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19 Dec 2006
Appeal Status
Not appealed

Strike-out application

2006 case note - plaintiff alleged misfeasance in public office against CIR following tax investigation and Serious Fraud Office referral of their investment scheme.

J A Reid & Others v The Commissioner of Inland Revenue


The plaintiff alleged misfeasance in public office against the Commissioner in relation to the tax investigation and Serious Fraud Office referral of the plaintiff's investment scheme.


This decision relates to an application by the Commissioner of Inland Revenue to strike out the plaintiffs' proceedings.

The proceedings in question relate to the Digi-Tech and NZIL investments promoted by the plaintiffs in the mid-1990s. The Commissioner investigated the transactions and made a referral to the Serious Fraud Office (SFO), which then prosecuted the plaintiffs on two counts of conspiracy to defraud the public and the Commissioner. The case was heard in 2004 and the plaintiffs were acquitted. The plaintiffs have filed proceedings against the Commissioner claiming damages for the tort of misfeasance in a public office.

The plaintiffs (in the substantive proceeding) claim that the Commissioner and his employees exercised their power with an improper motive, with intent to injure the plaintiffs.

The Commissioner applied for an order striking out the proceeding on the grounds that the statement of claim discloses no reasonable cause of action and is an abuse of process.


Counsel for the Commissioner argued that the plaintiffs' claim could not possibly succeed, because the Commissioner cannot be vicariously liable for acts done by his subordinates as they are employed by the Crown, not the Commissioner. Plaintiffs' Counsel argued that the Commissioner is directly liable, not vicariously liable.

Counsel for the Commissioner further argued that the employees of the Commissioner do not hold "public office", which is a requirement for the tort. In addition, it was submitted that the alleged actions were not "in the exercise of public office" which is another requirement.

A further ground advanced by the Commissioner's Counsel was that the alleged improper motive (to encourage investors to concede their tax disputes and to deter promoters in comparable investment schemes) was intra vires, so could not found the tort. Counsel for the plaintiffs submitted that the "improper motive" lay in the means by which the Commissioner sought to encourage investors to concede disputes and to deter promoters in other schemes, and referred to sections 6(2)(a),(b) and (f) of the TAA.

The Commissioner's final argument was that the claim was really one of malicious prosecution and could not be brought against the Commissioner as it was the SFO which prosecuted the plaintiffs. This was refuted by the plaintiffs.

Andrews J was not sufficiently convinced by any of the Commissioner's arguments that the plaintiffs' claim could not possibly succeed, as this was a very high test for the applicant to meet. The application was dismissed.

High Court Rule 186