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25 Feb 2010
Appeal Status
Not appealed

Commissioner's strike out application largely successful

2010 case note - an assessment is a matter of substance and not form - Judicial review, strike out, Russell template and GST.

FB Duvall Ltd v Commissioner of Inland Revenue


The Commissioner was able to have most of the causes of actions in a judicial review by the taxpayer struck out. The taxpayer was required to re-draft its pleadings for the sole remaining cause of action.

Impact of decision

This is largely dealing with historical matters and well settled law. It is a further contribution to case law that an assessment is a matter of substance and not form.


FB Duvall Limited ("FBD") filed a number of amended Goods and Services Tax ("GST") returns seeking a refund of output tax paid. These were considered to be late objections (the filing pre-dated the disputes regime). The Commissioner declined to accept these returns and did not amend the existing GST assessments.

In addition FBD (and the other plaintiffs) argued the Commissioner had acted incorrectly in respect of some income tax assessments and GST in failing to issue new assessments once the Commissioner substituted section 99 Income Tax Act 1976 ("ITA") for a sham basis of assessment, even though the change did not alter the quantum of tax. FBD argued that in some way this also impacted on GST.

Subsequently FBD sought judicial review of the Commissioner's decision on five grounds:

  1. that the Commissioner acted unlawfully, unreasonably, and unfairly in refusing to issue amended assessments and refusing to accept late objections;
  2. that the Commissioner acted unlawfully, unreasonably, and unfairly in refusing to issue amended assessments once the sham basis of income tax assessment was abandoned;
  3. that the Commissioner acted unlawfully, unreasonably, and unfairly in refusing to amend the GST returns when the sham basis of income tax assessments was abandoned;
  4. that the Commissioner acted unlawfully, unreasonably, and unfairly in refusing to issue new assessments required by section 99(4); and
  5. for one party Managed Fashions Limited ("MFL") it was pleaded that the Commissioner acted unlawfully, unreasonably, and unfairly in refusing to set a new due date for payment of outstanding tax.

The Commissioner sought to strike out the claim in its entirety.

As the matter proceeded MFL had been liquidated meaning the fifth cause could not be maintained and therefore did not need to be struck out and the fourth cause was being worked through by the parties so it was stayed to allow this to occur.


Justice Allan briefly addressed the rules for striking out the particular role of judicial review in tax cases, the Russell template and the procedural history of FBD in the courts. His Honour noted the success FBD had at the Court of Appeal with GST returns similar to those in question, on what the Commissioner contends was a technical point.

Addressing the first cause of action, his Honour noted the pleadings were "hampered by reason of the paucity of particulars and the complete lack of affidavit evidence ..." as well as the conflation of two distinct issues (the decision to decline the late objections and the precedential effect of the earlier procedural history).

He observed that the relative merits of the late objection were a proper consideration and also noted that the Taxation Review Authority had previously determined the objections in FBD's favour, which militated against the Commissioner's submission that the objections were weak. But he noted that in judicial review he could not order the Commissioner to allow the late objections.

Thus he concluded that:

  • [55] In summary, I find that Duvall has a tenable argument for review of the Commissioner's decision not to accept (as distinct from allow) its late objections (made by way of amended return), but the relief available to Duvall must be confined to an order directing the Commissioner to reconsider the late objections.

    [56] Duvall is not entitled to maintain, by way of judicial review, a claim in respect of the correctness of the assessment itself. To that extent the first cause of action is struck out, with leave to amend in order to incorporate that portion of the first cause of action that survives. The first cause of action is struck out in respect of the remaining plaintiffs in its entirety, but without prejudice to their entitlement to file fresh, properly constituted proceedings that are confined to the procedural issues which have survived in respect of Duvall.

In respect to the second cause of action, His Honour stated that:

  • [62] It is settled law that an assessment is a decision by the Commissioner, quantifying the amount of tax payable by the taxpayer for the period in question: CIR v Canterbury Frozen Meat Co Ltd [1994] 2 NZLR 681 at 690. It must be definitive as to the taxpayer's liability at the time it is made, and subject to challenge only through the objection process. It is the substance rather than the form of the decision that matters: JD and CE Henson Partnership v CIR [2009] 24 NZTC 23,802. The Commissioner is required to give notice of an assessment to a taxpayer pursuant to section 111 of the Tax Administration Act 1994. But no particular form of notice is prescribed, and indeed, assessments may be found in more than one document. In other words, documents may be combined to form an assessment: Henson at [24].

Based upon this he concluded that a letter by the Commissioner could easily be sufficient to give effect to the withdrawal of the sham assessments and to revive the earlier in time assessments. His Honour noted that FBD's insistence on a Notice of Assessment seemed aimed at reviving rights that had expired (at paragraph [67]) and struck out this cause of action.

The third cause of action was swiftly dealt with and struck out because:

  • [69] Here, the plaintiffs allege that the Commissioner has acted unlawfully, unfairly or unreasonably by failing to amend his assessments of GST in respect of the plaintiffs, in consequence of the withdrawal of the Track C assessments. Track C formed part of the Commissioner's reconstruction activities in consequence of the application of section 99 of the Income Tax Act 1976, which related only to income tax. The Goods and Services Act 1985 has its own tax avoidance provision: section 85. In other words, Track C and its subsequent withdrawal are irrelevant for GST purposes.

High Court Rules