FALOON v INLAND REVENUE [2013] NZHC 3090

FALOON v INLAND REVENUE [2013] NZHC 3090 [21 November 2013]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYCIV 2013-485-783[2013] NZHC 3090UNDER the Tax Administration Act 1994IN THE MATTER OF an application to the Court undersection 89M(11) of the Act for more timewithin which to reply to theCommissioner's Statement of Positionissued 1 May 2013BETWEEN CLARENCE JOHN FALOONApplicantAND THE COMMISSIONER OF INLANDREVENUERespondentHearing: On papersCounsel: Applicant in PersonA Goosen and M Stapleton for RespondentJudgment: 21 November 2013COSTS JUDGMENT OF RONALD YOUNG J[1] In these proceedings Mr Faloon filed an interlocutory application for leave to bring an originating application pursuant to s 89M(11) of the Tax Administration Act 1994. Mr Faloon was seeking more time to reply to a Commissioner'sStatement of Position under the tax dispute process. His application was refused by me.[2] Mr Faloon's originating application was based on the proposition that he was entitled to reply to a Summary of Position from the Commissioner. In my judgment of 10 October 2013 I pointed out that because Mr Faloon had initiated the notice of proposed adjustment under the tax dispute process then he had no right to reply tothe Statement of Position from the Commissioner. The result of that conclusion was that Mr Faloon did not need more time to reply to the Commissioner's Statement ofPosition and therefore there could be no basis upon which the originating application could be granted.[3] The respondent now seeks indemnity costs. Rule 14.6(4) of the High Court Rules provides:14.6 Increased costs and indemnity costs(1) Despite rules 14.2 to 14.5, the court may make an order—(a) increasing costs otherwise payable under those rules (increased costs); or(b) that the costs payable are the actual costs, disbursements, and witness expenses reasonably incurred by a party (indemnity costs).(2) The court may make the order at any stage of a proceeding and in relation to any step in it.(3) The court may order a party to pay increased costs if—(a) the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or(b) the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—(i) failing to comply with these rules or with a direction of the court; or(ii) taking or pursuing an unnecessary step or an argument that lacks merit; or(iii) failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or(iv) failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or(v) failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or(c) the proceeding is of general importance to persons other than just the parties and it was reasonably necessary for the party claiming costs to bring it or participate in it in the interests of those affected; or(d) some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.(4) The court may order a party to pay indemnity costs if—(a) the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or(b) the party has ignored or disobeyed an order or direction of the court or breached an undertaking given to the court or another party; or(c) costs are payable from a fund, the party claiming costs is a necessary party to the proceeding affecting the fund, and the party claiming costs has acted reasonably in the proceeding; or(d) the person in whose favour the order of costs is made was not a party to the proceeding and has acted reasonably in relation to it; or(e) the party claiming costs is entitled to indemnity costs under a contract or deed; or(f) some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.[4] The application for indemnity costs is said to be justified on the following grounds:(a) this matter could have been dealt with under s 89M(13) of the Tax Administration Act 1994, if Mr Faloon had approached the Commissioner and asked him to agree that additional information could be added to the Statement of Positions;(b) during the course of the proceedings Mr Faloon tried to set aside therespondent's notice of opposition and affidavit on what appeared to be trivial technical grounds wasting the Court time;(c) Mr Faloon tried to review Associate Judge Doogue's timetablingorders which was a further waste of time;(d) Mr Faloon's application was really to advance his tax dispute argument rather than to obtain more time;(e) this in turn was an attempt by Mr Faloon to relitigate matters already previously determined years ago;(f) the application could not possibly succeed;(g) the application was originally made without notice. This was inappropriate and wrong;(h) the application was hopeless, it should never have been brought; and(i) counsel for the Commissioner wrote to Mr Faloon and on a without prejudice basis save as to costs offered to give Mr Faloon 20 working days to provide further documentation in response to theCommissioner's Statement of Position. Mr Faloon did not respond to the offer. This would have achieved the same result as Mr Faloon'sapplication.[5] Mr Faloon filed a memorandum responding. Regretfully few, if any, of his submissions on costs appear to relate to the grounds on which the Commissioner seeks costs. A significant portion of his submissions relate to some form of claim that I should direct the Commissioner of Inland Revenue to file a charging document arising from what Mr Faloon sees as allegations of criminal conduct by the Commissioner against him.[6] I am satisfied that this is a case for indemnity costs. Firstly, and fundamentally, in their letter of 2 September 2013 the Commissioner made an offer which effectively would have provided Mr Faloon with the opportunity he sought by virtue of his originating application. Mr Faloon did not respond to this letter. AsCrown counsel notes it could have been avoided if Mr Faloon had taken the time to read and understand the Commissioner's letter of 2 September 2013.[7] Further, the application could never have succeeded. I adopt the words usedby Crown counsel that the proceeding was "misconceived hopeless andunsuccessful". In addition Mr Faloon was distracted by his unmeritorious objection to documents filed by the Commissioner and timetabling orders rather than focussing on his application. It was clear from my discussion with Mr Faloon that his primary purpose in bringing these proceedings was to attempt to relitigate issues previously determined. This ulterior motive is illustrated also by his failure to ask the Commissioner to agree to the provision of further information and his failure to respond to the letter of September 2013.[8] These actions bring Mr Faloon directly within r 14.6(3) and (4) of the High Court Rules and r 14.10. I order indemnity costs in the sum of $16,368.24 and disbursements of $236.50.______________________Ronald Young JSolicitors:Crown Law, Wellington