Chesterfield Preschools Ltd v Cir - [2010] NZSC 155

IN THE SUPREME COURT OF NEW ZEALAND

SC 96/2010
[2010] NZSC 155

BETWEEN CHESTERFIELDS PRESCHOOLS LIMITED
First Applicant

AND DAVID JOHN HAMPTON
Second Applicant

AND CHESTERFIELDS PARTNERSHIP
Third Applicant

AND CHESTERFIELDS PRESCHOOLS PARTNERSHIP
Fourth Applicant

AND ANOLBE ENTERPRISES LIMITED
Fifth Applicant

AND COMMISSIONER OF INLAND REVENUE
Respondent

Court: Elias CJ, McGrath and William Young JJ

Counsel: D J Hampton in person and on behalf of other Applicants
M S R Palmer for Crown

Judgment: 16 December 2010

JUDGMENT OF THE COURT

The application for leave to appeal and the associated application for directions are dismissed with costs of $2,500 to the respondent.

REASONS

This case arises out of a long-standing dispute between the applicants and the Commissioner of Inland Revenue (Commissioner) around complaints by the applicants that the Commissioner:
(a)had not honoured informal arrangements made as to the taxation (mainly GST) liabilities of the applicants;
(b)had failed to act with reasonable diligence and celerity in progressing audits and processing GST returns;
(c)had behaved unreasonably over the re-registration for GST purposes of one of the applicants (Anolbe Enterprises Ltd);
(d)had acted unreasonably over the proposed remission of penalties and attempts to recover from the applicant their total tax indebtedness.
In a judgment delivered on 15 December 2006 (the first review judgment), Fogarty J found generally in favour of the applicants.[1] He set aside a June 2004 decision by the Commissioner declining the remission (under s 182 of the Tax Administration Act 1994) of additional tax. He required the remission issue to be reconsidered and gave certain directions (under s 4(5) of the Judicature Amendment Act 1972) as to that reconsideration. These directions imposed constraints on the Commissioner to ensure that the reasonable expectations of the applicants were not frustrated. Relevant to the required reconsideration was the Judge’s apparent view that the Commissioner was required to remit additional tax to the extent necessary to ensure that the resulting impost was proportionate to the breaches on the part of the applicants and his conclusion that if the conditions for remission stipulated in s 182 could not be satisfied, the Commissioner should resort to his more general powers under ss 6 and 6A of the Tax Administration Act.
[1] Chesterfields Preschools Ltd v Commissioner of Inland Revenue (2007) 23 NZTC 21,125 (HC).
The reconsideration directed by Fogarty J resulted in a decision made on 5 June 2007 by an Inland Revenue Department officer (Mr R K Budhia). Mr Budhia’s role was not easy. His reconsideration was obviously required to accord with the law (including limitations provided for in s 182 of the Tax Administration Act as to the power to remit additional taxes). But he also had to give effect to Fogarty J’s first review judgment which was never appealed by the Commissioner.
The result of Mr Budhia’s reconsideration was that the total indebtedness of the applicants was reduced, but not by much. This lead to a further judgment of Fogarty J delivered on 25 November 2008 (the second review judgment) in which he…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2010] NZSC 155
Decision Date: 16 December 2010

CaseChat Overview and Summary

The Supreme Court of New Zealand was asked to decide an appeal against a decision of the Court of Appeal in relation to a dispute over taxation liabilities and the conduct of the Commissioner of Inland Revenue. The applicants, Chesterfield Preschools Ltd and others, sought leave to appeal and directions from the Supreme Court, arguing that the Court of Appeal had misinterpreted the lower court's judgments on the issues of proportionality and the processes to be followed by the Commissioner. The central legal issue was whether the Court of Appeal's interpretation of the lower court's judgments constituted a sufficient basis for granting leave to appeal under the Judicature Amendment Act 1972.

The Supreme Court found that the Court of Appeal's interpretation of the lower court's judgments did not establish a clear error of principle or an appearance of injustice that would warrant granting leave to appeal. The case was highly fact-specific and had limited precedential value. The applicants' arguments did not raise substantial issues of principle, and the Court of Appeal's judgment on proportionality correctly reflected the applicants' entitlement to have additional tax reduced to the portion attributable to their own fault. The Supreme Court also dismissed the application for directions, as the issue of late discovery of documents had already been addressed by the lower court.

The Supreme Court dismissed the application for leave to appeal and the associated application for directions, with costs of $2,500 to be paid by the applicants to the Commissioner of Inland Revenue.

Orders