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13 Aug 2012
Appeal Status
No right of appeal

The Supreme Court dismisses Mr Russell's application for leave to appeal

2012 case note – Application for leave to appeal dismissed by Supreme Court - tax avoidance, public importance, substantial miscarriage of justice.

John George Russell v Commissioner of Inland Revenue


The Supreme Court has dismissed Mr Russell's application for leave to appeal the decision of the Court of Appeal.


Mr Russell applied to the Supreme Court for leave to appeal the decision of the Court of Appeal which rejected his objection to a tax assessment of his income (Russell v Commissioner of Inland Revenue [2012] NZCA 128).

The substance of the case related to the CM Partnership and activities conducted by two of Mr Russell's companies between 1985 and 2000. These activities were found to constitute an arrangement having the purpose and effect of tax avoidance by which Mr Russell was affected and by which he obtained tax benefits.


The Supreme Court dismissed Mr Russell's application on the grounds that the statutory criteria for appeal were not made out. Accordingly, the Supreme Court considered the following:

  1. The decision of the Court of Appeal represented the application of well-settled legal principles to the particular facts of the case.
  2. The Court of Appeal upheld the findings in the High Court and Taxation Review Authority that:
    1. there was an arrangement;
    2. its purpose or effect was to alter the incidence of tax;
    3. Mr Russell was affected; and
    4. the tax avoidance involved was more than merely incidental.
  3. Mr Russell had failed to show, in any of the Courts, that the Commissioner's reconstruction was wrong, let alone by how much.
  4. Mr Russell's application regarding the effect of section 99(4) of the Income Tax Act 1976, as advanced in the Court of Appeal, had no merit.
  5. None of the matters which Mr Russell sought to raise by further appeal were of general or public importance. Nor was there any basis for concern that a substantial miscarriage of justice might occur if leave was not given.
  6. Granting leave would not be in the interests of justice as none of the points Mr Russell sought to raise were reasonably arguable in his favour. The Court of Appeal was undoubtedly correct in the conclusions to which it came on the facts of this case. Save for some inconsequential minor matters, those facts were the subject of agreement in the Court of Appeal.

The Supreme Court ordered costs to the Commissioner of $5,000 plus all reasonable disbursements.

Income Tax Act 1976