The appellant in CA703/2008 must pay costs to the respondent in CA703/2008 for a standard appeal on a band A basis plus usual disbursements. We certify for second counsel.

The respondent in CA330/2009 must pay costs to the appellant in CA330/2009 for a standard appeal on a band A basis (but with no allowance for preparation or appearance at the hearing) plus usual disbursements.
The appellant in CA330/2009 must pay costs to the respondent in CA330/2009 in respect of the High Court decision under appeal in CA330/2009 on a category 2B basis plus disbursements as approved by the Registrar of the High Court at Christchurch.

____________________________________________________________________

REASONS OF THE COURT

(Given by O’Regan J)

Table of Contents

Para No
Introduction [1]
CA703/2008 [2]
CA330/2009 [3]
Summary of Facts [4]
The test to be applied to each appeal [15]
Statutory demand appeal [16]
Judicial review appeal [19]
The statement of claim [21]
When is judicial review of Commissioner’s processes
appropriate? [23]
Applying the law to the pleading [29]
Outcome of the appeals [42]
The statutory demand appeal [43]
The judicial review appeal [45]
Costs [47]

Introduction

[1] The two appeals that are the subject of this judgment raise for consideration one key issue: were the circumstances surrounding the making of assessments of the tax liability of Tannadyce Investments Limited (Tannadyce) by a delegate of the Commissioner of Inland Revenue (the Commissioner) so exceptional that Tannadyce should be permitted to challenge the assessments in judicial review proceedings?

CA703/2008

[2] The first appeal is an appeal by Tannadyce against a decision of Associate Judge Christiansen dismissing an application by Tannadyce to set aside the statutory demand of the Commissioner claiming $356,686.79 for income tax for the 2002-2004 tax years.[1] Tannadyce argued that there was a substantial dispute about the liability for tax. The Associate Judge found the time period for a statutory challenge of the assessments had expired. Tannadyce argued it could file judicial review proceedings aimed at having the decisions founding the assessments quashed. However, the Associate Judge found that Tannadyce’s case was not exceptional and thus the judicial review proceedings had no prospect of success. This meant there was no “substantial dispute” about whether the debt was owed, nor other relevant grounds, as is required for the Court to set aside a statutory demand under section 290(4) of the Companies Act 1993. We will call this decision the statutory demand decision and the appeal against it the statutory demand appeal.

CA330/2009

[3] The second appeal is an appeal by the Commissioner against a decision of French J in which she refused to strike out one aspect of Tannadyce’s judicial review claim (she struck out all the other grounds). The Commissioner applied to strike out the judicial review proceedings on the basis that the statement of claim disclosed no reasonable cause of action and amounted to an abuse of process. French J found that only one of the allegations made against the Inland Revenue Department (the IRD) in the statement of claim was capable of constituting the “exceptional circumstances” required for judicial review.[2] The allegation was that the IRD was knowingly in possession of the very documentation it had repeatedly and falsely denied possessing, and which Tannadyce required in order to file the returns individually. French J found that as there was no evidence as to the content of the documents held by the IRD, she was “unable to have the degree of certainty required for strike out”.[3] She was satisfied that such conduct would, if proven, amount to “conscious maladministration”.[4] We will call this decision the judicial review decision and the appeal against it the judicial review appeal.

Summary of facts

[4] The factual background is complicated by the long and difficult relationship between Mr Henderson, the sole director and shareholder of Tannadyce, and the IRD. The difficulties between them span a period exceeding 15 years. This has been the subject of a book and a film, and investigation by a Select Committee of the House of Representatives. It is not necessary for us to traverse this history in detail. The appendix to the Associate Judge’s judgment does do so, however. Our summary of the facts that are relevant to the issue for determination in the appeals is based on that in the judgment of French J.
[5] The core of the dispute between Tannadyce and the Commissioner is an allegation by Tannadyce that the Commissioner (or, more generally, the IRD) has held and continues to hold financial records that Tannadyce needed for it to file its income tax returns for the tax years 1993-1998. The IRD has maintained throughout that it returned any documents it held and has required the returns to be filed.
[6] On 5 March 1999, after a number of meetings and extensive correspondence

between the parties, the IRD issued nil default assessments for the relevant years. Mr Henderson went to the Ombudsman. At a resulting meeting in June 1999 between the Chief Ombudsmen, Mr Henderson and IRD representatives, Mr Henderson agreed to file tax returns for Tannadyce for the financial years in question based on the information available to him. In August 1999, Mr Henderson filed tax returns “on a global basis” for the years 1993-1998 and “such supporting accounts and information as he was able to provide”, claiming $1,539,733 losses.

[7] Within a month, the IRD acknowledged receipt of the global returns but raised a number of questions. More meetings and correspondence followed. The questions were not answered: Tannadyce said it needed the records held by the IRD to do so. The IRD maintained that all documents had been returned. In May 2004, an IRD officer, Ms Stella, acting as a delegate of the Commissioner, issued default assessments for income tax of $6,523 and notices of loss determination for losses of $209,373 to be carried forward for the period 1993- 1999.
[8] The IRD objected to the global nature of the tax returns that Mr Henderson had filed for Tannadyce. This point had not been made before. Mr Henderson said the global basis of the returns was contemplated by the agreement brokered by the Ombudsman.
[9] In September 2003, Mr Henderson made a request under the Official Information Act 1982 to see documents relating to Tannadyce currently held by the IRD. Ms Stella denied his request. She said Mr Henderson had had access to the records when he came into the Christchurch office of the IRD and gave as additional reasons the age and volume of the records and the secrecy provisions of the Tax Administration Act 1994 (the TAA).
[10] In October 2006, Ms Stella issued tax assessments for the period 2000-2004, adopting the IRD’s determination of the losses that could be carried forward from 1999 ($209,373) as the starting point. The income tax owing by Tannadyce for the 2002-2004 income years (including penalties and interest) was $356,686.79, which was the amount claimed by the IRD in the statutory demand in issue in the statutory demand decision. If Tannadyce’s position on its tax losses in the 1993-1998 years were accepted (losses of $1,539,733), there would be no liability to the Commissioner for tax in the 2002-2004 income tax years as the income in those years would be less than the amount of the losses carried forward from previous years.
[11] On 3 April 2008, the Commissioner served a statutory demand on Tannadyce for the $356,686.79 of tax said to be owed by Tannadyce. Tannadyce filed its application to set aside the statutory demand.
[12] On 14 April 2008, Mr Henderson made a second request under the Official Information Act 1982 for all documents relating to Tannadyce currently held by the IRD. On 14 May 2008, the Commissioner sent a response to Tannadyce’s application stating that the IRD held “a large volume of information relating to Tannadyce.” On the 7 August 2008, the Commissioner sent another letter stating that there were approximately 200 Eastlight folders of documents relating to Tannadyce. The contents of these documents are unknown; in particular, it is not known whether the documents would assist Tannadyce in filing accurate returns for the 1993-1998 tax years. However, Mr Henderson saw this as confirming his concern that the IRD had documents provided by him that he needed to prepare Tannadyce’s tax returns. He claims that the IRD is deliberately withholding those documents from him.
[13] Tannadyce commenced judicial review proceedings on 1 August 2008.
[14] Tannadyce has now received a disc with some of the documents in electronic form, however it claims the disc will not work. In any case, the matter has stalled as Tannadyce has not paid the $60,000 costs the IRD claims for producing these documents. The IRD will not produce the rest until the costs are paid.

The test to be applied in each appeal

[15] As already noted, the essential legal issue in both cases is whether the decision to assess Tannadyce’s tax liability is open to judicial review. However there are procedural differences between the two cases, which mean the issues for determination in each are not identical.

Statutory demand appeal

[16] The Associate Judge had before him what he referred to as a very large volume of evidence about events from 1998 to 2008. He summarised the salient points in an appendix to his judgment. His consideration of this evidence led him to conclude that the allegation made by Mr Henderson on behalf of Tannadyce that officials of the IRD deliberately withheld financial information was “nonsensical”.[5]
[17] For Tannadyce to succeed in its appeal against Associate Judge Christiansen’s judgment (CA703/2009), it has the onus to show that there is a “substantially disputed debt” or “other reasons” why the Court should prevent the Commissioner from enforcing its debt against Tannadyce’s assets.[6] This requires the Court to assess whether the creditor’s prima facie entitlement to liquidate a company is outweighed by some factor making it plainly unjust for liquidation to ensue.[7]
[18] The limitation period has now expired for Tannadyce to invoke the statutory challenge process. Therefore, it can establish that there is a “substantial dispute” about the debt only if it has an “arguable case” that its judicial review proceedings may succeed or that there are “other grounds” for setting aside the statutory demand. Its case in both the High Court and this Court relied on the former.

Judicial review appeal

[19] French J struck out all but one of the judicial review causes of action. She said that the allegation of conscious maladministration, arising from the contention that the Commissioner had misled Tannadyce about the documents, should go to trial. Unlike the Associate Judge she did not engage in detail with the evidence. Rather, she adopted the standard approach in strike-out proceedings of treating as true the facts pleaded in the statement of claim.
[20] In this context, the essential question is whether the judicial review claim is either so clearly untenable that it cannot possible succeed or is otherwise an abuse of process.[8] In Commissioner of Inland Revenue v Abattis Properties Ltd this Court observed that it amounts to an abuse of process to commence judicial review proceedings unless the taxpayer can point to exceptional circumstances justifying that course.[9]

The statement of claim

[21] Tannadyce filed its judicial review proceedings a short time before the hearing before Associate Judge Christiansen. So the Associate Judge was considering the statement of claim as originally filed. After the statutory demand decision, Tannadyce filed its first amended statement of claim. That was the pleading that was before French J. It included allegations about the IRD’s letter saying it held 200 Eastlight folders (that letter had been sent after the initial statement of claim was filed). As noted earlier, French J struck out all but one of the judicial review causes of action and Tannadyce has now filed in the High Court a second amended statement of claim which deletes the causes of action that were struck out and otherwise reflects the decision of French J. By consent, the second amended statement of claim was made available to us and we have determined both appeals on the basis of the judicial review claim as set out in the second amended statement of claim. However, the key allegation against the Commissioner is a feature of all versions of the statement of claim.
[22] The relevant parts of the statement of claim are the section headed “Application for Judicial Review” and the section setting out the claims made by the plaintiff. We reproduce these in full:

Application for judicial review

The defendant (and the IRD) has, in relation to the plaintiff, exercised or refused to exercise statutory powers, or has purported to have done so (“the statutory powers of decision”).
The statutory powers of decision are reviewable by the court under the Judicature Amendment Act 1972 s 4.
The defendant (including the IRD officers involved) has been guilty of conscious maladministration and deliberately misleading conduct and has abused his statutory powers of decision since August 1999 [sic, but Mr Forbes told us this would be corrected to 1998], including in terms of:

(i) The Act[10] s 6(1), which requires the defendant at all times to use his best endeavours to protect the integrity of the tax system;

(ii) The Act 6(2)(a), which provides that the defendant’s obligations under s 6(1) includes the taxpayer’s perception of that integrity;

(iii) The Act s 6(2)(b), which provides that the defendant’s obligations under s 6(1) includes the rights of taxpayers to have their liability determined fairly, impartially, and according to law;

(iv) The Act s 6(2)(f), which provides that the defendant’s obligations under s 6(1) includes the responsibilities to administer the law fairly, impartially and accord to law.

Particulars

(v) Since at least August 1998, by making untruthful, inaccurate, incomplete, contradictory and deliberately misleading statements as to the nature and extent of the plaintiff’s documents held by the IRD and the extent to which these had been returned to the plaintiff, when he (and the IRD) knew that the plaintiff, through David Henderson, had repeatedly claimed, since at least 1998, that:

(a) the reasons why annual tax returns for the plaintiff for each of the 1993-1998 years could not be filed was because the plaintiff did not hold the documents, records and information which it required for this purpose but that the IRD held the plaintiff’s documents or had lost documents and records which had been provided by or obtained from the plaintiff;

(b) this was also the reason why the plaintiff and David Henderson could not answer the queries raised in the IRD’s letter of 13 September;

(c) this was also the reason why the plaintiff, through David Henderson, had complained to the Office of the Ombudsmen, which had given rise to the involvement of the Chief Ombudsman and the agreement reached between David Henderson and the defendant as recorded in the Chief Ombudsman’s letter of 29 June 1999;

(vi) By having knowledge that the plaintiff, through David Henderson, had made requests in 2003 and 2004 for the plaintiff’s documents which the IRD held, including requests under the Official Information Act 1992, all of which were refused;

(vii) By failing to disclose the true nature and extent of the plaintiff’s documents which the IRD held but which he (and the IRD) failed to have regard to before issuing the assessment and notices of loss determination against the plaintiff in May 2004 (as referred to in paragraph 28 above) and the statutory demand issued in March 2008 (as referred to in paragraph 4 above);

(viii) By refusing to provide the plaintiff with or copies of all the plaintiff’s documents, as requested by it through “David Henderson.

The assessments and notices of loss determination referred to in paragraphs 28[11] and 34[12] above were not truly proper assessments and notices.

Particulars

As referred to in paragraph 40 above.

The matters which the plaintiff complains of could not, whether as at mid-2004 or since, have been able to be properly and fairly be determined under the statutory disputes procedures (the Act Part IVA) or the statutory challenge procedures (the Act Part VIIIA).
The plaintiff has sought full discovery against the defendant in this proceeding.
There are exceptional circumstances, involving issues as to the conduct of the defendant and the IRD officers involved, and the process adopted by them since August 1999, that justify the plaintiff seeking judicial review.

THE plaintiff claims:

(i) A declaration that the following statutory powers of decision made by the defendant (and the IRD) are invalid and that they be set aside:

(a) The defendant’s decision to issue default income tax assessments and notices of loss determination in May 2004 against the plaintiff for the period 1993 to 1998 [sic, but presumably intended to be 1999], as referred to in paragraph 28 above;

(b) The defendant’s decision to issue income tax assessments in October 2006 against the plaintiff for the period 2000 to 2004, as referred to in paragraph 34 above;

(d) The defendant’s decision to issue a statutory demand for income tax arrears against the plaintiff issued in March 2008, as referred to in paragraph 4 above.

(ii) Costs.

When is judicial review of Commissioner’s processes appropriate?

[23] The most recent authority on when judicial review in tax cases is appropriate is Westpac Banking Corporation v The Commissioner of Inland Revenue.[13] That decision was delivered after the statutory demand decision but was considered and applied by French J in the judicial review decision. Counsel agreed that that decision was authority for the proposition that, as a general rule, the proper process for a challenge to an income tax assessment is that mandated by Part 8A of the TAA. This is provided for in ss 109 and 114 of the TAA, which appear in Part 8A. Judicial review proceedings challenging an assessment decision are permitted only in exceptional circumstances. Where there are no exceptional circumstances, judicial review proceedings will be an abuse of process.
[24] The key finding in Westpac for present purposes is the description of the exceptional circumstances in which judicial review proceedings will be permitted. The Court said:[14]

We accept that judicial review is available where what purports to be an assessment is not an assessment. Associated with this, we accept that judicial review is available in exceptional cases and thus may be available in cases of conscious maladministration... We can reconcile this with ss 109 and 114 on the basis that in such cases (that is, no genuine assessment or conscious maladministration) what is challenged is either not an assessment or, at least, not the sort of assessment which the legislature had in mind in enacting those sections. On this basis we see the availability of judicial review as depending on the claimant establishing exceptional circumstances of a kind which results in the amended assessment falling outside the scope of sections 109 and 114 and thereby not engaging those sections.

[25] The parties had different views on the circumstances in which conscious maladministration would allow for the availability of judicial review. For the Commissioner, Ms Clark QC argued that the Court’s concern in Westpac was with conscious maladministration that led to the assessment under challenge in the judicial review proceeding not being an assessment at all, or at least not one of the kind described in s 109. On the other hand, Mr Forbes QC for Tannadyce argued that Westpac allowed judicial review proceedings where there had been conscious maladministration in the process leading up to the assessment, even if such conscious maladministration did not result in an assessment that was not an assessment at all or at least not a proper assessment.
[26] In our view it is clear that the Commissioner’s position on this is the correct one. The Court in Westpac took the reference to “conscious maladministration” from the decision of the High Court of Australia in Commissioner of Taxation v Futuris Corporation Ltd.[15] The Court quoted the observation in the judgment of the plurality in Futuris that conscious maladministration of an assessment process may be said not to produce an assessment to which the Australian equivalent of s 109 applied. This Court then observed:[16]

In effect the Court [in Futuris] confined judicial review to two circumstances: first, where what is said to be an assessment is not in truth an assessment; and secondly, where there has been conscious maladministration. We note however that these concepts were, to some extent, run together as both not producing the sort of assessment which is immune from challenge outside the statutory process.

[27] This is made even clearer later in the Westpac judgment where the Court set out its reasons for rejecting Westpac’s contention that conduct of officers of the IRD in the process leading up to the making of the assessments was conscious maladministration. This Court rejected the suggestion that conscious maladministration of that kind would amount to exceptional circumstances and observed:[17]

From our point of view, the decisive consideration is that, as Westpac accepts, Mr Goggin [the IRD officer who made the assessment] in issuing the amended assessment, acted in good faith and with the belief that he was entitled to do so. There is thus no allegation of conscious maladministration which relates directly to the issuing of the amended assessment.

[Emphasis added]

[28] The Court found that even though the conduct said to amount to conscious maladministration was causally connected to the assessment in issue in that case, it was inconsistent with the policy underlying ss 109 and 114 of the TAA to allow complaints of that kind to be relied on in support of a challenge to the validity of the assessment in judicial proceedings.[18]

Applying the law to the pleading

[29] We now turn to apply the analysis in Westpac to the facts as pleaded in this case. Like French J, we proceed on the basis of the facts as pleaded, though we acknowledge that the Commissioner strongly disputes many of the allegations made in the statement of claim.

Paragraph 41 of the second amended statement of claim pleads that the assessments and notices of loss determination in the periods 1993-1999 and 2000-2004 respectively “were not truly proper assessments and notices”. The particulars in support of that contention are the same as the particulars given in para 40 of the pleading that the Commissioner and the IRD officers involved had been guilty of conscious maladministration and deliberately misleading conduct, in breach of s 6 of the TAA.

[30] Those particulars are:

(a) making untruthful and misleading statements as to the nature and extent of the documents relating to Tannadyce held by the IRD and the extent to which they had been returned to Tannadyce, knowing that Tannadyce had requested those documents;

(b) failing to disclose the true nature and extent of the documents relating to Tannadyce which the IRD held but which the IRD failed to have regard to before issuing the assessments and notices of loss determination in issue; and

[31] The only one of those particulars that has any logical link with the allegation they are said to support in para 41 (that the assessments were not proper assessments) is the second particular referred to at [31](b) above. The others particularise what could amount to conscious maladministration, but they do not suggest that any such maladministration has affected the assessments. The second particular could potentially have a link with the assessments not being proper assessments if it was an allegation that the officer who made the assessment deliberately ignored material in the IRD’s possession that was relevant to the assessment of Tannadyce’s tax liability. But there is nothing in the statement of claim or the supporting affidavits to support such an allegation and the particular refers to a failure to disclose, not a failure to consider relevant information when making the assessment.
[32] The allegations set out in the particulars are against the Commissioner personally and “the IRD officers involved” as a generic group. There is no allegation in the statement of claim that the IRD officer who made the assessments and loss determination in issue, Ms Stella, herself engaged in conscious maladministration in making the default assessments for the 1993-1999 years in May 2004 or in making the assessments for the 2000-2004 years in October 2006. Nor does Tannadyce plead that, in making those assessments, Ms Stella knew that the IRD had withheld Tannadyce’s documents. Similarly, there is no pleading that the assessments issued in May 2004 and those issued in October 2006 did not represent the honest belief of the IRD officer making the assessments on the information available to her that the income tax liability of Tannadyce and its loss position was as disclosed in the relevant assessments and loss determinations.
[33] Ms Clark argued that these defects in the pleading were fatal, and could not be remedied by amendment because the evidence relied on by Tannadyce does not support allegations of the nature required to bring the case within the exceptional circumstances in which judicial review proceedings are permitted, as described in Westpac.
[34] Mr Forbes strongly resisted that contention. He sought to distinguish Westpac on the basis that the allegations said to involve conscious maladministration in that case did not affect the officer who made the assessments, who honestly held the view that the assessments properly represented Westpac’s tax liability. In this case he argued that the allegation is that the Commissioner and his officers knowingly made untruthful and misleading statements to the taxpayer.
[35] We do not see why that provides a basis to distinguish Westpac. Westpac makes it clear that in circumstances where the assessment represents the honest view of the officer making the assessment, conscious maladministration in the process antecedent to the making of the assessment will not constitute exceptional circumstances for the purposes of judicial review proceedings.
[36] Mr Forbes also argued that some of the correspondence between the IRD and Tannadyce prior to the making of the assessments involved Ms Stella, and thus established that she was aware of the dispute about the availability of records to Tannadyce and the efforts made by Tannadyce to recover records. Mr Forbes said the evidence established that Ms Stella knew about Mr Henderson’s complaint about the issue of lost records and knew that the IRD held relevant information relating to Tannadyce’s tax affair prior to the default assessments and notices of loss determination being made 25 May 2004. But, tellingly, he did not suggest any basis on which it could be said that Ms Stella did not honestly believe that the assessments reflected Tannadyce’s true tax liability or that the assessments were not proper assessments for any other reason.
[37] Mr Forbes suggested that Ms Stella’s assessment was not honest and genuine because she knew about Tannadyce’s complaints as to the absence of its records and the effect it claimed this had on its ability to file annual tax returns for the period 1993-1998. Even if that were true, we do not see how that supports a suggestion that the assessments actually made were not based on honestly held views.
[38] French J said that the judicial review proceedings would not be a challenge to the correctness of the default assessment made by Ms Stella in May 2004, but rather a claim that there should not have been a default assessment in the first place.[19] She said this was because the essence of the allegation appeared to be that, had the IRD released the relevant documents to Mr Henderson, then he would have been able to file individual returns for Tannadyce for the 1993-1998 years and/or been able to respond to the IRD’s inquiries about the global return he did file when those inquiries were made in 1999. With respect to the Judge, we do not see how that creates a basis for a judicial review challenge to the assessments that were actually made. Mr Henderson does not claim that the IRD held information which established the correctness of the global assessment he filed or the incorrectness of the default assessments made by the IRD. We do not see how the allegation that the IRD withheld information affects the default assessments that were actually made or the later assessments for the 2000-2004 years.
[39] Ms Clark made detailed submissions on the factual background to Mr Henderson’s complaints. It is not necessary to engage with those submissions. But it is notable that Mr Henderson is not specific in his affidavits and Tannadyce is not specific in its pleadings as to what documents Tannadyce required to file its tax returns for 1993-1998 that it believes the IRD had but would not return. Nor is there mention of any effort to obtain documents from other sources (banking records from Tannadyce’s bank, for example).
[40] We would, of course, be concerned if the effect of this decision was to leave a taxpayer with no way of challenging the alleged improprieties in the actions of the IRD officers in the process leading up to the assessments under challenge. But as has been made clear in numerous decisions of this Court and confirmed in Westpac, the challenge process mandated by Part 8A of the TAA allows for such matters to be raised. If a taxpayer chooses not to engage in the Part 8A process (as Tannadyce did in this case, notwithstanding reminders from the IRD as to the availability of the process and the deadlines for activating the process), it cannot complain when the alternative but extremely limited process of judicial review is unavailable to it.
[41] We conclude that the allegations as pleaded do not come within the Westpac test for exceptional circumstances and that the allegations made by Tannadyce in the evidence before the Court do not provide a basis for a proper pleading which would meet that test. In those circumstances we rule that the judicial review proceedings are an abuse of process and should therefore be struck out on that basis.

Outcome of the appeals

[42] We now turn to the appeals before us and apply this finding.

The statutory demand appeal

[43] The unavailability of judicial review in this case means that Tannadyce does not have an arguable case to dispute its liability to meet the claim made by the Commissioner for income tax for the 2002-2004 income years in judicial review proceedings. It cannot dispute that amount in Part 8A proceedings because the time limit has elapsed. Thus, it has no arguable basis to dispute the liability for the sum claimed in the statutory demand. In those circumstances there can be no substantial dispute as to whether the debt is owing or due nor is there any other reason to set aside the statutory demand. Accordingly, we dismiss Tannadyce’s appeal against the decision of Associate Judge Christiansen in the statutory demand appeal.
[44] This Court has recently made some observations about the approach that should be taken in proceedings enforcing payment of a debt owed to a body whose pricing decisions are amenable to judicial review where the non-payer resists summary judgment on the basis that it has issued (or will issue) judicial review proceedings challenging the decision.[20] Although the factual context is different in this case, the approach is equally applicable. On the facts of this case, the adoption of that approach would have required Tannadyce to seek interim relief under s 8 of the Judicature Amendment Act 1972 prior to the hearing of its application to set aside the statutory demand, rather than arguing before the Associate Judge that its intended judicial review proceeding would arguably provide a defence to the Commissioner’s claim for tax owing under the relevant assessments. That would have prevented the situation that arose in the statutory demand decision where Associate Judge Christiansen was required to deal with the merits of the proposed judicial review claim even though he did not have jurisdiction to deal with the judicial review claim itself.

The judicial review appeal

[45] In view of our conclusion that judicial review is not available on the facts of this case, the judicial review proceedings should be struck out as an abuse of process. In those circumstances we allow the Commissioner’s appeal in the judicial review proceeding.
[46] We observe that the effect of this decision is that Tannadyce is unable to utilise the judicial review procedure to challenge the assessments. It does not immunise the Commissioner from judicial review in all circumstances. For example, a judicial review proceeding seeking an order that the Commissioner return documents would not be struck out in the same manner as the judicial review claim in this case, because it would not be a challenge to an assessment. We make no comment on the possible merits of such a claim; rather, we observe that there would be no legal impediment to the pursuit of such a claim if it did, in fact, have merit.

Costs

[47] The Commissioner sought costs both in this Court and in the High Court on the same basis as this Court awarded costs in relation to an earlier application by the Commissioner to strike out the statutory demand appeal because the security for costs had not been paid as required.[21] In that case the Court allowed a 50 per cent uplift on the amount of costs that would have been payable for a standard application because the Commissioner’s application to strike out the appeal was a direct consequence of Tannadyce’s failure to comply with the Court of Appeal (Civil) Rules 2005.
[48] We do not see that as setting any precedent for the present case. The appeals before us were on points that were genuinely arguable and, of course, Tannadyce was successful on one of the issues now before us in the High Court. In those circumstances we are satisfied that the appropriate course is to award costs to the Commissioner in both appeals on the basis that each was a standard appeal and that the appropriate band is band A. To avoid doubling up, we deduct from the costs in CA330/2009 the amounts which would otherwise be payable for preparation time and appearances, as these are adequately provided for in the costs award relating to CA703/2008. We certify for second counsel. Tannadyce must also pay the usual disbursements in relation to both appeals.
[49] In the statutory demand decision, Associate Judge Christiansen ordered costs to the Commissioner on a category 2B basis together with disbursements approved by the Registrar. In the judicial review decision, French J indicated that she considered that costs should lie where they fall, and made no award. Given the outcome of the appeal the award made by Associate Judge Christiansen should stand, and we consider that costs on the same basis should be awarded to the Commissioner in relation to the judicial review decision.

Solicitors:
Cousins & Associates, Christchurch for Tannadyce Investments Limited
Crown Law Office, Wellington for Commissioner of Inland Revenue

[1] Tannadyce Investments Ltd v Commissioner of Inland Revenue HC Christchurch CIV-2008-409-759, 13 October 2008.

[2] Tannadyce Investments Limited v Commission of Inland Revenue HC Christchurch CIV-2008-409-1744, 12 May 2009.
[3] Ibid, at [60].
[4] Ibid, at [55].
[5] At [72].
[6] Companies Act 1993, s 290(4)(a) and (c).

[7] Commissioner Inland Revenue v Chester Trustee Services Ltd [2003] 1 NZLR 395 (CA) at [3] per Tipping J.

[8] Attorney-General v Prince and Gardner [1998] 1 NZLR 262 at 267 (CA). See also Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33] (SC).

[9] Commissioner of Inland Revenue v Abattis Properties Ltd [2002] NZCA 186; [2003] NZAR 155 at [24].

[10] The Act is defined earlier in the statement of claim as the Tax Administration Act 1994.
[11] Assessments and notices of loss determination for 1993-1990.

[12] Assessments for 2000-2004 and a notice rejecting Tannadyce’s claimed loss of $1,539,754 and assessing the loss for 1999 as $209,373.

[13] Westpac Banking Corporation v Commissioner of Inland Revenue [2009] NZCA 24, [2009] 2 NZLR 99 at [58]; leave for appeal denied by the Supreme Court [2009] NZSC 36.
[14] At [59].
[15] Commissioner of Taxation v Futuris Corporation Ltd [2008] HCA 32; (2008) 247 ALR 605 at [25].
[16] At [52].
[17] At [92].
[18] At [94].
[19] At [56].

[20] Air New Zealand Ltd v Wellington International Airport Ltd [2009] NZCA 259, [2009] 3 NZLR 713 at [82] – [87].
[21] Tannadyce Investments Ltd v Commissioner of Inland Revenue [2009] NZCA 136.

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