Sharpcan and the Purpose Problem in Litigation: Why Objectives Shape Outcomes and Costs
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Published: 18 November 2025 | Reviewed: 18 November 2025
(3-minute read)
Case Summary - What the High Court Decided
Commissioner of Taxation v Sharpcan Pty Ltd [2019] HCA 36 turned on a single question: What was the taxpayer really doing, from a practical and business point of view?
The trustee of the Daylesford Royal Hotel had paid $600,300 for gaming machine entitlements (GMEs). The issue was whether that expenditure was a day-to-day business outgoing (deductible) or the purchase of an enduring asset (not deductible).
The High Court held it was undeniably capital. The Court observed:
“The Trustee’s purpose in paying the purchase price of the GMEs was to acquire, hold and deploy the GMEs as enduring assets of the hotel business … for the purpose of generating income from gaming.”
Purpose, examined through facts rather than labels, determined the tax outcome.
Why It Still Matters -
Purpose Shapes Strategy, Not Just Tax
Although Sharpcan is a tax case, its reasoning echoes a deeper truth in civil litigation:
Parties often lose sight of their true purpose.
In practice, most civil litigants fall into one of two groups:
They want the matter resolved economically, sensibly, and within a predictable timeframe; or
They want to teach the opponent a lesson, prove a principle, or send a message - even at a financial premium.
The problem is that many litigants think they are in category (1) while behaving, or being billed, as if they are in category (2). That drift usually comes not from intention but from structure: once litigation machinery starts, incentives often shift away from early, efficient resolution.
Sharpcan reminds us that purpose must be held steadily, or the consequences will follow a different logic than the one the client intended.
How to Avoid the Same Trap -
Match Objective to Structure
For clients whose genuine purpose is economic, timely resolution, a safer approach is to build a structure where incentives and roles are aligned to that goal.
That means two independent lawyers running the case concurrently, each in one lane, instead of one lawyer charging for both:
The courtroom lawyer handles trial preparation and advocacy.
Clean Law handles settlement, cost alignment, timing, and escrow oversight.
This is not duplication; it is separation. In the usual model, one lawyer prepares for settlement and trial simultaneously, and charges for both tracks, even though only one will be used. Clean Law’s structure prevents that drift by design:
Two lawyers often cost less than one - because you fund one path, not both.
If you save, we win; if your case drags, we lose.
By contrast, if a client chooses category (2), to send a message, pursue a principle, or make the dispute intentionally costly, they need to ensure they have substantially greater financial capacity than their opponent. That is not moral judgment; it is simply the economic architecture of such disputes.
Sharpcan’s focus on objective purpose provides a helpful mirror here: the system will treat your choices according to their substance, not your initial hopes.
Reflection
Clients rarely fail because they chose the wrong purpose. They struggle because the structure around them did not reinforce the purpose they actually had.
When the aim is principled deterrence, resources matter. When the aim is economic resolution, alignment matters.
Sharpcan is a reminder that purpose is not expressed - it is enacted. In litigation, the safest path is the one where the structure itself keeps you anchored.
Purpose-driven litigation only works when the financial structure matches the objective. If you’re curious how one-path funding prevents cost drift, the following explainer walks through it step-by-step.
If you’re working out whether your matter fits purpose (1) or purpose (2), many clients find it helpful to map those options confidentially before committing to any litigation spend.
Book a free confidential consultation
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.
