Russell v Commissioner of Inland Revenue

[2015] NZCA 155

IN THE COURT OF APPEAL OF NEW ZEALAND

CA215/2015
[2015] NZCA 155

BETWEEN	JOHN GEORGE RUSSELL Appellant
AND	COMMISSIONER OF INLAND REVENUE Respondent

Court:

Randerson, Miller and Cooper JJ

Counsel:

SRG Judd for Appellant
P H Courtney for Respondent

Judgment:

(On the papers)

8 May 2015 at 3.00 pm

JUDGMENT OF THE COURT

A    The application for interim relief is dismissed. 

BCosts are reserved.

____________________________________________________________________

REASONS OF THE COURT

(Given by Miller J)

1. This judgment responds to Mr Russell’s application for a stay, or interim relief, pending the hearing of his appeal against a judgment of the High Court in which Asher J struck out his application for judicial review of the Commissioner’s decision to refuse to accept a proposal for instalment payments.[1] 

   [1]Russell v Commissioner of Inland Revenue [2015] NZHC 754.

2. The application is brought under r 12 of the Court of Appeal (Civil) Rules 2005, which provides that pending determination of an appeal, the court appealed from or this Court may order a stay or grant interim relief.  No application has been made to the High Court.

3. Mr Russell owes the Commissioner some $367 million in unpaid tax, interest and penalties.  At issue in the judgment under appeal was his liability for the
   1985–2000 years, a total of some $75 million.  He says he cannot meet his obligations but has offered to pay all that he can.  The offer was first made in 2006.  He offered to pay instalments of $1,000 per week for the rest of his life, leaving the Commissioner to pursue any claim for the residue against his estate.  Mr Russell is now aged 78.

4. The Commissioner rejected Mr Russell’s proposal, and a variant under which he offered to pay $150,000, which he would borrow against future earnings.  Her stance is that she does not accept that Mr Russell can pay no more than he has offered.  She wants to pursue bankruptcy proceedings with a view to having the Official Assignee ascertain what assets are available to Mr Russell. 

5. A bankruptcy notice was served on 24 April 2015, shortly after the
   High Court judgment was delivered.  On its expiry on 8 May the Commissioner may commence bankruptcy proceedings in the High Court.  The present application seeks to restrain the Commissioner from commencing any such proceeding.

6. The application for judicial review challenged the Commissioner’s decision to reject Mr Russell’s instalment proposal.  It is said that the Commissioner failed in her duty under s 176 of the Tax Administration Act 1994, to maximise the recovery of outstanding tax and improperly declined to enter an instalment arrangement authorised under s 177B of the Act.  It will be seen that the claim proceeded on the essential factual premise that the Commissioner will recover less through bankruptcy than she would under Mr Russell’s proposal.  Asher J struck the application out, finding all of the grounds untenable and characterising the application as an abuse of process.

7. We are satisfied that the interim relief is not necessary to preserve the applicant’s position, for three reasons.  First, there is no reason to suppose that the High Court will, or must, deal with the application for adjudication in bankruptcy before Mr Russell’s appeal is heard on 24 June 2015. 

8. Second, the Commissioner is correct to say that Mr Russell’s position can be protected in the bankruptcy proceedings.  That Court has jurisdiction to halt the bankruptcy proceeding for such period as it thinks fit.[2]  Its decision whether or not to do so, pending a decision on the appeal, will be better informed than ours.  Mr Russell has pleaded that he has no more to give, and in this proceeding he submits that we must take that allegation as proved.  The High Court is not so constrained.  It will be in a position to manage the bankruptcy proceeding, in which it may hear evidence, so as to allow his claim to be verified, and delay its final decision if it thinks fit. 

   [2]Insolvency Act 2006, s 38.

9. Third, Mr Russell’s position will be no worse should the High Court carry on and determine the Commissioner’s proceeding.  If he is indeed unable to pay more than he has offered, the High Court may refuse an order of adjudication in the exercise of its discretion under s 37 of the Insolvency Act 2006.  And Mr Russell cannot claim to have been disadvantaged should it turn out that the premise of his judicial review application is unfounded. 

10. This last point overlaps with the substantive merits of the appeal.  We take the view that it has weak prospects of success, if only because judicial review is not a suitable forum in which to test Mr Russell’s allegation, on the one hand, that he has no more to give and the Commissioner’s allegation, on the other, that he may have undisclosed means.

11. Finally, we consider that the application for interim relief in this case should properly have been made first in the High Court.  This Court has jurisdiction, but in the absence of any actual urgency, we would have benefited from the High Court’s views.  However, we have dealt with the application on the merits.

12. The application is dismissed.  Costs are reserved.

Solicitors:
Ladbrook Law Ltd, Auckland for Appellant
Crown Law Office, Wellington for Respondent