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19 Apr 2011
Appeal Status

Bias appeal dismissed on the basis of cause of action estoppel

2011 case note - appeal from the High Court for judicial review of the Taxation Review Authority has been dismissed on the basis of cause of action estoppel.

John George Russell v Commissioner of Inland Revenue


An appeal from the High Court for judicial review of the Taxation Review Authority has been dismissed on the basis of cause of action estoppel and any possible bias was cured by the appeal of the substantive case to the High Court.

Impact of decision

The law in the area of bias by a judicial decision maker is reasonably well established since the Saxmere and Muir cases. The law regarding appeal by way of re-hearing is that in Austin Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103; [2008] 2 NZLR 141 at [16].


This was an appeal from the High Court (Cooper J (2009) 24 NZTC 23,284).

The taxpayer was the designer and promoter of the "Russell template" tax avoidance scheme. Additionally his personal tax affairs were subject to reassessment for the years 1985 to 2000 on the basis there was a tax avoidance arrangement. His personal tax affairs have little relationship to the Russell template litigation. The personal assessments have been upheld by the Taxation Review Authority ("TRA") (Case Z19 (2009) 24 NZTC 14,217) and High Court (Wylie J (2010) 24 NZTC 24,463) and are under appeal to the Court of Appeal.

Mr Russell made an application to the TRA prior to the commencement of his personal tax challenge seeking that the TRA Judge (Judge Barber) recuse himself. The Judge considered the application but declined to recuse himself (see Case Z3 (2009) 24 NZTC 14,027). The High Court, on two occasions, reviewed the TRA's decision and affirmed the decision, the last being that before Cooper J.

The taxpayer appealed, arguing that the Judge was actually - albeit unconsciously - biased as a consequence of many years exposure to the Russell template litigation and, if not actually biased, there was the risk of the appearance of bias such that the Judge should have recused himself.

The Commissioner argued there was no actual bias (conscious or unconscious) and no appearance of bias if the test in Saxmere Co Ltd v Wool Board Disestablishment Co [2009] NZSC 72, [2010] 1 NZLR 35 (also Muir v Commissioner of Inland Revenue [2007] NZCA 334; [2007] 3 NZLR 495) was applied.

Additionally it was argued that any risk of actual bias or the appearance of bias was cured by the appellate process which saw the High Court consider the tax assessments and affirm their correctness.

It was also argued that due to the taxpayer abandoning the recusal point in his substantive appeal, he was now cause of action estopped from proceeding with it in this appeal. This operates as follows:

  • ... cause of action estoppel ... prevents a party ... from asserting or denying, as against the other party, the existence of a particular cause of action, the non-existence or existence of which has been determined by a court of competent jurisdiction in previous litigation between the same parties. If the cause of action was determined to exist i.e. judgment was given upon it, it is ... merged in the judgment ... If it is determined not to exist, the unsuccessful plaintiff can no longer assert that it does; he is stopped ... [27]


The Court of Appeal decided that the determination of Mr Russell's tax challenge by the High Court before Wylie J cured any apparent bias in the TRA [3]. The appeal was dismissed.

The Court referred to the appeal of the substantive tax challenge and its hearing before Justice Wylie at the High Court concluding:

  • ... The effect of his rehearing those issues was that he formed his own opinion on them. And he did that, not upon facts which had been found by Judge Barber at the TRA, but upon agreed facts ... It follows that, even if apparent bias affected Judge Barber's decision, and Cooper J erred in holding that Judge Barber was not required to recuse himself, the situation has been cured by the judgment of Wylie J on appeal. Upon undisputed facts Wylie J decided the issues with a fresh mind, unaffected by any suggestion of apparent bias or predetermination. [45]

Additionally the Court thought that Mr Russell would have been cause of action estopped given the fact he did not pursue his bias allegation at the time of the substantive appeal before Wylie J as it was a ground of appeal in that matter but was abandoned by him. But the Court preferred to address the matter in a substantive way [25] to [29], [44].

The Court did not determine the bias issue. They considered there was an arguable case for recusal but because the appeal before Wylie J of the substantive tax challenge was by way of rehearing this cured any suggestion of bias.