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High Court of New Zealand Decisions |
Last Updated: 6 November 2011
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV 2008-409-000995
BETWEEN CHESTERFIELDS PRESCHOOLS LIMITED
First Plaintiff
AND DAVID JOHN HAMPTON Second Plaintiff
AND CHESTERFIELDS PARTNERSHIP Third Plaintiff
AND CHESTERFIELDS PRESCHOOLS PARTNERSHIP
Fourth Plaintiff
AND THE COMMISSIONER OF INLAND REVENUE
First Defendant
AND PHILLIP JOHN SHAMY Second Defendant
AND THE ATTORNEY GENERAL Third Defendant
Hearing: 27 January 2010
(Heard at Christchurch)
Appearances: D J Hampton in Person
J Pike for Defendants
Judgment: 5 August 2011
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
Introduction
[1] This was an application to strike out the plaintiffs‘ claims for damages for
misfeasance in public office and for compensation for breach of the New Zealand
CHESTERFIELDS PRESCHOOLS LIMITED V THE COMMISSIONER OF INLAND REVENUE HC CHCH CIV 2008-409-000995 5 August 2011
Bill of Rights Act 1990. At the same time as hearing this application, I heard a similar application by the defendant in a separate proceeding commenced by the plaintiffs in CIV 2008-409-2057.
Background
[2] The plaintiffs have been variously property holding companies or entities, or owners and operators of pre-schools. They all involve or are associated with David John Hampton who appeared for them in this interlocutory application by leave. The Hampton family home was transferred to the third plaintiff (a partnership) in 1990. A chronology of the various plaintiffs‘ dealings both between themselves and with the Inland Revenue Department from 1990 to date would occupy many, many pages. Some of the history is captured in the judgments of this Court in judicial review proceedings on 15 December 2006 (reported at (2007) 23 NZTC 21,125) and on 25
November 2008 (reported at (2009) 24 NZTC 23,148) and of the Court of Appeal
(on appeal in the same proceeding) [2010] NZCA 400, delivered on 31 August 2010.
[3] The intertwining of the dealings of the plaintiffs is reflected in the first five paragraphs of their amended statement of claim which read:
1. The first plaintiff is a duly incorporated company (―CPL‖) set up by the trustees of the Anolbe Family Trust and incorporated in 1993, having its registered office at Christchurch and carrying on business there as a property holding company. From 1993 until 2001 CPL also owned and operated preschools previously owned by the third plaintiff.
2. The second plaintiff at all material times was a director of CPL and the fifth plaintiff, Anolbe Enterprises Limited.
3. The third plaintiff is a partnership formed in 1990 (―OCP‖) trading
briefly as an owner of preschools in Christchurch OCP dissolved in
1993 and sold its assets to CPL. OCP ceased trading in 1993.
4. The fourth plaintiff is the trading name of Mr Hampton (―NCP‖) who from 2002 to 2004 owned and operated the preschools previously owned by CPL.
5. The fifth plaintiff is a duly incorporated company (―AEL‖) set up by the trustees of the Anolbe Family Trust and incorporated in 1993, having its registered office at Christchurch and carrying on business there as a property holding company.
[4] Many of the issues which arose between Mr Hampton and the Inland Revenue Department arose in relation to GST, beginning with a GST refund claim on the transfer of the family home in 1990. GST claims were lodged. The Department made numerous assessments and took enforcement action. Discussions and negotiations occurred. Settlements were negotiated. In more recent years proceedings have been pursued by one or more of the plaintiffs.
The focus of this proceeding
[5] The plaintiffs pursue six causes of action in the tort of misfeasance in a public office, leading to a claim for damages. They plead a seventh cause of action based on a breach of the plaintiff‘s rights of natural justice under the New Zealand Bill of Rights Act, leading to a claim for compensation. They claim damages in the amended statement of claim in this way:
91. The first defendant‘s cumulative exercise of the statutory powers for improper purposes as set out in the first to sixth causes of action resulted in the first defendant, knowingly or recklessly, allowing the penalty accumulations to spiral out of control over the extraordinary number of years that the unlawful conduct continued from 1993 to
2006.
92. The first defendant‘s extraordinary delay or refusal to properly and fairly address the plaintiffs‘ complaints caused severe hardship and damage to the plaintiffs. For example, the third plaintiff‘s core tax of approximately $33,000.00 for the June 1990 GST period, which had been settled in December 1992 by Consent Order of the Taxation Review Authority, as set out in the second cause of action, attracted out of control penalties to spiral over $1.2 million from
1990 to 2006.
93. In 2004 the first defendant imposed the immediate enforcement and full force of the invasive and punishing section 157 TAA seizure powers without concession or respite, thereby intentionally causing harm to the plaintiffs knowing that the Aronsen filenotes had not been disclosed to the plaintiffs at any time over the years of complaints from 1996, and continued to withhold disclosure of those vital filenotes during the first defendant‘s exercise of the seizure enforcement powers.
(The nature of compensation claimed under the seventh cause of action is not pleaded).
[6] The first defendant, the Commissioner of Inland Revenue, is sued as the Chief
Executive of the Department of Inland Revenue appointed under the State Sector Act
1998, who administers taxes covered by the Inland Revenue Acts as defined in s 3
Tax Administration Act 1994.
[7] The second defendant is identified by the pleading as a partner of the law firm Raymond Donnelly, solicitors, the legal representative of the Commissioner. The plaintiff pleads that Mr Shamy was engaged by the Commissioner to advise on, and assist in, the enforcement of the Commissioner‘s statutory powers. It is alleged he was therefore appointed to discharge a public duty.
[8] In the remaining cause of action, the plaintiffs sue the third defendant, the Attorney General, in right of the Department of Inland Revenue. It is alleged that the Attorney is the guarantor of rights contained in the New Zealand Bill of Rights Act. He is sued in respect of the actions of the Commissioner and Mr Shamy. Compensation is claimed.
Principles applicable to a strike out application
[9] High Court Rule 15.1 makes provision for orders striking out all or part of a pleading. In this case the defendants/applicants invoke r 15.1(1)(a) (no reasonably arguable cause of action) and r 15.1(1)(d) (abuse of the process of the court).
[10] I adopt the following as principles applicable to the consideration of this application:
(a) The Court is to assume that the facts pleaded are true (unless they are entirely speculative and without foundation).
(b) The cause of action must be clearly untenable in the sense that the
Court can be certain that it cannot succeed.
(c) The jurisdiction is to be exercised sparingly and only in clear cases.
(d) The jurisdiction is not excluded by the need to decide difficult questions of law, even if requiring extensive argument.
(e) The Court should be slow to rule on novel categories of duty of care at the strike out stage. (See Attorney General v Prince [1998] 1
NZLR 262).
Misfeasance in public office – the principles
The elements of the tort of misfeasance in public office
[11] The Commissioner‘s application for orders striking out the first six causes of action, which are expressly pleaded as invoking the tort of misfeasance, refers to the elements of the tort of misfeasance in public office.
[12] The tort of misfeasance in public office has been analysed by the House of Lords in Three Rivers District Council v Bank of England (No 3) [2003] 2 AC 1, Lord Steyn at 191-196, an analysis adopted by the New Zealand Court of Appeal in Ministry of Fisheries v Pranfield Holdings Limited [2008] 3 NZLR 649, per O‘Regan J for the Court at 672-673. I summarise the analysed elements:
1. The act complained of must be done by a public officer.
2. The act must be done in the purported exercise of the public officer‘s
public functions (the principles of vicarious liability applying).
3. The public officer must have had a malicious state of mind – that is an awareness that his/her conduct was unlawful and that it would probably injure the plaintiff. This may be proved in either of two ways, namely through:
ii) untargeted malice – the public officer has acted with knowledge of the illegality of his or her act, or with a state of mind of reckless indifference to the illegality of the act, and knows or is reckless as to whether the act will probably injure the plaintiff (or a person of a class of which the plaintiff was a member).
5. The conduct of the public officer must cause the plaintiff loss.
i) have had knowledge that his or her conduct would probably injure the plaintiff or a person of a class of which the plaintiff was a member; or
ii) have been reckless about the consequences of his or her conduct in the sense of not caring whether the consequences happened or not.
See also Garrett v Attorney-General [1997] 2 NZLR 332 (CA); Rawlinson v Rice [1997] 2 NZLR 651 (CA); Hobson v Attorney-General [2007] 1 NZLR 374; CIR v Reid (2008) 23 NZTC 21,783 (CA).
[13] In this case, the plaintiffs do not assert targeted malice. (The plaintiffs in Three Rivers - see per Lord Steyn at 192 - took the same position). If the plaintiffs‘ action in tort is sustainable it must be under the second form – untargeted malice (see [12]3ii) above).
The plaintiffs’ case in misfeasance – the general thrust
[14] The plaintiffs plead six causes of action in misfeasance.
[15] It is appropriate to set out by way of background the introduction which Mr Hampton gave to his analysis of each of the causes of action. The following introduction is taken directly from Mr Hampton‘s written synopsis:
1. The Plaintiffs claim damages in misfeasance in relation to an unlawful failure to abide by certain arrangements and assurances made by the Commissioner in relation to the remission of penalty, denials that such arrangements and assurances were made by the Commissioner‘s officers, and failure to disclose critical evidence of those arrangements and assurances in the filenotes of the Commissioner contemporaneous with denials that such evidence existed in the files of the Commissioner.
2. In 1994 and 1995 Mr Aronsen, on behalf of the Commissioner, made decisions to defer settlement of those arrangements and assurances until the Commissioner had completed processing of various GST refunds, which by
1995 had, in the view of Mr Aronsen, (as recorded in the computer records of the Commissioner), been inordinately delayed, such conduct on the part of the Commissioner considered to be unethical and unprofessional by Mr
Aronsen.
3. The Commissioner allowed penalties to continue to climb astronomically during the period of delay in processing the refunds, some 14 years later, and made decisions to initiate enforcement action to collect the unlawfully accumulating penalties causing damage to the plaintiffs while the abovementioned conduct continued.
4. Mr Aronsen discussed the failure to process the refunds with audit officers. His filenotes indicate that he made it clear to the Commissioner‘s audit officers that he expected decisions to be made in respect of those refunds promptly so that he could finalise and regularize the tax affairs of the plaintiffs in accordance with the arrangements and assurances.
5. As a result of the meetings with Mr Aronsen the plaintiffs had a reasonable expectation that the Commissioner would make decisions promptly concerning the GST refunds in order to complete the regularization and settlement of the plaintiffs taxes and accumulating penalties. The assurances and arrangements of Mr Aronsen created an imperative duty for the Commissioner to process the refunds promptly, in other words, to complete the statutory duty under section 46(2) of the Goods and Services Tax Act to process the refunds within a reasonable time. This duty was found to have been breached in the judgment of Fogarty J in the judicial review proceedings, at paragraph [154]:
“[154] It was never the intention of Parliament that the Commissioner could place GST refund claims under investigation, indefinitely. Mr Aronsen used the words unethical, but in legal parlance it was conduct contrary to the purpose of giving the Commissioner power to investigate refund input claims with a view to rejecting them.”
6. It seems unarguable that a decision made by a public officer can be formulated and is manifest and implemented by action or omission, just as by communicated word. Where a public officer has a statutory duty to act, but fails to do so within a reasonable time, the public officer can be inferred
to have made an unlawful decision not to carry out that lawful duty by his or her inaction in just the same way as if that officer had overtly stated that he she will not carry out that statutory function. Therefore the submission of the defendant at paragraph 4 is not accepted by the plaintiffs. It seems clear for the decision to be established, that it is necessary to establish that there was a statutory duty to process the refunds within a statutory timeframe or other reasonable time, that the Commissioner‘s officers knew of that duty, that the Commissioner‘s officers knew or were reckless as to the unlawfulness not to carry out that duty, and that the duty was not performed. It is submitted that Mr Aronsen made it plain in his filenotes in 1995 that he was aware that the Commissioner‘s officers were acting unlawfully in placing the GST refund claims under investigation indefinitely, and communicated his dissatisfaction to the officers responsible for lawfully processing the refunds.
[16] It will be appreciated that in part (paragraph 6) Mr Hampton‘s introduction was in response to a synopsis filed by Mr Pike for the Commissioner. I will return to that in more detail in my examination of the various causes of action.
First cause of action (against the Commissioner) – the GST non-decisions
[17] The plaintiffs summarise their first cause of action as being that the Commissioner elected to examine GST refund claims but unlawfully failed to make decisions. It is accepted in the plaintiffs‘ pleading that the Commissioner in 1993 and 1995 acted lawfully pursuant to s46 Goods and Services Act 1985 (as the provision then stood) and elected to examine various GST refund claims made by Chesterfields Preschools Limited and Anolbe Enterprises Limited, and to withhold payment of those refunds in the meantime. The plaintiffs allege that the Commissioner unlawfully exercised those powers for an improper purpose by failing to make decisions in respect of those refund claims indefinitely and by withholding the payment of those refunds indefinitely. The plaintiffs allege (in the amended statement of claim) that the tort of misfeasance is established in this case because:
i) the first defendant is a public officer;
ii) the exercise of the powers in 1993 and 1995 to examine the first and fifth plaintiffs‘ GST refund claims and withhold payment was done in the exercise of the first defendant‘s public functions; and
iii) the first defendant acted:
a. with knowledge of the illegality of the unlawful acts;
or
b. with a state of mind of reckless indifference to the illegality of the unlawful acts; and
iv) the first defendant owed a duty to the plaintiffs to act lawfully and to exercise statutory powers for a proper purpose; and
v) the first defendant‘s unlawful act caused the plaintiffs loss in that the first defendant made decisions in 1994 to settle the taxes of the plaintiffs once the GST refund claims were finalised (as set out in the second cause of action) and these decisions could not be implemented; and
vi) by failing to make decisions in respect of those refund claims, and contemporaneously withholding payment of the GST refund credits indefinitely, the first defendant;
a. knew that the plaintiffs would be injured by the consequential exponential accumulation of penalty on the plaintiffs‘ taxes intended to be settled once the GST credit refunds were finalised; or alternatively,
b. was reckless about the consequences of the unlawful act in the sense of not caring whether the plaintiffs were injured by the consequential exponential accumulation of penalty on the plaintiffs‘ taxes intended to be settled once the GST credit refunds were finalised.
Second cause of action (against the Commissioner) – the failure to abide by three decisions
[18] The plaintiffs summarise their second cause of action as being that the Commissioner made decisions for the purpose of settling the taxes of the plaintiffs, remitting penalties, and (with the consent of the plaintiffs) applying GST refunds claimed (being those covered by the first cause of action) in part-payment of the Commissioner‘s settlement decisions, but that the Commissioner then failed to abide by those decisions.
[19] The plaintiffs then plead three decisions, the pleading of which takes 14 pages of the amended statement of claim. I summarise.
[20] The first decision (―decision 1‖) alleged is a settlement arrangement entered into on 16 August 1993 between the Commissioner and Chesterfields Partnership for all the Chesterfield Partnership taxes, excluding the June 1990 GST period. The meeting was with the Commissioner‘s officer, Mrs Thornley. The arrangement was to involve the transfer of $36,335.09 of a September 1993 refund claim of Chesterfields Preschools Limited to Chesterfields Partnership.
[21] It is alleged that the Commissioner failed to abide by decision 1 and in particular did not transfer the $36,335.09 from Chesterfields Preschools Limited to Chesterfields Partnership. It is alleged that the Chesterfields Partnership recorded tax liabilities (including default penalties) continued to increase.
[22] The second decision (―decision 2‖) is summarised as being an out of Court settlement of Chesterfields Partnership and the Commissioner by the consent order of the Taxation Review Authority in November/December 1992. It is alleged that Chesterfields Partnership entered into an out of Court settlement between 27 and 30
November 1992 in relation to the June 1990 GST period. The arrangement is said to have been entered into with the Commissioner‘s solicitor, Mr Coleman. It is stated that the Taxation Review Authority confirmed the settlement by consent order on 2
December 1992. It is said that the settlement repayment date and repayment plan were left to be determined by further negotiation with Mrs Thornley. It is said that at a meeting on 3 December 1992 Mrs Thornley, without explanation, deferred setting
a new repayment date. It is said that from March 1999 the Commissioner denied that the consent order settlement had ever been made.
[23] The third decision (―decision 3‖) is summarised as being the Commissioner‘s decision, made with the consent of Anolbe Enterprises Limited, to transfer the credits of Anolbe Enterprises Limited for the 1993 GST year to Chesterfields Preschools Limited. This pleading relates to what is said to have been a written authorisation by the plaintiffs dated 12 July 1994 at the request of Mr Nimmo for the Commissioner, whereby the plaintiffs authorised the transfer of 1993 GST credit claims of Chesterfields Preschools Limited to other plaintiffs. It is said that pursuant to that authorisation the Commissioner made a decision around 16 July 1994 to transfer the Anolbe Enterprises Limited 1993 GST credit claim to Chesterfields Preschools Limited. It is said that that decision was confirmed by the Commissioner‘s officer, Mr Aronsen, on 20 September 1994, when a further decision was made, as an interim arrangement pending the anticipated finalisation of the Anolbe Enterprises 1993 GST credit returns. That decision was to defer the due date for payment of the core taxes of Chesterfields Preschools Limited until the Commissioner‘s audit officers had finalised the Anolbe Enterprises Limited refund claims and was also to remit any accrual of penalty in the tax accounts of Chesterfields Preschools Limited pending implementation of the interim arrangement. It is said that the Commissioner failed to abide by the transfer decision, denying from 1999 that the decision 3 had ever been made. It is said that Chesterfields Preschools Limited, in reliance on decision 3, did not make provision for the payment of penalty taxes.
[24] It is a common aspect of the pleading of the three decisions that there was subsequently a failure by the Commissioner to disclose relevant records to the plaintiffs. In particular it is said that between February 1999 and June 2006 the Commissioner did not disclose to the plaintiffs the filenotes of Mr Aronsen, which were critical to establishing the rationale of the Commissioner‘s decision to continue the terms of the 16 August 1993 settlement arrangement over the years from 1994.
[25] Further, in relation to the three decisions, the plaintiffs refer to the findings of
Fogarty J in the 15 December 2006 judicial review judgment (above [2]). The
pleadings quote extensive passages from that judgment. In summary, they relate to findings as to the intention of Mr Hampton (for the various plaintiffs) to reach arrangements with the Inland Revenue Department; common expectations which Mr Hampton would have had with Mrs Thornley and Mr Aronsen respectively; and a readiness on the part of the Department‘s officers to wipe penalties relating to debit accounts.
[26] The plaintiffs allege in relation to these three decisions that the tort of misfeasance is established on grounds directly parallel to those summarised at [17] above (in relation to the first cause of action).
Third cause of action (against the Commissioner)– the October 1998 closure decision
[27] The plaintiffs summarise their third cause of action as being the failure of the
Commissioner to remit the penalties of Chesterfields Preschools Limited in October
1998 (the amended statement of claim by typographical error says 1988) when enforcement action was taken by the first defendant in lieu of making decisions to finalise the GST refunds of the plaintiffs. The more detailed pleading indicates that the Commissioner made a decision to bring decision 3 (the transfer of the Anolbe
1993 GST credits to Chesterfields Preschools Limited) to a close. It is said that the plaintiff had a legitimate expectation that the Commissioner would abide by decision 3 to remit accumulated penalties in lieu of making finalised decisions on the GST refunds.
[28] The plaintiffs allege, in relation to this third cause of action, that the tort of misfeasance is established on grounds again directly parallel to those pleaded in relation to the first cause of action.
Fourth cause of action (against the Commissioner) – non-disclosure of the Aronsen filenotes, 1996 to October 2004
[29] The plaintiffs summarise their fourth cause of action, against a background of complaints concerning the failure of the Commissioner to abide by the decisions which are the subject of the first, second and third causes of action. They allege that
from 1996 to October 2004, the Commissioner, despite repeated requests, did not disclose the filenotes of Mr Aronsen. It is said that the Aronsen filenotes were relevant to the overall resolution of the settlement of the taxes of the plaintiffs and that the file notes proved that Mr Aronsen had made decisions to remit the penalties of the plaintiffs. The plaintiffs plead particularised details of representations and complaints made by the plaintiffs between 1996 and 2004. The plaintiffs plead steps taken by their legal representatives by way of informal discovery. They plead a refusal by the Commissioner to provide access to the requested records.
[30] The plaintiffs allege in relation to this fourth cause of action that the tort of misfeasance is established on grounds directly parallel to those set out in relation to the first cause of action (above [17]).
Fifth cause of action (against the Commissioner and Mr Shamy) – non-disclosure of the Aronsen filenotes, May 2004 to June 2006, during the exercise of seizure powers
[31] The plaintiffs summarise their fifth cause of action as being that, from May
2004 to June 2006, the Commissioner and Mr Shamy failed to disclose the Aronsen filenotes during the exercise of the powers for enforcement. It is pleaded that the complaints and requests by the plaintiffs for disclosure of the Aronsen file notes in
2004 put the Commissioner and Mr Shamy on notice that there was an imperative duty of procedural fairness with regard to the acknowledgment and disclosure of the Aronsen filenotes. It is alleged that the Commissioner and Mr Shamy knew at all material times from 1996 to 2004 that it would be inequitable and unlawful to initiate seizure enforcement actions against a background of the plaintiffs‘ complaints made genuinely and in good faith. It is alleged that the Commissioner, pursuant to s157 Tax Administration Act 1994, issued seizure notices to the knowledge of Mr Shamy while continuing unlawful conduct by failing to acknowledge the existence of the Aronsen filenotes and failing to disclose the filenotes and to explain their previous non-disclosure.
[32] The plaintiffs allege in relation to this fifth cause of action that the tort of misfeasance is established on grounds directly parallel to those set out in relation to the first cause of action (above [17]).
Sixth cause of action (against the Commissioner and Mr Shamy) – non-disclosure of the Aronsen filenotes, 2004 – 2006, during the High Court discovery process
[33] The plaintiffs summarise their sixth cause of action as being that, during 2004
– 2006, Mr Shamy failed to ensure that the Commissioner disclosed the Aronsen filenotes during the High Court discovery process and that Mr Shamy unlawfully claimed privilege of certain of the Aronsen filenotes and failed to notify the plaintiffs prior to trial (in July 2006) that the Aronsen filenotes had been withheld as privileged.
[34] It is pleaded that Mr Shamy was from 1999 – June 2006 the Commissioner‘s legal adviser and legal representative in relation to the dispute with the plaintiffs and that from May 2004 – June 2006 Mr Shamy was the solicitor on the record on behalf of the Commissioner during the first judicial review proceeding and in relation to discovery of documents. The plaintiffs plead that the Commissioner‘s verified list of documents (sworn by Mr Kettley) dated 12 October 2004 did not make proper disclosure of the Aronsen filenotes and in particular failed to identify the Aronsen filenotes as filenotes involving Mr Aronsen in any category of documents. The plaintiffs plead that a CD Rom provided to the plaintiffs in November 2004 by the Commissioner‘s officer, Ms Gillard-Glass, was represented to contain only replicated tax data previously disclosed and voluminous tax data. It is asserted that the plaintiffs were not put on notice that the CD Rom contained Aronsen filenotes or filenotes of the Commissioner‘s officers generally. It is pleaded that the CD Rom contained certain file notes including some of the filenotes of Mr Aronsen but did not contain a critical filenote dated 17 October 1995. It is alleged that the CD Rom received by the plaintiffs was then misplaced and remained misplaced between November 2004 and March 2009.
[35] The plaintiffs plead that the Commissioner and Mr Shamy were put on notice that the plaintiffs had never been in possession of any of the Aronsen filenotes by letters dated 8 November 2004 and 12 January 2005, requesting disclosure of any Aronsen filenotes. It is alleged that the Commissioner made specific (which I take to be ―express‖) and implied representations as to Mr Shamy‘s compliance with High Court discovery rules and as to the disclosure of all relevant documentation. It is further alleged that Mr Shamy made it clear that relevant documents had not been
disclosed. It is said that the defendants‘ correspondence and denials meant that the
plaintiffs could not refer to any specific documents of Mr Aronsen.
[36] It is said that the Commissioner and Mr Shamy made a decision around June 2006 to rectify the breach of duty to make full disclosure of the Aronsen file notes shortly before the first judicial review trial. It is said that during the 20 months between the Commissioner‘s first discovery affidavit and the full disclosure of the Aronsen filenotes the Commissioner claimed a further approximately $1,000,000.00 in penalties from the plaintiffs.
[37] It is said that there were further breaches of discovery duties in June 2006 by simply attaching the Aronsen filenotes (rather than listing them) and by failing to file an affidavit of further discovery or to explain previous concealment.
[38] The plaintiffs allege in relation to this sixth cause of action that the tort of misfeasance is established as against the Commissioner on grounds directly parallel with those set out in the first cause of action (above [17]). As against Mr Shamy, it is alleged that he performed the functions of a public officer in that:
a. as the Commissioner‘s legal representative he performed publicly funded duties for the Commissioner; and
b. he performed the public function of enforcement and prosecution of statutory offences and payment of taxes on behalf of the Commissioner; and
c. he supervised the Commissioner‘s discovery process in the
facilitation of enforcement proceedings; and
d. he was under a strict obligation to act only in the public interest in the performance of his public duties to the Commissioner.
The defendants’ strike out application – first six causes of action
The grounds
[39] In the application filed by Mr Pike for an order striking out the proceeding the grounds of application in relation to each cause of action were separately identified. Understandably there is a significant overlap within the application as it relates to each cause of action.
[40] The grounds of application which are common to the six misfeasance causes of action are these:
a. There is no pleading that the first defendant made the relevant decisions. He may not be made vicariously liable for the act of another state servant.
b. The elements of misfeasance are not pleaded.
c. The proviso to s 6(1) Crown Proceedings Act 1950 applies.
d. Specific to the following causes of action are the following grounds of application for strike out:
i. First cause of action – the plaintiffs sue in relation to powers exercised in 1993 and 1995, which claims are barred by the Limitation Act 1950.
ii. Second, fourth and fifth causes of action – duties pleaded by the plaintiffs are not known to the law.
iii. Fifth and sixth causes of action - Mr Shamy does not hold public office.
iv. Sixth cause of action – both defendants have witness immunity in relation to allegations as to the affidavit of documents.
[41] It is convenient to deal first with those grounds of application which relate to specific causes of action and to then come to the common grounds of application.
Limitation Act 1950 (first cause of action)
[42] The Commissioner in his application said that the plaintiffs sue in relation to powers exercised in 1993 and 1995, which claims are barred by the Limitation Act
1950. Mr Pike did not pursue any submissions in relation to this particular ground and I therefore do not examine it.
Pleaded duties (second, fourth and fifth causes of action) unknown to the law
[43] The plaintiffs pleaded the following –
a. Second and fourth causes of action – the first defendant owed a duty to the plaintiffs to act lawfully and to exercise statutory powers for proper purpose.
b. Fifth cause of action – the first and second defendants owed a duty of procedural fairness to the plaintiffs to act lawfully and to ensure that statutory powers of enforcement were exercised for a proper purpose.
[44] The plaintiffs bring their first six causes of action as claimed in the tort of misfeasance in public office.
[45] It appears, as Mr Pike submitted, that the three pleadings of ―duty‖ have been at least in part imported by the plaintiffs from the judgments of Fogarty J. Those judgments involved an examination by way of judicial review of administrative action of the key decisions made by Department officers. The judgments were not concerned with duties in the law of tort.
[46] I do not read the plaintiffs‘ pleadings as suggesting that the three pleaded duties are key or essential to the pleading of the three causes of action in question. Rather, they appear to arise as part of a series of propositions which lead to the ultimate allegation in relation to each of the first six causes of action that the public officers involved knew they were acting illegally. I do not read the pleading of any of the first six causes of action as indicating that it is a claim based in breach of statutory duty. Indeed, each is expressly stated to be a claim based in misfeasance (in public office).
[47] It may be that the difficulty is one of a layman (albeit legally qualified) seeking to identify a relevant illegality. It is the plaintiffs‘ case in relation to misfeasance that this was a case of untargeted malice where the public officers acted with knowledge of the illegality of their act.
[48] In his submissions Mr Hampton made it clear that his intention was to identify actions, such as ―placing the GST refund claims under investigation indefinitely‖ which in his submissions he referred to as ―unlawful‖. It was clear from Mr Hampton‘s submissions that these matters were pleaded as the underlying circumstances – in his pleading unlawful – and that the officers in question acted knowingly or recklessly in relation to the quality of those acts and the likelihood that they would cause injury.
[49] In short, the three particular paragraphs of pleading in the second, fourth and fifth causes of action are part of a misfeasance pleading and are not intended to assert a breach of statutory duty.
[50] It would not be appropriate to strike them out. They might be rephrased in language that speaks more directly into the ingredients of the tort of misfeasance in public office. What they do in the meantime is serve as a signpost as the manner in which the plaintiffs construct their allegations as to misfeasance.
Fifth and sixth causes of action – Mr Shamy as a public officer
[51] The plaintiffs say that Mr Shamy, in acting for the Commissioner from 2000, performed the functions of a public officer in that:
a. he performed publicly-funded duties for the Commissioner in his capacity as the Commissioner‘s legal representative; and
b. he performed the public function of enforcement and prosecution of statutory offences and payment of taxes on behalf of the Commissioner; and
c. he was under a strict obligation to act only in the public interest in the performance of his public duties for the Commissioner.
[52] On the sixth cause of action, the plaintiffs added as a particular of
Mr Shamy‘s performance of the functions of a public officer that he –
d. supervised the Commissioner‘s discovery process in the facilitation of enforcement proceedings.
[53] For Mr Shamy, Mr Pike submitted that in the proceedings in which he represented the Commissioner Mr Shamy did not possess the necessary attributes of a public officer.
[54] Mr Pike referred to Tampion v Anderson [1973] VLR 715 at 720 (Supreme
Court of Victoria) in which Smith J found that the
―office must be one that the holder of...owes duties to members of the public as to how the office shall be exercised‖.
The powers which are the subject of the litigation must be an incident of the public office. Thus the Victorian Court of Appeal in Cannon v Tahche (2002) 5 VR 317, at
347, when considering whether a prosecuting barrister and his instructing solicitor could be liable to an accused person for misfeasance in public office, said:
...[S]uch wrongful conduct could not expose them to liability to the plaintiff for misfeasance in public office because...their duty to conduct the prosecution fairly, and to disclose the information to the plaintiff, was not one which was owed to the plaintiff.
[55] Mr Pike submitted that in relation to the tort of misfeasance it is not sufficient that a duty is imposed on the officer concerned - the duty must be one that is owed by the office holder and by virtue of the office to the plaintiff as a member of the public (Mr Pike‘s emphasis).
[56] In his oral submissions, Mr Pike concluded that the defective nature of the claim against Mr Shamy could be summarised in two propositions –
a. Whatever view is taken of ―public office‖ a lawyer in private practice does not hold public office; and
b. Mr Shamy was not exercising a statutory power attaching to an office he held.
[57] Mr Hampton‘s written submissions filed for the hearing did not deal with the allegation that Mr Shamy held public office. His oral submissions at the hearing were very brief, coming down to the proposition that from 2000 Mr Shamy as a partner in a ―Crown Law‖ firm had a continuing participation in the Commissioner‘s proceedings. The case against Mr Shamy comes down to ―public function‖.
[58] At the hearing, given the paucity of Mr Hampton‘s submissions on this issue (and some other issues), I reserved leave to Mr Hampton to file an additional memorandum responding on some specific topics. One was any legal authority for the proposition that there was a sustainable allegation that Mr Shamy was a public officer exercising the powers of his public office.
[59] Mr Hampton took the opportunity in a 21 page additional synopsis to address
8 pages to ―the law on Crown Prosecutors‘ public functions‖. The submission ranged between some legal authorities, pursuant to the Court‘s reserved leave, and contained extensive redevelopment and argument of the way in which the case against Mr Shamy is framed.
[60] Mr Pike immediately filed a brief memorandum respectfully submitting that Mr Hampton‘s submissions in relation to Mr Shamy‘s liability in tort should not be read because they were not limited to the issue reserved to Mr Hampton for further submissions.
[61] In the immediate context – the pleading against Mr Shamy as a ―public officer‖ – I am able to deal with Mr Hampton‘s submissions in terms of the matters reserved to him.
[62] I summarise:
a. The Crown Law Office is a public authority, listed as a Department of the Public Service by s 27(1) State Sector Act 1988.
b. Mr Hampton appears to link this statutory provision to Mr Shamy‘s partnership in the law firm Raymond Donnelly, as the legal representative of the Commissioner. While Mr Hampton‘s submissions then developed the proposition that ―Raymond Donnelly...holds the Crown warrant for the Christchurch area‖, an allegation that is not pleaded and which, as a matter of judicial notice, the Court may be entitled to regard as inaccurate. Mr Hampton does not plead or establish a relationship between Raymond Donnelly in that role and the Crown Law office.
c. Mr Hampton referred to commentary by the then Solicitor General (Terrance Arnold) in Litigating against the Crown (New Zealand Law Society, April 2010). The author recognised that where Crown Counsel are appearing for the Crown, they attempt to act as model advocates because the Crown attempts to be a model litigant. Mr Hampton noted the Solicitor General‘s reliance on a United States decision in McMoran Oil & Gas Co v Federal Energy Regulatory Commission [1992] USCADC 266; 962 F.2d 45 (DC cir, 1992) in which the Court said (at para 10):
The notion that Government lawyers have obligations beyond those of private lawyers did not originate in oral argument in this case. A Government lawyer ―is the representative not of an ordinary party to a controversy‖ the Supreme Court said long ago in a statement chiseled on the walls of the Justice Department, ―but of a sovereignty whose obligation...is not that it shall win a case, but that justice will be done.‖ ...The Supreme Court was speaking of Government prosecutors... but no one to our knowledge (at least prior to oral argument) has suggested that the principle does not apply with equal force to the go v ernm e nt ‘s ci vil lawyers... (Mr Hampton‘s emphasis)
d. Mr Hampton suggested that an appropriate approach to determining whether a body which is not a standard public authority is performing a public function as a public officer would be to answer two questions:
b. Is the particular act in issue an act of a private nature?
Mr Hampton referred the House of Lords decision in Aston Cantlow
& Wilmcote with Billesley Parochial Church Council v Willbank [2003] 3 WLR 283 as indicating that the focus when deciding whether a body was exercising a public function as a public officer must be on the particular function the body or person exercises, rather than the nature of the body itself.
e. Mr Hampton referred also to the decision in R (on the application of A) v Partnerships in Care Limited [2002] 1 WLR 2610, a case involving privately provided mental health care, in which the Court examined a number of aspects of public interest in the provision of the care, finding all those to be relevant factors in deciding whether the function was public. The focus was not on the fact that the body involved was distinctly private.
f. Mr Hampton also relied on Poplar Housing & Regeneration Community Association v Donoghue [2001] EWCA Civ 595; [2002] QB 48. Mr Hampton described this as a case in which the Court did not focus on a functional test at all but found that the closer the relationship between a public body and the activity in question, the more likely it will be that a Court will regard it as public function.
g. Gathering these English authorities together, Mr Hampton observed that the State requires the services of appropriately qualified persons to enforce its regulations. The Crown Law Office is the public service normally engaged to do such work. If Crown Law is not available and Raymond Donnelly or Mr Shamy undertake the work that is effectively a delegation of the public service enforcement role.
[63] I remind myself in the context of this strike out application that I must focus on the plaintiffs‘ pleadings (while, in the exercise of a residual discretion, making some allowance for the fact that a particular part of a claim might be repleaded to make it satisfactory).
[64] In this case the first and central pleading is that Mr Shamy was a partner at Raymond Donnelly, the legal representative of the Commissioner, engaged by the Commissioner to advise on, and assist in, the enforcement of his statutory powers. The pleading says that thereby Mr Shamy was appointed to discharge a public duty.
[65] The fifth cause of action claim against Mr Shamy is said by the plaintiffs to relate to Mr Shamy‘s involvement through ―knowledge‖ of the Commissioner‘s issuing seizure notices pursuant to s 157 Tax Administration Act 1994 from May
2004, while continuing to fail to acknowledge or disclose the Aronsen filenotes. (The reference to s 157 Tax Administration Act is to the set of provisions which deals with the giving to defaulting tax-payers notice of deduction of tax from payments due to them). The claim against Mr Shamy in the sixth cause of action is on the basis that between 2004 and 2006 Mr Shamy was the Commissioner‘s legal adviser and legal representative during the first judicial review claim (including in relation to discovery of the Commissioner‘s documents).
[66] There is a significant attraction to the proposition that a solicitor in private practice, who is retained to act in civil proceedings for a person who is undoubtedly a public officer, does not thereby become himself or herself a public officer. The litigation is the litigation of the public officer. The solicitor involved conducts the litigation on the instruction of the public officer. If, in pursuing payment of a civil debt, the Commissioner had chosen to use a debt collection agency it would seem inapt to characterise the debt collection agency as a public officer. Similarly, if the Commissioner had needed forensic accounting advice and had used an accountant in private practice to prepare calculations which were then provided to the tax payer as part of the claim, it would seem inapt to describe the accountant as a public officer.
[67] The pleading in this case that Mr Shamy is a partner of Raymond Donnelly which in turn is the ―legal representative of the Commissioner‖ provides further flavour to the mix. The concept of the Crown warrant was introduced by Mr Hampton in submissions rather than through pleading. However, whether the terminology is in terms of ―warranted by the Crown‖ or ―representing the Crown‖ the plaintiffs are entitled beyond that to adduce evidence of the precise nature of the relationship. For instance, is the relevant partner at Raymond Donnelly warranted only in relation to criminal work or also in relation to civil work? The question then becomes (if the warrant is for civil work as well as criminal work), does that impact on the question of whether a partner at Raymond Donnelly, conducting the legal business of the Commissioner, has in the context of the tort of malicious prosecution become a public officer?
[68] The uncertainty in this area of the law is highlighted by a passage in the judgment of the President in the Court of Appeal‘s decision in New Zealand Defence Force v Berryman [2008] NZCA 392 at [63] per Young P:
For a plaintiff to succeed in misfeasance, the defendant must be a public officer. This means someone appointed to discharge a public duty in return for compensation. That said, there is scope for doubt and debate as to the breadth of the concept of public office for the purposes of the tort. Conflicting approaches to this issue are exemplified by the judgment of the Court of Appeal of Victoria in Cannon v Tahche (2002) 5 VR 317, particularly at 336 – 339, and a recent New South Wales Supreme Court decision, Noori v Leerdam [2008] NSWSC 515. In the Victorian case, the Court concluded that counsel appearing for the Crown in a prosecution and his instructing solicitor were not public officers. In contradistinction, in the
New South Wales case, the Court concluded that it was reasonably arguable that the solicitor appearing for the Minister of Immigration in litigation before the Administrative Appeals Tribunal was a public officer. Further, obiter remarks of Steyn LJ in Elguzouli-Daf v Commissioner of Police of the Metropolis [1994] EWCA Civ 4; [1995] QB 335 at 347 (CA) suggest that liability for the tort of misfeasance in public office might conceivably attach to the functions of a prosecutor. The Saskatchewan Court of Appeal has likewise held that such a claim is potentially available against prosecutors, see Milgaard v Mackie (1994) 118 DLR (4th) 653.
His Honour in the succeeding paragraph [64] dealt with the related question as to whether a claim for misfeasance in public office is available only in relation to the performance or purported performance of public functions. His Honour examined authority in relation to that question before concluding:
That said, the actions of a public officer must have some public character before they can be the subject of a claim for misfeasance in public office.
[69] The Court of Appeal then concluded at [67] – [72] that the claim against the Army, to the extent that it was based on evidence given and submissions made to the Coroner, could not succeed because it was inconsistent with the immunity of suit that attaches to evidence and submissions to a Court.
[70] While that was sufficient to dispose of the claims, the Court went on to consider the status of those who had appeared as counsel for the Army at the inquest. Mr McGuire, who was an officer in the Territorial Force, was instructed as counsel for the first inquest. Submissions which were filed at that inquest by Mr McGuire were approved in draft by the officer in charge of the Army‘s legal section, Colonel Howard, before they were submitted to the Coroner. An aspect of the allegations as to misfeasance in public office related to the submissions which had come from them. Under a heading ―Other problems with the claims – submissions which were made‖ the Court of Appeal dealt with their status in this way:
[75] It is reasonably arguable that Mr McGuire and Colonel Howard were not public officers in respect of the inquest and that their actions were insufficiently public in nature to be subject to a claim for misfeasance in public office. Relevant to these issue are the cases referred to in [63] – [64]. As well, the actual harm suffered by the Berrymans (which is referred to in [47]) may not have been obvious to Colonel Howard and Mr McGuire.
[76] It would be rather artificial to treat these issues as independent of the immunity of suit point that we have already discussed and which we see as decisive of this aspect of the case. But, for the avoidance of doubt, we think
it right to say that were it not for immunity of suit principles we would regard the claim for misfeasance in public office focussing on the submissions made to the Coroner as sufficiently tenable to survive a summary judgment application.
[71] This conclusion in the Berryman case, (as to whether in a summary judgment context it was reasonably arguable that the two lawyers were public officers and that their actions were public in nature for the purposes of the tort), must be applied by this Court.
[72] It is tempting to anticipate that when the Court of Appeal comes again to examine the authorities in relation to public office, in the light of the decision of the New South Wales Court of Appeal in Noori v Leerdam [2008] NSWSC 515, that the New Zealand Court of Appeal itself will follow what has now emerged as either the settled or the settling common law position in Australia. The three judgments of the Court contain compelling analysis as to why the solicitor in that case, act ing on behalf of the Minister of Immigration in the Administrative Appeals Tribunal, did not occupy an ―office‖ of any character.
[73] The New South Wales Court of Appeal referred to the decision of the Victorian Court of Appeal in Cannon v Tahche (above [54]), in which a prosecutor was found not to hold a public office. In that case the obligations of a prosecutor were analysed in terms of obligations to the Court and not to the public at large or to the accused. The New South Wales Court of Appeal considered that the position of a lawyer appearing before the Administrative Appeals Tribunal to be a stronger case in that a solicitor appearing before such a tribunal did not have ―the heightened responsibilities of a prosecutor‖ (per MacFarlan JA at [111]). Mr Shamy‘s representation of the Commissioner in relation to tax recovery in this case is at least as removed from prosecutor‘s duties as an appearance in an Administrative Appeals Tribunal is. Arguably, it is further removed.
[74] The New South Wales Court of Appeal judgments in Noori v Leerdam (above [72]) were also informed by the conclusion that the role of the solicitor in question was entirely contractual (see Spigelman CJ at [18] – [19], Alsop P at [49]; MacFarlan JA at [108]). Two members of the Court adopted the conclusions of P D Finn in ―Public Officers: Some Personal Liabilities‖ (1977) 51 ALJ 313 at 314,
where Professor Finn observed that there is a need to differentiate between offices and other employment and that drawing that distinction –
...excludes from the ambit of public office law those persons who may be regarded as discharging public duties because they happen to be involved in contracting with a Government or with a governmental or public authority.
[75] In following the decision of the Victorian Court of Appeal in Cannon the three Judges of the New South Wales Court of Appeal in Noori v Leerdam applied parallel reasoning but in separate judgments each adopted the primary conclusion in Cannon, namely that the work of the lawyer in question had not involved the exercise of a public office.
[76] The thrust of the submissions of Mr Pike, for Mr Shamy, is that this Court should reasonably anticipate that the New Zealand Court of Appeal will now adopt and apply the reasoning and conclusions of the Court of Appeal of Victoria in Cannon v Tahche and of the New South Wales Court of Appeal in Noori v Leerdam. While I accept that the cogency of reasoning in those cases is such as to create a reasonable anticipation that the New Zealand Courts may will settle upon a similar legal approach, I am not in a position to say that with certainty. The present position remains that in Berryman the New Zealand Court of Appeal has recently regarded as tenable a claim for misfeasance in public office brought in relation to two lawyers who had acted in situations at least arguably similar to that of Mr Shamy in the present case. I therefore, with reluctance, find that there remains a ―public office‖ argument in relation to Mr Shamy.
Sixth cause of action – witness immunity
[77] The plaintiffs‘ sixth cause of action (summarised above at [33] – [38]) may be further summarised as asserting that the Commissioner and Mr Shamy did not make proper discovery of documents in the judicial review proceedings in the High Court.
[78] Mr Pike, for Mr Shamy, characterises the central aspect of the sixth cause of action as an affidavit of documents sworn 12 October 2004 (see above at [34]). That
document, says Mr Pike, is a sworn statement prepared for a judicial proceeding which may be the subject of cross examination.
[79] Mr Pike relied upon the doctrine that those involved in the judicial process are immune from liability for anything said, written or done in the course of proceedings or immediately preparatory to those proceedings. This immunity is summarised, for instance, in R P Balkin & J R A Davis Law of Torts (3rd ed, 2004) at [25.1] in this way:
The protection is afforded to witnesses, litigants, Judges and advocates in relation to their conduct in Court, however improper or malicious that might have been, as well as to juries in respect of their verdicts.
[80] Mr Pike invited the Court to apply the doctrine of immunity of suit as it had been applied by the Court of Appeal in the Berryman case (above [68]). In that case (at [69]) the Court, in applying the decision of House of Lords in Darker v Chief Constable of the West Midlands Police [2001] 1 AC 435, endorsed the remarks of Lord Clyde at 457 as to the need to be able to predict with some confidence whether or not an immunity will apply. Summary determination is therefore appropriate where the claim of the plaintiff is clearly within the immunity.
[81] The Court of Appeal in Berryman at [70] then applied the immunity doctrine thus:
This case falls squarely within the immunity. It involves an attempt to impose a civil liability in relation to evidence given and submissions made in the course of judicial proceedings...
[82] Mr Hampton‘s submissions did not engage on the issue of immunity. What
the Court has by way of response is that contained in the notice of opposition:
The plaintiffs do not accept that the concept of witness immunity applies.
The first and second defendant failed as public officers performing public functions, to discharge the obligation, as representatives of the Crown, to make full and proper disclosure and discovery of the critical filenote evidence of Mr Aronsen relating to communications and records of decisions and assurances, knowing or recklessly indifferent to the likelihood of damage to the plaintiffs.
The plaintiffs suffered damage as a result of that unlawful failure.
[83] As the Court of Appeal decision in Berryman indicates, the doctrine of immunity applies in relation to the tort of misfeasance in a public office as it applies to other torts. The ground of opposition stated by the plaintiffs is therefore not an answer to the defendants‘ assertion that the immunity arises.
[84] In then applying the doctrine to the circumstances of this case, it is illustrative to consider the gravamen of the Berryman complaints. As summarised in the Court of Appeal judgment at [2] Mr and Mrs Berryman alleged that the army had acted improperly in relation to the inquest:
b. in evidence and submissions which were given and made to the
Coroner.
[85] The immunity applied precisely because the conduct complained of was evidence given and submissions made in the course of judicial proceedings, namely the coronial process.
[86] The plaintiffs‘ sixth cause of action in this case equally relates to judicial proceedings – the complaint is as to non-disclosure during the discovery process under the High Court Rules during the years 2004 – 2006. This sixth cause of action stands alongside the fifth cause of action which alleges a failure to disclose the file notes during the Commissioner‘s exercise of powers. Responsibly, the defendants did not seek to argue that the immunity would apply in relation to the administrative processes referred in the fifth cause of action – they focused their ground of application solely on the judicial process which is the subject matter of the sixth cause of action.
[87] The defendants are entitled to succeed on the ground immunity in relation to the sixth cause of action. The Berryman decision applies.
First six causes of action - who made the relevant decisions – is there direct liability?
[88] The Commissioner says as a ground of application that there is no pleading that the Commissioner made relevant decisions. He says that he may not be made vicariously liable for the act of another state servant.
[89] This ground of application invited deliberation in relation to two possible avenues of liability.
[90] The first avenue of liability – accepted by Mr Pike as an established basis of liability in relation to this tort – is that a public body as well as its individual officers can be directly liable – see the cases gathered in S Todd (ed), The Law of Torts in New Zealand, (5th ed, 2009) at 19.2.02, fn 34. The Commissioner‘s attack in relation to this avenue of liability lay in a pleading issue, namely that there was no pleading that the Commissioner made the relevant decisions.
[91] The Commissioner‘s proposition in relation to a second avenue of liability – vicarious liability – is based on a legal proposition rather than a pleading issue, namely that as a matter of law the Commissioner cannot be vicariously liable for the act of another State servant.
The imposition of direct liability – the principles
[92] Powers and duties are conferred on the Commissioner to arrange tax legislation, including as in this case, the Goods and Services Tax Act. The general nature of the Commissioner‘s role in relation to such legislation is set out in s 6A(2) Tax Administration Act:
The Commissioner is charged with the care and management of the taxes covered by the Inland Revenue Acts and with such other functions as may be conferred on the Commissioner.
[93] Section 7 Tax Administration Act makes provision for the delegation of any
or all of the Commissioner‘s powers either generally or particularly.
[94] Mr Pike did not refer me to the decision of this Court in Reid v Commissioner of Inland Revenue (2007) 23 NZTC 21,194 (in which Mr Pike also appeared for the Commissioner). That case is authority (in the context of an application to strike out a claim based on misfeasance in public office) for the proposition that it is arguable that the Commissioner may be held directly liable for the actions of others carried out in the name of the Commissioner. In Reid v CIR, having reviewed the nature of the Commissioner‘s role as defined by the Tax Administration Act, Andrew J said at [26] - [30] -
[26] Mr Walker submitted that the whole scheme of the Act is that the defendant is charged with the duty (the ―care and management of the taxes‖) and is given the power to carry it out. Whether formally or informally, as a matter of practicality the defendant must have people acting on his behalf. There is no question of vicarious liability, he submitted. The plaintiffs are not seeking to hold the Commissioner liable for the actions or omissions of the named persons, they seek to hold the Commissioner liable for his own acts or omissions, committed, however, by those persons. Mr Walker did not cite any authority for his contention that the Commissioner could be held directly liable on this basis. The Court‘s own research has not disclosed any such authority.
[27] Under the law of agency, the principal is held directly liable for the actions of the agent. However, Mr Walker did not suggest that his submission was based on agency principles. Further, the principles of agency (being based on the principal/agent contract) are of limited application with respect to the law of tort.
[28] Some support for the plaintiffs‘ position may perhaps be derived from the judgment of the High Court of Australia in George v Federal Commissioner of Taxes [1952] HCA 21; (1952) 86 CLR 183. There, the Court dismissed a taxpayer‘s appeal against the lower Court‘s refusal to order the Commissioner to give particulars of the person or officer who had formed an opinion as to his income, leading to the issue of an amended assessment.
[29] In its recital of the facts, the High Court noted that it had been ascertained
―by or on behalf of the Commissioner‖ that the taxpayer‘s income was considerably
higher than stated in his return of income. The Court then noted that the
Commissioner ―using that term to include his officers‖ then assessed the taxpayer‘s
income (see at 199).
[30] The High Court was in no doubt that it was part of the Commissioner‘s function of assessing taxpayers to form an opinion as to whether a return was satisfactory. It commented (at 206) that ―any other view would make it impossible to carry on the work of the Department of Taxation.‖
[95] The Commissioner‘s appeal from the High Court decision in Reid v CIR was unsuccessful: [2007] NZCA 576 (a further judgment to which Mr Pike did not refer me).
[96] The Court of Appeal was called on to briefly consider the possibility of vicarious liability (to which I will return) in the judgment of the Court delivered by Wilson J. In relation to what counsel for Mr Reid submitted was ―the point‖ of the case, the Court of Appeal said this at [32] – [33]:
[Mr Walker] contends that the relevant acts are the principal acts which cause injury to the respondents, and that all of these acts were exercises of power conferred on the Commissioner by virtue of his position. The fact that he may have been assisted by his agents or employees does not alter the position.
For the purposes of this strike out application, we accept this submission. The acts complained of by the respondents were all at least arguably acts of the Commissioner ...
The plaintiff’s pleadings on “direct liability”
[97] The Commissioner‘s case in relation to direct liability is that there is no
pleading to support a contention that the Commissioner made the relevant decisions.
[98] Before turning to the pleadings, it is convenient having referred to Reid v CIR for its legal propositions, to compare the factual allegations against the Commissioner in that case with the plaintiffs‘ pleaded causes of action in this case.
Application of Reid v CIR to the facts of this case
[99] In Reid v CIR the factual allegations against the Commissioner were summarised by Andrews J at [13] - [18] under five headings, namely:
An Inland Revenue Department Investigation
[being allegations as to errors, failures and delays]
Statements of Position (SOPs)
[being allegations as to errors and failures]
Complaints to the SFO
[being allegations as to errors and failures]
Notices of Proposed Adjustment (NOPAs) [being allegations
as to incorrect issue]
The Commissioner‘s ignoring of explanations and
advice given to
the Department by Mr Reid and the Commissioner‘s delay in
disclosing documents to Mr Reid
[being allegations as to failures and delays]
[100] In the present case, the plaintiffs‘ pleading identifies as conduct constituting
misfeasance:
1. First cause of action – the GST non-decisions (see [17] above).
2. Second cause of action – the failure to abide by the three decisions
(see [18] to [26] above).
3. Third cause of action – the October 1998 closure decision (see [27]- [28] above).
4. Fourth cause of action – non disclosure of the Aronsen file notes
1996-October 2004 (see [29] to [30] above).
5. Fifth cause of action – non disclosure of the Aronsen file notes, May
2004 to June 2006, during the exercise of seizure powers (see [31] –
[32] above).
6. Sixth cause of action – non disclosure of Aronsen file notes, 2004-
2006 during the High Court discovery process (see [33] – [38] above).
Delay or failure to make decisions indefinitely
[101] Mr Pike began with what was effectively an overarching submission arising from the plaintiffs‘ pleading that the Commissioner‘s unlawful acts involved failing to make decisions indefinitely and withholding refunds indefinitely.
[102] Mr Pike submitted that there was a fallacy in the plaintiffs‘ reference to
―decisions‖ in that no decisions to exercise, or failure to exercise, statutory powers attaching to a specific office were identified.
[103] Mr Hampton, for his part, submitted that the decisions involved in the conduct complained of lend themselves to being described as actions or omissions.
He submitted that where a public officer has a statutory duty to act but fails to do so within a reasonable time, it can be inferred that the public officer has made an unlawful decision not to carry out his or her duty.
[104] I find however that there is in the pleadings in this case a parallel with Reid v CIR. The parallel lies in the aspects of delay alleged against the Commissioner in relation to the Department‘s investigation, the ignoring of explanations and advice given to the Department by Mr Reid, and the Commissioner‘s delay in disclosing documents to Mr Reid. Significantly, in Reid, Andrews J found (at [35]) that the arguable public duty involved lay in the Commissioner‘s duty of assessment and collection of taxes. Her Honour concluded (at [38]) that it was therefore unnecessary to consider whether the plaintiffs had to prove that persons named in the statement of claim were ―public officers‖, given that the plaintiffs were proceeding against the Commissioner on the basis of direct liability.
[105] Her Honour had concluded in the passage I have cited (above [94]) that she could not exclude the possibility of the plaintiffs‘ succeeding in arguing that the Commissioner could be held directly liable for the actions of others carried out in his name. In reaching that conclusion, her Honour (at [28]) had regard to the judgment of the High Court of Australia in George v Federal Commissioner of Taxes. In George there had been a finding ―by or on behalf of the Commissioner‖ that the taxpayer‘s income was considerably higher than stated in his return of income. The High Court was in no doubt that it was part of the Commissioner‘s function of assessing taxpayers to form opinions as to whether a return was satisfactory.
[106] A parallel process of reasoning can be applied to the subject matter of the each of the cause of action in this case –
1. in relation to the first cause of action the decision as to the validity of a GST return claim;
2. in relation to the second cause of action, the decision to refuse to or to delay implementation of a concluded tax position negotiated between the Commissioner and the taxpayer;
Who is pleaded as having made the relevant decisions?
[107] It is a common ground of the Commissioner‘s application in relation to the all of the first six causes of action that there was no pleading that the Commissioner made the relevant decisions.
[108] I have ultimately found it unhelpful for there to have been a focus on ―the decisions‖ as if decisions alone constituted the pleaded grievances of the plaintiffs. The difficulty of focussing on ―the decisions‖ is that in relation to some of the causes of action, the ―decisions‖ pleaded are simply part of a larger mix or possibly background. The conduct which the plaintiffs complain of might more appropriately be referred to as precisely that, namely conduct.
[109] What is clear, is that in relation to each of the first six causes of action, the plaintiffs are holding the Commissioner responsible for the Commissioner‘s conduct. Where, for instance, it is pleaded in the second cause of action that the Commissioner committed the tort of misfeasance in his conduct relating to ―three decisions‖, the pleading is (amended statement of claim para 13) that it was the Commissioner who made those three decisions. In the particulars of the three decisions, there is reference to named officers of the Department but the pleading is that these were the Commissioner‘s decisions. This is not conceptually different to decisions or positions reached ―by or on behalf of the Commissioner‖ as that expression was used in the High Court of Australia decision in George v Federal Commissioner of Taxes.
[110] I must take care not to let the particularisation of exactly which persons carried out which functions detract from the overarching allegation that it was the Commissioner who did the alleged acts.
[111] As the pleading stands, it provides a sufficient basis for the proposition that in relation to each of the first six causes of action, the Commissioner was directly responsible for the impugned conduct.
First six causes of action - may the Commissioner be made vicariously liable for the conduct of another State servant?
[112] Because Mr Pike sought to cast the plaintiffs‘ case as one alleging only vicarious liability and not direct liability, detailed submissions were presented to me in relation to the concept of vicarious liability as it might apply to the tort of misfeasance in public office.
[113] Mr Pike‘s submissions in relation to the Commissioner‘s liability began with
the provisions of s 6(1) Crown Proceedings Act 1950, which provides
Liability of the Crown in tort
(1) Subject to the provisions of this Act and any other Act, the Crown shall be subject to all those liabilities in tort to which, if it were a private person of full age and capacity, it would be subject—
(a) In respect of torts committed by its servants or agents;
(b) In respect of any breach of those duties which a person owes to his servants or agents at common law by reason of being their employer; and
(c) In respect of any breach of the duties attaching at common law to the ownership, occupation, possession, or control of property:
Provided that no proceedings shall lie against the Crown by virtue of paragraph (a) of this subsection in respect of any act or omission of a servant or agent of the Crown unless the act or omission would apart from the provisions of this Act have given rise to a cause of action in tort against that servant or agent or his estate.
[114] Thus, the circumstances in which the Crown is liable in tort are those set out in s 6(1) of the Act. The previous immunity of the Crown no longer exists. As Professor Todd says in The Law of Torts in New Zealand (5th ed, 2009) at 23.1.02 -
... the general principles of the common law now [are] the source of the
Crown‘s liability.
But such liability of the Crown in tort is subject to the proviso to s 6(1).
[115] I adopt the summary of the proviso appearing in J Hodder SC ‗Civil Claims in Commercial Perspectives‘ in Litigation against the Crown (New Zealand Law Society, 2010):
The proviso in 6(1) effectively means that the Crown is immune from
―institutional liability‖. The Crown, as an intangible body, conducts all its
actions through its employees and agents, and so unless those agents and
employees can be held personally liable for their actions in tort, proceedings cannot lie against the Crown [for] ―its‖ tortious liability as an institution. This is contrasted with any other body corporate, whose liability is not contingent upon an agent‘s personal liability.
[116] Thus, s 6(1) of the Act permits vicarious liability of the Crown.
[117] The notion of the Crown‘s liability under the equivalent United Kingdom legislation (Crown Proceedings Act 1947) is explained in Chagos Islanders v Attorney-General [2004] EWCA Civ 997 by Sedley LJ (for the Court) in passages adopted by Heath J in Delamere v Attorney-General HC Auckland CIV-2008-404-
001377, 3 March 2010 at [24]:
20. ... the English common law has no knowledge of the state. Public law recognises the Crown as the repository of a range of prerogative and statutory powers. By the prerogative writs and orders, it has for centuries called ministers to account if they abuse the latter, and in recent years if they misuse the former. But the State has no tortious liability at common law for wrongs done by its servants, from ministers down. In England at least (Scottish law has historically differed) either the Crown's servants are personally liable or there is no redress. It was to change this anomalous situation that the Crown Proceedings Act 1947 was passed. But the 1947 Act does not work by making the state a potential tortfeasor: it works by making the Crown vicariously liable for the torts of its servants. It has only been with the enactment of the Human Rights Act 1998 that the Crown, in the form of a 'public authority', has acquired a primary liability for violating certain rights. Where, of course, a limb of the state has corporate legal personality – a local authority, for example, or the Bank of England – no such problem arises; but this is not such a case.
...
Misfeasance in public office
26. [Counsel's] principal contention, here too, has been that the state can be institutionally liable. But the same fundamental problem arises: the state is not a potential tortfeasor. The nature of misfeasance in public office is tailored to this fact: it is concerned with individuals who consciously abuse
powers entrusted to them by the state and do so knowing that it may well harm someone: see Three Rivers DC v Bank of England (No 3), per Lord Steyn at page 191.
27. [Counsel] founds upon what Lord Hutton said at paragraph 126 of his speech on the application to strike out the claims against the Bank of England: "It is clear from the authorities that a plaintiff can allege misfeasance in public office against a body such as a local authority or a government ministry: see Dunlop v Woollahra Municipal Council and Bourgoin SA v Ministry of Agriculture, Fisheries and Food." But Dunlop self-evidently concerned a local corporation. The claim against the nominated department of state in Bourgoin depended on proof that "the minister's motive was to further the interests of English turkey producers by keeping out the produce of French turkey producers – an act which must necessarily injure them" (per Oliver LJ at 777). In other words, if the necessary knowledge and motive could be brought home to the minister, the Crown in the nominal form of MAFF (pursuant to the list of authorised departments published under s.17 of the Crown Proceedings Act 1947) would be vicariously liable. It is in that sense that Lord Hutton was speaking of departmental liability for misfeasance in public office.
(Footnotes omitted)
[118] Mr Pike submitted that the Commissioner cannot be held vicariously liable for the actions of employees of the Department because the Crown, not the defendant, was their employer. Mr Pike referred the Court to Bainbridge v Postmaster-General [1906] 1 KB 178 and Crispin v Registrar of the District Court [1986] 2 NZLR 246.
[119] In Bainbridge, the Court held that the defendant was not vicariously liable for the wrongful acts of his subordinates. This was because there was no employment relationship between the defendant and the subordinates. The Crown, not the defendant, employed them.
[120] Bainbridge was applied in New Zealand in Crispin in which Cooke P said at
255:
Claims in tort based on actions or omissions of Crown servants can be put forward in three ways. First, there can be an action against the Crown, commonly represented by the Attorney-General, under the Crown Proceedings Act 1950, alleging vicarious liability on the part of the Crown. Secondly there can be an action against the individual employee or employees alleged to have committed the tort: this would be against them personally, named as individuals, although it would often be the case that the Crown as a good employer would stand behind them financially. Thirdly, where a statute or subordinate legislation so permits, there may be an action against the holder of an office simply as such holder: a class of case in which
the legislation authorises the holder of the office for the time being to be sued eo nomine. What cannot be done, however, is to sue a senior Crown servant on the footing that at common law he is vicariously liable for the torts of his subordinates. For this well-settled principle, see for instance Bainbridge v Postmaster-General [1906] 1 KB 178.
[121] Thus to this point the authorities appear to be stacked up against the imposition of vicarious liability upon the Commissioner.
[122] As I have stated earlier, Mr Pike did not refer me to the decisions of this Court and of the Court of Appeal in Reid v CIR. Those judgments as well as being relevant to allegations of direct liability are also relevant in relation to the issue of vicarious liability.
[123] In Reid v CIR, the arguable liability of the Commissioner was put by the plaintiffs and found by the Court upon the basis of the Commissioner‘s (arguable) direct liability. In the High Court it was not contended that the Commissioner could be vicariously liable, but that possibility was raised in the Court of Appeal (see the judgment at [10]). The Court of Appeal upheld the High Court judgment on the finding of arguable direct liability (see [32]) and in relation to vicarious liability said at [33]:
The acts complained of by the respondents were all at least arguably acts of the Commissioner, or arguably acts of employees for which the Commissioner is vicariously liable.
[124] In reaching its conclusion as to vicarious liability, the Court of Appeal noted (at [31]) Mr Pike‘s concession that the possibility of vicarious liability in relation to misfeasance in public office is not foreclosed and his recognition that it is at mo st
―controversial‖. Mr Pike had referred to the House of Lords’ decision in Kuddus v Chief Constable of Leicestershire Constabulary [2002] 2 AC 122 as support for the proposition that vicarious liability is incompatible with the nature of the tort. I take it that the reference to the Kuddus decision is to the discussion of objections to exemplary damages awards in vicarious liability cases by Lord Hutton, especially at [126] – [138]. His Lordship expressed concern at the way in which vicarious punishment of public employers for the misfeasances of their employees had crept into English civil law (see [136]). Ultimately, however, his Lordship observed (at
[138]) that because the point regarding vicarious liability and exemplary damages had not been the basis of the strike out application in the Kuddus case, his Lordship‘s views were to be regarded as provisional and the point was left for decision at a later stage in the proceedings.
[125] In Reid’s case in New Zealand, again in a strike out setting, the New Zealand Court of Appeal was constrained to find a claim based on vicarious liability for misfeasance was at least arguable.
[126] Applying CIR v Reid, I find it is arguable in this case that the Commissioner is vicariously liable for the acts of Departmental officials in relation to GST decisions.
The plaintiffs’ pleadings – in relation to vicarious liability
[127] It was Mr Pike, as I have indicated, who sought to cast the plaintiffs‘ pleading as one based on vicarious liability. The irony of this position is that the plaintiffs themselves had not expressly pleaded the concept of vicarious liability in the amended statement of claim. Notwithstanding the Commissioner‘s reference to vicarious liability in his strike out application, Mr Hampton did not articulate reliance upon the doctrine of vicarious liability in his notice of opposition. Nor did he develop submissions as to vicarious liability orally. When I requested additional written submissions from Mr Hampton in relation to four specific topics at the conclusion of the hearing, Mr Hampton took the opportunity in his additional written document to raise a ―preliminary issue of vicarious liability‖. Mr Hampton‘s notes suggested that he had entered some agreement with Mr Pike whereby the Commissioner would accept vicarious liability for ―any proven reckless tort conduct of his employees‖. Mr Hampton suggested this had led to the plaintiffs not suing individual officers. He suggested that if the Commissioner was not accepting vicarious liability, the plaintiffs would be happy to ―reinstate the identities of the lower level officers alleged to be liable for wrongful acts‖. Mr Pike immediately responded in a brief memorandum advising the Court that Mr Hampton was incorrect to assert that Mr Pike had authority to enter into an arrangement on behalf of the Commissioner by which vicarious liability was accepted. It is appropriate that
this exchange be here recorded. That said, it is unnecessary in view of the absence of an express pleading of vicarious liability in the amended statement of claim that I take this issue any further. It is for a plaintiff to precisely allege whether and how vicarious liability arises: see Crispin at 256 per Cooke J for the Court.
Minimum requirements for misfeasance
The impugned conduct
[128] Mr Pike‘s submissions appropriately identified the conduct pleaded by the plaintiffs as an ―unlawful act‖ as being –
failing to make decisions indefinitely
withholding GST refunds indefinitely.
[129] Mr Pike submitted that the element of decision-making or action-taking was missing in the pleading in that:
―no decision to exercise, or to fail to exercise at all, a statutory power attaching to a specific office is identified, and cannot be‖.
[130] Mr Hampton is, in my judgment, entitled to say that that criticism is unfair. The plaintiffs have pleaded conduct of the Commissioner, and Mr Pike himself was able to identify the thrust of the pleadings as lying in the failure to make decisions indefinitely and to withhold refunds indefinitely. A comment by Mr Pike that the plaintiffs‘ pleaded unlawful act ―arises at some indeterminate time‖, when the defendant began to do those things, might again be seen as an unfair criticism in that the plaintiffs were faced with the decision-making of another (or others) on his behalf at times known only to the Commissioner and his and/or the Department‘s officers. Discovery may assist the plaintiffs to provide greater particularity. In any event, they would be entitled to put it to witnesses and to argue at trial that it is an inference to be drawn by the nature and length of delay that at some point a decision must have been made.
[131] By reference to Three Rivers (No 3) above [12]), Mr Pike submitted that whether the basis of an intended proceeding is targeted or non-targeted malice, the essence of the tort is that a person holding public office has deliberately abused a power of that office. Mr Pike‘s submissions came close to suggesting that because there was no statutory direction limiting the time within which the Commissioner must determine a GST liability, there could be no deliberate abuse of the public office through mere delay. This submission stood side by side with criticisms of the plaintiffs‘ pleadings as involving an allegation of undue delay ―at some unspecified time by some unspecified person‖.
[132] In the context of the arguability of a plaintiff‘s claim, the fact that a statute does not impose a specific time limit cannot be decisive. The tort exists to protect those who are vulnerable to the wrongful exercise of a public officer‘s powers or functions. What is not abusive through short term delay may become abusive over a long term. The previous examination of the Commissioner‘s conduct by this Court and the Court of Appeal in a judicial review context points at least argua bly to the Commissioner‘s engaging in conduct contrary to the purpose of the GST legislation (see the judgment of Fogarty J dated 15 December 2006 at [154]) and assists an argument that powers arguably have been exercised for improper purposes (same judgment at [156]).
[133] Significantly, the conduct in no less than four of the five headings of allegation identified by Andrews J in Reid v CIR involved failures and/or delays on the part of the Commissioner. Those delays and failures, in the context of the strike out application, were treated as no less ―conduct‖ in the context of the Commissioner‘s duties than positive actions such as the issuing of notices of proposed adjustment. Andrews J, at [48], considered the plaintiffs‘ allegations as to the conduct of the tax investigation in Reid in this way:
Among the powers and functions [of the Commissioner] is the general ―care and management of taxes‖. In my view, it is arguable that in exercising the power to
―manage taxes‖ the Commissioner is acting in the exercise of a power with which he
is clothed by virtue of his public office. The ―manner in which he exercises his power‖ arguably includes the manner in which he conveys information to other agencies, makes notes, and deals with information and explanations given to him.
[134] In a parallel way, the Commissioner‘s management of the plaintiffs‘ GST positions and tax positions generally were arguably part of the exercise of public office in this case. Whether they were in fact so and whether the conduct was tortious is a matter properly for trial.
Improper motive/requisite intention
[135] I adopt the ―improper motive‖ and ―requisite intention‖ terminology adopted by the Court of Appeal in the Reid case.
[136] Mr Pike‘s attack on the plaintiffs‘ case in relation to the element of intention
(or recklessness) was summarized in this form –
It is then alleged that the defendant knew the delay was illegal, or was reckless as to that. The plaintiffs do not allege that there was at any time a decision by an identified person holding an identified public office to decline to continue the s 46 enquiry intending to harm the plaintiffs (or being reckless as to that).
[137] Mr Pike‘s reference to the lack of allegation as to a decision ―by an identified person‖ has parallels with his reference to the act in question being at ―some indeterminate time‖. The plaintiffs plead that the defendant is responsible for the decision. What emerges at trial, with or without the added assistance of discovery, may vindicate that pleading. Bearing in mind my finding that the Commissioner may arguably be directly liable for actions of others carried out in his name, it is a matter for evidence at trial whether the plaintiffs can sustain the allegations made in relation to each of the first six causes of action as to knowledge of injury through the accumulation of penalties resulting from unlawful acts or recklessness as to the consequences of those unlawful acts.
Conclusion – first six causes of action
[138] The plaintiffs‘ sixth cause of action is clearly untenable in the sense that the Court is certain it cannot succeed. In relation to the first five causes of action, the Commissioner has not satisfied me that they are clearly untenable. Even had the Commissioner come close to satisfying that threshold, this would have been a case in which the remaining uncertainties as to the boundaries of the tort required the Court
to be slow to strike out. While the tort is frequently described as ―ancient‖ (dated from the 1600‘s) its recent history is one of renaissance. By way of example, that has led the Court of Appeal, as recently as 2008 (in the Berryman decision (at [63])), to identify the ―scope for doubt and debate as to the breadth of the concept of public office for the purposes of the tort‖. More broadly, it was observed by the Court of Appeal of Victoria in 2002 in Cannon v Tahche at para 27 that –
It is still the case ... that Courts consider the precise limits of the tort remain undefined.
[139] In the event, I find the first five causes of action, assuming the facts pleaded to be true, to be tenable.
Seventh cause of action – alleged breaches of right under the New Zealand Bill of Rights Act
Plaintiff’s pleading (????)
[140] The third defendant, the Attorney General, in right of the Department of
Inland Revenue, is sued as the guarantor of rights contained in the Bill of Rights Act.
[141] The express pleading of fact is contained in paragraphs 96, 98 and 99 of the amended statement of claim and reads
96. The first defendant is a public authority with the power to make determinations in respect of the plaintiffs.
...
98. The plaintiffs repeat paragraphs 8 to 12 in the first cause of action and say that the third defendant, in respect of the first defendant, exercised the statutory powers provided in the taxation legislation for improper purposes as set out in the first to sixth causes of action, made assurances for the remission of penalties but failed to honour them and exercised statutory powers of enforcement in breach of those assurances, and therefore breached the right of the plaintiffs to the observance of natural justice under section 27 of the Bill of Rights Act 1990.
99. The plaintiffs repeat paragraphs 30-90 in the fourth to sixth causes of action and say that the third defendant, in respect of the first and second defendants, failed to disclose the Aronsen files notes and
therefore breached the right of the plaintiffs to the observance of natural justice under section 27 of the Bill of Rights Act 1990.
Basis of strike out application
[142] The Attorney applies for an order striking out the claim against him on the basis –
1. He is not in relation to the allegations against the Commissioner the guarantor of the rights contained in the Bill of Rights Act.
2. The Attorney may not be deemed to have made the decisions sued on.
3. The rights sued on apply to adjudicative bodies and neither the
Commissioner nor the Attorney is an adjudicative body.
Opposition
[143] The plaintiffs oppose the application for strike out in relation to the seventh cause of action. They say –
1. The Attorney in relation to the claims against the Commissioner is the guarantor of rights as alleged by virtue of the Commissioner‘s power under the Tax Administration Act to make discretionary decisions concerning the plaintiffs‘ rights, obligations or interests protected or recognised by law;
2. In exercising the power to make discretionary decisions, the Commissioner had the sole knowledge, power and control of the evidence contained in file notes of Mr Aronsen, with the plaintiffs therefore vulnerable to and entirely dependent upon the observation by the Commissioner of the principles of natural justice and general rights contained in the New Zealand Bill of Rights Act in relation to the disclosure of evidence contained in the file notes of Mr Aronsen;
3. the Attorney is deemed to have made the decisions and engage in the conduct set out in the first six causes of action by virtue of ss 3(2)(b) and 6(3) Crown Proceedings Act 1950.
Submissions for the Attorney
[144] Mr Pike summarised the plaintiffs‘ pleading of their seventh cause of action as being a ―make-weight‖ pleading which did not and could not identify the principles of natural justice relied upon. Mr Pike did not in his oral submissions develop the point further.
[145] Mr Pike noted that the right to natural justice relied upon by the plaintiffs is that contained in s 27(1) of the Bill of Rights Act, which provides:
27 Right to justice –
(1) Every person has the right to the observance of the principles of natural justice by any tribunal or other public authority which has the power to make a determination in respect of that person's rights, obligations, or interests protected or recognised by law.
[146] The Court of Appeal in Minister of Fisheries v Pranfield Holdings Ltd [2008]
3 NZLR 649 had in part to consider a claim by United Fisheries Limited that the Fisheries Division of the Ministry of Agriculture and Fisheries had failed to observe the principles of natural justice in its dealings with United Fisheries. The particular conduct complained about was MAF‘s alleged failure to process a commercial fishing permit application and not granting a fishing permit as soon as reasonably possible after the application was made, and a continuing failure to issue a permit after a moratorium was imposed.
[147] The Solicitor-General for the Crown submitted that MAF was not a tribunal or a public authority exercising an adjudicative function and therefore s 27(1) of the Bill of Rights Act was not engaged on the facts of the case.
[148] O‘Regan J, for the Court, summarised the Solicitor-General‘s submissions at
[135] –
He said that the present case involved the exercise of discretion by a public official, rather than an adjudication on the rights of a person of the kind which could be expected from a tribunal. ...
and the Court concluded at [136] –
We accept Mr Collins‘ submission. In our view Chisholm [v Auckland City Council [2005] NZAR 661 at [32]] correctly states the ambit of s 27(1), and we agree that it is not engaged unless the decision of the public authority which is under consideration is of an adjudicative character...
[149] The Court concluded that United Fisheries‘ cause of action did not succeed.
Plaintiff’s submissions
[150] Mr Hampton briefly addressed the seventh cause of action in his oral submissions. He submitted that the seventh cause of action raised a legitimate issue as to the function of the Commissioner in relation to discretionary relief. His proposition, without authority, was that the Commissioner had a responsibility in the nature of determining rights to which rules of natural justice should apply. He commented that the foundation for the seventh cause of action was the totality of matters pleaded in the first six causes of action.
Discussion
[151] The decision of the Court of Appeal in Pranfield Holdings applies (above
[146]) in this case.
[152] The impugned conduct of either the Commissioner or the officials was not adjudication of the rights of the plaintiffs of a kind which could be expected from a tribunal. There are specifically rights of recourse to tribunals for tax-payers such as the plaintiffs if adjudication is desired. What the plaintiffs complain of in this case is, as in Pranfield Holdings, the way in which the public officials involved exercised discretions.
[153] The provisions of s 27(1) of the Bill of Rights Act are accordingly not engaged on the facts pleaded by the plaintiffs in this case.
[154] The seventh cause of action is clearly untenable in the sense that the Court is certain it cannot succeed.
Orders on strike out application
[155] I order –
2. The seventh cause of action against the third defendant is struck out.
Costs
[156] I reserve costs. My preliminary views are as follows.
[157] The Attorney as third defendant has been successful in his application and costs should follow the event. Scale 2B would seem appropriate.
[158] The first and second defendants have been partly successful and partly unsuccessful. It may be that an appropriate outcome would be for costs to lie where they fall. In any event, I direct Mr Hampton and Mr Pike to discuss all questions of costs in relation to the strike out applications with a view to reaching agreement. If agreement is not possible, then Mr Pike is to first file and serve his submissions in relation to costs and Mr Hampton is to file and serve his submissions within ten working days thereafter. These submissions should deal with the proposed incidence of costs and the proposed scale or quantum of costs and disbursements.
Next case management conference
[159] I adjourn the proceeding (including the plaintiff‘s opposed application ―for discovery‖) to a case management conference at 12.30pm 13 September 2011 by
telephone (Associate Judge Osborne). The period of adjournment takes into account the appeal period in relation to this judgment. Leave is reserved to Mr Pike and Mr Hampton to request an earlier telephone conference if that becomes appropriate.
[160] Mr Pike and Mr Hampton are to file by 8 September 2011 memoranda setting out their submissions as to appropriate timetabling and other directions.
Associate Judge Osborne
Solicitors/Representatives:
Mr D J Hampton, C/- Edgeware Law Centre, PO Box 21319, Christchurch
Crown Law, PO Box 2858, Wellington 6140
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