GARRY ALBERT MUIR v COMMISSIONER OF INLAND REVENUE [2018] NZSC 81

GARRY ALBERT MUIR v COMMISSIONER OF INLAND REVENUE [2018] NZSC 81 [29 August 2018]IN THE SUPREME COURT OF NEW ZEALANDI TE KŌTI MANA NUISC 41/2018[2018] NZSC 81BETWEEN GARRY ALBERT MUIRApplicantAND COMMISSIONER OF INLANDREVENUERespondentCourt: Elias CJ, William Young and Ellen France JJCounsel: R B Hucker for ApplicantS J Leslie for RespondentJudgment: 29 August 2018JUDGMENT OF THE COURTA The application for leave to appeal is dismissed.B Costs of $2,500 are awarded to the respondent.____________________________________________________________________REASONSThe issue between the parties[1] In issue is a judgment of Associate Judge Bell in which he entered summaryjudgment in favour of the Commissioner of Inland Revenue against the applicant forunpaid taxes, interest and penalties for the 1997–2010 tax years.1 The applicant'sappeal against that judgment was dismissed by the Court of Appeal2 and the applicantnow seeks leave to appeal to this Court.1 Commissioner of Inland Revenue v Muir [2017] NZHC 1413 [Muir (Bell AJ)].2 Muir v Commissioner of Inland Revenue [2018] NZCA 129 (Winkelmann, Courtney andMallon JJ) [Muir (CA)].[2] The Commissioner's claim is founded in tax assessments for the tax years inquestion. The applicant challenged all of the assessments under Part 8A of the TaxAdministration Act 1994. For the 1998–2006 assessments, the challenges were lodgedwith the Taxation Review Authority. The other assessments were challenged in theHigh Court.[3] Under the Tax Administration Act, there is a deferral of liability in respect ofassessments which are challenged. This deferral comes to an end on the "day ofdetermination of final liability" which is relevantly defined in s 3 as:(iv) if a challenge is determined by a court, whether or not by way ofappeal, the day on which the challenge is finally determined, whetherin those proceedings or in a subsequent appeal: Under s 142F, a taxpayer is liable to pay tax which is due on the 30th day after the lastday of the deferral period which, as noted above, will be the day of determination offinal liability.[4] The challenges against the 1998–2006 assessments were struck out by theAuthority on 1 February 2011.3 On 22 April 2015, Faire J decided an appeal againstthe Authority's decision of 1 February 2011 at the same time as he dealt with anapplication by the Commissioner to strike out challenge proceedings by the applicantfor the 1997 and 2007–2010 assessments.4 Faire J struck out the challenges to the1997 and 2007–2010 assessments and dismissed the applicant's appeal from theAuthority's 2011 decision. In doing so, he concluded that further prosecution of thechallenge proceedings would be an abuse of process given the decision of this Courtin Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue.5 An appealagainst his judgment was dismissed by the Court of Appeal on 8 December 2015.6[5] On 20 July 2016, the applicant's application for leave to appeal to this Courtwas dismissed in relation to the 1997 and 1998 tax years but allowed in relation to the3 [Muir] v Commissioner of Inland Revenue [2011] NZTRA 2, (2011) 25 NZTC ¶1-006.4 Muir v Commissioner of Inland Revenue [2015] NZHC 792, (2015) 27 NZTC ¶22-004.5 Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2008] NZSC 115, [2009] 2NZLR 289.6 Muir v Commissioner of Inland Revenue [2015] NZCA 591, (2015) 27 NZTC ¶22-034.1999–2010 tax years.7 This grant of leave was, however, revoked on 26 August 2016.8The Court noted, "[t]he consequence is that the decision of the Court of Appeal willstand, and the appellant's proceedings will remain struck out in their entirety".9[6] Pausing at this point, the leave and revocation decisions of this Court might bethought to have determined the challenges which had been made by the applicant. Ifso, this would mean that:(a) The "day of determination of final liability" of the applicant's taxliabilities for the 1997 and 1998 tax years was 20 July 2016 (when leaveto appeal in respect of those years was declined) and, for the 1999–2010tax years was 26 August 2016 (when the revocation decision wasmade).(b) The amounts assessed for those years became due 30 days after thosedates.(c) At the expiry of the 30-day periods, it was open to the Commissionerto recover the amounts assessed.[7] In issue in the case is thus whether the leave and revocation decisions of thisCourt finally determined the challenges then before the Court. As to this the applicantseeks to argue that all that happened in the litigation referred to in [4]–[5] is that hispleadings were struck out but the proceedings remained alive with the result that he isentitled to pursue the proceedings on the basis of amended pleadings, providing thosepleadings do not rest on assertions which are inconsistent with the reasoning inBen Nevis.The applicant's primary argument[8] The applicant's contention is that the 20 July and 26 August 2016 decisionswere not final determinations of the challenges.7 Muir v Commissioner of Inland Revenue [2016] NZSC 90, (2016) 27 NZTC ¶22-060.8 Muir v Commissioner of Inland Revenue (No 2) [2016] NZSC 113, (2016) 27 NZTC ¶22-067.9 At [11].[9] Consistently with his position – that is that the challenge proceedings remainalive – the applicant filed, or attempted to file, amended statements of claim with theAuthority and in the High Court. This attempt was unsuccessful in the case of theAuthority which rejected the amended statement of claim on the basis that thechallenge proceeding had been struck out. An amended statement of claim was,however, accepted by the High Court. The applicant then applied to the High Courtto review the Authority's rejection of his amended statement of claim and theCommissioner applied for a review of the Registrar's acceptance of the amendedstatement of claim in the High Court challenge proceedings.[10] Pausing at this point, the applicant was out of time under s 138B(1)(c) of theTax Administration Act to file new challenges. This is because the last assessment hadbeen issued on 28 March 2013 and challenges must be brought within two months ofthe issue of a notice of assessment.10 Under s 138D, this time limit does not apply ifthe hearing authority is satisfied that there are exceptional circumstances which justifynot commencing a challenge within the response period. The applicant, however, hasnot directly sought to invoke s 138D, presumably because:(a) this would at least imply a concession that the initial challenges hadbeen finally determined; and(b) there would be some difficulties in establishing exceptionalcircumstances of a kind which would warrant an extension of time.11The approach of Associate Judge Bell[11] The summary judgment application came on for hearing prior to thedetermination of the two applications referred to above at [9].[12] Associate Judge Bell entered judgment for the Commissioner on the basis thatthe challenges had been finally determined on 20 July and 26 August 2016. As wewill note later, the applicant contends that this approach involved a prejudgment of theissues which were then still to be decided in the proceedings referred to above at [9].10 The response periods are set out in s 89AB of the Tax Administration Act 1994.11 See the definition of "exceptional circumstances" in s 138D(2).We disagree. Although Associate Judge Bell referred to those proceedings as"pointless and doomed to fail",12 our reading of his judgment is that he did not in factseek to predict the outcome of those proceedings; rather he addressed, on its merits,whether summary judgment could be entered against the applicant.Subsequent decisions in respect of the challenge proceedings[13] Associate Judge Bell's view that the other proceedings were "pointless anddoomed to fail" has, at least as matters currently stand, been borne out by subsequentevents as:(a) On 29 August 2017, Toogood J granted the Commissioner's applicationin respect of the amended statement of claim filed in the High Courtand directed the Registrar to remove it from the file and return it to theapplicant.13(b) On 29 November 2017, Jagose J dismissed the applicant's applicationto review the decision of the Authority.14Both judgments proceeded on the basis that the proceedings in which the applicanthad sought to file the amended pleadings were already at an end.15The appeal to the Court of Appeal in respect of the summary judgment decision[14] Somewhat awkwardly, the appeal to the Court of Appeal against the judgmentof Associate Judge Bell was not linked with the applicant's appeals against thejudgments of Toogood and Jagose JJ. The Court nonetheless dismissed the appealagainst the entry of summary judgment on the basis that while it is "theoreticallypossible" that the appeals against Toogood and Jagose JJ might succeed16 – in which12 Muir (Bell AJ), above n 1, at [54]. The applicant had argued that the Associate Judge should notdecide the case while the applicant still had what he contended were live challenge proceedings.The "pointless and doomed to fail" comment was a response to that argument. The AssociateJudge also expressed views as to whether the applicant could invoke s 138D. This wasunnecessary as the applicant has not directly sought to do so.13 Muir v Commissioner of Inland Revenue [2017] NZHC 2082 [Muir (Toogood J)].14 Muir v The Taxation Review Authority [2017] NZHC 2932 [Muir (Jagose J)].15 Muir (Toogood J), above n 13, at [12]; and Muir (Jagose J), above n 14, at [14]–[15].16 Muir (CA), above n 2, at [35].case there would be a defence to the summary judgment claim – the Associate Judgehad been entitled to form his own conclusion as to whether the dates of finaldetermination of liability had arrived.17The current position[15] The appeals to the Court of Appeal from the judgments of Toogood andJagose JJ have been heard, but judgment has been reserved.[16] There are thus two current streams of litigation:(a) The summary judgment proceedings which are now before us. Asnoted, in this proceeding the fundamental question is whether the 2016decisions of this Court "finally determined" the challenge proceedings.(b) The other proceedings (the appeals against the judgments of Toogoodand Jagose JJ). In these proceedings, the issue is whether it remainsopen, despite the 2016 judgments, for the applicant to continue thechallenge proceedings on the basis of amended pleadings.[17] By filing challenges to the relevant tax assessments, the applicant triggered tothe deferral provisions of the Tax Administration Act. The deferrals came to an endwhen the challenges were "finally determined". If, as a result of the judgmentsreferred to in [4]–[5] the challenge proceedings were at an end, it must follow that thechallenges had been "finally determined"; this because, at that point there were no livechallenges before the Court. This is all the more so as any further challenge is nowout of time. All of this means that the key issue in both streams of litigation is whetherthe challenge proceedings have been brought to an end.The application for leave to appeal from the judgment of the Court of Appeal onthe summary judgment appeal[18] The applicant's position is that our starting point for the assessment of thepresent application is that the question whether his challenges remain live "must be17 At [35].taken to be justiciable" pending determination by the Court of Appeal of the secondappeal. He also argues that:(a) Associate Judge Bell in substance determined the challengeproceedings and that such a collateral determination is inconsistent withthe scheme of Part 8A of the Tax Administration Act; and(b) the Court of Appeal's recognition of the possibility that the otherappeals might be resolved in favour of the applicant was inconsistentwith upholding the judgment of Associate Judge Bell.A request for additional submissions[19] By minute of 2 August 2018, we sought further submissions for the applicantas to:(a) whether the challenge proceedings remained on foot after the decisionsof this Court in July and August 2016; and(b) the possible application of the res judicata principles to the proceedingsbefore Toogood and Jagose JJ, and the later and still undetermined,appeal to the Court of Appeal against those decisions. The minute madeit clear that what was in issue was whether Associate Judge Bell'sjudgment gave rise to a res judicata, precluding the possibility of thecurrently undetermined appeal being determined in favour of theapplicant.[20] Further submissions were received on 10 August. In them counsel for theapplicant engaged with the first of the requests primarily by:(a) claiming that this involved "relevant contested facts" in respect of anissue still sub judice and which was likely to come to this Court on anapplication for leave to appeal from the party who is unsuccessful inthe Court of Appeal; and(b) submitting that the Ben Nevis decision did not give rise to an estoppelor res judicata preventing the applicant from advancing the groundsrelied on in the amended statements of claim referred to in [9].Counsel dealt with the second request with the assertion that a judgment which issusceptible to appeal (as Associate Judge Bell's judgment then was) does not give riseto a res judicata.Our approach[21] It was open to Associate Judge Bell to take the approach he did. The questionwhether the challenge proceedings had been finally determined was fairly andsquarely before him and he was entitled to determine it. It does not matter that thesubstantially same question was before the Court in other proceedings. Nor was herequired to determine the question by seeking to predict the way in which the otherproceedings would be determined.[22] Instead, his judgment (unless successfully challenged) creates a res judicataand thus controls the results in the other litigation stream. This – that is a res judicataapproach – has the advantage of addressing squarely the awkwardness generated byparallel sets of proceedings winding their ways through the courts. It also addressesthe awkwardness of the Court of Appeal's recognition that it was possible that theother appeal might be allowed. If that were the case, there would be a defence to thesummary judgment claim and an apparent inconsistency between that recognition andthe upholding of a summary judgment premised on the conclusion that there was noarguable defence.[23] As we have noted, the applicant's argument is that Associate Judge Bell'sjudgment did not create a res judicata because of its susceptibility to appeal. Althoughit is possible to find authority to this effect, there is substantial authority for the viewthat a judgment is relevantly final for the purposes of res judicata even if susceptibleto being reversed or varied on appeal.18 In any event, this argument completely fallsaway if the current application is dismissed because the corollary of such dismissal isthat Associate Judge Bell's judgment is no longer susceptible to appeal.[24] The grant of summary judgment turns on the conclusion that the challengeproceedings have been finally determined, which in turn is premised on the findingthat the judgments referred to in [4]–[5] above resulted in the challenge proceedings,and not just the pleadings, being struck out. Contrary to the way in which theapplicant's submissions address the point, this conclusion does not rest on principlesof res judicata or estoppel. Instead it rests on the simple proposition that the strikingout of a proceeding means that that proceeding has been determined and cannot berevived by the filing of a further statement of claim.[25] Given the way in which the judgments were expressed, particularly theSupreme Court's revocation decision, the conclusion that the proceedings were at anend might be thought to be reasonably obvious. As will be apparent, the applicant didnot fully engage with our invitation to address this point. And in any event, thequestion arises in a context which is so specific to the very particular proceduralbackground which we have summarised that it does not rise to a question of public orgeneral importance.19 Nor do we see any appearance of a miscarriage of justice.[26] Accordingly the application for leave to appeal is dismissed. Costs of $2,500are awarded to the respondent.Solicitors:Hucker & Associates for ApplicantCrown Law Office, Wellington for Respondent18 Scott v Pilkington (1862) 2 B & S 11 at 41, 121 ER 978 at 989 (QB); Nouvion v Freeman (1889)15 App Cas 1 (HL) at 10–11; Wakefield Corporation v Cooke [1904] AC 31 (HL) at 36;Marchioness of Huntley v Gaskell [1905] 2 Ch 656 (CA); and Colt Industries Inc v Sarlie (No 2)[1966] 3 All ER 85 (CA). Some of these cases involve the enforcement of foreign judgments; butthere is no apparent reason why the underlying res judicata principle should not be the same asbetween foreign and domestic judgments. See also K R Handly Spencer Bower and Handley: ResJudicata (4th ed, LexisNexis, London, 2009) at [5.19]–[5.21].19 Senior Courts Act 2016, s 74(2)(a); and Supreme Court Act 2003, s 13(2)(a).