Mawhinney v Commissioner of Inland Revenue
[2018] NZHC 2604
•5 October 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-000350 [2018] NZHC 2604
UNDER the Judicial Review Procedure Act 2016 IN THE MATTER
of Goods and Services Tax Act 1985 and the
Tax Administration Act 1994BETWEEN
PETER WILLIAM MAWHINNEY Applicant
AND
COMMISSIONER OF INLAND REVENUE
First Respondent
TAXATION REVIEW AUTHORITY Second Respondent
Hearing: 23 August 2018 Appearances:
Applicant in person
R Roff and H Salisbury for the RespondentsJudgment:
5 October 2018
JUDGMENT OF WOOLFORD J
This judgment was delivered by me on Friday, 5 October 2018 at 12:30 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors: Crown Law, Wellington
Copy to: Applicant
MAWHINNEY v COMMISSIONER OF INLAND REVENUE [2018] NZHC 2604 [5 October 2018]
Introduction
[1] Mr Mawhinney, as trustee of the Sixty-Six Auckland Trust, applies for judicial review of decisions by the Commissioner of Inland Revenue and Taxation Review Authority. The Commissioner considers the Court does not have jurisdiction to hear most of the complaints. Even if there was jurisdiction, the Commissioner says the statement of claim does not disclose an arguable cause of action and is an abuse of process. The Commissioner, accordingly, applies to strike out the application for judicial review.
Facts
[2] Mr Mawhinney is a trustee of the Sixty-Six Auckland Trust (the Trust), the taxpayer. This case revolves around GST returns filed by the Trust in 2008 and 2009, and the processes which followed.
[3] For the period ended 31 July 2008, the Trust claimed a GST refund of
$144,706.72. This was on the basis it had purchased a property for approximately
$1.3 million. Then, for the period ended 31 March 2009, the Trust returned GST output tax of $144,444.44. This time on the basis it had sold the property for approximately $1.3 million.
[4] The Commissioner formed the view the Trust was not carrying on any taxable activity. She considered the property was never supplied to the Trust and the Trust never paid for it. On 30 March 2011, the Commissioner reassessed:
(a)The July 2008 refund to nil (the 2008 Reassessment). The input credit claimed for the purchase of second hand goods was disallowed.
(b)The March 2009 GST return to nil. This removed the corresponding output tax liability on the sale of the property.
[5] The Commissioner says she did not have to issue a notice of the proposed adjustment (NOPA) because of s 89C(eb) of the Tax Administration Act 1994:
89C Notices of proposed adjustment required to be issued by
Commissioner
The Commissioner must issue a notice of proposed adjustment before the
Commissioner makes an assessment, unless—
…
(eb)the Commissioner has reasonable grounds to believe that the taxpayer has been involved in fraudulent activity; or
[6] The Trust denies any fraudulent activity and maintains it carried on taxable activity.
[7] On 4 May 2011, the Commissioner cancelled the Trust’s GST registration with effect from the taxable period ending 30 September 2010. This too reflected the Commissioner’s view the Trust was not carrying on any taxable activity.
[8] On 29 July 2011, the Trust issued a NOPA in relation to the 2008 Reassessment. That initiated the disputes procedures under Part 4A of the Tax Administration Act.
[9] On 25 August 2011, the Commissioner wrote to the Trust advising she would be rejecting the notice in full. A notice of response (NOR) was issued by the Commissioner on 26 September 2011 to the same effect.
[10] The normal course is for the disputes procedures in Part 4A to be followed before the matter progresses to the Taxation Review Authority (TRA). However, on
3 August 2011, the Trust issued challenge proceedings in the TRA in relation to the
2008 Reassessment. It issued those proceedings together with Zebra Crossings Trading Company Ltd (Zebra Crossings), the alleged purchaser of the property. The Commissioner had also disallowed Zebra Crossings’ claim for a GST input credit.
[11] The Commissioner, through her solicitors, wrote to the Trust on 24 November
2011 asking which process it intended to pursue – the disputes procedures or the challenge procedures. The Trust replied saying it wished to pursue the challenge in the TRA and asked for the disputes procedures to “be put in abeyance in the meantime”.
[12] On 20 January 2012, the Trust registered for GST again, effective from
20 January 2012.
[13] The Commissioner applied to strike out the challenge proceedings on 26 June
2013. Before the strike out application was heard, the Trust discontinued the challenge proceedings on 30 September 2013. On the same day, Mr Mawhinney wrote to the Inland Revenue Department on behalf of the Trust, asking to progress the dispute. The Commissioner declined on 18 October 2013:
By discontinuing the TRA proceedings the taxpayer has accepted the Commissioner’s assessments. The taxpayer’s challenge has been finalised and there is no longer any dispute to progress. Therefore, the assessments are confirmed.
I note that you filed a dispute and challenge around the same time in July 2011 and you chose to pursue the challenge for over 2 years until you recently discontinued. Further, Crown Law wrote to you at the time to clarify whether you wished to continue with the dispute or challenge. You decided to pursue the challenge.
Accordingly, it is not possible to continue to dispute an assessment under Part
4A Tax Administration Act 1994.
[14] The Commissioner then heard nothing from Mr Mawhinney for almost two years. On 3 August 2015, Mr Mawhinney wrote to the Department again on behalf of the Trust. He said:
It is now more than 4 years since the taxpayer’s notice of proposed adjustment dated 28 July 2011 was issued, in respect of an IRD assessment for the GST period ended 31 March 2009.
Please refund the excess GST by cheque payment. …
[15] In late 2015, the Commissioner cancelled the Trust’s GST registration with effect from 30 September 2015.
[16] The parties exchanged further correspondence. In a letter dated 19 September
2016, the Department of Inland Revenue advised Mr Mawhinney it did not consider there was any live dispute or excess GST refund available.
[17] In August 2017, the Trust filed a notice of claim in the TRA in relation to:
(a) The 2008 Reassessment.
(b) The cancellation of the Trust’s GST registration with effect from
30 September 2015.
[18] The Authority struck out the Trust’s challenge in relation to the 2008
Reassessment on 29 January 2018. It did so pursuant to s 138H on the basis it had not been commenced within the required statutory response period, and therefore did not comply with the requirements of s 138B.
Application for judicial review
[19] The Trust commenced judicial review proceedings in February 2018. In substance, the Trust seeks to challenge the following decisions:
(a)The Commissioner’s decision to not complete the disputes process in accordance with the Trust’s NOPA, dated 29 July 2011. It seeks an order requiring the Commissioner to complete that process.
(b) The Commissioner’s decision to invoke s 89C(eb) in respect of the
2008 Reassessment. It seeks a declaration of the “true interpretation”
of that sub-section.
(c)The TRA’s decision on 29 January 2018 to strike out the part of its challenge relating to the 2008 Reassessment. It seeks an order setting aside that decision.
[20] The application discloses six causes of action to that effect. These are as follows:
(a)The decision by the Commissioner to not complete the disputes process amounted to unreasonable administrative delay. As a result, the Trust has been deprived of its right to have the disputes process completed within a reasonable time.
(b)The delay breached the Trust’s right to natural justice. The TRA was also mistaken when it concluded, on 29 January 2018, the challenge had not been commenced within the statutory response period.
(c)The Commissioner has misinterpreted s 89C(eb) of the Tax Administration Act as giving her the power to reassess GST input tax to nil on the basis that it is believed the Trust had been involved in fraudulent activity. That section only allows the Commissioner to circumvent the duty to first issue a NOPA before making that reassessment.
(d)Judicial review is available with respect to the Commissioner’s decision to invoke s 89C(eb). That is because that decision cannot be subject to the disputes process and it cannot be the subject of a challenge. It is also not a “disputable decision” under ss 3 and
138E(1)(E)(iv) of the Tax Administration Act.
(e)The Trust will face substantial injustice if it is required to argue the misinterpretation of s 89C(eb) by the first respondent through the disputes and challenge procedures. This is because the onus will be on the Trust in those procedures to establish it has not been involved in fraudulent activity.
(f)Under the heading “appeal”, the TRA erred in its 29 January 2018 decision in striking out the part of the challenge relating to the 2008
Reassessment. It was not filed outside the response period.
The law
Strike out
[21] Rule 15.1(1) of the High Court Rules 2016 provides the power for the High
Court to strike out all or part of a proceeding:
15.1 Dismissing or staying all or part of proceeding
(1) The court may strike out all or part of a pleading if it—
(a)discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
(b) is likely to cause prejudice or delay; or
(c) is frivolous or vexatious; or
(d) is otherwise an abuse of the process of the court.
…
[22] The relevant principles are:
(a)A strike out application proceeds on the assumption that the facts pleaded in the statement of claim are true1 unless they are entirely speculative and without foundation.2
(b)Before the Court may strike out proceedings, the causes of action must be so clearly untenable that they cannot possibly succeed.3 The case must be “so certainly or clearly bad” that it should be precluded from going forward.4
(c)The Court may strike out proceedings if it is likely to cause prejudice or delay. Pleadings which can cause delay include those that are “prolix; are scandalous and irrelevant; plead purely evidential matters; or are unintelligible”.5
(d)The Court may also strike out a claim if it is frivolous, vexatious, or otherwise an abuse of the Court’s process. A frivolous proceeding is one which trifles with the Court’s processes, while a vexatious one
contains an element of impropriety.6 A proceeding that is “otherwise
1 Attorney-General v Prince [1998] 1 NZLR 262 (CA) at 267.
2 Commissioner of Inland Revenue v Michael Hill Finance (NZ) Ltd [2016] NZCA 276, [2016] 3
NZLR 303 at [4].
3 Attorney-General v Prince [1998] 1 NZLR 262 (CA) at 267.
4 W v Essex County Council [2001] 2 AC 592 (HL) at 601.
5 Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013] 2 NZLR
679 at [89].
6 Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013] 2 NZLR
an abuse of process” captures all other instances of misuse of the
Court’s processes.7
(e)The jurisdiction is to be exercised sparingly, and only in a clear case where the Court is satisfied it has the requisite material.8
(f)The fact that a strike out application raises difficult questions of law and requires extensive argument does not exclude jurisdiction.9 But particular care is required where the law is confused or developing.10
Disputes in the tax context
[23] The Tax Administration Act prescribes a detailed statutory process through which taxpayers may contest decisions and assessments made by the Commissioner. There are essentially two steps involved.11
[24] First, there are the disputes procedures contained in Part 4A of the Act. The disputes procedures generally follow the filing of a return and go up to the point at which the Commissioner issues an assessment.12 The purposes of the disputes procedures include improving the accuracy of disputable decisions made by the Commissioner and promoting the prompt and efficient resolution of disputes by having open and full communication prior to commencing challenge proceedings.13
[25] Second, the challenge procedure, set out in Part 8A of the Act, follows on the disputes procedures. Part 8A takes over if and when the disputes procedures have
failed to resolve the matter and the Commissioner has issued an assessment which the
7 Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013] 2 NZLR
679 at [89].
8 Attorney-General v Prince [1998] 1 NZLR 262 (CA) at 267.
9 Attorney-General v Prince [1998] 1 NZLR 262 (CA) at 267.
10 Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].
11 Tannadyce Investments Ltd v Commissioner of Inland Revenue [2011] NZSC 158, [2012] 2 NZLR
153 at [48]. See also Susan Glazebrook “Tax and the Courts” (paper presented to Chartered Accountants of Australia and New Zealand, 19 November 2015) and Callum JL Burnett “Tax Litigation in New Zealand: An Empirical Analysis” (2016) 27 NZULR 315 at 317–318.
12 Tannadyce Investments Ltd v Commissioner of Inland Revenue [2011] NZSC 158, [2012] 2 NZLR
153 at [48].
13 Tax Administration Act 1994, s 89A.
taxpayer wishes to challenge.14 A challenge is commenced by filing a proceeding in a hearing authority, either the TRA or the High Court, within the strict timeframes prescribed by the Tax Administration Act.15
[26] Part 6 of the Tax Administration Act concerns assessments. Sections 109 and
114 provide:
109 Disputable decisions deemed correct except in proceedings
Except in objection proceedings under Part 8 or a challenge under Part 8A,— (a) no disputable decision may be disputed in a court or in any
proceedings on any ground whatsoever; and
(b)every disputable decision and, where relevant, all of its particulars are deemed to be, and are to be taken as being, correct in all respects.
114 Validity of assessments
An assessment made by the Commissioner is not invalidated—
(a) through a failure to comply with a provision of this Act or another
Inland Revenue Act; or
(b)because the assessment is made wholly or partially in compliance with—
(i)a direction or recommendation made by an authorised officer on matters relating to the assessment:
(ii)a current policy or practice approved by the Commissioner that is applicable to matters relating to the assessment.
[27] Section 114 makes clear no assessment is invalidated by any of the circumstances set out in the section.16 As the definition of a disputable decision includes an assessment, the effect of s 109 is that no assessment or other disputable decision may be disputed in any court or on any ground whatsoever, except in
14 Tannadyce Investments Ltd v Commissioner of Inland Revenue [2011] NZSC 158, [2012] 2 NZLR
153 at [50].
15 Tax Administration Act 1994, ss 138B to 138F.
proceedings under the Act.17 In Tannadyce Investments Ltd v Commissioner of Inland
Revenue, the Supreme Court said:18
It is clear that by means of s 109 Parliament was concerned to ensure that disputes and challenges capable of being brought under the statutory procedures were brought in that way and were not made the subject of any other form of proceeding in a court or otherwise.
[28] The Supreme Court accordingly held that because of s 109 judicial review will only be available in the following limited circumstances:19
(a)If it is not practically possible for a taxpayer to challenge an assessment under Part 8A. The ability of the hearing authorities to consider the challenge will not be present in such cases. This will be rare.
(b)If the issue concerns some suggested flaw in the statutory process that needs to be addressed outside the statutory regime, because it is not provided for within it, as opposed to challenging the legality, correctness or validity of an assessment.
[29] It follows that to resist the striking out of its application for judicial review, the Trust must establish a sufficient factual foundation that it is not practically possible for it to follow the statutory procedure.20 As the Supreme Court said:21
Because of the clear parliamentary indication in s 109 that, if possible, the statutory procedures must be followed, litigants who seek to invoke judicial review and are challenged by way of an application to strike-out must persuade the Court that there is a valid basis for invoking judicial review. If the strike out test were not at that level the whole purpose of s 109 would be open to subversion.
17 Tannadyce Investments Ltd v Commissioner of Inland Revenue [2011] NZSC 158, [2012] 2 NZLR
153 at [53].
18 Tannadyce Investments Ltd v Commissioner of Inland Revenue [2011] NZSC 158, [2012] 2 NZLR
153 at [53].
19 Tannadyce Investments Ltd v Commissioner of Inland Revenue [2011] NZSC 158, [2012] 2 NZLR
153 at [58]–[59]. See further Andrew T Grant “Tannadyce and the Role of Judicial Review in
New Zealand Tax Disputes” [2018] NZ Law Rev 39 at 71.
20 Tannadyce Investments Ltd v Commissioner of Inland Revenue [2011] NZSC 158, [2012] 2 NZLR
153 at [84].
Commissioner’s submissions on strike out
[30] The Commissioner makes three main submissions on strike out. First, there is no jurisdiction because the Trust’s application for review does not fall within either of the exceptions set out by the Supreme Court in Tannadyce Investments Ltd v Commissioner of Inland Revenue. Second, even if there is jurisdiction, the Trust’s statement of claim discloses no arguable cause of action. Third, the proceedings should be struck out as an abuse of process.
No Jurisdiction
[31] The Commissioner essentially argues the present proceeding is a collateral attack on the correctness of the 2008 Reassessment, which is a disputable decision in accordance with s 3. It was practically possible for the Trust to invoke the statutory disputes and challenge procedures. Therefore, the case does not fall within the first Tannadyce category.
[32] In fact, the Trust invoked these procedures in 2011, but discontinued the challenge in 2013. The disputes and challenge procedures are not available now with respect to the 2008 Reassessment because the Trust has exhausted its dispute and challenge rights. Even if the dispute was still alive after the Trust discontinued its challenge, the Trust took no action on it between 2013 and 2017. The filing of the
2017 claim was not within the statutory response period.
[33] The present case also does not fall under the second Tannadyce exception. There is no flaw in the statutory process which needs to be addressed outside the statutory regime. Rather, the relief the Trust seeks lies within the statutory procedures. Section 138D expressly provides for a taxpayer to commence a challenge proceeding under Part 8A outside the statutory response period, when certain criteria are met. That pathway has not been pursued.
[34] In respect of the Trust’s allegation the Commissioner misinterpreted s 89C(eb), the Commissioner submits this complaint ultimately focuses on the validity or correctness of the 2008 Reassessment. So, while she accepts her discretionary
decision to not issue a NOPA under s 89C(eb) cannot be challenged pursuant to s 138E(1)(iv), the resulting reassessment clearly can, and was challenged by the Trust.
No arguable cause of action – first and second causes of action
[35] The Commissioner says the disputes procedures in relation to the 2008
Reassessment concluded when the challenge rights were properly exercised.
[36] Prior to the amendments by the Taxation (Tax Administration Act and Remedial Matters) Act 2011, s 138B(3) of the Tax Administration Act entitled a taxpayer to commence challenge proceedings if the Commissioner rejected the taxpayer’s NOPA and the taxpayer filed proceedings within two months of the Commissioner’s notification that the proposed adjustment would not be adjusted.
[37] Section 138B(3) essentially gave taxpayers a right of unilateral opt-out in taxpayer initiated disputes. This means that then (unlike now) it was not necessary for the Commissioner to issue a disclosure notice or statement of position for the taxpayer to initiate challenge proceedings early, rather than following the remainder of the statutory procedures.
[38] The Commissioner argues the Trust invoked that unilateral opt out by electing to continue with the proceedings in the TRA. The Trust’s indication that it wanted the dispute to be put in abeyance in the meantime was of no legal effect. As the Supreme Court said in Tannadyce, the challenge procedure “takes over” from the disputes procedures if, and when, the disputes procedures fail to resolve the dispute.22 It cannot have been Parliament’s intention that a taxpayer would be able to simultaneously engage in the disputes and challenge procedures, swapping between them at will. That would be contrary to the purpose of the statutory scheme, which is to provide certainty
and finality in tax administration.
22 Tannadyce Investments Ltd v Commissioner of Inland Revenue [2011] NZSC 158, [2012] 2 NZLR
153 at [48].
No arguable cause of action – third, fourth and fifth causes of action
[39] The Trust’s third to fifth causes of action relate to the Commissioner’s decision pursuant to s 89C(eb) to make the 2008 Reassessment without first issuing a NOPA. But the Commissioner says the 2008 Reassessment was made using her s 113 powers, not s 89C(eb). Section 89C(eb) was relied on purely as the procedural basis to reassess without first issuing a NOPA.
[40] It follows the Commissioner has made no error in her use or interpretation of s 89C(eb). Even if she had, such an error would not be material. Due to s 114, the
2008 Reassessment would not be invalidated for that reason.
[41] Section 89D(1) specifically provides that if the Commissioner issues an assessment without previously issuing a NOPA, the taxpayer may issue a NOPA in respect of that assessment. It is the resulting assessment that gives rise to dispute and challenge rights, and any alleged procedural defect is capable of cure by the de novo hearing by a hearing authority.
No arguable cause of action – sixth cause of action
[42] The Trust’s sixth cause of action alleges errors on the part of the TRA.
[43] The Commissioner does not dispute the Court’s ability to review a decision of the TRA, but contends the Trust’s sixth cause of action is not reasonably arguable. This because the Authority did not err in its interpretation or approach to s 138B(3). It was not required to consider, expressly or by implication, that the Commissioner had not “completed the disputes procedure” by issuing a disclosure notice pursuant to s 89M.
[44] The Trust opted out of the disputes procedures in 2011 and filed challenge proceedings. Section 138B(3) applied. In those circumstances, it was not necessary for the Commissioner to issue a Disclosure Notice or a Challenge Notice.
[45] The Tax Administration Act prescribes strict timeframes within which a taxpayer is required to issue challenge proceedings. These were clearly not met by the
Trust. This left the Authority with no choice (in the absence of an application to allow a challenge filed out of time), but to strike out the challenge to the 2008 Reassessment out of lack of jurisdiction pursuant to s 138H.
Abuse of process
[46] The Commissioner submits the current proceedings are an abuse of process and an attempt to “game the tax system”. This through:
(a)Filing challenge proceedings in 2011 prematurely, before any challenge rights arose.
(b)Attempting to simultaneously invoke the statutory disputes and challenge procedures in 2011, and thereafter attempting to swap between them at will.
(c)Making no genuine attempt to progress the dispute and/or commence these proceedings in a timely way after discontinuing challenge proceedings in September 2013.
(d)Seeking to resurrect the dispute by “piggybacking” it to valid, but separate unrelated challenge proceedings in 2017, nearly seven years after the original disputable decision, being the 2008 Reassessment.
[47] In Fraser v Robertson, the Court noted New Zealand does not have a time limit on applications for judicial review, but that the courts continue to insist on reasonable promptness in all the circumstances of the particular case and decline to entertain truly stale claims.23 The Court of Appeal found there had been a delay of more than four years in bringing the challenge and the High Court was plainly right to treat the proceeding as an abuse of process.24
[48] In the present case, the Commissioner says the significant delay in issuing judicial review proceedings, combined with the concern surrounding a taxpayer
23 Fraser v Robertson [1991] 3 NZLR 257 (CA) at 260.
24 Fraser v Robertson [1991] 3 NZLR 257 (CA) at 260.
expecting preferential treatment after not taking appropriate action in a timely way, strongly indicate the court would not grant a remedy in the substantive judicial review proceeding. This is particularly so given the statutory procedure provides the Trust with an avenue to apply for relief under s 138D.
[49] If allowed to progress this proceeding would bring the administration of justice into disrepute. It is contrary to the purpose and scheme of the Tax Administration Act and the statutory disputes and challenge procedures. It cuts across the central tenets of certainty and finality in tax administration would realise the administrative chaos and uncertainty forewarned by Richardson P in Commissioner of Inland Revenue v Wilson.25
Mr Mawhinney’s submissions on strike out
[50] Mr Mawhinney, as trustee, submits the Court does have jurisdiction to determine the application for judicial review. His submissions on strike out can be summarised in six key points.
[51] First, the Trust lodged both a NOPA under Part 4A and filed a challenge under Part 8A in order to comply with the response periods. If the challenge under Part 8A had not been filed, the Trust would have foregone its entitlement to challenge. The Trust also received advice that the procedures were to be initiated at the same time.
[52] Second, the Trust indicated in late 2011 that the challenge procedure would be pursued and stipulated that the disputes process under Part 4A should be put “in abeyance”. The disputes process was intended to be suspended, not discontinued or completed.
[53] Third, in order for the disputes process to cease, it was necessary for the Trust and Commissioner to agree so in writing pursuant to s 89N(1)(c)(viii). There was no such agreement in this case. The power in s 113 to amend assessments has always been subject to s 89N. The Commissioner misinterpreted s 138B(3) by considering it enabled taxpayers to unilaterally opt out of the Part 4A disputes procedures.
25 Commissioner of Inland Revenue v Wilson (1996) 17 NZTC 12,512 (CA) at 12,520.
[54] Fourth, after Tannadyce, it became apparent to the Trust that the Part 4A disputes procedures had to be completed before issuing a challenge under Part 8A. That is why the Trust discontinued its challenge in 2013.
[55] Fifth, the Commissioner has wrongly omitted to complete the Part 4A disputes procedures. There is nothing in the Act that provides for the discontinuance of a challenge proceeding to automatically end the disputes procedures. When the Trust discontinued the challenge, there were steps in the disputes procedures that had not been complied with. The Commissioner still had to issue a disclosure notice under s 89M, the Trust had to issue a statement of position under s 89M(5) and then the Commissioner had to issue a statement of position.
[56] Sixth, accordingly, it is not practically possible for the Trust to challenge the Commissioner’s decision to reassess GST input tax to nil on the basis of s 89C(eb). That is because the Commissioner has omitted to complete the Part 4A disputes procedures. There is no remedy or procedure in the Tax Administration Act for such
an omission. The decision under s 89C(eb) is also not an assessment as defined in s 3 nor is it a disputable decision as defined in ss 3 and 138E(1)(e)(iv). Accordingly, the circumstances of this case fall within the Tannadyce exceptions. It is not practically possible for the Trust to use the challenge procedures. The only remedy available to the Trust is judicial review.
Analysis
[57] I will look at each of the Trust’s six key points in turn.
[58] First, it is clear from a review of the legislation then in force that the Trust received incorrect advice that the separate disputes and challenge processes were to be initiated at the same time. The Trust was not able by law to commence challenge proceedings until after the Commissioner’s NOR was issued on 26 September 2011. The Trust had, however, issued challenge proceedings almost two months earlier, on
3 August 2011, which had been accepted for filing.
[59] The Commissioner did not initially take the view that the challenge proceedings were in some way defective.26 Instead, the Commissioner was unsure whether the Trust intended to proceed with the disputes procedures or proceed with the challenge before the TRA. On 24 November 2011, the Commissioner’s lawyers wrote to the Trust asking it to elect which process it intended to pursue. The Trust replied on 4 December 2011, saying that it intended to pursue the challenge before the TRA and asked that the disputes process “be put in abeyance in the meantime”.
[60] The Trust’s second key point relates to the effect of its request that the disputes process “be put in abeyance in the meantime”. It says that the disputes process was intended to be suspended, not discontinued or completed. Whatever the Trust’s intention, however, it was not able to suspend the disputes process while it pursued the challenge process. An assessment cannot be challenged unless the disputes process has been undertaken or, under the legislation then in force, the taxpayer opted out of the disputes process. The legislation is not designed to allow the two processes to run in tandem. And it does not allow the taxpayer to swap between them at will. By opting to pursue the challenge process, the Trust was unable to complete the disputes process at some later stage.
[61] It follows, I am of the view that the Trust’s third key point, that in order for the disputes process to cease, it was necessary for the Trust and Commissioner to agree so in writing pursuant to s 89N(1)(c)(viii), is wrong. Section 89N(1)(c)(viii) provides:
89N Completing the disputes process
(1) This section applies if—
(a) a notice of proposed adjustment has been issued; and
(b) the dispute has not been resolved by agreement between the
Commissioner and the disputant; and
(c) none of the following applies:
…
(viii)the disputant and the Commissioner agree, recording their agreement in a document, that they have reached a position in which the dispute would be resolved more efficiently by being submitted to the court or
26 The Commissioner did, however, later include a ground in a strike-out application that the TRA lacked the jurisdiction to hear what was said to be an invalid challenge proceeding because of the failure to complete the disputes process.
Taxation Review Authority without completion of the disputes process:
…
[62] Section 89N(1)(c)(viii) clearly permits the submission of a dispute to the court or TRA without completion of the disputes process. That provision is, however, in addition to the power of the taxpayer to opt out of the disputes process under the former s 138B(3). A taxpayer using the former s 138B(3) did not require the agreement of the Commissioner to do so and the Trust did not in fact seek the Commissioner’s agreement before initiating the challenge process.
[63] The Trust’s further key point relates to the reason why it discontinued the challenge process. It says that after Tannadyce, it became apparent that the disputes process under Part 4A had to be completed before issuing a challenge under Part 8A. The ability of a taxpayer to opt out of the disputes process was, however, available until 29 August 2011, when the legislation was amended. The reason why the Trust may have discontinued the challenge process is also immaterial. It may equally have been a realisation that its proceedings before the TRA were likely to have been struck out anyway on the Commissioner’s application because of the Trust’s history of non- compliant behaviour, including repeated and continuing failures to comply with timetable orders made by the TRA and engaging in discretionary or gaming behaviour that was contrary to the public interest.
[64] As to the fifth key point, that the Commissioner had wrongly omitted to complete the disputes process, it follows from my findings above that she was not required to do so. By discontinuing the challenge process before the TRA, the dispute was effectively at an end. The Trust was not able to have a second bite of the cherry by effectively starting again. While there is no specific provision which provides that a notice of discontinuance automatically ends the disputes process, there is no other logical and reasonable outcome based on a purposive interpretation of the legislation. Following the filing of the notice of discontinuance, the Commissioner wrote to the Trust on 18 October 2013, clearly stating that it was “not possible to continue to dispute an assessment under Part 4A of the Tax Administration Act 1994”. The Trust did nothing for two years and, then on 3 August 2015, wrote to the Commissioner asking her to “please refund the excess GST by cheque payment”.
[65] I do not accept the Trust’s sixth key point, that it is not practically possible for the Trust to challenge the Commissioner’s decision to reassess GST input tax to nil on the basis of s 89C(eb) and, therefore, the only remedy available to the Trust is judicial review. The Trust alleges that the Commissioner misinterpreted s 89C(eb). The complaint, however, ultimately focuses on the validity and/or correctness of the 2008
Reassessment. While the Commissioner’s decision to issue a NOPA under s 89C(eb) cannot be challenged pursuant to s 138E(1)(iv), the resulting reassessment clearly can and was challenged by the Trust when it invoked its dispute rights and challenge rights in 2011. These procedures are not available now because the Trust has exhausted them. It does not get another shot.
Conclusion
[66] The present proceeding does not fall within the two narrow categories specified in Tannadyce where judicial review is available. The Trust has not shown that it was not practically possible for it to follow the statutory procedures. The proceeding is therefore struck out for lack of jurisdiction.27 If I am wrong in that conclusion, the statement of claim discloses no arguable cause of action and is also struck out on that basis. The Commissioner has made no error as to the disputes process in relation to the 2008 reassessment concluding when the challenge rights were exercised.
[67] Costs are payable by the Trust to the Commissioner.
Woolford J
27 Except in so far it relates to reviewing the TRA where the Commissioner accepts there is jurisdiction. That part is struck out on the basis it is not reasonably arguable.
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