w w w . L a w y e r S e r v i c e s . i n



Redcliffe Forestry Venture Limited & Others v/s Commissioner of Inland Revenue


Company & Directors' Information:- B B VENTURE PRIVATE LIMITED [Active] CIN = U52209CT2008PTC020645

Company & Directors' Information:- S A R VENTURE PRIVATE LIMITED [Active] CIN = U70102DL2015PTC275704

Company & Directors' Information:- A K G FORESTRY LIMITED [Strike Off] CIN = U01111DL1996PLC081349

Company & Directors' Information:- R D FORESTRY PRIVATE LIMITED [Strike Off] CIN = U20221UP1998PTC023135

Company & Directors' Information:- N J VENTURE PRIVATE LIMITED [Strike Off] CIN = U70101MH2008PTC186387

Company & Directors' Information:- INLAND CORPORATION PRIVATE LIMITED [Dissolved] CIN = U99999TN1955PTC000997

    CA791 of 2013, CA633 of 2013 & CA23 of 2014

    Decided On, 05 August 2014

    At, Court of Appeal of New Zealand

    By, THE HONOURABLE MR. JUSTICE O?REGAN P
    By, THE HONOURABLE MR. JUSTICE STEVENS & THE HONOURABLE MR. JUSTICE WILD

    G J Judd QC for Appellants in CA633/2013. No appearance for Appellants in CA791/2013. G A Muir for Appellant in CA23/2014. R L Roff and S J Leslie for Respondent. Stainton Chellew, Auckland for Appellants (CA23/2014 and CA791/2013). Wynyard Wood, Auckland for Appellants (CA633/2013). Crown Law Office, Wellington for Respondent.



Judgment Text

(Given by O’Regan P)

Introduction

[1] We heard these three appeals together and, given the similarity of subject matter, it is appropriate to deal with them in a single judgment. We heard two other appeals involving some or all of the appellants at the same time and the judgments in those appeals are being delivered at the same time as this judgment.[1] In addition, we have, with the parties’ agreement, dealt with two costs appeals on the papers.[2]

[2] The appellants in all appeals were parties to an arrangement, known as the Trinity scheme, that was the subject of a ruling that it was a tax avoidance arrangement.[3]The ruling was made in a decision of the High Court determining a challenge by the appellants and other parties to the Trinity scheme to the assessments of their tax liability for the 1998 tax year. We will call this decision Accent 2004. Accent 2004 was upheld by this Court and the Supreme Court.[4]

[3] Since the decision of the Supreme Court upholding the finding that the Trinity scheme is a tax avoidance arrangement and confirming the assessments made by the Commissioner of Inland Revenue for the 1998 tax year in Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue (Ben Nevis 2008), a number of taxpayers, including the appellants in the present appeals, have embarked on a series of challenges to the outcome. These are summarised in our judgment in Accent Management Ltd v Attorney-General.[5]We will not go through the detail of these proceedings here, but summarise them as follows:

(a) An attempt to recall Accent 2004 failed.[6]An appeal against the decision refusing to recall Accent 2004 was dismissed by this Court.[7]

(b) An application for judicial review of the Commissioner’s assessments on the basis that they were invalid and unlawful was struck out.[8]The appeal against this judgment was abandoned.

(c) An application to set aside Accent 2004 was dismissed on jurisdictional grounds.[9]

(d) A further application to set aside Accent 2004, on the ground of presumptive bias on the part of the trial Judge also failed.[10]

(e) An application by Accent Management Ltd (Accent) to set aside Accent 2004 on the basis that the High Court decision had involved an unlawful levying of tax and had been made outside the powers granted to a hearing authority under the Tax Administration Act 1994 was dismissed.[11]

(f) We were told a further challenge to the validity of Accent 2004, based on the New Zealand Bill of Rights Act 1990, has been mounted and the proceeding has been heard in the High Court. Judgment is reserved.[12]

Present appeals

[4] All of the present appeals arise from statutory demands issued by the Commissioner for amounts the Commissioner says are owing by the various appellants in respect of the 1998 income tax year.[13]We will set out details later. The appellants challenged the validity of these demands and applied to have them set aside. They failed in the High Court and renew their challenges on appeal in this Court.

Issues

[5] The appeals are advanced on three grounds.

[6] The first is that the statutory demands are not, in law, statutory demands as defined in s 289 of the Companies Act 1993 because the Commissioner is not a creditor in relation to the amounts demanded. Rather, the Crown is the creditor. Accordingly the statutory demands are invalid because they demand payment of an amount for which the person making the demand is not the creditor.

[7] The second is that the statutory demands should be set aside under s 290(4)(a) of the Companies Act because the amount demanded by the Commissioner is not owing. There has not been a final determination in relation to the challenges to the assessments made for the relevant tax years. This is because not all of the proceedings seeking to set aside or otherwise invalidate Accent 2004[14]have been finally determined.

[8] The third is an argument based on s 290(4)(c) that the statutory demands should have been set aside on other grounds: namely that liquidation of the appellants would be futile and would not lead to payment of the debts; and the attempt to liquidate the appellants was driven by an improper motive, namely removing the appellants from the litigation referred to above.[15]

[9] An additional ground is raised in respect of CA23/2014. We will deal with that later.

Statutory provisions

[10] The statutory demands issued by the Commissioner were issued in accordance with s 289 of the Companies Act. Under s 289(1) a statutory demand is said to be 'a demand by a creditor in respect of a debt owing by a company made in accordance with [s 289]'. 'Creditor' is defined in s 240 of the Companies Act as 'a person who, in a liquidation, would be entitled to claim in accordance with section 303 that a debt is owing to that person by the company'.

[11] The jurisdiction to set aside a statutory demand is derived from s 290 of the Companies Act. The relevant aspects of that section are set out below:

290 Court may set aside statutory demand

(1) The court may, on the application of the company, set aside a statutory demand.

...

(4) The court may grant an application to set aside a statutory demand if it is satisfied that-

(a) there is a substantial dispute whether or not the debt is owing or is due; or

(b) the company appears to have a counterclaim, set-off, or cross-demand and the amount specified in the demand less the amount of the counterclaim, set-off, or cross-demand is less than the prescribed amount; or

(c) the demand ought to be set aside on other grounds.

(5) A demand must not be set aside by reason only of a defect or irregularity unless the court considers that substantial injustice would be caused if it were not set aside.

(6) In subsection (5), defect includes a material misstatement of the amount due to the creditor and a material misdescription of the debt referred to in the demand.

...

[12] As noted earlier, the applications to set aside the statutory demands in the decisions under appeal all invoked ss 290(4)(a) and 290(4)(c).

Decisions under appeal

CA633/2013

[13] The decision under appeal in CA633/2013 is a decision of Associate Judge Faire dismissing applications made by Bristol Forestry Venture Ltd (Bristol) and Ben Nevis Forestry Ventures Ltd (Ben Nevis) to set aside statutory demands.[16]In the case of Bristol, the demands sought payment of $819,268.16. In the case of Ben Nevis, the demands sought payment of $1,612,108.36. In each case, the demands recorded that they were 'in respect of amounts owing under Revenue Acts for the 1998 tax year' and being '31/3/03 ATP shortfall penalty assessment' and '4/12/12 interest' in respect of which each relevant company was indebted to the Commissioner.

[14] Bristol and Ben Nevis applied to set aside the statutory demands under ss 290(4)(a) and 290(4)(c) of the Companies Act. In the alternative they sought declarations that the demands were not statutory demands within the meaning of s 289 of the Companies Act.

[15] Associate Judge Faire recorded that the debtor companies argued there was a substantial dispute as to whether or not the debts said to be owed by them were owing or overdue, because they had sought to have Accent 2004 set aside ex debito justitiae (as of right).[17]Counsel for the debtor company submitted that if Accent 2004 were set aside, the shortfall penalties and interest claimed by the Commissioner would not be owing. This was because a disputant is not liable to pay a shortfall penalty where the penalty is payable in respect of any tax in dispute, until the due date for payment of the deferrable tax.[18]The same applies to the obligation to pay interest accruing on a shortfall penalty.[19]
[16] The due date for payment of deferrable tax is the day which is the 30th day after the last day of the relevant period of deferral.[20]The relevant period of deferral resulting from a pt 8A challenge proceeding under the Tax Administration Act ends at the expiry of the day that, in relation to the deferrable tax, is the day of determination of final liability.[21]The term 'day of determination of final liability' is defined in s 3 of the Tax Administration Act. For present purposes, the relevant provision is para b(iv), which provides that the relevant day of determination is:

(iv) if a challenge is determined by a court, whether or not by way of appeal, the day on which the challenge is finally determined, whether in those proceedings or in a subsequent appeal.

[17] The essence of the debtor companies’ case was that, as long as the application to set aside Accent 2004 was outstanding, the determination of the Supreme Court in Ben Nevis 2008 was not a final determination of their challenges to the Commissioner’s assessments and there had been no such final determination. And because the statutory challenge regime effectively suspended the Commissioner’s assessment pending completion of the challenge, the obligation to pay the shortfall penalties and interest should be considered to be a contingent rather than a presently owing debt.

[18] The Associate Judge determined that, unless Accent 2004 and the judgments of this Court and the Supreme Court upholding it were set aside, they remained conclusive as to the legal consequences they decided, citing the statement of principle of the Elias CJ in R v Smith.[22]Accordingly he found that unless those decisions were, in fact, set aside, they finally resolved the dispute about the taxation owing by the debtor companies, including issues of shortfall penalties and interest. That meant that the amounts claimed by the Commissioner were presently owing and no substantial dispute existed. Accordingly the arguments that a substantial dispute about the amounts being owed or about whether the amounts had yet fallen due did not exist and the claim to have the demand set aside under s 290(4)(a) failed.

[19] In relation to s 290(4)(c), the argument also relied on the existence of the proceedings to set aside Accent 2004. The Associate Judge found that there was no basis in which to apply s 290(4)(c), given that the debtor companies failed the solvency tests and no arrangements had been made to pay the shortfall penalties or interest.

[20] The Associate Judge then dealt with an application by the Commissioner to put the debtor companies into liquidation under s 291 of the Companies Act, but concluded that it was not appropriate to order their immediate liquidation. Rather, he made orders in terms of s 291(1)(a) that the companies pay the demanded sums within ten working days, and the Commissioner could make an application to put the relevant non-paying debtor company into liquidation in the event of default.

[21] The Associate Judge ordered costs on a 2B basis.

CA791/2013

[22] The judgment under appeal is also a judgment of Associate Judge Faire, this time dealing with an application by Redcliffe Forestry Venture Ltd (Redcliffe) to set aside a statutory demand.[23]The statutory demand sought payment of a total of $819,268.18, made up of a shortfall penalty of $391,748.55 and interest of $427,519.63.

[23] The submission made to the Associate Judge again relied on s 290(4)(a): the existence of a substantial dispute about the debt demanded. In this case it was argued that the Supreme Court decision in Ben Nevis 2008 had not formally determined the tax shortfall, on which the tax shortfall penalty could be calculated. Associate Judge Faire was satisfied that the decision of the Supreme Court in Ben Nevis 2008 had upheld the Commissioner’s assessment and that the shortfall penalty of $391,746.78 had, itself, also been upheld. Accordingly he considered there was no substantial dispute. The Associate Judge also rejected an argument based on s 290(4)(c).

[24] In a separate judgment, the Associate Judge determined that it was appropriate to award indemnity costs.[24]

CA23/2014

[25] The judgment under appeal in CA23/2014 dealt with two separate applications, one by Accent and one by Lexington Resources Ltd (Lexington) to set aside the statutory demands that had been made against them.[25]The parties had agreed that the two applications should be dealt with together.

[26] In relation to Accent, the Commissioner demanded payment of $3,250,265.74 'in respect of amounts owing under Revenue Acts for the 1998 tax year as set out in the attached statement of account'. In relation to Lexington the demand was for $2,115,039.48 in respect of similarly characterised amounts.

[27] The debtor companies sought orders declaring that the document was not a statutory demand, or, in the alternative, an order setting the statutory demand aside. The application to set aside the statutory demand was, as with the others dealt with in this judgment, based on ss 290(4)(a) and 290(4)(c) of the Companies Act. The applications were again dealt with by Associate Judge Faire.

[28] The argument that the documents were not statutory demands in terms of s 289 of the Companies Act was based on a ground that had not been argued in the earlier cases, namely that the Commissioner was not authorised to issue a statutory demand on behalf of the Crown to recover unpaid taxes. The argument was advanced on the basis that Parliament imposes the obligation to pay tax. The power to recover taxes is delegated by Parliament under s 156(1) of the Tax Administration Act, which provides that all unpaid taxes are recoverable 'by the Commissioner on behalf of the Crown by suit in the Commissioner’s official name'. Since a statutory demand was not a 'suit', s 156 did not apply. The Commissioner did not therefore acquire the status of a creditor for the purposes of s 289 of the Companies Act and could not sign a statutory demand to recover unpaid taxes.

[29] Associate Judge Faire rejected this. He said that s 6A of the Tax Administration Act charges the Commissioner with the care and management of taxes covered by the Inland Revenue Acts and imposes an obligation on the Commissioner to collect taxes. He concluded therefore that the Commissioner was a creditor in respect of a taxpayer who had not paid his or her taxes.

[30] The Associate Judge referred to the decision of this Court in Cates v Commissioner of Inland Revenue.[26]Therethe Commissioner was referred to as the statutory agent of the Crown. The observation was made that disputes about income tax are in truth disputes between the taxpayer and the Crown. The Associate Judge noted the statement in that case that the fact tax proceedings are commenced by or against the Commissioner is a matter of form not substance.[27]

[31] The Associate Judge said that a statutory demand was a document intended for use in legal proceedings: its purpose was to provide a foundation for one of the grounds to authorise the court to appoint a liquidator under s 241 of the Companies Act, namely that the company is unable to pay its debts. Thus it should be seen as a document for the purpose of a proceeding to be issued by the Commissioner in respect of a taxpayer who has not paid taxes. As a proceeding to place a company into liquidation is a 'suit' for the purposes of s 156, the issuing of a statutory demand should be seen as a step in the process of commencing a 'suit' and therefore authorised by s 156 of the Tax Administration Act.

[32] The Associate Judge rejected the argument that there remained a substantial dispute about the debts referred to in the statutory demands, relying on his earlier decisions to the effect that the Supreme Court decision in Ben Nevis 2008 finally resolved those matters. In the present case the argument that the matter was not finally resolved was based on a different argument from that which had been advanced by Bristol, Ben Nevis and Redcliffe. Accent and Lexington instead relied on the argument dealt with in our judgment in Accent Management Ltd v
Attorney-General, issued at the same time as the present judgment.[28]As we have rehearsed the arguments on the substantive matter in that judgment, it is not necessary for us to do so again in this judgment. It suffices to say that the Associate Judge was satisfied that the existence of the Accent Management Ltd v Attorney-General proceeding did not affect the finality of the Supreme Court judgment in Ben Nevis 2008, and thus did not affect the final determination of the amounts owing by both Accent and Lexington.

[33] The Associate Judge then dealt with two issues of quantum.

[34] The first related to a GST credit available to Accent of $257,742.43. At issue was whether this could be set off against the tax liability referred to in the statutory demand under s 46(6) of the Goods and Services Tax Act 1985. The Judge was satisfied that no offset should be allowed because the GST credit was more than absorbed by amounts owing by Accent in relation to the 1994 tax year, which had been omitted from the statutory demand.

[35] The second issue of quantum related to whether a costs order made by Keane J (included in the statutory demand and totalling $63,450.62) could also be the subject of a credit.[29]The Associate Judge said that irrespective of the question of whether or not a credit for costs is permissible under s 46(6) of the Goods and Services Tax Act, the fact that any such credit would be absorbed entirely by the amount owing in respect of the 1994 tax year meant there was nothing to credit.

[36] The Associate Judge therefore concluded that the amount said to be owing by Accent in the statutory demand was correct.

[37] Accordingly the Associate Judge ordered that Accent and Lexington pay the amounts demanded within 10 working days, and should default be made, the Commissioner could make an application to put the defaulting company into liquidation.

[38] In a separate costs judgment, Associate Judge Faire awarded costs to the Commissioner on a 2B basis until 12 September 2013 and thereafter on an indemnity basis.[30]That decision was delivered after the hearing of these appeals and was not therefore under challenge before us.

[39] Representation on appeals

[40] The appellant in CA791/2013, Redcliffe, was not represented at the hearing. Its solicitor, Mr Hetherington, filed a memorandum supporting the submissions of the counsel for the appellants in the other two appeals, abandoning any points of appeal that were inconsistent with those submissions and seeking to be excused. Counsel was excused and the hearing proceeded on that basis. Redcliffe had indicated it would challenge the High Court costs award against it. In the absence of any submissions supporting that challenge, we treat it as abandoned.

Dealing with the issues

[41] We now turn to the issues arising in respect of all three appeals. Once we have dealt with those, we will turn to the specific issue that relates only to CA23/2014.

Is the Commissioner a creditor?

[42] This argument was pursued in relation to all three appeals, though it was argued in the High Court only in the decision under appeal in CA23/2014. However, counsel for the Commissioner, Ms Roff, did not object to its being pursued in relation to the other appeals as well and we allowed that to occur.

[43] The essence of the argument is that the statutory demands were not, in fact, statutory demands because the party making the demand, the Commissioner, was not the party to whom the indebtedness referred to in the demand was owed. That argument, in turn, is based on a proposition that tax (or shortfall penalties and interest on shortfall penalties) is owed to the Crown, not to the Commissioner. It follows that the Commissioner is not entitled to exercise the rights of the Crown as creditor in relation to statutory demands. Thus the statutory demands which refer to the demand being made by the Commissioner and state that the demanded amount is an amount 'in respect of which you are indebted to the Commissioner' are inaccurate.

[44] This is a novel argument. We were not taken to any authority where a court has taken issue with the Commissioner issuing statutory demands,[31]nor with the concept of the Commissioner as a creditor pursuant to pt 16 of the Companies Act.[32]

[45] During the course of argument, Mr Judd QC for Ben Nevis and Bristol (and, implicitly, for Redcliffe given its adoption of his submissions) conceded that the Commissioner could issue a statutory demand as agent of the Crown, but said that the demand would need to state that the Commissioner is issuing the demand as agent for the Crown, and also refer to the fact that the debt is owing to the Crown or to the Commissioner as agent for the Crown.

Application of the relevant provisions

[46] The relevant Tax Administration Act provisions are as follows:

6A Commissioner of Inland Revenue

(1) The person appointed as chief executive of the department under the State Sector Act 1998 is designated the Commissioner of Inland Revenue.

(2) The Commissioner is charged with the care and management of the taxes covered by the Inland Revenue Acts and with such other functions as may be conferred on the Commissioner.

(3) In collecting the taxes committed to the Commissioner’s charge, and notwithstanding anything in the Inland Revenue Acts, it is the duty of the Commissioner to collect over time the highest net revenue that is practicable within the law having regard to-

(a) the resources available to the Commissioner; and

(b) the importance of promoting compliance, especially voluntary compliance, by all taxpayers with the Inland Revenue Acts; and

(c) the compliance costs incurred by taxpayers.

...

156 Mode of recovery of unpaid tax

(1) All unpaid tax shall be recoverable by the Commissioner on behalf of the Crown by suit in the Commissioner’s official name.

...

[47] For the Commissioner, Ms Roff argued that the Commissioner is the Crown or, alternatively, (but as a secondary submission) is an agent of the Crown.
[48] Ms Roff’s argument that the Commissioner is the Crown is based on the Commissioner’s status as a statutory officer of the Crown and Chief Executive Officer of a Department of State. Ms Roff relied on:

(a) s 156 of the Tax Administration Act, interpreted in light of its purpose[33]and in a manner that does not make it inconsistent with s 12 of the Crown Proceedings Act 1950; and

(b) s 6A of the Tax Administration Act.

[49] The argument that the Commissioner is the Crown relies on the amorphous and rather undefined nature of the Crown.[34]We accept that as an officer of the Crown the Commissioner can be seen as part of the Crown. But in the present context, that would render the words 'on behalf of the Crown' in s 156 of the Tax Administration Act redundant.

[50] We think the better view is that the Commissioner, as an officer of the Crown, can exercise certain functions on the Crown’s behalf. Section 156 makes it clear this includes conducting litigation to recover tax. However, we disagree with Associate Judge Faire that a statutory demand can be seen as part of the process of recovering tax 'by suit'. A statutory demand is issued under the Companies Act. It is not filed in court. It does not, unlike an application to put a company into litigation, involve the commencement of legal proceedings.

[51] Support for the proposition that the Commissioner is acting as an agent of the Crown comes from the decision of this Court in Cates v Commissioner of Inland Revenue. Though the outcome was unanimous, all three Judges made observations on the exact position of the Commissioner. Cooke J described the case as:[35]

... whether a case stated by the Commissioner and to which he is the respondent is a civil proceeding against the Crown. Section 14(2) of the Crown Proceedings Act provides that civil proceedings under that Act against the Crown shall be instituted against certain persons, listed as (a) to (d), but the subsection is expressed to be 'subject to the provisions of this Act and any other Act'. By reason of the words last quoted the case stated procedure under the income tax legislation could not be affected by s 14(2). So, if the Commissioner is to be treated as representing the Crown, jurisdiction to order discovery against him is given by s 27. ...

Sinclair J [in the lower court] thought that the Commissioner is not to be looked on for the purposes of the Crown Proceedings Act as the Crown or (it seems) an officer of the Crown. Rather he is, in the Judge’s words, a 'person designated by statute to exercise the powers and functions conferred by the Income Tax Act 1976 and the Inland Revenue Department Act 1974'. It is true that the Commissioner is so designated, but that is in no way inconsistent, in my view, with the reality of the matter. He is an officer of the Crown charged by statute with the function of collecting revenue on behalf of the Crown.

[52] Section 27 of the Crown Proceedings Act, referred to in the quotation above, is the provision relating to discovery. McMullin J made the following finding:[36]

The Commissioner has, of course, those powers and functions [conferred by the relevant legislation] and any claim for unpaid tax must be brought in his name in terms of s 399 of the Income Tax Act 1976. But it is noteworthy that s 399 provides for recovery to be made by the Commissioner 'on behalf of the Crown'. In so providing, the section recognises that income tax is recovered as a debt to the Crown and that the Commissioner is no more than a statutory agent of the Crown appointed to collect it. Historically, the imposition of taxes was the right of the Sovereign. Later it became an issue between the Sovereign and Parliament and the consent of Parliament was required before they could be levied. But such taxes still retain their character as debts due to the Crown. To treat the Commissioner as not being the Crown for its purposes of s 27 of the Crown Proceedings Act is to overlook this fact.

[53] Somers J stated:[37]

... income tax is levied and paid for the use of the Crown. The Commissioner, who is head of a Department of State, assesses the tax and collects it on behalf of the Crown. Disputes about income tax are in truth disputes between the taxpayer and the Crown. That proceedings are commenced by or against the Commissioner is a matter of form and not substance.

[54] Ms Roff argued the reference to 'by suit' in s 156 should not be seen as limiting the Commissioner’s power to recover tax.[38]Rather, it simply provides that, if proceedings are required, the Commissioner sues in her own name. We agree. But we also accept the debtor companies’ submission that s 156 is not a source of statutory power to issue a statutory demand in the Commissioner’s name.

[55] However, we consider s 6A, when read alongside s 156, does give the Commissioner power to collect taxes, including power to take debt collection proceedings and steps designed to facilitate debt collection, such as issuing a statutory demand. It is notable s 6A not only charges the Commissioner with the care and management of taxes covered by the Inland Revenue Acts[39]but also describes the Commissioner’s duty as 'collecting over time the highest net revenue'.[40]

[56] Section 6A may also be read in conjunction with s 176 of the Tax Administration Act. That section requires the Commissioner to 'maximise the recovery of outstanding tax from a taxpayer'. It is hard to reconcile that duty with the appellants’ argument.

[57] Mr Judd argued that the Commissioner, unlike any other creditor, would collect a (tax) debt only by taking legal proceedings. The use of the statutory demand mechanism was denied to her. Alternatively, statutory demands would need to be issued by the Queen, perhaps acting through the Attorney-General. We consider each of those alternatives has an air of unreality about it.

[58] Even if the statutory powers of the Commissioner omitted the power to issue a statutory demand in her own name, there is no doubt she could do so as agent or officer of the Crown. Mr Judd accepted this. Ms Roff pointed out that, in that event, s 290(5) of the Companies Act would apply. That provision says a statutory demand should not be set aside by reason only of a defect or irregularity,[41]unless the Court considers a serious injustice would arise.

[59] Applying s 290(5) requires that the Court first determine that the documents served on the debtor companies were statutory demands in terms of s 289. We accept that where the demand is made by an entity that is neither the creditor nor has any interest in the debt, a purported demand may well not meet the requirements of s 289(1).[42]

[60] However, that is not the situation here. We think s 290(5) gives an indication that, if the only thing amiss with the intended statutory demand is a 'defect', then that should not lead to its being treated as having failed to achieve its intended purpose.[43]In effect the 'defect' in the statutory demands in this case, on the best case for the debtor companies, is the omission of the words 'on behalf of the Crown' after each reference to the Commissioner. The addition of those words would be a statement of the obvious. Their omission is at worst a trivial defect. We think the better view is that their omission is not a defect at all. We would not see the omission as compromising the status of the statutory demands under s 289, just as it would not provide a reason to set the demands aside.
[61] We conclude therefore that this first argument fails.

Is there a substantial dispute?

[62] As to the existence of a substantial dispute, Mr Muir, counsel for Accent, renewed the submission he had made in the High Court to the effect that the day of final determination of liability in respect of the tax assessments had not yet arisen. This again relied on the attempts to set aside or invalidate Accent 2004 that were the subject of the two other judgments issued by this Court today.[44]
[63] The propositions advanced in support of this argument were essentially the same as those advanced to the Associate Judge.[45]To summarise:

(a) A statutory demand must be in respect of 'a debt that is due' (Companies Act, s 289(2)(a)).

(b) Where there has been a challenge to an assessment of penalties the debt is not due until the day which is the 30th day after the last day of the relevant period of deferral (Tax Administration Act, s 142F).

(c) The period of deferral in respect of deferrable tax in relation to which proceedings challenging the assessment are issued under pt 8A of the Tax Administration Act is a period which ends at the expiry of the day that, in relation to the deferrable tax, is the day of determination of final liability (definition of 'period of deferral' in s 3 of the Tax Administration Act).

(d) Applying those provisions, the appellants submit the shortfall penalty debts become due on the 30th day after the day of determination of final liability which is the day the challenge is finally determined. It does not become due because of Accent 2004 or the judgments upholding it on appeal, but by statutory operation, once the necessary preconditions have been satisfied.

(e) Under the definition of 'day of determination of final liability' (Tax Administration Act, s 3(b)(iv)) the first requirement is that a challenge is 'determined' by a court. The second is that it is 'finally determined'. Until this has occurred, there can be no liability to pay the deferrable tax.

(f) If Accent 2004 is set aside the setting aside will operate retrospectively to render the decision a nullity.

(g) There is a proceeding seeking to have Accent 2004 set aside on grounds that if proved would result in its being set aside ex debito justitiae. Whether the debt is categorised as contingent or prospective, it remains contingent or prospective – and not 'due' – until such time as the setting aside proceeding has been finally determined. Setting aside of Accent 2004 will result in the debt not being due and never having been due.

(h) For the purposes of s 290(4)(a), there is at least a 'substantial dispute'.

[64] Mr Muir was critical of the Associate Judge for focusing on the finality of Ben Nevis 2008 rather than on the provisional nature of shortfall penalties until tax disputes are finally resolved.

[65] We see no proper basis for that criticism. The argument stands and falls on the argument that the attempts to have Accent 2004 set aside render the final determination of Ben Nevis 2008 provisional until those attempts are resolved. The fact that we have ruled that both the 'unlawful tax' application and the 'presumptive bias' application fail in the two judgments issued today provides further support for the Associate Judge’s rejection of this argument. The fact that yet another attempt to attack Accent 2004 has been made does not dissuade us from that view.[46]

[66] Mr Judd also argued that Accent 2004 did not establish a debt for shortfall penalty but rather confirmed the assessment that created it. He said the Associate Judge was wrong to say the judgment established the debt. It is hard to reconcile this argument with the arguments put to us in Accent Management Ltd v Attorney-General.[47]And, in any event, the point goes nowhere because whether Accent 2004 established or confirmed a debt, the pt 8A challenge to the assessment has now been finally determined and the amounts assessed are now due. So the point raised under this head cannot succeed unless it is accepted that the proceedings referred to earlier are such as to render Ben Nevis 2008 not final. We have already rejected the proposition that they do.

[67] If the appellant’s arguments were accepted, it would mean that any defaulting taxpayer having challenged and appealed as far as the Supreme Court without success could nevertheless defer payment of deferred tax, shortfall penalties or interest by simply commencing proceedings attacking the judgments in which his or her challenge failed. As each attack failed, another could be commenced. One only needs to state that proposition to realise how unappealing and unreal the appellants’ argument is.

[68] Accordingly the argument based on the existence of a substantial dispute under s 290(4)(a) also fails.

Section 290(4)(c)

[69] In Commissioner of Inland Revenue v Chester Trustee Services Ltd, this Court stated:[48]

... the general policy of the [Companies] Act that insolvent companies should be put into liquidation, if a creditor seeks such an order, should not be departed from lightly. To justify such departure there must be some other factor, be it policy, principle or simply the justice of the particular case, which outweighs the prima facie entitlement of the creditor to an order putting the insolvent company into liquidation. If the focus is on the justice of the particular case the discretion must always be exercised on a principled basis and not on some ad hoc perception of what individual justice might require. All cases involving s 290(4)(c) must in the end come down to a judgment by the Court as to whether the creditor’s prima facie entitlement is outweighed by some factor or factors making it plainly unjust for liquidation to ensue.

[70] The appellants submit that if there is any doubt about the necessity to set aside the statutory demands under s 290(4)(a), then the demands ought to be set aside under s 290(4)(c). This is not supported by authority. In the context of a debtor attempting to apply s 290(4)(c) on the ground that it is solvent, this Court has found:[49]

If there is no dispute as to the company’s liability, so that para (a) or (b) [of s 290(4)] cannot be invoked, it is difficult to imagine circumstances in which the company should be able to avoid paying a debt, merely by proving that it is able to pay that debt. If the debt is indisputably owing, then it should be paid.

[71] The appellants also make submissions on the public interest nature of the proceedings, questioning the motives of the Commissioner. One of these questionable motives is said to be that the respondent’s statutory demands are an attempt to take the appellants out of the setting aside proceeding[50]and the proceeding based on the New Zealand Bill of Rights Act.[51]In Attorney-General v Howard, referring to the principle of finality and the public nature of litigation involving the Commissioner, Glazebrook J stated:[52]

... the modern view is that the public does have an interest in finality of court proceedings. Even with the current civil fee structure, the public purse sustains litigation to a large degree.

[72] The relevance of this observation is evident from the Commissioner’s submission that in the five years since the Supreme Court issued its decision in Ben Nevis 2008, there has never been a time when she has not had to defend proceedings from the appellants and their co-investors. The observation supports the argument that the public in fact has an interest in litigation coming to an end, and the appellants paying the debt that is due. The observation also provides a response to the appellants’ argument that setting aside the statutory demand is in the public interest because the appellants have no other creditors.
[73] The Associate Judge was correct to rule that there was no proper basis for reliance on s 290(4)(c).

Paymentof $63,450.62 (CA23/2014)

[74] This sum relates to a costs order made by Keane J,[53]included in the statutory demand issued against Accent. It relates to CA23/2014 only. Accent argued in the High Court that the amount of this costs award could be the subject of a GST credit, capable of set-off. Associate Judge Faire accepted that the amounts set out in the statutory demands were correct.[54]The Judge did not decide the issue of whether or not a credit for costs is permissible under s 46(6) of the Goods and Services Tax Act. The section provides:

46 Commissioner’s right to withhold payments

...

(6) If, but for this subsection, a registered person would be entitled to an amount as a refund under section 19C(8) or 20(5) or 45 or 78B(5)(c) or under the Tax Administration Act 1994, or as a payment of interest under Part 7 of the Tax Administration Act 1994, the Commissioner may apply the amount, in accordance with a request under section 173T of the Tax Administration Act 1994 or in the absence of a request in such order or manner as the Commissioner may determine, in payment of-

(a) tax that is payable by the person:

(b) an amount that is payable by the person under another Inland Revenue Act.

[75] The respondent submits that this does not provide for GST credits to be offset against costs awarded by the High Court in a judicial review proceeding. We agree. Combined with the Associate Judge’s finding that the credit is absorbed entirely by amounts outstanding in respect of the 1994 year,[55]there is no reason to set aside the Judge’s decision on the amount owing.

Result

[76] All of the arguments raised on the appellants’ behalf fail. Accordingly, we dismiss all the appeals.

Costs

[77] The Commissioner seeks indemnity costs.

[78] The applicable principles are set out in our judgment dealing with the costs appeals mentioned above at [1].[56]

[79] The Commissioner says the appeal points were hopeless and the appeals continue and prolong the appellants’ improper use of the s 290 process to frustrate and delay the collection of tax owing by them.

[80] In our view that characterisation of the position is accurate. The argument that the Commissioner was not a creditor was made in written submissions as an argument as to invalidity of the statutory demands. In oral argument it was conceded that the addition of the words 'as agent for the Crown' to the statutory demands would answer the point. It was thus an argument as to a minor defect in the demands, remediable under s 290(5). The arguments based on alleged lack of finality of Ben Nevis 2008 fail for the reasons given above. The appellants in CA791/2013, not being party to either of the challenges to the finality of Ben Nevis 2008, were in no position to put forward the argument.

[81] We accept also that the appeals and the High Court proceedings to which the appeals relate were brought with an ulterior motive of delay and frustration of the collection of tax owed by the appellant and others.

[82] In the circumstances, we are satisfied that an award of indemnity costs and usual disbursements should be made.

[1]Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2014] NZCA 350; Accent Management Ltd v Attorney-General [2014] NZCA 351.

[2]Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2014] NZCA 348.

[3]Accent Management Ltd v Commissioner of Inland Revenue (2004) 22 NZTC 19,027 (HC).

[4]Accent Management Ltd v Commissioner of Inland Revenue [2007] NZCA 230, (2007) 23 NZTC 21,323; Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2008] NZSC 115, [2009] 2 NZLR 289 [Ben Nevis 2008].

[5]Accent Management Ltd v Attorney-General,above n 1, at [11]−[23].

[6]Accent Management Ltd v Commissioner of Inland Revenue (2006) 22 NZTC 19,758 (HC). The judgment also dealt with other issues, including an application for the High Court Judge, Venning J, to recuse himself on the basis of bias.

[7]Accent Management Ltd v Commissioner of Inland Revenue [2007] NZCA 231, (2007) 23 NZTC 21,366.

[8]Accent Management Ltd v Commissioner of Inland Revenue (2010) 24 NZTC 24,126 (HC).

[9]Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue [2011] 1 NZLR 336 (HC); rev’d Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue [2011] NZCA 638, [2012] 2 NZLR 823; rev’d Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd [2012] NZSC 94, [2013] 1 NZLR 804.

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r />[10]Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2013] NZHC 2361, (2013) 26 NZTC 21-032. The appeal against this decision was dismissed in this Court’s judgment in Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue, above n 1. [11]Accent Management Ltd v Attorney-General [2013] NZHC 1447, (2013) 26 NZTC 21,020. The appeal against this decision has been dismissed in our judgment in Accent Management Ltd v Attorney-General, above n 1. [12]Ben Nevis Forestry Ventures Ltd v Attorney-General (CIV-2013-404-4345). [13]In one case, an unpaid costs award is included in the sum demanded. [14]Outlined above at [3]. [15]Above at [3]. [16]Bristol Forestry Venture Ltd v Commissioner of Inland Revenue [2013] NZHC 2384, (2013) 26 NZTC 21-031. [17]At [31]. As we have dealt with the substantive argument in our judgment in Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue, above n 1, we will not outline the arguments again in this judgment. [18]Tax Administration Act 1994, s 138I(2)(b). [19]Tax Administration Act, s 138I(2)(c). [20]Tax Administration Act, s 142F. [21]Tax Administration Act, s 3: definition of 'period of deferral'. [22]R v Smith [2003] 3 NZLR 617 (CA) at [46]. [23]Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue [2013] NZHC 2818, (2013) 26 NZTC 21-041. [24]Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue [2013] NZHC 3468. [25]Accent Management Ltd v Commissioner of Inland Revenue [2013] NZHC 3197, (2013) 26 21-050. [26]Cates v Commissioner of Inland Revenue [1982] 1 NZLR 530 (CA). [27]At 535 per Somers J. [28]Accent Management Ltd v Attorney-General,above n 1. [29]Accent Management Ltd v Commissioner of Inland Revenue, (2010) 25 NZTC 20-022 (HC). [30]Accent Management Ltd v Commissioner of Inland Revenue [2014] NZHC 758. [31]See for example Commissioner of Inland Revenue v Chester Trustee Services Ltd [2003] 1 NZLR 395 (CA): this case concerned an application to set aside a statutory demand issued by the Commissioner, but the Commissioner’s ability to issue the demand was not disputed. [32]See for example Commissioner of Inland Revenue v Atlas Food and Beverage Ltd [2010] NZHC 1955; (2010) 25 NZTC 20-002 (HC): this case concerned an argument from the taxpayers that the undisputable portion of the debt had been paid to the Commissioner, and the disputable portion was subject to the disputes process under the Tax Administration Act. The taxpayers submitted that the Commissioner was therefore no longer a creditor. Taking into account s 303 of the Companies Act 1993, at [21], Panckhurst J stated he was in no doubt that the Commissioner remained a creditor. [33]Interpretation Act 1999, s 5(1). [34]Philip A Joseph Constitutional and Administrative Law in New Zealand (4th ed, Brookers, Wellington, 2014) at 609; Town Investments Ltd v Department of the Environment [1977] UKHL 2; [1978] AC 359 (HL) at 397–398. [35]Cates v Commissioner of Inland Revenue, above n 26, at 532. [36]At 534. [37]At 535. [38]She referred us to the statutory history that indicated the words 'by suit' were redundant. [39]Subsection (2). [40]Subsection (3). [41]A defect does not need to be minor: s 290(6) defines defect to include certain material inaccuracies. [42]Redoubt Hill Vineyard Ltd v Torrent Bay Vintners Ltd [2014] NZHC 675 at [16]−[19]. [43]Markham 2000 Ltd v Max & Co Ltd (2005) 9 NZCLC 263,735 (HC). [44]Accent Management Ltd v Attorney-General, above n 1; Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue,above n 1. [45]Above at [17]. [46]Above at [3](f). [47]Accent Management Ltd v Attorney-General, above n 1. [48]Commissioner of Inland Revenue v Chester Trustee Services Ltd, above n 31, at [3]. [49]AMC Construction Ltd v Frews Contracting Ltd [2008] NZCA 389, (2008) 19 PRNZ 13 at [7]. [50]Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue, above n 1; above at [3](d). [51]Above at [3](f). [52]Attorney-General v Howard [2010] NZCA 58, [2011] 1 NZLR 58 at [123]. [53]Accent Management Ltd v Commissioner of Inland Revenue, above n 29; above at [35]. [54]Accent Management Ltd v Commissioner of Inland Revenue, above n 25, at [39]. [55]At [39]. [56]Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue,above n 2, at [10]–[17].
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