Commissioner of Inland Revenue v Woodgate Limited
[2025] NZHC 1763
•30 June 2025
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2024-485-000797
[2025] NZHC 1763
UNDER THE Tax Administration Act 1994 BETWEEN
THE COMMISSIONER OF INLAND REVENUE
Applicant
AND
WOODGATE LIMITED
Respondent
Hearing: 7 May 2025 Appearances:
K I S Naik-Leong, S J Smith for Applicant D P Weaver for Respondent
Judgment:
30 June 2025
JUDGMENT OF GWYN J
[Application under s 138N(2) Tax Administration Act 1994 for transfer of proceeding]
Introduction
[1] This is an application by the Commissioner of Inland Revenue (Commissioner) to transfer a proceeding which has been filed in the Taxation and Charities Review Authority (Authority) to the Wellington Registry of the High Court. The application is opposed. Leave is sought to commence the application by way of originating application under Part 19 of the High Court Rules 2016 (Rules).
Background
[2] The proceeding which the Commissioner seeks to transfer was filed by the respondent, Woodgate Limited (Woodgate), in the Authority on 7 May 2024.
THE COMMISSIONER OF INLAND REVENUE v WOODGATE LIMITED [2025] NZHC 1763 [30 June 2025]
[3] The proceeding is a tax challenge commenced under Part 8A of the Tax Administration Act 1994 (TAA) (the challenge proceeding). At issue in the challenge proceeding is Woodgate’s right to claim a GST input tax credit on the purchase price of a property at 153 Pacific Drive, Aokautere, Palmerston North (the property). The property is just over 48 ha of vacant residential land. Woodgate is engaged in the activity of property development. Woodgate’s sole director and shareholder, Leslie Fugle, is a property developer based in Palmerston North.
[4] Woodgate filed a GST return claiming the GST input credit of $2,282,608.69, for the period ended 31 January 2018, on 2 February 2018. The Commissioner issued a notice to Woodgate under s 46 of the Goods and Services Tax Act 1985 (GST Act) on 13 February 2018, placing a hold on the GST refund and advising that the claimed GST refund would not be issued until the Commissioner had completed a review of Woodgate’s GST return for the 31 January 2018 period. The Commissioner then conducted an investigation into the circumstances leading to the GST return.
[5] The Commissioner commenced an audit and the parties exchanged information but disagreed about how the law applied to the transaction and consequently the availability of the GST input tax credit, under s 3A of the GST Act.
[6] The dispute process established by Part 4 of the TAA was commenced on 27 October 2020. The following steps occurred:
(a)on 27 October 2020 the Commissioner emailed Woodgate’s counsel and Mr Fugle a copy of the Commissioner’s notice of proposed adjustment (NOPA), together with a cover letter. The cover letter advised that criminal proceedings were being contemplated against Woodgate and/or Mr Fugle. Given the prospect of criminal proceedings and to ensure Woodgate’s and Mr Fugle’s fair trial rights were not infringed, the letter advised that Woodgate could delay issuing its notice of response (NOR) until after the question of prosecution had been resolved;
(b)on 17 November 2020, Woodgate of its own volition issued a NOR to the Commissioner;
(c)the Commissioner issued his statement of position on 31 July 2023, pursuant to s 89M of the TAA and issued an addendum to the statement of position on 8 November 2023;
(d)Woodgate issued a statement of position on 29 September 2023 and issued an addendum to the statement of position on 5 December 2023.
[7] No resolution could be reached after exchange of the parties’ statements of position so the dispute was referred to the Disputes Review Unit (DRU) of Inland Revenue’s Tax Counsel Office. The DRU decided the dispute in favour of the Commissioner and an adjudication report was issued on 20 March 2024.
[8] On 22 March 2024 the Commissioner issued a notice of assessment reflecting his reassessment of Woodgate’s GST Return. On his reassessment the Commissioner disallowed the GST refund and assessed Woodgate for evasion shortfall penalties, totalling $1,711,956.53. The total amount in dispute in the challenge proceeding is therefore approximately $3,994,565.22.
[9] Following receipt of the notice of assessment issued on 22 March 2024, Woodgate filed its notice of claim with the Authority on 7 May 2024. The Commissioner filed his notice of defence on 13 June 2024.
[10]The parties have since been engaging in the discovery process.
Associated matters
[11] In May 2022, Woodgate applied for judicial review of four purported decisions it alleged the Commissioner made in the course of his investigation into the GST refund. Woodgate says the judicial review was primarily about the Commissioner’s
decision to prolong the statutory disputes resolution procedures. The judgment in the judicial review recorded:1
In brief, Woodgate says the audit has taken too long. It says there is no statutory mechanism through which it can compel the Commissioner to progress promptly through the civil dispute resolution processes contained in the Tax Administration Act 1994 (the TAA). Nor can it take any steps to progress criminal proceedings which have been threatened by the Commissioner, as the pursuit of those proceedings is a matter for the Commissioner. As a result, Woodgate says there is effectively no time limit for the resolution of the tax dispute underlying the GST Return.
[12] The judicial review judgment (issued on 12 May 2023) dismissed Woodgate’s application.
Orders sought by the Commissioner
[13]In this proceeding the Commissioner seeks the following orders:
(a)leave to commence this application by way of originating application under Part 19 of the High Court Rules;
(b)transfer of the challenge proceeding, Woodgate Limited v Commissioner of Inland Revenue (TRA001/24), which has been filed in the Taxation and Charities Review Authority, to the Wellington Registry of the High Court of New Zealand;
(c)subject to the orders above, application of the provisions in High Court Rules 5.64 to 5.68 to the transferred proceeding as if it had been an action transferred from the District Court to this Court;
(d)in the event that the respondent opposes the application for transfer, costs.
1 Woodgate Ltd v Commissioner of Inland Revenue [2023] NZHC 1132 [judicial review judgment], at [2].
Preliminary matter – mode of application
[14] The Commissioner seeks leave under r 19.5 of the Rules to commence these proceedings by way of an originating application.
[15]Rule 19.5(1) provides:
Court may permit proceeding to be commenced by originating application
(1) The Court may, in the interests of justice, permit any proceeding not mentioned in rules 19.2 to 19.4 to be commenced by originating application.
[16] A transfer application under s 138N of the TAA is not a proceeding mentioned in rr 19.2–19.4. Accordingly, neither the TAA nor the Rules prescribe the procedure by which the Commissioner can bring a s 138N(2) transfer application before the Court.
[17] Woodgate does not oppose this aspect of the application and a number of previous High Court authorities have confirmed the practice of s 138N(2) proceedings being commenced by filing an originating application under Part 19 of the Rules. For example, in Commissioner of Inland Revenue v McIlraith the Court said:2
I have no doubt that it is in the interests of justice and in accordance with the intention of Part IV of the High Court Rules that the present application should be brought under that provision. The bringing of the application to the Court is authorised by section 138N of the Tax Administration Act and is a straight- forward application not calling for a statement of claim. It is a purely procedural application which can be promptly disposed of. Once determined it has no further life of its own.
[18]Leave to proceed by way of originating application is granted accordingly.
The transfer application
Section 138N(2)
[19] Section 138N(2) of the TAA enables the Commissioner to apply for a transfer. Section 138N provides:
2 Commissioner of Inland Revenue v McIlraith (2003) 21 NZTC 18,112 (HC) at [15].
(1)If a disputant commences a challenge in the High Court,—
(a) the Commissioner may apply to the High Court to have the challenge transferred to a Taxation Review Authority; or
(b) the High Court may, of its own motion, transfer the challenge to a Taxation Review Authority.
(2)If a disputant commences a challenge in a Taxation Review Authority, the Commissioner may apply to the High Court to have the challenge transferred to the High Court.
(3)The High Court may order that any proceedings transferred to the High Court under this section are to be transferred into the Court of Appeal.
[20] Section 138N does not include any criteria for assessing whether a challenge should be transferred to the High Court under subsection (2).
[21] The discretion to transfer under s 138N of the TAA has been considered in a series of decisions which provide a non-exhaustive list of factors that may be taken into account when deciding whether the discretion should be exercised. The principles were discussed by the Court of Appeal in Commissioner of Inland Revenue v Erris Promotions,3 summarised by the High Court in Commissioner of Inland Revenue v McIlraith,4 and affirmed by the Court of Appeal in Kensington Developments Ltd (In Receivership) v Commissioner of Inland Revenue.5 In Commissioner of Inland Revenue v Great Northern Motor Company Ltd (In Receivership) Toogood J helpfully restated the applicable principles from those decisions:6
(a)although there are no statutory criteria set out for transfer applications to the High Court under s 138N(2), there is no legislative intent to change the roles of the TRA and the High Court in taxation matters;
(b)factors that bear on whether transfer is appropriate include but are not limited to, that:
3 Commissioner of Inland Revenue v Erris Promotions [2003] 1 NZLR 506 (CA) [Erris].
4 Commissioner of Inland Revenue v McIlraith, above n 2, at [18].
5 Kensington Developments Ltd (In Receivership) v Commissioner of Inland Revenue [2015] NZCA 60 at [9].
6 Commissioner of Inland Revenue v Great Northern Motor Company Ltd (In Receivership) [2015] NZHC 1645, at [22].
(i)the challenge involves or may involve significant legal issues of precedent;
(ii)the facts of the challenge are either not clear or are in dispute;
(iii)the amount of the tax in dispute between the parties is high;
(iv)the matter is of general or public importance;
(v)the matter is complex;
(vi)the decision is likely to be appealed;
(vii)the taxpayer has mounted administrative law challenges against the TRA or the Commissioner; in particular, allegations that the Commissioner was pursuing a vendetta against the taxpayer, abused her power or committed fraud on the taxpayer; and
(viii)the applicant delayed the bringing of transfer proceedings in such a way that prejudices the other party;
(c)the taxpayer has the initial choice of forum and the onus is on the Commissioner in seeking a transfer to show good cause for why that should occur;
(d)the Court is required to consider the factors relied upon by the Commissioner and the reasons for the taxpayer's choice of forum against the background of the scheme of the legislation and the roles of the TRA and the High Court in taxation disputes;
(e)the TRA was designed to provide a more informal and less complex forum as evidenced by the anonymity provisions, and the fact that costs cannot be awarded in favour of any party. Although it is a specialist tribunal for dealing with taxation disputes, there is no presumption in
the legislation that taxation disputes should normally be dealt with in the TRA at first instance;
(f)the High Court is the court of first instance jurisdiction for major litigation and, in particular, where matters are complex and involve matters of major legal significance. That is also the case for taxation litigation; and
(g)the amount of money involved does not necessarily equate with complexity, but it does bear upon the issue of significance, both for the Commissioner and the taxpayer.
Summary of Commissioner’s reasons as to why the proceeding should be transferred
[22] The Commissioner acknowledges that, as the taxpayer has the initial choice of forum (which Woodgate has exercised by filing in the Authority), the onus is on the Commissioner to show why the challenge proceeding should be transferred into the High Court.7
[23] Woodgate suggests that there is a “statutory presumption” that the disputant may choose the forum for hearing its challenge and the Commissioner must normally respect that choice. The Commissioner says that because the High Court is the court of first instance jurisdiction for major and significant litigation, transfer from the Authority may be justified by the amount of tax in dispute, the general or public importance of the matter, or its complexity or difficulty. The Commissioner points to Commissioner of Inland Revenue v Erris Promotions where the Court of Appeal, in considering whether to transfer a challenge proceeding filed in the Authority to the High Court discussed the respective roles of the Authority and the High Court. Justice Glazebrook stated that:8
[22] The scheme of the legislation for the resolution of taxation disputes is that there are two first instance Courts – the TRA and the High Court. The TRA was designed to provide a more informal and less costly forum as evidenced by the anonymity provisions, and the fact that costs cannot be
7 Commissioner of Inland Revenue v Erris Promotions [2003] 1 NZLR 506 (CA) at [22].
8 At [22].
awarded in favour of any parties. But is specialist in the sense that it only deals with taxation disputes but there is no presumption in the legislation that taxation disputes should normally be dealt with at first instance in the TRA. This is understandable as taxation disputes so often (and this is no exception) involve issues of a general legal character. In our judicial system the High Court is the court of first instance jurisdiction for major litigation and in particular where the matters are complex and involve matters of major legal significance. This is no different for taxation litigation.
[24] The Commissioner says this passage from Erris clearly addresses the submission from Woodgate that Parliament created the Authority as the “presumptive forum for tax challenges and has accorded Woodgate the choice of forum to challenge a tax reassessment”. On that point, the Commissioner relies on the subsequent endorsement of Erris by the Court of Appeal in Kensington Developments Limited (in rec), Winkelmann J said:9
[22] We do not therefore see any merit in Kensington’s argument that a presumption in favour of taxpayer choice applies. As this Court acknowledged in Erris because the taxpayer has the initial choice of forum, the onus is on the Commissioner when seeking a transfer to provide reasons why that should occur. Requiring the Commissioner to show reason for the transfer gives effect to the statutory scheme that it is the taxpayer’s choice as to the forum in which the proceedings are commenced. No more recognition is required to give effect to the scheme of the Act or to the particular provisions.
[25] The Commissioner also cites Faqiryar10 but Woodgate says that case is not relevant — there the transfer application considered the reverse situation. The taxpayer first filed its challenge in the High Court and later sought to have the court exercise its own motion to transfer the challenge to the Authority. There the High Court identified that the onus of proof to warrant the transfer fell on the taxpayer.11
[26] The particular grounds advanced by the Commissioner in support of the argument that the High Court is the appropriate forum for this challenge proceeding are:
(a)the challenge proceeding is complex, involving tracing ownership of the property over decades, by a number of entities controlled to a
9 Kensington Developments Limited (in rec) v Commissioner of Inland Revenue [2015] NZCA 60 at [22].
10 Faqiryar v Commissioner of Inland Revenue [2022] NZHC 552.
11 At [21].
greater or lesser extent by Mr Fugle. As the land has been subdivided, the legal description of the property has changed a number of times, and it has been transferred between entities controlled by Mr Fugle or associated parties;
(b)the Commissioner is conducting investigations into Mr Fugle and related entities for other tax periods, so transfer of the challenge proceedings to the High Court and strict application of the Evidence Act 2006 would better protect the fair trial rights of Mr Fugle and the associated entities;
(c)the challenge proceeding has a significant precedential value, in respect of the application of the law governing sham transactions to a tax context and because the findings would be relevant to other GST assessments of Woodgate and other entities associated with Mr Fugle;
(d)the amount of tax and penalties involved is significant —
$3,994,565.22. This increases the likelihood of appeal by either party and it is preferable for the first instance hearing to occur in the High Court to remove a level of appeal and expedite final determination of the dispute;
(e)Woodgate seeks to challenge the Commissioner’s decision under s 108A of the TAA, which is not a disputable decision that can be heard by the Authority.
(f)Woodgate has indicated concerns about the conduct of Inland Revenue officers in the course of investigating its tax affairs, which is an issue in the nature of judicial review, properly heard by this Court.
[27] The Commissioner says that, overall, the transfer of the challenge proceedings is a just, expeditious and economical use of the parties’ and the Court’s resources.
[28] I consider each of those grounds, and Woodgate’s responses to them, in turn, noting that there is a degree of overlap between the grounds.
“Complexity”; amount at issue
[29] The Commissioner says the amount in dispute in this challenge proceedings is “not an insignificant sum”, at approximately $3,994,565.22. The Commissioner says that those cases which have involved hundreds of millions of dollars related to a number of taxpayers, not just a single taxpayer as here; challenges transferred to the High Court have also involved much lower amounts. By way of example the Commissioner refers to Commissioner of Inland Revenue v McIlraith, where the High Court granted the Commissioner’s application to transfer a challenge proceeding from the Authority to the High Court where the tax in dispute was $180,000;12 and Commissioner of Inland Revenue v Bell Road Developments Limited, where the tax in dispute was in “the region of $3.5 million”.13
[30] The Commissioner submits the challenge proceeding is also complex. The Commissioner refers to the judicial review judgment and says that the Judge considered it was obvious from the material filed by the Commissioner and allegations made in that material that the investigation of the matter was complex.14
[31] The Commissioner refers to the discussion in the judicial review judgment of the history of ownership of the property, which is intricate and complex and has passed through a number of entities associated with Mr Fugle over the course of approximately three and a half decades. The Commissioner says there are a number of financial transactions made by and between entities controlled by Mr Fugle that require analysis, on which the parties’ evidence is not aligned.
[32] The Commissioner also says that in the challenge proceeding the Court will be required to consider questions concerning land transfer transactions, including a vesting application made by CTS Investments LLC (the company from which
12 Commissioner of Inland Revenue v McIlraith, above n 2, at [19].
13 Commissioner of Inland Revenue v Bell Road Developments Limited [2014] NZHC 1841 at [35].
14 Woodgate v Commissioner of Inland Revenue [2023] NZHC 1132 [judicial review judgment] at [238].
Woodgate acquired the property) to the High Court after the property was disclaimed as onerous under s 269 of the Companies Act 1993 in the liquidation of an associated entity.
[33] The Commissioner says that the High Court regularly deals with the transfer of land, land vesting applications and liquidation issues in its general jurisdiction.
[34] In response Woodgate says this challenge proceeding does not come close to exhibiting any of the same features as the Erris or Trinity15 tax avoidance schemes.
[35] In Erris Promotions, where transfer was ordered, the substantive challenge involved determination of issues about the operation, acquisition and depreciation of fixed life intangible property, being computer software source code, legal principles of general commercial law about when the joint venture was formed, constructive trust law and whether software is tangible or intangible property.16 Woodgate says it is also significant that in that case the parties had agreed that resolution of the challenge proceeding would also resolve the taxation position of approximately 400 other investors in the mass-marketed Actonz tax avoidance scheme and affect the rights of all the investors.17 Erris was, at the time, the second largest tax case ever in terms of tax revenue at stake, across multiple tax years for all investors whose individual tax positions were affected.18
[36] Commissioner of Inland Revenue v A Taxpayer [Trinity] was also an application by the Commissioner to transfer challenge proceedings commenced in the Authority to the High Court. The challenge proceeding there related to the Trinity tax avoidance scheme and involved disputed tax of hundreds of millions of dollars for dozens of participants.19 At that stage, this was the largest tax avoidance scheme ever argued before the courts, with $3.7 billion of tax at stake, over the 50-year life cycle of the scheme. The transfer application related to one of 23 identical applications
15 Commissioner of Inland Revenue v A Taxpayer (2003) 21 NZTC 18,001 (HC) [Trinity]. That judgment did not identify the taxpayer to preserve confidentiality (at [2]), but subsequent litigation involving the identity identified it as the Trinity scheme. See, for example, Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2008] NZSC 115, [2009] 2 NZLR 289.
16 Erris, above n 3, at [26].
17 At [24].
18 Trinity, above n 15, at [21].
19 At [17].
made by the Commissioner in relation to disputants whose cases were similarly before the Authority.
[37] Woodgate says that, as in Erris, the Trinity litigation involved multiple parties and key issues involved the tax treatment of depreciable and tangible property, offshore captive insurers, the financial arrangements and the use of offshore tax havens. There was also specialist competing expert evidence about forestry/silviculture, economics and general tax policy.
[38] Although transfer was ordered in Trinity, the High Court rejected the Commissioner’s submission that the High Court has a greater ability to deal with hard fought litigation than the Authority.20
[39] Woodgate notes that the present challenge proceeding, in contrast, is not a representative or test case affecting the rights of any other taxpayers. Nor does it require specialist evidence or involve matters of general law.
[40] Woodgate also notes that, unlike in Erris, there is no offer by the Commissioner to pay the hearing fees in the High Court and to agree that costs lie where they fall or to cooperate in seeking confidentiality orders.
[41] Woodgate also addresses the Commissioner’s reliance on Kensington Developments Limited, noting that this was part of the JG Russell template tax avoidance scheme. In that case, the Court of Appeal recognised that the judgment would have important precedent value:21
…[A] decision by the High Court in this challenge proceeding would be binding on the TRA and future disputes that involved identical issues. It would be binding on other similarly positioned taxpayers and would be a significant precedent event if Mr Russell chose to argue otherwise.
[42]The Court of Appeal also held:22
…the moderate complexity weighed in favour of a transfer to the High Court but could not on its own be decisive.
20 At [45(f)].
21 Kensington Developments Limited, above n 9, at [25].
22 At [29].
[43] Woodgate points to the precedential effect being determinative in the decision to transfer — the outcome of the proceedings impacted on the tax position of a further 14 other companies which had claimed interest expenditure deductions on a yearly basis that was purportedly owed to Kensington Developments Limited under debentures held by the company.23
[44] Woodgate also points to a number of cases where, it says, a transfer was warranted only because the challenge raised matters of general or public importance or were extraordinarily complex or difficult.24
[45] Nor is the challenge proceeding part of overlapping proceedings, in contrast to, for example, Commissioner of Inland Revenue v McIlraith.25 That case was a challenge proceeding involving transactions spanning many tax years where the taxpayer had already filed a challenge proceeding for earlier years that was live before the High Court, as well as judicial review proceedings. The taxpayer then filed challenge proceedings in the Authority involving the same facts and issues for the subsequent tax year.26
[46] I accept Woodgate’s submission that the challenge proceeding does not form part of any wider or overlapping proceedings. It is a challenge to a single GST reassessment that does not allege bias, bad faith, abuse of power or lack of integrity on the part of the Commissioner’s officials, as in Deep Sea Seafoods.
[47] I also accept Woodgate’s submission that the challenge proceeding in not a representative or test case, the outcome of which would affect other taxpayers.
[48] Nor does it appear that the challenge proceedings require specialist evidence. The matters of law that will arise are matters readily dealt with by the Authority. While the property arrangements which form the background to the challenge proceeding are
23 At [4].
24 Commissioner of Inland Revenue v Deep Sea Seafoods (No 1) Limited (2004) 21 NZTC 18,469 (HC) at [18(c)].
25 Commissioner of Inland Revenue v McIlraith, above n 2.
26 At [2].
factually complex, that alone does not render the case sufficiently complex to require transfer.
[49] I conclude that the challenge proceeding is not of sufficient complexity and/or for such an amount that it would be determinative of the transfer application.
Protection of fair trial rights
[50] The Commissioner says that, as investigations into Woodgate, Mr Fugle and related entities are ongoing, transfer of the challenge proceedings to this Court would ensure that the fair trial rights of Mr Fugle and those entities are protected.
[51] The Commissioner notes particularly that the Authority is a commission of inquiry.27 Under s 17(3) of the Taxation Review Authorities Act 1988 (TRAA), the Evidence Act applies to an Authority and all proceedings before it, as if an Authority were a court within the meaning of that Act. However, this is subject to s 17(1) of TRAA which provides that an Authority may receive as evidence “any statement, document, information, or matter that in its opinion may assist it to deal effectively with the subject of the inquiry, whether or not that would be admissible in a court of law”.
[52] The Commissioner’s submission is that in the circumstances of this case, a strict approach to the rules of evidence under the Evidence Act, narrower than that permitted in the Authority, is required to protect Mr Fugle’s fair trial rights in respect of the concurrent audits and potential criminal proceedings.
[53] Woodgate does not accept that its fair trial rights would be better preserved through the High Court proceedings. Mr Weaver points out that throughout the history of the investigation and dispute the Commissioner had warned about the possibility of a criminal prosecution but, on 2 June 2023, advised that prosecution would not be pursued in respect of the GST Return.
27 Taxation Review Authorities Act 1994, s 15; and Commissions of Inquiry Act 1908, s 4B.
[54] Throughout, Woodgate has openly and proactively engaged with the substance of the Commissioner’s allegations at issue in the challenge proceeding, notwithstanding the taxpayer’s right to refuse to engage in the pre-litigation dispute.28
[55] Woodgate also notes that, under s 17 of the TRAA, the Authority is bound by the Evidence Act, just like the High Court. Despite its residual powers to admit evidence as a Commission of Inquiry, the Authority must exercise the power judicially.29 Woodgate says it is unclear what prejudice would arise to Woodgate through the matter remaining before the Authority.
[56] Woodgate has plainly indicated its willingness to waive its fair trial rights in this context. For that reason this is not a factor that weighs in favour of transfer.
Precedent value
[57] The Commissioner’s view is that the challenge proceeding has significant precedential value. That is because the Commissioner has active investigations in progress involving Woodgate, Mr Fugle and related entities. The Commissioner acknowledges that those audits expressly exclude the GST Return period ending 31 January 2018, but says that findings in the challenge proceeding will be applicable to the later GST Return periods of Woodgate being audited by the Commissioner and possibly also to the tax returns of entities associated with Mr Fugle which are also being audited.
[58] The Commissioner points to the Court of Appeal decision in Kensington Developments Limited (in rec) which found that the precedent value was the determinative consideration in deciding whether to order transfer.30
[59] The Commissioner contends that, in acquiring the property, Woodgate is party to a sham or, alternatively, a tax avoidance arrangement that is void against the Commissioner pursuant to s 76 of the GST Act. While acknowledging that the law in
28 Parore v Attorney-General [2023] NZHC 1010 at [71].
29 Commissioner of Inland Revenue v Skudder HC Auckland CIV-2007-404-007642, 27 February 2008 at [24].
30 Kensington Developments Limited, above n 9, at [24].
relation to sham or tax avoidance is “relatively settled”,31 the Commissioner says the Court has not applied that law for a long time.
[60] Further, the Commissioner’s view is that precedent established by the challenge proceeding, being applicable to other GST Returns of Woodgate and returns of associated entities, strongly supports the exercise of the discretion to transfer.
[61] In response, Woodgate emphasises the Commissioner’s concession that the ongoing audits expressly exclude the GST Return period ending 31 January 2018. Mr Weaver also notes that there are no other live tax challenges before the Court associated with Woodgate, or Mr Fugle, nor any disputes under Part 4A of the TAA.
[62] There are no other related proceedings before the High Court and no third parties/investors or other participants whose cases (or tax positions) are pending or awaiting the outcome of this challenge.
[63] I accept Woodgate’s submission that the correct GST treatment of a single purchase of one property, based on specific circumstances, will not resolve any pending cases before the High Court or Authority. Nor am I persuaded that there is particular value in the proceeding being transferred to the High Court in order to have a High Court authority on sham and/or tax avoidance, given the Supreme Court authority on the question, and noting that the Authority has on many previous occasions determined the issue of sham.32
Allegations of bias, bad faith, abuse of power or lack of integrity on the part of officials
[64] The Commissioner’s submission is, in effect, that the Court can infer from Woodgate’s statement of position dated 29 September 2023 and from the judicial review judgment,33 that the challenge proceeding is or is likely to raise the issue of how the Commissioner’s officials have conducted their investigation of Woodgate and a suggestion that Woodgate has been “targeted” by the Commissioner.
31 Ben Nevis, above n 15.
See, for example, Case U6 (1999) 19 NZTC 9,038 (TRA); Case X10 (2005) 22 NZTC 12,155
(TRA); Case Z29 (2010) 24 NZTC 14,407 (TRA); and Case X21 (2006) 22 NZTC 12,265 (TRA).
33 Judicial review judgment, above n 1.
[65] The Commissioner says the High Court should be favoured where the challenge involves allegations of bias, bad faith, abuse of power or lack of integrity on the part of Departmental Officers.34
[66] In response, Woodgate emphasises there are no such allegations made in the challenge proceeding.
[67]This is a speculative factor. I give it no weight in my assessment.
Likelihood of appeal, delay
[68] The Commissioner says that delay to the final resolution of this dispute is more likely if the challenge proceeding is heard in the Authority in the first instance, because of the potential for appeals (there are two appeals as of right from decisions of the Authority — to the High Court and Court of Appeal),35 with associated costs. The Commissioner says that is so, even if an earlier hearing date were available in the Authority.
[69] The Commissioner says he would be likely to appeal if Woodgate were successful in the challenge proceeding, because the Commissioner would then have to refund more than $2 million.
[70] For Woodgate, Mr Weaver submits that the likelihood of appeal may be more readily seen as a relevant factor in the exercise of the discretion in cases involving large-scale tax avoidance schemes, with dozens of participants. However, in light of the lack of precedential value of this challenge to any other taxpayers, the likelihood of appeal remains uncertain. Further, given that, as the Commissioner has acknowledged “the law on tax avoidance and arguably sham may be relatively settled” it is plain that this challenge primarily raises questions of the implications of well- understood legal precedents to generally understood facts. An appeal is no more likely in this proceeding than in any other challenge that may be heard by the Authority.
34 Commissioner of Inland Revenue v McIlraith, above n 2, at [19]–[20]; and Commissioner of Inland Revenue v Deepsea Seafoods, above n 24, at [18(f)].
35 Taxation Review Authorities Act 1994, ss 26A and 28.
[71] Whether either party will appeal the determination of the challenge proceeding is a matter for the future. I am not satisfied that the likelihood of an appeal is a significant issue, and is certainly not determinative in this application. I regard it as a neutral factor.
Challenge under section 108A TAA
[72] When the Commissioner reassessed Woodgate in the GST Return period ended 31 January 2018, he relied on s 108A(3) of the TAA. Section 108A(3) provides an exception to the application of the four-year statutory time bar which normally applies under s 108A(1) to prevent the Commissioner from amending a GST assessment so as to increase the amount assessed if four years had passed since the end of the GST Return period in which the tax return was provided.
[73] Section 108A(3) of the TAA permits the Commissioner to amend an assessment at any time to increase the amount of the assessment if the Commissioner considers that the person assessed has knowingly or fraudulently failed to disclose to the Commissioner all of the material facts necessary for determining the amount of GST payable for a GST Return period.
[74] The Commissioner says that his decision to rely on s 108A(3) of the TAA is not a disputable decision that can be challenged in a Hearing Authority. If Woodgate intends to proceed with its challenge of the Commissioner’s decision to rely on s 108A(3), it must apply for judicial review. In that event, the parties could agree for the challenge proceeding and the judicial review proceeding to be heard together or consolidated.
[75] Woodgate does not accept the Commissioner’s view that the challenge to the time bar under s 108A(3) of the TAA is not a disputable decision capable of challenge in a “hearing authority”. But, as Mr Weaver submitted, if the Commissioner is correct, that argument applies equally to the High Court, which is also a “hearing authority”, as defined in s 3 of the TAA.
[76] I accept that, for that reason, a transfer would not alter the position for either the Commissioner or Woodgate and is therefore a neutral factor in this application.
Conclusion
[77] Leave is granted for the Commissioner to proceed by way of originating application.
[78] For the reasons given above, no factors in this application weigh in favour of a transfer to the High Court. I am therefore not satisfied that this is an appropriate case for transfer. The Commissioner’s application to transfer the challenge proceeding from the Authority to the High Court is declined.
Costs
[79] The respondent is entitled to costs calculated on a category 2B basis. I invite the parties to confer and agree quantum. If they are unable to do so they should promptly file memoranda. Costs memoranda should not exceed five pages. Costs will then be determined on the papers, unless the Court directs otherwise.
Gwyn J
Solicitors:
Crown Law, Wellington for Applicant
Holland Beckett Law, Tauranga for Respondent
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