Update to our report:  Judicial review in tax disputes 

Decision by Associate Judge Matthews in:

Commissioner of Inland Revenue v Tannadyce Investments Ltd [2012] NZHC 369, 6 March 2012

Background

The Commissioner of Inland Revenue (CIR) applied for an Order to have the taxpayer placed into liquidation. The amount of tax owed by the taxpayer was in excess of $586,000. The taxpayer applied for leave to file a statement of defence out of time. Both applications had been adjourned on a number of occasions as the taxpayer had been waiting for a decision from the Supreme Court.

In Tannadyce Investments Ltd v Commissioner of Inland Revenue [2011] NZSC 158, their Honours reaffirmed that the statutory review procedures are the correct mechanism by which to challenge assessments. The taxpayer’s tax indebtedness was therefore beyond dispute.

The Decision:

One

An order was made placing the taxpayer into liquidation and liquidators were appointed.

Two

The taxpayer’s application for special leave to file a statement of defence was declined, there being no convincing reason for the Court to grant it. Such application must be seen in the context of the general policy of the provisions of the Companies Act relating to liquidation (companies that are insolvent should be liquidated).

The reasons for declining the application were:

a) the taxpayer did not establish that it had an arguable defence because of its inability, now to challenge the CIR’s assessment of tax
b) the taxpayer’s lack of evidence to support its contention that it was solvent 
c)  no reasonable explanation had been provided by the taxpayer to explain its failure to file and serve its defence within time
d) looking at the justice of the case overall the Court was not satisfied that the time should be extended. Mosaed v Roy Turner Ski Shop Ltd HC Wanganui M63/92, 10 December 1992 applied.

Three

There was a substantial indisputable an unpaid debt to the CIR, the taxpayer was unable to pay its debts and it was appropriate for the taxpayer to be placed into liquidation. Commissioner of Inland Revenue v Berryman (2009) 24 NZTC 23,447 applied.

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