Skip to main content
31 Aug 2010
Appeal Status

Commissioner partially successful on appeal

2010 case note – CIR's appeal of High Court decisions - remission, arrangement, care and management, costs, freezing orders.

Chesterfields Preschools Limited v Commissioner of Inland Revenue

Judicature Amendment Act 1977, Tax Administration Act 1994


The Commissioner successfully appealed three decisions of the High Court and had a partial success of a fourth appeal. He received directions from the Court of Appeal for the steps necessary to satisfy the earlier orders of the High Court.

Impact of decision

The decision is a mixed result for the Commissioner. While he is required to redo some aspects of earlier decisions, other aspects were upheld. It is helpful to have the Court’s views on what should be done to remedy the Commissioner’s mistakes and the Court’s view that this mistake did not originate from a deliberate attempt to not give effect to the High Court’s first judicial review judgment (as found in the second judicial review judgment).

Of particular interest is the Court’s express statement confining the litigation to its facts.

The Commissioner will not appeal any part of the decision where he was unsuccessful.


The taxpayers and the Commissioner have been in protracted dispute on a number of legal fronts.

Following a first judicial review (1JR: reported (2007) 23 NZTC 212,125) and after several months of consideration the Commissioner made a series of decisions to give effect to that first judicial review. Those decisions are referred to as the Budhia decision.

The taxpayers were dissatisfied with the outcome of those decisions and commenced a further judicial review (2JR: reported (2009) 24 NZTC 23,148). This second judicial review concluded that the Commissioner had failed to give effect to the 1JR and that he was required to re-do the exercise.

The Commissioner appealed the 2JR on the basis that he had given full effect to the 1JR.

In addition there were three other appeals (all brought by the Commissioner) considered by the Court. Two of these related to the taxpayers’ attempt to vary orders restraining their ability to further encumber their assets to the Commissioner’s disadvantage. At two separate times, the High Court authorised the further encumbering of those assets. Both times the Commissioner successfully obtained an order of the Court of Appeal freezing the execution of the High Court decision. The substantive appeal from the variation decisions was heard with the 2JR appeal.

Additionally the High Court’s costs orders in the 1JR and 2JR against the Commissioner were appealed on the basis these were excessive (reported (2009) 24 NZTC 23,504).


The Court pointed out that the 1JR had not been appealed and thus binds the parties on its findings. Nonetheless, 1JR was held not to be precedential in any way.

The court concluded that the Commissioner had complied with the 1JR only in part. To a degree the Budhia decision was upheld (regarding issues of GST registration and challenges to GST returns) but the balance was struck down (the relief from interest and penalties where these were attributable to the Commissioner’s inordinate delay).

The Court considered that section 6/6A was available for the Commissioner to mitigate the effects of “inordinate delay” as this case was extraordinary. The Court gave several alternatives as to what should happen next to resolve this case.

The Court rejected any suggestion that “proportionality” is a legal concept in judicial review.

The Court allowed the Commissioner’s appeal against the costs decisions of the High Court and the appeals against varying the Commissioner’s security.