Douglas v Commissioner of Inland Revenue HC Auckland CIV-2003-404-006359

[2011] NZHC 1310

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2003-404-006359

BETWEEN  N T H DOUGLAS & ORS Applicants

ANDCOMMISSIONER OF INLAND REVENUE

Respondents

CIV-2003-404-006401

AND BETWEEN            WIRE SUPPLIES LIMITED Applicants

ANDCOMMISSIONER OF INLAND REVENUE

Respondent

Hearing:         On the papers

Judgment:      8 July 2011 at 3:00 PM

JUDGMENT OF COURTNEY J

This judgment was delivered by Justice Courtney on 8 July 2011 at 3:00 pm

pursuant to R 11.5 of the High Court Rules.

Registrar / Deputy Registrar

Date……………………….

Solicitors:           Ladbrooks, P O Box 37633, Parnell

Fax: [phone]
Meredith Connell, P O Box 2213, Auckland
Fax: [phone] – C Wood

Counsel:             S R G Judd, P O Box 3320 Shortland Street, Auckland

Fax: [phone]

DOUGLAS & ORS V COMMISSIONER OF INLAND REVENUE HC AK CIV-2003-404-006359 8 July 2011

[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.[2]

The 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.

[1] Wire Supplies Ltd v Taxation Review Authority (No 2) (2005) 22 NZTC 19,401 (HC); Wire Supplies Ltd 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.

[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 I accept Mr Wood’s suggestion that I make an order confirming the amended assessments 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.

[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 jurisdiction to 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:[3]

The rule as to finality in sealed judgments or orders is an important one, not lightly to be weakened.

[3] BNZ v Mulholland (1991) 4 PRNZ 299 (HC) at 302.

[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’s intention:[4]

Although it is of course the case that the “slip rule” is primarily designed to correct 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.

[4] Foenander v Foenandere [2004] EWCA Civ 1675 at [57].

[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 individual

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 the Commissioner’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 the tax 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 back to  the TRA.    I refused  to  remit  the  matter  back,  notwithstanding  Mr  Russell’s argument 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 to service 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]

[5] Zaza v Beckett HC Auckland 105/98, 7 September 1998.

[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 that

intended by the judgment.   I accordingly decline to make the order sought by the

taxpayers.

P Courtney J