The Supreme Court has dismissed an appeal by a Revenue-authorised inspector over an order requiring the Revenue to pay two financial institutions’ costs for complying with a tax information order.
The appeal concerned costs only. In a judgment delivered on 29 July 2011, Chief Justice Denham said the High Court judge had been entitled to award the institutions the costs of the original application, their work complying with the orders, and a motion seeking those costs. The Supreme Court did not determine the disputed allegations that the institutions had failed to keep proper records or had facilitated tax evasion.
The original application was made under section 908 of the Taxes Consolidation Act 1997. In June 2002, the High Court ordered the institutions to provide specified information about non-resident deposit accounts, including accounts above set balance thresholds at specified dates. The order was amended several times, and the information was supplied.
The institutions later sought their application and compliance costs. The High Court awarded them those costs, as well as interest on compliance costs from 1 August 2005. The inspector argued on appeal that the costs should be refused or reduced because, he submitted, the institutions’ alleged failures to maintain accurate records had increased the work required. The institutions argued that they should be paid for work carried out at the Revenue’s request and for its benefit.
The Supreme Court described section 908 as an investigative procedure designed to help Revenue obtain information. The section contains no express costs rule, leaving conditions and costs to the High Court judge’s discretion. The Court agreed with the principle that the financial institution’s proper costs of complying with such an order should be borne by the Revenue.
The Court also said that costs should not be used as a penalty for alleged recalcitrant, negligent or otherwise reprehensible conduct. Any penalties for such conduct would have to be pursued in other proceedings. It said an application for costs should be made when the information order is sought, or in accordance with a specific High Court order.
The Court dismissed the appeal and held that the institutions were entitled to their costs. It said it was therefore unnecessary to consider the High Court judge’s alternative assessment of how a broader discretion should be exercised.