Application of High Court orders stayed by Court of Appeal
2009 case note – CIR successful in staying the application of orders made in the High Court pending resolution of appeal to the Court of Appeal – costs.
The Commissioner was successful in staying the application of orders made in the High Court pending resolution of his appeal to the Court of Appeal.
Impact of decision
This is an interlocutory step in a protracted litigation with the taxpayers.
The case highlights that the mere fact an appeal has been lodged does not stay the effect of any orders a lower court may have made: this requires a formal stay application.
Also of note is the Court's concern as to the solvency of the taxpayers when the costs were being considered. In the absence of clear evidence of solvency in the advent the Commissioner's appeal succeeds, the balance was in favour of staying the payment of costs to the taxpayers. This factor seems to create an evidential onus upon the taxpayer (in this case) to prove their solvency if costs are subject to an application for a stay.
At the High Court the taxpayers were successful in a judicial review against the Commissioner and in gaining a substantial award of costs payable to them by the Commissioner (see: Chesterfield Preschools Ltd v CIR (2009) 24 NZTC 23,148 and Chesterfield Preschools Ltd v CIR (2009) 24 NZTC 23,504). These cases were the result of an earlier judicial review: see (2007) 23 NZTC 21,125.
The Commissioner applied to the Court of Appeal to stay the application of both the substantive decision and the costs decision. The taxpayer opposed the application. The Commissioner had earlier obtained an interim stay of the judgments, pending a fully argued case upon the application before the Court of Appeal.
Before the Court of Appeal the Commissioner argued that:
The taxpayer opposed this arguing (as summarised by the Court):
 Secondly, the respondents submit that the Commissioner's appeals would not be rendered nugatory because Ms Sisson's undertaking gives sufficient security for the Commissioner.
 Thirdly, Mr Hampton emphasises that the Commissioner did not appeal against the first judgment. The judicial review appeal is, he submits, a back-door means of challenging the Judge's original findings which were not appealed.
 Finally, Mr Hampton says the various factors were appropriately considered by Fogarty J in the Judge's decision declining a stay and there is no good reason for this Court to take a different view."
The Court of Appeal granted the stays sought by the Commissioner.
In granting the stays the Court applied the test found in Duncan v Osborne Buildings Ltd (1992) 6 PRNZ 85 which requires the Court to balance the competing rights of the party who obtained the judgment appealed from, and the benefits of that judgment, against the need to preserve the appellant's position against the event of the appeal succeeding.
The considerations, in granting a stay, required to be taken into account are found in New Zealand Insulators Ltd v ABB Ltd (2006) 18 PRNZ 459 at .
Despite some reservations regarding the effect of delay upon the taxpayers' financial position, the Court accepted the Commissioner's submission that the lack of a stay would force him to take statutory steps (under the High Court decisions) which could not be reversed and thus render the appeal pointless:
The Court also accepted that the apparent insolvency of the taxpayers meant the costs judgment should also be stayed saying;
Court of Appeal (Civil) Rules