FALOON v COMMISSIONER OF INLAND REVENUE [2013] NZHC 1736

FALOON v COMMISSIONER OF INLAND REVENUE [2013] NZHC 1736 [9 July 2013]IN THE HIGH COURT OF NEW ZEALANDTAURANGA REGISTRYCIV-2010-470-922[2013] NZHC 1736BETWEEN CLARENCE JOHN FALOONPlaintiffAND THE COMMISSIONER OF INLANDREVENUEDefendantHearing (on the papers following a telephone conference on 25 June2013)Appearances: Plaintiff in personD Lemmon and A van Ammers for the DefendantJudgment: 9 July 2013JUDGMENT OF WOODHOUSE JThis judgment was delivered by me on 9 July 2013 at 5:00 p.m. pursuant to r 11.5 of the High Court Rules 1985.Registrar/Deputy RegistrarParties/Solicitors: Mr C J Faloon Mr D Lemmon, Crown Law, Wellington[1] Mr Faloon has filed an application for review of a costs judgment of Associate Judge Christiansen.1 The defendant Commissioner has applied for an order that the application be dismissed on the grounds that there is no jurisdiction to review a costs judgment; that the only recourse for Mr Faloon would have been an appeal to the Court of Appeal.[2] I received written submissions for both parties and discussed the issue with Mr Faloon and Mr Lemmon, for the Commissioner, during a telephone conference. The parties agreed that I should make a decision on jurisdiction on the papers and give appropriate directions depending on the decision. There is also an application by Mr Faloon for stay.Background[3] The costs decision followed a successful application by the Commissioner to strike out a proceeding brought by Mr Faloon.2 In the strike out judgment the Associate Judge did not fix costs. He recorded that it was an appropriate case toconsider the Commissioner's application for costs to be fixed on an indemnity basis and gave timetable directions for submissions on costs. Before that process was completed Mr Faloon applied for review of the substantive strike out decision.[4] The application for review was dismissed by judgment of Peters J delivered on 29 February 2012.3 The costs decision of Associate Judge Christiansen which is subject to the present application for review was made following the decision of Peters J. The Associate Judge also fixed the quantum of an award of 2B costs made by Peters J in favour of the Commissioner.Jurisdiction[5] Section 26P(1) of the Judicature Act 1908 provides that an application for review is the appropriate procedure for challenging a decision of an Associate Judge"made in Chambers". Section 26P(2) provides that a challenge to any other decision of an Associate Judge must be by way of appeal to the Court of Appeal.1 Faloon v Commissioner of Inland Revenue [2013] NZHC 1296.2 Faloon v Commissioner of Inland Revenue HC Tauranga CIV-2010-470-922, 8 November 2011.3 Faloon v Commissioner of Inland Revenue [2013] NZHC 307.[6] The expression "in Chambers" is not defined in the Judicature Act, notwithstanding the capitalisation of the word "Chambers". Rule 1.3 of the High Court Rules defines the expression "hearing in chambers", but this does not assist.Whether a decision is made "in Chambers" does not turn on whether the Judge wassitting in open court or in chambers when the decision was made.4 In broad terms the answer to the question whether a decision is made "in Chambers" turns on thenature of the application leading to the decision and the different jurisdictions of Associate Judges conferred by ss 26I and 26P of the Judicature Act. This is an area of the law which should be straightforward, but the fact that it is not is reasonably clearly demonstrated by the large number of decisions considering the issue. A number of these were reviewed by Clifford J in Nga Uri Whakatipurunga O Ngarae (Inc) v Marac Finance Ltd.5[7] The primary submission of Mr Lemmon was that the costs order of the Associate Judge was an order in exercise of the jurisdiction conferred on Associate Judges by s 26I(3) of the Judicature Act. Section 26I(3) confers jurisdiction to deal with costs and other matters incidental to the matters over which an Associate Judge is given jurisdiction by subsections (1) and (2) of s 26I. Subsections (1) and (2) confer on Associate Judges the jurisdiction and powers of the Court in respect of a wide range of matters. In Talyancich v Index Developments Ltd6 the Court of Appeal held that where an Associate Judge exercises the jurisdiction of the Court under s 26I this jurisdiction must be exercised in court, not in chambers, and that, as a result, a challenge to the decision must be by an appeal to the Court of Appeal.[8] I do not agree with Mr Lemmon's submission that the costs decision wasincidental to exercise of any of the jurisdiction or powers specified in subsections (1) and (2) of s 26I. The primary decision was a costs order incidental to the decision made on an interlocutory application to strike out the proceeding. The AssociateJudge's jurisdiction to entertain the interlocutory application to strike out theproceeding is not conferred by s 26I but by s 26J. Challenge to a decision on an interlocutory application to strike out a proceeding must be by an application for4 Talyancich v Index Developments Ltd [1992] 3 NZLR 28 at 36-37, (1992) 4 PRNZ 509 at 516-517.5 Nga Uri Whakatipurunga O Ngarae (Inc) v Marac Finance Ltd HC Auckland CIV-2008-404-6180, 9 December 2009.6 Talyancich v Index Developments Ltd, above n 4.review, not by appeal. Talyancich is, in fact, the leading authority on the point. And,of course, in this case Mr Faloon's challenge to the strike out decision was by the application for review, which application proceeded to a conclusion without any challenge to jurisdiction.[9] Mr Lemmon submitted that the Commissioner's application for costs was notan application for costs following the interlocutory application to strike out. Thefoundation for this submission was that the Associate Judge's decision had been upheld by the Court on review and this decision was "determinative of" theproceeding.[10] I do not agree. The submission is, with respect, artificial. The proceeding, in a substantive sense, was brought to an end by the decision of the Associate Judge. That decision was simply affirmed by Peters J. Neither the decision to strike out the proceeding, nor the decision affirming it, brought to an end the right of the Commissioner, as part of the original interlocutory application, to seek costs. The point is given some emphasis in this case because Associate Judge Christiansen had, in effect, made a decision that the Commissioner was entitled to costs, but simplyreserved his decision on quantum. It is implicit in Mr Lemmon's submission that thecosts application made by the Commissioner to the Associate Judge was some form of original application, but that is not so.[11] The submission for the Commissioner, if correct, would also add to the unsatisfactory state of the law in this area. It would mean, in essence, that some costs decisions on successful strike out applications would have to be challenged by an application for review, but other costs decisions on successful strike out applications would have to be challenged by appeal to the Court of Appeal.[12] For these reasons the Commissioner's application to dismiss the applicationfor review on jurisdictional grounds is dismissed.[13] Because the Associate Judge's decision dealt with costs awarded on theapplication for review as well as costs on the original application it is necessary to define the scope of this present application for review. The present application forreview cannot in any way challenge the order of Peters J that the Commissioner is entitled to costs on a 2B basis. The only matter that can be reviewed in that regard is the decision of Associate Judge Christiansen fixing the quantum of costs in a sum of $7,761 and the disbursements in a sum of $546.50. The application for review of theAssociate Judge's costs decision arising from his original decision to strike out theproceeding applies to the decision to award costs to the Commissioner as well as thequantification of those costs. In recording these matters I am not intending toindicate that there is any merit in the challenge to the decision to award costs or as toquantification. The question of merit is further considered below when dealing withMr Faloon's application for stay.Directions for disposal of the application for review[14] Mr Lemmon proposed that, if the decision went against the Commissioner on the jurisdiction point, a notice of opposition and any affidavits for the Commissioner should be filed within two weeks of this decision. Mr Faloon did not challenge that proposal.[15] There are directions as follows:(a) A notice of opposition for the Commissioner, and any affidavit (although none would appear to be required), are to be filed and served by 24 July 2013. The Commissioner is also to advise, in the notice of opposition, or by separate memorandum, whether the Commissioner is content for the application for review to be dealt with on the papers. Mr Lemmon indicated during the telephone conference that it was likely that the Commissioner would be content for the matter to be dealt with on the papers.(b) On or before Wednesday, 31 July 2013, Mr Faloon is to file and serve a memorandum advising whether he agrees to the application for review being dealt with on the papers. If Mr Faloon agrees that is all he needs to record. If he opposes the application for review being dealt with on the papers he is to state his reasons succinctly and in any event with the reasons not to exceed two pages.(c) No other documents are to be filed by either party without leave of theCourt.(d) On the first convenient date after 31 July 2013 the file is to be referred to a Judge to consider whether the matter can appropriately be dealt with on the papers or whether there should be directions for a hearing.Application for stay[16] Mr Faloon has sought an order that his application for review operate as a stay of the proceeding. He relies on r 2.3(3) of the High Court Rules.[17] Mr Faloon's application is much the same as an application for stay pending an appeal. The usual basis for granting stay pending an appeal is that appeal rightswould be rendered nugatory in the absence of a stay. Mr Faloon's possible rights ona successful application for review will not be rendered nugatory if there is no stay. If he were to succeed on the application for review, in whole or in part, it would mean that the Commissioner would be required to repay any costs recovered in the meantime from Mr Faloon. There can be no doubt that the Commissioner would comply with the judgment of the Court, subject to any right of appeal the Commissioner might have.[18] On an application for stay the Court is also bound to make a provisional assessment of the prospects of success. In my judgment, Mr Faloon has no realistic prospect of succeeding on his application for review. I advised Mr Faloon to this effect during the telephone conference. That part of Associate Judge Christiansen'sdecision which dealt with the costs awarded by Peters J simply involved confirmation of an entirely straightforward quantification on a 2B basis. The fixing of costs on the original strike out application on a 2B basis was also quite straightforward. What is more, it in fact favours Mr Faloon because, as earlier noted, Associate Judge Christiansen had considered that indemnity costs might be appropriate. It is likely that indemnity costs would have been more than 2B costs. The reason indemnity costs were not pursued by the Commissioner appears simply to be that 2B costs were awarded on the review hearing. My assessment of MrFaloon's prospects of success are such that I encourage him to withdraw thisapplication for review. If he persists with it and is unsuccessful there is a prospect of indemnity costs being awarded against him.[19] Having regard to these considerations an order for stay of execution of the existing orders will only be made if the total costs and disbursements awarded byAssociate Judge Christiansen are paid into Court.[20] The formal order is that the application for stay will be deemed to have been dismissed unless the total sum fixed by Associate Judge Christiansen, being $19,106.98, is paid into Court on or before 3:00 pm on Friday, 19 July 2013.Intituling[21] I have amended the intituling by deleting the references to the Tax Administration Act 1994 and the detailed description of the matter contained in theintituling of the original notice of proceeding and statement of claim filed by MrFaloon. The details contained in the original intituling are unnecessary and, to anextent, inappropriate.________________________________Woodhouse J