ROTHSCHILD PROPERTIES LTD V NZ CUSTOMS SERVICE HC NAP CIV 2005-441-658

ROTHSCHILD PROPERTIES LTD V NZ CUSTOMS SERVICE HC NAP CIV 2005-441-658 29 November 2005IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY CIV 2005-441-658BETWEEN ROTHSCHILD PROPERTIES LIMITED Appellant AND NEW ZEALAND CUSTOMS SERVICE Respondent Hearing: 29 November 2005 Appearances: E M Bate for Appellant C J Mathieson & M L Campbell for Respondent Judgment: 29 November 2005JUDGMENT OF KEANE JSolicitors Hansen & Bate, Hastings for Appellant Crown Law Office, Wellington for Respondent[1] Rothschild Properties Limited, relying on R 710 of the High Court Rules and this Court's inherent jurisdiction, seeks a stay of the judgment of the Customs Appeal Authority, dated 30 August 2005, pending an appeal to this Court, or a reconsideration by the Authority itself of its own decision. [2] In reality, what Rothschild seeks is a stay of execution on the part of the New Zealand Customs Service of the debt constituted by an assessment of duty to Rothschild, which the Authority, on the appeal, declined to disturb. Also, though the stay is sought to extend to the resolution of the appeal, Rothschild would be content with a lesser stay. There is a question whether the appeal can proceed at all or whether it is necessary. That is contingent on the further decision of the Authority. A stay, if only to that point, would serve.Context[3] Rothschild is a motelier and retail liquor discounter of 16 years standing. It purchased spirits from a licensed manufacturer, Bishop Woods Estate Limited. Under the Customs and Excise Act 1996 Bishop Woods was liable as manufacturer to assess itself for duty and primarily liable, retaining the ability to pass on in whole or part any duty paid. It did not comply with its duty or meet its liability and went out of business. On 1 April 2004 NZC turned instead, under s 76(2)(b) and s 89 of the 1996 Act, to Rothschild. It assessed Rothschild to be liable to pay the unpaid duty assessed to Bishop Woods of $147,677 and pursued Rothschild by statutory demand. [4] On 23 February this year Rothschild repelled NZC's demand on the basis that it was not insolvent and that late last year it had brought an action against NZC seeking by way of damages the duty assessed to it, on the footing that the customs and excise regime had been negligently administered. Rothschild's primary line of defence, however, lay in an appeal to the Customs Appeal Authority. [5] In a decision given on 30 August 2005 the Authority, Judge Barber, accepted that NZC's recourse to Rothschild was novel. The primarily liability, the Authority accepted, lay rather with Bishop Woods as the licensed manufacturer. However, theAuthority concluded, if Bishop Woods did not meet that liability it passed to Rothschild as on-purchaser. Accordingly, the Authority upheld the assessment but reserved to Rothschild the ability to obtain a further ruling as to whether the assessment ought to have been made under ss 88 or 89 of the 1996 Act. [6] Rothschild appealed that decision by notice dated 23 September 2005 but did not, on the face of it, comply distinctly with the obligation imposed by s 272(4) of the 1996 Act, which required that it prepare a draft case stated for this court, to be approved by the Authority. That had to happen within two months after the giving of the decision and in late October time ran out. That omission was inadvertent, I am told: the directions issued by the Authority did not distinctly raise the necessity. NZC contends, however, that it is beyond cure and that the appeal has lapsed:Hawkes Bay Hide Processers of Hastings and CIR [1990] 3 NZLR 313, CA. [7] Rothschild does not accept that its appeal has lapsed, contending that theHawkes Bay decision relates to a materially different statutory regime, but before that is put to the test Rothschild seeks instead to bypass the issue by pursuing two lines of advance before the Authority. [8] First, it seeks to have the Authority revisit the appeal, and take it to a second phase, by going beyond the issue whether NZC's assessment was right or wrong, to what assessment is just. The Authority can, Rothschild contends, set to one side the duty assessed to Bishop Woods as the source of Rothschild's own liability, and assess Rothschild instead in a significantly lesser amount, having regard to the fact that NZC had turned to it, as it says, so entirely unexpectedly. [9] That would call for a re-assessment, which Rothschild contends that the Authority retains the ability still to make, despite the decision already given determining the appeal and the narrow ambit of the leave reserved. NZC, not surprisingly, will contend that the Authority has given its decision on the appeal, except on the point reserved. [10] Alternatively, Rothschild seeks to have the Authority, with or without any amendment to the notice of the appeal, deem the notice of appeal also to be the casestated, thus complying with s 272(4). A further possibility, should that not be open, on which Rothschild relies, is that the Authority himself could state as issues for this Court under s 274 the issues Rothschild wishes to pursue on the appeal. [11] The Authority is to consider those possibilities on 20 December (there is now a question whether Rothschild can accept the fixture, because its preferred counsel may not be available), and that is the context within which I am asked to decide whether or not there should be a stay. [12] That presents this immediate difficulty. I cannot be certain that there will be any appeal. That will depend on whether the Authority resumes jurisdiction, or acts under s 274; or if the Authority does neither, whether Rothschild can transcend s 272(4). Nor can I assess on the papers as they are whether the appeal has any merit. I cannot then, as is usually essential, assess whether Rothschild has rights, able to be vindicated, that ought to stand above those of NZC to the duty assessed. On the view I take, however, I need not go that far.Discretion to stay[13] Rule 710 of the High Court Rules, which lies within Part 10 concerned with appeals, states that an appeal does not of itself operate as a stay of proceedings, or of the execution of any judgment or order (R 710(1)). Rather, the Court has a discretion to order a stay, or to grant interim relief (R 710(2)); and as to the whole or part and on terms (R 710(3)). [14] Underlying R 710 is the long standing principle that whoever has the benefit of a judgment is entitled to the benefit of it unless the one carrying the detriment can persuade the Court that, if a stay were not granted, any right of appeal would be rendered nugatory: Phillip Morris (New Zealand) Ltd v Liggett & Myers Tobacco Co (New Zealand Ltd) [1977] 2 NZLR 41. [15] That presumption, that judgment once given is to be honoured, holds even where there is a cross-claim still to be decided. That is the theme of numerous decisions in the commentary to R 565, which concerns stay of execution; forexample, Econotek Construction Ltd v Kale (HC Auckland CP 8/87, 7 January 1998) in which Tompkins J said:A miscarriage of justice can hardly be said to result where the defendant is required to pay the plaintiff an amount that is owing to it and the defendant will be free to pursue his claim against the plaintiff in the normal way.[16] In this case that presumption stands higher. Section 92 of the 1996 Act marks the logical end point of the preceding section, s 91, that an assessment is presumed correct until set aside on appeal. The obligation to pay and the right to receive and recover duty under the 1996 Act, it says, are not suspended by any appeal or legal proceedings. Section 92 could be read as a bar to a stay. NCE contends instead that it is a powerful reason why a stay should be declined. I agree that it stands at least that high.Conclusions[17] The question is then whether Rothschild's alternative lines of advance before the Authority, and this Court, or for that matter its action in negligence, would be rendered nugatory if s 92 took its literal effect; and that depends on whether, as Rothschild says, the liability (now as a result of interest $212,000), is so far beyond its means that, if it had to pay, it would cease to trade and would lose its assets, including goodwill acquired over many years. [18] When that issue was canvassed on the action to set aside the statutory demand the Associate Judge accepted that Rothschild was then able without borrowing to pay its debts as they fell due; and Rothschild's accountant then considered that it could, if it needed to, borrow the duty payable. However, the statutory demand was set aside unconditionally and that was never put to the test. [19] The issue is now, of course, alive a second time. This time the accountant takes a more nuanced position. In his affidavit, dated 28 November, he confirms that since 2001, to his knowledge, Rothschild has at all times been able to meet its debts as they fell due. But, he says, if it were now to have to meet the duty assessed, thatcould only be by borrowing and that would call, most probably, for guarantees from the shareholders and director. [20] Rothschild contends on this application that to put the shareholders and director in that position would be oppressive. I am asked to accept indeed that they might not be prepared to shoulder that liability and that the inevitable consequence of the denial of a stay would be that Rothschild would be irretrievably compromised. [21] I have to say that I cannot, on the evidence, reach that conclusion. The evidence of the accountant does not seem to me to go that far. The shareholders and director have a decision to make and, should they choose to put the viability of Rothschild first, as is not unusual for shareholders and directors to do, they might well assume that secondary liability, and Rothschild's viability would not begin to be compromised. [22] Rothschild's liability might be put at risk, I accept, if the shareholders and directors chose not to assume personal liability, but that does not mean that the various remedies Rothschild seeks would be rendered nugatory or that the grant of a stay is inevitable. In Liggett & Myers Richmond P said, at 42, that a stay ought still to be declined even if the consequence was 'a grave, perhaps even a fatal, interruption in marketing': see also Re General Mortgage Ltd & Anor (2003) 16 PRNZ 931 Wild J for a contemporary restatement. In this case that holds, I think, even more strongly as a result of s 92. [23] I decline, therefore, to grant the stay applied for. NZC seeks costs but, I consider, that issue ought to be revisited only once the fate of the present appeal to this Court is resolved one way or the other. _____________ P.J. Keane J