Kaur v Taxation Review Authority
[2023] NZHC 2748
•29 September 2023
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2023-485-152
[2023] NZHC 2748
UNDER the Judicial Review Procedure Act 2016 and Part 30 of the High Court Rules 2016 IN THE MATTER
of an application to review a decision of the Taxation Review Authority
BETWEEN
RAVINDER KAUR
Applicant
AND
THE TAXATION REVIEW AUTHORITY
First Respondent
COMMISSIONER OF INLAND REVENUE
Second Respondent
CIV-2022-485-795 IN THE MATTER
of an appeal under section 26A of the Taxation Review Authorities Act 1994
BETWEEN
RAVINDER KAUR
Appellant
AND
THE TAXATION REVIEW AUTHORITY
First Respondent
THE COMMISSIONER OF INLAND REVENUE
Second Respondent
Hearing: 7 September 2023 Appearances:
A B Darroch and M I Smol for Applicant/Appellant Appearance excused for First Respondent
E J Norris and R L Grierson for Second Respondent
Judgment:
29 September 2023
KAUR v THE TAXATION REVIEW AUTHORITY [2023] NZHC 2748 [29 September 2023]
JUDGMENT OF McQUEEN J
Table of Contents
Para Nos
Introduction [1]
Background [5]
The tax dispute [5]
The proceedings before the TRA [9]
The unless orders [15]
Strike out decision [22]
TRA decision about effect of unless orders [30]
Issues in the proceedings [31]
The appeal [31]
Application for judicial review [34]
Is the strike out decision a determination from which an appeal lies? [36]
Ms Kaur’s submissions [36]
The Commissioner’s submissions [38]
Discussion [39]
Conclusion [49]
The appeal [50]
Approach to appeal [50]
Relevant law [51]
Ms Kaur’s submissions [54]
The Commissioner’s submissions [61]
Discussion [67]
Relief [88]
The application for judicial review [90]
Result [91]
Costs [93]
Introduction
[1] Ms Kaur challenges the decision of the Taxation Review Authority (TRA) to strike out her claim against the Commissioner of Inland Revenue (the Commissioner) for non-compliance with unless orders (the decision).
[2] Ms Kaur sought initially to bring an appeal against the decision (CIV-2022- 485-793). Ms Kaur then filed an application for judicial review after the Commissioner indicated his position that there is no right of appeal from the decision (CIV-2023-485-152). The two proceedings rely on the same factual background and substantive arguments. On 28 April 2023, Radich J ordered that the proceedings were to be heard together and that is what has taken place before me.1
[3] The TRA abides the decision of the Court, and its counsel were excused from appearing. The Commissioner opposes both Ms Kaur’s appeal and application for judicial review.
[4] For the reasons that follow, I allow the appeal and dismiss the application for judicial review.
Background
The tax dispute
[5] In its key aspects, the factual background is not in dispute between the parties. An affidavit was filed in support of Ms Kaur’s appeal and application for judicial review from a Mr Lukey. Mr Lukey is a tax barrister who was engaged by Mr Draht of Greenland CA Ltd to act as counsel for Mr Kaur in relation to the claim before the TRA. An affidavit from a Mr Wallace was filed in support of the Commissioner’s position. Mr Wallace is a senior solicitor at Inland Revenue.
[6] On 17 April 2017, the Commissioner amended Ms Kaur’s income tax assessments for the 2006 to 2010 income years (inclusive). The total tax shortfall was
1 Kaur v Taxation Review Authority HC Wellington CIV-2023-485-152, 28 April 2023 (Minute of Radich J).
calculated at $220,209.55. On 22 February 2019, the Commissioner assessed Ms Kaur for evasion shortfall penalties totalling $165,157.17.
[7] Also relevant by way of background is that in 2015, the Commissioner of Police instituted proceedings under the Criminal Proceeds (Recovery) Act 2009 in respect of the Masala group of companies and those properties having a connection with the Masala group. These proceedings involved the liquor store business of Mr Supinder Singh (Ms Kaur’s husband) and properties related to him, including a property at 495 Porchester Road. These proceedings were settled, with the settlement approved by the High Court under s 95 of the Criminal Proceeds (Recovery) Act on 28 February 2017.2 The settlement sum involved represented “almost all of the unlawful benefit said to have been derived from the tax evasion offending”.3
[8] Ms Kaur had received funds which she used to pay the mortgage for properties situated at 495 Porchester Road and 163 Popes Road (the properties). Ms Kaur’s claim alleges that the Commissioner’s assessment of her income tax and the penalties applied was incorrect. She says that the payments she received to fund the mortgages on the properties were not taxable income as they were held by her on trust for the beneficial owners of the properties and therefore the payments were not her personal income. Ms Kaur also alleges that it was the intention of the parties to the Masala settlement, referred to above, to settle all the tax matters related to the Masala chain of restaurants and, if Ms Kaur was assessed for the funds received for the properties, this would amount to double taxation.
The proceedings before the TRA
[9] By notice of claim dated 19 July 2021, Ms Kaur commenced challenge proceedings in the TRA under pt 8A of the Tax Administration Act 1994 (the TAA). The challenge was to the correctness of the Commissioner’s assessments.
[10] Timetable orders were made by the TRA by consent on 17 December 2021. The orders included filing and service of affidavits of documents for discovery, service
2 See Commissioner of Police v Investments Ltd [2017] NZHC 284.
3 At [13].
of proposed evidence, and indexes of documents for the common bundle. On 21 March 2022, amendments to the timetable orders were again made by consent, as the parties were engaged in settlement discussions.
[11] On 8 April 2022, Mr Lukey sought an extension to the date by which Ms Kaur was to provide discovery, and suggested consequential amendments to the remaining timetable steps, due to ongoing settlement discussions. On 12 April 2022, the TRA issued amended timetable orders and a notice of hearing for a five day fixture commencing on 12 September 2022. The amended timetable orders provided that:
(a)parties were to file and serve their respective affidavits for discovery by 3 May 2022;
(b)inspection was to be completed by 9 May 2022;
(c)any agreed statement of facts was to be filed by 23 May 2022;
(d)Ms Kaur’s proposed briefs of evidence and index of documents for inclusion in the common bundle were to be served by 20 June 2022;
(e)the Commissioner’s proposed briefs of evidence and index of documents for inclusion in the common bundle were to be served by 18 July 2022;
(f)the common bundle of documents was to be filed by 8 August 2022;
(g)Ms Kaur’s synopsis of opening submissions and bundle of authorities was to be filed and served by 15 August 2022;4 and
(h)the Commissioner’s synopsis of opening submissions and bundle of additional authorities were to be filed and served by 5 September 2022.
4 The parties were asked to confirm whether this date should be 15 August or 22 August 2022.
[12] The Commissioner filed and served an affidavit of documents on 3 May 2022, but Ms Kaur did not file or serve such an affidavit of documents. Mr Lukey explains in his affidavit that settlement discussions were still underway and so he sought to file an updating memorandum by 13 May 2022, as at that stage he would know Ms Kaur’s response to the further settlement offer made by the Commissioner.
[13] On 12 May 2022, the TRA confirmed that an updating memorandum would be accepted if filed by 13 May 2022, but no such memorandum was filed on behalf of Ms Kaur. Nor was any evidence or index of documents for the common bundle provided by Ms Kaur, as anticipated by the timetable.
[14] On 6 July 2022, counsel for the Commissioner requested a telephone conference with the TRA to discuss the progress of the claim. At that teleconference, it was agreed that unless orders would be made by consent. Mr Lukey says that his instructions at that time were to prioritise the reactivation of the case. He says Ms Kaur had not fulfilled the previous timetabling directions, and given the delay, unless orders appeared to be an appropriate way to move the case forward.
The unless orders
[15] On 13 July 2022, the TRA issued a minute. The minute noted that Ms Kaur had failed to comply with directions relating to discovery, filing witness statements, and providing an index of documents for the common bundle. The minute also noted that the hearing scheduled for 12 September 2022 was vacated. It went on to make “unless orders” pursuant to r 7.41 of the District Court Rules 2014. These orders (the unless orders) provided that:
(a)Ms Kaur must file her affidavit of documents for standard discovery, using the standard listing protocol by no later than 5:00 pm on 12 September 2022; and
(b)Ms Kaur must file and serve her witness statements and the index of documents for inclusion in the common bundle no later than 5:00 pm on 12 October; and
(c)if Ms Kaur fails to comply with either part of the preceding orders and remains in default for three working days, her notice of claim is struck out, and an order will be sealed dismissing the challenge in the whole, without further notice.
[16] The minute went on to indicate that if Ms Kaur complied with the unless orders, the TRA would convene a telephone conference to set a date for hearing and timetable of steps to the hearing. The TRA requested that parties provide any comment on the form of the unless orders by 5:00 pm on 14 July 2022 and advised that a sealed copy of the unless orders would be issued after that point. Mr Lukey says that this process accords with his understanding of the usual process for sealing orders, that is, that parties are provided with a copy of the orders and an opportunity to comment before they are sealed. Mr Lukey confirms that he was aware of the strict terms of the unless orders and that he worked closely with Ms Kaur and her proposed witnesses to ensure that the deadlines were met. A sealed copy of the unless orders was duly issued by the TRA.
[17] On 9 September 2022, Mr Draht filed and served Ms Kaur’s affidavit of documents on the case manager at the TRA and counsel for the Commissioner. They both acknowledged receipt of that email. Counsel for the Commissioner wrote to the case manager, copied to Mr Lukey and Mr Draht, stating that Ms Kaur had not made the documents listed in her affidavit available for inspection. At 6:34 pm that day, Mr Lukey responded to the email asking Mr Draht to provide the documents to counsel for the Commissioner. He further emailed counsel for the Commissioner seeking clarification about the required format for Ms Kaur’s documents. It appears that the case manager at the TRA was not copied into that email.
[18] On 14 September 2022, counsel for the Commissioner responded to Mr Lukey’s email in relation to the format requirements for Ms Kaur’s discovery documents. Counsel for the Commissioner indicated that the schedule of documents did not list relevant documents in accordance with the standard discovery order and did not list or otherwise identify each document. Documents were provided accordingly, by Mr Draht, later that day, to the case manager at the TRA and counsel for the Commissioner.
[19] On Tuesday 11 October 2022, Mr Lukey served Ms Kaur’s briefs of evidence and exhibits on the Commissioner by way of email to counsel for the Commissioner. Counsel for the Commissioner acknowledged receipt on 12 October 2022. Mr Lukey did not file the briefs of evidence and exhibits, nor an index to the common bundle, with the TRA. Mr Lukey says that, at this point, he believed that the unless orders had been complied with.
[20] On 17 October 2022, counsel for the Commissioner emailed Mr Lukey asking for a copy of an exhibit to one brief of the evidence, as it was missing from the service email. Mr Lukey provided a copy of the missing exhibit shortly afterwards. Mr Lukey also noted that the exhibits to another brief of evidence would need to be provided separately. The Commissioner says that those exhibits have never been provided.
[21] Mr Lukey says that, around this time, he had at least one conversation with counsel for the Commissioner about the progression of the case. He says that she raised issues with some aspects of the admissibility of one of the briefs of evidence. He says that she did not indicate that Ms Kaur’s challenge could be struck out on the basis that the briefs of evidence were non-compliant, nor did she raise an issue with the fact he had not provided a draft index of documents for inclusion in the common bundle.
Strike out decision
[22] On 19 October 2022, the TRA issued a sealed order dismissing Ms Kaur’s challenge. The decision stated that Ms Kaur had failed to comply with the unless orders and had been in default for more than three working days, that she had provided no explanation, and that she had not sought further time. The TRA struck out Ms Kaur’s statement of claim and dismissed her challenge in whole, pursuant to r 7.41 of the District Court Rules. This decision was made without correspondence with counsel. The decision described Ms Kaur’s default and the order made in the following terms:
Default
[4]Ms Kaur filed an affidavit of documents dated 9 September 2022. However it appears the schedule of documents does not comply, given many of the documents in the record are not listed (or not listed discretely as required).
[5]Whether or not the affidavit of documents dated 9 September 2022 complies with the first stage of the 13 July 2022 orders, there has been no compliance with the requirement to file witness statements and the index for the common bundle by 12 October 2022. Ms Kaur has been in default for more than three working days and provided neither an explanation nor sought further time.
Order
[6]The Authority strikes out Ms Kaur’s statement of claim, and dismisses her challenge in whole, pursuant to Rule 7.41 of the District Court Rules 2014.
[23] The case manager’s email attaching the strike out decision noted that Ms Kaur may have a right of appeal to the High Court from the decision pursuant to s 26A of the Taxation Review Authorities Act 1994 (the TRAA).
[24] On 20 October 2022, Mr Lukey emailed the case manager at the TRA and counsel for the Commissioner stating that all the briefs were sent in time and that he would “dig out the email and forward it” on. Mr Lukey says that when he located the email serving the briefs of evidence on the Commissioner, he noticed that he had omitted to separately email the case manager at the TRA or copy her into his service email to counsel for the Commissioner. Mr Lukey says that this was a surprise to him as his usual practice would be to copy the case manager into service emails “or, for that matter any emails regarding the case that were not privileged or on a counsel to counsel basis”.
[25] Mr Lukey says he cannot now recall whether he just forgot to copy in the case manager at the TRA or whether he mistakenly thought the unless order only required that the briefs of evidence be served but not filed. He says he was on holiday at this time and may have been working from his phone . He says that in his experience of proceedings before the TRA, it is common for parties to only serve their briefs of evidence and these are not required to also be filed with the TRA. Mr Lukey forwarded his service email and attachments to the case manager at TRA, apologising for not having included her initially.
[26] Mr Lukey acknowledges that the unless orders also required Ms Kaur to file and serve an index of documents for inclusion in the common bundle along with her briefs of evidence. He says he is not exactly sure what the TRA was expecting him to
file, over and above Ms Kaur’s discovery affidavit and documents. He says that in his experience before the TRA, Crown Law usually offers to prepare the common bundle in the correct format, regardless of it strictly being the disputant’s obligation to prepare it. He says this is especially so when dealing with relatively unsophisticated taxpayers. In response to this, Mr Wallace says that in his (over 25 years) of experience working for Inland Revenue’s Litigation Management Unit (and now Inland Revenue’s Legal Services) he is unaware of any instance where the Commissioner has offered to prepare the common bundle where the disputant is represented by a lawyer, as the Commissioner expects lawyers to understand how to prepare a common bundle. He also says that the Commissioner did not offer to prepare the common bundle in this case and that the parties had agreed that Ms Kaur would do this.
[27] Also on 20 October 2022, counsel for the Commissioner sent an email stating that she was not previously aware that Mr Lukey had not filed the witness statements. She also indicated that the Commissioner was in the process of preparing to file a memorandum concerning issues with the witness statements, which she said did not meet the requirements of the unless orders, including being unsigned, undated and having no cover pages. She also noted the failure to provide an index of documents for inclusion in the common bundle. She advised that if the claim had not been struck out, the Commissioner had been intending to object to the content of the evidence. Counsel for the Commissioner indicates in her written submissions that any phone call with Mr Lukey concerning these issues took place after these matters had been raised in the email of 20 October 2022, rather than before.
[28] On 27 October 2022, counsel for the Commissioner filed a memorandum with the TRA that stated that the strike out decision could not be recalled because it had been sealed (pursuant to r 11.9 of the District Court Rules). Mr Lukey filed a memorandum later the same day. In it he explained his mistake in not copying in the case manager at the TRA to his email serving the briefs of evidence on the Commissioner. He requested that the strike out decision be recalled. He noted that any deficiencies in the briefs of evidence or the discovery list could be remedied, and it was plainly unfair for Ms Kaur to lose her rights over his error.
[29] A teleconference with the TRA took place on 8 November 2022, at which there was a discussion about whether the strike out decision had in fact been sealed by the TRA. The case manager indicated that it had been automatically sealed before it was sent to the parties.
TRA decision about effect of unless orders
[30] On 9 November 2022, the TRA issued a decision concerning the effect of the unless orders which stated:
[10]I am satisfied that the [Commissioner] is correct, the Authority has no jurisdiction to revisit this matter. The 13 July 2022 order took the standard form of an unless order, it said:
... if [Ms Kaur] fails to comply with either part of the preceding orders and remains in default for three working days, her notice of claim is struck out, and an order will be sealed dismissing the challenge in whole, without further notice.
[11]After the three days, the order was expressed to have the effect of striking out the notice of claim, and the Authority did issue a sealed order dismissing the challenge.
[12]I am satisfied the Authority is now functus officio, and neither DCR
11.3 nor the merits of [Ms Kaur’s] position can alter that. It is a jurisdictional issue. In terms of DCR 11.3 the operative order was made by consent as the outcome of a telephone conference attended by counsel, and the sealing of that order and the consequential order on 19 October 2022 did not infringe DCR 11.3 or DCR 11.9 in relation to recall, to the extent it has a bearing if the Authority is functus officio, excludes sealed orders from recall.
[13]Accordingly, I am satisfied the Authority has no jurisdiction in relation to this matter, as it has made a final dispositive decision.
[14]In these circumstances it is not appropriate to discuss the issues of fairness and justice raised by Counsel for [Ms Kaur], they cannot confer jurisdiction the Authority does not have.
[15]Similarly, given there was a definite failure to file the necessary documents, it is not appropriate to discuss whether the documents [Ms Kaur] did file and the documents she served complied with the order. The [Commissioner] says they did not comply, but it is not appropriate to explore the issue in the absence of jurisdiction.
Issues in the proceedings
The appeal
[31]Ms Kaur’s appeal is brought under s 26A of the TRAA which provides:
(1)Unless subjection (2) applies, the determination by an Authority of a challenge may be appealed to the High Court if—
(a) the amount of tax involved in the appeal is $2,000 or more; or
(b) the amount of net loss involved in the appeal is $4,000 or more.
(2)The determination by an Authority of a challenge may not be appealed to the High Court if the determination was made by the Authority under a tax law that provides for the Authority’s determination to be final.
(3)This section only applies to challenges commenced under Part 8A of the Tax Administration Act 1994.
[32] Thus, the first issue is whether the strike out decision was a determination of Ms Kaur’s challenge. If it was, the strike out decision is subject to appeal under s 26A, and the second issue is then whether the grounds of appeal are made out. The grounds of appeal relied upon by Ms Kaur are that:
(a)the TRA was wrong to strike out the statement of claim and challenge as a whole without first informing Ms Kaur of her non-compliance and/or allowing her an opportunity to be heard;
(b)the TRA was wrong to find that Ms Kaur had failed to provide an explanation for her non-compliance or seek further time, because she was unaware of the non-compliance;
(c)the TRA failed to consider that:
(i)the non-compliance resulted from an unintentional error on behalf of her lawyer (he served the witness statements on the Commissioner but failed to copy the TRA in his service email);
(ii)Ms Kaur personally had no part in the non-compliance;
(iii)there is no prejudice to the Commissioner because he was served with the witness statements in accordance with the timetable;
(iv)Ms Kaur has genuine substantive arguments to pursue as set out in her statement of claim and the challenge;
(v)there was substantial compliance with the unless orders; and
(vi)the overall interests of justice will be served by allowing Ms Kaur to pursue her substantive right to challenge the Commissioner’s decision.
[33]Ms Kaur seeks orders setting aside the decision of the TRA and costs.
Application for judicial review
[34] The third issue is whether the TRA’s decision is reviewable. The Commissioner concedes that if there is no right of appeal, the TRA’s decision is amenable to review.5 If the decision is reviewable, the issue then becomes whether Ms Kaur’s pleaded grounds of review are made out. Ms Kaur pleads in respect of her application for review that:
(a)the TRA’s failure to inquire into the reasons for the non-compliance with the unless orders and/or to allow Ms Kaur an opportunity to comment amount to a breach of natural justice;
(b)the TRA made a mistake of fact as to Ms Kaur’s non-compliance with the unless orders rather than her counsel’s non-compliance;
(c)the TRA failed to take into account relevant considerations (being substantive compliance with the unless orders, that the non-compliance was that of Ms Kaur’s counsel and there was no prejudice suffered by
5 The Commissioner refers to Tannadyce Investments Ltd v Commissioner of Inland Revenue [2011] NZSC 158, [2012] 2 NZLR 153.
the Commissioner and Ms Kaur has substantive arguments to advance);
(d)as a result the TRA was not aware of key facts and proceeded to make the strike out decision on a materially mistaken factual basis;
(e)the strike out decision was substantively unreasonable, and an excessive and disproportionate outcome; and
(f)the TRA made a mistake of law as to the correct approach to r 7.41 of the District Court Rules and strike out more generally.
[35] Ms Kaur seeks that the strike out decision, the sealing decision and the recall decision are quashed and that the claim is remitted to the TRA.
Is the strike out decision a determination from which an appeal lies?
Ms Kaur’s submissions
[36] Mr Darroch, counsel for Ms Kaur, accepts that previous decisions have held that ss 26A (and 26, which is in materially similar terms) do not provide a right of appeal from interlocutory decisions of the TRA, and that the right of appeal under those sections is only from a determination of the substantive challenge.6 He accepts also that a strike out decision is technically interlocutory in nature, but submits that because it has the effect of finally resolving Ms Kaur’s challenge, in a real and practical sense, it is a determination of the substantive challenge.
[37] Mr Darroch submits that such an approach would align with other areas of law relating to appeal rights, noting that strike out decisions are explicitly excluded from the general requirement for leave to appeal an interlocutory decision to the Court of Appeal, pursuant to s 56(4) of the Senior Courts Act 2016. Mr Darroch also referred to the position prior to the enactment of the Senior Courts Act, where the Court of Appeal was considered to have the jurisdiction to entertain an appeal as of right against exceptional interlocutory rulings that “determine or affect rights or liabilities which
6 Jiao v Commissioner of Inland Revenue HC Auckland CIV-2009-404-5397, 15 September 2009; and M & J Wetherill Company Limited & Ors v Taxation Review Authority (2004) CA226/03, 10 November 2004.
are in issue”.7 He submits that the strike out decision in this case is not an ordinary interlocutory decision, and that it represents a substantive conclusion of Ms Kaur’s rights. He says that this is supported by the provision of an appeal right against orders for costs made by the TRA.8
The Commissioner’s submissions
[38] Ms Grierson, for the Commissioner, reiterates that the right of appeal created by ss 26 and 26A is only in relation to the final determination of a challenge or on an objection on its merits. She says that this conclusion in the case law was based upon reasoning that relied upon the wider scheme of the TRAA, and the need to avoid the frustration of objection or challenge proceedings by repeated appeals of interlocutory decisions, which is particularly important in a taxation context. She says, in reliance on Jiao v Commissioner of Inland Revenue, and M & J Wetherill Company Limited v Taxation Review Authority, that the scheme of the TRAA is consistent with a right of appeal being limited to a final decision on the merits.9 Ms Grierson also relies on ss 20(1) and 21A(2) of the TRAA as being consistent with the right of appeal being limited to a final decision on the merits of the objection or challenge.
Discussion
[39] As submitted by Mr Darroch, where a proceeding is struck out by the High Court, pursuant to s 56(4) of the Senior Courts Act, a person has a right of appeal to the Court of Appeal. They are not required to seek leave to appeal. Section 56 of that Act provides:
(3)No appeal, except an appeal under subsection (4), lies from any order or decision of the High Court made on an interlocutory application in respect of any civil proceeding unless leave to appeal to the Court of Appeal is given by the High Court on application made within 20 working days after the date of that order or decision or within any further time that the High Court may allow.
7 Winstone Pulp International v Attorney General (1999) 13 PRNZ 593 at [18]; but see also Siemer v Heron [2011] NZSC 133, [2012] 1 NZLR 309 at [30]–[31].
8 Taxation Review Authorities Act 1994, s 22.
9 See above n 6. The Commissioner also referred to Winstone Pulp International v Attorney General (1999) 13 PRNZ 593 and Association of Dispensing Opticians of New Zealand Inc v Opticians Board [2000] 1 NZLR 158.
(4)Any party to any proceedings may appeal without leave to the Court of Appeal against any order or decision of the High Court—
(a)striking out or dismissing the whole or part of a proceeding, claim, or defence; or
(b)granting summary judgment.
[40] The Senior Courts Bill was originally a part of the Judicature Modernisation Bill and was then split out during its third reading.10 Prior to the Select Committee process for the Judicature Modernisation Bill, subs (3) provided that:11
No appeal lies from an interlocutory order of the High Court in respect of any civil proceeding unless leave to appeal to the Court of Appeal is given by the High Court on application made within 10 working days after the date of the decision being given or within any further time that the High Court may allow.
[41] Subs (3) was amended, and subs (4) was inserted by a recommendation of the Select Committee, following a submission to the Select Committee by Judges of the Supreme Court, Court of Appeal and High Court, which noted:12
Clause 57(3) deals with appeals from interlocutory decisions. It needs to be made clear in this provision that a decision of the High Court on an interlocutory application that has the effect of finally resolving the High Court proceeding (for example, a decision granting summary judgment or striking out a proceeding) is not to be treated as an interlocutory order for the purposes of this clause.13 That would ensure that there is no restriction on the right to appeal for a litigant whose cases are finally resolved by an order made in the High Court, even if that order was made in response to an interlocutory application in the High Court.
[42] The Court of Appeal had previously noted in the context of the High Court’s commercial list that:14
Parties whose proceedings are on the commercial list should be able to determine without difficulty whether they have a right of appeal or must obtain leave. For them the focus should be on the substance of the decision and not on the form of the application. A decision is final and not interlocutory if it constitutes a final disposition of the rights of the parties in the proceeding, whether or not there has been consideration of the substantive merits. In the
10 See (11 October 2016) 717 NZPD 3494.
11 Judicature Modernisation Bill (178-2) (select committee report) at 55–56.
12 Supreme Court, Court of Appeal, and High Court “Submission of the Supreme Court, Court of Appeal, and High Court on the Judicature Modernisation Bill” at [27].
13 The Court of Appeal’s decision in Waterhouse v Contractors Bonding Ltd [2013] NZCA 151, [2013] 3 NZLR 361 at [27] is to this effect, but we consider the Bill should make this clear.
14 Waterhouse v Contractors Bonding Ltd, above n 13, at [33]–[34].
context of commercial list cases, consistency between New Zealand and Australia is also a desirable outcome.
Adopting this approach, a decision granting summary judgment for a plaintiff or a defendant is a final decision because it determines the claim and brings the proceeding to an end. It is not in fact an interlocutory decision, even although it is made after an interlocutory application has been filed.
[43] While it may not be strictly necessary to set out this background detail, it does provide important context for the inclusion of s 56(4), and the reasoning behind it— which accepts that although a strike out decision is technically interlocutory in nature, it does finally determine a proceeding. Given the compelling nature of that reasoning, the real issue in the present case is whether the context of the TRAA justifies a different analysis. Counsel for the Commissioner says that the taxation context requires a different outcome because of the public interest in prompt resolution of tax matters. Mr Darroch does not accept this and relies upon the principles discussed above.
[44] M & J Wetherill Company Limited v Taxation Review Authority was an appeal against a High Court decision declining an application for judicial review, against a refusal by the TRA to sign a case on appeal under s 26 of the TRAA.15 The Court of Appeal did not consider that the appellants had a right of appeal under s 26 of the TRAA.16
[45] In Jiao v Commissioner of Inland Revenue, the appellants sought to appeal a decision of the TRA declining to recall a decision determining a challenge against them.17 The issue was whether the decision declining recall was a decision from which the appellants had a right of appeal pursuant to s 26A.18 As to that issue, Venning J noted the decision in M & J Wetherill Company Ltd, and considered that the TRA’s decision on the recall application was not the determination of the challenge.19
[46] A strike out application is properly regarded as an interlocutory matter. It does not relate (particularly in these circumstances) to the merits of a particular dispute.
15 M & J Wetherill Company Ltd v Taxation Review Authority, above n 6, at [1]. The TRA had granted the Commissioner an extension of time in which to file a case on appeal.
16 At [60].
17 Jiao v Commissioner of Inland Revenue, above n 6.
18 At [4].
19 At [10]–[14].
Nevertheless, the reality is that if a proceeding is struck out it is finally determined. That is equally true in proceedings before the TRA as in proceedings before the High Court. While I accept the Commissioner’s submission that context is important, and that ‘endless interlocutory skirmishes’ should be avoided, I am not convinced that the taxation context requires a different approach to the long-standing and well- established view of the effect of strike out decisions as held by the senior courts.
[47] I consider that the striking out of a challenge by the TRA amounts to a substantive determination of that challenge and therefore comes within the appeal rights contained in s 26A. I do not need to comment on the position in relation to s 26 and I do not do so, other than to observe that the analysis of the Court of Appeal in M & J Wetherill Company Ltd does in part rely on aspects of s 26 that are not repeated in s 26A.
[48] I do not consider that this conclusion is inconsistent with the findings of the Court of Appeal in M & J Wetherill Company Ltd or this Court in Jiao. Both of those cases concerned decisions that could properly be regarded as interlocutory in both form and substance, in that they did not substantively determine an objection or challenge, but rather were procedural. Further, the decisions in those cases make no findings to the effect that a strike out decision in a taxation context should not be regarded as a decision substantively determining an objection or challenge. That a strike out of a proceeding is substantively determinative is instead an established principle present in other areas of the law, from which the taxation context is not sufficiently different, in my view, to warrant a different outcome.
Conclusion
[49] Accordingly, I conclude the strike out decision was a determination of Ms Kaur’s claim. It is therefore able to be the subject of an appeal under s 26A of the TRAA. I now turn to address Ms Kaur’s appeal.
The appeal
Approach to appeal
[50] As submitted by Mr Darroch, an appeal under s 26A is a general appeal, to be determined in accordance with the principles in Austin, Nichols & Co Inc v Stichting Lodestar.20 Ms Kaur has the burden of establishing that the strike out decision is wrong and that the Court should reach a different conclusion. It is for the Court to arrive at its own assessment of the merits of the case.
Relevant law
[51] The powers and functions of the TRA are determined by the TRAA, the Taxation Review Authorities Regulations 1998 (TRAR) and the TAA. To the extent they are not inconsistent with the TRAA, TRAR and TAA, the District Court Rules 2014 apply to the commencement, interlocutory steps and conduct of proceedings in the TRA as if those proceedings were civil proceedings in the District Court.21
[52]Rule 7.41 of the District Court Rules provides that:
Enforcement of interlocutory order
If a party (the party in default) fails to comply with an interlocutory order or any requirement imposed by or under subpart 1 (case management), a Judge may, subject to any express provision of these rules, make an order that the Judge thinks just.
The Judge may, for example, order—
(a)that any pleading of the party in default be struck out in whole or in part:
(b)that judgment be sealed:
(c)that the proceeding be stayed in whole or in part:
(d)that the party in default be fined, ordered to do community work, or committed to prison under section 16 of the Contempt of Court Act 2019:
(e)if any property in dispute is in the possession or control of the party in default, that the property be sequestered:
20 See Dowden v Commissioner of Inland Revenue [2019] NZHC 2729 at [9]; citing Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.
21 Taxation Review Authorities Regulations 1998, reg 4.
(f)that any fund in dispute be paid into court:
(g)the appointment of a receiver of any property or of any fund dispute.
An interlocutory order may only be enforced by an order imposing a fine or community work or by a warrant committing the person to prison in accordance with the requirements of subpart 4 of Part 2 of the Contempt of Court Act 2019.
[53] The parties agree that the leading case on the Court’s ability to excuse non- compliance with an unless order is SM v LFDB.22 In that case, the Court of Appeal set out the following principles:23
(a)As an unless order is an order of last resort, it is properly made only where there is a history of failure to comply with earlier orders.
(b)An unless order should be clear as to its terms. That is, it should specify clearly what is to be done, by when and what is the sanction for non-compliance. That sanction should be proportionate to the default.
(c)The sanction will apply without further order if the party in default does not comply with the order by the time specified. However, the party in default may seek relief by application to the Court.
(d)Justice may require that the party in default be relieved of the consequences of the unless order where the Court is satisfied that the breach resulted from something for which that party should not be held responsible. The party should not assume that belated compliance will suffice.
(e)Where the unless order has been deliberately breached – that is, flouted – it is difficult to conceive of any situation where the interests of justice would require granting the flouter relief from the sanction imposed, notwithstanding belated compliance with the order.
(f)In deciding whether or not to excuse breach of an unless order the question for the Judge is: what does justice demand in the circumstances of this case? Considerations in answering that question include:
(i)The public interest in ensuring that justice is administered without unnecessary delays and costs.
(ii)The interests of the injured party, in particular in terms of delay and wasted cost.
(iii)Any injustice to the defaulting party, although that consideration is likely to carry much less weight in the circumstances than considerations (i) and (ii).
22 SM v LFDB [2014] NZCA 326, [2014] 3 NZLR 494.
23 At [31].
Ms Kaur’s submissions
[54] Mr Darroch, while accepting the unless orders were breached, submits in reliance on SM v LFDB that there are a number of circumstances in which a court should excuse failure to comply with an unless order, instead of striking out a claim or a defence. He notes that the following aspects of a failure to comply are relevant:24
(a)its duration;
(b)its impact upon the progress of the proceedings as a whole;
(c)whether there appears to be any excuse or explanation;
(d)whether it continued after reasonable opportunities and reminders, particularly where the Court has already made a fresh order, or given a warning, due to earlier non-compliance;
(e)whether it has substantially prejudiced the innocent party, whether procedurally or due to some wider impact upon the innocent party's interests and affairs; and
(f)whether there is any realistic expectation that it will be rectified following further opportunity for compliance.
[55] Mr Darroch submits that the Court’s approach to non-compliance is traditionally benevolent, requiring a balance of efficiency and a plaintiff’s legitimate expectation of judgment on the merits. He cites the Court of Appeal’s statement in Parlane v Hayes that:25
To compromise irretrievably a party’s right to a merits judgment for failure to meet some procedural obligation is a serious step that should be taken only when necessary to do justice to the other interests at stake.
[56] As to the explanation for the failure to comply, Mr Darroch submits that generally, a distinction is made where the breach of an unless order has resulted from
24 Smith v Antons Trawling Company Ltd HC Auckland CL40/98, 24 March 2000 at [3]–[5].
25 Parlane v Hayes [2015] NZCA 341 at [31].
something which a party personally should not be held responsible, particularly including counsel error. He referred to Jarden v Lawlor, and Low v Xue.26
[57] Mr Darroch submits that the TRA erred in not investigating the reasons for non-compliance nor reviewing whether the breach might be excused. He says this led the TRA to fail to consider several relevant factors. Mr Darroch submits that in the present case:
(a)there were no reminders or opportunities to rectify non-compliance prior to the strike out decision, notwithstanding that the Commissioner had received the witness statements prior to the due date;
(b)there was no prejudice to the hearing date, as at the time of the strike- out decision, no new hearing date had been allocated;
(c)there was an explanation—that the fault was a result of a mistake made by counsel, rather than Ms Kaur;
(d)there was no history of the flouting of court orders or directions;
(e)there was no prejudice to the Commissioner, who received the witness statements within time; and
(f)non-compliance was rectified as soon as Mr Lukey was made aware of the situation, and the remaining issues about the content of the witness statements and the common bundle index could be resolved without affecting a possible future hearing date.
[58] Mr Darroch emphasises that there were exchanges between counsel as to how to resolve issues about the evidence files, and counsel for the Commissioner did not seek enforcement of the unless order. Mr Darroch submits that a sanction for failing to comply with unless orders must be proportionate to the default, and that strike out
26 Jarden v Lawlor (1998) 12 PRNZ 516; and Low v Xue HC Auckland CIV-2006-404-1863, 29 November 2006.
is the harshest possible sanction. He says that the TRA’s view that any non-compliance would result in strike out was not proportionate to the non-compliance that actually occurred.
[59] Mr Darroch submits that the TRA made procedural and factual errors, by failing to allow Ms Kaur to be heard or take other reasonable steps to ascertain the relevant facts and circumstances before issuing the strike out decision. He says that it would have been straightforward for the TRA to provide an opportunity for comment to be made in the same manner as when the unless orders were drafted, and then sealed. He says if that had occurred, the TRA would have instead made a decision being furnished with all the relevant information. Rather, Mr Lukey remained under the impression that the unless orders had been complied with. Mr Darroch infers from the TRA decision that the effect of the unless orders that the outcome in this case may not have been what was intended. Mr Darroch submits that there is no wilful default by Ms Kaur and that she continues to seek an opportunity to resolve her substantive claim.
[60] As to relief, Mr Darroch submits that I should set aside the strike out decision and direct the TRA to make appropriate case management directions with a view to allocating a hearing date.
The Commissioner’s submissions
[61] Ms Norris submits that the unless orders were made in response to Ms Kaur’s ongoing disregard for timetable orders, and by consent, in circumstances where the parties agreed they were both necessary and appropriate. She notes that the terms of the unless orders were clear, specifying what was to be done, by when, and what sanction would follow for non-compliance. She says therefore that Ms Kaur’s appeal is in essence a challenge to the terms of the unless orders. Ms Norris submits that the consequences of non-compliance applied automatically and did not require any exercise of discretion by the TRA, and thereby prejudice to the Commissioner is not relevant.
[62] Ms Norris submits that there was no error of law or failure to take into account relevant factors by the TRA. She submits that the only relevant matter that the TRA was required to determine was whether Ms Kaur had complied with the terms of the
unless orders. As those orders were not complied with, and no application for relief from them was filed in the TRA, there can be no challenge to them. She says also that in the context of orders that take effect automatically, there was no responsibility upon the TRA to investigate the reasons for non-compliance or whether a breach might be excused.
[63] Consequentially, Ms Norris maintains that there were no procedural errors nor a breach of natural justice, particularly as the unless orders were made by consent and Ms Kaur was on notice of their terms. She says that nor was there a mistake of fact because there was a definitive failure to file the necessary documents, and that the TRA was not required to explore that question.
[64] To the extent that prejudice is relevant, Ms Norris submits that there has been prejudice to the Commissioner, which is ongoing, as Ms Kaur’s non-compliance is the reason that these proceedings were filed. Ms Norris describes the history of this matter as one where Ms Kaur has filed to seriously prosecute her case, to the disadvantage of the Commissioner. She says also that a party is not entitled to rely on errors made by their counsel.27
[65] Ms Norris submits that the effect of the unless orders dated 13 July 2022 is that Ms Kaur’s notice of claim is struck out automatically following the default in compliance with the orders. Ms Norris says those orders must remain in effect. Rather, the real issue is with the sealed order of 19 October 2022 because it is as a result of this order that the TRA has become functus officio. Ms Norris submits that the only relief that the Court should order is that which allows the TRA to recover jurisdiction so that it may deal with any application by Ms Kaur for relief from the automatic striking out of her claim.
[66] Ms Norris refers to Houghton, where the Court of Appeal itself determined the issue of whether non-compliance should be excused.28 However, counsel for all parties in that case consented to the Court taking that approach. Ms Norris emphasises that
27 Hytec Information Systems Ltd v Coventry City Council [1997] 1 WLR 1666 (CA); and Hunter v Attorney-General [2022] NZHC 1890.
28 Houghton v Saunders [2020] NZCA 638 at [82].
the Commissioner does not consent to such an approach in the present case. She also submits that allowing the TRA to deal with any application to be made by Ms Kaur would be consistent with the approach taken by Palmer J in Hunter.29
Discussion
[67] This case is a perhaps unusual scenario because of the combination of Mr Lukey’s mistaken belief that he had complied with the requirements of the unless orders and the effect of the sealed order making the TRA functus officio. The present case is therefore different from both Houghton and Hunter. In Houghton, the Court of Appeal said:30
We consider that where the making of unless orders has not been challenged, and the only issue is whether a failure to comply with such orders should be excused, an application for relief should be made in the High Court rather than by way of appeal to this Court.
[68] The Court then went on to address the request for relief from non-compliance on the basis that the parties consented to that course of action. The above-quoted passage from Houghton indicates that in that case, the High Court was not functus officio. Houghton cannot therefore, in my view, have a bearing on the manner in which this Court assesses what is effectively an application for relief from a decision of a decision maker that is functus officio.
[69] Rule 11.9 of the District Court Rules provides that a Judge may recall a judgment given orally or in writing at any time before a formal record of it is drawn up and sealed. The corollary of this is that once a judgment is sealed, the District Court, or in this case, the TRA, is functus officio. The effect of this rule is that the TRA, having sealed the strike out decision, could not entertain any application for relief from that decision. While there remains some uncertainty as to the ability of the High Court to exercise its inherent jurisdiction to set aside a sealed decision made in the High Court in special circumstances, that is not an issue that arises in this proceeding.31 In
29 Hunter, above n 27at [13]–[16].
30 Houghton v Saunders, above n 28, at [82].
31 See Herron v Wallace [2016] NZHC 2426, (2016) 23 PRNZ 620; Body Corporate 68792 v Lynx Trustees Ltd (in liq) [2022] NZHC 1156; and Slavich v Attorney-General [2020] NZCA 32 at [7].
any event, I am satisfied that the TRA, and the District Court, as creatures of statute, do not have such a jurisdiction.32
[70] As Palmer J recognised in Hunter, where it is possible to seek relief from the effect of a strike out following unless orders, it is appropriate for that relief to be sought from the court (or in this case the TRA) that made the unless orders.33 Here, this is not possible as the TRA’s jurisdiction to act has been removed through the inability of the TRA to recall the sealed order under r 11.9. This explains why Ms Kaur has filed an appeal (and the application for judicial review) in this Court.
[71] I return to the impact of this in my discussion of appropriate relief in this case but now turn to consider as a substantive matter whether it is appropriate for relief to be granted in respect of the unless orders such that Ms Kaur is able to at least attempt continue to pursue her claim against the Commissioner.
[72] A key aspect in this appeal is the impact of counsel error. It was accepted by the parties that there was no basis upon which to suggest that Ms Kaur was personally responsible for non-compliance. Several cases were referred to by counsel. Mr Darroch relied upon Jarden v Lawlor, and Low v Xue.34 Ms Norris relied upon Hytec Information Systems Ltd v Coventry City Council and Hunter v Attorney-
General.35
[73] Jarden v Lawlor involved unless orders made requiring the provision of further particulars, which were not fully complied with, resulting in the striking out of the defendant’s claim. Before the High Court on appeal, it was accepted that the blame for failure to comply was properly laid at the feet of the instructing solicitor, rather than counsel or the defendant. Master Venning (as he then was) confirmed that the Court has inherent jurisdiction to reinstate proceedings that have been struck out for want of
32 See Jones v Accident Compensation Corporation [2022] NZHC 2083 at [30]–[31] and [35]–[36]. Like Muir J in Jones, I consider also that even if this Court could “lend” its inherent jurisdiction to the District Court or the TRA, that it is not seriously arguable that there are sufficiently exceptional circumstances to justify doing so in this case. In any event, this is not an issue that arises in the present matter.
33 Hunter, above n 27, at [15].
34 See above n 26.
35 See above n 27.
compliance with timetable or unless orders and considered the following factors to be relevant:
(a)that the explanation offered, that the instructing solicitors were either overseas or ill was not an adequate explanation, but the failure to comply involved no active contempt;
(b)sufficient particulars were yet to be provided;
(c)there had been no prejudice to other parties apart from general delay;
(d)that it is a “draconian step” to have a claim struck out for failure to comply with procedural orders of the court;36
(e)that if the appeal was not allowed, the defendant would be able to issue fresh proceedings against third parties, thereby leading to further delay and expense; and
(f)that the appeal was filed promptly.
[74] Following consideration of those factors, Master Venning concluded that, by a fine margin, the appeal should be allowed.
[75] In Low v Xue, the defendant had failed to comply with orders made directing the filing and serving of an affidavit of documents, and then in the face of a unless order, served on the plaintiff an unsworn non-complying list of documents. During this time the defendant was terminally ill. After he had died, a second affidavit of documents was sworn by an attorney and filed and served by that attorney. The plaintiff sought to strike out the statement of defence on the basis that the unless order had not been complied with.
36 Jarden, above n 26 at 518.
[76] Doogue AJ indicated that he would have refused to strike out the statement of defence, despite having been the Judge who made the unless orders. In doing so, his Honour had regard to the following factors:
(a)that he had not known the extent of the defendant’s illness at the time the unless orders were made, and that his illness could provide an explanation as to why he was dilatory in his compliance;
(b)that while case management orders are designed to expedite progress in litigation, they must not be permitted to work injustice;37
(c)that something more than simple neglect to comply with an order is what is important;
(d)there was an attempt to comply, albeit a botched one, and the second attempt was similarly imperfect, and that the error had come from the defendant’s solicitors, meaning that it would be unfair to blame the defendant for their failures; and
(e)that the overall picture showed that the defendant had not “contumeliously disregarded his obligations in the matter”.38
[77] Hunter involved repeated failures to comply with orders relating to pleadings, discovery, and briefs of evidence, between May 2016 and November 2021, at which time the statement of claim was struck out by the District Court.39 The plaintiff then appealed to the High Court. Nowhere in Hunter does Palmer J state that a party cannot rely on a failure by counsel to explain non-compliance with an unless order. I consider also that the failure to comply in that case was far more significant than in the present.
[78] Turning then to Hytec Information Systems Ltd v Coventry City Council, in which the Court of Appeal of England and Wales discussed at length the standard of
37 Low v Xue, above n 26 at [9]; citing Bevan-Smith v Reed Publishing (NZ) Limited & Anor
CA85/06, 11 May 2006 at [34].
38 At [18].
39 Hunter, above n 27.
non-compliance that was required in order for a claim to be struck out for non- compliance with unless orders.40 The defendant, the Coventry City Council, appealed against an order striking out their defence for failure to provide further and better particulars, which had been ordered four times. The defendant had provided further particulars which were inadequate, and counsel for the defendant, who had failed to comply with the orders for particulars, did not attend the hearing of the plaintiff’s strike out application, sending in her place her pupil of six months experience, who, being overwhelmed with the complexity of the matter, could do no more than seek an application for an adjournment.
[79] The Judge who struck out the defence considered that the defendant had “behaved in a contumacious manner, apparently taking the view that it was not necessary to serve an intelligible pleading”.41 On appeal against the decision to strike out the defence, Ward LJ addressed “what is the proper test for striking out the proceedings for failure to comply with an ‘unless order’”, and “whether the contumacious conduct of a legal representative is to be held against the client who may be personally blameless for the inadequacies of the preparation of his case”.42 As to the first question, Ward LJ adopted the test proposed in Re Jokai Tea Holdings, being “was the defendants’ failure to comply with the peremptory order properly to be described as showing perverse and obstinate resistance of authority”,43 and also stated:44
1.An unless order is an order of last resort. It is not made unless there is a history of failure to comply with other orders. It is the party’s last chance to put his case in order;
2.Because that was his last chance, a failure to comply will ordinarily result in the sanction being imposed;
3.This sanction is a necessary forensic weapon which the broader interests of justice require to be deployed unless the most compelling reason is advanced to exempt his failure;
4.It seems axiomatic that if a party intentionally or deliberately (if the synonym is preferred), flouts the order then he can expect no mercy;
40 Hytec, above n 27.
41 Hytec, above n 27, at [9].
42 At [12].
43 At [23]; citing Re Jokai Tea Holdings [1992] 1 WLR 1196.
44 At [30].
5.A sufficient exoneration will almost inevitably require that he satisfies the court that something beyond his control has caused his failure to comply with the order;
6.The judge exercises [their] judicial discretion in deciding whether or not to excuse. A discretion judicially exercised on the facts and circumstances of each case on its merits depends on the circumstances of that case; at the core is service to justice;
7.The interest of justice require that justice be shown to the injured party for the procedural inefficiencies caused by the twin scourges of delay and wasted costs. The public interest in the administration of justice to contain those two blights upon it also [weighs] very heavily. Any injustice to the defaulting party, though never to be ignored, cones a long way behind the other two
[80]As to the second question, Ward LJ considered that:45
…there was no binding principle which fettered the broad discretion he had to exercise that a default, whether an act or omission of the litigant’s solicitor, should always be visited on the litigant himself. This is a perfect example of the exigencies of justice coming to do justice in a particular case.
[81] As in Hunter, there is no indication in Hytec Information Systems Ltd v Coventry City Council that a party is not entitled to rely on errors made by their counsel, and I do not consider those cases stand for that proposition. As in Hunter, the extent of non-compliance present in Hytec Information Systems Ltd v Coventry City Council is much greater than in the present case. The approach set out by Ward LJ was described in SM v LFDB as an “excellent statement of principles”,46 and was cited by the Court of Appeal in Anderson v Mainland Beverages Ltd, which was also referred to in SM v LFDB. In sum, I do not accept the Commissioner’s submission that in attempting to provide an explanation for non-compliance with unless orders a party is not entitled to rely on errors made by their counsel. Instead, the approach set out in those cases, and indeed the application of the court’s discretion indicates that counsel failure is a relevant and sometimes determinative factor, as in Jarden v Lawlor, and Low v Xue.
[82] In the present case, the parties accept that Ms Kaur’s non-compliance can properly be laid at the feet of Mr Lukey. He failed to file the relevant evidence (although he did serve it within time), and neglected completely to prepare the
45 Hytec, above n 27, at [33]; referring to Pereira v Beanlands [1996] 3 All ER 528.
46 SM v LFDB, above n 24, at [30].
common bundle index, seemingly believing it was not necessary. The fact that the non- compliance was entirely a result of Mr Lukey’s failures raises the secondary issue of whether it is in the interests of justice for Ms Kaur to suffer for the non-compliance.
[83] I accept that Ms Kaur repeatedly sought extensions to the timetabling orders made by the TRA, but given the surrounding context of settlement discussions, I am reluctant to describe Mr Lukey’s behaviour following the making of the unless orders as showing “perverse and obstinate resistance of authority”. Nor do I consider it to amount to contumacious conduct as contemplated by the case law discussed above. Instead, the failure to include the TRA as a recipient to his email serving the relevant evidence within time was an unfortunate but somewhat understandable error.
[84] I have greater difficulty with Mr Lukey’s failure to prepare the common bundle index as directed. This is especially so considering the clarity of this requirement in the unless orders and the significance of the unless orders to Ms Kaur’s position. In the circumstances, Mr Lukey’s apparent thought that Crown Law would organise the common bundle is a quite inadequate explanation for this failure. Nevertheless, I accept also that in the circumstances, it cannot be a factor that is regarded as resulting in serious delay for the progress of the case, given that at the relevant time, a new hearing date was yet to be allocated, and a common bundle index could have easily been prepared in the remaining time to hearing. Accordingly, I am also reluctant to describe that aspect of Mr Lukey’s non-compliance as showing “perverse and obstinate resistance to authority”, or to find that Mr Lukey has flouted the TRA’s orders.
[85] The public interest in ensuring that justice is administered without unnecessary delays and cost is a primary consideration. Delay and cost has been caused as a result of Mr Lukey’s non-compliance. The orders of the TRA must be ordinarily upheld and respected. However, in light of the fact that no hearing date was allocated as at the time the strike out order was made and sealed, I consider that the delay, cost, and prejudice to the Commissioner caused by the specific non-compliance in the present case can properly be described as limited.
[86] Although any injustice to Ms Kaur is a factor which ordinarily is to bear less weight, I consider that in the present case it bears serious consideration. By reason of Mr Lukey’s failures (and no other reason), Ms Kaur has lost the opportunity to challenge an assessment made by the Commissioner, in respect of a not insignificant liability. There is no evidence that she has been personally responsible for any degree of delay or non-compliance, and she has also engaged in settlement discussions. This is a matter of importance in reaching my conclusion.
[87] Ultimately, I consider that in the circumstances, the interests of justice require, by a fine margin, that Mr Lukey’s failures are not visited upon Ms Kaur, and that it is appropriate to allow her appeal against her claim being struck out. Although Mr Lukey’s failures were serious, he had attempted to comply with part of the unless orders, and the common bundle index was a matter that could have been resolved without delaying the progression of the claim to a hearing. I consider that Ms Kaur should not be prevented from challenging the Commissioner’s assessment of her tax liability as a result.
Relief
[88] Ms Kaur seeks an order setting aside the decision to strike out her statement of claim and dismiss her challenge in whole.
[89] I cannot accept Ms Norris’ submission that it would be appropriate to simply set aside the sealed order and return the matter to the TRA to respond to any application by Ms Kaur for relief from the effect of the unless orders. I consider that in granting the appeal I have found that, in the circumstances, it is appropriate for Ms Kaur to be able to pursue her claim. It would be wrong, then, for me to give the TRA a chance to make that determination when this Court has already made it and has jurisdiction to do so.
The application for judicial review
[90] Given my conclusions above, it is not necessary for me to consider Ms Kaur’s application for judicial review. I note only that the approach set out by the majority of
the Supreme Court in Tannadyce establishes that judicial review in respect of tax disputes is available in only extremely limited circumstances.47
Result
[91] Accordingly, for the reasons above, Ms Kaur’s appeal is allowed and her application for judicial review is dismissed.
[92] I set aside the TRA’s order striking out Ms Kaur’s claim and dismissing her challenge in whole, and direct the TRA to make case management directions to progress Ms Kaur’s claim to hearing.
Costs
[93] I express the preliminary view that costs should lie where they fall, on the basis that although Ms Kaur has succeeded on her appeal, it was her non-compliance with the unless orders that was the instigating feature of this appeal, and she has obtained a significant indulgence from this Court.
[94] Should counsel be unable to agree on costs, they may file memoranda no greater than five pages in length, within ten working days of this judgment, with any replies to be filed within a further five working days. Costs will then be determined on the papers.
McQueen J
Solicitors:
Darroch Forrest, Wellington for Appellant
Crown Law Office, Wellington for Second Respondent
47 See above n 5, at [58]–[61] per Blanchard, Tipping and Gault JJ.
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