Musuku v Commissioner of Inland Revenue
[2017] NZCA 144
•28 April 2017 at 3.00 pm
| IN THE COURT OF APPEAL OF NEW ZEALAND |
| CA631/2016 [2017] NZCA 144 |
| BETWEEN | JAWAHAR BHASKAR MUSUKU |
| AND | COMMISSIONER OF INLAND REVENUE |
| Counsel: | G J Thwaite for Appellant |
Judgment: (On the papers) | 28 April 2017 at 3.00 pm |
JUDGMENT OF BROWN J
(Review of Registrar’s decision)
AThe application to review the Deputy Registrar’s decision declining to dispense with security for costs is declined.
BThe appellant is to pay the sum of $6,600 by way of security for costs within 20 working days of this decision.
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REASONS
Introduction
On 22 March 2017 Mr Musuku sought review of a decision of Deputy Registrar McGrath under r 7(2) of the Court of Appeal (Civil) Rules 2005 (the Rules). The decision of the Deputy Registrar dated 8 March 2017 declined Mr Musuku’s application to dispense with security for costs in his appeal.
The appeal itself is against a decision of Associate Judge Doogue in the High Court dated 17 November 2016 in which he adjudicated Mr Musuku bankrupt.[1]
[1]Commissioner of Inland Revenue v Musuku [2016] NZHC 2773.
Security for costs will not be dispensed with except where it is right to require the respondent to respond to an appeal brought by an impecunious appellant without the usual protection for costs provided by security.[2] Where the appeal is one that would not be pursued by a sensible, solvent litigant, there will be no basis for dispensing with security for costs.[3]
Review
[2]Reekie v Attorney-General [2014] NZSC 63, [2014] 1 NZLR 737 at [21] and [31].
[3]At [35].
Mr Thwaite’s submission for Mr Musuku commenced by emphasising that the review function of a judge in relation to security for costs is to be exercised de novo.[4] His argument involved two distinct heads.
[4]At [23].
Mr Thwaite first contended that the Insolvency Act 2006 neuters the provisions in the Rules requiring security for costs on appeal as it prevents an appellant placing his or her funds in the Court. Hence it was submitted that the requirement for security for costs is inapplicable in bankruptcy.
However as French J recently observed in Harrison v Harrison, while s 414 of the Insolvency Act confers a right of appeal it does not exempt an appellant from being required to pay security for costs which is a normal incident of bringing an appeal.[5] Access to justice issues may arise if an appellant is impecunious but the fact that an appellant is adjudicated bankrupt does not automatically mean that the appellant is impecunious.
[5]Harrison v Harrison [2017] NZCA 67 at [12].
In the alternative Mr Thwaite argued that on normal principles security should be dispensed with in this appeal. Observing that impecuniosity appears to be a de facto requirement, he submitted that a bankrupt is by status impecunious and that the available evidence, provided in Mr Musuku’s letter of 25 August 2016 prior to adjudication, was that he could obtain funds from his family but only if all his liability was fully compromised.
It is for an appellant to demonstrate impecuniosity. The Deputy Registrar commenced her decision by recording that Mr Musuku had applied for security for costs to be dispensed with or reduced on the grounds that:
(a)the appeal involves fundamental issues of the rule of law and of the propriety of the conduct of the Commissioner of Inland Revenue (the Commissioner) in terms of the Tax Administration Act 1994; and
(b)it was in the public interest for the appeal to proceed so that the conduct of the Commissioner did not escape judicial scrutiny.
The Deputy Registrar noted that, unlike most applications for dispensation, Mr Musuku had not raised impecuniosity as a ground in his application.
Noting the observations of Associate Judge Doogue in the judgment under appeal,[6] the Deputy Registrar recorded that there was no evidence that Mr Musuku was unable to pay the amount set as security. While recognising that his funds might be restricted as a consequence of his bankruptcy, there was no information about the extent to which that was so, nor as to other sources of financial assistance such as family members or trusts. She was therefore unable to conclude that Mr Musuku was unable to pay security for costs. I can discern no error in the Deputy Registrar’s analysis and I agree with her conclusion on the evidence before her. No additional evidence has been provided which would warrant my reaching a different conclusion on this issue.
[6]Commissioner of Inland Revenue v Musuku, above n 1, at [22].
With reference to the merits of the appeal no challenge was made to the findings that Mr Musuku owed a debt to the respondent and that an act of bankruptcy had been committed by the appellant’s failure to respond to the bankruptcy notice. The focus of the appeal is on the refusal to exercise the discretion in s 37 of the Insolvency Act to refuse to make an order for adjudication.
Mr Thwaite submitted that the exercise of the discretion was open to challenge under the May v May principles,[7] outlining the basis for the contention that the Associate Judge had acted on a wrong principle, had not taken into account relevant matters and had taken into account irrelevant matters. He also contended that the judgment was plainly wrong. He further argued that the appeal was reasonable on the basis of a cost/benefit analysis.
[7]May v May (1982) 1 NZFLR 165 (CA) at 170.
While the Deputy Registrar accepted that if his appeal succeeded Mr Musuku would regain control over his assets and that potential benefits to him might follow which would outweigh the potential costs of the appeal, she assessed the merit of his wide-ranging grounds of appeal as slim. She concluded in this way:
[35] Although the potential benefits of this appeal to Mr Musuku may exceed the potential costs, the appeal has slim merits and raises no significant issues of public interest. Further, and importantly, it seems that Mr Musuku is able to pay security for costs.
[36] Taken together, I am not convinced that these circumstances are exceptional, so as to justify departure from the norm. In my view, it would not be right to require the Commissioner to defend the appeal without the usual amount of security for her costs.
Having considered the several points advanced for Mr Musuku by Mr Thwaite, I agree with the Deputy Registrar’s assessment. Neither the merits of the appeal nor any public interest consideration warrants a dispensation from the requirement to provide security for the respondent’s costs.
Result
The application for review of the Deputy Registrar’s decision declining to dispense with security for costs is declined. Security for costs of $6,600 is to be paid within 20 working days of this decision.
Solicitors:
Abraham Lincoln Chambers, Auckland for Appellant
Crown Law Office, Wellington for Respondent
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