Accent Management Ltd v The Commissioner of Inland Revenue

• Jurisdiction: New Zealand
• Judge: O'Regan P
• Judgment Date: 15 May 2013
• Neutral Citation: [2013] NZCA 155
• Docket Number: CA431/2012
• Court: Court of Appeal
• Date: 15 May 2013

Between

Accent Management Limited

First Appellant

and

Ben Nevis Forestry Ventures Limited

Second Appellant

and

Bristol Forestry Venture Limited

Third Appellant

and

Clive Richard Bradbury

Fourth Appellant

and

Garry Albert Muir

Fifth Appellant

and

Gregory Alan Peebles

Sixth Appellant

and

Hillvale Holdings Limited

Seventh Appellant

and

Lexington Resources Limited

Eighth Appellant

and

Peter Arnold Maude

Ninth Appellant

and

Redcliffe Forestry Ventures Limited

Tenth Appellant

and

Waikato Residential Properties Limited

Eleventh Appellant

and

The Commissioner of Inland Revenue

Respondent

[2013] NZCA 155

Court:

O'Regan P, Arnold and Miller JJ

CA431/2012

IN THE COURT OF APPEAL OF NEW ZEALAND

Appeal against a High Court decision dismissing applications by the appellant taxpayers for orders that Crown Law and Crown counsel (collectively “Crown Law”) be debarred from acting for the Commissioner of Inland Revenue in various proceedings to which the taxpayers and the Commissioner were parties — proceeding related to long-running Trinity tax avoidance litigation — a protocol in place between Solicitor-General and the Commissioner set out their respective roles and recorded that Crown Law and Inland Revenue would “respect each other's roles” and had to “work together with the aim of ensuring that [both departments had] consistent positions on the interpretation and application of tax laws” — whether Crown Law was sufficiently independent from the Commissioner so that it was able to meet its professional obligations under r13.5 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (“Client Care Rules”) (independence in litigation), considering the effect of the protocol.

Counsel:

G A Muir for Fifth Appellant

No appearance for other Appellants

M S R Palmer and R L Roff for Respondent

JUDGMENT OF THE COURT

A The appeal is dismissed.

B The appellants must pay the respondent indemnity costs (the actual costs incurred by the respondent in relation to the appeal) and usual disbursements. The liability of the appellants is joint and several.

C We reserve leave to apply in the event of a dispute about the amount of costs.

REASONS OF THE COURT

(Given by O'Regan P)

Table of Contents

	Para No
Introduction	[1]
Issues	[6]
Background	[12]
Judicial review proceeding	[14]
Set aside proceeding	[16]
Present proceedings: application to debar Crown Law	[20]
High Court decision	[24]
Applicable law	[32]
Is Crown Law sufficiently independent?	[36]
Will Crown counsel be required to give evidence?	[53]
Is Crown Law's advice in issue in the extant challenges?	[54]
Can Crown Law comply with the Client Care Rules?	[55]
The “estoppel” issue	[56]
Indemnity costs	[58]
Conclusion	[63]
Costs	[64]

Introduction

1 This is an appeal against a decision of Woodhouse J dismissing the applications made by the appellants (the taxpayers) for orders that Crown Law and Crown counsel be debarred from acting for the respondent, the Commissioner of Inland Revenue (the Commissioner) in various proceedings to which the taxpayers and the Commissioner are parties. 1

2 The taxpayers argued that Crown Law would not be able to act with the degree of independence required of lawyers and that counsel from Crown Law would not be able to comply with their duties to the Court. This was said to arise because Crown Law allegedly colluded with the Commissioner in making certain tax assessments knowingly contrary to law and in wrongly maintaining that position in tax challenge proceedings. That, in turn, was said to mean that Crown Law and Crown counsel would face actual or potential conflicts in the ongoing challenge proceedings between the taxpayers and the Commissioner.

3 The High Court Judge rejected these allegations and dismissed the taxpayers' application. He awarded indemnity costs against the taxpayers. In this appeal, they challenge both of those rulings.

4 Like Woodhouse J, we will use the term “Crown Law” as including both Crown Law as an institution and Crown counsel, unless it is necessary to differentiate them.

5 Dr Muir appeared in support of the appeal. He claimed to be appearing as a litigant in person (he is the fifth appellant) but was gowned and the submissions he

filed were filed by the solicitors on the record for all the taxpayers. The other appellants adopted Dr Muir's submissions and requested that they be excused from appearing. We granted their request. After some discussion at the beginning of the hearing Dr Muir agreed he was appearing as counsel. This raised a number of issues, not the least of which was that Dr Muir had sworn an affidavit in the proceedings. But, rather than delay the hearing, we proceeded on the basis that Dr Muir appeared as counsel for himself and on the basis that the other taxpayers adopted his submissions. There was a certain irony in Dr Muir's position, given the subject matter of the appeal

Issues

6 Dr Muir changed tack during his oral argument to the extent that the matters in issue were substantially limited. He addressed us for some time on why he considered that Woodhouse J had not adequately addressed the taxpayers' arguments in the High Court, and initially sought as the remedy for this the remission of the case to the High Court. But, in his closing address, he said the only issue on the appeal (other than the indemnity costs issue) was whether Crown Law should be debarred because it was insufficiently independent to comply with its professional obligations. As the other taxpayers had adopted Dr Muir's written submissions that predated this change of position, we will address the arguments made in the written submissions and in Dr Muir's initial oral submissions as well as the indemnity costs issues.

7 Adopting that approach, we need to address the following two broad issues:

• (a) Whether Crown Law is sufficiently independent from the Commissioner so that it is able to fulfil its professional obligations. In particular, this issue turns on the effect of a protocol in place between the Solicitor-General and the Commissioner. 2 We will refer to this as “the Protocol”.

• (b) Whether Woodhouse J found that there was an estoppel preventing him from considering the application of the Lawyers and Conveyancers Act 2006 ( LCA) and Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (Client Care Rules) to Crown Law. If Woodhouse J did find that there was an estoppel, was he correct to do so?

8 The taxpayers' arguments in relation to the first issue extended to arguments that Crown counsel may be required to give evidence and that Crown Law's advice may be in issue in the proceedings. It was also argued that Crown Law could not comply with the Client Care Rules. These were either not pursued or were secondary arguments in this Court but we will address them briefly.

9 Once we have resolved those issues, we will need to decide whether Woodhouse J was correct to award indemnity costs against the taxpayers.

10 In his written submissions, Dr Muir sought an order remitting the case to the High Court so that the substance of the taxpayers' application could be addressed. However, in his oral submissions he asked that we determine whether Crown Law should be debarred ourselves. We have sufficient information before us to determine the issue ourselves and that is what we will do.

11 Before addressing the issues identified above, we will outline the factual background and summarise the High Court judgment.

Background

12 This appeal relates to the long-running Trinity tax avoidance litigation. The Trinity scheme taxpayers had claimed deductions for the 1997 and 1998 tax years under subpart EG of the Income Tax Act 1994. The Commissioner disallowed the deductions on the basis of s BG 1, and imposed penalties. The Supreme Court upheld the Commissioner's decision in Ben Nevis. 3 In the Supreme Court, some of

the taxpayers sought leave to argue, for the first time, that deduction and spreading issues should have been determined under subpart EH of the Act, rather than subpart EG. The Court declined to hear those arguments. 4

13 Some of the taxpayers from the Ben Nevis litigation have attempted to relitigate the proceeding. Three further proceedings are of particular relevance: the judicial review proceeding, the set aside proceeding, and the present proceedings.

Judicial review proceeding

14 The judicial review proceeding was brought on 23 December 2008, four days after the delivery of the Supreme Court's judgment in Ben Nevis. The plaintiff was Accent Management Ltd, the first appellant in this proceeding, claiming for itself and six other plaintiffs from the Ben Nevis proceeding. The application was for review of the Commissioner's decision not to apply subpart EH to the 1997 and 1998 assessments. The taxpayers alleged that the Commissioner knew that the taxpayers' liability should have been assessed under subpart EH and chose to disregard the law. Declarations were sought that the Commissioner had no power to make the 1997 and 1998 assessments and that those assessments were invalid. Keane J struck out the judicial review proceeding and awarded indemnity costs against the taxpayers. He summarised his conclusions as follows: 5

[105] Accent's challenge to the validity of the 1997–98 assessments does not lie within the two exceptional categories of case, beyond the reach of the statutory presumptions in ss 109 and 114 of the Tax Administration Act 1994. The sources of any invalidity on which Accent relies in its statement of claim to contend for the one or the other do not begin to found the conclusion that the Commissioner either made no assessment or was culpable of conscious maladministration.

[106] Accent's present review challenge relies, moreover, on a proposition...