SC 43/2007
[2008] NZSC 6
BETWEEN BEN NEVIS FORESTRY VENTURES
LIMITED AND ORS
Appellants
AND COMMISSIONER OF INLAND
REVENUE
Respondent
SC 44/2007
BETWEEN ACCENT MANAGEMENT LIMITED
AND ORS
Appellants
AND COMMISSIONER OF INLAND
REVENUE
Respondent
Hearing: 8 February 2008
Court: Elias CJ, Tipping and McGrath JJ
Counsel: R B Stewart QC (by video link) and G J Harley for Appellants in
SC43/2007
C T Gudsell QC for Appellants (by video link) in SC44/2007
D J White QC and R J Ellis for Respondent
Judgment: 19 February 2008
JUDGMENT OF THE COURT ON ADJOURNMENT APPLICATION
[1] The fixture for 3 March for the hearing of the appeals is
vacated and the hearing is adjourned to 23 June.
[2] The appellants’ submissions are to be filed and served by
11 April and the respondent’s submissions are to be filed
and served by 15 May.
[3] Counsel may exceed the page limit prescribed by the
Rules, if they think it necessary.
[4] The appellants in SC 43/2007 are to pay to the respondent
costs on the application in the sum of $3,000.
REASONS
[1] The application by the Ben Nevis appellants for adjournment of their appeal,
set down for hearing on 3 March 2008, was heard by us on 8 February. At the
hearing, the application was opposed by the Commissioner but supported by the
Accent Management appellants. At the conclusion of argument we announced that
the application was granted and the fixture adjourned to 23 June, for reasons to be
given in writing later. We made the further directions as to time-tabling and
submissions on the substantive appeal, formally recorded above. We now give our
reasons for granting the adjournment.
[2] The proceedings which give rise to the appeal have been acknowledged to be
in the nature of a test case. They concern the liability for tax of investors in a
forestry scheme. The taxpayers who bring the present appeal were found in the
lower Courts not to be entitled to claim substantial tax deductions as investors in
Trinity Foundation (Services No 3) Ltd for the 1997 tax year. The liability of
investors in two other companies set up under the same scheme is still to be
determined but will clearly be affected by the consideration of principle in the
present appeal. Some 170 taxpayers are affected. Assessments of tax and penalties
amounting to some $300 million is at stake in respect of the Trinity cases. The court
proceedings challenging the assessments in respect of investments made through
Trinity Foundation (Services No 3) Ltd have been underway since 2002. The
taxpayers were granted leave to appeal to this Court on 9 October 2007. In addition
to the implications for those involved with the Trinity schemes, the case is said to
raise issues which are relevant to other litigation about similar structured finance
arrangements, including another appeal to this Court and a substantial trial due to
begin in the High Court later in the year. It is clearly desirable that the appeal be
heard as soon as is practicable. After leave to appeal was granted on 9 October, the
Registrar of the Court attempted to set a fixture for hearing the appeal.
[3] Under Rule 32 of the Supreme Court Rules the Registrar is obliged to consult
with counsel before allocating a fixture but the agreement of counsel is not required
by the Rule. Although the Registrar should try wherever he reasonably can to
accommodate the preferences of each counsel, it may not be possible to do so and
also meet the interests of other parties and the public interest in the orderly despatch
of the work of the Court. Where there are a number of different parties, separately
represented, finding a fixture that suits all may be impossible without unacceptable
delay. That difficulty should not have arisen in relation to the present case, where
there are two appeals only and a common respondent. The Registrar apparently felt
he should consult separately with each of the three counsel retained in respect of the
Ben Nevis appellants, Mr Carruthers QC, Mr Stewart QC, and Mr Harley. Each of
them had other fixtures which did not coincide and which made it difficult for the
Registrar to find a five-day fixture which suited all during the months of February
and March.
[4] After proposing a number of weeks in February and March on which the Court
could hear the appeal, and after canvassing the views of counsel during November,
the Registrar allocated a fixture for 12 February, a date he had ascertained was
suitable for senior counsel for all parties. The notice elicited a prompt response from
Mr Stewart that he and Mr Harley were engaged in a five day trial in Auckland that
week. An application for adjournment made on 12 December was granted
unopposed on 17 December.
[5] In a notice to the parties dated 17 December advising them of the adjournment,
the Registrar fixed the hearing of the appeal for the week of 3 March. He had
ascertained that this date was suitable for Mr Carruthers for Ben Nevis and
Mr Gudsell QC for Accent. At the time the fixture was notified, however, the
Registrar knew from separate advice he had received from Mr Stewart that the date
clashed with a further hearing in which he was counsel in the High Court at
Auckland. The fixture was made by the Registrar on the basis, referred to in his
notice to the parties, that it was a date on which “the majority” of counsel were
available.
[6] It was not until 17 January that Mr Stewart filed an application for further
adjournment. Nor had he earlier notified counsel for the Commissioner or the Court
that such application was contemplated. Without notice that an adjournment would
be sought, counsel for the Commissioner proceeded over the summer period with
preparation for the hearing on 3 March. They were in a position to proceed with the
fixture. In the meantime, it seems that counsel for the appellants took no steps to
prepare for the hearing. Both failed to file their submissions on 1 February, as
required by the Rules.
[7] The principal reason advanced by counsel for the Ben Nevis parties in a
memorandum in support of their application for adjournment of the fixture was
Mr Stewart’s conflicting fixture in the High Court on 3 March. In addition, it was
said that counsel for the Ben Nevis parties had been unable to confer about
preparation for the hearing or division of argument among themselves because of:
the summer vacation; other fixtures to which Mr Stewart was committed in
December, February and March (including the February fixture which had
occasioned the first adjournment and which also involved Mr Harley); and
Mr Carruthers’s involvement in a settlement of High Court proceedings. The
principal ground put forward in support of the adjournment application was
substantially a reassertion of the fact of the March fixture, a circumstance the
Registrar had clearly considered could not be accommodated if a timely fixture was
to be set. No indication was given in the memorandum that there had been any
attempt to meet the fixture notified on 17 December. At the hearing of the
adjournment application Mr Stewart explained that he considered his obligations to
his clients precluded his withdrawing from the cases which clashed with the appeal.
No doubt the imminence of the Christmas vacation added to the pressure.
[8] There is no adequate explanation of why prompt application for adjournment
was not made following receipt of the notice of fixture on 17 December. Although
Mr Stewart was engaged in another hearing until 20 December, it is hard to accept
that he or other counsel for the Ben Nevis parties could not have made immediate
application. It is harder still to accept that informal advice could not have been
immediately given of intention to apply for an adjournment both to the Court and to
counsel for the Commissioner. Indeed, at the hearing Mr Stewart accepted criticism
of the failure to take these steps.
[9] The overall effect is that the Court has been presented with something of a fait
accompli. It does not question counsel’s claim that the appeal is not ready to
proceed and cannot be properly prepared in the time between now and 3 March. The
appellants, in a case of the highest importance to them, would clearly be prejudiced.
Moreover, the case raises matters of substantial public importance on which the
Court is entitled to expect submissions which are well-prepared from counsel who
are on top of their arguments. Since counsel say they cannot be ready, we
considered that in this case it was in the interests of justice for the fixture to be
vacated.
[10] There are a number of unsatisfactory aspects about the course of events. The
adjournment in the present case is ultimately necessary not because the Ben Nevis
parties could not be adequately represented in the absence of Mr Stewart by counsel
already engaged, but because on the date we heard the application all counsel for the
Ben Nevis parties were insufficiently prepared. Once leave had been granted, the
parties and their counsel had no reason to defer preparation for hearing until they
were notified of a fixture date. It is hard to understand why, in a case of such major
importance for the parties and when counsel have already had to address the scope of
the appeal in the leave hearing, preparation for the substantive appeal is not further
advanced. All parties have been aware that the Registrar has been endeavouring to
set down the appeal since leave was granted, more than four months ago. It is
unsatisfactory, too, that the Registrar seems to have been expected to consult about
the fixture separately with all counsel who have the joint conduct of one appeal. Nor
can counsel expect that the preferences of all counsel in the matter of a fixture must
be accommodated. It would, however, be unreasonable to impose a fixture without
notice adequate to allow counsel and the parties to adjust other commitments,
including by relinquishing briefs. In most cases three months notice should be more
than sufficient. If counsel cannot meet a fixture allocated on this basis, it will
usually be necessary for other counsel to be instructed.
[11] Although the adequacy of the notice in this case has to be considered in the
context of the complexity of the litigation and the intervention of the long vacation,
those circumstances themselves made it incumbent on counsel to make prompt
application for adjournment. Counsel for the Ben Nevis parties took it upon
themselves to defer preparation for the hearing despite the notice of the fixture. That
unilateral decision made it inevitable in this case that an adjournment would have to
be acceded to, in the interests of justice.
[12] It was not disputed at the hearing that costs should be paid to the respondent on
the application. The parties are in agreement that $3000 is appropriate and we make
that order, as invited.
Solicitors:
Wynyard Wood, Auckland for Appellants in SC43/2007
Wynyard Wood, Auckland for Appellants in SC44/2007
Crown Law Office, Wellington for Respondent
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