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02 Dec 2014
Appeal Status
Not appealed

Leave to bring evidence not granted to disputant

2014 case note - admissibility of evidence and effectiveness of evidence - bad faith, 'lis' in proceeding.

TRA 021/11; [2014] NZTRA 16


The disputant was denied leave to bring evidence alleging bad faith on the part of the Commissioner of Inland Revenue ("the Commissioner"). The Taxation Review Authority ("TRA") took into account s 89A of the Tax Administration Act 1994 ("TAA") and the disputant's conduct in these proceedings and found that it was not necessary to admit the disputant's evidence to avoid manifest injustice to the disputant. Further, the TRA was not prepared to exercise its discretion under s 17(1) of the Taxation Review Authorities Act 1994 ("TRAA").

Impact of decision

The TRA, in determining the admissibility of evidence under s 17 of the TRAA, will consider whether proposed evidence will assist to deal effectively with the matters in the proceeding.


The disputant filed submissions alleging that the Commissioner acted in bad faith in making the assessment and sought leave to lead evidence of the alleged actions. The assessment that underlies the dispute was made in August 2009 when the disputant was assessed under s 61 of the Goods and Services Tax Act 1985 as an agent of certain companies for their GST liability.


The TRA declined to grant leave to the disputant to bring the proposed evidence alleging bad faith on the part of the Commissioner.

Evidence excluded

Judge Sinclair noted the relevant statutory provisions of s 17(2A) and s 17(2B) of the TRAA  and pointed out that the disputant's statement of position dated 17 July 2010 did not raise any facts, evidence, issues or propositions of law that related in any way to an allegation of bad faith. The TRA further noted that there has been no application under s 17(2B) of the TRAA or any reasons given as to why the disputant could not at the time of his statement of position "with due diligence" have discovered those matters he now wishes to raise in evidence.

Judge Sinclair moved on to consider two allegations submitted by the disputant which the Commissioner stated could relate to the assessment. Those were that:

  1. the proceeding can have no financial benefit to the Commissioner, therefore the proceeding is predicated on ill will; and
  2. no explanation was provided to the disputant as to why the assessment against him was maintained while the assessment against a co-director was cancelled.

In regard to the first allegation, Judge Sinclair agreed with the Commissioner's submission that the fact that it has subsequently become apparent that there are no assets in the estate to satisfy the debt, does not support an allegation that the assessment was made in bad faith.

With regard to the second allegation, Judge Sinclair found this matter irrelevant as to whether or not the disputant had been correctly assessed. Judge Sinclair stated that under s 81 and s 6(2) of the TAA the disputant is not entitled to an explanation from the Commissioner in respect of the tax affairs of another taxpayer.

Judge Sinclair found the evidence the disputant wished to raise to be unrelated to the assessment and not relevant to the issues for her determination. Allowing the disputant to bring fresh evidence (the disputant intended to call 12 witnesses) would cause further delay in finalising the matter.

Having taken into account s 89A of the TAA and the disputant's conduct in these proceedings, Judge Sinclair found that it is not necessary to admit the disputant's evidence in order to avoid manifest injustice to the disputant.

Admissibility of evidence under s 17(1) of the TRAA

Judge Sinclair stated that even if she is wrong in her analysis under s 17(2B), she is not prepared to admit this evidence exercising her discretion under s 17(1) of the TRAA.

Judge Sinclair considered ss 17(1) and 17(3) of the TRAA and s 7 of the Evidence Act 2006 and found that the disputant's proposed evidence did not have any probative value in these proceedings. The events which were alleged to have occurred since the making of the assessment were not evidence of any particular pattern of behaviour by the Commissioner.

Judge Sinclair, having referred to Dandelion Investments Limited v Commissioner of Inland Revenue [1997] 2 NZLR 96 approved by the Court of Appeal in Dandelion Investments Limited v Commissioner of Inland Revenue [2003] 1 NZLR 600 ("Dandelion") did not consider that the proposed evidence "may" be of assistance to her in dealing with the matters for determination in this proceeding.

Commissioner has no "lis" in this proceeding

The disputant also sought leave to refer to s 177C(2) of the TAA which requires the Commissioner to write off the tax claimed in the proceeding as it is accepted by the Commissioner that there will be no recovery from the disputant's bankruptcy.

The disputant claimed that once the tax is written off then the Commissioner will have no lis (described as when an "active dispute exists between specific contesting parties" in Re 110 Martin Street, Upper Hutt [1973] 2 NZLR 15) in these proceedings.

Judge Sinclair stated that the Commissioner is not bound by s 177C(2) of the TAA until there has been a final distribution of a dividend from the Official Assignee or notification from the Official Assignee that no dividend is available to pay to the Commissioner for the outstanding tax liability assessed. Judge Sinclair found that that position has not been reached in this case, and stated that even if that position was reached the assessment would remain on foot, as writing off the tax forms part of the enforcement and collection process and does not affect the dispute between the parties.

Taxation Review Authorities Act 1994, Evidence Act 2006, Tax Administration Act 1994