Deputy Commissioner of Taxation v D’Arro (No 2) [2026] QSC 177

SUPREME COURT OF QUEENSLAND CITATION: Deputy Commissioner of Taxation v D’Arro (No 2) [2026] QSC 177 PARTIES: DEPUTY COMMISSIONER OF TAXATION (plaintiff) v ORAZIO SALVATORE D’ARRO (defendant) FILE NO/S: BS No 13569 of 2023 DIVISION: Trial Division PROCEEDING: Application ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 22 July 2026 DELIVERED AT: Brisbane HEARING DATE: On the papers JUDGE: McCafferty J ORDER: 1. The costs of the application filed on 2 April 2026 will be each party’s costs in the proceeding. CATCHWORDS: PROCEDURE — CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS — COSTS — INTERLOCUTORY PROCEEDINGS — COSTS IN THE CAUSE — where the plaintiff applied for summary judgment — where summary judgment was refused — where the ordinary position is that costs be costs in the proceeding — where the plaintiff seeks its costs of the application on the standard basis — where the plaintiff contends the defendant’s success on the application was predicated on the granting of two indulgences by the court — whether the defendant was granted any such indulgences — whether the plaintiff should be awarded its costs of the application PROCEDURE — CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS — COSTS — INTERLOCUTORY PROCEEDINGS — COSTS IN THE CAUSE — where the plaintiff applied for summary judgment — where summary judgment was refused — where the ordinary position is that costs be costs in the proceeding — where the defendant seeks its costs of the application on the standard basis — whether the plaintiff acted unreasonably in bringing the application — whether the defendant should be awarded its costs of the application -- 1 of 6 -- 2 Taxation Administration Act 1953 (Cth), Sch 1 s 269-35 Uniform Civil Procedure Rules 1999 (Qld), r 296, r 296(2), r 299, r 299(1), r 378, r 439, r 439(3) Blue Dog Group Pty Ltd v Credit Suisse Equities (Australia) Limited [2026] QSC 110, cited Clements v Lillas & Loel Lawyers Pty Ltd [2023] QSC 271, considered Davis v Perry O’Brien Engineering Pty Ltd (No 2) [2016] QSC 285, cited Day v Humphrey & Ors [2018] QCA 321, cited Deputy Commissioner of Taxation v D’Arro [2026] QSC 109, related Folwell v Mayer (No 2) [2020] QSC 211, cited National Australia Bank Limited v Bluanya Pty Ltd & Anor (No 2) [2018] QSC 93, applied Queensland Rail v Amaca (No 2) [2011] QSC 317, cited State of Queensland v Nixon [2002] QSC 296, considered Wei Xin Chen v Australian and New Zealand Banking Group Ltd [2001] QSC 43, cited COUNSEL: K Boomer for the plaintiff R J Anderson KC, with C H Matthews, for the defendant SOLICITORS: ATO Litigation & Legal Services for the plaintiff Robinson Locke Litigation Lawyers for the defendant Introduction [1] On 8 June 2026, I made orders dismissing the plaintiff’s application for summary judgment and inviting further submissions on the issue of costs.1 The parties have subsequently filed written submissions. Each party seeks their costs of the application on the standard basis. Relevant principles [2] While the general rule is that costs ought to follow the event, the awarding of costs is nonetheless a discretionary exercise.2 That the unsuccessful application sought summary judgment makes the discretionary exercise more complex and engages further matters of principle which were not addressed by the parties in their respective submissions. Relevantly, there are no hard and fast rules as to the appropriate costs order when a summary judgment application is declined,3 and any award of costs must be made in consideration of all the relevant circumstances.4 This was explained by Muir J (as his Honour then was) in Queensland v Nixon:5 1 Deputy Commissioner of Taxation v D’Arro [2026] QSC 109 (Reasons). 2 Queensland Rail v Amaca (No 2) [2011] QSC 317 at [6]. 3 Davis v Perry O’Brien Engineering Pty Ltd (No 2) [2016] QSC 285 at [10]. 4 Queensland Rail v Amaca (No 2) [2011] QSC 317 at [7]. 5 State of Queensland v Nixon [2002] QSC 296 at [4], [6]-[7]. -- 2 of 6 -- 3 “[4] There is a ‘general rule that a wholly successful defendant should receive his costs unless good reason is shown to the contrary’. … … [6] The position in relation to summary judgment applications though, as r 299(1) recognises, is somewhat different. Such an application may fail even though that applicant may have good prospects of ultimately succeeding in the action. The party seeking to resist the application may rely on evidence which may not be accepted on the final hearing and the applicant may be obliged to proceed on the basis that the respondent’s version of the facts be accepted for the purposes of the application. [7] Because of considerations such as these, costs of summary judgment applications are something reserved or made the parties’ costs in the cause. It is otherwise where it appears, for example, that the applicant for summary judgment ought reasonably to have appreciated that the application would fail or is applying primarily with a view to securing a forensic advantage.” (citations omitted) [3] Where a summary judgment application has failed, r 299(1) of the UCPR is relevant. It provides: “299 Costs (1) If it appears to the court that a party who applied under this part for judgment was or ought reasonably to have been aware that an opposite party relied on a point that would entitle that party to have the application dismissed, the court may dismiss the application and order costs to be paid within a time specified by the court.” [4] In Clements v Lillas & Loel Lawyers Pty Ltd,6 Freeburn J explained the operation of this rule:7 “[12] The focus of rule 299(1) is the applicant’s awareness, or constructive awareness, that the opposite party had a real prospect of succeeding. In other words, the focus is on whether the applicant acted reasonably in bringing the application. [13] Of course, other factors may be relevant. But the point of rule 299(1) is to provide a costs disincentive for a party to bring an application for summary judgment merely for tactical or forensic reasons or where they knew or ought reasonably to have known that the summary judgment application had bleak prospects. [14] Viewed more broadly, justice often requires that the party who bears the interlocutory costs be determined by the result in the principal 6 Clements v Lillas & Loel Lawyers Pty Ltd [2023] QSC 271. 7 At [12]-[14]. -- 3 of 6 -- 4 litigation. Thus, the usual order where an application for summary judgment is dismissed is that the costs of the application be ‘in the cause’.” (citations omitted) [5] There is some authority for the proposition that if an application for summary judgment was refused solely on the basis of granting a defendant an indulgence, an award of costs in favour of the plaintiff may be appropriate.8 This derives from the principle that where a party applies for an indulgence from the court, they will generally be required to pay the other party’s costs (irrespective of the outcome) unless the other party’s opposition is “wholly unreasonable”.9 In this context costs are commonly awarded against parties who have sought an indulgence in an application to amend a pleading or court document.10 Consideration Background [6] The context of the summary judgment application is set out in detail in the Reasons.11 It was brought in the course of proceedings commenced by the plaintiff seeking the recovery of monetary penalties allegedly incurred by the defendant pursuant to the Taxation Administration Act 1953 (Cth) 12 in his capacity as a company director. [7] The plaintiff’s summary judgment application was advanced on a narrow basis. It was confined to whether the facts pleaded by the defendant were capable of giving rise to the statutory defence under s 269-35 of Schedule 1 to the TAA.13 [8] At the hearing of the application the defendant relied on three factual matters which were said to support an arguable statutory defence.14 The first and third of these matters were unpleaded (the Unpleaded Matters). They were raised for the first time in an affidavit served on the plaintiff at 5.43 pm on 22 April 2026 and filed by leave at the hearing the next day. This is outside the deadline for filing evidence on an application of this kind.15 The affidavit was, however, not objected to. [9] It later became apparent that the affidavit had omitted a key exhibit. After correspondence with my chambers the defendant sought and was granted leave to file a further affidavit containing this exhibit. Again, leave was not objected to. The plaintiff’s position [10] The plaintiff submits that the defendant’s success on the application depended on two indulgences granted to him: (i) assumed leave to amend his defence for the third time and (ii) “the indulgence of relying on the affidavit served on 22 April”. 8 See National Australia Bank Limited v Bluanya Pty Ltd & Anor (No 2) [2018] QSC 93 at [7]-[8]. 9 See Folwell v Mayer (No 2) [2020] QSC 211 at [6]; Day v Humphrey & Ors [2018] QCA 321 at [9]. 10 Blue Dog Group Pty Ltd v Credit Suisse Equities (Australia) Limited [2026] QSC 110 at [23]. 11 See Reasons at [9]-[14]. 12 (“TAA”). 13 Reasons at [34]. 14 Reasons at [27]. 15 UCPR r 296(2). -- 4 of 6 -- 5 [11] As to the first matter, I do not consider the Reasons are accurately characterised as granting the defendant an indulgence of assumed leave to further amend his defence. It may be accepted that the affidavit contains factual matters—the Unpleaded Matters —that should be pleaded in the defence but are not.16 However, their omission from the current version of the defence does not preclude the Court relying upon such factual matters in resisting an application for summary judgment.17 [12] The prospect that a defendant may improve their position by proper amendment to the pleadings is a basis upon which summary judgment may be refused.18 Undoubtedly, a court refusing summary judgment on the basis of matters which are not in a pleaded case has power to order an amendment to a pleading. But there is no requirement that this be done. Senior Counsel for the defendant identified that in the event the Court was influenced by matters which were not pleaded then it would be appropriate that such matters are pleaded so that they are appropriately relied upon. In circumstances where the defendant has not put before the Court a proposed amended pleading it is not appropriate to make orders that the defendant amend his defence. In any event, the defendant does not require leave to amend. 19 Whether he decides to do so now, in light of the Reasons, is a matter for him. [13] As to the second matter, the plaintiff contends that the defendant was afforded the indulgence of relying on the late affidavit. It is difficult to see the granting of leave to a party to rely upon late-served material in defending an application for summary judgment as a comparable kind of “indulgence” to those commonly accepted as justifying an adverse costs order. But there is also a further difficulty with this argument, as there was simply no opposition to the defendant being granted that indulgence. The plaintiff submits there was insufficient time between receipt of the affidavit and the hearing of the application for it to digest and consider the Unpleaded Matters and decide whether the application should proceed. That may certainly have been the case. But despite being entitled to object to its filing at the hearing (or at least seek an adjournment to further consider its position), the plaintiff did not do so. [14] In any event, I do not consider that either or both of these matters formed the sole basis upon which summary judgment was refused. One of the three factual matters was already pleaded in the defence,20 and the late-served affidavit was but one of several affidavits relied upon in resisting the application.21 In the circumstances, I am not satisfied it is appropriate to make an order for costs in the plaintiff’s favour. The defendant’s position [15] The defendant seeks an order that the plaintiff pay his costs of the application on the standard basis. This submission was expressed on the basis that there is no reason to depart from the general rule that costs follow the event. For the reasons outlined above, that submission is of limited utility to unsuccessful applications for summary judgment. 16 Reasons at [28]. 17 See, for example, Shaw v Deputy Commissioner of Taxation [2016] QCA 275 at [19] and [43]. 18 Wei Xin Chen v Australian and New Zealand Banking Group Ltd [2001] QSC 43 at [1]; National Australia Bank Limited v Bluanya Pty Ltd (No 2) [2018] QSC 49 at [20]. 19 UCPR r 378. 20 Reasons at [27]-[28]. 21 Reasons at [26], [53]. -- 5 of 6 -- 6 [16] Where a plaintiff’s application for summary judgment has been refused, the Court may exercise its discretion to order costs in the defendant’s favour, including in the circumstances contemplated by r 299(1) or where it considers the plaintiff applied primarily with a view to securing a forensic advantage.22 The primary consideration involved is whether the plaintiff acted reasonably in bringing the application.23 [17] I accept that the lateness of service of the affidavit on the plaintiff (including a further portion of the affidavit not served until after the hearing) likely gave the plaintiff insufficient time to consider the material and its impact on the application’s prospects of success. There is however nothing to suggest that the plaintiff acted unreasonably in bringing the application or persisting with it in light of the affidavit. [18] As was outlined in the Reasons, there may well be issues with the defendant’s evidence that inform the operation of his defence and whether it has been made out.24 The strength and reliability of that evidence will be tested at trial. In these circumstances, it is appropriate that the costs of this application be borne by the party who is ultimately unsuccessful at that time. I do not therefore consider it appropriate to depart from the usual position that each party’s costs be their costs in the proceeding. [19] Accordingly, I order that the costs of the application will be each parties’ costs in the proceeding. 22 State of Queensland v Nixon [2002] QSC 296 at [6]-[7]; Clements v Lillas & Loel Lawyers Pty Ltd [2023] QSC 271 at [12]-[14]. 23 Clements v Lillas & Loel Lawyers Pty Ltd [2023] QSC 271 at [12]. 24 Reasons at [50]. -- 6 of 6 --