Appeal against dismissal of Strike-out Application
2007 case note – plaintiff alleged misfeasance in public office against the CIR regarding the investigation and SFO referral of their investment scheme.
The plaintiff alleged misfeasance in public office against the Commissioner in relation to the tax investigation and SFO referral of the plaintiff's investment scheme. The Commissioner's application to strike out the proceedings was denied by the High Court. He appealed to the Court of Appeal.
This decision relates to an application by the Commissioner 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, 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) filed a claim in the High Court alleging that the Commissioner and his employees exercised their power with an improper motive and with intent to injure the plaintiffs.
The Commissioner applied for an order striking out the proceeding on the grounds that the statement of claim disclosed no reasonable cause of action, and was an abuse of process. The High Court found against the Commissioner as it was not convinced that the plaintiffs claim could not possibly succeed. The Commissioner appealed that decision to the Court of Appeal.
In considering the criminal proceedings first and whether the claim should be struck out as an improper attempt to re-litigate matters already resolved, the Court saw no reason to depart from the strike-out principle that the proceedings must be determined on the basis the of the facts as pleaded in the statement of claim.
In terms of the argument by the Commissioner that the claim was an attempt to bypass a claim of malicious prosecution, the Court considered these were matters which should be addressed at a substantive hearing.
The Court considered that for an application for strike-out to succeed, it needed to be shown that the cause of action on the facts as pleaded, were so untenable that it could not possibly succeed. Therefore, the Commissioner needed to show one or more of the elements of the tort of misfeasance was absent. The Court found there was no question that the Commissioner held public office but conceded the majority of the allegations focused on employees and contractors. However, the Court accepted for the purpose of strike-out the submission by the respondents that the relevant acts were those that caused the injury and that all those acts were exercises of power conferred on the Commissioner. The fact he may have been assisted by employees or agents did not alter that position.
In relation to the element of intention the Court again accepted for strike-out purposes that the Commissioner acted with the motive alleged in the statement of claim. They conceded that whether it in fact was present would be a matter for trial.
On the basis of the allegations pleaded, the Court of Appeal could not say the claim of misfeasance could not possibly succeed, or that it was an abuse of process. They agreed with the High Court that whether the actions were illegitimate and with improper motive were questions that could only be determined at trial.
The Court did however; acknowledge that the claim could face difficulties in establishing the required intention on the part of the Commissioner and his employees and any proximate cause of damage to the respondents.
High Court Rule 186