Decision date: 26 February 2010
Case: Redcliffe Forestry Venture Ltd & Ors v Commissioner of Inland Revenue
Act(s): High Court Rules, Tax Administration Act 1994
Keywords: Functus officio, jurisdiction, finality, fraud, nullity
The High Court held that the plaintiffs did not allege fraud so as to engage the jurisdiction of the Court to set aside its judgment of 20 December 2004. Furthermore, the judgment of 20 December 2004 was not a nullity. Accordingly, the High Court was functus officio.
Impact of decision
The decision confirms that to set aside a judgment on the basis that it was obtained by fraud requires actual fraud (in the strict legal sense) being something in the nature of the deliberate presentation of false evidence, the deliberate suppression of a material fact(s) or the falsification of documents. The decision also confirms that where an unsealed judgment has been the subject of an appeal there is no jurisdiction for the trial Court to recall its judgment on the basis that counsel had failed to direct the Court's attention to a legislative provision or authoritative decision.
On 20 December 2004, the High Court held that the Trinity scheme was created for the purpose of tax avoidance. That finding was upheld by the Court of Appeal and the Supreme Court.
The plaintiffs sought to set aside the judgment of 20 December 2004 on the basis that the Commissioner presented a false case and in the alternative, that the judgment was a nullity.
The Commissioner entered a protest to the High Court's jurisdiction and applied to dismiss the proceedings.
His Honour, Justice Venning said that the starting point in litigation is the principle of finality and related to that principle is the principle that the trial Court is functus officio once its decision has been finally recorded or overtaken by the processes in superior courts. There are exceptions to the principle of finality, however, Justice Venning held that the Court's inherent power to set aside a judgment will only be invoked in exceptional circumstances to avoid a miscarriage of justice.
Fraud is a genuine, albeit limited, exception to the important principle of finality of litigation. However, Justice Venning did not consider that exceptional circumstances had been raised on the plaintiffs' pleadings and that the plaintiffs' case was in the nature of an allegation of an error of law being made, not fraud. His Honour said that unlike evidence, the applicability of a statutory provision cannot, by definition, be concealed or suppressed. In any event, Justice Venning held that it could hardly be suggested that a false case was put forward by the Commissioner.
Justice Venning held that actual fraud in a strict legal sense is required if a judgment of the High Court (that has been taken through two levels of appeal) is to be set aside. He said that to set aside a judgment on the basis that it was obtained by fraud requires something in the nature of the deliberate presentation of false evidence, the deliberate suppression of a material fact(s) or the falsification of documents.
The plaintiffs advanced the argument that the judgment of 20 December 2004 was a nullity as it was made without jurisdiction. The plaintiffs submitted that by failing to apply section EH of the Income Tax Act 1994 to the assessment of the licence premium, the Commissioner did not comply with statutory requirements and accordingly, the assessments, the challenge proceedings and consequently the judgment were all nullities. Justice Venning rejected the plaintiffs' argument relying on section 138P of the Tax Administration Act 1994 which gave the Court jurisdiction to determine whether the Commissioner's assessment of the plaintiffs for tax under section EG of the Income Tax Act 1994 (and other relevant provisions) was valid or not; and the principle that the Commissioner's assessment, has de facto operation unless and until it is declared a nullity by a competent court: Love v Porirua City Council  NZLR 308 at 310. Justice Venning held that if the High Court was wrong not to cancel the assessment, then that was an error to law to be addressed on appeal.
Justice Venning held that there was no jurisdiction for the High Court to declare its earlier decision a nullity as it is functus officio, given the appeals taken from that decision. If the plaintiffs were right and the process had been flawed because at law there was no valid assessment and therefore no valid decisions, then the Supreme Court (as the last superior Court to have dealt with the matter) was the proper Court to determine the issue.
Date published: 10 May 2010