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19 Mar 2010
Appeal Status

Default assessments are inevitable where returns are not filed

2010 case note - confirms that there are obligations on everyone to pay tax, irrespective of race - default assessments, confidentiality, NZ Bill of Rights.

John David Hardie v Commissioner of Inland Revenue


The appellant appealed unsuccessfully against a District Court decision which held the Commissioner could recover unpaid taxes and penalties of $10,341,410.32.

Impact of decision

This judgment confirms that there are obligations on everyone to pay tax, irrespective of race. It also confirms that when a taxpayer fails to file a return the Commissioner can issue default assessments.


This is an appeal by the taxpayer against the District Court decision of Judge Recordon.

The taxpayer had failed to file his relevant tax returns and the Commissioner made default assessments. The taxpayer failed to exercise his right to challenge those default assessments pursuant to section 89D of the Tax Administration Act 1994. The District Court granted the Commissioner judgment by default for $10,341,410.32.


In the High Court, his Honour Stevens J began with considering the taxpayer's request to have the hearing and subsequent judgment subject to total confidentiality orders.

The Court rejected this. It did not consider that any exceptional circumstances in this case outweighed the principle of open justice. The Court then went through each of the grounds of appeal.

First, whether the taxpayer ceased to be an employer from March 2004. The Commissioner conceded this issue in favour of the taxpayer. The appeal was, therefore, allowed in part to the extent that $6,250 was to be removed from the judgment debt of $10,341,410.32.

Next, whether the taxpayer, being of part Māori descent, is not a person who must compulsorily pay any form of tax. The Commissioner submitted that Parliament has the right to enact legislation imposing taxes. The Commissioner also noted that the appellant had not provided any evidence of his whakapapa establishing on the facts that he is of Māori descent. The Court rejected the taxpayer's arguments. There was no authority to support such a submission that statutes passed by Parliament are not applicable to persons of Māori descent. There is an obligation to pay tax irrespective of race.

The taxpayer also argued that the decisions of the Commissioner "transgress the provisions of sections 9 and 27" of the New Zealand Bill of Rights Act. The Court agreed with the Commissioner that these sections had no application in the circumstances of this case.

Next, the Court discussed the "fresh evidence" that the taxpayer sought to present at the hearing in an attempt to support a new point that the Commissioner abused his powers by making the taxpayer's assessments. The Court held that the taxpayer did not meet the requirements for adducing fresh evidence on appeal. Nor in any event was it held that the proposed "new evidence" would have made any difference.

Finally, the Court reviewed the point raised by the taxpayer that the District Court Judge accepted the assessments as made by the Commissioner. The Court noted that the taxpayer had not filed the relevant tax returns and had failed to commence proceedings challenging the default assessments. The Court agreed with the Commissioner that it is a fundamental statutory obligation for the taxpayer to file returns. The Commissioner had no choice but to make assessments by default. As the taxpayer failed to challenge, the assessments are now indisputable and are deemed to be correct. The taxpayer cannot now go behind the assessments.

Tax Administration Act 1994, Income Tax Acts, Goods and Services Tax Act 1986, Bill of Rights Act 1990