Issued
2011
Decision
08 Jul 2011
Appeal Status
No right of appeal

Court declines to use the "slip rule"

2011 case note – The purpose of the 'slip rule' to correct errors but not to be lightly invoked and not used in this instance - Slip rule, Russell, tax avoidance.

Case
NTH Douglas and Others v Commissioner of Inland Revenue
Legal terms
Slip rule, Russell, tax avoidance

Summary

Justice Courtney considered the purpose of the "slip rule" was to correct errors but that it was not to be lightly invoked as it would weaken the finality of a judgment and was not used in this instance.

Impact of decision

Although this was a judgment (in the Commissioner's favour) in the ongoing Russell template litigation, it is a useful precedent on the application of the "slip rule" under the High Court Rules.

Facts

The taxpayers were involved in the Russell template avoidance scheme. They were considered by the Commissioner to be engaged in tax avoidance and assessed accordingly. The taxpayers challenged the assessments by tax objections and judicial review but the various reviews and appeals to and from the Taxation Review Authority ("TRA") did nothing to alter the conclusion of tax avoidance.

Due to the prolonged period of the litigation, when the appeal was dismissed by the High Court, the Judge ordered the Commissioner to file and serve affidavits annexing the original cases stated for the various individual taxpayers involved at the same time as he sought to seal the final judgments (see Douglas v CIR (2009) 24 NZTC 23,331).

The Commissioner filed the required affidavits when seeking to seal his judgments but, due to an error, did not serve the affidavits on the taxpayers' agent (Mr Russell) until the same time as he served the sealed judgments.

The taxpayers made an application that the judgments had been sealed in error and could not be relied upon by any person. The application was made relying upon the "slip rule" of the High Court Rule:

  • Correction of accidental slip or omission
    1. A judgment or order may be corrected by the court or the Registrar who made it, if it -
      1. contains a clerical mistake or an error arising from an accidental slip or omission, whether or not made by an officer of the court; or
      2. is drawn up so that it does not express what was decided and intended.
    2. The correction may be made by the court or the Registrar, as the case may be, -
      1. on its or his or her own initiative; or
      2. on an interlocutory application.

Decision

Justice Courtney considered the purpose of the "slip rule" was to correct errors but that it was not to be lightly invoked as it would weaken the finality of a judgment. While acknowledging the Commissioner had acted in error, Her Honour was not satisfied the "slip rule" should be invoked. She concluded that while there was a requirement to serve the affidavits, it was not intended to give the taxpayers further rights of challenge.

Although unfortunate that the affidavits were not served prior to sealing of the judgments, it would make no difference to the taxpayers' position and the sealed orders were not contrary to the judgment reached. Thus the Court declined to invalidate the sealed orders.

High Court Rules