Leave to continue challenge
2014 case note - disputant wished to continue litigation and right to a hearing should not be denied - challenge deemed withdrawn, good reason.
The disputant showed a genuine wish to continue the litigation and the right to a hearing and determination should not be lightly denied. The disputant was granted leave to proceed with the challenge proceeding.
Impact of decision
The Taxation Review Authority ("TRA") will not be quick to deem a challenge withdrawn if the application to continue under regulation 32(2)(a) is within the time limits and the disputant can provide a plausible explanation. This was distinguished from regulation 32(2)(b) which has a higher threshold as exceptional circumstances need to be satisfied.
This proceeding was set down for a directions hearing on 20 February 2014. The disputant failed to attend the hearing and the challenge was deemed to be withdrawn. The disputant made an application for leave to continue on 27 February 2014.
An affidavit in support was filed by Mr AB who lives in Australia and is the sole director of the disputant. He stated that Mr XY had been the principal person involved in handling this dispute and that on 19 February 2014 Mr XY advised him by email that he was no longer acting on behalf of him in this matter. Mr AB stated he was unaware of the directions hearing, and in any case believed Mr XY was acting on his behalf.
The Inland Revenue investigator stated in an affidavit that during a conversation held on 5 July 2013, Mr XY advised her that he was no longer acting for the disputant and that she should contact Mr AB to obtain new contact details. On 20 August 2013, the investigator stated she met with Mr AB and discussed the status of his challenge proceeding.
Mr XY also filed an affidavit. Mr XY stated that in the middle of 2013, he stopped acting for the disputant in relation to the settlement discussions with the Commissioner of Inland Revenue ("the Commissioner"). After that he was only engaged on a limited basis regarding small residual matters.
In an email to the TRA on 19 February 2014, Mr XY disclosed he no longer acted for Mr AB. However, in his affidavit, Mr XY stated that this was not strictly true. He believed, because of his diminished role in the matters, attending the hearing was no longer his responsibility. He also stated that Mr AB could have thought the hearing was a procedural matter of which he was still responsible.
The disputant submitted that the evidence of Mr AB and Mr XY are consistent and both state that due to the lack of communication between them, Mr AB thought erroneously that Mr XY was handling the directions hearing.
The Commissioner submitted that the circumstances show there was no room for confusion. Mr AB knew that Mr XY was not acting for him and would not attend the directions hearing.
The disputant was granted leave to proceed with this challenge proceeding.
The disputant filed its application within 20 working days of the directions hearing so regulation 32(2)(a) of the Taxation Review Authorities Regulations 1998 applies. The disputant then needed to satisfy the TRA that it had a good reason for failing to attend the directions hearing.
The TRA stated that because the matter was heard on the papers, there was no opportunity to examine the credibility of the witnesses. The TRA was satisfied, based on the investigator's evidence, that there could have been confusion between Mr AB and Mr XY as to Mr XY's involvement in the proceeding.
The TRA recognised that there was no case law on what constitutes a "good reason" for failing to attend a directions hearing and agreed with the disputant's submission that the test for obtaining leave under 32(2)(a) was less demanding than an application under 32(2)(b). The TRA further added that it was mindful that the right to a hearing and determination should not be lightly denied and took into account that having a case withdrawn is a severe consequence for any disputant.
The TRA determined that, while greater care should have been taken, the failure to attend arose from a misunderstanding and was not deliberate and that in the context of the regulation, the explanation provided amounted to a "good reason" for failing to attend.
Taxation Review Authorities Regulations 1998