Judicial review of assessments refused

Summary

The Commissioner successfully appealed against the refusal of the High Court to strike out the taxpayer's judicial review claim in respect of certain assessments. The conscious maladministration complained of by the taxpayer was not found and this did not affect the validity of the assessments.

Impact of decision

This case confirms that judicial review of assessments is only available in exceptional circumstances. Conscious maladministration is a possible exceptional circumstance that allows judicial review but it must be such that it invalidates the assessments made.

Facts

Two appeals were heard together. The first was an appeal by the taxpayer against a decision of an associate judge to dismiss its application to set aside the Commissioner's statutory demand. The second was an appeal by the Commissioner against the refusal of the High Court to strike out the taxpayer's judicial review claim as disclosing no reasonable cause of action and as an abuse of process.

The statutory demand was attacked on the basis that the Commissioner's default assessments were wrong and that the taxpayer had filed judicial review proceedings to have those assessments quashed. The central allegation in the judicial review of the assessments was that the Commissioner was knowingly in possession of taxpayer documents that he had repeatedly and falsely denied possessing and which the taxpayer required in order to file its tax returns.

Decision

The Court applied its decision in Westpac Banking Corporation v CIR [2009] NZCA 24. The Court held that as a general rule, the proper process for challenging tax assessments is contained in Part 8A of the Tax Administration Act 1994. Judicial review of assessments is permitted only in exceptional circumstances and may be available in cases of conscious maladministration. Where there are no such exceptional circumstances judicial review proceedings may be an abuse of process.

The Court held that in order to succeed on the ground of conscious maladministration there must be behaviour sufficiently egregious as to invalidate an assessment. The act complained of in this case was that the Commissioner had failed to disclose to the taxpayer certain documents, not that the Commissioner had failed to take them into account in making his assessment. There was no basis on which it could be said that the officer that made the assessments did not honestly believe that the assessments reflected the taxpayer's true liability.

The Court concluded that the allegations as pleaded did not come within the Westpac test for exceptional circumstances. The Commissioner's appeal was allowed and the judicial review proceedings were held to be an abuse of process and were struck out.

That finding meant that the taxpayer could not dispute the amount in Part 8A proceedings because the time limit had elapsed. There was therefore no arguable basis to dispute the sum claimed in the statutory demand. Accordingly the taxpayer's appeal against the decision to refuse to set aside the statutory demand was also dismissed.