ANZ NATIONAL BANK LIMITED AND ORS V COMMISSIONER OF INLAND REVENUE HC WN CIV-2005-485-1037

ANZ NATIONAL BANK LIMITED AND ORS V COMMISSIONER OF INLAND REVENUE HC WN CIV- 2005-485-1037 21 February 2006IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY CIV-2005-485-1037 CIV-2005-485-1038 CIV-2005-485-1039IN THE MATTER OF the Tax Administration Act 1994 BETWEEN ANZ NATIONAL BANK LIMITED UDC FINANCE LIMITED TUI ENDEAVOUR LIMITED Plaintiffs AND COMMISSIONER OF INLAND REVENUE Defendant Hearing: 20 February 2006 (by telephone conference call) Appearances: L. McKay and M.J. Crawford for Plaintiffs D.J. White QC and E.J. Norris Judgment: 21 February 2006 In accordance with r540(4) I direct the Registrar to endorse this judgment with a delivery time of 3.30pm on the 21st day of February 2006.JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL Introduction[1] The defendant seeks an order for further and better particulars of the plaintiff's Statement of Claim. The notice by the defendant seeking further and better particulars was issued on 24 June 2005, and the defendant's subsequent application filed on 1 August 2005 was opposed by the plaintiffs by Notice of Opposition dated 6 December 2005.[2] In the meantime, on 12 August 2005 the plaintiffs had filed a formal application for an adjournment of these proceedings to allow the dispute resolution procedure set out in Part IVA of the Tax Administration Act 1994 to be pursued as between the parties. The plaintiffs state that the High Court is not the proper forum to hear the issues raised between the parties and that this is consistent with the Court's decision in Alpe & Ors v CIR (2001) 20 NZTC 17, 372. [3] The plaintiffs' substantive adjournment applications are now set down for a one day fixture in this Court at 10.00am on 29 March 2006. [4] In submissions before me the plaintiffs contend that these adjournment applications are not run-of-the-mill applications for adjournment. They say that at stake is an issue of fundamental importance to the administration of New Zealand's Income Tax Acts, namely a taxpayer's right to have the statutory dispute resolution procedures laid down in Part IVA of the Tax Administration Act 1994 followed in the event of a dispute between the Commissioner and a taxpayer.Application for Further and Better Particulars[5] Turning now to the application before me, the plaintiffs' general opposition to the defendant's request for further and better particulars was set out at paragraphs 4, 5 and 6 of their Notice of Opposition in the following way:4. The Plaintiffs do not object to answering the Defendant's requests for particulars, it is merely the timing of this that forms the basis of their present opposition. It is not now appropriate for the plaintiffs to provide further and better particulars when applications for lengthy adjournments are pending before the Court. The Plaintiffs have indicated in earlier memoranda to the Court for Case Management Conferences that the proper time for requests for particulars to be answered is after (and if) the adjournment applications have been determined against the Plaintiffs. 5. The Defendant is not able to make any material use of particulars, even if provided by the Plaintiffs, while the proceedings are effectively on hold pending the fixture on 29 March 2006. Nor is the Defendant prejudiced in any way by the delay. 6. Conversely, the Plaintiffs would unnecessarily incur the cost or providing the particulars sought if they are successful in adjourning these proceedings in favour of the Dispute Resolution Procedure.Those costs would not be insignificant given the breadth of the particulars sought and the number of persons who would need to be consulted in relation to the tax affairs of the Plaintiffs who may have the requisite knowledge of the particulars sought.[6] The defendant's position with regard to these points in opposition, as I understand it, raises five essential elements. These are: a) In paragraph 4 of the plaintiffs' Notice of Opposition the defendant contends that the plaintiffs acknowledge they have no objection to answering in substance the requests for particulars, but merely query the timing for provision of these answers. b) The defendant notes that the plaintiffs have not sought any interim stay of these proceedings, being proceedings which in any event were obviously initiated by the plaintiffs as claimants. c) As to paragraph 5 of the plaintiffs' Notice of Opposition, which indicates that the defendant would not be able to make any material use of the particulars, even if they were provided now by the plaintiffs, this is firmly disputed by the defendant. The defendant contends that provision of the further particulars would be relevant to determination of the adjournment application. The defendant makes this submission on the basis that the substantive issue on the adjournment application will be whether the tax avoidance proceedings, which involve complex issues of law and large amounts of tax, should be determined by the High Court (as is occurring with related proceedings in this Court affecting Westpac and Bank of New Zealand) or by the internal Inland Revenue Department processes. d) In paragraph 6 of the plaintiffs' Notice of Opposition the plaintiffs argue that if ordered to do so now, they would unnecessarily incur the cost of providing the particulars sought by the defendant if the plaintiffs were then successful in having these proceedings adjourned in favour of the dispute resolution process. The defendant takes issue with this and claims that, in any event, whatever the outcome, theplaintiffs would be required to provide the particulars. Further, the defendant argues that the costs issue is irrelevant, as the defendant could be held to be liable to meet the costs of the plaintiffs' compliance with a particular order if this was thought to be appropriate. e) Finally, the defendant contends that the High Court is the proper place for the substantive avoidance issues to be heard, especially relating to the purposes and relevance of the transactions alleged to be tax avoidance. [7] In reply, counsel for the plaintiffs indicated that the reference in paragraph 4 of the plaintiffs' Notice of Opposition that the plaintiffs do not "object to answering the Defendant's requests for particulars" meant simply that the plaintiffs do not object to responding to those requests. Counsel was at pains to stress that this does not mean that the plaintiffs accept that the defendant's requests for particulars are properly made in every case. By way of example, in his submissions counsel noted that the plaintiffs would object (referring to the requests made in the Tui Endeavour Limited proceedings by way of representative example only): a) To the particulars sought of paragraph 31 of the Statement of Claim on the basis that the issue of whether an "arrangement" exists is a legal issue; and b) To the particulars sought of paragraph 31 of the Statement of Claim on the basis that the "purposes" of an arrangement as that term is used by the defendant are irrelevant in law. [8] And, the plaintiffs' primary submission before me was that until a determination is made by this Court as to the adjournment application (and thus which is the appropriate forum for hearing the dispute between the parties), it is inappropriate to make any assumption that the defendant would ultimately succeed in opposing the adjournment application and make an order now that the particulars sought are to be provided.[9] If the plaintiffs' adjournment application on 29 March 2006 proves to be successful, then this will be because this Court determines that the specialist tax determination bodies provided for under the Tax Administration Act 1994 rather than this Court are the appropriate forum to hear the dispute between the present parties. In that event, the separate and independent procedures provided for within the Tax Administration Act Rules (for example, disclosure etc) will apply, and the current proceedings, including the defendant's request for further particulars, would simply be placed on hold. [10] The plaintiffs' stress too that provision of the particulars at this point would be a major and time-consuming exercise for the plaintiffs, and they should not presently be required to fight their current "battle" on two fronts.My Decision[11] The further particulars of the plaintiffs' Statement of Claim sought by the defendant (as outlined in the defendant's 24 June 2005 Notice) are substantial. They relate to paragraphs 4, 7, 9, 11, 12, 13, 14, 15, 16, 18, 19, 20, 21, 22, 23, 42 and 44 of the plaintiffs' Statement of Claim. [12] The particulars sought in the Notice are set out in some seven pages and 20 paragraphs. By my broad calculations the Notice asks approximately 61 individual questions. [13] As I have noted above, before me counsel indicated that the plaintiffs object to answering a number of those questions. This objection is made on the basis that the requests for particulars in some instances are not properly made. [14] Notwithstanding this, before me there was no specific argument addressed to any of those particular questions. The arguments before me, however, were addressed principally at the timing of the provision of particulars. I am unable, therefore, to tell where the plaintiffs may take issue with a request from the defendant. None of this can be considered to be entirely satisfactory.[15] That said, I am mindful that the present proceeding in this Court is to be the subject of a full day's argument on 29 March 2006 when the plaintiffs' adjournment application is due to be heard. [16] The defendant's particulars application is made pursuant to r.185(3) High Court Rules. As to this provision, McGechan on Procedure at para HR185.12 states in part:The exercise of discretion to grant or refuse an order for particulars depends very much upon the facts of each case: Phillips v Phillips (1878) 4 QBD 127, at p139.[17] As I see it, there is nothing of any conclusive nature before the Court at the present stage in this case which establishes that the further particulars sought are necessarily required for determination of that adjournment application. [18] The material before the Court on the present particulars application is somewhat limited. On this basis the proper course, in my view, is for all matters to await the determination of this adjournment application. [19] That said, the defendant's application for further and better particulars is not granted at this point. It is appropriate, however, that it should be adjourned. [20] No final decision is therefore made on the plaintiffs' application for further and better particulars. This application is adjourned in the meantime. Leave is reserved for either party to bring this application on for further argument, if appropriate, subsequent to the hearing of the adjournment application on 29 March 2006. [21] Costs are reserved. __________________________Associate Judge D.I. GendallSolicitors:Russell McVeagh, Auckland for Plaintiffs Crown Law Office, Wellington for Defendant