MUIR v COMMISSIONER OF INLAND REVENUE [2018] NZCA 456

MUIR v COMMISSIONER OF INLAND REVENUE [2018] NZCA 456 [26 October 2018]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA549/2017[2018] NZCA 456BETWEEN GARRY ALBERT MUIRAppellantAND COMMISSIONER OF INLANDREVENUERespondentCA16/2018BETWEEN GARRY ALBERT MUIRAppellantAND COMMISSIONER OF INLANDREVENUERespondentHearing: 31 May 2018 (further submissions received 24 September 2018)Court: Winkelmann, Clifford and Williams JJCounsel: Appellant in person, R B Hucker and J E Tomlinson for AppellantS J Leslie and G H H Gordon for RespondentJudgment: 26 October 2018 at 11.15 amJUDGMENT OF THE COURTA The appeals are dismissed.B The appellant must pay the respondent one set of costs for a standardappeal on a band A basis and usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Clifford J)Introduction[1] In 2015 this Court upheld a decision of the High Court striking out, as an abuseof process, challenges brought by the appellant, Dr Muir, to the respondent's,the Commissioner of Inland Revenue's, assessments of him for the tax years 1997 to2010.1 Dr Muir subsequently purported to file amended claims in those challengeproceedings.[2] In separate decisions, Toogood J2 and Jagose J3 in effect found those purportedclaims also to be an abuse of process.[3] Dr Muir now appeals those decisions. He says he is entitled to replead hischallenge proceedings as the repleaded challenges involve facts the courts have notpreviously considered.The recent Supreme Court decision[4] We heard Dr Muir's appeal on 31 May 2018. At that time, the Supreme Courtwas considering an application by Dr Muir for leave to appeal. In June 2017Associate Judge Bell granted the Commissioner summary judgment against Dr Muirfor $8,179,830.94 — being Dr Muir's unpaid assessed taxes, interest and penalties forthe years 1997 to 2010.4 Dr Muir appealed to this Court. That appeal was dismissed.5Dr Muir's leave application was to bring a second appeal against that summaryjudgment decision.1 Muir v Commissioner of Inland Revenue [2015] NZCA 591, (2015) NZTC ¶22-034 at [43][Court of Appeal decision].2 Muir v Commissioner of Inland Revenue [2017] NZHC 2082, (2017) 28 NZTC ¶23-029[Toogood J decision].3 Muir v Taxation Review Authority [2017] NZHC 2932 [Jagose J decision].4 Commissioner of Inland Revenue v Muir [2017] NZHC 1413, (2017) 28 NZTC ¶23–019.5 Muir v Commissioner of Inland Revenue [2018] NZCA 129, (2018) 28 NZTC ¶23–056.[5] Shortly before we were to release our decision in these appeals, theSupreme Court released its decision declining Dr Muir's application for leave.6[6] The conclusion we had reached at that point was that, as this Court had held inits 2015 strike-out decision, the challenge proceedings in which Dr Muir purported tofile amended claims had been struck out.7 Accordingly, as the High Court had found,Dr Muir could not file amended claims in those proceedings. We would, we haddecided, therefore have dismissed these appeals.[7] In its leave decision, the Supreme Court found that Associate Judge Bell'sdecision created a res judicata, and thus controlled the results in the challengeproceedings and hence these appeals. In doing so, the Supreme Court reasonedfurther:8[24] The grant of summary judgment turns on the conclusion that thechallenge proceedings have been finally determined, which in turn is premisedon the finding that the judgments referred to in [4]–[5] above resulted in thechallenge proceedings, and not just the pleadings, being struck out. Contraryto the way in which the applicant's submissions address the point, thisconclusion [that the challenge proceedings have been struck out] does not reston principles of res judicata or estoppel. Instead it rests on the simpleproposition that the striking out of a proceeding means that that proceedinghas been determined and cannot be revived by the filing of a further statementof claim.[8] That "simple proposition" reflected the conclusion we had by then reached.Further submissions[9] We nevertheless gave Dr Muir and the Commissioner the opportunity to makesubmissions on the effect of the Supreme Court's leave decision as regards thedisposition of these appeals. The Commissioner's submission was that the decisionwas dispositive, in her favour, of these appeals. Dr Muir maintained the arguments hehad made before us, in effect challenging the Supreme Court's reasoning in that leavedecision and arguing that, in any event, that decision did not bind this Court.6 Muir v Commissioner of Inland Revenue [2018] NZSC 81, (2018) 28 NZTC ¶23–067[Supreme Court leave decision].7 Court of Appeal decision, above n 1.8 Supreme Court leave decision, above n 6.[10] In these circumstances, we can express our reasons succinctly, and withoutrecording as much of the background to these appeals as we would otherwise havedone.BackgroundThe initial challenge proceedings[11] We adopt the Supreme Court's summary of the fate of Dr Muir's initialchallenge proceedings:9[4] The challenges against the 1998–2006 assessments were struck out bythe [Taxation Review Authority] on 1 February 2011.10 On 22 April 2015,Faire J decided an appeal against the [Taxation Review Authority's] decisionof 1 February 2011 at the same time as he dealt with an application by theCommissioner to strike out challenge proceedings by the applicant for the1997 and 2007–2010 assessments.11 Faire J struck out the challenges to the1997 and 2007–2010 assessments and dismissed the applicant's appeal fromthe [Taxation Review Authority's] 2011 decision. In doing so, he concludedthat further prosecution of the challenge proceedings would be an abuse ofprocess given the decision of this Court in Ben Nevis Forestry Ventures Ltd vCommissioner of Inland Revenue.12 An appeal against his judgment wasdismissed by the Court of Appeal on 8 December 2015.13[5] On 20 July 2016, the applicant's application for leave to appeal tothis Court was dismissed in relation to the 1997 and 1998 tax years butallowed in relation to the 1999–2010 tax years.14 This grant of leave was,however, revoked on 26 August 2016.15 The Court noted, "[t]he consequenceis that the decision of the Court of Appeal will stand, and the appellant'sproceedings will remain struck out in their entirety".16The further challenge proceedings[12] As he had indicated he would, Dr Muir then endeavoured to re-engage with hischallenges in each of the Taxation Review Authority (TRA) and the High Court.9 Supreme Court leave decision, above n 6.10 [Muir] v Commissioner of Inland Revenue [2011] NZTRA 2, (2011) 25 NZTC ¶1-006.11 Muir v Commissioner of Inland Revenue [2015] NZHC 792, (2015) 27 NZTC ¶22-004.12 Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2008] NZSC 115, [2009]2 NZLR 289.13 Court of Appeal decision, above n 1.14 Muir v Commissioner of Inland Revenue [2016] NZSC 90, (2016) 27 NZTC ¶22-060.15 Muir v Commissioner of Inland Revenue (No 2) [2016] NZSC 113, (2016) 27 NZTC ¶22-067.16 At [11].[13] First, in August 2016 Dr Muir attempted to file an amended statement of claimin the TRA relating to years 1998 to 2006. In his amended notice of claim Dr Muirfirst sought an order that for the relevant years no valid assessments and/orassessments capable of being confirmed by the TRA had been made. To the extent hedid not succeed on that ground, Dr Muir sought orders allowing deductions for, as bestas we can tell, expenses incurred in connection with the unwinding of theTrinity scheme, including a payment "to Trinity of money's worth of $5,200,000" anda declaration that the penalties imposed in the years 1998 to 2003 were not payable byhim.[14] Secondly, and at the same time, Dr Muir filed an amended statement of claimin the High Court relating to the 1997 and 2007 to 2010 years. For the 1997 year, heclaimed that the payment of $5,200,000 "monies worth" to Trinity was a lossthe Commissioner was required to take into account when assessing his 1997 tax year.For the years 2007 to 2010 he was entitled to deductions for professional fees incurredon revenue account.The challenged High Court decisionsJagose J[15] The TRA declined to accept Dr Muir's August 2016 amended notice of claim.Judge Sinclair, in a minute of 21 September 2016 recording that decision, reasoned:[7] It is clear from the above review of these proceedings that the decisionof Judge Barber has not been overturned and therefore the challengeproceedings remain struck out.[8] A strike out application, if successful, has the effect of determiningthe whole proceeding. Consequently, there are no challenge proceedingsextant before [the TRA] and the [TRA] therefore has no jurisdiction to hearany application in relation to these proceedings.[9] It also follows that there is no ability for the disputant to file anyfurther amended notice of claim in these proceedings and the second amendednotice of claim is not accepted for filing accordingly.[16] Dr Muir sought judicial review of that decision in the High Court.The Commissioner responded, protesting the Court's jurisdiction and applying for thedismissal of that claim. In the alternative, the Commissioner applied for theproceeding to be dismissed as an abuse of process.[17] In his November 2017 decision Jagose J addressed those applications in thefollowing terms:17[14] This Court earlier held of Dr Muir's 'amended' pleadings,respectively in the [TRA] and this Court, "Once a proceeding is at an end it isnot possible to file fresh pleadings in the same proceeding to resume thelitigation", and: filing a document which purported, misleadingly, to amend apleading in a proceeding which had been brought to an end by anorder of the Court constitutes a collateral attack on the decisionsof this Court, the Court of Appeal and the Supreme Court. It wasan abuse of the Court's processes. In Lai v Chamberlains, theSupreme Court referred to the Court's independent duty toprevent abuse, noting that principles of finality underlie theexercise of the broad inherent procedural power to strikeproceedings out where further litigation amounts to an abuse ofprocess.[15] As the [TRA] proceeding is at an end, there is nothing in which any'amended' pleading may be filed. It follows the [TRA] exercises no power inrefusing to accept such a pleading for filing, and I am satisfied this Court hasno jurisdiction to review such a refusal. In accordance with HCR 5.49(6)(a),I therefore dismiss the proceeding.[16] Given that decision, I do not need to decide, and therefore dismiss,the Commissioner's alternative application. Had I been required to decide theapplication, I would have granted it, essentially for the reasons set out above.Toogood J[18] The High Court Registrar initially accepted Dr Muir's August 2016 amendedstatement of claim. The Commissioner challenged that decision, by way ofmemorandum. Dr Muir filed further memoranda. Faire J declined to deal with thematter on the basis of those written memoranda. In a minute of 13 September 2016,he said:[3] It appears that the Registrar, or Registrar's Deputy, had accepted thedocument for filing. No application to review that decision pursuant to r 2.11has been made. On that basis, any challenge to the proceeding would appearto have to be made either in reliance on Part 12 Summary Judgment or Part 15.Should the defendant wish to take one or other action accordingly, the17 Jagose J decision, above n 3 (footnotes omitted).appropriate application should be filed. The Case Officer should arrange forit to be accorded nominal date or hearing when appropriate directions can begiven.[19] The Commissioner subsequently filed a interlocutory application to reviewthe Registrar's acceptance of Dr Muir's amended statement of claim. Having recordedthe procedural background, in his August 2017 decision Toogood J noted:18[5] The primary issue arising from the submissions of the parties iswhether the proceeding remains on foot. [Counsel] agree that everythingflows from a determination of that point.[20] The Judge was satisfied that the proceeding had been brought to an end whenstruck out by Faire J on 22 April 2015.19 The subsequent decision of this Court, andthe comments made by the Supreme Court when revoking leave, confirmed that. Nor,Toogood J reasoned, could Dr Muir draw any comfort from the distinction theHigh Court Rules 2016 draw between staying all or part of a proceeding anddismissing it.[21] Toogood J noted:20Notwithstanding that Faire J referred to striking out rather than dismissing theproceeding, there is no doubt he intended to bring to an end a proceedingwhich he had held was an abuse of the Court's process. The judgments of theappellate courts confirm unequivocally that the proceeding itself is at an end.This appeal[22] Dr Muir's argument in these appeals relies (i) on the existence of the distinctionreflected in the High Court Rules between striking out pleadings and staying ordismissing proceedings and (ii) on those particular features of tax disputes which flowfrom the well-established principle that it is the Income Tax Act 2007 that imposesliability on a taxpayer, not the decision of the Commissioner or a hearing authority.21On that basis Dr Muir said he was entitled to replead the challenge proceedings in theTRA and the High Court and that, as a matter of tax law, he was doing so on the basis18 Toogood J decision, above n 2.19 At [6].20 At [12].21 Reckitt and Colman (New Zealand) Ltd v Taxation Board of Review [1966] NZLR 1032 (CA)at 1045.of facts that have not previously been considered by the hearing authorities. So new,or de novo, decisions are now required.[23] Dr Muir pointed to the former as the basis of his proposition that Faire J andthis Court did not hold that Dr Muir's proceedings had been struck out: those decisionsonly affected the pleadings he had filed and, implicitly, allowed him to replead.[24] The more general principle supported that conclusion, because it demonstratedthe separate and distinct nature of the debt a taxpayer owes for each tax year, and thefocus of the disputes procedure as being to determine the correct amount of that debtin accordance with the provisions of the Income Tax Act. Thus, and for example,Dr Muir pointed to the well-established principle that a hearing authority hears a taxchallenge de novo,22 is not bound by the positions the parties take, and may itselfimpose what it considers to be the correct tax liability.23[25] Dr Muir emphasised that he was no longer disputing the substantive effect ofthe Ben Nevis decision as regards deductions that might have been claimed undersub-pt EH or EG of the Income Tax Act. Rather, the deductions he now sought hadnot previously been considered by the Commissioner.[26] For the Commissioner, Ms Leslie relied on the decisions of the High Court andthe Court of Appeal which, she said, had clearly struck out Dr Muir's challengeproceedings as an abuse of process. That was confirmed by the observations made bythe Supreme Court. As those proceedings had been struck out, Dr Muir could not fileamended pleadings. Theoretically, he could apply to bring fresh challengeproceedings out of time under s 138D of the Taxation Administration Act 1994. Butthat was a separate question.[27] Fundamentally, Ms Leslie's point was that Dr Muir was continuing hiscollateral attack on the Supreme Court's decision in Ben Nevis as it applied to him.That was an abuse of process, as were the amended proceedings he had commencedin reliance on sub-pt EH.22 Great North Motor Co Ltd (in rec) v Commissioner of Inland Revenue [2017] NZCA 328, (2017)11 NZCLC 98-053 at [33].23 Commissioner of Inland Revenue v Zentrum Holdings Ltd [2007] 1 NZLR 145 (CA).Analysis[28] The High Court Rules provide for dismissal, strike out and stay in thefollowing terms:15.1 Dismissing or staying all or part of proceeding(1) The court may strike out all or part of a pleading if it—(a) discloses no reasonably arguable cause of action, defence, orcase appropriate to the nature of the pleading; or(b) is likely to cause prejudice or delay; or(c) is frivolous or vexatious; or(d) is otherwise an abuse of the process of the court.(2) If the court strikes out a statement of claim or a counterclaim undersubclause (1), it may by the same or a subsequent order dismiss theproceeding or the counterclaim.(3) Instead of striking out all or part of a pleading under subclause (1),the court may stay all or part of the proceeding on such conditions asare considered just.(4) This rule does not affect the court's inherent jurisdiction.[29] We acknowledge that the drafting of r 15.1 reflects the well-establisheddistinction which exists between the striking out of a pleading and the dismissal of aproceeding.24 But that distinction does not support the argument Dr Muir attemptshere.[30] We also acknowledge that income tax owed by a taxpayer for a particular taxperiod is a debt that is distinct from income tax for a different tax period or payableby another taxpayer. The question of issue estoppel in tax cases may be problematic.British and Australian courts have resisted the general proposition that issue estoppelcan be applied in respect of successive years of assessment.25 But, again, thatargument does not assist Dr Muir here.24 We also acknowledge that at strike out decision on procedural grounds may leave the door openfor the affected party to file amended pleadings — Westpac Banking Corp v M M KemblaNew Zealand Ltd [2001] 2 NZLR 298 (CA) at [60].25 Caffoor (Trustees of the Abdul Gaffoor Trust) v Commissioner of Income Tax, Colombo [1961]AC 584 (PC); and Spassked Pty Ltd v Federal Commissioner of Taxation [2007] FCAFC 205,(2007) 165 FCR 484.[31] Dr Muir's liability for tax in the years in question has been assessed and hischallenge proceedings have been substantially struck out as an abuse of process.[32] In our view, the phrase "striking out the proceeding" — as used by each ofJudge Barber and Faire J — can only be understood as meaning that, having beendetermined to be an abuse of process, Dr Muir's challenge proceedings were, at thatpoint, at an end. Just as the Supreme Court in Lai v Chamberlains described theinherent procedural power,26 they had been struck out as an abuse of process.Remember the context: Ben Nevis, a test case, had determined the tax treatment ofthe Trinity scheme. All of the multitude of steps taken by Dr Muir and othersassociated with him, after that decision, to challenge it on the basis of the arguedapplicability of sub-pt EH of the Income Tax Act had been determined to be collateralattacks on a decision that had been determined to be binding upon him personally.The challenge proceedings considered by Judge Barber and struck out by him, and thechallenge proceedings considered by Faire J and struck out by him, were acontinuation of that abuse of process.[33] In upholding Faire J's strike-out decision, this Court said:27[43] In our judgment it would be an abuse of the Court's process to allowMr Muir to continue his claim. It would commit judicial resources for nopurpose and bring the administration of justice into disrepute. It would alsobe unfair to require the Commissioner to expend further costs in defending aposition on taxation liability which has been unequivocally and authoritativelyanswered in the Commissioner's favour.[34] The Supreme Court chose its words carefully in its decision on Dr Muir'samendment application, saying this:28[11] In oral argument, the appellant accepted that, given the nature of thenew argument foreshadowed by his amendment application, the leave toappeal granted by this Court should be revoked, a concession which wascorrectly made. The consequence is that the decision of the Court of Appealwill stand, and the appellant's proceedings will remain struck out in theirentirety.26 The principles of finality also underlie one application of the broad inherent procedural power tostrike proceedings out as an abuse of process — Lai v Chamberlains [2006] NZSC 70, [2007]2 NZLR 7 at [59].27 Court of Appeal decision, above n 1.28 Muir v Commissioner of Inland Revenue (No 2), above n 15 (emphasis added).[35] As the Supreme Court has reasoned in its recent leave decision, Dr Muir'schallenge proceedings in the TRA and in the High Court were struck out substantively:they were dismissed. It follows that Dr Muir cannot pursue his new response toBen Nevis by filing amended pleadings in those proceedings. Dr Muir's challenges tothe High Court decisions must therefore fail.Result[36] The appeals are dismissed.[37] The appellant must pay the respondent one set of costs for a standard appealon a band A basis and usual disbursements.Solicitors:Edmonds Judd, Te Awamutu for AppellantCrown Law Office, Wellington for Respondent