REDCLIFFE FORESTRY VENTURE LTD v COMMISSIONER OF INLAND REVENUE [2013] NZHC 3411

REDCLIFFE FORESTRY VENTURE LTD v COMMISSIONER OF INLAND REVENUE [2013] NZHC 3411 [17 December 2013]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2009-404-5991[2013] NZHC 3411IN THE MATTER OF judgment of Venning J dated 20 December2004; Accent Management & Ors vCommissioner of Inland Revenue (CIV-2003-404-7324, Auckland)BETWEEN REDCLIFFE FORESTRY VENTURELTDFirst Plaintiff Continued...AND COMMISSIONER OF INLANDREVENUEDefendantHearing: 6 December 2013Counsel: GJ Judd QC for Fourth, Fifth, Seventh and Eighth PlaintiffsRL Roff and SJ Leslie for DefendantJudgment: 17 December 2013JUDGMENT OF BREWER JThis judgment was delivered by me on 17 December 2013 at 12 noonpursuant to Rule 11.5 High Court Rules.Registrar/Deputy RegistrarSolicitors: Second Plaintiff in personWynyard Wood (Auckland) for First, Third, Fourth, Fifth, Sixth Seventh and Eighth PlaintiffsCrown Law (Wellington) for DefendantAND GARY ALBERT MUIRSecond PlaintiffACCENT MANAGEMENT LTDThird PlaintiffLEXINGTON RESOURCES LTDFourth PlaintiffBRISTOL FORESTRY VENTURES LTDFifth PlaintiffBEN NEVIS FORESTRY VENTURES LTDSixth PlaintiffCLIVE RICHARD BRADBURYSeventh PlaintiffGREGORY ALAN PEEBLESEighth PlaintiffIntroduction[1] The Commissioner of Inland Revenue, the defendant, was successful in defeating a proceeding brought against her in this Court by the plaintiffs.1 The defendant now seeks indemnity costs, alternatively increased costs, alternatively costs on a category 2C basis.Background[2] This case is one of a number involving the plaintiffs and the defendant. The first tranche of litigation concluded with the decision of the Supreme Court in Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue.2 The defendant was successful. Subsequently, the plaintiffs attempted to re-open the litigation on a number of fronts. All attempts failed. On some occasions indemnity costs were awarded.3[3] In this case, which was commenced while a case involving similar issues was being considered by Keane J who had reserved his decision thereon, the plaintiffs sought to have the original judgment of this Court, which led to the Ben Nevisdecision of the Supreme Court, set aside4 on the basis that the defendant had"presented a false case".5[4] The response by the defendant was to file a protest to jurisdiction. This protest was upheld by Venning J. The Court of Appeal overturned Venning J'sjudgment, not on the merits but upon a decision that the defendant should have applied to strike out the statement of claim rather than protest jurisdiction.6 The Supreme Court, however, allowed the defendant's appeal of the decision of the Court of Appeal and reinstated Venning J's judgment.71 Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue [2011] 1 NZLR 336 (HC).2 Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2008] NZSC 115; [2009] 2 NZLR 289.3 Relevantly, Accent Management Ltd v Commissioner of Inland Revenue (2011) 25 NZTC 20,022 (HC) and Accent Management Ltd v Attorney-General [2013] NZHC 1447, (2013) 26 NZTC 21,020.4 Accent Management Ltd v Commissioner of Inland Revenue (2004) 22 NZTC 19,027 (HC).5 Statement of claim dated 15 September 2009, at para 34.6 Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue [2011] NZCA 638; [2012] 2 NZLR 823.7 Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd [2012] NZSC 94; [2013] 1 NZLR 804.Discussion[5] A Judge has a discretion when it comes to the award of costs. The power to grant indemnity costs is contained in r 14.6 of the High Court Rules, which provides, relevantly: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 ...[6] The defendant's submission is that the case was vexatious, frivolous or otherwise an abuse of process.[7] The submission is that I can draw the necessary inferences of fact from the judgments of Venning J, the Court of Appeal and the Supreme Court in this case and by looking at related cases such as those decided by Keane J8 and Priestley J.9[8] The defendant submits that the latter two Judges awarded indemnity costs and there is no reason why I should not also.[9] So far as increased costs are concerned, the defendant submits that the jurisdiction conferred by r 14.6(3) is satisfied. That rule states, relevantly:The court may order a party to pay increased costs if—...(b) the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—...(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 ...8 Accent Management Ltd v Commissioner of Inland Revenue, above n 3.9 Accent Management Ltd v Attorney-General, above n 3.[10] In the last resort, I should decide that band C applies because of the amount of time that was required.[11] The plaintiffs are either represented directly by Mr Judd QC or have elected to ride on his coattails.[12] Mr Judd's primary submission is that there are no judicial findings whichentitle me to draw the inferences I am exhorted to draw by the defendant. All that was decided here was a jurisdictional point. Had the defendant proceeded by way of strike out application, and been successful, there would be a basis upon which I could decide whether the plaintiffs' case was frivolous, vexatious or otherwise anabuse of process. However, the defendant elected to protest jurisdiction.[13] Similarly, there is no foundation for an award of increased costs. The argument which took place was purely about jurisdiction, a subject which was sufficiently complex that the Court of Appeal fell into error. It took the Supreme Court to enunciate the law in relation to the case.[14] In Mr Judd's submission, all that I can go on is the fact that a proceeding wasfiled and ultimately a protest to jurisdiction was successful.Decision[15] I start by observing that the costs regime in the High Court Rules is based on the principles that costs should be readily ascertainable and consistently awarded. The costs regime does not operate to reimburse to the successful party their actual costs.[16] In every case, there is a winner and a loser. Losing badly or comprehensively is not a ground for being required to pay indemnity or increased costs.[17] In this case, I have to have regard to the situation as revealed by the judgments of Venning J, the Court of Appeal and the Supreme Court. I heard no evidence, and there are no affidavits, upon which I could draw inferences of perfidy as I am invited to do by the defendant.[18] That does not mean that I cannot have regard to the history of litigation between the parties. I just have to be sensible about it and remind myself that my discretion is not an unfettered one.[19] It is clear to me on the judgments of Venning J and the Supreme Court that the plaintiffs' case was hopeless from the outset. It amounted to a collateral attackon legal matters which had already been pronounced upon by the Supreme Court inBen Nevis. The only possible reason for the Court recalling its judgment, thustoppling the tower of superior Courts' judgments made in relation to it, would be if the original judgment had been obtained by fraud. Fraud was never pleaded. Neither, on the facts pleaded in the statement of claim, could it have been.[20] The proceeding was commenced while a related proceeding on very similar issues was awaiting the decision of Keane J. Keane J's decision was released afterthat of Venning J and his Honour found that there was no merit to the plaintiffs'claims about the actions of the defendant's staff members and the legal point said to flow from the alleged actions. The plaintiff's claim was struck out as an abuse of process.[21] In deciding to award indemnity costs, Keane J observed:10[21] On the indisputable record, I held, Accent could not begin to say that the Commissioner had made his assessments dishonestly or defectively, as Accent pleaded in its statement of claim. In reality, I held, Accent was launching a collateral attack on the assessments and decisions adverse to it and that was an abuse of process.[22] Accent's application for review, I concluded then, and conclude now, most obviously given the fate of its foundational argument in the Supreme Court, was wholly unmeritorious and self evidently so from the outset. The attack made on the Commissioner's officers, in their assessment of its claims to deduction was, on the record, I consider, equally without substance.[22] Venning J in this case held:11... There is now no jurisdiction to recall the judgment of this Court on the basis suggested. To allow a recall on the alleged non application of a statutory provision would amount to a re-launching of the already concluded appellate process, which was specifically warned against in Faloon v CIR.10 Accent Management Ltd v Commissioner of Inland Revenue, above n 3.11 Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue, above n 1, at [59].To do so would be to completely undermine the hierarchical structure of the Courts.[Footnotes omitted][23] The Supreme Court in this case held:12[40] Redcliffe's allegation of fraud rests on two propositions:(a) the true legal position was that the case was governed by s EH8; and(b) this was dishonestly concealed from the Court by the Commissioner.Put in this way, it is clear that Redcliffe, in proposition (a), is directly challenging the conclusions of this Court on matters of law which it was competent to address. This is not a case which rests on an allegation of fraud involving perjury or dishonest suppression of evidence bearing on findings of fact which were the primary responsibility of the High Court as the trial court....[42] There is another relevant and important consideration. As we have noted, where the fraud exception to finality is properly invoked, the party challenging the judgment will be able to show that his or her ability to mount an effective case was compromised by the fraudulent conduct of the other party. It is this consideration which provides the rationale for not insisting on finality. But this rationale is not applicable in the present context. The subpart was there to be seen in the legislation and was thus inherently incapable of concealment. For this reason alone, Redcliffe cannot credibly claim that the litigation strategy attributed to the Commissioner compromised its ability to mount an argument as to the subpart'sapplicability. The force of these considerations is enhanced when the facts are examined. The potential applicability of the subpart was signalled in the Notice of Proposed Adjustment; so it was not concealed. And counsel for Redcliffe at the High Court trial were well aware of this potential applicability as the cross-examination of Ms Lloyd shows.[24] My conclusion is that this proceeding was unnecessary and improper. The defendant should not have been put to the expense of defending the case. I do not go so far as to say that the case was frivolous or vexatious. I do not have an evidential basis for making such conclusions. Therefore, I cannot draw the inference submitted by the defendant that the proceeding was brought by a desire to avoid the financial consequences of the Ben Nevis decision. Nor can I infer that the proceeding was brought for some other ulterior and vexatious motive.12 Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd, above n 7.[25] The reason why the proceeding was unnecessary is that the Supreme Court had already pronounced on the subject matter of the case. It was improper in that it was a collateral attack on the assessments and decisions adverse to it (as Keane J put it).[26] The plaintiffs' argument that indemnity costs cannot be awarded because no findings were made by Venning J on the merits cannot succeed. I am considering costs on the judgment given by Venning J. His Honour's decision was that there is no jurisdiction for the High Court to consider the plaintiff's claim. If a claim isbrought to the Court, the Court has no jurisdiction to hear it, and the circumstances behind the making of the claim lead to conclusions that it was unnecessary and improper, then indemnity costs can be awarded.[27] I consider that in all the circumstances indemnity costs are justified. I award the defendant her reasonable indemnity costs accordingly.[28] No argument was made that the costs quantified by the defendant are unreasonable. On my perusal of the schedule supplied, I see nothing unreasonable. This judgment may be sealed in the sum claimed by the defendant.________________________________Brewer J