REDCLIFFE FORESTRY VENTURE LIMITED V THE COMMISSIONER OF INLAND REVENUE CA818/2009 [2013] NZCA 493

REDCLIFFE FORESTRY VENTURE LIMITED V THE COMMISSIONER OF INLAND REVENUE CA818/2009 [2013] NZCA 493 [18 October 2013]IN THE COURT OF APPEAL OF NEW ZEALANDCA818/2009[2013] NZCA 493BETWEEN REDCLIFFE FORESTRY VENTURELIMITEDFirst AppellantGARRY ALBERT MUIRSecond AppellantACCENT MANAGEMENT LIMITEDThird AppellantBRISTOL FORESTRY VENTURELIMITEDFourth AppellantBEN NEVIS FORESTRY VENTURESLIMITEDFifth AppellantLEXINGTON RESOURCES LTDSixth AppellantCLIVE RICHARD BRADBURYSeventh AppellantGREGORY ALAN PEEBLESEighth AppellantAND THE COMMISSIONER OF INLANDREVENUERespondentCourt: Stevens, Wild and Miller JJCounsel: R B Stewart QC for Fourth, Fifth, Seventh and EighthAppellantsM S Hinde for First, Third and Sixth AppellantsG A Muir in personR L Roff for RespondentJudgment:(On the papers)18 October 2013 at 11.30 amJUDGMENT OF THE COURTA The appellants jointly and severally must pay the respondent costs for a standard appeal on a band A basis and usual disbursements.B The costs component is to be uplifted by 50 per cent.C If the parties cannot agree on a reasonable time for each step taken in the proceeding, then the parties are to file a joint memorandum of no more than three pages in length setting out the steps taken, the time taken for each step, those steps on which the parties agree, and those steps on which the parties do not agree, with reasons given for the disagreement. That memorandum must be filed within fifteen working days from the date of this judgment.D There will be an order for payment to the respondent of the total amount of costs and disbursements payable from the security for costs held by the Registrar. Any balance of the security for costs held is to be paid out toWynyard Wood, the appellants' solicitors.____________________________________________________________________REASONS OF THE COURT(Given by Stevens J)[1] The Commissioner of Inland Revenue (the Commissioner) has sought costs in the abandoned appeal in CA818/2009 against the appellants (to whom we will collectively refer as Redcliffe). The parties have resolved the question of costs in two related appeals (CA204/2010 and CA69/2011) which were also abandoned. We have considered the various submissions and memoranda filed by the appellants and the Commissioner in respect of the remaining costs claim.11 In particular the Commissioner's memoranda of 29 June and 13 August 2012 and Redcliffe'smemoranda of 20 July 2012 and 1 May 2013.Background[2] The context to the abandoned appeal is this. In September 2009, Redcliffe filed a statement of claim in the High Court seeking an order setting aside a 20 December 2004 decision of Venning J.2 Lang J, the Civil List Judge, assigned the setting aside proceeding to Venning J. Redcliffe applied to have that administrativedecision of Lang J reviewed on the basis of the "prior involvement" principle. In adecision delivered on 2 December 2009, Venning J declined to review the administrative decision, noting that there was no principled basis for objection to his assignment.3 It was from this 2 December decision that Redcliffe appealed in CA818/2009.[3] The appeal was scheduled to be heard from 27–30 June 2011. There were three other appeals which were to be heard at the same time. Two of these were abandoned at the same time as CA818/2009.4 The third appeal, CA152/2010, was successful in this Court.5 However, this Court's judgment was appealed by theCommissioner to the Supreme Court, and was overturned in that Court.6[4] The chronology of relevant events is as follows:Date EventSeptember 2009 Redcliffe issues proceeding to set aside the 20 December 2004decision of Venning J (the setting aside proceeding).2 December 2009 Venning J declines review of the administrative decision to assignthe setting aside proceeding to him.23 December 2009 Redcliffe files notice of appeal in this Court in respect of the2 December 2009 decision (CA818/2009).26 February 2010 Venning J dismisses Redcliffe's setting aside proceeding for want ofjurisdiction.723 March 2010 Redcliffe files notice of appeal against 26 February 2010 decision ofVenning J (CA152/2010).2 Accent Management Ltd v Commissioner of Inland Revenue (2005) 22 NZTC 19,027 (HC).3 Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue (2010) 24 NZTC 23,991 (HC) [Review decision].4 CA204/2010 and CA69/2011.5 Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue [2011] NZCA 638, [2012] 2 NZLR 823.6 Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd [2012] NZSC 94, [2013] 1 NZLR 804.7 Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue [2011] 1 NZLR 336 (HC).Date Event31 May 2010 Complaints about Venning J made by some of the appellants to theJudicial Conduct Commissioner.9 November 2010 Parties agree a timetable to file submissions on all appeals.8Redcliffe to file by 30 May 2011, Commissioner to file by 13 June2011.17 March 2011 By minute, Venning J recuses himself from dealing further with thesetting aside proceeding.20 April 2011 Redcliffe seeks an indefinite adjournment for all appeals until afterthe release of the Judicial Conduct Commissioner's decisionregarding Venning J.12 May 2011 By minute, Arnold J declines to grant the adjournment.30 May 2011 Redcliffe's submissions due pursuant to timetable agreed in jointmemorandum dated 9 November 2010.31 May 20119 Redcliffe files a notice of discontinuance in respect of CA818/2009,and also in respect of CA204/2010 and CA69/2011. OnlyCA152/2010 remained ongoing.2 February 2012 Commissioner files memorandum regarding costs of abandonedappeals.17 February 2012 Redcliffe files memorandum seeking direction that costs in respectof CA204/2010 and CA69/2011 not be fixed until the Supreme Courthad determined the Commissioner's appeal in CA152/2010.27 February 2012 Commissioner files further memorandum regarding costs ofabandoned appeals – Commissioner saw no justification for delayingthe fixing of costs.2 March 2012 Redcliffe files two memoranda: one asked that costs in CA818/2009also be deferred, and the other explained why costs in the abandonedappeals should not be determined until the Supreme Court had heardthe appeal in CA152/2010.29 June 2012 Commissioner files submissions on costs seeking indemnity costsand, if not, increased costs on all three of the abandoned appeals.20 July 2012 Parties file joint memorandum advising that the parties have reachedagreement on costs in CA204/2010 and CA69/2011. TheCommissioner's claim for costs in CA818/2009 remainedunresolved.20 July 2012 Redcliffe files memorandum submitting there should be no order forcosts in CA818/2009.13 August 2012 Commissioner files memorandum in reply to Redcliffe's 20 July2012 memorandum.1 May 2013 Redcliffe files memorandum in reply to the Commissioner's13 August 2012 memorandum.8 Except CA69/2011. By minute issued on 12 May 2011 Arnold J decided that the CA69/2011 appeal would be heard at the same time as the other three.9 This is the date on the notices of abandonment. Notices of result sent by the Court were dated 7 June 2011.Submissions[5] For the Commissioner, Ms Roff claims indemnity costs in relation to CA818/2009 on the basis that it was objectively obvious to Redcliffe that they were acting vexatiously, improperly and unnecessarily.10 In summary, the Commissioner relies on the following grounds:(a) Each of the five categories endorsed by this Court in Bradbury v Westpac Banking Corp was engaged.11(b) The appeal is an example of the taxpayers' wider strategy to a collateral attack on the Supreme Court's decision in Ben Nevis.12 Thepurpose of such an attack is to delay finalisation of the taxpayers'affairs for as long as possible.(c) The appeal was plainly hopeless.(d) Redcliffe's conduct in abandoning the appeal at such a late stage resulted in a waste of the Court's and the Commissioner's time andresources. The Commissioner had already prepared extensive submissions when the appeal was abandoned, bearing in mind that theCommissioner's submissions were due on 13 June 2013.[6] In the event that the Court is not minded to award costs on an indemnity basis, the Commissioner seeks increased costs on the basis that Redcliffe contributed unnecessarily to the time and expense of the appeal by taking and pursuing unmeritorious arguments without reasonable justification.13 The Commissioner relies on the same grounds as outlined above at [5]. The Commissioner also relies on the decision of this Court in Holdfast NZ Ltd v Selleys Pty Ltd14 where it was held that an uplift of 50 per cent on scale costs would generally be sufficient for fairrecovery, but that "there may be circumstances where the Court considers a higher10 Court of Appeal (Civil) Rules 2005, r 53E(3)(a).11 Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [29].12 Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2008] NZSC 115, [2009] 2 NZLR 289.13 Court of Appeal (Civil) Rules, r 53E(2)(b)(ii) and (iii).14 Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA). See also Bradbury v Westpac Banking Corporation at [27].award to be justified."15 The Commissioner submits that an uplift of at least 75 per cent is appropriate in this case to reflect the failure of Redcliffe to act reasonably in light of the unmeritorious and vexatious nature of the appeal.[7] Redcliffe submits that, given the circumstances, particularly the Judge'srecusal which led to the abandonment, costs should lie where they fall. It was not the actions of Redcliffe which led to the appeal being discontinued, but the issue ofthe Judge's minute of 17 March 2011. Redcliffe acted reasonably in issuing theproceeding, and acted equally reasonably in discontinuing it.Our evaluation[8] We are not persuaded that indemnity costs are appropriate in this appeal. In our view, the grounds set out in Bradbury for indemnity costs are not made out.16[9] However we consider that an award of increased costs is justified. We consider that the appropriate award is costs for a standard appeal on a band A basis uplifted by 50 per cent. We apply the approach of this Court in Holdfast that such an increase would generally be sufficient for fair recovery where an award of higher costs than scale is justified. We see no justification for a greater uplift.[10] We consider that the application made in the High Court effectively to have Venning J recuse himself from dealing with the setting aside proceeding should never have been made. Counsel for Redcliffe submitted to Venning J that there were three situations in which a Judge would be unable to hear a case on the basis of a"prior involvement" principle. As Venning J held, the first two situations did notapply to this case.17 The third situation in which Redcliffe said this principle operated was where a Judge was hearing a fresh proceeding asserting that the earlier decision should be set aside based on a false case. The authority relied on for this proposition was Kuwait Airways Corp v Iraqi Airways Corp.18 Mr Forbes QC for some of the Redcliffe appellants conceded in a telephone conference with Venning J15 At [47]–[48].16 Bradbury, above n 11.17 Review decision, above n 3, at [15].18 Kuwait Airways Corp v Iraqi Airways Corp [2003] EWHC 31 (Comm), [2003] 1 Lloyd's Rep448.that that case did not stand for such a principle.19 Accordingly, there was no basis forreview of Lang J's decision based on the prior involvement principle. Mr Stewart QC for some of the Redcliffe appellants advanced an argument that Redcliffe may have a feeling of pre-determination because of Venning J's previous adversedecisions against them. However, as Venning J pointed out, those decisions simplyreflected the Judge's compliance with his duty to decide cases in compliance withthe law. They did not give rise to a reasonable apprehension of bias.20[11] We are satisfied that the application for review of the administrative decision was unmeritorious. The appeal in CA818/2009 should never have been brought.[12] There is thus no merit in Redcliffe's point that it abandoned the appeal in atimely way when Venning J recused himself. In any event, it is clear that Venning J did not recuse himself for the reasons that Redcliffe has submitted he should do so. Rather, he recused himself due to the actions of Redcliffe in making allegationsagainst him. As the Judge's minute of 17 March 2011 said:[3] Given the extreme and personal nature of the allegations made against me by the complainants which are now before the Judicial [Conduct] Commissioner I have determined it would be inappropriate for me to deal further with this file.[13] Even if there were merit in the appeal, Redcliffe waited a month and a half after the issuing of Venning J's recusal minute to abandon the appeal. The appeal was abandoned the day after Redcliffe's submissions were due, and then only after amisconceived application for adjournment had been declined by Arnold J. Thus the Commissioner had already put time and resources into preparing for a meritless appeal, and should be compensated for this.[14] We accept that the Commissioner's counsel will have incurred considerablecosts up to the point of the abandonment. From the material before us we are unable to determine what costs were incurred by the Commissioner in relation to CA818/2009. Hence we make a default direction that the parties are to endeavour to agree on a reasonable time for each step required in this appeal as provided by19 At [28].20 At [32].r 53D.21 If agreement cannot be reached, the parties are to file a joint memorandum of no more than three pages in length setting out the steps taken, the time taken for each step, those steps on which the parties agree, and those steps on which the parties do not agree, with reasons given for the disagreement. That memorandum must be filed within fifteen working days from the date of this judgment.Result[15] The appellants jointly and severally must pay the respondent costs for a standard appeal on a band A basis and usual disbursements. The costs component is to be uplifted by 50 per cent.[16] We direct the Registry to pay that sum out to the Commissioner from the security for costs held. Any balance of the security for costs held is to be paid out to Wynyard Wood, the appellants' solicitors.Solicitors:Wynyard Wood Solicitors, Auckland for AppellantsCrown Law Office, Wellington for Respondent21 See also Holdfast, above n 15, at [44].