Issued
2009
Decision
13 May 2009
Court
NZSC
Appeal Status
Not appealed

Status of Farnsworth and Zentrum decisions remains unclear

2009 case note - CIR's application for partial recall of Supreme Court decision to clarify the status of Farnsworth in light of the decision in Zentrum refused.

Case
Ben Nevis Forestry Ventures Limited & Ors v Commissioner of Inland Revenue [2009] NZSC 40
Legal terms
Farnsworth, Zentrum

Summary

Commissioner’s application for partial recall of Supreme Court decision, to clarify the status of Farnsworth in light of the decision in Zentrum, was refused.

Impact of decision

The status of the respective decisions remains unclear. The Supreme Court confirmed that it has expressed no view on the correctness of either Farnsworth or Zentrum.

Facts

In the recent Supreme Court hearing in Trinity[1], the Accent Management appellants endeavoured to raise an argument that the agreement to grant a licence and options fell within the definition of a financial arrangement. The Supreme Court refused to hear that argument and in the judgment, reference[2] is made to the Court of Appeal decision in Commissioner of Inland Revenue v VH Farnsworth Limited[3]:

  • "Although it was decided on earlier legislation, the leading case on what can be argued at a hearing is [Farnsworth]"

The Commissioner made an application for recall of paragraphs 152-155 of the Trinity judgment and requested that the Court omit or (preferably) amend those paragraphs to clarify the status of the decision in Commissioner of Inland Revenue v Zentrum Holdings Limited[4], which held that Farnsworth had no application in tax litigation that is preceded by the new disputes process under Part IVA of the Tax Administration Act 1994.

Decision

The Supreme Court dismissed the Commissioner’s application for partial recall and said:

  • "[2] Inadvertently therefore this Court has created uncertainty as to whether Zentrum is a correct statement of the law. The reasons given in paragraphs [152]-[155] should not be regarded as representing this Court’s view of the correctness or otherwise of either the Farnsworth or the Zentrum cases in the light of Part IVA.
  • [3] We consider this clarification of the position is all that is necessary..."

1 Ben Nevis Forestry Ventures Limited & Ors v Commissioner of Inland Revenue [2008] NZSC 115. 

2 at paragraph 153. 

3 [1984] 1 NZLR 428 (CA). 

4 [2007] 1 NZLR 145 (CA). 

Income Tax Act 1994, Tax Administration Act 1994