The Commissioner's application to strike out disputant's notice of claim
2016 case note - TRA's decision reinforces the importance of serving a Notice of Claim in accordance the Taxation Review Authorities Regulations 1998.
The Commissioner of Inland Revenue (“the Commissioner”) applied to strike out the disputant’s Notice of Claim for non-compliance with s 138B of the Tax Administration Act 1994 (“TAA”) and, in the alternative, for want of prosecution. The Taxation Review Authority (“the Authority”) held that the proceeding must be treated as having been discontinued as the claim was not effected on the Commissioner. In the alternative, the Authority held that there has been inordinate delay and that the dismissal of the disputant’s claim is justified as the Commissioner will suffer serious prejudice if the disputant was permitted at this stage to pursue his claim.
The Authority’s decision reinforces the importance of service of a Notice of Claim on the Commissioner in accordance with regs 8(2) and 13 of the Taxation Review Authorities Regulations 1998 (“the Regulations”).
Also, in dismissing the proceeding for want of prosecution, the Authority considered whether any fault on the Commissioner’s part led to the delay, whether any steps have been taken to gather and preserve evidence, and time and costs incurred by the Commissioner.
The Commissioner applied to strike out a Notice of Claim alleged by the disputant to have been filed with the Authority on or about 8 December 2011, for non-compliance with s 138B of the TAA. In the alternative, the Commissioner applied to dismiss the proceeding for want of prosecution.
Evidence was given by the investigator (“Mr Brown”) who was responsible for the disputant’s file, and by the disputant’s accountant (“Mr Jones”).
On 6 December 2011, before the final assessments for the relevant tax years were issued, Mr Jones sent an email to the Authority, which he copied to Mr Brown and to which he attached a letter stating that a notice of claim and a cheque for the filing fee were attached.
On 7 and 8 December 2011, discussions took place to resolve the outstanding issues before final assessments were issued. In an email on 8 December 2011, Mr Jones stated: “I will communicate with Ministry of Justice and try & put a hold on presenting the cheque so mailed yesterday?”.
Mr Jones gave evidence that he did call the Tribunals Unit but he was informed that the cheque and claim had already been processed.
On 21 May 2012, the case manager at the Tribunals Unit sent an email to Mr Jones seeking to confirm whether the matter was going to proceed with the Authority. No reply was ever sent to the case manager.
Deduction notices pursuant to s 157 of the TAA, were issued and funds sufficient to clear the disputant’s tax liabilities were deducted from the disputant’s account.
In December 2014, the proceeding was registered on a without prejudice basis.
The Authority held that the proceeding is treated as discontinued pursuant to r 5.68 of the District Court Rules. In the alternative, the Authority dismissed the proceeding for want of prosecution.
Was the notice of claim filed in the Authority in accordance with s 138B(2)(c) of the TAA?
The Authority considered that it is reasonable to expect that the claim would have been received (at the earliest) on 8 December 2011 and the cheque was banked on this date. The Authority held that the disputant was entitled under s 138B(2) of the TAA to bring challenge proceedings on 8 December 2011, the date on which the notice of claim was filed.
The Authority held that the claim was filed in accordance with s 138B(2)(c) of the TAA and that the events that followed did not alter the fact that the notice of claim was filed with the Authority and that the requisite fee was paid.
Was the notice of claim served on the Commissioner?
The Authority referred to regulations 8(2) and 13 of the Regulations which set out the requirements for service of a notice of claim.
The Authority stated that there is no evidence to support Mr Jones’ assertion that “as far as he was concerned” Mr Brown had accepted service of the notice of claim.
The Authority held that the proceeding must therefore be treated as having been discontinued pursuant to r 5.68 of the District Court Rules 2014.
In the alternative, has the disputant failed to prosecute the claim?
The Authority held that there has been inordinate delay by the disputant as the notice of claim was filed in December 2011 and no progress was made until the matter came to life in September 2014. The Authority did not consider that there was any credible excuse for the delay.
The Authority accepted that the Commissioner did not know the claim had been filed and is now prejudiced in that no steps have been taken to gather and preserve evidence. The Authority also did not consider that this is a case where there has been any fault on the part of the Commissioner which has led to the delay.
Having regard to the interests of justice, the Authority held that the dismissal of the disputant’s claim is justified as the Commissioner will suffer serious prejudice if the disputant was permitted at this stage to pursue his claim.
Tax Administration Act 1994