Enforcement proceedings, judicial review, interim relief
Shane Warner Builders Ltd sought interim relief in a stay of the liquidation proceedings filed by the CIR to recover unpaid PAYE and GST to allow its judicial review proceedings to be heard.
Judicial Review Procedure Act 2016; Companies Act 1993; Tax Administration Act 1994
Shane Warner Builders Ltd (“the applicant”), by its sole director and shareholder, Shane Warner (“Mr Warner”) sought interim relief in the form of a stay of the liquidation proceedings filed by the Commissioner of Inland Revenue (“the Commissioner”) to recover unpaid PAYE and Goods and Services Tax (GST) in order to allow its judicial review proceedings to be heard.
The applicant sought declarations in the judicial review proceedings that the Commissioner has erred in law and acted unreasonably in failing to accept its proposal to pay outstanding tax over time. The Court declined to grant interim relief to the applicant as it was not satisfied that an interim order was reasonably necessary to preserve the applicant’s position.
The judgment confirms that the Commissioner is not required to accept taxpayer proposals to pay off outstanding tax over time over continuing with enforcement proceedings.
The applicant had difficulty keeping up with its tax obligations since operation began in 2012. The applicant had several instalment arrangements in place to pay off its tax debt over time since 2013. However, it had consistently failed to keep to these instalment arrangements and keep current taxes up to date, despite having the advantage of several write offs over the years totalling $106,000. By 25 April 2018, the applicant had tax arrears of $105,679.35.
The Commissioner filed her third statutory demand in November 2017 and made an application to put the company into liquidation on 31 January 2018. The liquidation proceeding was adjourned several times to allow the applicant to apply for financial relief.
The applicant made a first proposal to pay off the tax arrears on 9 April 2018 through instalment payments over time and lump sum payments. The proposal was considered and declined based on the applicant’s past history of failing to comply with previous instalment and lump sum arrangements.
The applicant made a second proposal on 23 April 2018. The applicant was advised on 24 April 2018 that the second proposal had been considered and declined based on the applicant’s past history of failing to comply with previous instalment and lump sum arrangements and because the applicant has failed to offer evidence that would give the Commissioner confidence that it would be able to meet the terms of this proposal and its current obligations.
The applicant filed an application for judicial review of the Commissioner’s decision and sought interim relief to prevent the liquidation proceeding until the judicial review was determined.
Position to preserve
The Court was not satisfied that the applicant had a position to preserve that would justify the granting of interim relief. On an overall assessment, the Court considered the application for interim relief was an effort to have its application for financial relief considered fairly and consistently with the Tax Administration Act 1994 (“the TAA”) and it had already had that opportunity.
In its judicial review proceedings the applicant alleged the Commissioner had erred in law or acted unreasonably in taking into account or failing to take into account factors set out in its statement of claim. These included the misapplication of the applicant’s payments by the Commissioner, a payment of $15,000 made in April 2018 and the applicant’s failure to provide further information.
The Court found there was no suggestion there had been any incorrect allocation of instalment payments at the time the statutory demand was issued in respect of defaults in payment of new tax, and where there was it was due to incorrect coding by the taxpayer. In addition, the Commissioner’s decision was based on her assessment of the applicant’s history on its ability to meet its tax obligations. The disputes as to specific amounts made no material difference to the background to the Commissioner’s decision. There was no dispute that there were defaults in the payment of new tax, and this was quite rightly a matter of significance to the Commissioner in rejecting the second proposal.
There was no doubt the case officer turned her mind to the recovery that might be obtained through agreeing to an instalment arrangement in preference to continuing with liquidation proceedings. Her correspondence in both proposals was directed at obtaining information that would assist in her decision making regarding outstanding arrears and future tax compliance. The information provided had been insufficient to satisfy the Commissioner there would be a change from the previous pattern and the applicant would have the resources to pay tax when it was due.
The Court found there was no predetermination and/or bias on behalf of the Commissioner as alleged. The evidence established that the case officer engaged with the applicant’s counsel over both proposals. She sought further information following the second proposal and had her decision peer reviewed despite having no obligation to do so. In addition, the Commissioner agreed to a number of adjournments of the liquidation proceedings to allow the proposals to be developed by the applicant and considered by the Commissioner.
The evidence provided by the applicant was considered insufficient to indicate there was a real possibility that any further review by the Commissioner would produce a different result. The Court considered this especially so given the evidence provided by the case officer (in an affidavit dated 5 June 2018) where she responded to the applicant’s allegations as to the decision making process in detail and explained how and why the recommended rejection of the proposal was made. This was not a case where the applicant had a reasonable chance of success in either the judicial review proceedings or on the application for financial relief.
The Court accepted it was in the public interest that the Commissioner could carry out her statutory duties under the TAA including enforcement action expeditiously. The Court considered the integrity of the tax system would be undermined if the right of the Commissioner to enforce payment of an undisputed tax debt through liquidation is frustrated by requiring the Commissioner to be a party to continuing judicial review proceedings which are without merit.