The ATO has issued two Decision Impact Statements in relation to this litigation.
First, the ATO has published a Decision Impact Statement in relation to the Federal Court decision in Clark v FCT  FCA 415. The case concerned offers of compromise under Order 23 of the Federal Court Rules and Calderbank offers.
Under Order 23, r 11(4) of the Federal Court Rules (FCR), there is a presumptive entitlement to indemnity costs (as opposed to lower party party costs) where a party offers to settle for a sum which is less than he or she eventually achieves at trial. A Calderbank offer is an offer made to settle the dispute which is without prejudice save as to costs.
The taxpayers made a Calderbank offer on 25 November 2008 which the Commissioner rejected. The Court held that the Commissioner did not act unreasonably in rejecting the Calderbank offer.
Then, on 9 December 2008, the taxpayers made offers of compromise pursuant to Order 23 of the FCR offering to settle the proceedings on the basis that the Commissioner would allow their objections in full, each party would bear their own costs of the proceedings and the taxpayers would forego the benefit of any existing costs orders. The Commissioner rejected the offers.
On 30 November 2009, the Court (Greenwood J) delivered judgment in relation to the taxation appeals in favour of the taxpayers.
However, in relation to costs, the Commissioner argued that there were exceptional circumstances to negative an indemnity costs order against him. One such ground was that the substantive matters in question in the proceeding raised a question of significant importance and that it was a matter of public interest that the issue be resolved. In relation to this consideration, the Court held that the fact that a proceeding raises a significant and unresolved question of law that is of public interest is not of itself an exceptional circumstance.
The Court therefore ordered, inter alia, that the Commissioner pay the costs of the taxpayers of and incidental to the proceeding from 10 December 2008 (being the day after the offer) on an indemnity basis.
Notwithstanding the finding of the Court on the question of public interest, and no doubt as a result of what the Full Federal Court said on appeal (see below), the Decision Impact Statement states:
"The Commissioner maintains that each offer of compromise made under Order 23 of the FCR or Rule 25 of the of the Federal Court Rules 2011, as the case may be, must be dealt with on its own merits and having regard to the particular facts and circumstances of each offer. For example, the question of whether a matter raises issues of public interest and importance may be a relevant consideration."
The Commissioner subsequently appealed to the Full Federal Court against the decision of Greenwood J. The ATO has also issued a Decision Impact Statement in relation to the Full Federal Court's decision in relation to the appeal - FCT v Clark (No 2)  FCAFC 140.
On 12 February 2010, prior to the hearing of the appeal, the taxpayers made offers of compromise pursuant to Order 23 of the FCR. The offers were to settle the appeal proceedings on the basis that each taxpayer would pay the Commissioner $5,000 within 7 days of acceptance of the offers, that the appeals would be dismissed and that the taxpayers would pay the Commissioner's costs of the appeal. The Commissioner also rejected this offer.
The Full Federal Court also found for the taxpayers and ordered the Commissioner to pay indemnity costs from 11am on 13 February 2010.
Once again, the Commissioner argued that "where disputes as to matters of principle have application beyond the interests of the individual taxpayer, it is incumbent upon the Commissioner to seek clarity in the future administration of the Act; and where an appeal involves matters important to the general administration of an Act, commercial settlement may be contrary to the Commissioner’s proper exercise of his general power of administration".
Without specifically adverting to these grounds, the Full Federal Court said:
"[The Commissioner's] conduct is to be judged by reference to all relevant circumstances including, in an appropriate case, his policies and procedures. We accept that in an appropriate case, the public interest may be better served by having the Court decide a case which has wider ramifications, rather than settling it upon the basis of purely commercial considerations. Despite the Commissioner’s frequent references to this proposition, it seems not to have applied in the present case."
The Decision Impact Statement in relation to the appeal states:
"The Commissioner notes the Court's finding that the Commissioner's conduct as a litigant is to be judged by reference to all relevant circumstances, including, in an appropriate case, his policies and procedures. The Commissioner maintains that each offer of compromise made under Order 23 of the FCR (or Rule 25 of the Federal Court Rules 2011, as the case may be) must be dealt with on its own merits and having regard to the particular facts and circumstances of each offer. For example, the question of whether a matter raises issues of public interest and importance may be a relevant consideration."