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17 Apr 2015
Appeal Status

High Court strikes out judicial review, finding it to be an abuse of process

2015 case note - High Court struck out an application for judicial review of the CIR's decision declining payment proposals - abuse of process, maximum recovery.

John George Russell v Commissioner of Inland Revenue


The High Court struck out John George Russell's ("Mr Russell") application for judicial review of the Commissioner of Inland Revenue's ("the Commissioner") decision declining his payment proposals.


Mr Russell has been assessed to owe tax of $5,692,665.90 for the period 31 March 1985 to 31 March 2000 (inclusive). That amount owed has greatly increased through the application of penalties and interest. He has had summary judgment entered against him in the amount of $367,204,207.41 plus costs and disbursements.

Mr Russell has made two instalment payment proposals and a lump sum proposal.

On 27 September 2006 at a judicial settlement conference, Mr Russell proposed to make instalment payments towards the assessments of $1,000 per week. The Commissioner refused this proposal.

On 9 December 2012, Mr Russell again proposed to pay tax debt by instalments of $1,000 per week for the rest of his life or until bankruptcy or mental incapacity. This was declined on 26 August 2013.

Mr Russell made an alternative offer on 2 September 2013 to pay a lump sum of $150,000, which he could borrow against further income on the basis that the balance would be remitted. This was declined on 13 September 2013.

Mr Russell filed judicial review proceedings on 23 May 2014, seeking declarations that the Commissioner's decisions declining his proposals were invalid, and an injunction preventing the Commissioner from taking any further steps to recover the debt.

The reasons for declining the 9 December 2012 proposal were set out in an internal memorandum of 10 July 2013. The offer proposed by Mr Russell was not considered to be a realistic offer as:

  • the Commissioner was unable to write off any portion of the debt owed;
  • there was no certainty or finality for either party;
  • Mr Russell's financial affairs were complex, allowing him to accumulate wealth in trusts while declaring little personal income, and so further investigation of these structures and gifts made to the trusts by Mr Russell was required;
  • Mr Russell had a poor history of compliance; and the proposal would be an inefficient use of resources given the debt would grow faster than the payments made.

The Commissioner's letters of 26 August 2013 and 13 September 2013 to Mr Russell were consistent with these reasons.


The application for judicial review is struck out.

Inconsistency with achieving highest net revenue

The Court held that the Commissioner could conclude it was consistent with achieving the highest net revenue if a specific offer was so small it would be better for the collection of revenue generally to reject it, even if it might offer the best possible commercial return.

An instalment arrangement would maximise recovery and was consistent with duty to recover the maximum outstanding tax

Mr Russell claimed that the Commissioner failed to comply with the duty to maximise recovery of the outstanding tax in s 177B of the Tax Administration Act 1994 ("TAA").

The Court found the Commissioner specifically referred to and set out in full s 177B in her memorandum. Further, the decision that there was too much uncertainty to warrant a decision that acceptance of the offer would maximise recovery was entirely open to the Commissioner in these circumstances. Pushing execution may produce a better result, and the Commissioner had a duty to consider broader issues of the overall integrity of the tax system.

Costs of continuing to litigation an inefficient use of resources

Mr Russell essentially argued the grounds set out in s 177B(2) of the TAA for the Commissioner declining to enter into an instalment arrangement were not made out.

Asher J held s 177B(2) had to be seen in the broader context of the TAA. The Commissioner could form the view that there could be some recovery, and that it could be more than was offered. There were grounds to consider that it was an efficient use of resources to proceed to execute the judgment against Mr Russell by bankruptcy proceedings or other execution. Moreover, the Commissioner was of the view that the proposals would not maximise the recovery of tax from Mr Russell, as a better return might be achieved by enforcement.

Decision not reasonable or rational

The Court found Mr Russell's complaints under this head related to the fairness of the Commissioner's decision to seek payment of the tax due, rather than her decision on the proposal. That decision cannot be assailed in the judicial review proceeding.

Asher J stated Mr Russell should have paid the tax when it was due, and can therefore fairly be required to pay the tax now.

Failure to take into account the fact that it was the Commissioner's decision to assess income not received by Mr Russell and which he could not recover, as a reason he could not pay tax

This was held to have been exhaustively litigated. Mr Russell had no further rights of challenge and could not raise the issue yet again in this judicial review proceeding.

The refusal to accept the instalment proposals was motivated by the improper purpose to bankrupt the applicant and other irrelevant considerations and was a decision no rational person could have made

There was no evidence that the decision to reject the proposal was influenced by any irrelevant or improper factors. The possible recovery if bankruptcy proceedings were brought compared to the amount recovered if Mr Russell's proposed arrangement was accepted was a relevant consideration.

Disproportionally severe treatment or punishment in breach of s 9 of the New Zealand Bill of Rights Act 1990 ("NZBORA") and an excessive fine in breach of the Bill of Rights Act 1688

It was held to be nonsensical to suggest that the Commissioner, in proceeding to bankrupt Mr Russell, was acting in a way that could be equated with torture or cruel and degrading treatment or punishment under s 9 of the NZBORA.

Article 1 of the Bill of Rights Act 1688 did not apply, as it was exclusively concerned with the conduct of Judges in enforcing the criminal law and extended only to judicially imposed punishments, of which this was not.

Asher J distinguished W v Commissioner of Inland Revenue (2005) 22 NZTC 19,602 (HC) and Chesterfields Preschool Ltd v Commissioner of Inland Revenue (2007) NZTC 21,125 (HC) on the basis that both were fact specific and involved errors by the Commissioner not present here.

Failure to give adequate or rational reasons

The letters provided to Mr Russell sufficiently set out why Mr Russell's proposals were rejected based on the applicable statutory framework. In regards to the judicial settlement conference, nothing more than oral reasons provided at the conference could be expected.

Abuse of process

Asher J was of the view that the judicial review proceedings were an abuse of the Court's process. There is a public interest in proceedings to enforce civil debts being allowed to proceed through the courts in a timely manner and for such proceedings not to be subjected to undue delay.

It must be in the public interest that the Commissioner is able to expeditiously carry out the duties imposed by the revenue acts including pursuing and completing enforcement action, and not be stalled by challenges to her refusal to accept minimal settlement offers.

The fact that Mr Russell waited seven years and six months before bringing a proceeding challenging the decision was indicative of an abuse of procedure. Judicial review proceedings challenging earlier decisions must be brought reasonably promptly for the judicial review application process to work efficiently and fairly. The judicial review proceedings were issued following the exhaustion by Mr Russell of his orthodox legal challenges to the Commissioner's assessment against him. The earlier delay and the pursuit now of this proceeding were held to be indicative of this proceeding being an abuse of procedure.

The attempt in the statement of claim to challenge indirectly yet again the fact that Mr Russell was assessed is a misuse of the judicial review procedure, and an indication that the proceedings as a whole are an abuse.

The judicial review proceeding was held to have no merit.

Judicature Amendment Act 1972