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05 Aug 2014
Appeal Status
Not appealed

Appeal against High Court decision awarding indemnity costs to the Commissioner

2014 case note – Court allowed appeal overturning cost judgment, indemnity costs replaced with scale costs – hopeless case, access to justice.

Ben Nevis Forestry Ventures Limited & Ors v Commissioner of Inland Revenue; Redcliffe Forestry Venture Limited & Others v Commissioner of Inland Revenue


The Court allowed the appeal overturning Brewer J's cost judgment in Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue [2013] NZHC 3411 and replaced the indemnity costs awarded in favour of the Commissioner of Inland Revenue ("the Commissioner") with scale costs.

Impact of decision

The Court confirmed the approach in Bradbury v Westpac Banking Corp [2009] NZCA 334, [2009] 3 NZLR 400 ("Bradbury") in determining whether a case for indemnity costs was made out and held that awarding the costs must be consistent with access to justice. Noting timing is a critical factor, what happens between substantive judgment and the costs decision is not relevant to the consideration of awarding indemnity costs.


This appeal relates to the Trinity scheme, which was confirmed as tax avoidance by the Supreme Court in Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2008] NZSC 115, [2009] 2 NZLR 289.

This decision in particular relates to the High Court judgment delivered by Brewer J which awarded indemnity costs to the Commissioner for a proceeding commenced by the appellants which sought to set aside Accent Management Ltd v Commissioner of Inland Revenue (2004) 22 NZTC 19.027 (HC) ("Accent 2004").

In the High Court proceeding, the Commissioner filed a protest to jurisdiction under rule 5.49 of the High Court Rules. This was upheld by Venning J in Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue [2011] 1 NZLR 336 (HC) ("Redcliffe 2010") but subsequently overturned by the Court of Appeal (Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue [2011] NZCA 638, [2012] 2 NZLR 823), on the basis that the rule 5.49 procedure was not the appropriate vehicle for the Commissioner to challenge the application to set aside the Accent 2004 judgment. However, on appeal the Supreme Court reinstated Venning J's judgment (Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd (2012) NZSC 94, [2013] 1 NZLR 804).

Brewer J found that the application to set aside Accent 2004 was hopeless from the outset and amounted to a collateral attack on legal matters that had already been pronounced upon by the Supreme Court. Brewer J relied, amongst other things, on a substantially similar proceeding that was rejected by Keane J in Accent Management Ltd v Commissioner of Inland Revenue (2010) 24 NZTC 24,126.


In addressing the principles governing indemnity costs, the Court first referred to rule 14.6 of the High Court Rules and rule 53E(3) of the Court of Appeal (Civil) Rules 2005, under which a court may award indemnity costs if:

  1. the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or
  2. some other reason exists that justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.

The Court considered Bradbury, the leading case on indemnity costs, where the Court noted that access to justice is a fundamental right, and listed non-exhaustive categories in which indemnity costs have been ordered. These included "making allegations which ought to never have been made or unduly prolonging a case by making groundless contentions, summarised in French J's 'hopeless case' test".

The Court noted that the reference to the "hopeless case" test is an observation made by French J (J Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (WA Branch) (No 2) (1993) 46 IR 301 (FCA)) who relied on an earlier decision of Woodward J (Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 (FCA)) where he found that if a case is truly hopeless, the action must be presumed to have been commenced for some ulterior motive.

The Court, pointing out the long delay (almost four years) between the judgment in Redcliffe 2010 and Brewer J's decision, considered that what happened after Redcliffe 2010 was decided could not have a bearing on the appropriate award of costs in Redcliffe 2010 itself.

The Court also found Keane J's judgment was not relevant to the determination of costs for Redcliffe 2010 as Keane J's decision was reserved and had not been delivered when the statement of claim for Redcliffe 2010 was filed.

The Court rejected the appellants' argument that if their case was hopeless, it meant that the Court of Appeal's decision reversing Redcliffe 2010 was a hopeless decision; pointing out the Court of Appeal only considered the Commissioner's jurisdictional argument, not the merits of the underlying proceeding.

The Court went on to find that while it accepted the existence of serial attacks on the decision of the Supreme Court in Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2008] NZSC 115, [2009] NZLR 289, indemnity costs could not be awarded in relation to Redcliffe 2010 which was at the beginning of the series of proceedings. It stated this was a case where a claim failed after due consideration, rather than one which was so hopeless that it should never have been brought in the first place. The Court also noted that awarding indemnity costs would not be consistent with access to justice, a consideration the court identified in Bradbury.

The Court held that Brewer J was wrong in taking into account subsequent litigation involving the appellants and others, and allowed the appeal substituting an award of costs on a 2C basis, plus disbursements.

In relation to the costs in this matter, the Court awarded to the appellants collectively one set of scale costs reduced by 50 per cent of the costs payable for a standard appeal in recognition that the appeal was heard on the papers in conjunction with a number of other appeals.

High Court Rules, Court of Appeal (Civil) Rules