Issued
2012
Decision
12 Jun 2012
Appeal Status
Appealed

Sufficient argument to decline strike-out

2012 case note - sufficient argument to decline strike-out - Judicial review, tort of misfeasance, public official, failure to act.

Case
Chesterfield Preschools Limited & Others v the Commissioner of Inland Revenue & Others
Legal terms
Judicial review, application to strike out, tort of misfeasance, public official, failure to act

Summary

A review of an earlier decision not to strike out a misfeasance claim against the Commissioner and others resulted in the strike-out again being declined. It was held that it was arguable the Commissioner can be liable for the tort of misfeasance; a failure to act can be misfeasance; and that the cause of action against a Crown Solicitor who had given advice should be allowed.

Impact of decision

The decision confirms the reluctance of the court to "strike out" a tort of misfeasance claim on purely technical grounds when a plaintiff shows that there may be some wrongful exercise of power by a public official. The decision of the Judge also indicates there is an issue regarding whether or not the misfeasance needs to be performed by a named individual and the extent to which others acting for public officials can be included in the claim.

Facts

Chesterfield Preschools Limited and other parties associated with Mr David Hampton ("Mr Hampton") have been involved in a number of tax disputes and litigation against the Commissioner for a number of years. This case involves a claim of misfeasance against the Commissioner and other officials, and the Crown Solicitor from Christchurch. It relates to the alleged actions of a number of persons who represented the Commissioner when dealing with Mr Hampton and the associated entities. Most of the persons involved performed independent roles, for example, debt officer, investigator or manager.

The basis of the allegation is that the Commissioner "knowingly or recklessly" allowed penalties to accumulate and to spiral out of control over an extraordinary number of years (1993 to 2006). It is also alleged that severe hardship and damage occurred because of delay or refusal to address complaints. Furthermore, immediate enforcement of debt and the use of seizure powers without respite were used to intentionally cause harm to the plaintiff.

An initial strike-out application was heard by an Associate Judge who, in his judgment of 5 August 2011, found against the Commissioner on the basis that:

  1. it is arguable that the Commissioner can be liable in the tort of misfeasance vicariously even though there is no evidence that he had made the relevant decisions, CIR v Reid [2007] NZCA 576 at [33];
  2. failure to act can be a misfeasance;
  3. the tort exists to protect those who are vulnerable to the wrongful exercise of a public officer's powers or functions;
  4. the Commissioner's management of the plaintiffs' goods and services tax (GST), and tax positions generally, were arguably part of the exercise of public office in this case. Whether they were in fact so, and whether the conduct was tortious, was a matter properly for trial;
  5. the cause of action against the Crown Solicitor (who had given advice) was allowed following New Zealand Defence Force v Berryman [2008] NZCA 392.

A review was made by the Crown against the decision of the Associate Judge on the basis that:

  1. the claim alleged "corporate responsibility" and the tort attached to conduct by individuals; and
  2. there was no basis for concluding the Crown Solicitor exercised the power of public office as he is advising and not the holder of a power.

Decision

The decision of the Associate Judge not to strike out the proceedings was correct. Consistent failure to exercise powers can be an abuse of statutory power [53].

There is room to argue for a development of the tort of misfeasance to encompass a failure to act by a class [57].

It is too early to decide the action must fail before the facts are proved.

High Court Rules