Goodricke v Commissioner of Inland Revenue

[2024] NZHC 3818

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2024-485-000252

[2024] NZHC 3818

UNDER

Part 20 of the High Court Rules 2016

IN THE MATTER OF

an appeal against a decision of the Taxation Review Authority

BETWEEN

WENDY GOODRICKE and PETER GOODRICKE

Appellants

AND

THE COMMISSIONER OF INLAND REVENUE

Respondent

On the papers:
Counsel:	A Goosen for Respondent
Judgment:	13 December 2024

JUDGMENT OF GRAU J

[Costs]

[1]                  On 2 December 2024, I dismissed an appeal by Wendy and Peter Goodricke of a decision of the Taxation Review Authority (the Authority).1 I upheld the Authority’s decision that the requisite information was not included in the Goodrickes’ notice of claim to the Authority and, in any event, that their failure to attend a mandatory directions hearing in respect of their claim resulted in the end of the proceedings.

[2]                  As the successful party, I found that the respondent Commissioner was entitled to costs (including disbursements). The parties have, however, been unable to agree on the quantum to be paid. Mr Goodricke also says that no costs should be paid to the

1      Goodricke v Commissioner of Inland Revenue [2024] NZHC 3639.

GOODRICKE v THE COMMISSIONER OF INLAND REVENUE (COSTS) [2024] NZHC 3818 [13 December 2024]

Commissioner because a Calderbank offer had been made—and rejected—which was for a similar amount to the costs the Commissioner now claims.

[3]                  The Commissioner says that Mr Goodricke’s argument is misguided, and the Calderbank principles do not apply. The Commissioner seeks costs (plus disbursements) on a 2B basis, for a total amount of $14,759.10.

[4]                  I begin by setting out the purported Calderbank offer made by Mr Goodricke via email on 4 September 2022. This email was sent after the Goodrickes filed a statement of claim in the Authority in relation to the Inland Revenue Department’s (IRD’s) treatment of attribution rules and charging of interest. The Goodrickes had already filed a notice of claim in the Authority regarding use of money interest. The email was addressed to “[email protected]”. It read:

Craig

If we walk away from the business and Wendy pays $13,581.88 are we able to put this to an end not have anything more to do with IRD over this.

Peter

[5]                  The email also included what appears to be a screenshot of the IRD webpage showing Mrs Goodricke’s residual income tax liability for the year end 31 March 2019, which was $13,581.68.

[6]The Commissioner’s position is that this is not a Calderbank offer. I agree.

[7]                  A party to a proceeding is entitled to make an offer to settle “without prejudice save as to costs” (or “without prejudice except as to costs”). Such offers are known as Calderbank offers.2 Calderbank offers allow settlement negotiations—which would otherwise be privileged and inadmissible under s 57 of the Evidence Act 2006—to be relied upon when the issue of costs falls to be determined. Where a settlement offer is not expressed as being without prejudice save as to costs, the parties are entitled to proceed on the basis that the offer will not subsequently be relied upon in resolving

2      In reference to the case of Calderbank v Calderbank [1975] 3 All ER 333 (CA).

costs.3 The underlying policy of this regime is to encourage parties to settle their disputes and to endeavour to do so without being discouraged by the knowledge that what is said in the course of negotiations may be used against them in the course of any subsequent proceedings.4

[8]                  Calderbank offers are provided for in rr 14.10 and 14.11 of the High Court Rules 2016. Rule 14.10 sets out the requirements for an offer to be considered a Calderbank offer by the Court, and r 14.11 outlines the potential effect of such an offer:

14.10Written offers without prejudice except as to costs

(1)A party to a proceeding may make a written offer to another party at any time that—

(a)is expressly stated to be without prejudice except as to costs; and

(b)relates to an issue in the proceeding.

(2)The fact that the offer has been made must not be communicated to the court until the question of costs is to be decided.

14.11Effect on costs

(1)The effect (if any) that the making of an offer under rule 14.10 has on the question of costs is at the discretion of the court.

(2)Subclauses (3) and (4)—

(a)are subject to subclause (1); and

(b)do not limit rule 14.6 or 14.7; and

(c)apply to an offer made under rule 14.10 by a party to a proceeding (party A) to another party to it (party B).

(3)Party A is entitled to costs on the steps taken in the proceeding after the offer is made, if party A—

(a)offers a sum of money to party B that exceeds the amount of a judgment obtained by party B against party A; or

(b)makes an offer that would have been more beneficial to party B than the judgment obtained by party B against party A.

(4)The offer may be taken into account, if party A makes an offer that—

3      Blakesfield Ltd v Foote [2016] NZHC 1354, [2016] NZAR 1112 at [18].

4      Rush & Tompkins Ltd v Greater London Council [1989] AC 1280 (HL) at 1299; cited in

Blakesfield Ltd v Foote, above n 3, at [16].

(a)does not fall within paragraph (a) or (b) of subclause (3); and

(b)is close to the value or benefit of the judgment obtained by party B.

[9]                  There are a number of reasons why the purported settlement offer made by Mr Goodricke is not a Calderbank offer for the purposes of rr 14.10 and 14.11. First, it is not clear that the offer is one intended to be “without prejudice except as to costs”. Such an express statement is required by r 14.10(1)(a). While the offer certainly appears to be an offer to settle if the outstanding tax liability is paid, Mr Goodricke does not communicate an intention to rely on the offer in relation to the issue of costs should it have been rejected. This means that the privilege to settlement communications in s 57 of the Evidence Act applies, and Mr Goodricke’s offer is inadmissible.

[10]              Second, the appeal that I determined did not actually concern Mr Goodricke’s tax liability. It was, in a general sense, procedural. This means that Mr Goodricke’s offer to pay the outstanding tax liability did not actually relate to an issue in the proceeding before me, which is required by r 14.10(1)(b).

[11]              Further, Mr Goodricke’s position misunderstands r 14.11(4)(b), which allows a party to rely on a Calderbank offer (that meets the requirements in r 14.10) where the amount offered is “close to the value or benefit of the judgment obtained” by the other party. The “value or benefit of the judgment obtained” does not mean the value of costs a successful party would otherwise be entitled to receive. What it refers to is the value or benefit of a substantive remedy received by the winning party. By way of illustration, if a party is awarded $50,000 in damages following a dispute about breach of a contract, a  Calderbank offer could  be relied upon for the purposes of     r 14.11(4)(b) if $49,000 was offered in settlement. It would not make sense to tie the amount of a Calderbank offer to the value of a costs award given that a Calderbank offer is often made before proceedings are commenced or in the early stages of it. In this way, it is usually the case that no costs, or only limited costs, will have accrued at the point the offer is made. On the other hand, a party will know the value of any substantive remedy they would seek in litigation. Costs are also unpredictable, given it is not known who the successful party will be, and nor are they a reflection of whether a party acted reasonably in rejecting an offer to settle.

[12]              Accordingly, I put the purported Calderbank offer made by Mr Goodricke to one side and decide the application applying the ordinary costs principles. Costs are at the discretion of the Court.5 Justice McQueen had previously fixed costs in relation to this appeal to be calculated on a category 2 basis.6 Despite the Commissioner seeking costs on a 2B basis, I am satisfied that 2A scale costs are appropriate in this case. This is because, while the proceeding was of average complexity and would have required counsel of average skill and experience, responding to Mr Goodrickes’ claim would likely have taken such counsel a comparatively small amount of time.7 The issues on appeal were limited and procedural in nature. The Commissioner is therefore to recalculate his costs table on a 2A basis and provide it to the Court for final confirmation.

[13]              In his costs memorandum, the Commissioner also raised an issue as to anonymisation in my substantive decision of the name of the Goodrickes’ company that was one of the disputants in the TRA, given that reg 36 of the Taxation Review Authorities Regulations 1998 provides that published reports of matters and decisions in the TRA may not contain the name of the disputant. These regulations are not applicable to the High Court, however, and it is relatively commonplace for disputants in TRA appeals to be named in appellate court decisions. In the absence of any special reason why the disputants in this case should not be named, I decline to make such an order for anonymisation.

Grau J

Solicitors:
Crown Law, Wellington

5      High Court Rules 2016, r 14.1.

6      Safety Beacons Ltd v Commissioner  of  Inland  Revenue  HC Wellington  CIV-2024-485-252, 26 August 2024.

7      See High Court Rules, r 14.5(2)(a).