New Zealand Transport Agency v Walters Holdings (2008) Limited
[2020] NZHC 1715
•16 July 2020
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IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CRI-2020-419-000044
[2020] NZHC 1715
BETWEEN NEW ZEALAND TRANSPORT AGENCY
Appellant
AND
WALTERS HOLDINGS (2008) LIMITED
Respondent
Hearing: 7 July 2020 Appearances:
N Flanagan and B Thompson for Appellant N Brodnax for Respondent
Judgment:
16 July 2020
JUDGMENT OF VENNING J
This judgment was delivered by me on 16 July 2020 at 3.00 pm.
Registrar/Deputy Registrar
Date……………
Solicitors: Meredith Connell, Auckland
Edmonds Judd, Te Awamutu
NEW ZEALAND TRANSPORT AGENCY v WALTERS HOLDINGS (2008) LIMITED [2020] NZHC 1715 [16
July 2020]
Introduction
[1] Walters Holdings (2008) Limited (Walters Holdings) faced four charges under s 43 of the Land Transport Management Act 2003 (LTMA).1 Following a defended hearing, Judge Down acquitted Walters Holdings on all four charges.2
[2] The New Zealand Transport Agency (NZTA) seeks leave to appeal against that decision on two questions of law.3
[3] Ms Brodnax, counsel for Walters Holdings, submitted that leave to appeal should be declined, but if leave was granted the substantive appeal should be declined. Finally, if, for any reason, the appeal was to be upheld on the question(s) of law she submitted that nevertheless, in all the circumstances, the charges ought to be dismissed in this Court.
Legislative background
[4] Fuel excise duty (FED) is charged by the New Zealand Customs Service on petrol when it is imported or when it leaves the point of manufacture such as the Marsden Point Oil Refinery. The revenue collected from the duty is used to fund the building and maintenance of New Zealand’s Land Transport network.
[5] In certain circumstances, persons using petrol can obtain a refund of the FED charged on the petrol they have used. Such refunds are provided for by s 41 of the LTMA and the Land Transport Management (Apportionment and Refund of Excise Duty and Excise-Equivalent Duty) Regulations 2004 (the Regulations).
[6]Section 41(1) of the LTMA provides:
41 Refund of excise duty, excise-equivalent duty, and GST
(1) Persons using any motor spirits, compressed natural gas, or liquefied petroleum gas are entitled to a refund in respect of excise duty, excise- equivalent duty, and goods and services tax charged on the consideration for the supply of motor spirits, compressed natural gas,
1 The charges were of making an application or furnishing information known to be false in a material particular for the purposes of obtaining a refund of fuel excise duty.
2 New Zealand Transport Agency v Walters Holdings (2008) Ltd [2020] NZDC 5138.
3 Criminal Proceedings Act 2011, s 296.
or liquefied petroleum gas, to the extent that the amount of the duty that is refunded forms part of the consideration for that supply and to the extent specified in regulations made under section 45.
[7] Section 42 sets out the procedure for obtaining a refund by application on a form approved by the Secretary (the Chief Executive of the Ministry):
42 Procedure for obtaining refund
(1) Every application for a refund under section 41 must be made to the Secretary on a form to be provided by the Secretary, and must be supported by any documentary evidence and any other information that the Secretary may require or as may be prescribed.
[8]As relevant, reg 5(1) of the Regulations provides:
5 Entitlement to refunds
(1)A person is entitled, under section 41 of the Act, to a refund of the excise duty, excise-equivalent duty, and goods and services tax charged in respect of motor spirits to the extent that the motor spirits are used—
(a)as fuel in an exempted vehicle; or
…
(e)for commercial purposes otherwise than as fuel in any motor vehicle, vessel, or aircraft.
[9] Exempted vehicle is defined in reg 3. It is accepted for present purposes the farm vehicles in issue meet the definition of exempted vehicles.
[10]The offence section is s 43 of the LTMA. It provides:
43 Offence and penalty
(1)A person commits an offence who, for the purposes of obtaining a refund under section 41, makes any application or furnishes any information that he or she knows to be false in any material particular.
(2)A person who commits an offence against subsection (1) is liable on conviction to a fine not exceeding $2,000.
[11] To prove an offence under s 43, the prosecuting authority, the NZTA, is required to prove beyond reasonable doubt:
(a)a person made an application for the purpose of obtaining a refund of FED under s 41;
(b)that the application or any information provided in support of the application was false in a material particular; and
(c)that the person knew the application or the information to be false in a material particular.
Factual background
[12] Walters Holdings owns five farm properties on which dairying operations are carried out. The company has three directors, one of whom is Mr Robert Walters. Sharemilkers carry out the dairying operations on the properties.
[13] Between 27 December 2017 and 24 September 2018, Walters Holdings made four applications under s 41 of the LTMA for refunds of FED. The total amount of fuel for which the refund was claimed over that period was 11,677 litres being petrol that Walters Holdings claimed to have used in exempt vehicles or for commercial purposes over the period covered by the applications.
[14] Each application was on the form provided by the Secretary and followed the same format. The form includes a section “Part B: Use of fuel claimed for refund” which requires the applicant to provide details of the exempt, unregistered vehicles to be inserted. The applications completed by Walters Holdings attached a schedule purporting to identify the exempt vehicles and their fuel use. In each case the attachment claimed the fuel had been used in two quad bikes and three farm bikes with a smaller amount used in chainsaws and other small motors. The form was certified as correct on behalf of Walters Holdings.
[15] Walters Holdings provided the tanks, bowsers, and arranged regular refills by Waitomo Petroleum for the use of each farm by the sharemilkers. The fuel was delivered to a bulk tank located on the relevant farm by Waitomo Petroleum. Walters Holdings then invoiced the relevant sharemilker for the full cost of the fuel that was
delivered to the particular farm. The sharemilkers paid Walters Holdings the full cost of the fuel and then used the fuel in the course of the particular dairying operation.
[16] The alleged offending came to light when, after receiving advice about their entitlement to a refund of FED, the sharemilkers applied for a refund of FED in relation to the same fuel that Walters Holdings had claimed a refund for.
[17] NZTA called evidence from two of the sharemilkers who operated farms owned by Walters Holdings and a NZTA revenue assessment officer, Ms Natasha Napier. Mr Walters gave evidence for the defendant company.
The District Court decision
[18] Judge Down noted the NZTA’s case was that each of the applications was false in the following material particulars:4
(a)the applications falsely represented the fuel had been used by Walters Holdings when in fact it had been used by (and paid for) by the sharemilkers; and
(b)the applications falsely represented that the fuel for which a refund was claimed had been used in two quad bikes and three farm bikes, with the remainder being used in chainsaws and other small motors when in fact it had been used in a number of other farm vehicles.
[19] The Judge accepted that the evidence established that the sharemilkers were in a “strict sense” the end users of the fuel and that they had paid the full asking price as charged to Walters Holdings by the fuel supplier and Waitomo Fuels, and it was the sharemilkers and not Walters Holdings who had the legal and moral right to those refunds.5
[20] The Judge also accepted the evidence established that the applications were inadequate in the sense they identified only a handful of vehicles in which the fuel had
4 New Zealand Transport Agency v Walters Holdings (2008) Ltd, above n 2, at [12].
5 At [29].
been used during the relevant period. Insufficient care was taken by the company’s administrative staff in assessing what vehicles were used by what farms and the approximate quantities of fuel used by each of those vehicles.6
[21] Despite those findings, the Judge surmised that, while the legislation could be used to deal with a case arising from a brief period of double-dipping, he did not consider that was one of the ways in which the legislators anticipated the offence would be committed. In his view, the prime purpose clearly is and was intended to focus on the potential abuse of the system by claiming for a refund of tax when the fuel was being used on public roads rather than on private property.7
[22] Next, he considered that the relationship between farmer and sharemilker was more complex than “one short passage in the sharemilker agreement” which recorded the relationship was of farm owner and independent contractor.8
[23]The Judge then redefined the issues as:9
(a)Could Walters Holdings properly be said to have been using the fuel in the course of its business?; and
(b)Was the failure of Walters Holdings to provide a more accurate and complete list of vehicles and estimates of fuel used in each of the vehicles, false in a material respect?
[24] The Judge answered those questions in favour of Walters Holdings. He found that the simple act of making the applications for a FED refund was not, without more, sufficient to amount to a false statement that Walters Holdings was using the fuel in the course of its dairy business. As to the second question, in broad terms, the overall amount of the duty refund claimed and the total number of litres used for each of the four periods was not false, rather, it was just not properly supported by full evidence as to how the fuel was used. It was also arguable that detailed evidence about the
6 New Zealand Transport Agency v Walters Holdings (2008) Ltd, above n 2, at [30].
7 At [43].
8 At [46].
9 At [50]–[55].
number, type and location of the vehicles in which the fuel was used was not itself material.
[25] In light of those findings, it was unnecessary for the Judge to go on and consider whether Walters Holdings knew the applications to be false in a material particular.
Questions of law
[26]The questions of law the NZTA asks the Court to answer are:
(a)Did the Judge err in law when he declined to find that the applications were false in a material particular in relation to a list of vehicles and assets in which Walters Holdings claimed to have used the fuel it was claiming a refund of despite finding that this information was “plainly inaccurate”?; and
(b)Did the Judge err in law in finding that for the purposes of determining entitlement to a refund of FED “a sharemilker does not work as a separate independent entity to the farm owner, but actually works within the farm business; in that sense they are not separate entities but closely entwined”, such as to “make it difficult to determine what entity was using the fuel”?
[27]In Brown v R, the Court of Appeal confirmed that:10
“Questions of law” in the context of s 296(2) must raise one or more of the three standard errors classified by modern authorities as creating a question of law:
(a)a misdirection of law apparent in the decision (what Fisher J called “a conventional legal question on unchallenged facts”);
(b)oversight of a relevant matter, or consideration of an irrelevant matter; or
(c)a factual finding unsupported by any evidence, or an omission to draw an inference of fact which is the only one reasonably possible on the evidence.
10 Brown v R [2015] NZCA 325 (2015) 30 FRNZ 471 at [16].
[28] The NZTA submit that the first question of law was an error falling within the third category and the second question of law was an error falling within the first category.
Leave to appeal
[29] Ms Brodnax submitted that leave should not be granted to appeal as the case was not of general application. Each sharemilking agreement is an individual contract and the terms may vary enormously. It would be inappropriate to make a decision on the basis that this case may have wider significance where the Judge had described the relationship as complicated.
[30] For the reasons that follow, I am satisfied that the case does have general significance, particularly in terms of the correct process of claiming refunds in the situation of a farm operation involving a sharemilking agreement. It is also the first time this Court has considered the meaning of “false in a material particular” under the LTMA. Leave is granted to the NZTA to appeal on the questions of law.
The legal relationship of the farmer and sharemilker
[31] It is convenient to address the second question of law first. The principal issue raised by that question is the nature of the legal relationship between Walters Holdings as the farmer and the sharemilkers for the purposes of claiming a refund of FED.
[32] Judge Down found that, for the purposes of determining the entitlement to a refund of FED, the individual sharemilkers were not independent entities, but rather worked within the farming business of Walters Holdings and in that sense, the sharemilkers and Walters Holdings were not separate entities but were “closely entwined”.11 The Judge rejected the clause in the Variable Order Sharemilking Agreement (the Agreement) between Walters Holdings and the sharemilkers that stated the relationship was of farm owner and independent contractor.12 In doing so,
11 New Zealand Transport Agency v Walters Holdings (2008) Ltd, above n 2, at [47].
12 At [46].
he said he was influenced by Mr Walters’ evidence and the other “documentary exhibits”.13
[33] The Judge’s reliance on Mr Walters’ evidence to determine the relationship was misplaced. Mr Walters’ evidence about the relationship was confused. For instance, Mr Walters accepted for Inland Revenue purposes the sharemilkers were independent contractors but said as far as he was concerned they were employees. That is contrary to the express provisions of the Agreement. Also, the categorisation of the legal relationship cannot change and be different for different purposes.
[34] The difficulty with the Judge’s reliance on Mr Walters’ evidence is also shown by the Judge’s inability to define the nature of the relationship. Having rejected the clause which provided the sharemilkers were independent contractors, he then said the relationship was not one of employer and employee, nor that of partnership, nor a traditional owner/contractor relationship. It was, in his words, “resistant to categorisation as any other familiar legal relationship”.14
[35] The Judge seemed influenced by the submission for Walters Holdings that the sharemilkers worked within the farm business and shared the profits with the farm owner and in that sense, the Walters Holdings and the sharemilkers were not separate entities. But the fact the parties had a contractual arrangement for the sharing of expenses and profits does not define their legal relationship. The legal nature of the parties’ relationship is a quite different issue to the profit share arrangements.
[36] The failure to identify the legal relationship and recognise the parties’ status as two separate and distinct legal entities was an error. To refer to their relationship as “closely entwined” is meaningless at law. The legal relationship between the separate entities of farmer and sharemilker is defined and provided for by the Agreement. The Agreement confirmed the sharemilker’s status as an independent contractor but went on to provide for an expense and profit-sharing arrangement.
13 At [46].
14 New Zealand Transport Agency v Walters Holdings (2008) Ltd, above n 2, at [49].
[37] While the relationship between a farmer and a sharemilker might have a number of unique features, particularly in terms of how expenses and profit are to be shared, the relationship is provided for by the Sharemilking Agreements Act 1937. The Agreement used by Walters Holdings and the sharemilkers in this case follows the form of the standard agreement contained in the schedule to the Sharemilking Agreements Act.
[38]“Farm owner” is defined in the Agreement as:
…A farm owner is any person by agreement with whom a sharemilker is entitled to receive a share of the returns or profits derived from the dairy farm operations.15
That recognises that the parties contemplate a share of the return or profits from the dairying operation.
[39]“Sharemilker” is defined as:
…A sharemilker is any person contracted to perform work on a dairy farm (other than an employee) and who is entitled under a Sharemilking Agreement to receive a share of the returns or profits derived from the dairy farm operation.
That definition makes it clear the sharemilkers are not employees (despite Mr Walters’ view).
[40] Ms Brodnax submitted it was relevant that the Sharemilking Agreements Act defined a sharemilker in terms of an entitlement to profits. But as noted, the fact the Sharemilking Agreements Act and the Agreement provide for the parties to share expenses and profits are a feature of the relationship, but do not assist in defining the legal relationship.
[41]The relationship of the parties is expressly defined in cl 16 of the Agreement:
The relationship of the parties to this Agreement is that of farm owner and independent contractor and is not that of employer and employee, nor that of a partnership.
15 That follows the substance of the definition of employer in the interpretation section of the Act and is word for word the same as the definition of farmer in the schedule.
[42] I note that the status of the sharemilker as an independent contractor is also consistent with the sharemilker being responsible for providing his or her own equipment, and employing and providing his or her own employees if necessary.
[43] Ms Brodnax submitted, by reference to Reay v Attorney-General and Institute of Professional Engineers New Zealand Incorporated, that the Court must ascertain the meaning that a contract would convey to a person having the background knowledge that would reasonably have been available to the parties in the situation they found themselves at the time of the contract.16
[44] But with respect to Ms Brodnax’s reliance on Reay, it is nothing more than a restatement of the established and generally accepted principles that, in interpreting a contract, the Court can and should have regard to the context in which it was negotiated.
[45] Ms Brodnax referred to Mr Walter’s views about the relationship as part of the context to be taken into account. But Mr Walter’s confused view of the nature of the relationship and his subjective views of how the contract was to operate or what it meant cannot affect the legal rights and responsibilities which are created and clearly defined by the Agreement.
[46] I am satisfied that the relationship of farmer and sharemilker is accurately defined by the Agreement and that, in particular, the sharemilkers are independent contractors for the purpose of determining an entitlement to a refund of FED.
[47] Mr Walters accepted that the fuel was used by the sharemilkers. The Agreement also contains a number of provisions which support the conclusion the fuel was used by the sharemilkers, rather than Walters Holdings.
[48]For example, cls 9 and 10 of the Agreement produced in evidence provides:
Machinery, implements, and vehicles
The Sharemilker agrees to supply the following machinery,
implements, and vehicles at the commencement of this Agreement:
16 Reay v Attorney-General [2019] NZCA 475 at [35].
One of the sharemilkers has inserted:
4 wheelers for self and staff, 2-wheeler
Ute
(emphasis added)
10.If the sharemilker is required to supply machinery, implements, and vehicles, the farm owner and the sharemilker must agree on a set amount to meet the running costs and supply of the machinery, implements, and vehicles. These amount(s) are to be specified in Annex 1.
[49]Clauses 81 and 82 of the standard Agreement provide:
Fuel and lubricants
81.The owner of the machinery, milking plant, effluent disposal unit, and water pumps must supply the fuel and lubricants for the machinery, plant unit, and pumps.
(emphasis added)
Motorbike
82.If the sharemilker uses a motorbike on the farm, the sharemilker will provide it. All costs, including fuel, oil, and running expenses, must be paid for by the sharemilker and recorded in Annex 1.
[50] Thus, under cl 9, the sharemilker agreed to supply certain machinery and, under cl 81, the sharemilker was responsible for supplying (i.e. paying for) the costs of the fuel for that machinery. Clause 10 of the Agreement contemplates that Walters Holdings and the sharemilker will agree a set amount for running costs, but that is a different issue.
[51] Mr Walters’ evidence of how and when the costs in general and the fuel in particular were apportioned in order to calculate the profits to be shared was confused. He may well be correct that because of Walters Holdings’ bulk purchase of the fuel the price charged to the sharemilkers for the fuel was still less than the net cost of fuel after the FED refund the sharemilkers would have had to pay if they had bought it direct. But that does not address the issue of entitlement to the FED refund which is determined by who used the fuel. The discounted price Walters Holdings paid to Waitomo Petroleum still included the FED. The FED element was included in the cost of the fuel charged to the sharemilker. Mr Walters may well consider that Walters
Holdings took account of the fact the sharemilkers had paid for the fuel when calculating their resultant profit share, but again that does not address which entity used the fuel and was thus entitled to the FED refund.
[52] Use of the fuel is the basis for the entitlement to the refund of FED under s 41 of the Act and reg 5 of the Regulations. The person who has paid for the fuel, which includes the FED, but has used the fuel in exempt vehicles is entitled to claim a refund of the FED paid. As noted, the evidence on this point, including that of Mr Walters, was clear. Walters Holdings charged the sharemilkers the full price for the fuel supplied to it by Waitomo Petroleum. Mr Walters accepted that the sharemilkers then used that fuel in their vehicles in the course of carrying out their obligations under the Agreement.
[53] To that extent, the sharemilkers were the ones using the fuel in the exempt vehicles (or otherwise for commercial purposes), and were the party entitled to claim the refund of FED rather than Walters Holdings.
[54] Ms Brodnax accepted that the evidence established the fuel was used by the sharemilker in their own vehicles and machinery but submitted the fuel was also used in some of Walters Holdings’ machinery (notably a tractor). That may be so, but again however, the sharemilker had paid for the fuel and it was the sharemilker that used the tractor in the course of carrying out their obligations under the Agreement. Ownership of the tractor was not the issue for the purposes of entitlement to the refund. Use was.
[55] By focusing on what he considered to be the prime purpose of the legislation, namely the potential by claiming for a refund of tax when the fuel had been used on roads rather than on private property (which undoubtedly is part of the legislation, but it is not the entire focus), the Judge misdirected himself. It is also fundamental that the user, the person who pays for and uses the fuel, is the person who is entitled to the refund.
[56] For the above reasons, the answer to the second question is yes, the Judge erred in law in finding that for the purposes of determining entitlement to a refund of FED “a sharemilker does not work as a separate independent entity to the farm owner, but
actually works within the farm business, in that sense they are not separate entities but closely entwined”, such as to “make it difficult to determine what entity was using the fuel”.
[57] That is sufficient to dispose of the appeal to the extent that, by applying for the FED on the basis it used the fuel, rather than the sharemilker, Walters Holdings’ applications were, on any view of it, false in a material particular. The Judge was wrong to find that in making the application for refund Walters Holdings was not making a false statement by representing that it (rather than the sharemilker) was using the fuel in the course of its dairying operation.
[58] However, for completeness and to provide assistance for the future application of the LTMA in this area, I also address the first question of law.
What is “false in a material particular” for the purposes of a refund of FED?
[59] On the issue of whether the applications or the information furnished were false in a material particular, the Court has had the benefit of submissions about the relevant authorities. Those authorities were not before Judge Down.
[60] The meaning of “false in a material particular” has been considered in a number of cases. It is to be determined in its legislative context. The first issue is the meaning to be given to “false” in this context. As a matter of ordinary English usage the word “false” has two distinct meanings. The Oxford English dictionary confirms it can mean either “erroneous” or “purposely untrue”.17
[61] In R v Gill, the Court of Appeal noted that in the context of tax legislation “false” meant “inaccurate” or “incorrect”.18 There was no need to give the word any mens rea element because the mental element was determined by the preceding words of the section, namely “wilfully” and “negligently”. Similarly, in the present case, there is no need to give the word any mens rea element or import any concept of mens rea as the section provides the application or information must “knowingly” be false.
17 The New Shorter Oxford English Dictionary (5th ed, Oxford University Press, Oxford, 2002) vol 1 at 919.
18 R v Gill (1999) 19 NZTC 15,526 (CA) at [20].
[62] In the present context, “false” in s 43 of the LTMA means “erroneous”. It will be sufficient therefore for the NZTA to prove that the application or the information submitted in support of the application is inaccurate or incorrect. The more difficult issue is what is meant by false in a “material particular”.
[63] Before addressing that, I note that the offence is made out if either the application or the information that is furnished to support the application is known to be false in any material particular. The offence can be made out in one of two ways. The application itself might be false, or alternatively, the information furnished in support of the application might be false.
[64] The application in this case is false in a material particular because Walters Holdings stated in the application it had used the fuel when the fuel had in fact been used by the sharemilker. The correct user of the fuel is obviously a material particular. The application by Walters Holdings was false in a material particular, even without reference to the further information provided to support the application.
[65] There are a number of ways in which the information furnished in support of the application could be false. For example, a claim for a refund may be made in relation to a number of identified exempt vehicles’ claims that all the fuel was used in those vehicles when some of the fuel has been used in a non-exempt vehicle. Or the information provided in support of the application may omit one of the exempt vehicles that the fuel was used in. In each case, the information furnished will be false if the full amount of fuel used is claimed, in the sense that it is erroneous, but the more difficult issue will be whether it is false in a material particular.
[66] That is because the use of the adjective “material” introduces a question of degree. The error or inaccuracy must be more than trivial or inconsequential. It must be a matter of moment or some significance.
[67] NZTA seems to recognise that a degree of latitude must apply to the information submitted to support applications for refunds. Ms Napier said that a reasonable estimate of the vehicles and the amount of the fuel is required.
[68] That is consistent with the NZTA’s approach in its publicity material. In its MR70 Guide in relation to FED NZTA poses the following FAQ:
How can I tell what fuel went into what?
This is up to you to keep track of. Some examples are:
·Attaching a meter to a bulk tank
·Using a log book to record fuel usage
·Work out how frequently you have used each machine, vessel or vehicle (eg you fill up your 10 litre motorbike about twice a week) and estimate the litres used.
[69]On the issue of materiality, in R v Banks, Wylie J held:19
[36] The words “any material particular” also drew their meaning from the context in which they appeared. The word “material” introduced a question of degree. Clearly, the statute implied that not every particular would be material. For example, if a donor’s name was simply misspelt, I doubt that any Court would find falsity in a material particular…
Similarly, in the present context, if the description of a farm bike was in error, that would not be false in a material particular.
[70] In R v Moses and R v Sullivan, the Court considered the phrase in the context of false statements made in prospectuses.20 In R v Sullivan, Heath J stated:21
[438] The more difficult question is whether a false statement is also material to the decision of someone to invest on the faith of information provided in a prospectus.
[439] Questions of materiality or immateriality are opposite sides of the same coin. In R v Moses, I took the view that a statement will be material if its disclosure “could well have made a difference to the decision whether to invest”. In expressing the test in that way, I did not intend to dilute the effect of previous authority on this subject. The context in which I articulated the principle is important; namely, in relation to the approach likely to be taken by a prudent but non-expert person deciding whether to make an investment based on the narrative of an investment statement.
[440] Greater precision in the expression of the test is preferable, in the context of a prosecution under s 242 of the Crimes Act in which the focus is on the knowledge of the maker of a statement, in light of the market to whom
19 R v Banks [2014] NZHC 1244, [2014] 3 NZLR 256.
20 R v Moses HC Auckland CRI-2009-004-1388, 8 July 2011; and R v Sullivan [2014] NZHC 2501.
21 R v Sullivan, above n 20.
the prospectus was directed. In a case such as this, I consider that the approach taken by the Supreme Court of the United States, most recently in Matrixx Initiatives Inc v Siracusano, should be followed. Delivering the unanimous opinion of the Court, Sotomayor J directed attention to whether a reasonable recipient of the information would have viewed any false statements “as having significantly altered the ‘total mix’ of information made available” to him or her. That approach is consistent with the test applied by Cooke J in Coleman v Myers, which itself was based on a prior decision of the Supreme Court of the United States that was followed in Matrixx Initiatives Inc.
[71] I agree with Ms Brodnax’s submission that the intent of s 242 of the Crimes Act 1961, as applied to prospectuses, is protective, and the comments of Heath J need to be read in that context.
[72] What emerges from the above authorities is the need to consider the concept of materiality in the context of the relevant legislative framework. Looking at the purpose of the legislation in this case, the error will be material if it might influence the decision of the NZTA to grant a refund it would not otherwise have granted if the correct information had been provided. The purpose of the application and the information supplied to support the application is to enable the NZTA to review the application and to confirm that the claimed refund of FED is appropriate. That will require consideration of, for example:
(a)the amount of fuel that has an ineligible use;
(b)the number of exempt vehicles;
(c)whether the fuel is used in an exempt vehicle, or for other commercial purposes about the farming operation; and
(d)whether the amounts of fuel attributed to the exempt vehicles or commercial purposes is reasonable.
These are critical details to help the NZTA determine whether a claimed rate of fuel use is credible.
[73] The test must be, would the inaccuracy or error in the form, if corrected, have led to a different outcome? Would it lead, for instance, to the refund being declined in whole or in part?
[74] Ms Brodnax emphasised that the forms are not provided by regulation. That is correct, but they have been provided under delegation from the Secretary and the information they require is authorised under s 42 of the LTMA. That section provides that every application for refund must be made on a form to be provided by the Secretary and supported by documentary evidence that the Secretary may require.
[75] The forms approved by the Secretary provide for the following information regarding unregistered vehicles: make/model; engine number; year of manufacture and litres used. Both Walters Holdings and the sharemilkers were able to provide schedules of such information without apparent difficulty, albeit that Walters Holdings information was incorrect.
[76] Mr Walters’ evidence, repeated in counsel’s submission, that Walters Holdings expected the NZTA to raise issues with them is quite the wrong approach. The obligation is on the person making the application for a refund of FED to ensure that the application and the supporting information is correct. The failing in Walters Holdings approach is reflected in the following exchange with Mr Walters:
Q. So, what steps did you take to ensure that the [applications] being submitted, on behalf of your company, contained correct information?
A. In terms of the vehicles, none. In terms of the application, I guess we relied on Transit New Zealand to approve or, they didn’t approve or have questions, we would give them the information or supply the correct information. I don’t think that’s been asked for.
[77] Where, as here, the evidence was that the application for refunds were entirely incorrect, the requirement is readily satisfied, no matter what test is applied to materiality. Further, as Mr Flanagan, counsel for the NZTA, noted, this is not a case of the forms being incomplete or missing some details. The forms in this case included positive misstatements.
[78] In terms of the details of the list of exempt vehicles supplied by Walters Holdings, there was the following frank concession by Mr Walters:
Q.So, you’d accept that that list is just wrong, insofar as it relates to the five farms?
A. Absolutely.
[79] Further, when questioned about how the administrator would have known how much fuel to allocate to particular vehicles, the answer was:
A. She would’ve probably guessed that, I suspect. Rather than by fact.
[80] In the circumstances of this case it was not enough, as Ms Brodnax submitted, that overall the amount of fuel may have been correct, and the fuel was used for the dairying operations rather than on the road. Quite apart from the fact Walters Holdings was not entitled to make the application as it was not the user of the fuel, the applications were false in a number of the material particulars furnished to support the application. The correct exempt vehicles were not identified, and the fuel allocated to their use was not even a realistic estimate.
Result
[81]Leave to appeal is granted.
[82]The questions of law are answered:
(a)Yes, the Judge erred in law when he declined to find that the applications were false in a material particular in relation to a list of vehicles and assets in which Walters Holdings claimed to have used the fuel it was claiming a refund of despite finding that this information was “plainly inaccurate”?
(b)Yes, the Judge erred in law in finding that for the purposes of determining entitlement to a refund of FED “a sharemilker does not work as a separate independent entity to the farm owner, but actually works within the farm business; in that sense they are not separate
entities but closely entwined”, such as to “make it difficult to determine what entity was using the fuel”?
[83] The appeal is allowed. The acquittals entered in the District Court are set aside. However, as the law has been clarified as sought by NZTA and in light of the Judge’s findings concerning Mr Walters’ belief as to Walters Holdings’ entitlement to the refund, justice does not require the matter to be reheard in the District Court. I decline to direct a rehearing.
Venning J
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