Commissioner of Inland Revenue v Accent Management Limited [2012] NZHC 2389 (14 September 2012)

Last Updated: 9 October 2012

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-4731 [2012] NZHC 2389

BETWEEN THE COMMISSIONER OF INLAND REVENUE

Applicant

AND ACCENT MANAGEMENT LIMITED Defendant

AND BEN NEVIS FORESTRY VENTURES LIMITED

Second Respondent

Cont ...

Hearing: (on the papers)

Representation: R L Roth for the Commissioner of Inland Revenue in all proceedings, seeking costs

G A Muir in person in all proceedings

R G Ewen for the 1st to 4th, and 6th to 11th Respondents in CIV-

2011-404-4731

Judgment: 14 September 2012

JUDGMENT OF WOODHOUSE J (Costs)

This judgment was delivered by me on 14 September 2012 at 4:00 p.m. pursuant to r 11.5 of the High Court Rules 1985.

Registrar/Deputy Registrar

..........................................

Counsel / Parties:

Mr B Stewart QC, Barrister, Auckland

Mrs M Hinde, Barrister, Auckland

Dr G Muir, Muir Law, Auckland

Dr M Palmer, Ms J D Kerr, Mr TGH Smith and Ms R L Roth, Crown Law, Wellington

Instructing Solicitors:

Mr R G Ewen, Wynyard Wood, Solicitors, Auckland

COMMISSIONER OF INLAND REVENUE V ACCENT MANAGEMENT LIMITED HC AK CIV-2011-404-

4731 [14 September 2012]

_{Cont ...}

AND BRISTOL FORESTRY VENTURE LIMITED

Third Respondent

AND CLIVE RICHARD BRADBURY Fourth Respondent

AND GARRY ALBERT MUIR Fifth Respondent

AND GREGORY ALAN PEEBLES Sixth Respondent

AND HILLVALE HOLDINGS LIMITED Seventh Respondent

AND LEXINGTON RESOURCES LIMITED Eighth Respondent

AND PETER ARNOLD MAUDE Ninth Respondent

AND REDCLIFFE FORESTRY VENTURES LIMITED

Tenth Respondent

AND WAIKATO RESIDENTIAL PROPERTIES LIMITED

Eleventh Respondent

CIV-2011-404-1132
CIV-2011-404-4197

BETWEEN GARRY ALBERT MUIR Appellant

AND THE COMMISSIONER OF INLAND REVENUE

Respondent

[1] Following my judgment of 22 June 2012 the Commissioner has sought indemnity costs or, in the alternative, increased costs. Both applications are opposed.

[2] The Commissioner seeks indemnity costs pursuant to r 14.6(4)(a) of the High

Court Rules. The rule provides:

(4) The court may order a party to pay indemnity costs if—

(a) the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding;

The essence of the Commissioner’s application, in terms of the rule, is that the taxpayers acted vexatiously and improperly and unnecessarily in commencing and continuing their applications for orders that Crown Law and Crown counsel not act for the Commissioner.

[3] In Bradbury v Westpac Banking Corporation1 the Court of Appeal listed circumstances in which indemnity costs have been ordered. Those which the Commissioner submits apply in this case are as follows:

(a) Particular misconduct that causes loss of time to the Court and to other parties.

(b) Commencing or continuing proceedings for some ulterior motive.

(c) Doing so in wilful disregard of known facts or clearly established law. (d) Making allegations which ought never to have been made or unduly

prolonging a case by groundless contentions; that is, advancing a hopeless case.

[4] The Commissioner submits that findings in the substantive judgment support

_{the submission that the taxpayers’ application comes within the circumstances just}

1 Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [29].

summarised and, in consequence, within r 14.6(4)(a). The findings in the substantive judgment relied on are those at [4], [53] and [54]. For convenience I will reproduce those paragraphs, adding some footnotes for purposes of clarity:

[4] I have concluded that the applications should be dismissed for two reasons. One is that the taxpayers’ allegations can have no relevance in the proceedings in question. As a result there are no relevant issues in respect of the duties of Crown Law. The second reason is that, in my judgment, the history of past litigation in which most of the taxpayers have been involved, including final determinations of fact of this Court, means that the taxpayers cannot establish an arguable factual foundation to support the applications. It is for this second reason that, in the following section, the litigation history is set out at some length, including a lengthy citation with factual findings from another case between the Commissioner and the taxpayers.

[53] I am satisfied, to the extent that I need to be satisfied on the point, that this application is an attempt to game the system. In this case, unlike the circumstances Tipping J was referring to in Tannadyce,2 it is an attempt to game the system within the statutory procedures. I am satisfied that the taxpayers have not brought this application because of a sincere and well- founded concern that their tax affairs will not be properly adjudicated on, but in an endeavour to cause unjustified difficulties for the Commissioner and to delay resolution of the tax disputes. The attempt to game the system, through the present applications, may be seen from the litigation history. It is for that reason that I set the history out in some reasonable detail, and in particular a substantial part of the conclusions of Keane J in the judicial review proceeding.

[54] The allegations of the taxpayers in these proceedings, in support of their debar applications, are essentially the same as their allegations in the judicial review proceeding. The only material difference is that, on the present applications, it is alleged that Crown Law participated in various ways in, and promoted, the alleged misconduct of the Commissioner, which misconduct was the foundation of the judicial review proceeding. This is not a material distinction in the present context. This is because the question whether there is an arguable foundation for the allegations against Crown Law is dependent on whether there is an arguable foundation for the allegations against the Commissioner. In the judicial review proceeding, Keane J made important findings of fact3 which are sufficient for the purposes of these applications to conclude that the taxpayers do not have a reasonably arguable factual foundation to advance the applications to debar. It is not necessary to find that the taxpayers are estopped by the relevant findings of fact in the judicial review proceeding. I am also satisfied that these applications constitute a form of abuse of process. These considerations provide further, and substantial, grounds for dismissing the applications.

2 Tannadyce Investments Ltd v Commissioner of Inland Revenue [2011] NZSC 158; [2012] 2 NZLR

_{153; (2011) 25 NZTC 20-103 at [71].}

3 Accent Management Limited v Commissioner of Inland Revenue (2011) 25 NZTC 20-022 (HC).

[5] The Commissioner seeks, by way of indemnity costs, $56,184.10 for fees, a sum which does not include GST, and $5,019.35 for disbursements, a sum which does include GST.

[6] The response for the taxpayers, in a joint submission from Dr Muir on his own behalf and Mr Ewen, the solicitor for the first to fourth, and sixth to eleventh respondents, does not in any direct way address the substance of the Commissioner’s submissions on r 14.6. Rather, the taxpayers submit, firstly, that a decision on costs should be deferred until after delivery of the Court of Appeal’s decision on the taxpayers’ appeal. The reasons for this submission are that the Commissioner’s application for indemnity is founded on the conclusions in the substantive judgment of 22 June and that judgment is under appeal. The taxpayers further submit that, if a costs decision is not deferred until after delivery of the Court of Appeal’s judgment, the taxpayers should have an “opportunity to address the Court on the individual findings which will be appealed and how each of these is relevant to costs in the High Court”. In support of that submission the taxpayers produced a draft of submissions to the Court of Appeal relating to findings in the substantive judgment which are relied upon by the Commissioner on this costs application.

[7] I am not persuaded that a decision should be deferred and I am not persuaded that there should be a hearing as sought by the taxpayers. The taxpayers submit that deferral of the decision “is based on broad principles”. That principle is not identified. Deferral of the decision, which is part of the proceeding, would be contrary to principle and also contrary to the general practice of the Courts. The proceeding in this Court – the applications to debar – should be brought to a conclusion with decisions on all matters that arise. That is the conventional approach to a proceeding (including individual applications) in the High Court. In addition, it means that all matters arising from decisions in the High Court can be addressed by the Court of Appeal as appropriate. That includes questions of costs. It is also consistent with r 1.2 of the High Court Rules requiring “just, speedy, and inexpensive determination of any proceeding or interlocutory application”.

[8] In respect of the alternative submission, this amounts to an application to re-argue matters that have already been determined. It also effectively ignores an

order already made by this Court, in the substantive judgment, timetabling submissions on costs for the Commissioner and for the taxpayers in response.

[9] I am satisfied that the Commissioner is entitled to the indemnity costs sought. This is because of the conclusions I have already reached as recorded in the substantive judgment. Particular findings are those relied on by the Commissioner and reproduced above. Those specific findings, by themselves, justify an award of indemnity costs. I would add one other conclusion from the substantive judgment, as follows:

[45] The only submissions which pointed to the possibility of a connection between lawyers’ duties and the extant challenges were those relating to counsel’s duty to put all relevant and significant law before the court. However, the submissions had no substance with respect to counsel’s duties. The heart of this was the argument about subpart EH. There is no risk that arguments in respect of these provisions, or any other relevant law, will not be put before the hearing authority. It is disingenuous for the taxpayers to argue to the contrary. The obligation of counsel to ensure that the court has all relevant law before it cannot be converted into an obligation for counsel on one side to concede the legal argument that is being advanced on the other side. This was the effect of Dr Muir’s submissions which have been recorded above at [37]. The submissions are not tenable. This may be illustrated with one example only; the proposition that a lawyer from Crown Law will be questioned as to whether a provision of the Income Tax Act

1994 is binding.4

I do note that, in the substantive hearing, Dr Muir was the only taxpayer who argued that Crown counsel should be debarred because Crown counsel might be subpoenaed to give evidence.

[10] No issue has been raised as to the quantum of the fees sought to be recovered. They appear reasonable and in that regard I note that the claim is for the net sum excluding GST. The taxpayers have questioned a number of the disbursements. I

_{will defer making a final order on disbursements.}

4 See paragraph 60(c) and 61 of Dr Muir’s submissions, reproduced at [37]. Dr Muir referred to “cross-examination” of counsel. That could only arise if a lawyer from Crown Law were to be called to give evidence for the Commissioner. Even if that unlikely event occurred, cross-examination of a lawyer for his or her opinion on the law would not be admissible evidence.

Result

[11] The taxpayers are to pay the Commissioner’s fees, excluding GST, of

$56,184.10. This order is effective immediately.

[12] The Commissioner is entitled to reasonable disbursements. If the parties are unable to agree on the quantum of disbursements the Commissioner is to file a memorandum, with any supporting evidence, within three weeks and the taxpayers are to respond by memorandum, with any supporting evidence, within a further three

_weeks.

Woodhouse J