Muir v Commissioner of Inland Revenue

• Jurisdiction: New Zealand
• Judge: Faire J
• Judgment Date: 22 April 2015
• Neutral Citation: [2015] NZHC 792
• Docket Number: CIV-2011-404-1132
• Court: High Court
• Date: 22 April 2015

Under the Administration Act 1994

In the Matter of an application for strike out of all proceedings transferred and consolidated in the High Court

BETWEEN

Garry Albert Muir

First Plaintiff

Clive Richard Bradbury

Second Plaintiff

Gregory Alan Peebles

Third Plaintiff

Peter Arnold Maude

Fourth Plaintiff

Accent Management Limited

Fifth Plaintiff

Ben Nevis Forestry Ventures Limited

Sixth Plaintiff

Bristol Forestry Venture Limited

Seventh Plaintiff

Hillvale Holdings Limited

Eighth Plaintiff

Lexington Resources Limited

Ninth Plaintiff

Redcliffe Forestry Venture Limited

Tenth Plaintiff

Waikato Residential Properties Limited

Eleventh Plaintiff

and

Commissioner of Inland Revenue

Defendant

In the Matter of Section 26A Taxation Review Authority

In the Matter of Decision of Taxation Review Authority [2011] NZTRA 2

BETWEEN

Garry Albert Muir

Appellant

and

The Commissioner of Inland Revenue

Respondent

[2015] NZHC 792

CIV-2011-404-1132

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

Application by the Commissioner of Inland Revenue (CIR) for strike out of proceedings and dismissal of an appeal from the Taxation Review Authority — proceedings related to the Trinity Scheme — the Supreme Court in Ben Nevis Forestry Ventures Ltd v CIR had held Trinity to be a tax avoidance scheme and void against the CIR for income tax purposes — challenges were to tax assessments under Part 8A of the Tax Administration Act 1994 — related to later or different assessments to the challenges determined by the SC — plaintiff was the architect of Trinity, an investor in it and he had effective control over one of the key companies in the scheme — whether the plaintiff was the privy to the parties in the Ben Nevis litigation — whether issue estoppel applied.

Counsel:

GA Muir for himself

RA Edwards for fifth, ninth and tenth plaintiffs

TGH Smith and SJ Leslie for Commissioner of Inland Revenue

JUDGMENT OF Faire J

Contents

Introduction	[1]
The applications	[2]
The appeals	[4]
The remaining plaintiffs	[8]
Background	[15]
Issues not examined	[20]
Strike out jurisdiction	[22]
Applicable principles	[23]
The plaintiff's major contention in opposition to strike out and in support of the appeal	[30]
The defendant's contention in support of strike out and against the appeal	[32]
Analysis	[34]
Conclusions	[39]
Orders	[41]
Costs	[43]

Introduction

1 There are two sets of proceedings which require consideration. They are:

• (a) Proceedings issued by Dr Muir and others which are challenges to assessments made by the Commissioner of Inland Revenue for the years 2007 to 2010 pursuant to Part 8A of the Tax Administration Act 1994. In addition, there is Dr Muir's challenge proceeding to the assessment made by the Commissioner of Inland Revenue for the 1997 year; and

• (b) Appeals from decisions of Judge PF Barber as the Taxation Review Authority. The first was delivered on 1 February 2011, which struck out the challenges to the Commissioner of Inland Revenue's assessment of Dr Muir for the financial years ending 31 March 1998 to 31 March 2006. The second was delivered on 16 June 2011. That decision refused Dr Muir's application to recall the 1 February 2011 decision.

The applications

2 The Commissioner applies to strike out the challenge proceedings. The Commissioner relies on three specific grounds, namely, that the challenge proceedings:

• (a) Disclose no reasonably arguable cause of action;

• (b) Are frivolous, vexatious and (or otherwise) an abuse of process of the court; and

• (c) Are, most relevantly, as they relate to assertions regarding limitation, speculative.

3 The Commissioner submits also that Dr Muir's appeals should be dismissed for the same reasons.

The appeals

4 Dr Muir's appeal seeks an order that the decision delivered on 1 February 2011 by Judge Barber as the Taxation Review Authority be set aside.

5 Dr Muir's notice of appeal in respect of the 1 February 2011 decision contains multiple grounds. They can, however, be broken into two parts, namely:

• (a) The Authority was wrong to strike out the challenges because it had no application for striking out before it; and

• (b) Even if it had, it was not appropriate to strike out the application on what was simply the determination of a preliminary issue of whether the Taxation Review Authority had statutory power to hear Dr Muir's challenge against the assessments of income tax.

6 Although the decision of Judge Barber delivered on 1 February 2011 purported to deal with Dr Muir's challenge proceeding in respect of the Commissioner's assessment for the 1997 year, counsel confirmed that it did not. Dr Muir sought leave to amend the statement of claim in the challenge proceedings by adding 1997 to paragraph 6 of his statement of claim so that it was clear that that year's assessment was included in the challenges. Mr Smith did not oppose as it was common ground that the 1997 challenges had not been dealt with. I ordered accordingly.

7 Mr Smith drew attention to the fact that the second appeal, that is, in respect of the 16 June 2011 decision, is an appeal from an interlocutory application in respect of which there is no right of appeal. 1 Dr Muir accepted that position. Accordingly, the appeal in respect of the 16 June 2011 decision is dismissed with costs reserved.

The remaining plaintiffs

8 In a judgment delivered on 31 October 2013 Toogood J ordered that: 2

• (a) The challenge proceedings which had commenced before the Taxation Review Authority be transferred to the High Court for hearing;

• (b) That the challenge proceedings be consolidated;

• (c) That the challenge proceedings be consolidated with Dr Muir's two appeals;

• (d) That statements of claim in accordance with the High Court Rules be filed in respect of the challenge proceedings to be followed by statements of defence; and

• (e) Other procedural orders and orders as to costs.

9 The assessments which are the subject of the current proceeding are the remaining cases which were the subject of notices of stay issued by the Commissioner of Inland Revenue. The notices of stay were issued to await determination of 13 test cases. Proceedings seeking orders for stay, judicially reviewing the Commissioner's decision to designate the 13 test cases and to stay the remaining cases were determined by Paterson J in a judgment delivered on 18 November 2013.

10 At the commencement of the hearing and with the consent the Commissioner of Inland Revenue and non-opposition by Dr Muir, I made an order on the application by Ms Edwards, granting leave to the fifth, ninth and tenth plaintiffs to discontinue their challenge proceedings.

11 The remaining parties in the challenge proceedings are the first plaintiff, Dr Muir, the fourth plaintiff, Mr Maude, the eighth plaintiff, Hillvale Holdings Ltd, and the eleventh plaintiff, Waikato Residential Properties Ltd. At a conference held on 5 February 2015 before me, Mr Ewen, counsel for Mr Maude, Hillvale Holdings Ltd and Waikato Residential Properties Ltd advised that Mr Maude, Hillvale Holdings Ltd and Waikato Residential Properties Ltd would take no active part in this hearing and would simply adopt the submissions made by Dr Muir.

12 The second plaintiff, Mr Bradbury, has been adjudicated bankrupt. Mr Peebles, the third plaintiff, who is represented by Mr Judd QC, advised at the conference on 5 February 2015 that he had attempted to file a debtor's application and that it was anticipated that that matter would be brought to conclusion shortly. On that basis Mr Judd advised that Mr Peebles would take no part in the hearing. Out of an abundance of caution, I adjourned this aspect of the application so far as it affects Mr Peebles to a conference on 13 March 2015. I excused Mr Judd's appearance.

13 Subsequently, counsel for the Commissioner and counsel for the Official Assignee acting for the bankrupt estate of Mr Peebles advised by memorandum that Mr Peebles was adjudicated bankrupt on 10 February 2015. The memorandum sought the striking out of the statements of claim, with costs reserved. Accordingly, the statements of claim on behalf of Messrs Bradbury and Peebles are struck out and costs are reserved.

14 The remaining plaintiffs not referred to in [11], [12] and [13] have discontinued.

Background

15 The challenges relate an investment known as “Trinity Investment” or “Trinity Scheme”. 3

16 The scheme was considered by the High Court, 4 the Court of Appeal 5 and Supreme Court 6 in relation to the assessments for the 1997 and 1998 years of certain investors in the scheme who had been selected as the participants in the test case.

17 I adopt the analysis of the facts and contractual terms as recorded by the Supreme Court:

Facts and contractual terms

[14] The nine appellants are investors, or loss attributing qualifying companies (LAQCs) of investors, in a syndicate that has been involved in the development of a Douglas Fir forest project as part of what is known as the Trinity scheme. The forest has been planted in Southland. Douglas Fir has a 50 year rotation and the forest is due to be harvested by 2048.

[15] The contractual arrangements for investment in the forestry project are complex. The scheme, including its contractual aspects, was

devised and set up by Dr Garry Muir, who is a tax lawyer. At the relevant time he was the partner of a Mr Bradbury in the law firm Bradbury & Muir, which acted in the establishment and implementation of the scheme. Dr Muir and Mr Bradbury were both also investors. Mr Bradbury and the LAQCs of both Dr Muir and Mr Bradbury are appellants.

[16] The initial steps in the implementation of the Trinity scheme were taken early in 1997 when an agreement was...