DOWDEN v COMMISSIONER OF INLAND REVENUE [2020] NZCA 152

DOWDEN v COMMISSIONER OF INLAND REVENUE [2020] NZCA 152 [8 May 2020]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA624/2019[2020] NZCA 152BETWEEN JOHN ALFRED DOWDENAppellantAND COMMISSIONER OF INLANDREVENUERespondentCounsel: Appellant in personM J Bryant and C M Kern for RespondentJudgment:(On the papers)8 May 2020 at 9.30 amJUDGMENT OF GILBERT JA The application for review of the Deputy Registrar's decision is declined.B Security for costs in the sum of $9,560 is to be paid no later than 29 May 2020.____________________________________________________________________REASONS[1] The Commissioner of Inland Revenue (the Commissioner) assessedMr Dowden for substantial sums of unpaid PAYE, GST and income tax in the periodfrom April 2003 to November 2011 in respect of two business said to have beenconducted by him. Mr Dowden challenged the assessments claiming he was notinvolved in either business in the relevant tax periods.[2] The challenge was heard over five days in July 2018 before the TaxationReview Authority. Mr Dowden was represented by counsel. In a reserved judgmentdelivered by Judge A A Sinclair on 30 August 2018, Mr Dowden's challenge wasdismissed and the Commissioner's assessments were confirmed.1 The Judge foundMr Dowden not to be a reliable or credible witness and she rejected his explanation ofthe arrangements for the operation of the principal business as being implausible.2For example, employees' wages were paid from bank accounts held in Mr Dowden'sname or under his control. Invoices were issued under his GST number and includeda direction to customers to make payments into his accounts. He also continued toapply as employer for certificates of approval for the employees of the business andheld himself out as the employer.3 The Judge was satisfied that during the relevantperiod, Mr Dowden carried on the business as its sole trader.4 The Judge noted thatMr Dowden did not produce any contemporaneous documentation or call anywitnesses to support his claims to the contrary.5[3] Mr Dowden appealed to the High Court. He was again represented by counsel.His appeal was dismissed by Peters J in a judgment delivered on 24 October 2019.6[4] Mr Dowden, who is no longer legally represented, filed a notice of appealagainst the High Court decision on 29 November 2019. No grounds of appeal areidentified. Mr Dowden simply asserts that the High Court judgment resulted ina serious miscarriage of justice.[5] Security for costs was fixed at $7,060 in terms of r 35 of the Court of Appeal(Civil) Rules 2005. Mr Dowden then applied, on 23 December 2019, for an orderdispensing with security for costs. On 22 January 2020, the Commissionercross-applied for an order increasing security for costs by $2,500 to $9,560.[6] After carefully reviewing all material filed, the Deputy Registrar declinedMr Dowden's application to dispense with security for costs and grantedthe Commissioner's cross-application for increased security for costs.[7] Mr Dowden now applies for a review of the Deputy Registrar's decision.1 XXX v Commissioner of Inland Revenue [2018] NZTRA 7.2 At [24].3 At [36]–[37].4 At [46].5 At [32].6 Dowden v Commissioner of Inland Revenue [2019] NZHC 2729.Should security for costs have been dispensed with?[8] Mr Dowden has not applied for legal aid and it appears he would not qualifyfor it even if his appeal had merit. He has substantial equity in his property inAuckland. This has an estimated value of $1.662 million against which there areoutstanding bank loans together totalling approximately $244,000. Mr Dowdenreceives a benefit of just over $400 per week and he earns another $500 per week frompart-time work.[9] Mr Dowden asserts that apart from the disputed debt to the Commissioner, hehas other liabilities totalling $1.3 million described as "mortgage, debts, matrimonialclaim". However, he provides no other details or evidence to substantiate theseliabilities other than bank statements showing the outstanding bank loans referred toabove.[10] I agree with the Deputy Registrar that Mr Dowden has not demonstrated thathe is impecunious and cannot afford to pay security for costs.[11] While it is generally not possible to assess the merits of an appeal at sucha preliminary stage, Mr Dowden is likely to face formidable obstacles in seeking tooverturn the concurrent factual findings made in the courts below which appear to beamply justified by the evidence detailed in the judgments. The evident weakness ofMr Dowden's appeal is underscored by the fact he has not even attempted to point toany error in the judgment under appeal. Given the strong credibility findings,the evidence supporting the Commissioner's position as detailed in the judgments andthe lack of any contrary documentary evidence adduced by Mr Dowden at the hearingbefore the Taxation Review Authority, it appears that his appeal has very little prospectof succeeding.[12] In the circumstances, I do not consider it would be right to requirethe Commissioner to defend the judgment under appeal without the usual protectionof security for costs. I consider the Deputy Registrar was correct to declineMr Dowden's application to dispense with security for costs.Should security for costs have been increased?[13] The Deputy Registrar concluded that increased security was warranted ofMr Dowden's past procedural misconduct:[21] The affidavit filed by the Commissioner in support of this applicationshow three separate instances of Mr Dowden failing to pay the Commissioneragreed or unchallenged debts. Mr Dowden has not paid the costs anddisbursements that the parties agreed upon following the High Court decisionunder appeal. He also has not paid costs arising from a default debt judgmentin April 2019. That default judgment arose from Mr Dowden's failure to payanything towards the amount of tax that the parties agreed in April 2017 wasowing. Mr Dowden has still made no payments towards that default judgmentdebt.[14] There is clearly a high risk that Mr Dowden will not meet any award of costsmade against him if his appeal fails. For the reasons already given, I considerthe appeal is also without merit. In these circumstances, I agree that the increasedamount set as security for costs was justified.Result[15] The application for review of the Deputy Registrar's decision is declined.[16] Security for costs in the sum of $9,560 is to be paid not later than 29 May 2020.Solicitors:Crown Law Office, Wellington for Respondent