IN THE COURT OF APPEAL OF NEW ZEALAND CA541/2013 [2014] NZCA 351 BETWEEN AND ACCENT MANAGEMENT LIMITED Appellant ATTORNEY-GENERAL First Respondent COMMISSIONER OF INLAND REVENUE Second Respondent Hearing: Court: Counsel: Judgment: 18, 19 and 20 March 2014 (further submissions received 15 April 2014) O Regan P, Stevens and Wild JJ G A Muir for Appellant K L Clark QC and S J Leslie for Respondents 5 August 2014 at 12 pm JUDGMENT OF THE COURT A The appeal is dismissed. B The appellant must pay the costs of the respondents on an indemnity basis plus usual disbursements. REASONS OF THE COURT (Given by O Regan P) ACCENT MANAGEMENT LTD v ATTORNEY-GENERAL & ANOR CA541/2013 [2014] NZCA 351 [5 August 2014]
Introduction [1] This is an appeal against a judgment of Priestley J in which he upheld a protest to jurisdiction by the respondents, the Attorney-General and the Commissioner of Inland Revenue (the Commissioner), and therefore dismissed an application made by the appellant, Accent Management Ltd (Accent). 1 [2] We heard the appeal along with four other appeals involving Accent or other parties to an arrangement, known as the Trinity tax scheme: CA632/2013, CA633/2013, CA791/2013 and CA23/2014. The present panel has also dealt with two associated appeals on the papers: CA51/2014 and CA55/2014. The judgments relating to all of those appeals are being delivered at the same time as this judgment. Accent s High Court application [3] Accent s application to the High Court sought, among other things, an order setting aside a decision in which the High Court ruled that the Trinity scheme, was a tax avoidance arrangement. 2 (We will call the judgment that Accent sought to have set aside Accent 2004). Accent 2004 upheld assessments made by the Commissioner and dismissed the taxpayers challenge to those assessments. Accent 2004 was upheld on appeal to this Court 3 and to the Supreme Court. 4 This proceeding is one of a long line of cases by parties to the Trinity scheme seeking to challenge the adverse decisions of the High Court, Court of Appeal and Supreme Court in the tax avoidance proceedings described above. 5 1 2 3 4 5 Accent Management Ltd v Attorney-General [2013] NZHC 1447, (2013) 26 NZTC 21,020. Accent Management Ltd v Commissioner of Inland Revenue (2005) 22 NZTC 19,027 (HC). An application for recall of this judgment was dismissed: Accent Management Limited v Commissioner of Inland Revenue (2006) 22 NZTC 19,758 (HC) [Recall application]. Accent Management Ltd v Commissioner of Inland Revenue [2007] NZCA 230, (2007) 23 NZTC 21,323. An appeal against the decision of the High Court refusing to recall its judgment was heard at the same time and was also dismissed: Accent Management Ltd v Commissioner of Inland Revenue [2007] NZCA 231, (2007) 23 NZTC 21,366 [Recall appeal]. Ben Nevis Forestry Ventures Limited v Commissioner of Inland Revenue [2008] NZSC 115, [2009] 2 NZLR 289 [Ben Nevis 2008]. Other parties involved in the Trinity tax scheme were Clive Richard Bradbury, Bristol Forestry Venture Ltd (Bristol), Gregory Alan Peebles and Ben Nevis Forestry Ventures Ltd (Ben Nevis) were originally parties to the present litigation but filed notices of discontinuance after the respondents filed their appearance under protest to jurisdiction.
[4] In the High Court, the respondents filed an appearance under protest to jurisdiction in accordance with r 5.49 of the High Court Rules, and an application to strike out the proceeding under r 15.1 of the High Court Rules on the basis that Accent s application was an abuse of the Court s process. The strike-out application was necessarily a fallback position, because it would have involved submission to the Court s jurisdiction. As it transpired, the respondents did not pursue the strikeout application, and the matter was dealt with in the High Court solely on the basis of jurisdiction. [5] Accent s statement of claim in the present proceedings pleaded that the decision in Accent 2004 was made by the High Court in its capacity as a hearing authority under the Tax Administration Act 1994 (TAA), that the decision was unlawful because it involved the High Court applying provisions of the Income Tax Act 1994 that were inapplicable and that the High Court therefore calculated amounts of tax that it was unlawful to levy and collect and otherwise exceeded the statutory power conferred on a hearing authority. Accent sought orders setting aside the decision in Accent 2004. It also sought a declaration that Accent 2004 was in excess of the jurisdiction of the High Court as hearing authority and that no lawful exercise of the statutory powers conferred on the hearing authority under the TAA had yet occurred. [6] In argument before us, counsel for Accent, Mr Muir, said that the intention of these pleadings was to achieve a result that effectively treated Accent 2004 as a nullity, requiring the High Court to continue (or perhaps, more correctly, start again) the challenges by Accent and the other parties to Accent 2004 to the assessments made by the Commissioner for the relevant tax years. High Court decision [7] The case before the High Court was that Accent 2004 involved the purported exercise of powers under s 138P of the TAA by the High Court as a deemed hearing authority which led to orders that were of no effect. Accordingly, it was argued, declarations should be made that the High Court had exceeded its jurisdiction and powers under ss 138B and 138P of the TAA.
[8] Priestley J rejected these contentions. He said: 6 What Accent is endeavouring to do in this proceeding is raise, yet again, its argument based on subpart EH of the Income Tax Act 1994 as a platform to do precisely what the Supreme Court states cannot be done. [9] Priestley J was satisfied that the proceeding represented a collateral attack on two judgments of the Supreme Court, Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue (Ben Nevis 2008) 7 and Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd (Redcliffe SC). 8 He applied the analysis from those Supreme Court judgments and reached the conclusion that the High Court was functus officio and lacked jurisdiction to entertain the relief sought. Thus, he found, r 5.49(4)(a) was engaged. He said that Accent, having exhausted its appellate pathways not once but twice, was abusing the Court s jurisdiction. He described Accent s persistence as untenable. 9 He ordered indemnity costs against Accent. 10 Issues for determination [10] The jurisdictional basis of the Commissioner s challenge means that the issue before us involves a consideration of the jurisdiction of the High Court to deal with an application of this nature which seeks to reopen a High Court decision that has been upheld on appeal by the Court of Appeal and Supreme Court. A subsidiary issue is whether the fact that the High Court is a deemed hearing authority as defined in s 3 of the TAA has any impact on the status of Accent 2004 and, in particular, whether this makes it amenable to review by the High Court itself. The factual context: serial challenges to the tax avoidance ruling [11] It is important to place the present application in its context. The taxpayers who contested the Commissioner s assessments in the High Court, and who were unsuccessful in Accent 2004 and in the decisions of this Court and the Supreme 6 7 8 9 10 Accent Management Ltd v Attorney-General, above n 1, at [18]. Ben Nevis 2008, above n 4. Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd [2012] NZSC 94, [2013] 1 NZLR 804 [Redcliffe SC]. Accent Management Ltd v Commissioner of Inland Revenue, above n 1, at [32]. At [33].
Court on appeal, have embarked on a series of challenges to the ruling, all of which have been ultimately unsuccessful and most of which have led to awards of indemnity costs against them. [12] A common theme of these proceedings has been the allegation that Accent 2004 and the decisions upholding it on appeal dealt with the spreading of insurance premiums under subpart EG of the Income Tax Act when they should have been dealt with under subpart EH. Accent s then counsel, Mr Gudsell QC, sought to argue this point for the first time in the Supreme Court in Ben Nevis 2008, but the Court did not permit him to raise the point. The other parties to the Ben Nevis 2008 proceeding did not seek to argue the point at any stage. Recall application [13] As noted earlier, Accent and a number of other parties applied to recall Accent 2004. 11 That application was dismissed by the High Court, and an appeal against the decision dismissing the recall application was dismissed by this Court. 12 Judicial review [14] The first challenge was launched by Accent five days after the Supreme Court had delivered its decision in Ben Nevis 2008 in December 2008. The application for judicial review made by Accent was struck out by Keane J. 13 (We will call the judgment of Keane J Accent 2010). Keane J set out in some detail the subpart EH argument. 14 As we are dealing with this proceeding on the basis of a jurisdictional argument, it is not necessary for us to do more than refer to the subpart EH argument, which underpinned Accent 2010 and has underpinned subsequent attempts to undermine Accent 2004, including the present proceeding. 11 12 13 14 Recall application, above n 2. Recall appeal, above n 3. Accent Management Ltd v Commissioner of Inland Revenue (2010) 24 NZTC 24,126 (HC) [Accent 2010]. In a separate judgment, Keane J awarded indemnity costs against Accent: Accent Management Limited v Commissioner of Inland Revenue (2011) 25 NZTC 20,022 (HC). Both of these decisions were appealed but the appeals were abandoned. At [16] [20].
[15] The essential argument in Accent 2010 was that the Commissioner s assessments were invalid and unlawful because of the failure to apply subpart EH, and thus were unlawful assessments. The Commissioner s strike-out application was successful. Keane J found that the Commissioner had, contrary to Accent s argument, not hidden the possible application of subpart EH, and it was open to Accent to raise the point in the High Court in the hearing leading to Accent 2004. 15 Accent s attempt to raise the matter in the Supreme Court in Ben Nevis 2008 was a complete change of position from the basis on which it had sought deductions and had fought the proceedings through the High Court and Court of Appeal. 16 [16] Keane J found that Accent could have raised the subpart EH point in its challenge proceedings, and that it was doing so in the judicial review proceedings only because it had lost in the Supreme Court in Ben Nevis 2008, as it had in Accent 2004 and in the decision of this Court upholding it. 17 Redcliffe proceedings [17] In September 2009, Accent and others also applied to have Accent 2004 set aside on the basis that the Commissioner had dishonestly concealed the possible applicability of subpart EH. That proceeding failed in the High Court. 18 The High Court determined that it did not have jurisdiction to recall the Accent 2004 judgment unless the judgment had been obtained by fraud. That was not the case and thus the proceeding failed for want of jurisdiction. [18] The High Court decision was overturned in this Court on the basis that it should not have been dealt with as a matter of jurisdiction, but should have been the subject of an application to strike out on the basis that it was an abuse of process. 19 [19] The decision of this Court was then reversed by the Supreme Court in Redcliffe SC. 20 15 16 17 18 19 20 At [89]. At [106]. At [106]. Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue [2011] 1 NZLR 336 (HC). Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue [2011] NZCA 638, [2012] 2 NZLR 823. Redcliffe SC, above n 8.
[20] The Supreme Court rejected the allegation that the Commissioner had concealed the potential applicability of subpart EH. It said subpart EH was there to be seen in the Income Tax Act and incapable of concealment. There was no fraudulent conduct by the Commissioner. The argument that subpart EH applied was a direct challenge to the Supreme Court s finding to the contrary in Ben Nevis 2008. An allegation of an error of law, not involving fraud, did not justify an exception to the principle of finality of judgments. [21] The essential findings of the Supreme Court are set out in the following paragraphs from the Court s judgment, delivered by McGrath J: 21 [28] The principle of finality in litigation gives rise to a rule of law that makes conclusive final determinations reached in the judicial process: 22 Unless a judgment of a Court is set aside on further appeal or otherwise set aside or amended according to law, it is conclusive as to the legal consequences it decides. The rule reflects both the public interest in there being an end to litigation and the private interest of parties to court processes in not being subjected by their opponents to vexatious relitigation. 23 The rule recognises, however, that a policy of absolute finality is unsafe. It accommodates exceptional situations by allowing final determinations to be revisited but within prescribed limits. For example, where there is no abuse of process involved, 24 an application for recall of the judgment of a court can be made on grounds, which include where counsel have failed to direct the Court s attention to a legislative provision or authoritative decision of plain relevance. 25 Limitations on the exceptions ensure that they do not subsume the general rule of finality and conclusiveness of judgments. The need for this was recognised by Lord Wilberforce in the leading case on the availability of the particular exception which Redcliffe relies on in this case: 26 For a policy of closure to be compatible with justice, it must be attended with safeguards: so the law allows appeals: so the law, exceptionally, allows appeals out of time: so the law still more exceptionally allows judgments to be attacked on the ground of fraud: so limitation periods may, exceptionally, be extended. But these are exceptions to a general rule of high public importance, 21 22 23 24 25 26 Redcliffe SC, above n 8. R v Smith [2003] 3 NZLR 617 (CA) at [46] per Elias CJ. Shiels v Blakeley [1986] 2 NZLR 262 (CA) at 266; and Lockyer v Ferryman (1877) 2 App Cas 519 (HL) at 530. Instances of which are discussed in New Zealand Social Credit Political League Inc v O Brien [1984] 1 NZLR 84 (CA) at 89; Henderson v Henderson (1843) 3 Hare 100 at 115, 67 ER 313 (Ch) at 319 per Wigram V-C; and Housing Corporation of New Zealand v Maori Trustee (No 2) [1988] 2 NZLR 708 (CA) at 719. Horowhenua County v Nash (No 2) [1968] NZLR 632 (SC) at 633. The Ampthill Peerage [1977] AC 547 (HL) at 569.
and as all the cases show, they are reserved for rare and limited cases, where the facts justifying them can be strictly proved. [29] In cases brought under the fraud exception, only fraud in the strict legal sense will suffice: equitable fraud or lack of frankness does not qualify. In Lord Wilberforce s words: 27 There must be conscious and deliberate dishonesty, and the declaration must be obtained by it. And as Lord Simon said in The Ampthill Peerage, citing a passage in the leading text on res judicata: 28 Where the allegation, or the evidence, of the suggested fraud is inconclusive, or wanting in precision, or such as to give rise to no more than surmise, suspicion, or conjecture, the affirmative answer fails, and the estoppel is not displaced. [40] Redcliffe s allegation of fraud rests on two propositions: (a) (b) the true legal position was that the case was governed by s EH8; and this was dishonestly concealed from the Court by the Commissioner. Put in this way, it is clear that Redcliffe, in proposition (a), is directly challenging the conclusions of this Court on matters of law which it was competent to address. This is not a case which rests on an allegation of fraud involving perjury or dishonest suppression of evidence bearing on findings of fact which were the primary responsibility of the High Court as the trial court. [41] As we have said, the High Court is best placed to determine any subsequent issue of whether the evidence on which a final judgment in the case was based is tainted by fraud, so that the judgment must be set aside and a new trial ordered. That is not, however, the position where the error allegedly induced by fraud is one of law. It is well-established that the High Court has no power to recall or set aside judgments on questions of law which have been the subject of appellate decision. 29 As Mr Brown submitted for the Commissioner, echoing the words of Jessel MR already cited, were the position otherwise, the High Court would be able to overturn the decision of a court on appeal from its judgment on the content of the law. [42] There is another relevant and important consideration. As we have noted, where the fraud exception to finality is properly invoked, the party challenging the judgment will be able to show that his or her ability to mount an effective case was compromised by the fraudulent conduct of the other party. It is this consideration which provides the rationale for not 27 28 29 At 571. At 591, citing Sir Alexander Turner s edition of George Spencer-Bower and Alexander Turner The Doctrine of Res Judicata (Butterworths, London, 1969) at [373]. Hikuwai v Sanford Ltd (1996) 9 PRNZ 587 (HC) at 591 per Thorp J.
insisting on finality. But this rationale is not applicable in the present context. The subpart was there to be seen in the legislation and was thus inherently incapable of concealment. For this reason alone, Redcliffe cannot credibly claim that the litigation strategy attributed to the Commissioner compromised its ability to mount an argument as to the subpart s applicability. The force of these considerations is enhanced when the facts are examined. The potential applicability of the subpart was signalled in the Notice of Proposed Adjustment; so it was not concealed. And counsel for Redcliffe at the High Court trial were well aware of this potential applicability as the cross-examination of Ms Lloyd shows. Nullity [43] Redcliffe argued in its written submissions that the nullity of a judgment is a further exception to the principle of finality and conclusiveness. It pleaded that, as a consequence of the Commissioner s failure to discharge his obligations concerning the application of subpart EH8(1) of the Income Tax Act, the assessments were unauthorised by Parliament and incapable of confirmation by the High Court in [Accent 2004]. During oral submissions, Mr Stewart accepted that, if the taxpayers failed on their fraud claim, there was a jurisdictional impediment to the High Court dealing with the nullity issue. Only the Supreme Court could do so on an application for recall of its 2008 Ben Nevis decision. Mr Gudsell QC and Ms Hinde for the first, second, third and fourth respondents, adopted the written submissions of Mr Stewart which had argued that nullity was an exception to the principle of finality. Venning J rejected Redcliffe s contention of nullity, on the merits, concluding that s 138P of the Tax Administration Act gave the High Court jurisdiction to decide the question of validity in the challenge proceedings. 30 [44] The nullity contention rests on two propositions: (a) (b) the true legal position was that the case was governed by subpart EH; and the failure to apply it deprived the High Court of jurisdiction to confirm the assessment. Proposition (a) is of course the proposition that underpinned the allegation of fraud. It is subject to the same objection as we have identified in that context, 31 namely it is challenging conclusions of this Court, on a matter of law, which it was competent to address. For the reasons previously given, 32 the High Court has no power to recall or set aside its judgment on the questions of law which have been the subject of appellate decision. 30 31 32 Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue, above n 18. See Redcliffe SC, above n 8, at [40]. In Re St Nazaire (1879) 12 Ch D 88 (CA) at 96 97 per Jessel MR, set out in Redcliffe SC, above n 8, at [24].
Apparent bias allegations [22] In December 2012, about a month after the delivery of the Supreme Court s judgment in Redcliffe SC, Ben Nevis, Bristol and their respective shareholders, Mr Bradbury and Mr Peebles, filed a statement of claim in the High Court seeking an order setting aside Accent 2004. They claimed that the judgment was voidable on the ground that the trial judge was or may be seen to be biased. That claim was dismissed by Katz J, upholding the Commissioner s protest to jurisdiction. 33 This decision is the subject of the appeal in CA632/2013, which we heard immediately after the present appeal. 34 We will say no more about it in this judgment. [23] In addition, we were told that another proceeding, alleging a breach of the New Zealand Bill of Rights Act 1990 because Accent 2004 was tainted by apparent bias has been heard in the High Court. Judgment is reserved. 35 Accent s case [24] Accent s case is founded on the proposition that s EH8(1) of the Income Tax Act, as it then stood, required that subpart EH be applied to the insurance premiums for which deductions were claimed. As noted above at [12], nobody raised this as a possibility until Mr Gudsell tried to do so in the Supreme Court in Ben Nevis 2008. But Accent says the High Court was bound to apply subpart EH and the fact that it did not means the decision in Accent 2004 is unlawful. It says by not applying subpart EH, the High Court levied a tax that was not levied by Parliament, in breach of s 1, art 4 of the Bill of Rights 1688 and s 22(a) of the Constitution Act 1986. It says the High Court is statutorily bound to recommence its hearing of the taxpayers challenges in order to discharge its obligation to apply subpart EH. Accent further submits that this unlawful levy allegation could not have been included in the original challenge proceedings, and is therefore a new point. 33 34 35 Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2013] NZHC 2361, (2013) 26 NZTC 21,032. In a later judgment, Katz J awarded indemnity costs against the plaintiffs: Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2014] NZHC 441. Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2014] NZCA 350. Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue (CIV-2013-404-4345).
Respondents case [25] The respondents argue that the principle of finality applies. The High Court is functus officio and therefore has no jurisdiction to consider Accent s claim. Counsel for the respondents, Ms Clark QC, points out that the argument based on the Bill of Rights and the Constitution Act is the same argument that was rejected by Keane J in Accent 2010. 36 The statement of claim in the Redcliffe proceeding also makes an allegation of a breach of the Bill of Rights and the Constitution Act because subpart EH was not applied. Ms Clark argued that Accent is essentially re-running the arguments on which it failed in Accent 2010 and in which its associate, Redcliffe, failed in the Redcliffe proceedings. Just as the Supreme Court found that the High Court did not have jurisdiction to consider Redcliffe s claims, so should this Court in the present case. Is this case different from the Redcliffe proceedings? [26] Counsel for Accent, Mr Muir, accepted the similarities between the present claim and those made in Accent 2010 and the Redcliffe proceedings. But he said there was an essential difference. In both Accent 2010 and the Redcliffe proceedings, the claims focused on actions or omissions of the Commissioner. He accepted that, as a consequence of the Supreme Court s decision in Redcliffe SC and its later decision in Tannadyce Investments Ltd v Commissioner of Inland Revenue, 37 (Tannadyce) proceedings challenging the lawfulness of an assessment had to be brought by way of a challenge under pt 8A of the TAA. [27] In the present case, Accent s claim did not focus on the Commissioner, but rather on the High Court as the hearing authority which upheld the Commissioner s assessments in Accent 2004. This, he argued, was a crucial distinction from the earlier cases. [28] Two aspects of this argument require some analysis. First, does the fact that the High Court is the hearing authority have any significance? Second, does the fact that Mr Muir argues subpart EH unambiguously applies make this case different 36 37 Accent 2010, above n 13, at [3]. Tannadyce Investments Ltd v Commissioner of Inland Revenue [2011] NZSC 158, [2012] 2 NZLR 153.
from any other case in which a litigant considers the Court reached the wrong conclusion? Hearing authority [29] Mr Muir made much of the fact that the High Court was the hearing authority in relation to the challenges determined in Accent 2004. The significance of this argument appeared to be that it provided a basis for arguing that the judicial review jurisdiction of the High Court could be applied to the hearing authority, notwithstanding that the hearing authority was a High Court Judge. However, we asked Mr Muir during the hearing whether his case relied on the High Court, as a hearing authority, having a separate capacity from its usual civil jurisdiction. He answered in the negative, but said that he considered that judicial review of a High Court decision may still be available in respect of Accent 2004, and cited a decision of the High Court of Australia, Kirk v Industrial Relations Court of New South Wales, in support of that possibility. 38 [30] In our view, the fact that the High Court is a hearing authority in terms of s 3 of the TAA is a red herring. The challenge process under pt 8A of the TAA, when the High Court is the hearing authority, is normal civil litigation governed by the High Court Rules. The outcome of such litigation is a Court decision that is subject to appeal to this Court under s 66 of the Judicature Act 1908. There is nothing to suggest that the fact the High Court is a hearing authority in terms of s 3 of the TAA affects the status of the High Court or of the High Court Judge hearing the challenge proceeding. The TAA does not reconstitute the High Court as an inferior tribunal, subject to the jurisdiction of the High Court on judicial review. In that respect, we agree with the analysis of Venning J in his decision in the Redcliffe proceedings. 39 The notion that Accent 2004 could be the subject of judicial review by another High Court judge is, therefore, fatally flawed. [31] Nor do we consider that the Kirk decision provides any basis for a judicial review jurisdiction in the context of the present case. Kirk concerned a decision of the Industrial Relations Court of New South Wales, which had been given the status 38 39 Kirk v Industrial Relations Court of New South Wales [2010] HCA 1, (2010) 239 CLR 531. Redcliffe v Commissioner of Inland Revenue, above n 18, at [5] [6].
of a superior court under legislation passed by the New South Wales Parliament. That Parliament had also conferred on the Industrial Relations Court criminal jurisdiction in relation to health and safety matters, and provided that appeals from decisions in that criminal jurisdiction lay to a specialist appeal court rather than to the Court of Appeal of New South Wales. The relevant legislation also had a privative clause preventing judicial review of decisions of the Industrial Relations Court by the Supreme Court of New South Wales. [32] The High Court of Australia found that it was not within the competence of the Parliament of New South Wales to deprive the Supreme Court of New South Wales of its supervisory jurisdiction over specialist courts. It found that the privative clause could not prevent judicial review in the case of jurisdictional error. That decision is based on the constitutional arrangements applying in Australia. It is not authority for the proposition that a decision of the High Court of New Zealand can be subject to judicial review on the basis of jurisdiction whereby one judge of the High Court reviews a decision of another judge of the High Court. We do not, therefore find Kirk of any assistance in the present case. Unambiguous application of subpart EH [33] The second basis on which Mr Muir claimed that Accent 2004 should be set aside was that it failed to apply subpart EH which unambiguously applied. He said that, as a result of this, the upholding of the Commissioner s assessment had led to the High Court levying a tax in breach of s 22(a) of the Constitution Act. That section provides that it is not lawful for the Crown to levy a tax, except by or under an Act of Parliament. [34] While it is correct that a hearing authority may make an assessment on a de novo basis, 40 we see Mr Muir s position as essentially advocating an interpretation of the Income Tax Act. If that interpretation was unambiguously correct as Mr Muir now says it is, it should have been advanced during the challenge proceedings which were the appropriate mechanism for such a submission to be made. More to the point, it should have been the basis on which Accent s tax 40 Commissioner of Inland Revenue v Zentrum Holdings Ltd [2007] 1 NZLR 145 (CA) and Tannadyce above n 37, at [25] and [50].
returns for the relevant years were prepared. In any event, both the High Court and the Supreme Court in Redcliffe SC found that the subpart EH argument was moot, given the conclusion in Ben Nevis 2008 that the insurance contracts were part of a tax avoidance arrangement. 41 [35] Accent 2004, subsequently confirmed in Ben Nevis 2008, upheld the Commissioner s assessment on the basis of the Court s interpretation of the Income Tax Act. Thus, in carrying out the Courts constitutional function of interpreting legislation, the High Court, Court of Appeal and Supreme Court reached the conclusion that the tax assessed by the Commissioner was correctly assessed in terms of the Income Tax Act. Thus, the tax that was levied was the tax that was levied under the Income Tax Act, and therefore in accordance with s 22(a) of the Constitution Act. Exactly the same analysis applies to s 1, art 4 of the Bill of Rights, which is to the same effect as s 22(a) of the Constitution Act. [36] When viewed in this light, the position now taken by Accent is no more than a contention that Accent 2004 contained an error of law, namely the application of subpart EG rather than subpart EH. Redcliffe SC provides a complete bar to the setting aside of a decision of the High Court on the basis that it involves an error of law. The analysis at [44] of Redcliffe SC applies equally to the present case: again the propositions which are put forward by Accent are that the true legal position was governed by subpart EH and that the failure to apply it deprived the High Court of jurisdiction. The Supreme Court was clear that in those circumstances the High Court did not have jurisdiction to recall or set aside its judgment on questions of law which have been the subject of appellate decisions. [37] Applying that decision to the facts of this case, we conclude that the High Court does not have jurisdiction to deal with the application put to it in these proceedings, and that Priestley J was correct to dismiss the proceeding on the basis that the High Court did not have jurisdiction to deal with it. 41 Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue, above n 18, at [59]; Redcliffe SC, above n Error! Bookmark not defined. at [40] and [44].
[38] Mr Muir also argued that the Supreme Court decision in Tannadyce supported the proposition that a decision that does not conform to the requirements of the Income Tax Act can be set aside. He said the majority in Tannadyce emphasised the need for a court dealing with a tax dispute to decide the case in accordance with the statute, even if the point is not raised by either party. This, he said, impliedly overturned the Supreme Court s reasons for not allowing Mr Gudsell to put his subpart EH argument to the Court in Ben Nevis. In addition, he said, it supported his point that a decision that does not conform with the statute (even where the correct interpretation was argued by neither party) is unlawful. [39] We do not accept that Tannadyce supports Accent s case. The fact that a majority of the Supreme Court applied a test for judicial review that had not been argued by either party says nothing about the approach to pt 8A challenge proceedings. 42 The Court made it clear that judicial review is not an available remedy where a point could have been raised in pt 8A challenge proceedings. 43 The fact that it contemplates the possibility of judicial review of a decision of a Taxation Review Authority does not provide any support for judicial review of a High Court decision. And the Supreme Court in Tannadyce said nothing about reopening judgments after they have been sealed and have been subsequently upheld at two levels on appeal. Result [40] We conclude that there is no material distinction between the present case and Redcliffe SC. Applying Redcliffe SC leads to the inevitable conclusion that the High Court does not have jurisdiction to deal with Accent s claim. Accordingly, the appeal is dismissed. Costs [41] Priestley J awarded costs on an indemnity basis against the appellants. He said that he saw the proceeding as being untenable at the outset. 44 He considered 42 43 44 In addition, the minority (Elias CJ and McGrath J) expressed concerns about the fact the majority s approach had not been argued before the Court: at [39] per McGrath J. At [56] [61]. Accent Management Ltd v Attorney-General, above n 1, at [30].
that on the basis of the Supreme Court judgment in Redcliffe SC, the Commissioner s protest to jurisdiction must have succeeded. He commented that the appellant had exhausted its appellate pathways not once, but twice and that its persistence was untenable. 45 [42] We have summarised the principles applying to costs awards, as outlined by this Court in Bradbury v Westpac Banking Corp, 46 in our judgment dealing with costs in the Redcliffe proceedings. 47 We will not repeat them here. [43] For the Commissioner, Ms Clark sought to uphold the High Court costs award and also sought indemnity costs in this court for the reasons given by the High Court Judge. Mr Muir argued that indemnity costs were inappropriate in the High Court and equally so in this Court. He argued that the point of law raised is an important constitutional point and that the appellants should not be penalised for raising it. He said any previous litigation involving the appellant was irrelevant. [44] We agree with Priestley J that the appellant s persistence is untenable. While we accept Mr Muir s point that costs in the present proceeding should be determined by reference to this proceeding and not others, the previous litigation is relevant to determining the merits of the case and the motives of the appellant, both of which are relevant considerations under Bradbury v Westpac Banking Corp. [45] As we have noted earlier the question of the applicability of s EH(1) has become something of a refrain. There comes a time when the appellant must accept that the decision of the Court went against it in the Supreme Court in Ben Nevis 2008 and must face up to the consequences of that finding. We agree, therefore, with Priestley J that indemnity costs were appropriate in the High Court. They are also appropriate in this court for the same reasons. We order accordingly. Solicitors: Stainton Chellew, Auckland for Appellant Crown Law Office, Wellington for Respondents 45 46 47 At [32]. Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400. Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2014] NZCA 348 at [10] [17].