Lindsay v Commissioner of Inland Revenue
[2021] NZHC 830
•20 April 2021
ORDERS UNDER THE INHERENT JURISDICTION SUPPRESSING THE IDENTITY OF THE PLAINTIFF AND OTHER PARTIES AS SPECIFIED IN FOOTNOTE 1.
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2020-485-311
[2021] NZHC 830
UNDER the Judicial Review Procedure Act 2016 IN THE MATTER OF
an application for Judicial Review
BETWEEN
LINDSAY
Plaintiff
AND
COMMISSIONER OF INLAND REVENUE
Defendant
Hearing: 15 March 2021 Appearances:
J W Maassen and M S Dobson for Plaintiff M Deligiannis and E Venter for Respondent
Judgment:
20 April 2021
JUDGMENT OF COOKE J
[1] Between approximately 2000 and 2002 Mr Lindsay had a sexual relationship with Ms Jones.1 Ms Jones became pregnant and she gave birth to their son in 2003. Although Mr Lindsay knew that Ms Jones had had a child, he did not have further communication with her and got on with his own life. Some 16 years later Ms Jones made contact and commenced paternity proceedings against Mr Lindsay. After DNA tests were undertaken it was established that he was the father and a paternity order was made by the Family Court on 26 October 2017.
1 These are not the parties true names. Under the inherent jurisdiction there are orders prohibiting the publication of the identity of Mr Lindsay, Ms Jones and their child.
LINDSAY v COMMISSIONER OF INLAND REVENUE [2021] NZHC 830 [20 April 2021]
[2] Ms Jones also applied for child support at this time. On 27 November 2017 the Commissioner of Inland Revenue determined that Mr Lindsay was obliged to provide child support. That assessment not only required Mr Lindsay to provide child support prospectively, but it also assessed Mr Lindsay as liable for child support backdated to 2003. The backdated amount said to be owing by him was some $89,000.
[3] In these judicial review proceedings Mr Lindsay challenges the Commissioner’s decision requiring him to pay child support dating back to 2003. He accepts the obligation to pay child support prospectively, but challenges the backdated assessment. The Commissioner’s stance is that she has no discretion in relation to the backdated assessment and that it arises automatically as a consequence of the application of s 19 of the Child Support Act 1991.
Background facts
[4] There is limited factual information before the Court. The key facts are revealed by the documentary record put in evidence by Ms Kylie Roundtree, a customer services officer with Inland Revenue. They are also before the Court in the form of an agreed bundle of documents. Mr Lindsay has also provided an affidavit describing the background.
[5] Mr Lindsay says he met Ms Jones in around 1994 and they began a sexual relationship in 1999 or 2000 when Mr Lindsay was a single parent. He explains that their relationship was an open one, and that he understood Ms Jones had other sexual partners. He also says that it was agreed that they would use contraception and that he made it clear that he did not want to have a child with her.
[6] He says that the sexual relationship ended in December 2002, and that he moved to a new city in 2003. He says that Ms Jones rang him in March 2003 to tell him that she was pregnant and that he was the father. He says he was not certain that he was the father as he knew Ms Jones had other sexual partners.
[7] He says that he received a message that the child was born and he then went to see Ms Jones and the baby. He did not see Ms Jones or the child thereafter. He continued his life as a parent to his son, and he also then met a new partner.
[8] In 2016 he says he was surprised to be served with paternity proceedings by Ms Jones. He defended the proceedings on the basis that he could not be sure that he was the father, but agreed to do DNA testing. This established he was the father and a paternity order was made by the Family Court.
[9] He indicates that he understood that he would be liable for child support for his son, but was shocked and upset to find out that when an assessment was made on 27 September 2017 it backdated child support to 2003. He says that he is struggling to meet the substantial arrears as well as the child support requirements, and this is causing him and his partner ongoing anxiety. He says:
If [Ms Jones] had pursued paternity proceedings against me in 2003 then I would have had an opportunity to arrange my life to reflect my status as [my son’s] father. This includes my role in his life. I would have also arranged my affairs to reflect my responsibility to [my son]. This would have affected my child support liability, and as such the total amount of child support I would have had to pay over those 14 years.
[10] The Commissioner has not disputed Mr Lindsay’s account in the evidence filed, although the documentary record has been put before the Court.
[11] One issue of significance is that the Commissioner has not put before the Court any evidence of what social welfare payments were made to Ms Jones in relation to the child in question. During the course of the argument, however, the Commissioner has accepted that there was only limited social welfare payments made to Ms Jones. I will explain this in greater detail below.
The stance taken by the parties
[12] Mr Maassen for Mr Lindsay contends that the Commissioner’s stance cannot be justified. Mr Lindsay can fairly be assessed for child support as from the date when the successful application was made for that support in 2017, but it is unfair and unjustified for Mr Lindsay to be liable for backdated child support for some 14 years. Mr Lindsay was not told that any application for child support had been made in 2003 and neither was any process followed to identify that he had any obligation to provide child support. The Commissioner’s interpretation of the legislation suggesting he had backdated liability for this period of time was unrealistic.
[13] For the Commissioner, Ms Deligiannis contended that the Commissioner had no discretion on this matter as the statute operated automatically to backdate child support to when an application was first made, and that an application had been filed by Ms Jones in 2003 as was required. She emphasised that the statutory regime involved the state providing financial support to parents who have had the day to day responsibility for bringing up a child, and people in the position of Mr Lindsay were simply being asked to pay their share of the support provided to the child when parenthood was subsequently established. She explained that no penalties were imposed on the amount sought from Mr Lindsay, and that the backdated amount reflected what the statute determined was his liability in accordance with his taxable income.
Approach to interpretation
[14] Before addressing the statutory interpretation issues that arise, I first briefly address the approach to interpretation.
[15] In Terminals (NZ) Ltd v Controller of Customs the Supreme Court explained that taxation statutes should be interpreted in the same way as any other statutes, and that there is no presumption in favour of either party.2 The same can be said of the present legislation, which is also administered by the Commissioner. Under s 5(1) of the Interpretation Act 1999 this means that the text of an enactment is to be interpreted in light of its purpose. The adoption of a purposive approach means that provisions should be interpreted to make them work as Parliament must have intended, particularly when they form part of an overall scheme.3
[16] For the plaintiff, Mr Maassen argued that the presumption against statutes having retrospective effect applied and that Parliament would have more clearly expressed itself if that had been its intention.4 But I do not accept that the Commissioner is seeking that legislation have retrospective effect. Rather she is arguing that Mr Lindsay’s obligation dates back to an earlier point in time, even though
2 Terminals (NZ) Ltd v Comptroller of Customs [2013] NZSC 139; [2014] 1 NZLR 121 at [39].
3 Northland Milk Vendors Association v Northland Milk Ltd [1988] 1 NZLR 530 (CA) at 537–538. See Douglas White “A personal perspective of legislation, Northern Milk revisited – soured or still fresh?” (2016) 47 VUWLR 699.
4 Houghton v Saunders [2016] NZCA 483, [2017] 2 NZLR 189 at [293].
he did not know that an application potentially creating that obligation had been filed. That does not involve a statute having retrospective operation.
[17] There are nevertheless two other related interpretation concepts that may be relevant. First, Mr Lindsay complains that the interpretation adopted by the Commissioner involves procedural unfairness. He says that it is not fair that he be held liable in relation to an application made in 2003 that he was not told about. The right to procedural fairness, or natural justice, is a fundamental right. It is referred to in s 27(1) of the New Zealand Bill of Rights Act 1990. There is a presumption of interpretation that Parliament does not legislate in a manner inconsistent with fundamental rights.5 That presumption may have some relevance here.
[18] Secondly, the more surprising or unreasonable the implications of a particular interpretation are the less likely it will be considered to be what Parliament intended. This does not involve a license to depart from the plain meaning of a statute, but assists in understanding what the meaning is. Whether the interpretation is surprising or unreasonable focuses on the scheme and purpose of the legislation, and not more abstracted concepts of what is fair or reasonable.
What are the applicable provisions?
[19] There is an initial question concerning the version of the relevant provisions that apply. Section 19 of the Child Support Act regulates the issue of backdated child support. But that section has been amended and its amended version is materially different from that which prevailed in 2003. So there is an issue as to whether it is the version of s 19 in 2003 that applies, or the version that applied when the Commissioner made the assessment in 2017.
[20] Changes were made to s 19 by the Child Support Amendment Act 2013 (the 2013 Amendment Act). Ms Deligiannis argued, however, that transitional provisions in that amending legislation made it clear that the old legislation still applies. The position is more complicated because the transitional provisions in the 2013
5 New Health New Zealand Inc v South Taranaki District Council [2018] NZSC 59, [2018] 1 NZLR 948 at [292]–[293]; R v Secretary of State for the Home Department, ex parte Simms [2000] 2 AC 115 (HL) at 131.
Amendment Act were themselves later amended.6 The relevant transitional provision provides:7
1AApplication of Act to financial support for child support years ending before 1 April 2015
(1)This Act applies on and after 1 April 2015 in relation to financial support in respect of a child support year ending before that date as if the amendments made by the enactments listed in subclause (2) had not been made.
(2)The enactments are:
(a)Part 1 of the Child Support Amendment Act 2013, except sections 6, 18, 19, 19A, 31, and 32:
…
[21] The new s 19 was inserted by a provision in Part 1 of the 2013 Amendment Act, and it is not within the exceptions referred to in cl 1A(2)(a). Ms Deligiannis submitted, therefore, that decisions concerning child support for the years before 1 April 2015 were made as if the amendments had not been passed.
[22] Mr Maassen argued that the transitional provision did not apply because the current matter did not relate to “financial support in respect of a child.” I do not accept that. It appears clear to me that Parliament has provided that child support for the financial years before the amended legislation came into effect were to be assessed under the legislation prior to amendment. The words “financial support” are clearly referring to “child support” and that includes backdated child support given that s 19 is part of the child support regime.8
[23] This analysis presumes, however, that there is financial support in respect of a child support year before 1 April 2015 properly to be considered. Whether that is so is the substantive issue addressed below. But to the extent that the Commissioner contends that Mr Lindsay is liable for child support for years before 1 April 2015 the former legislation applies.
6 By s 55(7) of the Taxation (Annual Rates for 2015-2016 Research and Development, and Remedial Matters) Act 2016.
7 Child Support Act 1991, sch 1 pt 1 cl 1A.
8 Contrary to Mr Maassen’s submission, the provisions concerning applications are also within cl 1A(1).
[24] On that basis the relevant provision to be considered is s 19 as originally set out in the Child Support Act. That provided:
19Commencement of liability of person declared to be parent after application made
Notwithstanding section 18 of this Act, where the Commissioner is unable to accept an application for formula assessment of child support in respect of a child because at the time the application was made the Commissioner was not satisfied that the person from whom payment of child support is sought is a parent of the child, and subsequently—
(a)a Court declares the person to be a parent of the child; or
(b)the person is declared to be a parent of the child by an order made by a Court or a public authority in a specified overseas jurisdiction to which section 7(5) of this Act applies,—
child support is payable by the person in respect of the child from the day on which the application was received by the Commissioner.
Other reasons why application was rejected
[25] Mr Maassen first argued that s 19 did not apply to create backdated liability because there were other reasons why Ms Jones’ application was not accepted in 2003. In particular, in addition to the application being rejected because there was no evidence furnished that Mr Lindsay was the father, Ms Jones also did not provide a birth certificate for the child, or the child’s IRD number. He argued that s 19 applied only when the sole reason why the application was rejected was related to the lack of proof of parenthood.
[26] Ms Deligiannis argued that this was not the correct interpretation of s 19, and that in any event the additional matters were either not requirements, or were satisfactorily addressed. In particular a birth certificate could not be provided so soon after the child’s birth, and an IRD number was not yet issued for that child, and was subsequently duly created and available from the Commissioner’s files.
[27] I agree with Ms Deligiannis’ submission that the two additional matters referred to do not prevent s 19 from operating. Both were routine matters that would be expected to be addressed had the application for child support been pursued. Both may have been matters which may have led the Commissioner not to accept the
application at that time pending provision of this further information. But the key issue was the lack of any evidence of parenthood. It is unrealistic to interpret s 19 as not applying simply if there were other matters that needed to be provided before the application was accepted. There is nothing in s 19 providing that proof of parenthood must be the sole reason why the application had not been accepted. The critical point is that an application that was not able to be accepted is later accepted when proof of parenthood is provided.
[28]For these reasons I do not accept Mr Maassen’s submission.
Did s 19 apply to the 2003 application?
[29] Mr Maassen’s second argument is that s 19 did not apply because there was a fresh application for child support made in 2017, and that this was not a case where the application made in 2003 applied.
[30] As a matter of fact it is clear that when Ms Jones contacted the Commissioner’s representatives in 2016 she was told she needed to file a new application, and that she duly did so. I accept, however, that this is not determinative. The advice given to Ms Jones, and steps taken by the Commissioner’s staff may simply have been incorrect.
[31] The ultimate question is whether at the time when the Commissioner received the application in 2017, the application first made in 2003 was reactivated as a matter of law, and that it had now been made complete by the new information provided. For the reasons set out below I do not accept that. In my view the application in 2017 was correctly treated as a new application rather than a continuation of the one made 14 years earlier. In particular I accept Mr Maassen’s argument that the application filed in 2003 was refused, and Ms Jones subsequently confirmed it was not pursued. In my view that means that s 19 had no application. That is for two reasons:
(a)First, this was not a situation where the Commissioner was “unable to accept” Ms Jones’ 2003 application for lack of evidence of parenthood. Rather Ms Jones’ application was declined at that time. This was because Ms Jones had advised that she was not pursuing the procedures
referred to in s 19 to establish parenthood, and she received reduced social welfare as a consequence.
(b)In any event, in 2006 Ms Jones then advised the Commissioner that she was no longer receiving any social welfare for this child, or pursuing any child support application. From at that point her application was clearly no longer alive, including for the purpose of s 19.
[32]I address each of those points in turn.
The application was declined
[33] Ms Jones made it clear in the 2003 application that no procedures were being initiated to establish that Mr Lindsay was the father. For this reason her application was declined. This was not a situation where the Commissioner advised that he was unable to accept the application because evidence of parenthood had not been provided as is required for s 19 to apply.
[34]There are two features of s 19 that are of significance. In particular:
(a)The section refers to the Commissioner being “unable to accept” the application. This potentially contemplates a deficiency that can be remedied and accordingly that steps will be followed in relation to the deficiency. That is further emphasised by the reference to “at the time” and the Commissioner “was not satisfied” which again suggests the position can be remedied.
(b)The section then refers to the steps that would take place “subsequently”, being one of two Court processes referred to in s 19(a) or (b). That also contemplates that Court proceedings involving Mr Lindsay would be initiated to address the deficiency referred to in the first part of s 19.
[35] As Mr Maassen submitted the distinction between the Commissioner refusing an application, and the Commissioner advising that he or she is unable to accept it is
important. Sections 17, 18 and 21 refer to the Commissioner refusing the application on the basis that it is not “properly made”. Section 14 specifies what criteria must be satisfied for an application to be properly made. Importantly, if the s 14 criteria are met, the Commissioner is given a discretion — s 17(2) provides that the Commissioner “… may refuse to accept the application if not satisfied that it is properly made” (emphasis added). The Commissioner is not obliged to refuse. An explanation for giving the Commissioner a discretion in this respect is that the Commissioner can advise the applicant that she is unable to accept the application at that time, and thereby provide an opportunity to the applicant to satisfy the criteria that are not satisfied before deciding to decline or accept it. The Commissioner is empowered to do this rather than simply refusing the application.
[36] It is a notable factor of the legislation that there are separate statutory decisions with different procedural requirements for accepting an application, and then making a decision on that application. This deliberate framework is also understood in light of other provisions. Section 17(3) contemplates that the Commissioner can (but is not obliged to) conduct further inquiries to determine whether the application is properly made. Section 24 only obliges the Commissioner to make an assessment as soon as practicable “after acceptance of a properly made application”.9
[37] The provisions also generally place a degree of emphasis on procedural fairness. There is a duty to immediately inform the custodial parent if the Commissioner refuses to accept the application,10 and there is also a duty to give notice if the application is accepted.11 There is also a duty to give notice to the liable parent if the application is accepted.12 The Commissioner has a duty to then make the assessment as soon as practicable under s 24, with a series of other obligations then arising, including an obligation under s 89 to give notice to the liable parent after making the assessment. There are then rights of objection and appeal under ss 90 and 91. These provisions as a whole suggest there is an emphasis on procedural fairness, including in relation to the liable parent. That is consistent with the presumption that Parliament legislates
9 Child Support Act 1991, s 24(1)(a).
10 Section 21.
11 Section 22.
12 Section 23.
consistently with fundamental rights such as the right to natural justice.13 It would be inconsistent with that overall intent to say that an application could be received, and remain unprocessed for 14 years while the liable amount accumulated without the affected person knowing of it.
[38] Section 19 only applies when the Commissioner “is unable to accept” the application “at the time” it was made. The fact that it does not refer to the decision to refuse the application under s 17 is important. It partly explains why the Commissioner is given a discretion under s 17(2) not to refuse an application even if it is not properly made. The Commissioner can advise the applicant that he or she is unable to accept it at that time, giving the applicant the opportunity to meet the deficiency before the acceptance/refusal decision is made. So the acceptance/refusal decision under s 17(2) is deferred. Most significantly the Commissioner could allow the applicant the opportunity to follow Court procedures to establish proof of parenthood. The Commissioner can also provide the opportunity to address other matters, such as the provision of an IRD number or birth certificate for the child.
[39] On that view of the provisions s 19 is not intended to apply when an application is refused. It only applies when the Commissioner has advised that the application cannot be accepted without proof of parenthood, and procedures are then followed to establish this. It applies to address the period of time before a decision under s 17(2) is made to accept or reject the application, and appropriately recovers child support contributions for that period when the application is accepted.
[40] That seems to me to correspond with what Parliament would have intended. Section 19 has a more modest reach than the Commissioner contends for. It exists to cover the period between the application being received and the completion of proceedings which determine that a parent is liable for child support. If there are no such proceedings, and the application is accordingly declined, it has no operation.
13 See [17] above.
The application here
[41] As indicated the Commissioner has provided limited evidence explaining what happened with the application in the present case. That is not surprising because it happened over 17 years ago. But based on the evidence that is available Ms Jones's application was refused under s 17(2) rather than the Commissioner advising her that it could not be accepted. The contemporaneous documents record that a decline letter was sent to Ms Jones and copied to WINZ. In other words, her application was not held by the Commissioner pending the provision of further information, or pending Court proceedings to determine paternity.
[42] That is not surprising. In the application form Ms Jones indicted that no action was being taken to establish that Ms Lindsay was the father. No child support was then provided. It may be that Ms Jones sought social welfare assistance in relation to the child, but if she did Ms Deligiannis accepted Mr Maassen’s submission that s 70A of the Social Security Act 1964 (or a legislative equivalent) would have applied. It provides:
70A Rates of benefits for sole parents may be reduced
…
(2)The rate of benefit payable to any beneficiary to whom this section applies shall be reduced in respect of each dependent child in the care of the beneficiary—
(a)whose other parent has not been identified in law; or
(b)whose other parent has not been named in an application for formula assessment of child support under the Child Support Act 1991 as a liable parent from whom child support is sought; or
(c)whose other parent the beneficiary has failed or refused to testify against as required under section 122 of the Child Support Act 1991,—
by an amount equal to $22.
…
[43] Ms Jones did not pursue an application for child support after it was declined, and then elected to receive reduced social welfare assistance in relation to this child because she was not pursuing any process to identify Mr Lindsay as the father.
[44] On the evidence available Ms Jones’ election not to pursue any processes to identify Mr Lindsay as a liable parent, and her advice to the Commissioner in the application form that she did not intend to do so, led to the application for child support being refused. In my view this means that s 19 does not apply.
Application withdrawn in any event
[45] In any event there is an alternative reason why s 19 does not apply. In September 2006 Ms Jones again made contact with the Commissioner. She explained that she had stopped taking social welfare, and confirmed that no child support application was being pursued in relation to this child. There is a contemporaneous note of a telephone communication between Ms Jones and the Commissioner’s staff. That note records that she rang and advised that she had cancelled the social welfare benefits in August 2006. The note records that the staff member confirmed this from other information. It also records that the Commissioner’s representative explained to Ms Jones “that if non-custodial parent doesn’t pay, she won’t be paid” and it says that Ms Jones was “okay with this”.
[46] There is no evidence from the Commissioner identifying what social welfare benefits Ms Jones received. Ms Roundtree’s affidavit refers to the record of this telephone discussion in ambiguous terms, and the note itself has some ambiguities. I was informed from the bar that Ms Jones had other children, and that the liable parent provisions were operating in relation to those other children. Ms Deligiannis accepted however, that from August 2006 Ms Jones not only received no child support in relation to Mr Lindsay’s son, but that she received no social welfare support in relation to him either. This means that for approximately 11 of the 14 years for which Mr Lindsay has been assessed as liable to pay child support there were no social welfare payments being made for this child at all, and for the remaining period of approximately three years the social welfare was only paid at reduced levels applicable when no liable parent has been identified.
[47] The obligation for the custodial parent to make an application for child support under s 9 of the Act is in the following terms:
9Custodian in receipt of social security benefit must apply for formula assessment
(1)Any person—
(a) who is an eligible custodian in relation to a qualifying child; and
(b) who is in receipt of a social security benefit,—
must apply for a formula assessment of child support in relation to any person who is a liable parent of the child.
(1A) Where a person is in receipt of an unsupported child's benefit in respect of a child, but is not in receipt of any other social security benefit, subsection (1) shall require the person to apply for a formula assessment of child support only in relation to the child or children in respect of whom the unsupported child's benefit is paid.
(2)Where 2 or more parents are liable to pay child support in respect of the child, and subsection (1) applies to the custodian in relation to each parent, the custodian must apply for formula assessment of child support in relation to each liable parent of the child.
(3)Every application required by this section shall be made at the same time as an application for the social security benefit is made and at any other time when the Commissioner notifies the eligible custodian of the qualifying child that an application under this section is required in relation to the qualifying child.
(4)Section 70A of the Social Security Act 1964 applies to any person who fails to comply with this section.
[48] Significantly, from August 2006 the precondition under s 9(1)(b) no longer applied. At the very least it seems to me that from this point of time the application first made in 2003 must be treated as being no longer alive. This is the consequence of Ms Jones advising the Commissioner that she was no longer receiving social welfare, and arising from the fact that she was not receiving any child support for this child because she had not taken the next steps to prove the identity of the father. It is clear at this point that an application for child support was no longer either mandated or pursued.
[49] The limited evidence filed by the Commissioner ultimately means that she has elected to argue this proceeding as a matter of principle. Ultimately her stance is that a person in Mr Lindsay’s position is obliged to pay backdated child support from the
date when an application is first filed, even in circumstances where limited social welfare payments have been made in relation to that child. With respect, that is an unrealistic interpretation of the provisions. There may have been some social welfare payments made for this child, but only for a period, and at the reduced rate that is payable in relation to all children when the liable parent cannot be, or has not been identified. For most of the period where the Commissioner claims that Mr Lindsay is liable for backdated child support there has been no State assistance provided in relation for the child at all.
[50] The text of an enactment must be interpreted in light of its purpose. Here the relevant purpose has been set out by Parliament itself in s 4 where the objects of the Act are specified. This includes the following object:
(j) To ensure that the costs to the State of providing an adequate level of financial support for children and their custodians is offset by the collection of a fair contribution from non-custodial parents:
[51] That object does not arise here. There has been limited cost to the State, and there is no need to have that cost offset by Mr Lindsay providing any contribution, let alone a fair one for most of this period. The State is demanding that Mr Lindsay contribute to financial support that has largely not been provided. That is a strong reason against the Commissioner’s interpretation prevailing.
[52] Turning back to s 19, this is no longer a situation where the Commissioner was “unable to accept” an application for child support. It was a situation where the Commissioner first declined the application, and then was later advised that the applicant no longer sought child support, and was no longer receiving social welfare such that the mandatory precondition requiring the application to be filed no longer applied. In my view by that stage the application could no longer be treated as alive for the purposes of s 19.
[53] For these reasons, and subject to the discretion in relation to relief that I next address, Mr Lindsay is entitled to the declarations concerning backdated liability sought in his statement of claim.
Discretion in relation to relief
[54] On behalf of the Commissioner, Ms Deligiannis argued that even if Mr Lindsay persuaded the Court that the Commissioner had misinterpreted the legislation, the Court should nevertheless decline relief. She did so for two inter-related reasons:
(a)That Mr Lindsay had a right of appeal which he had not exercised, such that judicial review relief should not be made available.
(b)That in all the circumstances of the case relief should be declined.
Mr Lindsay should have pursued appeal rights
[55] When the Commissioner made the assessment in 2017 requiring Mr Lindsay to pay prospective child support, and also backdated child support to 2003, Mr Lindsay had a right to object to the assessment within 28 days and also had a right to appeal to the Family Court. He did not exercise those rights. Ms Deligiannis argued that it was inappropriate to allow Mr Lindsay to effectively avoid the time limits by now bringing these judicial review proceedings.
[56] Although Ms Deligiannis accepted that there was no ouster clause applicable in the present case such that the Supreme Court’s approach in Tannadyce Investments v Commissioner of Inland Revenue would apply, 14 she argued there was good reason why judicial review should not be permitted. She referred to the judgment of Brown J in Lay v Commissioner of Inland Revenue where the Court found that a liable parent could not defend enforcement proceedings by challenging the assessments, as the correct procedure for him to challenge them was through the appeal process.15
[57] I see no substance in the Commissioner’s argument. The right to challenge decisions by way of judicial review is a fundamental right. It is affirmed by s 27 of the New Zealand Bill of Rights Act 1990. That right exists irrespective of whether there is a right of appeal – that is expressly confirmed by s 16(3)(a) of the Judicial
14 Tannadyce Investments Ltd v Commissioner of Inland Revenue [2011] NZSC 158, [2012] 2 NZLR 153.
15 Lay v Commissioner of Inland Revenue [2015] NZHC 2962, (2015) 27 NZTC 22–033.
Review Procedure Act 2016. In H v Refugee and Protection Officer the Supreme Court referred to the right in the context of an ouster clause. The Court held:16
[63] Given the constitutional importance of judicial review, reinforced as it is by s 27(2) of the Bill of Rights Act, the courts approach privative clauses cautiously and in particular will give anxious consideration to their interpretation and application. As noted in the reasons of the majority in Tannadyce Investments Ltd v Commissioner of Inland Revenue, judges should be slow to conclude that an ouster provision precludes applications to the High Court for judicial review alleging unlawfulness of any kind. That caution is appropriate in this case. What is required is a construction of s 249 that recognises Parliament’s intention to prevent duplicative proceedings but also preserves the ability of the Court to supervise the exercise of public power and prevent injustice occurring when a statutory process fails because the decision-maker acts unlawfully and an injustice results.
[58] And when finding that the clause did not preclude judicial review in that case the Court went on to say:
[78] … the privative clause does not prevent the Court from exercising its supervisory jurisdiction to ensure that the requirements of the Act are met and the applicant’s claim is considered lawfully. Since the decision of the Court of Appeal in Bulk Gas Users Group v Attorney-General, it has been settled law that a privative provision does not necessarily prevent scrutiny of a decision based on an error of law on the part of the decision-maker that is otherwise reviewable.17 The Court may strike out review proceedings where the Court is satisfied that the available appeal rights provide a more appropriate pathway to a remedy than might otherwise have been sought in the review proceedings.18 But for the reasons given, the deprivation of first instance determination as required by the statute could not be remedied by the alternative pathway of appeal in the present case.
[59] There will accordingly be some cases where the appeal route would provide the obvious way in which decisions could be challenged, and the pursuit of judicial review could be seen as an abuse of process. But that is not the case here. Whilst it is conceivable that Mr Lindsay could have pursued objection or appeal rights, including before the Family Court, this would not have been the most appropriate avenue. The present case is one best suited for judicial review. It turns on questions of statutory interpretation. The High Court has the authority to make declarations in relation to the true meaning of statutes. A decision of the Family Court might address
16 H v Refugee and Protection Officer [2019] NZSC 13, [2019] 1 NZLR 433 (footnote omitted).
17 Bulk Gas Users Group v Attorney-General [1983] NZLR 129 (CA) at 133.
18 As occurred in Tannadyce, … See also Love v Porirua City Council [1984] 2 NZLR 308 (CA) where an application for judicial review of a decision of the Council was struck out, the Court having concluded that a claim of defect in the decision was appealable and capable of satisfactory resolution on appeal.
Mr Lindsay’s case, but not the interpretation of the statute more generally. The Commissioner has advanced the argument here on the basis of a point of principle that would potentially apply to other cases, and not just the case of Mr Lindsay. The statutory regime for objections and appeals is not best equipped to deal with the present issue.
[60] Whilst there has been some delay in the present case in the sense that the time periods provided for the rights of appeal have been exceeded, the delay is not such that would warrant the Court declining relief in its discretion for that reason.
[61] The decision in Lay v Commissioner of Inland Revenue is directed to a different question.19 It concerns the question of collateral challenge. It is not appropriate for a person to challenge the legality of an assessment by resisting enforcement. An assessment is valid and effective unless and until it is set aside. The appeal procedure or judicial review proceedings are the appropriate avenues to address such challenges, not collateral challenges during enforcement proceedings.
Other discretionary factors
[62] Ms Deligiannis argued that, in addition to the alternative remedies available under the objection and appeal processes, there were other factors that meant relief should be declined, including:
(a)That Mr Lindsay did not bring the proceedings with “clean hands”. He knew Ms Jones had said he was the father in 2003, but took no steps to establish whether he was before undertaking a paternity test in 2016.
(b)That there was prejudice to third parties if judicial review was granted, including the fairness to liable parents who do meet their child support obligations, and also Ms Jones. She submitted:
[Ms Jones] becomes solely responsible for the upbringing and financial support of [her son] and misses out on any financial support from [Mr Lindsay] as a liable parent. In addition, for those periods [Ms Jones] was receiving Social Welfare
19 Lay v Commissioner of Inland Revenue, above n 15.
benefit, the financial tab falls on the taxpayer to support her and [her son]. As per the objects of the Act, it is the responsibility of parents to provide for their children, not the taxpayers or third parties.
(c)That there was no substantial public benefit in the proceedings as the Child Support Amendment Bill 2020 remedied any wider issues, including by providing a timeframe of 60 days for backdating of child support.
[63] I have little hesitation in also rejecting these arguments. First, there is real difficulty with the proposition that the Court should, in its discretion, decline to set aside a determination that someone is liable to pay the Crown approximately $90,000 notwithstanding concluding that that amount is not lawfully due. That would seem to be inconsistent with the very function of the Court, and the rule of law. There would have to be extremely powerful reasons before the Court would adopt that approach.
[64] In any event I do not agree with the Commissioner’s submissions on the merits. As I have already indicated, this is not a case where the State has stepped in and met Mr Lindsay’s obligations as a parent. Whilst some social welfare payments were initially made to Ms Jones, that was only for a comparatively short period, and the payments she received were at the reduced rates when no liable parent is identified. In any event the Commissioner argues this case as a matter of principle — that is on the basis that a person in Mr Lindsay’s position is liable even if there has been little or no relevant social welfare payments at all.
[65] As for the position of other liable parents, if there are other parents in the same position as Mr Lindsay it may be that they have been required to make payments unlawfully. It would be wrong for the Court not to declare the law, and apply the results of that declaration in this case because of the potential for this to be the case.
[66] Finally, to the extent that it is appropriate to consider what is before Parliament by way of a Bill, it is noteworthy that the Bill recognises the unfairness in long periods of backdating, but the proposals do not remedy the more extreme circumstances such as the present case. So I struggle to see why that would be a reason why the Court would exercise its discretion in favour of the Commissioner.
[67] For these reasons I do not accept the Commissioner’s arguments that relief should be declined in the Court’s discretion.
Result and Costs
[68] Mr Lindsay’s judicial review challenge is upheld. There will be a declaration that the child support assessment of the Commissioner dated 23 November 2017 is invalid to the extent that it imposed backdated liability to 2003. Leave is reserved as to the precise formulation of that declaration.
[69] Mr Lindsay sought indemnity costs under r 14.6(4) of the High Court Rules 2016 on the basis that the Commissioner had acted unreasonably in the conduct of these proceedings. I accept Ms Deligiannis’s submissions that the high threshold required for an indemnity award is not met in this case, however.20
[70] There is nevertheless a related concept. Under r 14.6(3)(c) increased costs can be awarded if a proceeding is of importance to persons other than the parties, and it is reasonably necessary for the party claiming costs to bring the proceedings in the interests of those affected.
[71] As indicated, the Commissioner has argued this case as a matter of principle, and on the basis that she had no discretion. Very little evidence was put before the Court concerning the individual circumstances relevant to Mr Lindsay’s child support obligations. Mr Lindsay has been required to bring these proceedings to challenge an interpretation adopted by the Commissioner relevant to the question of backdated child support generally. The individual circumstances concerning Mr Lindsay only became relevant on the Commissioner’s case on the question of the discretion in relation to relief. For the reasons I have addressed above, the matters advanced by the Commissioner on that issue had no substance. It emerged during the hearing that, on the facts of Mr Lindsay’s case, no social welfare payments were being made in relation to the child for approximately 11 of the 14 years, and at much reduced rates for the other three. It seems to me that in those circumstances Mr Lindsay has been required
20 See Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400; Paper Reclaim Limited v Aotea International Limited [2007] 3 NZLR 188 (CA).
to address an issue on behalf of those affected by this interpretation more broadly, and it was reasonably necessary for him to do so given the Commissioner’s stance.
[72] For these reasons it seems to me that an uplift of scale costs is appropriate under r 14.6(3)(c). In my view uplift of 10 per cent of the costs otherwise awardable (but not the disbursements) is appropriate. The parties have previously agreed this is a category two proceeding, and costs should accordingly be awarded on a 2B basis with that uplift. If the parties are unable to resolve the final quantification, leave is reserved to file memoranda.
Cooke J
Solicitors:
Wadham Partners, Palmerston North for the Plaintiff Crown Law, Wellington for the Defendant
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