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22 Dec 2006
Appeal Status
Not appealed

High Court substantially upholds validity of Section 17 Notice issued to taxpayer

2006 case note – Court upheld validity of notice requiring taxpayer statement of assets and liabilities - investigations, section 17 notice.

Lupton v CIR


The Commissioner issued a notice under section 17 of the Tax Administration Act (TAA) 1994 requiring a taxpayer under investigation to complete a statement of assets and liabilities in form IR 110, and to respond to specific requests for information. The High Court upheld the validity of the notice on most issues, and where the notice was found invalid, the Court accepted the invalid parts could be severed leaving the rest of the notice valid and enforceable. It was left to the Commissioner to decide whether he should withdraw the existing notice and issue a fresh one in the interests of clarity.


This decision relates to an application by the taxpayer for judicial review of a section 17 TAA notice issued to the taxpayer.

The Commissioner is investigating the taxpayer's tax affairs. The taxpayer is connected with a group of around 40 companies; the group operates in several countries with the holding company thought to be located in the British Virgin Islands. The Commissioner has been seeking information about remuneration and benefits derived by the taxpayer from the group and certain other companies and trusts with which the Commissioner believes the taxpayer is connected. The Commissioner seeks to establish whether the taxpayer has met his obligations under New Zealand tax legislation.

The Commissioner issued a formal notice under section 17 seeking specific information, books and documents. The notice also required the completion and signature of a statement of assets and liabilities in form IR 110. The taxpayer now challenges the validity of the notice as served.


The notice is invalid in respect of specific issues, ruling that it will be a matter for the Commissioner to decide whether to withdraw the existing notice in its entirety or amend it.

The Commissioner has not exceeded his powers in seeking estimates of values of assets in form IR 110. The taxpayer has knowledge of his assets, the Commissioner requires "a bona fide and genuine attempt with a reasonable measure of accuracy". The notice was not invalidated by the request for details of the taxpayer's wife's credit card as the notice provides for the taxpayer to identify where relevant records are located if not in his possession/control.

The notice is invalid to the extent that it requires the taxpayer's wife to sign a declaration that the information is true and correct. Section 17 does not authorise the Commissioner to require a person, other than the person named in the notice to vouch for the correctness of the information given.

The taxpayer challenged a number of specific questions in the notice on various grounds involving uncertainty, oppression and abuse of power. Four of the questions were held to be invalid. The questions that were deemed to be expressed too widely or required the taxpayer to speculate or guess were held to be invalid for uncertainty. Attention was draw to the fact that criminal sanctions apply for non-compliance. The Judge agreed with taxpayer's Counsel that the question relating to naming other parties who have control or equitable interests in certain trusts was wrong in law and could not be validly called upon to answer in the manner in the form.

The Judge found the Commissioner intended expressions used in the form to be interpreted by their natural and ordinary meaning. Not specifying the time periods for information requested did not of itself demonstrate that the questions were unreasonably burdensome. The question relating to separately specifying items over $500 purchased in the last four years is not too burdensome. Although the notice informs the taxpayer they can contact the department in the event of difficulty, this does not overcome lack of clarity in the notice.

Tax Administration Act 1994, S 17