Commissioner of Inland Revenue v Accent Management Ltd

JurisdictionNew Zealand
JudgeWoodhouse J
Judgment Date22 June 2012
Neutral Citation[2012] NZHC 1430
Docket NumberCIV-2011-404-4731 CIV-2011-404-4197
CourtHigh Court
Date22 June 2012
Between
The Commis Sioner of Inland Revenue
Applicant
and
Andaccent Management Limited
First Respondent

and

Andben Nevis Forestry Ventures Limited
Second Respondent

and

Andbristol Forestry Venture Limited
Third Respondent

and

Andclive Richard Bradbury
Fourth Respondent

and

Andgarry Albert Muir
Fifth Respondent

and

Andgregory Alan Peebles
Sixth Respondent

and

Andhillvale Holdings Limited
Seventh Respondent

and

Andlexington Resources Limited
Eighth Respondent

and

Andpeter Arnold Maude
Ninth Respondent

and

Andredcliffe Forestry Venture Slimited
Tenth Respondent

and

Andwaikato Residential Properties Limited
Eleventh Respondent
Between
Garry Albert Muir
Appellant
and
Andthe Commissioner of Inland Revenue
Respondent

[2012] NZHC 1430

CIV-2011-404-4731

CIV-2011-404-1132

CIV-2011-404-4197

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

Application by respondents for an order that Crown Law cease acting for the appellant on the basis they could not be independent under s4 Lawyers and Conveyancers Act 2006 (fundamental obligations of lawyers) and r13 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (lawyer must maintain independence) because counsel might be called as witnesses and Crown Law's relationship with the appellant was too close — respondents challenging tax assessments made in relation to Trinity scheme — appellants sought to set aside judgment in Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue on the basis the appellant presented a false case to the Court because the tax assessments were knowingly made under the incorrect provision of the Income Tax Act 1994.

Appearances:

B Stewart QC and N Gedye for the 2nd to 4th and 6th Respondents in CIV-2011-404-4731

M Hinde for the 1st and 7th to 11th Respondents in CIV-2011-404-4731

G A Muir in person in all proceedings

M Palmer and J D Kerr for the Commissioner of Inland Revenue in all proceedings opposing applications

Mr B Stewart QC, Barrister, Auckland

Mrs M Hinde, Barrister, Auckland

Dr G Muir, Muir Law, Auckland

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

JUDGMENT OF Woodhouse J

1

The appellant in two of these proceedings, Dr Muir, and the respondents in the third proceeding, who include Dr Muir, are challenging tax assessments. These are assessments relating to a scheme known as the Trinity scheme. The taxpayers have sought orders that Crown Law cease acting as the solicitors for the Commissioner of Inland Revenue, and that no Crown counsel appear as counsel in proceedings for the Commissioner, in respect of the challenge proceedings, and some related proceedings.

2

There are three applications: one by four taxpayers, for whom Mr Stewart QC has appeared; one by six taxpayers, for whom Mrs Hinde has appeared; and one by Dr Muir, acting on his own behalf. The grounds advanced in support of the applications varied to an extent, with the widest grounds being those advanced by Dr Muir. However, the essence of the primary ground for all applicants is that it is likely that Crown Law and Crown counsel will not be able to act with the degree of independence required of lawyers, and counsel will not be able to comply with duties to the court. This is said to arise because, it is alleged, critical assessments made by the Commissioner for the 1997 and 1998 income years were made fraudulently, or knowingly contrary to law, and Crown Law and Crown counsel colluded in this, or had relevant knowledge of it, and wrongly maintained this position in tax challenge proceedings already determined. In consequence, it is contended, Crown Law as solicitors, and any Crown counsel, in respect of the ongoing challenge proceedings, will face conflicts or potential conflicts such that the orders sought should be made.

3

For convenience, in this judgment, I will use the name Crown Law as including Crown counsel, and the taxpayers' arguments relating to the obligations of counsel will be incorporated within this.

Conclusions in summary
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.

The litigation history
5

The Trinity scheme was devised by Dr Muir in 1996. Dr Muir and his legal partner, Mr Bradbury, also one of the present respondents, then took steps to establish and implement the scheme. The particulars of the scheme, and details in respect of the legal issues to which it has given rise, do not need to be outlined in this judgment. Particulars may be found in the High Court, Court of Appeal and Supreme Court judgments referred to at [7] below.

6

The policy advice division of the Inland Revenue Department became aware of the Trinity scheme in October 1998. Over a period to around May 2003 the Commissioner issued assessments and amended assessments to taxpayers in the Trinity scheme for the 1997 and 1998 income years. Again it is unnecessary to go into the details. It is sufficient to note that the end result of the assessments was, in part, that certain deductions claimed by the taxpayers under subpart EG of the Income Tax Act 1994 were disallowed and penalties were imposed under the general anti-avoidance provisions of the Act. It is relevant to add at this point that a central contention of the taxpayers in the present proceedings is that subpart EH of the 1994 Act applied to the deductions in question and the Commissioner was bound by law to have assessed the relevant deductions under subpart EH. The alleged misconduct of the Commissioner and Crown Law is said to have arisen in this regard in particular. The contentions are set out more fully below.

The Ben Nevis proceeding
7

The taxpayers, on various dates, filed notices of claim in the Taxation Review Authority challenging the amended assessments. These challenge proceedings were transferred to the High Court. These are proceedings which culminated in the Supreme Court's judgments on tax avoidance in Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue. 1 The assessments were upheld. As a matter of convenience I will refer to these proceedings, in the High Court, the Court of Appeal and the Supreme Court, as the “Ben Nevis proceeding”, although the lower court judgments are reported under the name of another taxpayer in the Trinity scheme. 2

8

In the Supreme Court counsel for 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 1994 Act (or subpart EZ of the 2004 Act). These taxpayers, then represented by Mr Gudsell QC, included four of the present respondent applicants, Ben Nevis Forestry Ventures Ltd, Bristol Forestry Ventures Ltd, Mr Bradbury, and Mr Peebles. The Court declined leave to advance the arguments. 3 Other taxpayers before the Supreme Court, with Mr Stewart QC as one of their counsel, disclaimed any reliance on subpart EH. Those taxpayers are two of the present respondent applicants, Accent Management Ltd and Lexington Resources Ltd. The remaining appellant in the Supreme Court was Redcliffe Forestry Ventures Ltd, another respondent applicant in this proceeding, and represented by Mrs Hinde in the Supreme Court as in these proceedings. There does not appear to have been any contention on behalf of Redcliffe in the Supreme Court that subpart EH should have been applied by the Commissioner.

The judicial review proceeding
9

On 23 December 2008, four days after delivery of the Supreme Court Ben Nevis judgment, an application for judicial review by some Trinity scheme taxpayers was filed in the High Court (the judicial review proceeding). The plaintiff was one of the present respondents, Accent Management Ltd, claiming for itself and as representative of all but one of the other plaintiffs in the Ben Nevis proceeding. The claimants in the judicial review proceeding were seven of the eleven taxpayers in the present proceeding.

10

The judicial review statement of claim may be summarised as follows:

  • (a) The Commissioner disallowed deductions that had been claimed under subpart EG (and under other provisions for other claimed deductions) for the 1997 and 1998 income years, and in any event assessed the scheme as tax avoidance.

  • (b) The taxpayers' contractual arrangements constituted a financial arrangement governed by subpart EH, the application of which was mandatory.

  • (c) At least from 1999 the Commissioner was of the view that the contractual arrangements constituted a financial arrangement governed by subpart EH because of, amongst other things, an opinion obtained by the Commissioner from Mr Don McKay.

  • (d) The Commissioner breached a duty owed to the taxpayers to ensure that the taxpayers' tax liability was correctly assessed.

  • (e) The 1997 and 1998 assessments were and are invalid. The particulars of invalidity were pleaded as follows:

    • (i) [The Commissioner] disregarded known law, that is section EH 8, and in doing so acted arbitrarily and/or capriciously in making [his] decisions in respect of the [taxpayers'] position in 1997 and 1998;

    • (ii) The decisions do not reflect a genuine attempt to ascertain the...

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5 cases
  • Accent Management Ltd v The Commissioner of Inland Revenue
    • New Zealand
    • Court of Appeal
    • 15 Mayo 2013
    ...to the parties to apply in the event of a dispute about the amount of costs. 1 Commissioner of Inland Revenue v Accent Management Ltd [2012] NZHC 1430, (2012) 25 NZTC 2 The Protocol is a document signed by the Solicitor-General and Commissioner of Inland Revenue dated July 2009. It sets ou......
  • Redcliffe Forestry Venture Limited v Commissioner of Inland Revenue
    • New Zealand
    • High Court
    • 18 Diciembre 2013
    ...Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue, above n 3. Accent Management Ltd v Commissioner of Inland Revenue [2012] NZHC 1430; Management Ltd v Commissioner of Inland Revenue [2012] NZHC 2389. challenge after challenge that occurs with this Trinity litigation has been......
  • The Commissioner of Inland Revenue v Muir
    • New Zealand
    • High Court
    • 7 Julio 2015
    ...now that the Commissioner is asking that the costs liability be joint 3 4 5 Accent Management Limited v Commissioner of Inland Revenue [2012] NZHC 1430. Commissioner of Inland Revenue v Accent Management Limited [2012] NZHC Accent Management Limited v Commissioner of Inland Revenue [2013] N......
  • The Commissioner of Inland Revenue v Muir
    • New Zealand
    • High Court
    • 31 Octubre 2013
    ...the Court may permit a proceeding not specifically mentioned in 9 10 11 12 Commissioner of Inland Revenue v Accent Management Limited [2012] NZHC 1430, (2012) NZTC 20-130. Accent Management Limited v Commissioner of Inland Revenue [2013] NZCA 155, [2013] 3 NZLR 374. Section 138N(2) was amen......
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