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Court of Appeal of New Zealand |
Last Updated: 3 December 2018
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BETWEEN |
GARRY ALBERT MUIR Appellant |
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COMMISSIONER OF INLAND REVENUE Respondent |
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CA16/2018
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BETWEEN |
GARRY ALBERT MUIR Appellant |
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COMMISSIONER OF INLAND REVENUE Respondent |
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Hearing: |
31 May 2018 (further submissions received 24 September 2018) |
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Court: |
Winkelmann, Clifford and Williams JJ |
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Counsel: |
Appellant in person, R B Hucker and J E Tomlinson for Appellant S J Leslie and G H H Gordon for Respondent |
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Judgment: |
26 October 2018 at 11.15 am |
JUDGMENT OF THE COURT
____________________________________________________________________
REASONS OF THE COURT
(Given by Clifford J)
Introduction
[1] In 2015 this Court upheld a decision of the High Court striking out, as an abuse of process, challenges brought by the appellant, Dr Muir, to the respondent’s, the Commissioner of Inland Revenue’s, assessments of him for the tax years 1997 to 2010.[1] Dr Muir subsequently purported to file amended claims in those challenge proceedings.
[2] In separate decisions, Toogood J[2] and Jagose J[3] in effect found those purported claims also to be an abuse of process.
[3] Dr Muir now appeals those decisions. He says he is entitled to replead his challenge proceedings as the repleaded challenges involve facts the courts have not previously considered.
The recent Supreme Court decision
[4] We heard Dr Muir’s appeal on 31 May 2018. At that time, the Supreme Court was considering an application by Dr Muir for leave to appeal. In June 2017 Associate Judge Bell granted the Commissioner summary judgment against Dr Muir for $8,179,830.94 — being Dr Muir’s unpaid assessed taxes, interest and penalties for the years 1997 to 2010.[4] Dr Muir appealed to this Court. That appeal was dismissed.[5] Dr Muir’s leave application was to bring a second appeal against that summary judgment decision.
[5] Shortly before we were to release our decision in these appeals, the Supreme Court released its decision declining Dr Muir’s application for leave.[6]
[6] The conclusion we had reached at that point was that, as this Court had held in its 2015 strike-out decision, the challenge proceedings in which Dr Muir purported to file amended claims had been struck out.[7] Accordingly, as the High Court had found, Dr Muir could not file amended claims in those proceedings. We would, we had decided, therefore have dismissed these appeals.
[7] In its leave decision, the Supreme Court found that Associate Judge Bell’s decision created a res judicata, and thus controlled the results in the challenge proceedings and hence these appeals. In doing so, the Supreme Court reasoned further:[8]
[24] The grant of summary judgment turns on the conclusion that the challenge proceedings have been finally determined, which in turn is premised on the finding that the judgments referred to in [4]–[5] above resulted in the challenge proceedings, and not just the pleadings, being struck out. Contrary to the way in which the applicant’s submissions address the point, this conclusion [that the challenge proceedings have been struck out] does not rest on principles of res judicata or estoppel. Instead it rests on the simple proposition that the striking out of a proceeding means that that proceeding has been determined and cannot be revived by the filing of a further statement of claim.
[8] That “simple proposition” reflected the conclusion we had by then reached.
Further submissions
[9] We nevertheless gave Dr Muir and the Commissioner the opportunity to make submissions on the effect of the Supreme Court’s leave decision as regards the disposition of these appeals. The Commissioner’s submission was that the decision was dispositive, in her favour, of these appeals. Dr Muir maintained the arguments he had made before us, in effect challenging the Supreme Court’s reasoning in that leave decision and arguing that, in any event, that decision did not bind this Court.
[10] In these circumstances, we can express our reasons succinctly, and without recording as much of the background to these appeals as we would otherwise have done.
Background
The initial challenge proceedings
[11] We adopt the Supreme Court’s summary of the fate of Dr Muir’s initial challenge proceedings:[9]
[4] The challenges against the 1998–2006 assessments were struck out by the [Taxation Review Authority] on 1 February 2011.[10] On 22 April 2015, Faire J decided an appeal against the [Taxation Review Authority’s] decision of 1 February 2011 at the same time as he dealt with an application by the Commissioner to strike out challenge proceedings by the applicant for the 1997 and 2007–2010 assessments.[11] Faire J struck out the challenges to the 1997 and 2007–2010 assessments and dismissed the applicant’s appeal from the [Taxation Review Authority’s] 2011 decision. In doing so, he concluded that further prosecution of the challenge proceedings would be an abuse of process given the decision of this Court in Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue.[12] An appeal against his judgment was dismissed by the Court of Appeal on 8 December 2015.[13]
[5] On 20 July 2016, the applicant’s application for leave to appeal to this Court was dismissed in relation to the 1997 and 1998 tax years but allowed in relation to the 1999–2010 tax years.[14] This grant of leave was, however, revoked on 26 August 2016.[15] The Court noted, “[t]he consequence is that the decision of the Court of Appeal will stand, and the appellant’s proceedings will remain struck out in their entirety”.[16]
The further challenge proceedings
[12] As he had indicated he would, Dr Muir then endeavoured to re-engage with his challenges in each of the Taxation Review Authority (TRA) and the High Court.
[13] First, in August 2016 Dr Muir attempted to file an amended statement of claim in the TRA relating to years 1998 to 2006. In his amended notice of claim Dr Muir first sought an order that for the relevant years no valid assessments and/or assessments capable of being confirmed by the TRA had been made. To the extent he did not succeed on that ground, Dr Muir sought orders allowing deductions for, as best as we can tell, expenses incurred in connection with the unwinding of the Trinity scheme, including a payment “to Trinity of money’s worth of $5,200,000” and a declaration that the penalties imposed in the years 1998 to 2003 were not payable by him.
[14] Secondly, and at the same time, Dr Muir filed an amended statement of claim in the High Court relating to the 1997 and 2007 to 2010 years. For the 1997 year, he claimed that the payment of $5,200,000 “monies worth” to Trinity was a loss the Commissioner was required to take into account when assessing his 1997 tax year. For the years 2007 to 2010 he was entitled to deductions for professional fees incurred on revenue account.
The challenged High Court decisions
Jagose J
[15] The TRA declined to accept Dr Muir’s August 2016 amended notice of claim. Judge Sinclair, in a minute of 21 September 2016 recording that decision, reasoned:
[7] It is clear from the above review of these proceedings that the decision of Judge Barber has not been overturned and therefore the challenge proceedings remain struck out.
[8] A strike out application, if successful, has the effect of determining the whole proceeding. Consequently, there are no challenge proceedings extant before [the TRA] and the [TRA] therefore has no jurisdiction to hear any application in relation to these proceedings.
[9] It also follows that there is no ability for the disputant to file any further amended notice of claim in these proceedings and the second amended notice of claim is not accepted for filing accordingly.
[16] Dr Muir sought judicial review of that decision in the High Court. The Commissioner responded, protesting the Court’s jurisdiction and applying for the dismissal of that claim. In the alternative, the Commissioner applied for the proceeding to be dismissed as an abuse of process.
[17] In his November 2017 decision Jagose J addressed those applications in the following terms:[17]
[14] This Court earlier held of Dr Muir’s ‘amended’ pleadings, respectively in the [TRA] and this Court, “Once a proceeding is at an end it is not possible to file fresh pleadings in the same proceeding to resume the litigation”, and:
... filing a document which purported, misleadingly, to amend a pleading in a proceeding which had been brought to an end by an order of the Court constitutes a collateral attack on the decisions of this Court, the Court of Appeal and the Supreme Court. It was an abuse of the Court’s processes. In Lai v Chamberlains, the Supreme Court referred to the Court’s independent duty to prevent abuse, noting that principles of finality underlie the exercise of the broad inherent procedural power to strike proceedings out where further litigation amounts to an abuse of process.
[15] As the [TRA] proceeding is at an end, there is nothing in which any ‘amended’ pleading may be filed. It follows the [TRA] exercises no power in refusing to accept such a pleading for filing, and I am satisfied this Court has no jurisdiction to review such a refusal. In accordance with HCR 5.49(6)(a), I therefore dismiss the proceeding.
[16] Given that decision, I do not need to decide, and therefore dismiss, the Commissioner’s alternative application. Had I been required to decide the application, I would have granted it, essentially for the reasons set out ... above.
Toogood J
[18] The High Court Registrar initially accepted Dr Muir’s August 2016 amended statement of claim. The Commissioner challenged that decision, by way of memorandum. Dr Muir filed further memoranda. Faire J declined to deal with the matter on the basis of those written memoranda. In a minute of 13 September 2016, he said:
[3] It appears that the Registrar, or Registrar’s Deputy, had accepted the document for filing. No application to review that decision pursuant to r 2.11 has been made. On that basis, any challenge to the proceeding would appear to have to be made either in reliance on Part 12 Summary Judgment or Part 15. Should the defendant wish to take one or other action accordingly, the appropriate application should be filed. The Case Officer should arrange for it to be accorded nominal date or hearing when appropriate directions can be given.
[19] The Commissioner subsequently filed a interlocutory application to review the Registrar’s acceptance of Dr Muir’s amended statement of claim. Having recorded the procedural background, in his August 2017 decision Toogood J noted:[18]
[5] The primary issue arising from the submissions of the parties is whether the proceeding remains on foot. [Counsel] agree that everything flows from a determination of that point.
[20] The Judge was satisfied that the proceeding had been brought to an end when struck out by Faire J on 22 April 2015.[19] The subsequent decision of this Court, and the comments made by the Supreme Court when revoking leave, confirmed that. Nor, Toogood J reasoned, could Dr Muir draw any comfort from the distinction the High Court Rules 2016 draw between staying all or part of a proceeding and dismissing it.
[21] Toogood J noted:[20]
Notwithstanding that Faire J referred to striking out rather than dismissing the proceeding, there is no doubt he intended to bring to an end a proceeding which he had held was an abuse of the Court’s process. The judgments of the appellate courts confirm unequivocally that the proceeding itself is at an end.
This appeal
[22] Dr Muir’s argument in these appeals relies (i) on the existence of the distinction reflected in the High Court Rules between striking out pleadings and staying or dismissing proceedings and (ii) on those particular features of tax disputes which flow from the well-established principle that it is the Income Tax Act 2007 that imposes liability on a taxpayer, not the decision of the Commissioner or a hearing authority.[21] On that basis Dr Muir said he was entitled to replead the challenge proceedings in the TRA and the High Court and that, as a matter of tax law, he was doing so on the basis of facts that have not previously been considered by the hearing authorities. So new, or de novo, decisions are now required.
[23] Dr Muir pointed to the former as the basis of his proposition that Faire J and this Court did not hold that Dr Muir’s proceedings had been struck out: those decisions only affected the pleadings he had filed and, implicitly, allowed him to replead.
[24] The more general principle supported that conclusion, because it demonstrated the separate and distinct nature of the debt a taxpayer owes for each tax year, and the focus of the disputes procedure as being to determine the correct amount of that debt in accordance with the provisions of the Income Tax Act. Thus, and for example, Dr Muir pointed to the well-established principle that a hearing authority hears a tax challenge de novo,[22] is not bound by the positions the parties take, and may itself impose what it considers to be the correct tax liability.[23]
[25] Dr Muir emphasised that he was no longer disputing the substantive effect of the Ben Nevis decision as regards deductions that might have been claimed under subpt EH or EG of the Income Tax Act. Rather, the deductions he now sought had not previously been considered by the Commissioner.
[26] For the Commissioner, Ms Leslie relied on the decisions of the High Court and the Court of Appeal which, she said, had clearly struck out Dr Muir’s challenge proceedings as an abuse of process. That was confirmed by the observations made by the Supreme Court. As those proceedings had been struck out, Dr Muir could not file amended pleadings. Theoretically, he could apply to bring fresh challenge proceedings out of time under s 138D of the Taxation Administration Act 1994. But that was a separate question.
[27] Fundamentally, Ms Leslie’s point was that Dr Muir was continuing his collateral attack on the Supreme Court’s decision in Ben Nevis as it applied to him. That was an abuse of process, as were the amended proceedings he had commenced in reliance on sub-pt EH.
Analysis
[28] The High Court Rules provide for dismissal, strike out and stay in the following terms:
15.1 Dismissing or staying all or part of proceeding
(1) The court may strike out all or part of a pleading if it—
(a) discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
(b) is likely to cause prejudice or delay; or
(c) is frivolous or vexatious; or
(d) is otherwise an abuse of the process of the court.
(2) If the court strikes out a statement of claim or a counterclaim under subclause (1), it may by the same or a subsequent order dismiss the proceeding or the counterclaim.
(3) Instead of striking out all or part of a pleading under subclause (1), the court may stay all or part of the proceeding on such conditions as are considered just.
(4) This rule does not affect the court’s inherent jurisdiction.
[29] We acknowledge that the drafting of r 15.1 reflects the well-established distinction which exists between the striking out of a pleading and the dismissal of a proceeding.[24] But that distinction does not support the argument Dr Muir attempts here.
[30] We also acknowledge that income tax owed by a taxpayer for a particular tax period is a debt that is distinct from income tax for a different tax period or payable by another taxpayer. The question of issue estoppel in tax cases may be problematic. British and Australian courts have resisted the general proposition that issue estoppel can be applied in respect of successive years of assessment.[25] But, again, that argument does not assist Dr Muir here.
[31] Dr Muir’s liability for tax in the years in question has been assessed and his challenge proceedings have been substantially struck out as an abuse of process.
[32] In our view, the phrase “striking out the proceeding” — as used by each of Judge Barber and Faire J — can only be understood as meaning that, having been determined to be an abuse of process, Dr Muir’s challenge proceedings were, at that point, at an end. Just as the Supreme Court in Lai v Chamberlains described the inherent procedural power,[26] they had been struck out as an abuse of process. Remember the context: Ben Nevis, a test case, had determined the tax treatment of the Trinity scheme. All of the multitude of steps taken by Dr Muir and others associated with him, after that decision, to challenge it on the basis of the argued applicability of subpt EH of the Income Tax Act had been determined to be collateral attacks on a decision that had been determined to be binding upon him personally. The challenge proceedings considered by Judge Barber and struck out by him, and the challenge proceedings considered by Faire J and struck out by him, were a continuation of that abuse of process.
[33] In upholding Faire J’s strike-out decision, this Court said:[27]
[43] In our judgment it would be an abuse of the Court’s process to allow Mr Muir to continue his claim. It would commit judicial resources for no purpose and bring the administration of justice into disrepute. It would also be unfair to require the Commissioner to expend further costs in defending a position on taxation liability which has been unequivocally and authoritatively answered in the Commissioner’s favour.
[34] The Supreme Court chose its words carefully in its decision on Dr Muir’s amendment application, saying this:[28]
[11] In oral argument, the appellant accepted that, given the nature of the new argument foreshadowed by his amendment application, the leave to appeal granted by this Court should be revoked, a concession which was correctly made. The consequence is that the decision of the Court of Appeal will stand, and the appellant’s proceedings will remain struck out in their entirety.
[35] As the Supreme Court has reasoned in its recent leave decision, Dr Muir’s challenge proceedings in the TRA and in the High Court were struck out substantively: they were dismissed. It follows that Dr Muir cannot pursue his new response to Ben Nevis by filing amended pleadings in those proceedings. Dr Muir’s challenges to the High Court decisions must therefore fail.
Result
[36] The appeals are dismissed.
[37] The appellant must pay the respondent one set of costs for a standard appeal on a band A basis and usual disbursements.
Solicitors:
Edmonds Judd,
Te Awamutu for Appellant
Crown Law Office, Wellington for Respondent
[1] Muir v Commissioner of Inland Revenue [2015] NZCA 591, (2015) NZTC 22-034 at [43] [Court of Appeal decision].
[2] Muir v Commissioner of Inland Revenue [2017] NZHC 2082, (2017) 28 NZTC 23-029 [Toogood J decision].
[3] Muir v Taxation Review Authority [2017] NZHC 2932 [Jagose J decision].
[4] Commissioner of Inland Revenue v Muir [2017] NZHC 1413, (2017) 28 NZTC 23–019.
[5] Muir v Commissioner of Inland Revenue [2018] NZCA 129, (2018) 28 NZTC 23–056.
[6] Muir v Commissioner of Inland Revenue [2018] NZSC 81, (2018) 28 NZTC 23–067 [Supreme Court leave decision].
[7] Court of Appeal decision, above n 1.
[8] Supreme Court leave decision, above n 6.
[9] Supreme Court leave decision, above n 6.
[10] [Muir] v Commissioner of Inland Revenue [2011] NZTRA 2, (2011) 25 NZTC 1-006.
[11] Muir v Commissioner of Inland Revenue [2015] NZHC 792, (2015) 27 NZTC 22-004.
[12] Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2008] NZSC 115, [2009] 2 NZLR 289.
[13] Court of Appeal decision, above n 1.
[14] Muir v Commissioner of Inland Revenue [2016] NZSC 90, (2016) 27 NZTC 22-060.
[15] Muir v Commissioner of Inland Revenue (No 2) [2016] NZSC 113, (2016) 27 NZTC 22-067.
[16] At [11].
[17] Jagose J decision, above n 3 (footnotes omitted).
[18] Toogood J decision, above n 2.
[19] At [6].
[20] At [12].
[21] Reckitt and Colman (New Zealand) Ltd v Taxation Board of Review [1966] NZLR 1032 (CA) at 1045.
[22] Great North Motor Co Ltd (in rec) v Commissioner of Inland Revenue [2017] NZCA 328, (2017) 11 NZCLC 98-053 at [33].
[23] Commissioner of Inland Revenue v Zentrum Holdings Ltd [2007] 1 NZLR 145 (CA).
[24] We also acknowledge that at strike out decision on procedural grounds may leave the door open for the affected party to file amended pleadings — Westpac Banking Corp v M M Kembla New Zealand Ltd [2000] NZCA 319; [2001] 2 NZLR 298 (CA) at [60].
[25] Caffoor (Trustees of the Abdul Gaffoor Trust) v Commissioner of Income Tax, Colombo [1961] AC 584 (PC); and Spassked Pty Ltd v Federal Commissioner of Taxation [2007] FCAFC 205, (2007) 165 FCR 484.
[26] The principles of finality also underlie one application of the broad inherent procedural power to strike proceedings out as an abuse of process — Lai v Chamberlains [2006] NZSC 70, [2007] 2 NZLR 7 at [59].
[27] Court of Appeal decision, above n 1.
[28] Muir v Commissioner of Inland Revenue (No 2), above n 15 (emphasis added).
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