BNZ Investments Ltd v Commissioner of Inland Revenue HC Auckland CIV 2004 485 1059
[2007] NZHC 1617
•15 February 2007
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV 2004 485 1059
IN THE MATTER OF The Tax Administration Act 1994 and the
Income Tax Act 1994
BETWEEN BNZ INVESTMENTS LIMITED First Plaintiff
ANDBNZ INTERNATIONAL LIMITED Second Plaintiff
ANDBNZI SECURITIES NO 1 LIMITED Third Plaintiff
ANDBNZI SECURITIES NO 2 LIMITED Fourth Plaintiff
ANDTHE COMMISSIONER OF INLAND REVENUE
Defendant
CIV 2005 485 1045
ANDIN THE MATTER OF The Tax Administration Act 1994 and the Income Tax Act 1994
BETWEEN BNZ INVESTMENTS LIMITED First Plaintiff
AND BANK OF NEW ZEALAND Second Plaintiff
ANDBNZ CORPORATION LIMITED Third Plaintiff
ANDTHE COMMISSIONER OF INLAND REVENUE
Defendant
BNZ INVESTMENTS LIMITED AND ORS V THE COMMISSIONER OF INLAND REVENUE HC WN CIV
2004 485 1059 15 February 2007
CIV 2006 485 1028
ANDIN THE MATTER OF The Tax Administration Act 1994 and the Income Tax Act 1994
BETWEEN BNZ INVESTMENTS LIMITED First Plaintiff AND
BANK OF NEW ZEALAND Second Plaintiff
AND
BNZ CORPORATION LIMITED Third Plaintiff
AND
CUSTOM FLEET (NZ) LIMITED Fourth Plaintiff
AND
NATIONAL AUSTRALIA LIMITED Fifth Plaintiff
AND
BNZI SECURITIES NO 1 LIMITED Sixth Plaintiff
AND
BNZI SECURITIES NO 2 LIMITED Seventh Plaintiff
AND
NATIONAL NOMINEES LIMITED Eighth Plaintiff
AND
BNZ EQUIPMENT LIMITED Ninth Plaintiff
AND
NATIONAL AUSTRALIA GROUP (NZ) LIMITED
Tenth Plaintiff
AND
BNZ BRANCH PROPERTIES LIMITED Eleventh Plaintiff
AND
THE COMMISSIONER OF INLAND REVENUE
Defendant
Hearing:
9 February 2007
Counsel: A R Galbraith QC and A S Butler for the plaintiffs in support
R A Dobson QC and E J Norris for the defendant to oppose
Judgment: 15 February 2007
JUDGMENT OF WILD J
[1] By application filed on 22 December, the plaintiffs (the BNZ) seeks a stay of two judgments I gave late last year, pending determination of appeals it has brought against both.
[2] In the first of those judgments, given on 22 November 2006, I ruled in the defendant’s (the CIR’s) favour on relevance, and therefore discovery, of “other bank and other BNZ transaction documents” (see [120] of that judgment) and held:
[160] … that s81 TAA permits the CIR to disclose the other bank documents he considers relevant, to the BNZ in the BNZ proceedings.
[3] In the second judgment, given on 6 December, I consolidated the three proceedings with which this judgment is now entituled (the 2004, 2005 and 2006 proceedings), on terms set out in [44] of that judgment, and dismissed the BNZ’s application to stay the 2006 proceeding pending the outcome of the trial of the earlier two proceedings.
[4] Whilst established principles must govern this application, it is unusual in that its effect, if granted, would be to halt progress toward trial of the consolidated proceedings which had a fixture for 1 November this year (vacated by the order I make in [26] below), and which now have the “fallback” 31 March 2008 fixture. In short, a stay would be consistent with the BNZ’s desired course of trying only the
2004 and 2005 proceedings together, and upon limited discovery. It would tend to thwart the CIR’s preferred course of trial of the three proceedings together upon considerably more extensive discovery. That is the course which the two judgments under appeal give effect to.
[5] Inquiries by counsel of the Court of Appeal Registry indicate that no hearing time for the BNZ’s appeals is available before about November of this year. If that
is correct, the 31 March 2008 fixture will be unachievable if the appeals fail, i.e. if the consolidated proceedings are for trial following the more extensive discovery/inspection.
[6] Mr Dobson asks that I proceed on the basis that the appeals can be heard in the next six months, and hopefully in the second week of May when there is a “window” of availability of all counsel involved. Even on that basis – allowing for judgment time – the 31 March 2008 fixture would, in my assessment, be in jeopardy.
[7] I consider that only a concerted and focused effort by the BNZ and the CIR alike to ready the consolidated proceedings for trial on the basis contained in my two judgments will make trial of the consolidated proceedings commencing 31 March
2008 achievable. It is to be borne in mind that that is now only a little over a year away and tempus fugit.
[8] That situation, plus the importance of this litigation and the desirability for the BNZ and CIR alike that it be heard as early as is reasonably possible, make the BNZ’s stay application an uninviting one, at least from my viewpoint as both the assigned trial Judge and the List Judge at Wellington.
[9] Nevertheless, the BNZ is entitled to a stay if refusal of one would render its appeals nugatory, and the balancing of other considerations favours a stay. Those other considerations, as assembled by Hammond J in Dymocks Franchise Systems (NSW) Pty Ltd v Bilgola Enterprises Ltd (1999) 13 PRNZ 48 at [9] are:
(1) The bona fides of the applicants as to the prosecution of the appeal. (2) Will the successful party be injuriously affected by the stay?
(3) The effect on third parties.
(4) The novelty and importance of the question involved. (5) The public interest in the proceedings.
(6) The overall balance of convenience.
That list of factors was implicitly endorsed by the Court of Appeal in its judgment in Dymocks (reported immediately following Hammond J’s at (1999) 13 PRNZ 48), and was expressly endorsed by the Court in New Zealand Insulators Ltd v ABB Ltd CA215/06 4 December 2006 at [11].
[10] On a stay application the aim, insofar as is practical, is:
… so to arrange matters that, when the appeal comes to be heard, the appellate Court may be able to do justice between the parties, whatever the outcome of the appeal may be …
[11] The formula is that of Buckley LJ in 3M v J & J [1976] RPC 671 (CA) at
676, cited by the Court of Appeal in New Zealand Insulators Ltd v ABB Ltd at [13]. [12] In practical terms, if the stay sought by the BNZ is granted, the parties can:
a) Halt discovery in respect of the 2006 proceeding in the interim.
b)Halt discovery and inspection of “other bank” documents, thus avoiding the confidentiality issues involved in inspection of those documents.
[13] Conversely, if the stay sought is refused, that work must continue.
[14] For three reasons, I do not consider the BNZ’s appeals will become pointless if a stay is refused. First, if and insofar as the appeals succeed on the relevance issue, they can be given effect by terminating discovery/inspection of documents the Court of Appeal has ruled to be irrelevant.
[15] Second, past “wasted” discovery/inspection costs (i.e. in relation to documents ruled irrelevant by the Court of Appeal) can be compensated for by an award of costs. While I accept Mr Galbraith’s submission that precise calculation would likely be elusive, I consider an order substantially reimbursing the BNZ could be made. Often, that is all an award of costs or damages can achieve.
[16] Third, reversal of my order consolidating the 2006 proceeding with the 2005 and 2004 proceedings could be given straightforward effect.
[17] Relevant to these points is the difference between the parties as to whether judgment in the 2004 and 2005 proceedings (and perhaps the Deutsche Bank proceeding referred to in [10] and [38] of my BNZ judgment of 22 November 2006) would resolve the 2006 proceedings. I noted Mr Galbraith, in his oral submissions, as contending for “a 99% prospect” that they would. Mr Dobson submitted that there is a virtual inevitability that they would not. He argued that a combination of the fact specificity of tax assessments and the large amount of tax in issue almost guarantees that the party unsuccessful in the trial of the 2004 and 2005 proceedings, would pursue the 2006 proceeding.
[18] Although based on little more than observations to date of this litigation, and judicial instinct, I anticipate that Mr Dobson’s prognosis may be the more realistic one. If I am correct, that substantially detracts from the BNZ’s argument that it risks throwing away substantial irrecoverable costs if no stay is granted. That is because the discovery and inspection work on the 2006 proceeding, in particular the two new transactions involved in it (Robo 2 and Lehmans), will need to be done anyway.
[19] Indeed, Mr Dobson submits that that is the position in any event, because the CIR contends that the two new transactions which are in issue in the 2006 proceeding are relevant to the 2004 and 2005 proceedings. That of course is part of the relevance issue, which is one of the issues on appeal.
[20] The other considerations I regard as relevant here are fourfold. First, I accept the bona fides of the BNZ in appealing, and did not understand Mr Dobson to suggest that the appeals are other than genuine. The BNZ’s view of relevance is almost totally at odds with that of the CIR, and I accept it is a tenable one. The BNZ argued before me with force, as it will no doubt do again on appeal, that the CIR’s position as to relevance is unprecedented in its ambit. Thus, I accept that the BNZ’s position, if successful on appeal, must be preserved. But, for the reasons I have given, I consider it can be, even if a stay is refused.
[21] Second, I consider the CIR’s position will be injuriously affected if a stay is granted. The CIR’s interests (which I consider effectively equate with the public interest) are best served by the earliest possible trial of the consolidated proceedings. I accept that the BNZ is good for any assessment(s) it might ultimately have to meet and that the use of money interest running in the interim (currently 13%) is over market rates. It is struck at a level which provides an incentive to pay tax assessed, and a disincentive to challenge it. But notwithstanding that, the CIR’s interests are undoubtedly served by having the proceedings determined, not by having them stayed.
[22] Third, third parties – mainly other trading banks – are affected insofar as their confidential documents are to be discovered and disclosed for inspection. On the basis of a folio of documents shown to me by consent in the ANZ proceedings, my tentative view (and one on which I do not place much weight in giving this judgment) is that confidentiality concerns are being somewhat overstated. Mr Dobson points out that Mr Galbraith has accepted that only limited briefing can occur in the next six months. He submits that protocols can adequately protect confidentiality through the inspection process, which will substantially involve only the parties’ counsel and solicitors. To summarise, I accept some, but not a great deal, of injurious affect to third parties if the stay is refused.
[23] Fourth, and finally, my assessment is that the overall balance of convenience comes down quite heavily against granting the stay sought by the BNZ. I am not persuaded that its appeal rights will be rendered nugatory by refusal of a stay. I consider that the BNZ can be reasonably compensated by an award of costs for any wasted work on discovery and inspection. I favour progress toward trial over delay. I see little injurious affect to third parties if a stay is refused. Insofar as the public interest is relevant, I consider it is best served by refusal of a stay.
[24] For those reasons, I refuse the stay sought by the BNZ and dismiss its application.
[25] The BNZ is to pay the Commissioner’s costs of the stay application on a 2B basis, together with disbursements fixed by the Registrar failing agreement. I certify for second counsel.
[26] Finally, and by consent, I vacate the fixture commencing 1 November this year for trial of the consolidated proceedings and confirm that the trial is now to commence on 31 March 2008.
Solicitors:
Russell McVeagh, Wellington for the Plaintiffs
Crown Law Office, Wellington for the Defendant
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