Meates v Commissioner of Inland Revenue

[2024] NZHC 1711

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2023-409-483

[2024] NZHC 1711

BETWEEN

MARK JOSEPH WILLIAM MEATES

Appellant

AND

THE COMMISSIONER OF INLAND REVENUE

Respondent

Hearing:	20 June 2024
Appearances:	A S P Tobeck for the Appellant J A Beech for the Respondent
Judgment:	26 June 2024

JUDGMENT OF PRESTON J

This judgment was delivered by me on 26 June 2024 at          pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date……………

MEATES v THE COMMISSIONER OF INLAND REVENUE [2024] NZHC 1711 [26 June 2024]

Introduction

[1]    On 8 December 2023, the District Court struck out the appellant Mark Meates’ statement of defence in tax debt proceedings and entered judgment in the sum of

$3,288,389.19 in favour of the respondent, the Commissioner of Inland Revenue.1

[2]Mr Meates appeals the District Court’s decision.

[3]    The issue on appeal is whether the District Court Judge was wrong to strike out the statement of defence.

[4]    Mr Meates contends the Judge erred in holding that there was no reasonably tenable defence and by taking into account an affidavit filed in support of the strike out application.

[5]    The Commissioner submits no error is disclosed; the decision is correct and the appeal clearly hopeless, as s 109 of the Tax Administration Act 1994 (TAA) operates as an absolute bar in these proceedings.

Background

[6]    On 7 October 2020, the Commissioner issued notices of assessment for the 2014 to 2018 years. The Commissioner-initiated default assessments were issued as Mr Meates had failed to file his income tax returns for these years.

[7]    By operation of law the assessments are deemed correct except in objection or challenge proceedings under Parts 8 or 8A of the TAA.2 Mr Meates did not dispute the assessments within the requisite four-month time frame.3

[8]    Nearly two years later, on 2 September 2022 Mr Meates filed tax returns for the 2015-2018 years. As the assessments were already in place and deemed correct, the Commissioner considered whether he should amend the assessments in reliance

1      Commissioner of Inland Revenue v Meates [2023] NZDC 16829.

2      Tax Administration Act 1994, s 109.

3      Section 89AB(3).

on the returns per s 113  of the TAA.   The Commissioner declined to do so.   On     3 October 2022, Mr Meates again filed tax returns for the 2015 to 2018 income tax years. The Commissioner rejected these returns and a letter to this effect was issued to Mr Meates on 6 October 2022.

[9]    Before Mr Meates filed the subsequent income tax returns the Commissioner on or about 16 May 2022 filed a statement of claim in the District Court, seeking judgment for the assessment amounts plus penalties and interest that accrued under the TAA. There was a delay in effecting service of the proceedings but, after an order for substituted service this occurred on 3 April 2023. Mr Meates filed a statement of defence shortly thereafter and in time. The statement of defence contained bare denials on the essential allegations.

[10]   The Commissioner filed an application to strike out the statement of defence on the basis there was no reasonably arguable defence to the statement of claim, and an affidavit of Judith Anne Thompson (the Thompson affidavit) in support. The Thompson affidavit annexed copies of the notices of default assessments sent to    Mr Meates. It also set out some other correspondence, principally from the Commissioner to Mr Meates in relation to the assessments from time to time.

[11]   Mr Meates opposed strike out, asserting that the statement of defence did disclose a reasonably arguable defence. He did not file an affidavit in opposition.

District Court decision

[12]   In an oral judgment Judge Farish recorded a chronology of events in relation to the tax debt proceedings as pleaded. The chronology included the key dates under the TAA regime noted at [6] and [7] above: the date of notice of issue of default assessments,4 and the date of deemed acceptance, after the lapse of the statutory response period four months from the date of issue of the notices of assessment.5

4      Commissioner of Inland Revenue v Meates, above n 1, at [3].

5 At [4].

[13]   The Judge’s decision also recorded in the chronology that shortly after the deemed acceptance there was correspondence indicating that Mr Meates wished to oppose or challenge the assessments. The Judge noted the subsequent issue of proceedings, dates of Mr Meates’ later attempts to file tax returns and that the Commissioner declined to accept the proposed assessments pursuant to s 113 of the TAA.6

[14]   The Judge recorded the submission of counsel for Mr Meates, opposing, as follows:

[9] Mr Tobeck submits, on behalf of Mr Meates, that there is an arguable defence in that there is no assessment currently in place on the basis that [t]he Commissioner has referred the file to its legal section after some correspondence from a third party in relation to whether or not they would review the matter. At the present point in time however, the original assessment remains in place.

[15]   The Judge noted the settled law in relation to striking out a proceeding, recording that the court might do so only where a cause of action is “so clearly untenable that [it] cannot possibly proceed”. The Judge directed herself to the statutory bar in s 109 of the TAA which, save under Parts 8 and 8A, prevents any dispute in a court of a disputable decision on any ground whatsoever. Her Honour found:

[13]      In this case it may appear that the decision of the Court today is draconian, however, I have no jurisdiction in relation to the matters raised by Mr Tobeck in relation to the defendant. I cannot overturn or pause either the assessment that was made originally and the decision not to accept the late filing under s 113, nor can I interfere with the late payment penalties and the use of monies interest which is accruing and has reached in excess of

$1 million.

[14]      There is no arguable defence at this stage.   The issues raised by    Mr Tobeck and the third party in relation to the steps taken or not taken by The Commissioner are not matters that I can entertain, therefore, I grant the interlocutory application and the statement of defence is struck out.

6      At [6], [7].

Approach on appeal

[16]   There is a general right of appeal against the decision.7 An appeal to the High Court is by way of a rehearing.8 The onus is on the appellant to satisfy the appeal court that it should differ from the decision that is under appeal.9

[17]   On general appeal, the appeal court must determine for itself the merits of the case and form its own opinion on the weight to be given to the evidence.10

The appeal

[18]   Mr Tobeck for Mr Meates says the Judge erred as the court’s enquiry ought to have been limited to the pleadings. The affidavit should not have been taken into account. Further, Mr Tobeck contends the Judge applied the wrong legal test on strike out. He argues the bare denials in the statement of defence inferred a denial that any tax assessment has been done and that this disclosed a defence to the statement of claim.

[19]   The Commissioner submits the appeal is clearly hopeless and without merit: the assessments giving rise to the debt cannot be disputed in the District Court. They may only be disputed by engaging the disputes procedure in Part 4A, and the challenge procedures in part 8A of the TAA.11 Mr Meates did not avail himself of that procedure.

Discussion

[20]The strike out jurisdiction is to be sparingly exercised and only in a clear case.12

[21]This is one such case, for the following reasons.

7      District Court Act 2016, s 124.

8      Section 127; High Court Rules 206, r 20.18.

9      Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [4].

10 At [3].

11 Tax Administration Act, s 3.

12 Marshall Futures Ltd (in liq) v Marshall [1992] 1 NZLR 316 (HC) at 323, citing R Lucas & Son (Nelson Mail) Ltd v O’Brien [1978] 2 NZLR 289 (CA); Tekaro Properties Ltd v Rowling [1978] 2 NZLR 314.

Section 109 of the TAA was a bar

[22]   First, and principally, as the District Court Judge found Mr Meates has no reasonably arguable defence in the tax debt proceedings. This is because Mr Meates failed to challenge the default assessments within the required statutory timeframe. As a result, the assessments are deemed correct.13 The Commissioner did not accept Mr Meates’ subsequent attempts to amend the assessments by filing income tax returns.

[23]   Accordingly, s 109 of the TAA applies to the assessments which found the statement of claim.

[24]That section relevantly provides:

Disputable decisions deemed correct except in proceedings

Except in … 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.

[25]   As section 109 provides, once an assessment has been made its correctness can only be challenged in proceedings under the TAA.14 Further, the statutory bar in section 109 applies to this Court on appeal as much as it does to the District Court.15

[26]   In oral argument Mr Tobeck contended that the underlying issue in the proceedings (and, implicitly, the appeal) is “whether there was an assessment at all”. But as is evident that argument simply seeks to relitigate the issue argued in the Court below, that is, disputing the assessment, which s 109 prescribes.

[27]   In short, Judge Farish was correct to find that s 109 applied, and as a result there was no defence to the tax debt claim.

13     Tax Administration Act, s 109.

14     Golden Bay Cement Company Ltd v Commissioner of Inland Revenue [1996] 2 NZLR 665 (CA).

15     Taylor v Commissioner of Inland Revenue [2023] NZHC 460 at [13]-[17].

Was the affidavit admissible?

[28]Secondly, no error has resulted from the Judge reading the affidavit.

[29]   While an application for strike out is usually determined on the pleadings,16 the Court is entitled to receive affidavit evidence.17 Evidence will be considered if it is put forward in opposition or support of the strike-out application and is not contradicted or inconsistent with the pleading itself.18

[30]   The Thompson affidavit annexed the notices of assessment. The documents are incontestable and the evidence of their dispatch incontrovertible. The affidavit was plainly admissible to confirm the assessments and consistent with the pleading.19 I do not accept the affidavit is properly characterised as controversial. Content beyond the assessments was context up to and following the deemed acceptances. It is not material to the issue on appeal, which turns on the fact of the assessments and their deemed acceptance.

Was application for summary judgment required?

[31]   Nor was a summary judgment application necessary as Mr Tobeck contends. An application for summary judgment is not necessary where the claim is untenable on the pleadings as a matter of law.20 In any event I accept, as Ms Beech submits, for the reasons set out above the defence was unsustainable whether under the strike out enquiry or, alternatively, on application for summary judgment, due to the operation of s 109. It was open to the Commissioner to proceed as he did.

16 Westpac Banking Corp v M M Kembla NZ Ltd [2001] 2 NZLR 298, (2000) 14 PRNZ 631 (CA) at [60].

17     Attorney General v McVeagh [1995] 1 NZLR 558 (CA) at 566; Pharmacy Care Systems Ltd v A- G (2001) 15 PRNZ 465 (CA) at 472 confirms that affidavit evidence not limited to applications invoking the inherent jurisdiction and also applies to applications under r 15.1 of the District Court Rules 2014.

18     Peerless Bakery Ltd v Watts [1955] NZLR 339.

19     Adams v Joseph Banks Trusts Ltd HC Wellington CP224/91, 4 March 1992.

20     Westpac Banking Corp v M M Kembla NZ Ltd, above n 16, at [60].

Did the Judge apply the correct test?

[32] Finally, the Judge applied the correct test on strike out as recorded at [15] above: there was no arguable defence. Although Mr Tobeck argued the correct enquiry was whether the statement of defence disclosed a defence, he conceded in oral argument that is a distinction without a difference. Mr Meates’ defence seeking to dispute the existence of the assessments cannot overcome the operation of s 109 in this case.

Conclusion

[33]The decision of the District Court is plainly correct.

[34]   The assessments were extant and deemed accepted. Accordingly, s 109 applied as a statutory bar. Mr Meates’s defence denying their existence disclosed no reasonably arguable defence.

Result

[35]The appeal is dismissed.

[36]   The Commissioner seeks costs. I see no reason why costs should not follow the event on the usual basis. Unless submissions on costs are filed within five working days, the order of the Court shall be that the respondent is entitled to costs on a 2B basis plus disbursements as fixed.

………………………………………

Preston J

Solicitors:

Menzies Marshall Law, Winton for the Appellant Inland Revenue Department, Christchurch

Copy to counsel:
A S P Tobeck, Otautau, Barrister for the Appellant