Russell v Commissioner of Inland Revenue CA18/05
[2006] NZCA 381
•28 February 2006
IN THE COURT OF APPEAL OF NEW ZEALAND
CA18/05
CA271/05
BETWEEN JOHN GEORGE RUSSELL Appellant
ANDTHE COMMISSIONER OF INLAND REVENUE
First Respondent
ANDTAXATION REVIEW AUTHORITY Second Respondent
Hearing: 13 February 2006
Court: William Young P, Potter and Rodney Hansen JJ Counsel: G J Judd QC for Appellant
M J Ruffin for First Respondent
Judgment: 28 February 2006
JUDGMENT OF THE COURT
AThe application for leave to appeal out of time made necessary by the deemed abandonment under r 43 of the Court of Appeal (Civil) Rules
2005 of a timely appeal is dismissed. Leave to appeal is refused on the basis that the proposed appeal was pointless and would in any event inevitably fail.
BThe appellant is ordered to pay the first respondent costs of $3,000 together with usual disbursements.
RUSSELL V THE COMMISSIONER OF INLAND REVENUE & ANOR CA CA18/05 28 February 2006
REASONS
(Given by William Young P)
Introduction
[1] This is an application by Mr John Russell for leave to appeal out of time from a judgment delivered by Keane J on 16 December 2004 staying the prosecution of one of three causes of action in judicial review proceedings brought by Mr Russell against the Commissioner of Inland Revenue. The present application is a sequel to the deemed abandonment under r 43 of the Court of Appeal (Civil) Rules 2005 of an earlier, timely, appeal which Mr Russell filed against that judgment.
How the first appeal came to be abandoned
[2] Mr Russell’s first appeal against the judgment of Keane J was filed and served in early February 2005.
[3] The Court of Appeal (Civil) Rules 2005 (“the 2005 Rules”) came into effect on 1 May 2005. Because Mr Russell’s appeal was then on foot it became subject to the 2005 Rules.
[4] Rule 43 of the 2005 Rules provides:
43 Appeal abandoned if not pursued
(1) An appeal is to be treated as having been abandoned if the appellant does not apply for the allocation of a hearing date and file the case on appeal within 6 months after the appeal is brought.
(2) The Court, on application, may—
(a) grant an extension of the period referred to in subclause (1);
and
(b) grant 1 or more further extensions of any extended period.
(3) An application for the grant of an extension may be made before the expiry of the period to which the application relates or within 3 months after that expiry; but no extension may be granted on an application that is made later than 3 months after that expiry.
(4) This rule overrides rules 5(2) and 6.
Rules 5(2) and 6 provide generally for extension of time and the effect of non-compliance with the 2005 Rules.
[5] A broadly similar regime applied under r 10 of the Court of Appeal (Civil) Rules 1997 (“the 1997 Rules”). As to the corresponding position under the
1997 Rules, see Airwork (NZ) Ltd v Vertical Flight Management Ltd [1999] 1 NZLR
29. Mr Russell’s position has not been prejudiced by the coming into effect of the
2005 Rules.
[6] In any event, the time for lodging a case on appeal expired in July. The three month period within which an application may be made for an extension of time expired in early November 2005. The case on appeal was not lodged until late November 2005. Accordingly, Mr Russell’s appeal is deemed to have been abandoned.
Is it open to Mr Russell to seek leave to appeal against the original decision notwithstanding the deemed abandonment of the first appeal?
[7] Neither the 1997 nor the 2005 Rules provide that an appeal which has been abandoned is deemed to be dismissed (cf the position in relation to criminal appeals discussed in R v Curtis CA288/04 17 February 2005). In those circumstances, Mr Judd QC, for Mr Russell, argued that there can be no objection in principle to an appellant whose appeal has been subject to a deemed abandonment under r 43 seeking and obtaining leave to appeal against the original decision out of time.
[8] Mr Ruffin, for the Commissioner, did not take any jurisdictional point. In those circumstances, we are prepared to accept that there is jurisdiction to grant leave to appeal notwithstanding the deemed abandonment of the first appeal.
Leave to appeal – general considerations
[9] There can be no doubt that Mr Russell’s non-compliance with r 43 was due to inadvertence on the part of his counsel. Throughout, Mr Russell has been endeavouring to have his appeal determined and failure to comply with r 43 was simply an oversight. As well, there has been no prejudice to the Commissioner associated with Mr Russell’s non-conformity with r 43. These considerations provide a reasonably auspicious (from the point of view of Mr Russell) context in which we must determine the application for leave to appeal.
[10] On the other hand, Mr Russell’s non-conformity with r 43 and his resulting need for leave to appeal out of time means that his ability to challenge the judgment of 16 December 2004 requires the exercise by this Court of a positive discretion. The factors which are relevant to the exercise of that discretion include the question whether the proposed appeal is genuinely arguable. Also relevant, in our view, is the allied question whether there is any practical point to the proposed appeal.
The underlying issues between the parties
[11] By assessments dated 24 September 1996 the Commissioner assessed Mr Russell for the 1985 – 1995 tax years. Because these assessments were made prior to 1 October 1996 they were not subject to the new dispute resolution procedures provided by Part 4A of the Tax Administration Act 1994. Mr Russell duly lodged objections to the assessments in November 1996. The Commissioner did not, at any stage, formally determine those objections. But on 20 November
2000 the Commissioner issued a NOPA (ie under the new dispute resolution process) in relation to the 1985 – 2000 years. In this NOPA the Commissioner proposed, inter alia, to reverse the 1996 assessments. In his response Mr Russell accepted that those assessments should, indeed, be reversed.
[12] Since then, two parallel processes have been underway: the first involving a continued focus by Mr Russell on the 1996 assessments and the second a
continuation of the statutory procedure initiated by the Commissioner’s NOPA
issued in November 2000.
[13] The first of these processes started in July 2001 when Mr Russell purported to require the Commissioner to state a case to the Taxation Review Authority in relation to his objections to the 1996 assessments. The Commissioner, without accepting that he was under any obligation to do so, filed what was described as a “protective case stated”. The Taxation Review Authority subsequently upheld the Commissioner’s position as to jurisdiction and, in particular, concluded that as the objections to the 1996 assessments had not been finally determined, it had no jurisdiction to determine the case stated, see Case W8 (2003) 21 NZTC 11,063. Mr Russell subsequently appealed to the High Court against the decision of the Taxation Review Authority but, after that appeal was filed, subsequently chose to issue review proceedings.
[14] In his statement of claim in the review proceedings Mr Russell pleaded three causes of action:
(a) The first cause of action challenged the legal validity of the
1996 assessments relying on the absence of appropriate delegated authorities vested in the individual officers who made the key decisions associated with those assessments.
(b)The second cause of action alleged that the effect of s 134 of the Tax Administration Act 1994 and reg 22 of the Taxation Review Authorities Regulations 1998 is that the Taxation Review Authority was required to direct the Commissioner to allow Mr Russell’s objections.
(c) The third cause of action challenged a particular finding of fact made by the Taxation Review Authority as to when a points of objection notice reached the Commissioner of Inland Revenue’s litigation management unit.
The second and third causes of action are only of peripheral significance in the present context. The judgment of Keane J which is now under appeal involves only the first cause of action.
[15] The second of the two processes referred to in [12] above led to what we will call the January 2003 assessments against Mr Russell in relation to the 1985 - 2000 tax years, assessments which Mr Russell has now directly challenged in proceedings before the Taxation Review Authority (“the challenge proceedings”). The primary issues between the parties (which relate to the taxation obligations of Mr Russell in respect of the 1985 - 2000 tax years) will be determined in the challenge proceedings.
The judgment of Keane J
[16] The application which gave rise to the judgment under appeal was by the Commissioner who sought to have the first cause of action in the review proceedings struck out as an abuse of process or stayed until the challenge proceedings are determined by the Taxation Review Authority.
[17] Keane J duly stayed the first cause of action. His reasons for doing so were as follows:
[33] Taken in isolation, Mr Russell’s first cause of action raises fairly arguable points as to the due exercise of statutory powers by the Commissioner’s officers, of a kind usually susceptible of review, and does not warrant being struck out. It should, however, I consider, be stayed until after Mr Russell’s challenge to the January 2003 assessments have been resolved by the Taxation Review Authority, and any appeal heard.
[34] The Taxation Review Authority is the forum within which the validity of assessments, and the process by which they are made, is presumptively first to be determined: New Zealand Wool Board v Commissioner of Inland Revenue [1997] 2 NZLR 6 (CA); Dandelion Investments Limited v CIR (2003) 21 NZTC 18,010; Russell v Taxation Review Authority (2003) 21 NZTC 18,255 (CA).
[35] In the Wool Board case Richardson P said, at 14, in the second of six reasons he gave to support that conclusion:
… the statutory objection procedure has primacy. Judicial review is not excluded, but it is to be regarded as a collateral process directed solely at the validity of the procedure followed by the Commissioner. Hence, it may
not impinge upon the matters which may properly fall for consideration in the course of the statutory objection procedure. Judicial review is to be reserved for the exceptional cases where the alleged abuse of power or unfairness cannot be resolved in the context of that procedure. To my mind the primacy of the statutory procedure is eroded if a proceeding for judicial review is permitted to continue ahead of the statutory procedure.
[36] Richardson P went on to say:
Compelling reasons should be required before the Court is prepared to depart from the principle that judicial review will be appropriate only in rare or exceptional cases. Put another way, the primacy of the statutory objection procedure should not be lightly diluted for what are essentially procedural considerations.
[37] Is this case in that exceptional category? On one view a want of delegated authority in a process of assessment may be no more than procedural. On another, it may go to the validity of the decision taken. But whether it is the one or the other is best decided, I consider, once the case stated procedure is complete.
[38] In this case also there is a distinct issue whether the 1996 assessment continues to matter. Mr Russell may argue that the validity of the 2003 assessment depends on the 1996 assessment also being valid. The Commissioner will contend that the 2003 assessment stands on its own two feet. That too is best considered first, I think, by the Taxation Review Authority.
[39] If, after that process is complete, including any appeal, there remains any issue about the validity of the 1996 assessment, which could have any actual effect, this Court will be able to consider it on this review, without complicating the case stated process. A stay does not deprive Mr Russell of a forum, if the point has some residual merit.
Is there any point to the proposed appeal?
[18] Section 27 of the Income Tax Act 1976 (which applies to the 1996 assessments) was in these terms:
27 Assessments Deemed Correct Except In Proceedings On
Objection
Except in proceedings on objection to an assessment under Part 3 of this Act, no assessment made by the Commissioner shall be disputed in any Court or in any proceedings (including proceedings before a Taxation Review Authority) either on the ground that the person so assessed is not a taxpayer or on any other ground; and, except as aforesaid, every such assessment and all the particulars thereof shall be conclusively deemed and taken to be correct, and the liability of the person so assessed shall be determined accordingly.
[19] On the face of it, Mr Russell’s challenge to the 1996 assessments via the first cause of action in his review proceedings is inconsistent with this section. Mr Judd for Mr Russell reminded us that s 27 has been held not to exclude absolutely rights of review in relation to the procedures and decisions of the Commissioner. But, as the decision of this Court in New Zealand Wool Board v Commissioner of Inland Revenue [1997] 2 NZLR 6 makes clear, resort to judicial review in the High Court is very much the exception.
[20] In the course of the hearing before us we pressed Mr Judd to identify the substantive point of the proposed appeal.
[21] Mr Judd’s initial response was along these lines. He wishes to argue that the January 2003 assessments were arrived at by the Commissioner in breach of the what he described as the “BASF principle”, see BASF New Zealand Ltd v Commissioner of Inland Revenue (1995) 17 NZTC 12,136 (HC). He spent some time explaining how this particular argument would work in the circumstances of the present case. But eventually he accepted that Mr Russell’s ability to prosecute the challenge proceedings and his reliance on the BASF principle will not be advanced by establishing in the High Court that the 1996 assessments were invalid. Likewise he acknowledged that Mr Russell’s position in the challenge proceedings will not be hindered by an inability to prosecute an appeal in this Court against the judgment of Keane J.
[22] Mr Judd’s final position was that Mr Russell’s entitlement, as he saw it, to challenge the 1996 assessments is justified by access to justice considerations.
[23] We take a different view. The resources of the legal system should be addressed to the determination of real controversies. The issues raised by Mr Russell as to the validity of the 1996 assessments do not give rise to such a controversy. The Commissioner does not seek to rely on those assessments. Their validity or otherwise is irrelevant in the determination of the primary issues between the parties which are the subject of the challenge proceedings. The mootness of the first cause of action in the review proceedings is underlined by the reality that as long ago as January 2001 the Commissioner and Mr Russell had reached a limited consensus
that the 1996 assessments should be reversed. It follows that there is no point in the claim for a declaration that the 1996 assessments are invalid. That pointlessness and the provisions of s 27 of the Income Tax Act mean that the prosecution of that claim is an abuse of process. Accordingly the proposed appeal would undoubtedly fail and, in any event, there is no practical point to be served by allowing it to be argued.
Result
[24] We decline leave to appeal. We order Mr Russell to pay the Commissioner costs of $3,000 together with usual disbursements.
Solicitors:
Warburton Solicitors, Auckland for Appellant
Meredith Connell, Auckland for First Respondent
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