When Responsibility Turns on Structure: What RCF IV Reveals About Power, Liability and Cost Control

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Published: 19 November 2025 | Reviewed: 19 November 2025
(3-minute read)

What Happened and Why It Mattered

In Commissioner of Taxation v Resource Capital Fund IV LP [2019] FCAFC 51, the Federal Court confronted a problem that appears often in complex commercial disputes:

when multiple entities sit inside a structure, who actually carries financial responsibility?

Two US-based corporate limited partnerships, RCF IV and RCF V, realised gains from selling shares in Talison Lithium. The Commissioner issued assessments to the partnerships themselves. The partnerships argued they were not the taxable entities; only the individual partners should be assessed.

The Full Court disagreed. Applying Div 5A of the Income Tax Assessment Act 1936, the Court confirmed that a corporate limited partnership is treated as a company for income-tax purposes, making the partnership itself liable to tax.

One sentence captures the core principle:

“Provisions of the income tax law which refer to a company are read as referring also to a corporate limited partnership.” (at [18])

This conclusion rippled through every issue: who can object, who is assessed, and how liability is enforced. The case also reaffirmed that the gain had an Australian source and that the Double Tax Agreement did not prevent assessment here.

Although the judgment concerns tax law, its deeper theme is broader:

when responsibility is not clearly mapped, parties can lose control over risk, timing and financial exposure.

Why It Still Matters Today

Modern commercial disputes often involve layered structures, partnerships, subsidiaries, trusts and cross-border entities. As RCF IV shows, one misunderstanding about where liability actually sits can reshape the entire outcome.

Clients who manage business, tax and investment decisions with precision often expect, and need, the same degree of clarity when litigation arises. Yet in the traditional model, litigation funding can be unclear:

one lawyer is paid for both settlement work and trial preparation,

even though only one path will occur. Costs escalate in the background, and clients may not see the duplication until late in the process.

The lesson from RCF IV is that structure determines power. When financial responsibility is opaque, the party with the least control bears the greatest risk. In litigation, that is typically the client.

How to Avoid the Same Trap -
Cost Alignment as a Structural Safeguard

The most fitting Clean Law safeguard for this case is Cost Alignment (One-Path Funding + Aligned Incentives). It answers the same systemic risk the judgment exposes: uncertainty about who pays, when, and for what.

1. One-Path Funding - preventing duplicated costs

In the traditional model, clients may unknowingly fund both the settlement path and the trial path:

• settlement negotiations

• trial preparation “just in case”

• duplicated strategy planning

• file work that assumes both outcomes

Because the same lawyer handles both roles, clients often pay twice, even though only one path ultimately occurs.

Clean Law’s structure is designed so that clients fund only one path, not both.
Your courtroom lawyer prepares for trial. Clean Law focuses solely on settlement and cost oversight. The roles do not overlap, so the funding does not duplicate.

As our public materials put it:

“Two lawyers often cost less than one - because you fund one path, not both.”

2. Incentive Alignment - making delay disadvantageous, not profitable

RCF IV illustrates the consequences when a structure lets obligations shift unpredictably. In litigation, unpredictability often appears as time: matters drift, preparation expands, and the financial responsibility grows.

Under hourly billing, delay benefits the lawyer and burdens the client.

Clean Law’s model reverses that dynamic.
Our fixed-fee oversight means delays create cost for us, not for the client. A results bonus only arises if early settlement avoids the bulk of trial costs.

This is expressed simply:

“If YOU save, WE win; if your case DRAGS, we lose.”

These two elements, one-path funding and aligned incentives, give clients a degree of leverage that mirrors the clarity missing in the RCF IV structure: control over cost, timing, length, file retention and the strategic direction of their case.

Reflection

The RCF IV decision is ultimately about what happens when liability attaches in ways a party did not expect. For clients facing litigation, the safest approach is a structure that makes responsibilities transparent and incentives visible. Cost alignment is built to provide that clarity, turning what is often the most uncertain part of litigation, funding, into a controlled, accountable framework.

Many clients who manage tax and business affairs carefully look for the same structure in litigation. Clean Law’s one-path model shows exactly how cost alignment works in practice.

If you want to understand how independence is maintained, no referral fees, audited trust accounts, ACNC governance, our safeguards are publicly documented.
See how independence is audited
or chat with us if you prefer a brief confidential consultation instead.

By Nicky Wang
Principal Solicitor
Legal Liaison Ltd (trading as Clean Law)
Prepared in accordance with public-interest governance,
annual Law Society trust-account audits, and ACNC-reported standards.

Disclaimer: This page is intended to provide general information only and is not legal advice. The contents may not reflect the most current legal developments and do not take into account your individual circumstances. You should not act or refrain from acting on the basis of this information without obtaining legal advice tailored to your situation.