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07 Aug 2014
Appeal Status

Cases involving alleged tax avoidance transferred to High Court and consolidated

2014 case note – CIR successful in having two related cases transferred from Taxation Review Authority to High Court and consolidated.

Commissioner of Inland Revenue v Bell Road Developments Ltd & Others & Kupuri Investments Ltd & Others


The Commissioner of Inland Revenue ("the Commissioner") was successful in having two related cases transferred from the Taxation Review Authority ("TRA") to the High Court. These cases were also consolidated.


Bell Road Developments Limited, Tararua Street Developments Limited and Messines Developments Limited ("Bell Group") successfully undertook three major property developments. Mr C J Mason, Kupuri Investments Limited, and Trustman Services Limited as trustee of the Columbia Trust ("Mason Group") ultimately received the profit from the property developments. However, the profits were returned by Emborion International Limited ("Emborion") in the 2004-2008 income years on the basis the Bell Group was acting as its agent.

The Commissioner assessed the Bell Group's profit on the basis it entered into a tax avoidance arrangement that was void against the Commissioner. The Mason Group was assessed in the alternative on the basis the profit derived by the Bell Group flowed to the Mason Group (again on the basis the Mason Group entered into a tax avoidance arrangement). The Bell Group and the Mason Group (jointly "the respondents") each commenced separate challenge proceedings in the TRA in August 2013.

In this proceeding, the Commissioner applied to the High Court seeking orders to transfer and consolidate the challenge proceedings filed by the respondents.



The Court was satisfied that there were sufficient factors supporting transfer of the proceedings to the High Court.

In determining whether transfer to the High Court was warranted, the Court referred to the decision in Commissioner of Inland Revenue v Erris Promotions [2003] 1 NZLR 506 (CA) as also referred to in the Commissioner of Inland Revenue v McIlraith (2003) 21 NZTC 18,112 (HC) decision.

Taxpayer's choice of forum

The Court considered the advantages available to the respondents in these proceedings being commenced and remaining in the TRA, namely; the TRA's specialist jurisdiction, its powers of a Commission of Inquiry, the informality, costs considerations, confidentiality and the fact it is not necessary to instruct a lawyer to conduct the challenge.

The Court determined that the fact the TRA is a specialist tribunal should not be overstated. The Court also held that while the TRA has the powers of a Commission of Inquiry there are existing authorities that support the transfer of proceedings in cases where there are complaints or challenges based on administrative law reasons. The Court agreed that the informality and costs considerations, generally, benefit taxpayers who commence challenge proceedings in the TRA.

The Court found that confidentiality did not appear to be an important feature to the respondents, or those associated with them. Accordingly, the Court found it necessary in this case to consider whether the reasons advanced by the Commissioner for transfer outweighed the factors favouring retention in the TRA.

The Commissioner had relied on the following factors in support of her application for transfer:

  1. the complexity of the arrangement;
  2. the significance of the litigation;
  3. issues of administrative law; and
  4. the likelihood of appeal.

Complexity of arrangement

The Court concluded that despite submission from counsel for the respondents, the matter was not straightforward and the fundamental features of the arrangement would have to be considered in a commercial and economically realistic way. The Court also noted that there were disputed facts. In addition, the Court referred to the TRA's minute of 20 November 2013, which recorded that Mr Russell estimated a 20-day hearing would be required and found that this was inconsistent with the respondents' submission that the matter was straightforward. The Court found that the proceedings were at least of moderate complexity.

Significance of the litigation

The Court noted, as a partial answer to the costs advantage of the TRA that due to the amount of tax in dispute (being in excess of $3.5m) and the limited number of parties affected, the argument that the costs in the High Court count against a transfer did not hold much weight. The Court also noted that tax disputes involving sums of this nature can properly be dealt with before the TRA. The Court concluded that while the use of a company with tax losses to offset tax was not novel, if the arrangement was found to be a tax avoidance arrangement there is potential for broader application. Accordingly, in principle there would be some precedential value in the case.

Issues of administrative law

The Court considered that the respondents' administrative law allegations (impugning the integrity and conduct of the Commissioner's officials, including an allegation of vendetta) supported a transfer to the High Court.

Likelihood of appeal

The Court acknowledged that the prospect of more than one appeal in this matter supported a transfer of proceedings to the High Court. However, the Court emphasised that weight should not be placed too heavily on the number of potential appeals that may arise but on the overall delay in resolution of the proceedings due to those potential appeals.


The Court noted that it has a broad discretion to grant consolidation under High Court Rule 10.12, albeit that it should be exercised in accordance with the interests of justice.

The Court found that the relationships between Emborion and the Bell and Mason Groups were interrelated and interlinked, and therefore consolidation would avoid repetition and conflicting findings of fact. The Court noted that the separate interests of the Bell and Mason Groups could be provided for as they could be separately represented and make their own cases in relation to their respective positions. The Court was ultimately satisfied that the interests of justice favoured consolidation and made orders consolidating the two proceedings.

Tax Administration Act 1994, High Court Rules