The High Court ordered the Revenue Commissioners to pay the second defendant 60% of her costs after proceedings against her became moot. The court did not decide whether she owed tax or rule on the underlying family law dispute.
The case began with a claim based on a capital gains tax return filed by the first defendant after shares were sold in August 2016. He said the tax should be shared with his former wife, the second defendant, from funds connected with their family law settlement. Revenue initially pursued the first defendant alone, and told him it could not sue third parties over a liability arising from his return.
At the first defendant’s request, the Master of the High Court joined the second defendant to the case in December 2017, despite Revenue’s opposition. She applied to have the joinder order set aside and, alternatively, to strike out the proceedings against her. She argued that she had not filed the return and had no assessment or liability forming the basis of Revenue’s claim. She also raised concerns about references to family law proceedings that she said were protected by the in camera rule. The court made no ruling on that issue.
While her application was pending, Revenue issued separate assessments to both defendants on 1 March 2019. Revenue accepted that the original assessment underpinning the case was no longer operative, so the proceedings would have to end. It argued that new information and mistakes by the parties had prompted the change, and that no costs order should be made.
Justice MacGrath considered whether there was an “event” that would make costs follow the event, or whether the case had become moot because of a unilateral decision or outside factors. He found Revenue had not established that external factors caused the proceedings to become moot. The evidence did not satisfy him that new facts emerged after the second defendant’s solicitors wrote on 26 February 2018, or that Revenue lacked earlier knowledge of the legal basis for such proceedings.
The judge concluded that the second defendant was entitled to costs. He reduced recovery to 60%, taking account of the unusual position Revenue faced after the Master’s order, its opposition to the joinder and other circumstances, including the second defendant’s stated intention to contest the debt. The ruling addressed costs only; it did not determine the validity or amount of either new assessment or the second defendant’s tax liability.