Issued
19 Mar 2019
Decision
19 Mar 2019
Court
NZSC
Appeal Status
Pending

Supreme Court dismisses application for leave to appeal

This was an application for leave to appeal to the Supreme Court on the basis the Court of Appeal did not apply principles set out in CIR v Diamond [2015] NZCA 613 (“Diamond”) to Mr van Uden’s case.

Case
Gerardus Peter van Uden v Commissioner of Inland Revenue [2019] NZSC 29
Legal terms
General or public importance, Commercial importance, Miscarriage of justice, Permanent place of abode

Summary

This was an application for leave to appeal to the Supreme Court on the basis the Court of Appeal did not apply the principles set out in Commissioner of Inland Revenue v Diamond [2015] NZCA 613 ("Diamond") to Mr van Uden's case. In addition, Mr van Uden challenged decisions about taxation of his employer's superannuation fund; whether the reassessment was properly made given the position of the officer who made it; and, as to the penalties imposed. The Supreme Court dismissed the application as there was no matter of general or public importance or general commercial significance or miscarriage of justice.

Impact

The decision confirms that the Supreme Court will not give leave to appeal unless it is satisfied it is necessary in the interests of justice to hear and determine the appeal.

Facts

Mr van Uden is a sea captain employed by a foreign shipping company. He has worked at sea for over 40 years. The Commissioner of Inland Revenue ("the Commissioner") assessed Mr van Uden as liable for New Zealand Income tax for the 2005 to 2009 tax years on the basis Mr van Uden had a permanent place of abode in New Zealand for those tax years and was liable to pay tax in New Zealand on his worldwide income. In addition, a 10 percent penalty was imposed because Mr van Uden, in not returning his income on that basis, had taken an unacceptable tax position.

In upholding the decisions of the High Court and the Taxation Review Authority ("the TRA") on the question of Mr van Uden's permanent place of abode, the Court of Appeal concluded that Mr van Uden had made the relevant property his home. The Court considered the "individual factors listed in Diamond support this conclusion". These included matters such as household expenditure.

The Court of Appeal then dealt with whether Mr van Uden's interest in his employer's non-contributory superannuation fund ("the Provident Fund") would constitute an interest in a foreign investment fund ("FIF") which was accordingly taxable on the basis of the accrual rules. The Court rejected the argument made on behalf of Mr van Uden that because the contributions to the Provident Fund were paid by his employer there was no "cost or expenditure incurred by or on behalf of Mr van Uden" as regards that Fund. The Court of Appeal concluded the employer was acting on Mr van Uden's behalf in making the contributions.

The Court of Appeal also rejected the challenge made to the process followed by the Commissioner in removing the time bar that applied to the assessment for the 2005 to 2008 tax years. The issue was whether the relevant officer acting under delegated power had made the necessary factual reassessment. The Court of Appeal upheld the finding of the High Court that the delegate had expressly exercised the delegated power.

Finally, the Court of Appeal rejected Mr van Uden's submission he should not have been liable for shortfall penalties under s 141B of the Tax Administration Act 1994.

Decision

The Supreme Court found that at some point the Court may wish to revisit the Diamond test, but the present case, where no issues as to that test arise, does not provide an appropriate opportunity for that. The proposed ground of appeal raises no point of general or public importance, nor any matter of general commercial significance. Nor is there an appearance of a miscarriage of justice. Rather, Mr van Uden in this respect would seek to revisit concurrent findings in the TRA, the High Court and the Court of Appeal. Further, the Diamond factors were seen as simply supporting the Court of Appeal's conclusion, not determining it.

The Court found that the other three proposed grounds raise no questions of general or public importance or of general commercial importance. The outcome on these matters rested on the particular factual circumstances.

Taking first the proposed ground relating to the FIF rules, the Court found that the applicant's concern arises from the Court's assessment of the particular facts in light of the direction in s CG 15(2)(d) of the Income Tax Act 1994 ("ITA 1994") that the cost be incurred "by or on behalf of the person". The second question, whether the person with the delegated powers undertook the reassessment so that the time bar was lifted is similarly fact- specific. Finally, the Court of Appeal in concluding shortfall penalties were payable applied the relevant principles from this Court's decision in Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2008] NZSC 115, [2009] 2 NZLR 2289 at [181]-[203].

The Court found no appearance of a miscarriage of justice arising from the Court of Appeal's approach to these matters. In terms of the first proposed ground of appeal, s CG 15(2)(d) of the ITA 1994 provides that expenditure incurred by "or on behalf of" the person is covered. Nothing raised by the applicant in relation to the proposed second ground calls into question the approach taken in the Courts below. On the last of the proposed grounds, nothing raised by Mr van Uden indicates there is a risk of a miscarriage of justice arising from the application of the principles in Ben Nevis.

In relation to Mr van Uden's submission that he has not had access to justice, the Court found the matters he wishes to raise have all been considered by the Courts below. The Court concluded it is not necessary in the interests of justice to hear and determine the proposed appeal.

Income Tax Act 1994
Income Tax Act 2004
Tax Administration Act 1994