Mawhinney v Commissioner of Inland Revenue [2014] NZCA 450 (11 September 2014)

Last Updated: 23 September 2014

IN THE COURT OF APPEAL OF NEW ZEALAND
CA208/2014 [2014] NZCA 450
BETWEEN	PETER WILLIAM MAWHINNEY AS TRUSTEE OF FOREST TRUST Applicant
AND	COMMISSIONER OF INLAND REVENUE First Respondent REGISTRAR OF THE TAXATION REVIEW AUTHORITY Second Respondent

Hearing:	25 August 2014
Court:	O’Regan P, Ellen France and Miller JJ
Counsel:	Applicant in person P H Courtney for First Respondent No appearance for Second Respondent
Judgment:	11 September 2014 at 10 am

JUDGMENT OF THE COURT

1. The application for an extension of time to appeal is dismissed.
2. The applicant must pay the first respondent costs for a standard application on a band A basis and usual disbursements.

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REASONS OF THE COURT

(Given by Ellen France J)

Introduction

[1] This is an application for an extension of time under r 29A of the Court of Appeal (Civil) Rules 2005 to appeal a decision of Cooper J on an application for judicial review.^[1] The application is brought by Mr Mawhinney in his capacity as trustee of the Forest Trust. Cooper J decided that the High Court had no jurisdiction to determine the pleaded causes of action. That was because all of the causes of action challenged disputable decisions which, in terms of s 109 of the Tax Administration Act 1994 (the Act), had to be dealt with through the statutory disputes and challenge procedures in the Act.^[2]

Background

[2] The Forest Trust filed GST returns for the period ended 31 July 2009 claiming a refund of $67,011.65. Most of that sum was GST paid in relation to a purchase of a property in Waitakere. The GST return was audited and a notice of assessment was issued on 20 June 2012 assessing the amount owed to the Trust as nil. The refund was disallowed in accordance with s 89C(eb) of the Act on the basis it was believed the Trust was involved in fraudulent activity.^[3] The Trust says it issued a Notice of Proposed Adjustment in relation to the assessment and that the Commissioner of Inland Revenue’s Notice of Response was out of time.
[3] The Trust’s next step was to file a Notice of Claim with the Taxation Review Authority (TRA) in respect of the Commissioner’s assessment. Following a number of interactions between the parties, the Trust filed a judicial review proceeding in the High Court. The Commissioner then filed a protest to jurisdiction and an application to strike out. These were the applications determined by Cooper J in the judgment for which an extension of time is sought to appeal.
[4] In his judgment, Cooper J addressed each of the five causes of action against the Commissioner.^[4] The first of these alleged that the Commissioner’s adjustment of GST was unlawful and not authorised by s 89C(eb) of the Act. The Trust alleged that nothing in the Goods and Services Act 1985 excludes GST from being applied to fraudulent activity. The second cause of action challenged the decision to adjust the GST on the basis that it was in breach of natural justice because of the failure to undertake “naturally just” investigations before making the determination. The third cause of action was based on the allegation that the failure to reassess the corresponding output tax in the relevant GST period was unreasonable. The fourth cause of action alleged the Commissioner did not issue her Notice of Response within the two month response period. Finally, there were allegations of breach of statutory duty by the Commissioner. These included an allegation the Commissioner misinterpreted s 89C(eb).
[5] As we have noted, Cooper J found that each of the causes of action could be dealt with in the statutory disputes and challenge procedures and therefore, applying Tannadyce Investments Ltd v Commissioner of Inland Revenue,^[5] the High Court had no jurisdiction. Cooper J observed that for each cause of action the relief sought included orders quashing the Commissioner’s decision about the GST for the period ended 31 July 2009 and also sought an order for a refund of $67,011.65. The Judge said that although various bases were argued, “the end point in each case involves consideration of the correct GST position” over the period.^[6] That was an issue amenable to resolution within the statutory disputes and challenge procedures and therefore not a matter that could be dealt with by way of judicial review.
[6] The Trust originally filed a notice of appeal in this Court in time but this notice was rejected for filing by the Deputy Registrar due to a number of procedural defects. Miller J reviewed and upheld the Deputy Registrar’s decision to reject the notice of appeal.^[7] The application for extension of time was filed on 19 March 2014, six days after Miller J’s decision. The application is opposed.

Discussion

[7] The parties agree that the test for whether an extension of time to appeal should be granted under r 29A is as expressed in My Noodle Ltd v Queenstown Lakes District Council:^[8]

[19] A number of factors are relevant to a decision as to whether time to appeal should be extended, including the reason for the delay, the length of the delay, the conduct of the parties and the extent of any prejudice caused by the delay. The overall test, however, is whether granting an extension would “meet the overall interests of justice”: Havanaco Ltd v Stewart [2005] NZCA 158; (2005) 17 PRNZ 622 (CA), at para 5.

[8] In terms of the factors set out in My Noodle Ltd, there was some debate between the parties over whether or not the applicant has been gaming the system. If it was substantiated that the applicant had been gaming the system, this would be relevant in considering the parties’ conduct. That said, the key issue for the present application is whether the appeal raises any seriously arguable point. That factor assumes importance because the delay in filing is short and in the circumstances we would have granted an extension if the proposed appeal had merit.
[9] The merits of the proposed appeal turn on whether the challenged decisions were “disputable decision[s]” as defined in s 3 of the Act. The parties agree that the effect of Tannadyce is that if the decisions fall within the definition in s 3 then the Trust’s remedy is via the statutory disputes and challenge procedures. The difference between them is whether the decisions fall within the definition of “disputable decision” in s 3. A “disputable decision” is defined as an assessment or decisions of the Commissioner under a tax law with some specified exceptions.
[10] The Trust wishes to argue on appeal that the statutory procedures could not be invoked for the matters for which judicial review was sought. In particular, in the proposed grounds of appeal, the Trust states that the purported reliance on s 89C(eb) of the Act by the Commissioner was not a disputable decision. Further, even if it could have been, it was excluded from the statutory procedures by s 138E(1)(e)(iv). Finally, the Trust’s notice of appeal relies on the contention that reliance on s 89C(eb) is unlawful and that this fact also takes the decisions outside of the definition in s 3.
[11] We can assess the merits of the proposed appeal, and thus where the overall interests of justice lie, by considering each of the proposed grounds of appeal in turn.
[12] In relation to the first of the proposed grounds, two initial bases are advanced by Mr Mawhinney to show that the decisions in issue are not disputable decisions. The first of these relies on the submission that the disputes/challenge processes are at an end. That is because the Trust’s Notice of Proposed Adjustment is deemed to be accepted by the operation of s 89H(2) of the Act. Mr Mawhinney says that result follows because the Commissioner did not file her Notice of Response, rejecting the Trust’s Notice, within the specified two month period. Section 89H(2) says the Commissioner in those circumstances is “deemed” to accept the Notice. Mr Mawhinney contends that it follows that any issues about the timeliness of the Commissioner’s response are not matters that can be resolved using the statutory procedures.
[13] The Commissioner’s position is that her Notice of Response was filed within time. She says an administrative error means the Notice of Response was date stamped as received on a Saturday. When that error is taken into account, the Commissioner’s position is that it is apparent on the face of the documents that her Notice was within time. But, in any event, she says that whether or not the Notice of Response was in time can be dealt with by means of the statutory procedures.
[14] We agree with the Commissioner that this issue can be dealt with using the statutory procedures. In our view, Mr Mawhinney’s approach is unduly artificial. An assessment, which is plainly a disputable decision, has been made and the fact there is a question about the timing of the Commissioner’s response does not of itself bring the process to an end. This issue must be able to be dealt with by means of the statutory procedures. After all, as Cooper J observed, the challenges made by the Trust are ultimately directed to the correctness of the assessment.
[15] Next, the Trust argues that if the disputes procedure in pt 4A is still live, the Commissioner did not issue a challenge notice under s 89P which would permit the Trust to utilise the pt 8A challenge procedure.
[16] This argument is based on a misconception about the process. As the Commissioner notes, the relevant GST period (that ended 31 July 2009) is currently in the statutory dispute process. The parties have now exchanged Statements of Position. The matter will ultimately be referred to the Commissioner’s Disputes Review Unit. If the Unit finds in the Commissioner’s favour, she will issue the Trust with a challenge notice as required by s 89P of the Act. The matter may then proceed to challenge proceedings in due course. Through that forum, as the Commissioner submits, the Trust will have the opportunity to raise the grounds relied on in the judicial review proceeding.
[17] We turn then to the proposed ground of appeal based on s 138E(1)(e)(iv). Mr Mawhinney wishes to argue that even if there was a disputable decision it was expressly excluded from challenge by s 138E(1)(e)(iv) of the Act. Section 138E(1) states that pt 8A, dealing with challenges, does not confer a right to challenge with respect to a number of decisions including a matter which by various provisions is left to the Commissioner’s discretion. However, as the Commissioner submits, it is her discretionary decision not to issue a Notice of Proposed Adjustment that cannot be challenged under s 138E(1)(e)(iv), not the assessment under s 89C(eb). Assessments are defined as disputable decisions and are challengeable under the statutory procedures in pts 4A and 8A of the Act.
[18] Thirdly, the Trust seeks to argue that the reliance on s 89C(eb) of the Act is unlawful. This is a reference to the Trust’s argument that the amount of GST payable is the same whether or not the activity was fraudulent. This matter plainly focuses on the assessment which as noted is a disputable decision.
[19] It is apparent from this discussion that the proposed appeal is hopeless and there is another statutory remedy available. Accordingly, although the delay is minimal, we consider it is not in the interests of justice to extend time for the Trust to pursue a meritless appeal.

Result

[20] For these reasons, the application for an extension of time to appeal is dismissed.
[21] The applicant must pay the first respondent costs for a standard application on a band A basis and usual disbursements.

Solicitors:
Crown Law Office, Wellington for Respondents

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^[1] Mawhinney v Commissioner of Inland Revenue (No 2) [2013] NZHC 3564, (2013) 26 NZTC 21079.

^[2] Applying Tannadyce Investments Ltd v Commissioner of Inland Revenue [2011] NZSC 158, [2012] 2 NZLR 153. Part 4A of the Tax Administration Act 1994 deals with the disputes procedures. Part 8A deals with challenges and takes over if the matter is not resolved by the disputes procedures.

^[3] Section 89C states that the Commissioner must issue a Notice of Proposed Adjustment before making an assessment unless the circumstances set out in subss (a)–(m) apply. One of the circumstances, subs (eb), is that the Commissioner “has reasonable grounds to believe that the taxpayer has been involved in fraudulent activity”.

^[4] A further cause of action against the Registrar of the Taxation Review Authority was dismissed by Cooper J: Mawhinney v Commissioner of Inland Revenue (No 2) [2014] NZHC 2070.

^[5] Tannadyce, above n 2.

^[6] At [45].

^[7] Mawhinney v Commissioner of Inland Revenue [2014] NZCA 69.

^[8] My Noodle Ltd v Queenstown Lakes District Council [2009] NZCA 224, (2009) 19 PRNZ 518 (citation omitted).