DOUGLAS & ORS V COMMISSIONER OF INLAND REVENUE HC AK CIV-2003-404-006359

DOUGLAS & ORS V COMMISSIONER OF INLAND REVENUE HC AK CIV-2003-404-006359 8 July 2011IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2003-404-006359BETWEEN N T H DOUGLAS & ORSApplicantsAND COMMISSIONER OF INLANDREVENUERespondentsCIV-2003-404-006401AND BETWEEN WIRE SUPPLIES LIMITEDApplicantsAND COMMISSIONER OF INLANDREVENUERespondentHearing: On the papersJudgment: 8 July 2011 at 3:00 PMJUDGMENT OF COURTNEY JThis judgment was delivered by Justice Courtneyon 8 July 2011 at 3:00 pmpursuant to R 11.5 of the High Court Rules.Registrar / Deputy RegistrarDate.Solicitors: Ladbrooks, P O Box 37633, ParnellFax: (09) 377-2133Meredith Connell, P O Box 2213, AucklandFax: (09) 336-7629 – C WoodCounsel: S R G Judd, P O Box 3320 Shortland Street, AucklandFax: (09) 368-1875[1] In my judgment of 16 February 2009 I dealt with outstanding issues that followed my earlier judicial review decision, appeals by way of cases stated from the Taxation Review Authority (TRA)1 and unsuccessful appeals from that decision.2The proceedings concerned the validity of assessments made in respect of taxpayers who had participated in tax arrangements organised by their tax agent Mr Russell. I confirmed, with one exception (deductions allowed for consultancy fee), the amended assessments that were the subject of the original cases stated to the TRA.[2] In my judgment I stated:[43] This leaves the following individual taxpayers; Neil Thomas Hugh Douglas, Ngaire Louise Douglas, William Joseph Henwood, June Beverly Henwood, John Upton McDougall, Lyndon Lee McDougall, John James McDougall, James Terrence Sherlock, T C Large, V H Large, P G Linton and G J Haynes. The amended assessments for these taxpayers which were upheld by the TRA have been affirmed in this Court and Court of Appeal.[44] Rather than reproduce the amended assessments in this judgmente Iaccept Mr Wood's suggestion that I make an order confirming the amendedassessments for each of these taxpayers as they are shown in the original cases stated to the TRA. Each case stated has to be produced to the Court by annexure to an affidavit by the Commissioner. The amount of the amended assessment shown in each case stated will be the amount for which judgment may be sealed.[3] I then made several orders including:Judgment made against any of the individual taxpayers may only be sealed upon the filing and service of an affidavit annexing the case stated to the TRA for that taxpayer.[4] The Commissioner's affidavits were filed in September 2010. Unfortunately,the Registry sealed the orders on 14 September 2010 without proof of service of the affidavit. The affidavit was, in fact, served on Mr Russell the same day together with the sealed orders. Although the memorandum filed on behalf of the Commissioner suggests that these judgments were only sealed after the Registry staff had satisfied themselves that my direction had been satisfied, that is plainly no so.1 Wire Supplies Ltd v Taxation Review Authority (No 2) (2005) 22 NZTC 19,401 (HC); Wire SuppliesLtd v Taxation Review Authority (2005) 22 NZTC 19,395 (HC).2 Wire Supplies Ltd v Commissioner of Inland Revenue [2007] NZCA 244; [2007] 3 NZLR 458.[5] Mr Russell, on behalf of the various taxpayers, now seeks an order that the judgments were not validly sealded and are not to be acted upon by any party. In his memorandum Mr Judd invites me to make such an order on the basis that the sealing of the judgments was an accidental slip or omission amenable to correction under the slip rule, r 11.10 High Court Rules.[6] Rule 11.10 provides that:(1) A judgment or order may be corrected by the Court or the Registrar who made it if it –(a) Contains a clerical mistake or an error arising from an accidental slip or omission, whether or not made by an officer of the court; or(b) Is drawn up so that it does not express what was decided and intended.[7] The purpose of r 11.10 is to recognise the High Court's inherent jurisdictionto correct errors in orders made as a result of a slip or accidental omission. It is, however, a rule that is not to be lightly invoked. In BNZ v Mulholland McGechan J drew a distinction between a deliberate act and a slip or failure in expression and observed:3The rule as to finality in sealed judgments or orders is an important one, not lightly to be weakened.[8] Considering the equivalent UK provision the EWCA did observe, however,that the rule could be invoked to ensure that an order gave effect to the Court'sintention:4Although it is of course the case that the "slip rule" is primarily designed tocorrect typographical or grammatical errors, it is permissible to use it to amend a court order to give effect to the intention of the Court: – see Bristol- Myers Squibb v Baker Norton Pharmaceuticals (2001) EWCA Civ 414.[9] Mr Russell submits that the reason for the order was that the substantive judgment was a general application. Therefore, it was necessary to apply the general findings reached in that judgment to the specific factual findings of the individual3 BNZ v Mulholland (1991) 4 PRNZ 299 (HC) at 302.4 Foenander v Foenandere [2004] EWCA Civ 1675 at [57].taxpayers. The affidavits from the Commissioner to which the individual taxpayers could respond were required for this purpose.[10] In his supporting affidavit Mr Russell states that:I was present in court on 16 February 3009 and understood that each taxpayer would have the right to file an affidavit in response to theCommissioner's affidavits. That was necessary because the main High Court judgment and the judgment of the Court of Appeal dealt with the general issues relating to the tax injections and it was still necessary to apply the general findings to the circumstances of the individual taxpayers The purpose of the Commissioner's affidavits was to clarify and finalise thetax liability of each of the taxpayers. Unfortunately, the affidavits do not do so and it is necessary for affidavits to be filed on behalf of each of the taxpayers in response in order to clarify the tax liability. Given the number of taxpayers, this will take a considerable period of time.[11] In response the Commissioner asserts that there was no requirement that the taxpayers be given further rights to dispute the assessments following the judgments stated being produced for sealing. I agree with this view. At the hearing that led to my decision of 16 February 2009, the Commissioner sought final decisions in relation to the assessments and the taxpayers sought to have the matter remitted backto the TRA. I refused to remit the matter back, notwithstanding Mr Russell'sargument that it should be remitted because of new evidence being available on the issue of inconsistent track assessments, the validity of the IR150 certificates and quantification of the funding charge. It is perfectly clear from my decision, read as a whole, that there was no intention that the taxpayers would have the right to respond and challenge the affidavit filed by the Commissioner for the purposes of obtaining a sealed judgment.[12] Whilst it is most unfortunate that the Registry sealed the judgment prior toservice of the Commissioner's affidavits, that failure could have made no difference to the taxpayers' position. The situation is not dissimilar to that in Zaza v Beckett.5[13] The actions of the Registry clearly do not fall within the generally understood nature of a slip or omission. Nor did they result in a situation contrary to that5 Zaza v Beckett HC Auckland 105/98, 7 September 1998.intended by the judgment. I accordingly decline to make the order sought by the taxpayers.____________________P Courtney J