Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue
[2013] NZHC 2361
•11 September 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2012-404-7682 [2013] NZHC 2361
BETWEEN BEN NEVIS FORESTRY VENTURES LIMITED and BRISTOL FORESTRY VENTURE LIMITED, CLIVE RICHARD BRADBURY AND GREGORY ALAN PEEBES
Plaintiffs
ANDCOMMISSIONER OF INLAND REVENUE
Defendant
Hearing: 5 June 2013
Counsel G Judd QC for Plaintiffs
B Brown QC and R Roff for Defendant
Judgment: 11 September 2013
JUDGMENT OF KATZ J
This judgment was delivered by me on 11 September 2013 at 10:00 am
Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
Solicitors: Crown Law Office, Wellington
Wynyard Wood, Auckland
Counsel: G Judd QC, Auckland
BEN NEVIS FORESTRY VENTURES LTD & BRISTOL FORESTRY VENTURE LTD & BRADBURY & PEEBES v COMMISSIONER OF INLAND REVENUE [2013] NZHC 2361 [11 September 2013]
Introduction
[1] The plaintiffs (together, “Ben Nevis”) invested in a forestry investment scheme known as the Trinity scheme. In 2004 Venning J (“the Judge”) found the Trinity scheme to be an unlawful tax avoidance scheme (“2004 Judgment”).1
[2] Extensive litigation has ensued. The investors appealed the 2004 Judgment to the Court of Appeal, unsuccessfully.2 They then appealed to the Supreme Court, but were unsuccessful there also.3 The Redcliffe litigation then followed, in which some of the Trinity investors challenged the 2004 Judgment on the basis that the Commissioner had fraudulently applied the wrong subpart of the Income Tax Act
2004 in reassessing the taxpayer investors. Those proceedings were ultimately struck out by the Supreme Court.4 More recently, certain investors and the architect of the scheme have unsuccessfully sought to collaterally attack the 2004 Judgment in Muir and Ors v Judicial Conduct Commission5 and Accent Management Limited v Attorney General.6
[3] In these proceedings, Ben Nevis seeks orders setting aside the 2004 Judgment and re-opening the original challenge proceedings on the grounds of presumptive bias on the part of the Judge. In particular, Ben Nevis alleges that when the Judge delivered the 2004 Judgment he was liable to the Commissioner in respect of certain duties arising out of his own investment in a forestry investment trust. Ben Nevis says that the Judge was, as a result, “beholden” to the Commissioner. (I note that the Court of Appeal has previously found this to be a “startling” assertion, lacking in any
evidential foundation.)7
[4] The Commissioner has filed a protest to jurisdiction under r 5.49 of the High
Court Rules, on the basis that the High Court is now functus officio and therefore has
1 Accent Management Limited & Ors v Commissioner of Inland Revenue (2005) 22 NZTC 19, 027 (HC).
2 Accent Management Limited v Commissioner of Inland Revenue [2007] NZCA 230, (2007)
23 NZTC 21, 323.
3 Ben Nevis Forestry Ventures Limited v Commissioner of Inland Revenue [2008] NZSC 115, [2009] 2 NZLR 289 (with an addendum noted at [2009] 2 NZLR 358).
4 Commissioner of Inland Revenue v Redcliffe Forestry Venture Limited [2013] 1 NZLR 804 (SC).
5 Muir and Ors v Judicial Conduct Commission [2013] NZHC 989, (2013) 26 NZTC 21-019.
6 Accent Management Limited v Attorney General [2013] NZHC 1447, (2013) 26 NZTC 21-020.
7 Muir v Commissioner of Inland Revenue [2007] 3 NZLR 495 at [81] – [83].
no jurisdiction to set aside the 2004 Judgment. The Commissioner has also applied to dismiss or strike out the proceedings on jurisdictional grounds. The Commissioner says that, as this Court is now functus officio, any challenge to the
2004 Judgment can only be heard by an appellate court. The Commissioner’s dismissal application also asserts that the pleading discloses no reasonably arguable cause of action, is likely to cause prejudice or delay, is vexatious, and is an abuse of process. However, the sole issue argued before me was that of jurisdiction.
[5] Ben Nevis disputes that this Court is now functus officio. It says that a person has a fundamental right to a tribunal which acts in accord with the rules of natural justice. A breach of the rules of natural justice, including due to presumptive bias on the part of the decision maker, requires that the earlier determination be set
aside ex debito justitiae (as of right).8 The Court that is responsible for any breach of
the rules of natural justice itself has the jurisdiction to remedy any defect. This is irrespective of any right of appeal that may exist.
[6] The key issues I must determine are:
(a) Is it arguable that the 2004 Judgment is a nullity, which Ben Nevis would have been entitled (prior to any appeals) to have set aside ex debito justitiae (as of right) by this Court, in the exercise of its inherent jurisdiction?
(b)If the 2004 Judgment is arguably a nullity, does this Court still have jurisdiction to set it aside once any appeals from the 2004 Judgment have been heard and determined?
Is it arguable that the 2004 Judgment is a nullity, which Ben Nevis would have been entitled (prior to any appeals) to have set aside by this Court as of right?
[7] Counsel for Ben Nevis submitted that a judgment of the High Court, delivered in circumstances where a Judge was presumptively biased, is a nullity.
8 I note, however, that such a judgment or order has de facto effect unless and until it is declared to be a nullity by a competent court.
Because it is a nullity it can be set aside ex debito justitiae (as of right) by the
High Court itself, in the exercise of its inherent jurisdiction.
[8] The Commissioner, on the other hand, submitted that the High Court does not have jurisdiction in collateral proceedings to set aside one of its own previous decisions. Rather, the correct procedure (regardless of whether the 2004 Judgment had been appealed or not) would be for Ben Nevis to seek to raise the bias issue by way of a further appeal on the grounds of “fresh” evidence. The Commissioner submitted that collateral proceedings in the court of first instance are only appropriate when fraud is alleged, as such allegations generally require the determination of disputed factual issues.
The finality principle
[9] It has long been a fundamental principle of both English and New Zealand law that once a court has delivered a final judgment it has no authority to correct, alter or supplement that judgment, subject to very limited exceptions. Once final judgment has been delivered, the court’s jurisdiction has been fully exercised and its authority in relation to the subject matter of the judgment has come to an end. This is known as the finality principle. It recognises that it would lead to unacceptable uncertainty for litigants, the public, and indeed the law generally if courts could
reconsider and amend final orders at will.9 There must be a defined end point to
litigation. Once a final decision has been delivered, the Court that has delivered it will generally be functus officio.
Exceptions to the finality principle
[10] There are exceptions to the finality principle, but they are relatively rare. As
Lord Wilberforce observed in The Ampthill Peerage:10
For a policy of closure to be compatible with justice, it must be attended with safeguards: so the law allows appeals: so the law, exceptionally, allows appeals out of time: so the law still more exceptionally allows judgments to
9 Lockyer v Ferryman (1877) 2 App Cas 519 (HL), as confirmed in Shiels v Blackeley [1986]
2 NZLR 262 (CA). See also R v Nakhla (No 2) [1974] 1 NZLR 453 (CA) at 455 – 456 and Redcliffe Forestry Venture Limited v Commissioner of Inland Revenue [2013] 1 NZLR 336 (HC).
10 The Ampthill Peerage [1977] AC 547 (HL) at 569.
be attacked on the ground of fraud: so limitation periods may, exceptionally, be extended. But these are exceptions to a general rule of high public importance, and as all the cases show, they are reserved for rare and limited cases, where the facts justifying them can be strictly proved.
[11] Lord Simon of Glaisdale made similar observations in the same case:11
But the fundamental principle that it is in society’s interest that there should be some end to litigation is seen most characteristically in the recognition by our law – by every system of law – of the finality of a judgment. If the judgment has been obtained by fraud or collusion it is considered as a nullity and the law provides machinery whereby its nullity can be so established. If the judgment has been obtained in consequence of some procedural irregularity, it may sometimes be set aside. But such exceptional cases apart, the judgment must be allowed to conclude the matter.
[12] The finality principle (and its limited exceptions) has been recognised and confirmed in numerous New Zealand cases, including the leading Court of Appeal decision of R v Smith12 (Smith followed the Privy Council decision of R v Taito13 which had identified fundamental errors in the Court of Appeal’s processing of criminal appeals).
[13] Ben Nevis submitted that the present case falls within one of the recognised exceptions to the finality principle. In particular, Ben Nevis submitted that where a decision is delivered in circumstances where natural justice has been breached (including as a result of actual or apparent bias), the decision will be a nullity.
[14] In R v Smith the Court of Appeal affirmed the fundamental entitlement to a tribunal which acts in accord with the rules of natural justice, recognising that a failure to do so would result in an exception to the finality principle:14
Failure to hear, consideration by the Court of material not disclosed to the appellants, presumptive bias on the part of participating Judges ... are breaches of the right to justice contained in s 27(1) of the New Zealand Bill of Rights Act. They are not mere irregularities. They are breaches of an irreducible minimum standard of justice...Such failure requires the determinations earlier reached to be set aside “ex debito justitiae” ... That result can be achieved in application of the inherent jurisdiction.
(Emphasis added and footnotes omitted).
11 At 576.
12 R v Smith [2003] 3 NZLR 617 (CA).
13 R v Taito [2003] 3 NZLR 577 (PC).
14 At 633.
[15] In R v Smith15 Elias CJ cited Lord Greene MR’s judgment in Craig v Kanssen (subsequently approved by the Privy Council in Kofi Forfie v Seifah16) where Lord Greene said this:17
Those cases appear to me to establish that a person who is affected by an order which can properly be described as a nullity is entitled ex debito justitiae to have it set aside. So far as procedure is concerned, it seems to me that the court in its inherent jurisdiction can set aside its own order, and that it is not necessary to appeal from it.
(Emphasis added.)
[16] In support of the submission that the High Court itself has jurisdiction to set aside a judgment when there has been a serious procedural irregularity, Ben Nevis also relied on the following statement of Thomas J in Auckland District Court v A-G:18
But the High Court cannot review its own decisions; it must determine its own jurisdiction and, if it is responsible for any irregularity, the defect must be corrected by the Court itself or on appeal: see Isaacs v Robertson [1985] AC 97, per Lord Diplock at 103. It is in that sense that the High Court is described as a superior Court of general jurisdiction and other Courts are described as “inferior” or as Courts or tribunals of limited jurisdiction.
(Emphasis added).
[17] The dictum of Lord Diplock from Isaacs v Robertson that Thomas J was referring to is as follows:19
[T]here is a category of orders of [a court of unlimited jurisdiction] which a person affected by the order is entitled to apply to have set aside ex debito justitiae in the exercise of the inherent jurisdiction of the court without his needing to have recourse to the rules that deal expressly with the proceedings to set aside orders for irregularity and give to the judge a discretion as to the order he will make. The judges in the cases that have drawn the distinction between the two types of orders have cautiously refrained from seeking to lay down a comprehensive definition of defects that bring an order into the category that attracts ex debito justitiae the right to have it set aside, save that specifically it includes orders that have been obtained in breach of rules of natural justice.
(Emphasis added).
15 At [29].
16 Kofi Forfie v Seifah [1958] AC 59 (PC).
17 Craig v Kanssen [1943] KB 256 (CA) at 262.
18 Auckland District Court v A-G [1993] 2 NZLR 129 (CA) at 133.
19 Isaacs v Robertson [1985] 1 AC 97 (PC) at 103.
[18] Ben Nevis referred to a number of cases where the High Court has set aside a prior decision in accordance with these principles. In Brogden v Arnold20 the High Court had made orders striking out an appeal to the High Court before hearing from the parties. The High Court (Heath J) vacated those orders and reinstated the appeal on the following basis:21
I have reached the view that I do have jurisdiction to take that course of action. The failure to hear parties is a fundamental failure which, in my view, is capable of characterising the orders made by the learned Judge as “nullities”. In that regard I rely upon the statement of principle set out in R v Nakhla (No 2) [1974] 1 NZLR 453, 455-456 (CA) as applied in similar circumstances, by Pankhurst J in Butterfield v R [1997] 3 NZLR 760, 764. In addition, I refer to s 27 of the New Zealand of Rights Act 1990...
[19] In Butterfield v R22 Holland J had dismissed an appeal under a fundamental misunderstanding. Pankhurst J set aside the dismissal on the basis that the resultant decision should be viewed as a nullity. In doing so, he (like Heath J in Brogden) relied on the Court of Appeal’s decision in Nakhla (No 2).23 Brogden and Butterfield were both relied on by Ben Nevis as examples of the High Court itself correcting irregularities in its processes. Ben Nevis also referred to several cases24 in which the Court of Appeal recognised that, despite not being a court of inherent jurisdiction, it also has the ability to review one of its own prior decisions in exceptional circumstances, pursuant to its inherent powers.
[20] In accordance with these authorities, Ben Nevis submitted that the
High Court, in the exercise of its inherent jurisdiction, is able to set aside the 2004
Judgment on the basis that it is a nullity, due to the presumptive bias of the Judge.
Must a post-trial allegation of bias on the part of a Judge be raised by way of appeal?
[21] The Commissioner accepted that if Ben Nevis had alleged fraud rather than bias, then that could be raised through separate collateral proceedings in this court.
The Commissioner submitted, however, that such a procedure is not available in
20 Brogden v Arnold [2003] NZAR 80 (HC).
21 At [12].
22 Butterfield v R [1997] 3 NZLR 760 (HC).
23 R v Nakhla (No 2) [1974] 1 NZLR 453 (CA).
24 Including R v Nakhla (No 2) and R v Smith.
cases involving allegations of bias, as opposed to fraud. Two English Court of Appeal cases, Taylor v Lawrence25 and Jaffray v Society of Lloyds,26 were relied on in support of that submission.
[22] In Taylor v Lawrence, new evidence relating to a bias allegation on the part of the trial Judge had come to light following the initial appeal. The Court was satisfied that it had a “residual jurisdiction” to re-open its earlier decision in exceptional circumstances where it was clearly established that significant injustice had probably occurred and there was no effective alternative remedy. The New Zealand Court of Appeal took a similar approach in R v Smith.27
[23] In Jaffray a similar issue arose, albeit in the context of a fraud allegation (involving alleged perjury at trial). In Jaffray the Court drew a distinction between bias and fraud, observing that “[b]ut in a fraud case there is always an alternative remedy... in the shape of a fresh action to set aside the original decision”.28 The Court in Jaffray therefore concluded that in all but the most exceptional case a complaint of fraud should be pursued by way of a fresh action to set aside the original decision rather than by re-opening the appeal.29 The Court expressed concern that, as an appellate court, it was “neither equipped to undertake the inquiry nor able to give any immediate remedy if it were to find that the allegations are established”.30 The New Zealand Supreme Court reached a similar conclusion in Redcliffe, noting that in cases invoking the fraud exception the challenge is directed at the integrity of determination of fact in the trial court, necessitating a fresh proceeding in that court even where the impugned judgment has already been the subject of appeal.31
[24] The appropriate remedy in a fraud case is therefore to bring a collateral action in the original Court. Post-trial challenges to a first instance judgment on the
grounds of bias are, however, of quite a different nature. There is no requirement to
25 Taylor v Lawrence [2003] QB 528, (CA) [2002] EWCA Civ 90.
26 Jaffray v Society of Lloyds [2007] EWCA CIV 586, [2008] 1 WLR 74.
27 R v Smith [2003] 3 NZLR 167 (CA).
28 At [18] .
29 At [29].
30 At [27].
31 Commissioner of Inland Revenue v Redcliffe Forestry Venture [2013] 1 NZLR 804 (SC) at [31].
show actual bias on the part of a decision-maker. Nor will a bias claim be defeated by a Judge establishing that he or she was, in fact, entirely impartial. Rather, where there is a potentially relevant interest it must be disclosed. The Judge will then be disqualified “if a fair-minded lay observer might reasonably apprehend that the judge may not bring an impartial mind to the resolution of the question the judge is
required to decide”.32 Given that the integrity of the factual findings of the trial
court are not under attack, there is no impediment to bias issues being raised (for the first time) before an appellate court.
[25] The Commissioner submitted, however, that this is not simply a matter of “best practice” or optimal court procedure. Rather, unlike in fraud cases, the High Court will not have jurisdiction to consider post-trial bias allegations, particularly where they are raised in collateral proceedings. Only an appellate court will have jurisdiction to consider such issues.
Discussion
[26] The fact that post-trial bias allegations are usually dealt with by an appellate court does not mean that only an appellate court will have jurisdiction to determine such issues. Ben Nevis submitted that the High Court and the Court of Appeal (or, possibly, the Supreme Court) may have parallel jurisdiction to determine post-trial allegations of presumptive bias. In that event, Ben Nevis submitted, it is entitled to elect which Court it wishes to proceed in. It wishes to proceed in the High Court.
[27] Ben Nevis submitted that the 2004 Judgment is a nullity, because the Judge was presumptively biased. This court therefore has jurisdiction to set it aside ex debito justitiae. As discussed at [13] – [20] above, a number of authorities expressly refer to breaches of natural justice as falling within the nullity exception to the finality principle.
[28] Natural justice has two distinct components: first, the duty to hear both sides of a dispute before making a decision; second, the right to an impartial decision
maker (the rule against bias). Almost all of the “breach of natural justice” nullity
32 Saxmere Company Limited v Wool Board Disestablishment Company Limited [2010] 1 NZLR 35 (SC) at [3], [37], [89], and [127].
cases have involved breaches of the right to be heard, rather than breaches of the rule against bias. For example, proceedings have been held to be a nullity where they were not served on a defendant, a party was not heard on an interlocutory or substantive matter, or default judgment was entered other than in compliance with rules of the court. Such failures all impact on the right of a party to be heard. Breaches of the right to be heard are often so obvious or egregious that the setting aside of a decision made in breach is not opposed. Indeed it is not unusual for such decisions to be made on the papers.
[29] Determining if there has been a breach of the rule against bias will generally be much more difficult. The Court must consider whether the facts are such that “a fair-minded lay observer might reasonably apprehend that the judge may not bring an impartial mind to the resolution of the question the judge is required to decide”. This can be a relatively complex exercise, as evidenced by the authorities on bias. I note that in this case Ben Nevis’s (draft) amended statement of claim runs to eight pages in length.
[30] I therefore have real reservations as to whether allegations of bias (as opposed to breaches of the right to be heard) are appropriately dealt with as “nullities”, other than in the clearest of cases. Such concerns are exacerbated in this case by the fact that Ben Nevis has sought to raise presumptive bias issues in collateral proceedings, rather than by way of application in the original proceedings. This adds to the overall complexity. In my view, the more appropriate procedural course is for post-trial bias allegations to be raised by way of appeal (as discussed at [21] – [25] above) rather than by endeavouring to have the first instance decision set aside on nullity grounds. The nullity exception is more appropriately applied in cases of obvious and egregious procedural deficiencies not requiring lengthy argument, let alone detailed pleadings.
[31] The dismissal jurisdiction is, however, exercised rarely, and then only in clear-cut cases. If there is room for doubt as to whether jurisdiction exists, it will not be appropriate to dismiss proceedings on the grounds of lack of jurisdiction. As noted at [14] above, in R v Smith the Court of Appeal specifically recognised presumptive bias as an example of a breach of natural justice that would not give rise
to a “mere” irregularity, but which would require an earlier determination to be set aside ex debito justitiae. Those comments were obiter (R v Smith was not a bias case). However, in light of that authority, and the other authorities I have referred to that state more generally that a breach of natural justice will render a judgment a nullity, it must be at least arguable that the 2004 Judgment could have been challenged as a nullity (and therefore able to be set aside by this Court) prior to the decision being appealed.
[32] This conclusion does not, however, assist Ben Nevis on the facts of this case. The 2004 Judgment was appealed, to both the Court of Appeal and Supreme Court. For the reasons I set out below, following those appeals it is quite clear that this Court no longer has jurisdiction to set aside the 2004 Judgment, as is sought by Ben Nevis.
This Court does not have jurisdiction to set aside the 2004 Judgment following the subsequent appeals to the Court of Appeal and Supreme Court
Submissions
[33] Ben Nevis submitted that if the 2004 Judgment is a nullity then the High Court itself has jurisdiction to remedy any irregularity, in parallel with any appellate jurisdiction that exists.
[34] The Commissioner submitted that this Court does not have jurisdiction to hear and determine a collateral attack on the 2004 Judgment (on the grounds of bias or otherwise) once the judgment has been appealed. As a matter of law, post appeal, any challenge to the original judgment can only be determined by an appellate court. This case can therefore, by law, only be determined by a “different New Zealand Court or authority”. That is one of the recognised circumstances in which the
objection to jurisdiction procedure under r 5.49 is available.33
33 Commissioner of Inland Revenue v Redcliffe Forestry Venture Limited [2013] 1 NZLR 804 (SC)
at [11].
Discussion
[35] The jurisdiction of a first instance court following appeal was most recently considered in the Redcliffe litigation, which followed the approach taken in previous cases including Hikuwai v Sanford Limited,34 UDC Finance Ltd v Madden35 and Collier v Creighton.36
[36] In Hikuwai v Sanford Limited, Mr Hikuwai sought a new trial on the grounds that fresh evidence had been discovered which made such a course necessary in the interests of justice. An appeal from the High Court judgment had by that stage been determined by the Court of Appeal and leave had been granted to appeal to the Privy Council. Thorp J concluded that any grant of a rehearing by order of the High Court would, if it were to have any effect, have to amount to a recall by the High Court of the judgment of the Court of Appeal. The hierarchical court structure cannot be reconciled with the High Court having power (whether under the inherent jurisdiction or otherwise) to recall or vacate a judgment of the Court of Appeal. However, the grant of a new trial in the High Court would be meaningless if the
judgment of the Court of Appeal were not vacated or recalled.37
[37] In Collier v Creighton, Robertson J followed Hikuwai v Sanford in concluding that to allow a new trial following appeal would ignore the hierarchical nature of the judicial system: “The issues in this case have now been finally determined by Courts, below which this Court comes in the hierarchy”. The High
Court decision had been overtaken by the processes in the superior Court:38
It is not competent as a matter of jurisdiction for this Court to order a new trial in respect of a process which began here, but the dispute which was the subject of the hearing in this Court is now determined by a judgment in another place.
[38] John Hansen J reached a similar conclusion in UDC Finance Ltd v Madden.
The applicant had lost at trial and unsuccessfully appealed to both the Court of
Appeal and Privy Council. A new trial was sought on the basis of new evidence and
34 Hikuwai v Sanford Limited (1996) 9 PRNZ 587 (HC).
35 UDC Finance Ltd v Madden [2000] 1 NZLR 504 (HC).
36 Collier v Creighton (1997) 10 PRNZ 645 (HC).
37 At 591.
38 At 647.
also on the basis that the Court’s failure to deal with certain evidence had resulted in a miscarriage of justice. Hansen J adopted the reasoning set out in both Hikuwai and Creighton, concluding that he had no jurisdiction to grant a new trial.
[39] In Redcliffe (HC) (which also involved an allegation that the 2004 Judgment was a nullity, albeit on different grounds) Venning J followed these authorities in concluding that the principle of finality meant that this Court is functus officio once its decision has been finally recorded or overtaken by the processes in superior courts.39 His Honour concluded that the High Court had no jurisdiction to recall the
2004 Judgment, as it has been the subject of appeal to the Court of Appeal and
Supreme Court. To allow a recall would amount to a re-launching of the already concluded appellate process, which was specifically warned against in Faloon v CIR: “To do so would be to completely undermine the hierarchical structure of the Courts”.40
[40] Venning J’s decision in Redcliffe was appealed, ultimately to the Supreme Court. The Supreme Court decision in Redcliffe records that counsel for Redcliffe accepted that there was a jurisdictional impediment to the High Court dealing with the nullity issue, on the basis that only the Supreme Court could do so on an
application for recall of its 2008 Ben Nevis decision.41 The Supreme Court further
observed that:42
Applying r 5.49 in this way in the present context enables the Court to avoid the kind of circularity that was identified in Re St Nazaire Co.43 In referring to an application to rehear a case which had been the subject of appeal, Jessell MR said:
...it is a petition presented to a Judge of the High Court to rehear a decision of the Appeal Court, I should have thought that the mere statement of that would be sufficient to shew that the Judge below had no jurisdiction. It would be a wonderful result indeed if the Judicature Act empowered a Judge of an inferior court to rehear a decision of the Appeal Court which perhaps had reversed his decision. Upon that theory, how long is the thing to go on? If the
39 Commissioner of Inland Revenue v Redcliffe Forestry Venture Limited [2011] 1 NZLR 336 (HC)
at [12].
40 Ibid, at [59].
41 Commissioner of Inland Revenue v Redcliffe Forestry Venture Limited [2013] 1 NZLR 804 (SC)
at [43].
42 At [24].
43 In Re St Nazaire Co (1879) 12 Ch D 88 (CA).
Judge below has this power, he may exercise it by reversing the decision of the Appeal Court where the Appeal had reversed his decision.
[41] The reasoning in Hikuwai, Creighton, UDC Finance and Redcliffe is compelling. I see no basis on which to distinguish those authorities. Ben Nevis seeks, in essence, to set aside the 2004 Judgment and have a re-trial of its original challenge proceedings on their merits, in the apparent hope of a different outcome (despite the fact that both the Court of Appeal and Supreme Court upheld the 2004
Judgment). Ben Nevis seeks to turn back the clock and start the litigation afresh, a decade after it was first commenced. However, once an appeal from a first instance decision has been pursued it is no longer possible for the original judgment to be recalled or set aside in the trial court.
[42] In order to declare the 2004 Judgment a nullity (and re-open the challenge proceedings) this Court would have to either expressly or implicitly declare the 2007
Court of Appeal and 2008 Supreme Court decisions on the substantive appeal from the 2004 Judgment to be nullities. A re-hearing could not take place unless the High Court set aside the decisions of both the Court of Appeal and Supreme Court. To borrow from the words of Jessell MR in St Nazaire, “I should have thought that the mere statement of that would be sufficient to show that the judge below had no
jurisdiction”.44 As Jessell MR further observed “it would be a wonderful result
indeed” if a judge of an inferior court could effectively rehear a decision of an appeal court “which perhaps had reversed his decision”.
[43] Granting the relief Ben Nevis seeks is accordingly well beyond the jurisdiction of this Court. It would run entirely contrary to the hierarchical nature of our judicial system.
Prior consideration of presumptive bias issue by Court of Appeal
[44] The Commissioner submitted (and I accept) that a further impediment to such a course is that the Court of Appeal has already considered the presumptive bias
issue, at least in part.
44 At 96-97.
[45] Following delivery of the 2004 Judgment the Commissioner sought costs against Ben Nevis as well as non-party costs against Dr Muir (one of the architects of the Trinity scheme) personally. Dr Muir applied for the Judge to recuse himself from dealing with the issue of costs, on various grounds. The third ground advanced by Dr Muir in support of recusal was that there was “a small suspicion” that the Judge, by virtue of his involvement in a private forestry scheme, may possibly have been exposed to income tax/gift duty or conveyance duty risks at the time the scheme was established and this would be known to the Commissioner. Dr Muir’s submissions included the following passage:
75 A fair minded person could well in the circumstances harbour some small suspicion that some step has not been properly taken to transfer the beneficial ownership, and this is known by the [Commissioner] (through the returns and other information which tax payers are required to provide), especially as such a step would usually require an assessment of gift duty and conveyance duty and possibly income tax. Alternatively the facts might show that the company is really a unit trust for tax purposes and it is “holding its breath” because that has not been its tax return position.
[46] The Judge declined Dr Muir’s application to recuse himself.45 In the same decision the Judge also declined an application by Ben Nevis to have the 2004
Judgment recalled. Both the recusal and recall decisions were appealed and heard separately on appeal. Both were dismissed by the Court of Appeal.46 It is apparent from the Court of Appeal’s recusal judgment that the same “suspicion” raised in the High Court was advanced before the Court of Appeal. In relation to the suggestion of presumptive bias alleged to have arisen from the Judge’s interest in the Tahakopa forestry investment, the Court of Appeal observed:47
...the Judge has said, in a judgment, that all income tax obligations have been complied with by Tahakopa. And as we observed at the hearing, it would be startling if counsel for the Commissioner had stood by in a situation such as this if there had been any suggestion of income tax impropriety in the case of Tahakopa.
...If anything, in the complete absence of evidence to the contrary, the Judge’s investment, unlike Trinity, can be assumed to be subject to the normal forestry taxation regime.
45 Accent Management Limited v Commissioner of Inland Revenue (2006) 22 NZTC 19, 758 (HC).
46 The recusal decision was reported as Muir v Commissioner of Inland Revenue [2007] 3 NZLR
495 (CA). The recall decision was reported as Accent Management Limited v The Commissioner of Inland Revenue [2007] NZCA 231, (2007) 23 NZTC 21, 366.
47 At [81] – [83].
In the result we reject on the facts the complaint as it is made under this head.
[47] The current proceedings therefore have the potential to require the High Court to not only, in effect, declare the 2007 Court of Appeal and 2008 Supreme Court decisions on appeal from the 2004 Judgment to be nullities, but also to potentially re-open aspects of the Court of Appeal’s separate recusal decision. That is also beyond the jurisdiction of this Court.
Summary and conclusion
[48] Once a final judgment has been delivered a court is functus officio, consistent with the principle that litigation must have a defined end point (the finality principle). In the interests of justice, however, courts have recognised some limited exceptions to the finality principle. These include where a judgment is a “nullity” because, for example, it was delivered without one party having been heard (a breach of natural justice). If a judgment is a nullity, the Court which delivered it can generally set it aside, without the need for an appeal.
[49] Ben Nevis submitted that the 2004 Judgment was a nullity because the Judge was presumptively biased due to an alleged tax obligation that resulted in him being “beholden” to the Commissioner (an allegation which the Court of Appeal has previously suggested was “startling” and lacking in any evidential foundation). The rule against bias is an aspect of natural justice. However, the allegations of presumptive bias in this case are far removed from the facts of any previous case where a judgment or order has been found to be a “nullity”. The nullity exception is usually applied where a procedural breach is both obvious and egregious.
[50] Nevertheless, in light of the authorities discussed at [13] – [20] above, if the
2004 Judgment had not been appealed I would have been reluctant to dismiss these proceedings solely on jurisdictional grounds. If there is room for reasonable doubt as to whether jurisdiction exists, it will rarely (if ever) be appropriate to dismiss proceedings on the basis of lack of jurisdiction.
[51] The 2004 Judgment was, however, appealed. It was upheld on appeal by both the Court of Appeal and the Supreme Court. In light of the decisions of St Nazaire, Hikuwai v Sanford Limited, Collier v Creighton, UDC Finance Ltd v Madden and the Redcliffe litigation itself, it is not, in my view, even remotely arguable that this Court now has jurisdiction to set aside the 2004 Judgment. To hear and determine these proceedings would require the High Court to disregard the hierarchical nature of our court system and, in effect, declare the decisions of its superior courts to be nullities. The relief sought by Ben Nevis is indisputably beyond the jurisdiction of this Court.
Result
[52] The proceedings are dismissed.
[53] The Commissioner is entitled to costs in respect of the protest to jurisdiction and dismissal application. As I did not hear argument on the appropriate quantum of
costs, leave is reserved to file memoranda if costs cannot be agreed.
Katz J
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