Attorney General in respect of Ministry of Finance and Economic Development v Waysang Kum Kee [2021] KIHC 17; Miscellaneous Application 51 of 2021 (26 November 2021)

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MISCELLANEOUS APPLICATION NO. 51 OF 2021
ARISING OUT OF CIVIL CASE NO. 19 OF 1991

[ATTORNEY-GENERAL IN RESPECT OF
[MINISTRY OF FINANCE AND ECONOMIC
[DEVELOPMENT APPELLANT
[
BETWEEN [AND
[
[WAYSANG KUM KEE RESPONDENT

Hearing: 19 November 2021

Judgment: 26 November 2021

Appearances: Mr. Monoo Mweretaka for the Applicant

Ms. Batitea Tekanito for the Respondent

[1] This case has been going on for 30 years. It is the oldest active file in this Court. The file is filled with ancient typed letters, blue-inked carbon copies of accounts corrected with white-out, and hand-written notes from judges who have long since passed through this building. It contains numerous rulings, interlocutory orders and adjournments without return dates. The respondent himself I am told has passed away, but his son Ezzy Kum Kee has the support of his siblings to continue this litigation.

[2] At its heart, this dispute concerns efforts by the respondent to recover amounts he says were wrongly garnished from income payable to him. The amounts garnished corresponded to unpaid income tax assessed for the years 1979 to 1989, and for the years 1992 and 1993.

[3] Each party has at various times over these 30 years been a plaintiff, applicant, appellant, defendant and respondent. For ease of reference, throughout this judgment, I will use the original intitulement and refer to the Attorney-General in respect of the Ministry of Finance and Economic Planning, the Ministry of Finance and Economic Development, or the Internal Revenue Board as the applicant; and Waysang Kum Kee as the respondent.

[4] As a preliminary point, having read his affidavit, I make the order sought under O.17 r.34, that Ezzy Waysang is admitted as a person to conduct these proceedings and to represent the estate of the respondent.

[5] In 1991, the applicant brought a claim against the respondent for unpaid income tax for the years 1979 to 1989 inclusive. This was High Court Civil Case 19 of 1991 (hereafter HCCC 19/1991). Tax owing for these years had been assessed and the amount claimed added up to $97,273.66, plus interest.

[6] On 18 March 1992, Muhammad CJ gave judgment for the applicant in the amount sought.^[1] He considered s 108 of the Internal Revenue Board Act 1990 (actually the Income Tax Act 1990), which stated that tax “due and payable” is “recoverable as a debt owing to the Republic.” Section 108 also provided the production of a certificate of assessment properly made “shall be sufficient evidence that that amount is due from that person.” Muhammad CJ said “in my view the Court would have to see that such tax as claimed is ‘due and payable’ and test the lawfulness of the assessment.” But he also rejected the evidence of the defendant, and found for the plaintiff without investigating whether or not the tax was due and payable and without testing the lawfulness of the assessment, notwithstanding his earlier comments. The respondent appealed.

[7] In April 1992, the applicant used s 114 of the Income tax Act 1990 to begin garnishing income payable to the respondent based on those assessments.

[8] The Court of Appeal allowed the appeal in a judgment dated 4 December 1992, having found that the 1990 Act did not govern income earned during the years at issue.^[2] The Court of Appeal also found the notices of assessment did not comply with the provisions of the repealed legislation. The Court of Appeal made no finding that the tax was not owed. The Court of Appeal allowed the appeal and, in light of Muhammad CJ’s rejection of the defendant’s evidence, ordered a new trial.

[10] Ten days after the Court of Appeal’s judgment, on 14 December 1992, a new payment arrangement was negotiated under which the respondent agreed to pay certain amounts if the s 114 garnishee notice was withdrawn. The notice was withdrawn and payments were made.

[11] On 30 March 1993, revised assessments for the years 1979 to 1989 were issued in the amount of $95,619, and a new s 114 garnishee notice was issued. On 31 January 1994, Mr Berina (the respondent’s lawyer at the time) wrote to the Attorney-General saying the s 114 notice could not be applied to tax arrears for the years 1979 to 1989. On 10 February 1994, the Attorney-General wrote to Mr Berina agreeing with him, but justified the Ministry’s actions “on the basis of common law and equitable principles related to debts owing.”

[12] In a letter dated 4 August 1994, Mr Berina wrote to the Registrar of the High Court asking her to exercise her discretion under O.62 r.1 of the Western Pacific High Court (Civil Procedure) Rules 1964 to summon the parties to Court to show cause why the action should not be struck out for want of prosecution, notwithstanding the Court of Appeal’s decision had effectively determined the action, and no fresh action had been commenced by the plaintiff. The action not being prosecuted appears to refer to the Court of Appeal’s order for a new trial, rather than the original claim. He repeated his request in a letter dated 31 August 1994. On 30 December 1994, the Acting Chief Registrar wrote to the Attorney-General asking “whether you are still interested in proceeding with this case or not.” There appears to be no reply on file. It also appears the Acting Chief Registrar did not exercise her discretion under O.62 r.1.

[13] It was fairly clear at this point that the applicant had not made and would not make any effort to retry the case. The respondent did not make use of O.64 r.9 which states the “in any cause or matter in which there has been no proceeding for one year from the last proceeding had, the party who desires to proceed shall give a month’s notice to the other party of his intention to proceed.” It was also clear at this point that the respondent had made payments acknowledging income tax owed, and that income paid to him was being garnished under the 1994 garnishee notice.

[14] On 29 December 1997 the Income Tax (Amendment) (No. 2) Act 1997 came into force. It added s 138 to the principal Act. Section 138 provided that any assessment made in accordance with s 100 in respect of any tax year prior to 1990 was deemed to be an assessment validly made in accordance with repealed legislation.

[15] Nearly nine years after the Court of Appeal’s judgment, and over seven years after asking the High Court Registrar to exercise her discretion under O.62 r.1, by notice of motion dated 24 September 2001, the respondent asked the High Court for an order striking out the applicant’s claim. The respondent submitted that the delay in prosecuting it meant that a defence that had been available to him after the Court of Appeal’s judgment was now no longer available to him following the entry into force of the Income Tax (Amendment) (No.2) Act 1997. It is not clear whether the action referred to is the original claim dealt with by the Court of Appeal, the failure to comply with the Court of Appeal’s order for a new trial, or a new claim subsequent to the Court of Appeal’s judgment. It is also not clear from the file if the matter was ever set down for a hearing. However, a later, differently numbered file, contains evidence that it was.

[16] On 28 November 2002 the respondent claimed recovery of $55,939.41 from the Attorney-General in respect of the Inland Revenue Board in High Court Civil Case 55 of 2002 (HCCC 55/2002). He originally claimed $72,128.91 but the court file shows this was altered by hand to $55,939.41 and initialled by Mr Berina. This amount was calculated on the basis of assessments for the years 1992 and 1993. At paragraph 5 of the statement of claim, the respondent states that on 19 October 2001, the High Court, by consent, struck out HCCC 19/1991. Although HCCC 19/1991 concerned assessments for the years 1979 to 1989, the respondent submitted that the $55,939.41 garnished from the applicant’s income in 1992 and 1993 was “unsustainable” following the High Court’s decision to strike out HCCC 19/1991. I can find no record of this decision in the file for HCCC 19/1991 or on PacLII.

[17] The judgment in HCCC 55/2002 is dated 10 February 2004.^[3] Millhouse CJ referred to an agreed chronology in which reference is made to the High Court decision striking out HCCC 19/1991. Millhouse CJ also referred to s 7(2) of the UK Limitation Act 1939 then in force in Kiribati, which provided that equitable causes of action corresponding to common law causes of action were subject to the same limitation. He decided that the respondent’s action to recover $55,939.41 was a cause of action analogous to a claim in tort or contract and that it was statute barred because it arose in 1992 and 1993, more than six years before 28 November 2002.

[18] By this stage, the applicant’s claim against the respondent for unpaid income tax for the years 1979 to 1989 in HCCC 19/1991 had been struck out in 2001, (although the action was struck out, the underlying claim remained and was dealt with by means of garnishment by notices under s 114 and payment arrangements) and the respondent’s claim in HCCC 55/2002 to recover amounts garnished and paid to the applicant for the years 1992 and 1993 was found to be statute barred in 2004. No claim appears ever to have been brought to Court by the respondent to recover any of the amounts garnished or paid with respect to the 1979-1989 tax years. In fact, even after the Court of Appeal decision allowing his appeal, the respondent was negotiating with the applicant about the amount he was willing to pay to satisfy the assessed debt.

[19] By notice of motion dated 16 May 2010, the respondent asked the Court of Appeal to order the refund of $72,128.91 he claimed the Ministry garnished in 1992 and 1993 “when it was aware that this Honourable Court had set aside the judgment of the High Court ....”. This is the original amount claimed in respect of tax years 1992 and 1993, before the statement of claim was amended, in HCCC 55/2002. The application was misconceived because the High Court judgment that was set aside by the Court of Appeal related to the tax years 1979 to 1989, not 1992 and 1993. This matter was filed as Court of Appeal Civil Appeal 12 of 2010 (CACA 12/2010) and was heard on 12 August 2010. On 18 August 2010, the Court of Appeal gave its judgment with admirable brevity: “Appeal withdrawn: struck out.”^[4]

[20] A fresh notice of motion was received in the High Court in January 2011. The respondent sought a refund of $72,128.91. This appears to be identical to the action considered by the Court of Appeal five months earlier. It appears not have been set down for a mention until 24 March 2015, over four years after filing, when Muria CJ directed counsel to agree the facts, agree the issues that needed to be resolved, and to provide skeleton arguments. Muria CJ set the case down for trial on 29 May 2015. The issue agreed was whether the respondent’s claim “for refund of money wrongly garnished is barred by the Limitation Act and any other related Act.”

[21] A trial was not held and the matter was adjourned several times for settlement discussions to occur. It was finally adjourned with no return date on 13 November 2015. In the course of the current triage of the backlog of cases awaiting disposition, I asked that it be called on 1 September 2021.

[22] Ms Tekanito submitted that continuing this action is not barred by statute or the principle of res judicata. She submitted that HCCC 55/2002 did not decide anything about the garnishment of $72,128.91. She submitted res judicata cannot preclude the respondent from challenging “the validity of the order that was later quashed on appeal.” She also submitted that an action to recover money unlawfully garnished is not subject to the Limitation Act.

[23] Mr Mweretaka submitted that HCCC 55/2002 dealt with the matter being pursued by the respondent. He submitted that s 4(4) of the Limitation Act applies to stop any action “brought upon any judgment after the expiration of 12 years from the date on which the judgment became enforceable.” He also submitted that “there was no garnishee but rather the plaintiff acted to recover the debt of the defendant.”

[24] HCCC 19/1991 was a claim to recover tax owing for the years 1979 to 1989. The Court of Appeal noted the respondent did not pay the tax assessed, did not object to the assessments, and did not lodge a notice of appeal against the assessments. The Court of Appeal allowed the appeal because the notices of assessment which would otherwise have been conclusive evidence that they were duly made and correct, could not be conclusive evidence in this case because they were not signed by the Minister or his delegate under s 59 of the Income Tax Ordinance 1972. It made no ruling on whether or not the tax was owed except to comment that the respondent did not object to, or appeal against, the assessments.

[25] HCCC 19/1991 was struck out in 2001. The recovery of tax owed was pursued by other means, including a negotiated payment schedule and garnishment. No action was ever brought to Court by the respondent to recover amounts paid or garnished by virtue of assessments for the years 1979 to 1989, although Mr Berina wrote to the applicant on 23 October 2001 requesting a refund of moneys paid in respect of tax years 1979 to 1989. No challenge was made in Court to the revised assessments for 1979 to 1989, except by Mr Berina in letters to the applicant dated 12 and 31 January 1994. The respondent did not avail himself of remedies to compel the applicant to comply with the Court of Appeal’s order for a new trial. These comments are only in respect of the tax years 1979 to 1989.

[26] HCCC 55/2002 was a claim by the respondent to recover amounts garnished for tax owing for the years 1992 and 1993. The High Court ruled in 2004 that this action was brought out of time. The respondent did not appeal this decision. That deals with the claim in respect of the tax years 1992 and 1993.

[27] To submit now, as Ms Tekanito has, that the Limitation Act 2004 provides an avenue to effectively relitigate what was decided by 2004, would effectively transform the present case into a vehicle by which the 2004 decision could be appealed to the wrong court well after the time for appeal has passed. This was anticipated by s 37(5) which states “the time for bringing proceedings in respect of a cause of action which accrued before the commencement of this Act shall, if it has not then already expired, expire at a time when it would have expired apart from the provisions of this Act or at any time when it would have expired if the provisions of this Act had at all material times been in force, whichever is the later.” Millhouse CJ decided in 2004 that time had expired to recover amounts related to tax years 1992 and 1993, and that would certainly have been the case if a claim had been made to recover amounts related to tax years 1979 to 1989. Section 4(7) of present Limitation Act, a “by analogy” provision similar to the one applied by Millhouse CJ in 2004, would also bar any action to recover payments related to the 1979 to 1989 tax years.

[28] These matters were resolved long ago. Despite being overturned in 1992 and struck out in 2001, HCCC 19/1991 somehow continued to live a Gollum-like existence in the dark recesses of filing cabinets until it was occasionally revived by the slender nourishment of lawyers’ promises that it was needed to right past alleged wrongs. Its short-lived cousin, HCCC 55/2002 suffered the same fate. They both need to be allowed to rest in peace.

[29] The only question I have been asked to resolve is whether the respondent’s action to recover $72,128.91, the amount at issue in HCCC 55/2002 for the tax years 1992 and 1993 (not HCCC 19/1991 as Ms Tekanito submitted) is barred by the operation of res judicata or the Limitation Act. For the above reasons, my answer is yes.

[30] HCCC 19/1991 and HCCC 55/2002 have both been finally determined, the former in 2001, the latter in 2004. No further action is to be taken on either file in this Court.

[31] The respondent must pay the appellant’s costs on this application, to be fixed by the Registrar if not agreed.

^[1] Attorney General in respect of Ministry of Finance and Economic Planning v Waysang Kum Kee, High Court Civil Case 19/91, 18 March 1992, (Muhammad CJ).
^[2] Waysang Kum Kee v Attorney General in respect of Ministry of Finance and Economic Planning, Court of Appeal Civil Appeal 2/91, 4 December 1992, (Gibbs VP, Donne and Dillon JJA).
^[3] Waysang Kum Kee v Attorney General in respect of Internal Revenue Board [2004] KIHC 96, 10 February 2004 (Millhouse CJ).
^[4] Waysang Kum Kee v Attorney-General for Ministry of Finance and Economic Development, Court of Appeal Civil Appeal 12/2010, 18 August 2010 (Millhouse P, Tompkins and Fisher JJA).

High Court of Kiribati

Attorney General in respect of Ministry of Finance and Economic Development v Waysang Kum Kee [2021] KIHC 17; Miscellaneous Application 51 of 2021 (26 November 2021)