IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-0006 [2013] NZHC 1447

IN THE MATTER OF	A Decision of the High Court as a deemed hearing authority dated 20 December 2004

BETWEEN	ACCENT MANAGEMENT LIMITED Plaintiff

AND	THE ATTORNEY-GENERAL OF NEW ZEALAND
First Defendant

AND	THE COMMISSIONER OF INLAND REVENUE
Second Defendant

Hearing:	6 June 2013

Appearances:	G A Muir for the Plaintiff
B Brown QC and R L Roff for the Defendants

Judgment:	17 June 2013

RESERVED JUDGMENT OF PRIESTLEY J

This judgment was delivered by me on Monday 17 June 2013 at 12.00 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date:………………………….

Solicitors:
G A Muir, Muir Law, Auckland
B Brown QC, Wellington
R L Roff, Crown Law, Wellington

ACCENT MANAGEMENT LIMITED v THE ATTORNEY-GENERAL OF NEW ZEALAND [2013] NZHC
1447 [17 June 2013]

Introduction

[1]	The defendants have properly raised as a threshold issue whether this Court has jurisdiction to entertain and determine the plaintiff’s statement of claim.  Rule
5.49 of the High Court Rules has been invoked.

The claim

[2]	The plaintiff’s amended statement of claim pleads two causes of action.  The first seeks to set aside a High Court judgment delivered by Venning J in December
2004.1     The pleading alleges the High Court,  as a “deemed hearing authority”,

purportedly exercised powers under s 138P of the Tax Administration Act 1994 (the

TAA) but made orders which were of no effect.

[3]       The second cause of action seeks declarations that, by the same judgment, the

High Court exceeded the jurisdiction and powers conferred on it by ss 138B and

138P of the TAA.

[4]       As will become apparent from the following brief narrative, the judgment of Venning J which the plaintiff seeks to set aside was unsuccessfully appealed to the Court of Appeal,2  and subsequently upheld by the Supreme Court.3   Thus the relief the plaintiff seeks 8½ years later, to have a judgment which has been scrutinised by two  appellate  courts  set  aside  and  declared  to  be  in  excess  of  this  Court’s jurisdiction,  is  startling.     Indeed,  in  terms  of  any  conventional  analysis,  the
proposition is preposterous.  This issue lies at the heart of the defendants’ protest to

jurisdiction.

Background

[5]	The briefest of backgrounds will suffice.   The plaintiff, and indeed a large number of other taxpayers, were investors participating in a syndicate designed to

1	Accent Management Ltd & Ors v Commissioner of Inland Revenue (2004) 22 NZTC 19,027 (HC).
2	Accent Management Ltd & Commissioner of Inland Revenue [2007] NZCA 230, (2007) 23
NZTC 21,323 (CA).
3	Under the name Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2008] NZSC 115, [2009] 2 NZLR 289 (SC), and an addendum at [2009] 2 NZLR 358.

carry out a forestry business on land indirectly owned by Trinity Foundation Charitable Trust.  Silviculture was probably of secondary interest to the taxpayers. The  scheme’s  primary  attraction  was  that  its  structure  purportedly  provided taxpayers with the opportunity to claim substantial write-offs.

[6]       It is unnecessary to discuss the detail of the taxation arrangements and their ultimate fate.   Suffice to say that in its 2008 judgment4 the Supreme Court unanimously held the scheme was a tax avoidance arrangement and as such, all taxpayers who had benefitted from it could be subject to corrective adjustments by the Commissioner.  Similar conclusions had been reached by Venning J four years earlier.5

[7]       During  the  course  of  argument  before  the  Supreme  Court  the  current plaintiff’s then counsel6  attempted to change the grounds of the appeal.  This issue purportedly lies at the heart of the plaintiff’s current proceedings.  At the outset, the taxpayers’ deductions had been claimed under subpart EG of the Income Tax Act
1994 for the 1997 and 1998 tax years.  During the course of submissions, counsel for the plaintiff submitted that, in fact, the taxpayers’ deductions should have been claimed under subpart  EH of the statute to which,  as  a matter of construction, subpart EG would have to yield.

[8]       The Supreme Court refused to hear this new argument.   In its judgment it dealt with matters this way:7

[149]    Mr Gudsell QC, on behalf of Accent Management Ltd, endeavoured to persuade us to entertain a new point raised for the first time in this Court. After hearing submissions from him and Mr White, the Court ruled that the new point  could not be taken nor could any subsidiary point, based on acceptance of the primary one. We indicated that our reasons would be given later. These reasons now follow.

[150]    In   summary,   Accent   Management   wished   to   argue   that   the agreement to grant the licence and options was an agreement for sale and purchase of property and fell within para (b) of the definition of financial arrangement in s EZ 45 of the Income Tax Act 2004. The agreement was

4	Ibid.
5	Above n1.
6	Although the appellant before the Supreme Court was Ben Nevis Forestry Ventures Ltd, the current plaintiff, along with others, was also an appellant.
7	Ibid, judgment of Tipping, McGrath, and Gault JJ.

said to constitute a deferred property settlement because payment was not made in full at the time when the first right in the specified property was transferred. This represented an attempt to have deduction and spreading issues  determined  in  accordance  with  Subpart  EZ  of  the  2004  Act,  or Subpart EH of the 1994 Act as it then was.

[151]    We declined to accept this line of argument as it had not been raised at any earlier stage of the proceeding. It cannot be said that the grounds upon which leave was granted to appeal to this Court contemplated or authorised the argument. Hence the first basis of our declining to consider it was the simple one that leave had not been granted to raise the point and it would not be appropriate to give leave at the hearing in the face of the Commissioner’s understandable opposition. The more is this so because the proposed new point was contradictory of the stance previously taken by Accent Management and inconsistent with the claimed deductions, the Commissioner’s objections to which are being challenged in these proceedings.

Subsequent attempts by plaintiff to circumvent Supreme Court judgment

[9]       In the wake of the Supreme Court’s judgment the plaintiff was involved in two further High Court proceedings.  The first was an attempt by the plaintiff to seek judicial review, challenging the validity of tax assessments made against it and six co-investors.  Keane J struck out the proceeding and stated:8

[106]    Accent’s present review challenge relies, moreover, on a proposition that it could easily have advanced from the outset.  But that proposition is antithetical to the deduction Accent actually sought and defended until the hearing in the Supreme Court.  Accent only advances it now because of the adverse  decisions it  has  suffered  in  this  Court  and on  appeal.   And  its challenge now has to be a collateral attack not just on the two assessments, deemed by statute to be correct and valid, but on the three decisions vindicating their correctness.  In all of these senses it constitutes an abuse of process and must be struck out.

[10]     This judgment was not appealed.  Ultimately Keane J awarded costs against the plaintiff on an indemnity basis.9

[11]     Secondly and more pertinent was an application involving Accent and other litigants seeking to have Venning J’s 2004 judgment set aside on the basis that first, the judgment had been obtained by fraud on the part of the Commissioner, and
secondly, that there was no lawful basis for the Commissioner’s assessments to be

8	Accent Management Ltd v Commissioner of Inland Revenue (2010) 24 NZTC 24,126 (HC).
9	Accent Management Ltd v Commissioner of Inland Revenue (2011) 25 NZTC 20-022 (HC).

confirmed by the High Court.  In Redcliffe Forestry Venture Ltd v Commissioner of

Inland Revenue Ltd10 Venning J dismissed the application.

[12]     Venning J held, inter alia, that the High Court had no jurisdiction to recall its earlier judgment and that effectively, as a trial court, it was functus officio.  He also observed:

[62]      Mr Forbes submitted that, in the present case, by failing to apply subpart EH to assessment of the licence premium, the Commissioner did not comply with the statutory requirements and, accordingly, the assessments, the challenge proceedings based on those assessments and, consequently, the judgment of this court on the challenge proceedings were all nullities.  The line of reasoning would not end there.  Logically, on his argument the Court of Appeal and Supreme Court judgments would also be nullities, as appeals from a nullity.

...

[70]      The last Court to rule on the validity of the assessment, and the findings of this Court and the Court of Appeal that the plaintiffs’ actions amounted to tax avoidance, was the Supreme Court.  If the plaintiffs are right and the process has been flawed because at law there was no valid assessment and therefore no valid decisions of this Court (and logically the Court of Appeal and Supreme Court), the Supreme Court must be the proper Court to determine that particular submission as the last superior Court to have dealt with the matter. A superior court has inherent jurisdiction to reopen an appeal where there may have been an unfair process in order to avoid a possible injustice: Saxmere Company Ltd v Wool Board Disestablishment Company Ltd.11

[13]     When holding the High Court had no jurisdiction to entertain Redcliffe’s and Accent’s claims, Venning J had before him, as do I, a protest to jurisdiction by the Commissioner under r 5.49.

[14]     Undeterred, Redcliffe appealed.  The Court of Appeal reinstated Redcliffe’s claim  in  the  High  Court,  taking  the  view  that,  rather  than  invoking  the  r 5.49 jurisdiction,   the   Commissioner   instead   should   have   relied   on   a   strike   out
application.12

10	Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue Ltd [2011] 1 NZLR 336 (HC).
11	Ibid. Footnotes omitted.
12	Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue Ltd [2011] NZCA 638, [2012]
2 NZLR 823 (CA).

[15]     Once again the Supreme Court granted leave, and in its judgment reversed the Court of Appeal upholding (for the second time involving these parties in that forum) the judgment of Venning J.13

[16]     The  Supreme  Court’s  judgment  was  unanimous.    Relevant  both  to  this

extraordinarily repetitive litigation and to r 5.49 the Supreme Court said:

[36]      The legal premise of the statement of claim is that in calculating certain expenditure incurred by participants in the Trinity scheme, the Commissioner was required to apply subpart EH of the Income Tax Act, rather than the depreciation allowance provisions of subpart EG, which were applied by the Commissioner in making the relevant assessments.

...

[40]      Redcliffe’s allegation of fraud rests on two propositions:

(a)	the true legal position was that the case was governed by subpart EH8; and

(b)	this  was  dishonestly  concealed  from  the  Court  by  the
Commissioner.

Put in this  way,  it  is  clear that  Redcliffe,  in  proposition (a), is directly challenging the conclusions of this Court on matters of law which it was competent to address. This is not a case which rests on an allegation of fraud involving perjury or dishonest suppression of evidence bearing on findings of fact which were the primary responsibility of the High Court as the trial court.

[41]      As we have said, the High Court is best placed to determine any subsequent issue of whether the evidence on which a final judgment in the case was based is tainted by fraud, so that the judgment must be set aside and a new trial ordered. That is not, however, the position where the error allegedly induced by fraud is one of law. It is well-established that the High Court has no power to recall or set aside judgments on questions of law which have been the subject of appellate decision. As Mr Brown submitted for the Commissioner, echoing the words of Jessel MR already cited, were the position otherwise, the High Court would be able to overturn the decision of a court on appeal from its judgment on the content of the law.

...

[44] The nullity contention rests on two propositions:

(a)	The true legal position was that the case was governed by subpart EH; and

13	Commissioner of Inland Revenue Ltd v Redcliffe Forestry Venture Ltd [2012] NZSC 94, [2013] 1
NZLR 804 (SC).

(b)	The   failure   to   apply   it   deprived   the   High   Court   of jurisdiction to confirm the assessment.

Proposition (a) is of course the proposition that underpinned the allegation of fraud.  It  is  subject  to  the  same  objection  as  we  have  identified  in  that context,  namely it is challenging conclusions of this Court, on a matter of law, which it was competent to address. For the reasons previously given, the High Court has no power to recall or set aside its judgment on the questions of law which have been the subject of appellate decision.

[45]      In this appeal Redcliffe’s error in commencing a fresh proceeding in the High Court on the correctness of the legal conclusions of the Supreme Court  is  one  that  goes  to  the  High  Court’s  jurisdiction  because  what Redcliffe alleges does not constitute a case capable of leading the High Court to set aside the 2004 judgment. The High Court accordingly lacks jurisdiction to determine whether the Supreme Court’s legal conclusions in Ben Nevis were wrong and for this reason Redcliffe’s proceeding must be dismissed.14

[17]     Relevant to r 5.49 and the Court of Appeal’s approach the Supreme Court

observed at [23]:

[23]      Because it erroneously saw the present case as being on all fours with Doug Hood Ltd, the Court of Appeal did not come to address this argument.  Had it done so, it would almost certainly have recognised that the Commissioner’s objection to the High Court’s jurisdiction falls within one of the categories of cases to which, on the test which the Court of Appeal had itself formulated, r 5.49 applied.  The Commissioner asserts that Redcliffe’s challenge to the High Court’s 2004 judgment cannot be determined by the High Court; it can only be determined by the Supreme Court.   That is because Redcliffe is challenging the correctness in law of that Court’s judgment.   The Commissioner’s application is accordingly directed to the competence of the High Court to decide the dispute, which was held in Doug Hood Ltd to be a proper function of r 5.49.15

Discussion

[18]     In [45] of Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd16 the Supreme Court, in a pronouncement which is both binding and unassailable, stated that the High Court lacks jurisdiction to decide whether the Supreme Court’s legal conclusions in Ben Nevis were wrong.  What Accent is endeavouring to do in this proceeding is raise, yet again, its argument based on subpart EH of the Income Tax Act 1994 as a platform to do precisely what the Supreme Court states cannot be
done.   The current attack is on the validity of Venning J’s 2004 judgment, which

14	Ibid. Footnotes omitted.
15	Ibid. Footnotes omitted.
16	Supra [16].

Accent seeks both to set aside and have declared an invalidity on jurisdictional or statutory grounds.

[19]     Rule 5.49 relevantly states:

5.49	Appearance and objection to jurisdiction

(1)        A defendant who objects to the jurisdiction of the court to hear and determine the proceeding may, within the time allowed for filing a statement  of  defence  and instead  of  so  doing,  file and  serve  an appearance stating the defendant’s objection and the grounds for it.

(2)        The  filing  and  serving  of  an  appearance  does  not  operate  as  a submission to the jurisdiction of the court.

(3)        A defendant who has filed an appearance may apply to the court to dismiss  the  proceeding  on  the  ground  that  the  court  has  no jurisdiction to hear and determine it.

(4)	The court hearing an application under subclause (3) must,—

(a)        if  it  is  satisfied  that  it  has  no  jurisdiction  to  hear  and determine the proceeding, dismiss the proceeding;

...

(6)	The court hearing that application must,—

(a)        if it is satisfied that it has jurisdiction to hear and determine the proceeding, set aside the appearance; but

(b)        if  it  is  satisfied  that  it  has  no  jurisdiction  to  hear  and determine the proceeding, dismiss both the application and the proceeding.

...

[20]     If the High Court, as a result of the 2004 and 2010 judgments of Venning J is functus  officio,  and  if  indeed,  as  the  Supreme  Court  states  this  Court  lacks jurisdiction to determine whether the Supreme Court’s legal conclusions in  Ben Nevis were wrong, then inevitably the r 5.49 application is well founded.  This Court would have no jurisdiction whatsoever to determine Accent’s current proceeding.

[21]     Mr Muir endeavoured to circumvent such a conclusion with a number of submissions.  He claimed that Venning J’s 2004 judgment, in terms of the TAA, was effectively the judgment of a hearing authority which could thus be revisited.   He submitted  that  the  current  proceeding  was  not  a  collateral  attack  on  previous

decisions of appellate courts.    Rather the proceeding raised fundamental constitutional issues including unlawfulness enshrined in legislation which flowed from the 1688 Glorious Revolution.  It was unlawful to impose any tax on a citizen without express Parliamentary authority.  He referred to Sovereign Assurance Co Ltd v CIR,17  a decision of Dobson J, which asserted that subpart EH of the TAA had primacy over subpart EG.  Accent’s attack was directed at the validity of the Commissioner’s assessment.   Venning J, in 2004, was essentially sitting as an administrative tribunal.   Thus the High Court, exercising its general supervisory
powers, was entitled to set aside a judgment which, for jurisdictional reasons, was flawed.

[22]     It  was  inappropriate,  submitted  Mr  Muir,  for  the  fate  of  71  pending challenges to assessments to be influenced by flawed jurisprudence.  The essential inquiry must always be what lawful taxation obligations the revenue statutes impose. The primacy of subpart EH effectively led to the “hearing authority” (Venning J) imposing a taxation liability which Parliament had prohibited.

[23]     Finally, Mr Muir appealed to the Court’s inherent jurisdiction, submitting I was entitled to ensure that another “tribunal” even if a High Court Judge, did not exceed the jurisdiction conferred by Parliament.

[24]     In general support of these propositions counsel referred me to Tannadyce Investments Ltd v Commissioner of Inland Revenue.18   With regard to that Supreme Court authority I accept Mr Brown QC’s submission there is nothing in Tannadyce which would justify a conclusion that this Court has jurisdiction to review, set aside, or declare invalid the 2004 judgment of Venning J which Mr Muir seeks, yet again, to attack.

Result

[25]     I am totally satisfied that the plaintiff’s proceeding represents a collateral

attack on not one but two judgments of the Supreme Court.

17	Sovereign Assurance Co Ltd v CIR [2012] NZHC 1760 (HC).
18	Tannadyce Investments Ltd v Commissioner of Inland Revenue [2011] NZSC 158, (2011) 25
NZTC 20-103 (SC).

[26]     I see the statement of claim as an impermissible attack on Venning J’s 2004 judgment.   I am equally satisfied, on the basis of the Supreme Court’s analysis in both  its  judgments,  that  this  Court  is  functus  officio  and  lacks  jurisdiction  to entertain the relief sought in the plaintiff ’s statement of claim.  Thus r 5.49(4)(a) is directly engaged.

[27]     For these reasons, and pursuant to the same rule, the plaintiff’s proceeding is

dismissed.

[28]     If, for some other taxpayer, an application of subpart EH might have led to a different result in respect of either the Trinity tax avoidance scheme or some comparable scheme, then it might be open to an appellate court or the Supreme Court to reach a different conclusion.  But the plaintiff has no such prospect.

Costs

[29]     Mr Brown QC, in his submission, seeks indemnity costs.  Mr Muir accepted a liability for 2B costs should the defendants succeed.  He resisted indemnity costs on the  basis  that  other  challenges  to  Trinity  scheme  investors’  assessments  were pending.

[30]     I see this proceeding as being untenable at the outset.   On the basis of the Supreme Court’s recent judgment in Commissioner of Inland Revenue v Redcliffe Forestry  Venture  Ltd,19   the  defendants’ protest  to  jurisdiction,  on  any  objective analysis, must have succeeded.

[31]     I note that in a related proceeding, Muir v Judicial Conduct Commissioner,20

Goddard J said of a complaint lodged with the Judicial Conduct Commissioner against Venning J:

[170]    It is beyond question that the Trinity litigation is at an end and the plaintiffs have exhausted all appeal rights in relation to Accent Management v  Commissioner  of  Inland  Revenue.53  It  is  not  clear  however  that  the plaintiffs accept there has been a final determination at the highest level on the Trinity Scheme.

19	Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd [2013] 1 NZLR 804.
20	Muir v Judicial Conduct Commissioner [2013] NZHC 989.

...

[189]    In summary, the plaintiffs’ complaints are all founded on the same premise of collusion and bias.  They are a continuing allegation of unlawful conduct by the Judge that was first levelled in 2006.  I have no difficulty in concluding that the complaints are in substance and effect a further attempt to impugn the decision in Accent Management v Commissioner of Inland Revenue and thus are a collateral attack on that judgment and an abuse of both the judicial complaints procedure and the High Court’s supervisory jurisdiction.

[32]     I see this proceeding and the plaintiff’s resistance to the r 5.49 application in a similar light.   The plaintiff has exhausted its appellate pathways, not once but twice.  Its persistence is untenable.

[33]     Accordingly I order the plaintiff is to pay the reasonable indemnity costs and disbursements of the second defendant from the outset of this proceeding to my dismissing it.

.......................................…
Priestley J