Notice of claim struck out for not complying with procedural requirements of Tax Administration Act 1994

Summary

The Taxation Review Authority (“the TRA”) upheld an application by the Commissioner of Inland Revenue ("the Commissioner") to strike out the disputant’s notice of claim on the basis that the proceedings were not commenced by the disputant within the response period under s 138B of the Tax Administration Act 1994 ("the TAA"), and that the disputant did not establish exceptional circumstances to allow the disputant to commence the proceedings after the response period pursuant to s 138D(1) of the TAA.

Impact

This decision confirms that the procedural requirements for commencing challenge proceedings must be strictly adhered to. It also follows the decision of Muir v Commissioner of Inland Revenue [2017] NZHC 2082 which stands for the proposition that it is not possible to file amending documents where there is no underlying claim.

Facts

The Disputes Review Unit ("the DRU") sent a letter to the disputant on 13 April 2017 enclosing its adjudication report following determination of the disputant's tax dispute in relation to the 2012 and 2013 income tax years.

On 24 April 2017, the investigator wrote to the disputant's accountant referring to the adjudication report, and stating that the DRU had accepted the disputant's proposed adjustments in part and had directed that a further adjustment be made on the basis of the conclusion in the adjudication report. Enclosed with the letter was a notice of assessment dated 24 April 2017.

The Commissioner's computer-generated notices of assessment dated 10 July 2017 were received on or about 14 July 2017.

The director of the disputant company emailed a completed notice of claim form to the Tribunals Unit on 21 June 2017 ("the initial notice of claim"). In a reply email dated 21 June 2017, the Registry stated it could not accept filing by email and that it would be necessary for the disputant to file 3 copies of the notice of claim and relevant documents by courier or post. Details of the street and postal addresses were provided together with the form to be completed for payment of the fee by credit card.

In an email to the Registry dated 22 June 2017, the director stated that he would not be able to obtain the additional information which was held by his accountant who was overseas and whom he understood would be back on or about 1 or 2 July 2017. The director observed that he would not like to work out what paperwork his accountant had prepared for this claim without his permission. He went on to say:

"I could just go to his office and look through the file and hopefully find it, he had written a (sic) extensive letter for my lawyer to go over before he left but for some reason believed I had more time to reply as no assessments had been loaded on the tax system, I will address this with him on his return."

"My lawyer was the one who rang me on Tuesday night to ask if I was filing a claim for the mistakes in the assessments. I told him I had not received any assessments and that no changes had been made on a tax system to indicate assessments had been issued."

"He informed me that even though no assessments had been forwarded to me nor that they had been loaded on the IRD system, it was the letter dated 24 April that was the time frame I had to act on."

The director stated that he then forwarded the initial notice of claim by overnight courier and included a payment form for payment by credit card. He sent an email to the Tribunals Unit on 23 June 2017 advising the Registry of this and noting that he would send the additional information as soon as he had access to it.

A notice of claim was subsequently filed on 18 September 2017 by the disputant's accountant. The notice was dated "21/6/17 (updated/amended 11/9/17)". This notice of claim was served on the Commissioner.

Decision

The Judge found that the notice of claim was not filed within the prescribed time in compliance with s 138B of the TAA.

The Judge was satisfied that the Commissioner issued a notice of assessment on 24 April 2017. Accordingly, the two-month period in which the disputant was required to file the proceedings in the TRA started on 24 April 2017 and ended on 23 June 2017.

The Judge noted that it was apparent from the director's email of 21 June 2017 that he was aware that the time period commenced on 24 April 2017. Furthermore, the notice of claim was eventually filed on 18 September 2017 so that even if the two-month period commenced from the date of the computer-generated notices, the proceedings were still commenced outside the requisite two-month period.

The disputant, relying on rr 1.8 and 2.6(2) of the District Court Rules 2014, contended that the initial notice of claim was filed within the prescribed time and that the subsequent filing was an amendment to the original filing. The Judge rejected this argument. Regulation 4 of the Taxation Review Authorities Regulations 1998 ("the Regulations") states that to the extent that they are not inconsistent with these Regulations, or the provisions of the Taxation Review Authorities Act 1994 or the TAA, the District Court Rules 2009 (now the District Court Rules 2014) apply to the commencement, interlocutory steps and conduct of proceedings in the Authority as if these proceedings were civil proceedings in the District Court.

The Judge noted that the requirements for the filing and service of the notice of claim set out in the Regulations are mandatory. The disputant did not file and serve within the statutory time period three copies of the notice of claim containing the documents required under reg 8, together with payment of the filing fee as required. Furthermore, the initial notice of claim was not served on the Commissioner.

The Judge referred to Muir v Commissioner of Inland Revenue [2017] NZHC 2082 and stated that it is not possible to file amending documents where no underlying claim in fact exists.

The Judge also found that there were no exceptional circumstances under s 138D(2) of the TAA.

In the disputant's notice of opposition, it asserted that exceptional circumstances existed in that the act or event causing the delay was beyond the control of the disputant. In the director's first affidavit, he referred to "ongoing health issues, accountant away and who also had health issues" as reasons why the disputant could not review the initial notice of claim and presumably ensure that it was properly filed.

In the disputant's submissions, the events or circumstances relied upon were identified as being that the disputant did not have in its possession all the necessary documents to file the claim, the documents being either with the disputant's accountant or withheld by the Commissioner. Further, the disputant's accountant was out of New Zealand at the time of filing and when he returned he had work commitments and health issues.

The disputant contended that the unique feature of this case is that the disputant did commence its challenge within the required time "as best it was able". The director filed an initial notice of claim which he knew would need to be amended. Further, the disputant would have filed the additional documents if they had been in its possession, and accordingly, this provides reasonable justification.

The Judge did not accept that any of these matters amounted to extraordinary circumstances in the context of s 138D (1) and (2) of the TAA. The Judge noted that the events and circumstances relied upon appeared to relate to the period around the end of June 2017 and subsequent. No evidence had been given as to why the notice of claim could not have been filed prior to that time.

The Commissioner's application under s 138H to strike out the notice of claim in its entirety was granted.