of 2013 in relation to grounds 1 and 2 of the Appellant’s Notice of Appeal Against Appealable Objection Decision dated 17 April 2013 filed in the said proceeding, including reserved costs as follows:

(i)    from and including 29 August 2013 to 20 September 2013 on a party and party basis;

(ii)    from 21 September 2013 on an indemnity basis;

(iii)    the amount to be agreed between the parties and in the event agreement cannot be reached, taxed.

PTTEP Australasia (Ashmore Cartier) Pty Ltd – VID 1329 of 2013

(1)    The appeal be allowed.

(2)    Paragraphs 1 and 3 of the orders made below in proceeding VID296 of 2013 be set aside.

(3)    The objection decision dated 13 February 2013 be varied to the following extent:

(a)    by allowing the Appellant’s objection to the inclusion of the amount of $1,376,688 as assessable petroleum receipts in the year ended 30 June 2008;

(b)    by making such consequential variations to the objection decision as are necessary as a result of the variation set out in sub-paragraph (a) above.

(4)    The Respondent pay the Appellant’s costs of this appeal.

(5)    The Respondent pay the Appellant’s costs of proceeding VID 296 of 2013 in relation to grounds 1 and 2 of the Appellant’s Notice of Appeal Against Appealable Objection Decision dated 17 April 2013 filed in the said proceeding, including reserved costs as follows:

(i)    from and including 29 August 2013 to 20 September 2013 on a party and party basis;

(ii)    from 21 September 2013 on an indemnity basis;

(iii)    the amount to be agreed between the parties and in the event agreement cannot be reached, taxed.

Associate:

Dated:    4 August 2014