Commissioner awarded indemnity costs

Summary

The Commissioner was awarded indemnity costs on the basis that some of the Trinity investors acted vexatiously, frivolously, improperly, or unnecessarily in commencing and continuing with their unsuccessful application to debar Crown Law from acting for the Commissioner.

Impact of decision

A further award of indemnity costs represents another success for the Commissioner in the Trinity Scheme litigation. The High Court characterised the taxpayers' unsuccessful application as an attempt to game the system and as an abuse of process justifying indemnity costs.

Facts

The Commissioner of Inland Revenue ("the Commissioner") applied for indemnity costs, or in the alternative increased costs, as a result of the taxpayers' unsuccessful application for orders that Crown Law cease acting as the solicitors for the Commissioner and that no Crown counsel appear as counsel in certain proceedings for the Commissioner.

The taxpayers' original application to debar Crown Law was heard over two days by Justice Woodhouse in the High Court. Justice Woodhouse gave a judgment, Accent Management Limited v Commissioner of Inland Revenue (2011) 25 NZTC 20-022 (HC) (which is currently under appeal) on 22 June 2012 dismissing the taxpayer's application.

Decision

Justice Woodhouse noted the Commissioner's application was pursuant to rule 14.6(4)(a) of the High Court Rules which provides for indemnity costs where a "party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or step in a proceeding".

The Judge noted the circumstances listed by the Court of Appeal in Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 in which indemnity costs had been ordered and noted those which the Commissioner stated applied in this case, being [3]:

1. particular misconduct that causes loss of time to the Court and other parties;
2. commencing or continuing proceedings for some ulterior motive;
3. doing so in wilful disregard of known facts or clearly established law;
4. making allegations which ought never to have been made or unduly prolonging a case by groundless contentions; that is, advancing a hopeless case.

Justice Woodhouse reproduced at length the findings from his substantive judgment, Accent Management Limited v Commissioner of Inland Revenue (2011) 25 NZTC 20-022 (HC) in [4], [45], [53] and [54] including findings at [53] of that judgment:

• ... this application is an attempt to game the system ... it is an attempt to game the system within the statutory procedures .... [T]he taxpayers have not brought this application because of a sincere and well-founded concern that their tax affairs will not be properly adjudicated on, but in an endeavour to cause unjustified difficulties for the Commissioner and to delay resolution of the tax disputes. The attempt to game the system, through the present applications, may be seen from the litigation history.

Further at [54]:

• I am also satisfied that these applications are an abuse of process.

Justice Woodhouse rejected the taxpayers' submissions that the issue of indemnity costs should either be deferred as the original High Court judgment is under appeal or in the alternative that the taxpayers should be able to address the Court on the individual findings which are being appealed and are relevant to this costs application.

The Judge held that deferral would be contrary to principle and general practice of the Courts. Further, the Court of Appeal could address any matter arising from the High Court decision if appropriate and a decision would be consistent with rule 1.2 of the High Court Rules requiring "just, speedy, and inexpensive determination of any proceeding or interlocutory application".

The alternative submission was rejected as it amounted to an application to re-argue matters that had been determined and effectively ignored an order already made.

Justice Woodhouse concluded that the Commissioner was entitled to indemnity costs of $56,184.10 exclusive of goods and services tax plus reasonable disbursements on the basis of his earlier findings in the substantive judgment.