CHARTER HOLDINGS LIMITED v THE COMMISSIONER OF INLAND REVENUE [2015] NZHC 2041 [27 August 2015]

CHARTER HOLDINGS LIMITED v THE COMMISSIONER OF INLAND REVENUE [2015] NZHC 2041 [27 August 2015]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2014-404-003013[2015] NZHC 2041BETWEEN CHARTER HOLDINGS LIMITEDApplicantAND THE COMMISSIONER OF INLANDREVENUERespondentHearing: 29 and 30 June 2015Appearances: John Land and Sam Carey for the ApplicantPauline Courtney and Polly Higbee for the RespondentJudgment: 27 August 2015JUDGMENT OF MOORE JThis judgment was delivered by me on 27 August 2015 at 3:30pmpursuant to Rule 11.5 of the High Court Rules.Registrar/ Deputy RegistrarDate:Contents ParagraphNumberIntroduction ................................................................................................................ [1]Factual background and chronology of events........................................................... [4]The SDCP regime for taxpayer-initiated dispute ..................................................... [41]Judicial review and ouster generally ........................................................................ [47]Tannadyce and the TAA Ouster Clause .................................................................... [51]Was the SDCP regime available? ............................................................................. [70]Conclusion ............................................................................................................... [81]Result ....................................................................................................................... [86]Costs ......................................................................................................................... [87]Introduction[1] Charter Holdings Limited ("Charter Holdings") applies for judicial review of the decision of the Commissioner of Inland Revenue ("the Commissioner") not toamend her assessment of its tax liability in the 2006 to 2012 tax years pursuant to s 113 of the Tax Administration Act 1994 ("the TAA"). Charter Holdings says thatthe Commissioner wrongly refused to allow it to claim losses from previous years and, as a result, the Commissioner has over-estimated the company's tax liability. The parties are agreed that the effect of the TAA is that this assessment is not subject to judicial review.[2] However, Charter Holdings also applied to the Commissioner to amend her assessment pursuant to s 113 of the TAA. That application was refused and it is this decision for which Charter Holdings seeks judicial review.[3] Charter Holdings argues that s 113 is not included in the ouster clause in the TAA which prohibits the Courts from examining the correctness of assessments outside the statutory challenge procedure. The Commissioner argues that this analysis is artificial, because the essential purpose of Charter Holdings' challenge isto contest the correctness of the assessment. As a consequence, the Commissioner claims it is attempting a collateral challenge against a protected decision. The Commissioner thus submits the application for judicial review should be dismissed.Factual background and chronology of events[4] In 1984 Charter Holdings Limited was incorporated as Pastoral Developments Limited. In 1991 the company purchased a swimming pool equipment retailer and in 1997 acquired another business which manufactured and distributed swimming pool equipment. The company changed its name to Pool Care FPI Services Limited.[5] In 2001 the business began to slow. The company submitted its 2000 tax return showing a small loss of just under $13,000. Following this the Commissioner sent the company an assessment in the form of a notice of determination of loss/loss to carry forward for the 2000 year. The Commissioner says that this assessment,along with those which would follow in later years, was automatically generated on the basis of the information provided by the company. That information was not checked.[6] Then, on 13 May 2002, the company submitted its 2001 tax return. This showed a loss of $150,949. Mr Adrian Padfield, the director of Charter Holdings who completed the tax return, left unanswered Question 24 which asked, "Can the company claim net losses brought forward?". This, according to Mr Padfield, was because he did not think to answer the question because the trading result for 2001 was a loss itself. He saw no need to refer to the past losses as there was not going to be any tax payable in any event.[7] On 24 May 2002, the Commissioner sent Charter Holdings a notice of determination of loss/loss to carry forward for the 2001 year of $150,949.[8] On 7 July 2003, Charter Holdings entered into an agreement to sell thebusiness. However, as a result of the company's trading difficulties, a supplier brought winding up proceedings. The Court appointed an interim liquidator. Despite this, the company never went into liquidation.[9] PWC were appointed receivers and completed the sale of the business on 25 July 2003. On the same day the company changed its name to Charter Holdings Limited, but remained in receivership until 2005.[10] Having divested itself of the swimming pool servicing and retail business Charter Holdings went into business as a management consultancy and employed Mr Padfield to provide management consultancy services for it.[11] On 2 June 2004, Mr Padfield was bankrupted under a personal guaranteeprovided to a supplier of Charter Holding's former pool business. From then anduntil 2007, when Mr Padfield was discharged, Charter Holdings was managed by someone else, although Mr Padfield was retained as an employee.[12] On 30 March 2005, the receivers issued their final report. Charter Holdings was released from receivership.[13] On 6 September 2006, Charter Holdings filed its tax returns for 2002 and 2003. Given that the returns were required to be filed by 7 July 2002 and 7 July 2003 respectively, they were substantially overdue.1 Apparently these had not been prepared earlier because of the receivership.[14] The 2002 return recorded a loss of $463,771 and the 2003 return a loss of $415,543. In the section of the returns relating to losses carried forward (Question 24) Mr Padfield left the box blank. He again said this was because he did not believe he needed to specify the loss as it had already been set out in the previousyear's return and had been accepted and confirmed by the Commissioner in hernotices. He also said each of the years from 2001 to 2003 showed losses for Charter Holdings and as such there was no tax due to set off against previous losses.[15] On 13 September 2006 the Commissioner sent Charter Holdings notices of determination of loss/loss to carry forward for the 2002 and 2003 years of $463,771 and $415,543 respectively.[16] On 12 December 2012 the Commissioner sent Charter Holdings a final notice advising that returns were overdue for the eight tax years between 2005 and 2012. The notice did not refer to the 2004 return. It appears that the notice for 2004 was sent to the receivers.[17] On 5 March 2013 Charter Holdings filed the outstanding returns for the 2005 to 2012 years. Mr Padfield said he assumed the receivers were attending to the 2004 return.[18] The 2005 tax return filed on 5 March 2013 reflected the sale of the company's business and the receivers' realisation of assets (debtors, vehicles andfixed assets). This information came from the final report of the receivers and provided for a significant loss.1 Tax Administration Act 1994, s 37(1)(c).[19] Each of the returns for 2006 to 2012 disclosed income earned by thecompany. However, on each return Mr Padfield ticked "Yes" to Question 24. Eachreturn had inserted an amount for losses claimed for that year equal to the amount of total income declared for that year.[20] No figure was inserted under, "Amount brought forward". Mr Padfield wasapparently wrongly of the view that the Commissioner maintained a record of losses for past years. He did not realise the company was required to add all previous losses into a total figure and note this in the tax returns.[21] On 17 March 2013, the Commissioner sent Charter Holdings a notice of determination of loss/loss to carry forward for 2005 of $409,433. Between 17 March 2013 and 31 May 2013 the Commissioner sent Charter Holdings assessments for amounts of tax to pay for the 2006 to 2012 tax years.[22] On 10 April 2013 Charter Holdings sent a letter to the Commissioner. The letter referred to the assessments and listed the tax losses previously accepted by IRD for 2000, 2001, 2002, 2003 and 2005. The letter concluded with these words:"These do not appear to have been applied to subsequent profits, pleasesupply and correct the Statement of Accounts.We maintain no tax liability exists for this company."[23] On 19 July 2013 Ms Wendy Hay, on behalf of the Commissioner, telephoned Mr Padfield in response to Charter Holdings' letter. When asked by Mr Padfield why Charter Holdings' losses had not been carried forward, Ms Hay apparently toldMr Padfield that the 2004 return was required before the carrying forward of the losses could be considered. She recommended he file it and make a proper request explaining what had happened and why, including a request the losses be carried forward. Apparently, up until this time, Mr Padfield was unaware that the 2004 return had not been filed. Despite this the 2014 return was not filed for another eight and a half months.[24] On 15 January 2014, Mr Padfield spoke to Ms Kaur of IRD. He asked why the tax losses had not been carried forward. His account of this conversation is thatMs Kaur told him the losses had not been carried forward because the 2004 return had not been filed; there was a break in the period which prevented the losses going forward. According to Mr Padfield Ms Kaur indicated that the losses would beapplied once the 2004 return had been filed. Ms Kaur's account is quite different.She said she told Mr Padfield that as the losses were significant they would need to be reviewed.[25] On 23 January 2014, Mr Padfield again spoke with Ms Kaur. She repeated her advice the 2004 tax return was required to be filed.[26] On 3 February 2014, Charter Holdings filed its 2004 return disclosing a lossof $63,663. On behalf of Charter Holdings Mr Padfield ticked, "Yes" to Question24. But he did not fill out item 25, "Total Income after net losses brought forward" or item 27, "Taxable income or net loss to carry forward". The return did notexpressly refer to the amount of the tax losses from 2000 to 2003 because Mr Padfield said he assumed this was not necessary; the return for 2004 provided for a loss in any event so there was no profit to set off against past losses.[27] On 18 February 2014, the Commissioner sent Charter Holdings a notice of determination of loss/loss to carry forward for 2004 of $63,663.[28] On 24 March 2014 Mr Padfield spoke with Ms Kaur who advised that copies of financial statements for 2000 to 2005 were required before the carrying forward of the losses could be considered. On the same day Ms Kaur sent Charter Holdings a letter acknowledging the filing of the 2004 return. The letter recorded that the request to apply losses from 31 March 2005 had been declined under s 113 of theTax Administration Act 1994 ("the TAA") as no further information had beenprovided to substantiate the claim. The letter asked for financial statements.[29] On 4 April 2014 Charter Holdings wrote to the Commissioner. The letter explained that the financial statements requested by IRD had already been filed with the original tax returns. The letter said Charter Holdings would nevertheless forward them again.[30] On 30 April 2014, Charter Holdings forwarded the financial statements for the 2000 to 2005 years. In the accompanying letter Charter Holdings requested the losses be applied to the subsequent years' trading.[31] On 17 June 2014, the period within which Charter Holdings was required to initiate the statutory dispute procedure under the TAA expired.[32] On 19 June 2014 Ms Kaur, on behalf of the Commissioner, wrote to Charter Holdings declining its application of 30 April to have losses applied to subsequentyears' trading. The letter recorded that Charter Holdings' request had been declinedunder s 113 of the TAA.[33] The letter noted that while the Commissioner has the discretion to amend assessments it is up to the taxpayer to give clear reasons for doing so with documentation to support the request. While noting the Commissioner was not required to amend the assessments, the decision to amend was one made on a case- by-case basis requiring the Commissioner to factor in the use of time and resources. In doing so, the letter recorded that the Commissioner must decide on how much evidence and documentation is being submitted by the taxpayer, whether time and resources expended by the Commissioner are worth the effort and whether or not the issue is one of genuine mistake or regretted choice. The Commissioner observed that the onus was on Charter Holdings to provide all relevant information with the amendment request. The letter also recorded that the Commissioner could not be compelled to investigate the claims that the assessment of the previous tax returns were in error and the assessments should be amended. The letter recorded that under s 138E(1)(e)(iv) of the TAA the taxpayer cannot challenge the exercise of theCommissioner's discretion under s 113, but observed the exercise of the discretionmay be subject to judicial review. The letter concluded by advising that payment in the full amount was required. It is this decision, made in terms of s 113 of the TAA, which Charter Holdings now seeks to review in these proceedings.[34] As signalled, on 2 July 2014 the Commissioner issued a statutory demand against Charter Holdings for $850,523.99. The demand attached a statement ofaccount for each year. The total tax component was $306,460. The balance was made up of penalties and interest.[35] On 3 July 2014, Charter Holdings replied to the Commissioner's letter of19 June 2014. The letter disputed the Commissioner's ruling and requested detailson to how to apply for a judicial review. The letter reiterated that Charter Holdings wished to have its tax losses from the 2000 to 2005 years applied to subsequentyears' trading.[36] On 17 July 2014, Charter Holdings again wrote to the Commissioner in similar terms. The letter disputed the IRD ruling and enclosed amended tax returns which included the losses carried forward which were erroneously omitted from the original returns filed. The letter said the company wanted these assessments corrected. It recorded that if they were not corrected Charter Holdings would seek a judicial review.[37] On 18 July 2014, Ms Kaur on behalf of the Commissioner responded toCharter Holdings' letter of 3 July. This letter set out the Commissioner's reasons fordeclining to reassess under s 113. The letter concluded by acknowledging Mr Padfield's request for details on how to apply for a judicial review. Ms Kaurstated that, as the process is governed by the High Court Rules, it was recommended that Mr Padfield obtain legal advice if he wished to commence review proceedingsagainst the Commissioner's decision.[38] Thus, in summary, in respect of each of the 2006 to 2012 income tax returns, Charter Holdings:(a) declared an amount of income;(b) in response to Question 24, answered, "Yes";(c) left the "Amount brought forward" box blank;(d) wrote in the "Amount claimed this year" box an amount exactlyequivalent to the declared amount of income;(e) wrote in the "Total income or loss to carry forward" box, the word, "NIL".[39] The way in which Mr Padfield, on Charter Holdings' behalf, completed theforms meant he failed to carry forward the claimed losses from the 2000 to 2005 income years.[40] Notices of assessment were automatically generated and issued in respect of each of the 2006 to 2012 income tax returns. Due to the way the income tax returns had been completed the claimed losses were not applied.The SDCP regime for taxpayer-initiated dispute[41] Part 4A of the TAA provides the statutory procedure by which taxpayers and the Commissioner may dispute an assessment (including a self-assessment) of tax liability. If Charter Holdings wished to amend its self-assessments it was required to issue a Notice of Proposed Adjustment ("NOPA") within the statutorily prescribed- timeframes.2 This would have initiated the Part 4A disputes procedure.[42] By way of explanation, the NOPA is required to be filed within four months of the date the notice of assessment was issued. Furthermore, pursuant to s 108 the Commissioner is only permitted to amend the assessment within four years from the end of the tax year within which the return was filed. Thus, as can be seen by the table, any amendment to the assessments for the 2000 to 2003 tax years is time barred by virtue of the operation of s 108.[43] The table below sets out the availability of the NOPA procedure relative to each income tax year.[44] The table also sets out the relevant due dates for the filing of returns, the actual dates the returns were filed, the dates on which assessments were issued and the dates by which the NOPAs were required to be filed in each of the relevant income years.2 Section 89D.IncometaxyearReturndue dateDate returnfiledLate ornot?Date NoticeofAssessmentIssuedLast date bywhich NOPArequired to befiledTime-bardate32000 7 July200015 April 2012 Late 19 April200218 August200231 March20072001 7 July200113 May 2002 Late 24 May200223 September200231 March20072002 7 July20026 September2006Late 13September200612 January200731 March20112003 7 July20036 September2006Late 13September200612 January200731 March20112004 7 July20043 February 2014 Late 18 February201417 June 2014 31 March20182005 7 July20055 March 2013 Late 17 March201316 July 2013 31 March20172006 7 July20065 March 2013 Late 17 March201316 July 2013 31 March20172007 7 July20075 March 2013 Late 29 April201328 August201331 March20172008 7 July20085 March 2013 Late 31 May201330 September201331 March20172009 7 July20095 March 2013 Late 17 March201316 July 2013 31 March20172010 7 July20105 March 2013 Late 18 March201317 July 2013 31 March20172011 7 July20115 March 2013 Late 18 March201317 July 2013 31 March20172012 7 July20125 March 2013 Late 18 March201317 July 2013 31 March20172013 7 July20125 March 2013 Late 18 March201317 July 2013 31 March2017[45] If, at the completion of the Part 4A disputes procedure the parties cannot agree on the correct quantification of tax liability the dispute can be the subject of a3 Section 108 of the TAA imposes a four year time bar from the end of the tax year in which the taxpayer provides the tax return beyond which the Commissioner may not amend the assessment.determination by the Taxation Review Authority ("the TRA") or the High Court in achallenge proceeding. Part 8A allows taxpayers to challenge an assessment before a hearing authority (either the TRA or the High Court). In order to engage that process a taxpayer must meet the requirements of s 138B.4[46] Both the TRA and the High Court have jurisdiction to determine issues relating to the correctness of assessments and, through a de novo hearing, address concerns about the decision-making process.Judicial review and ouster generally[47] The jurisdictional basis for, and the extent of the availability of, judicial review has been the subject of ongoing debate.5 This debate has been particularly active where Parliament has attempted to exclude access to judicial review in relation to certain decisions. Such provisions, often called privative clauses or ouster clauses, have received limited support from the Courts. Often they have been given a narrow interpretation in order to preserve access to the judicial review jurisdiction.[48] Historically, courts have divided errors made by decision makers into jurisdictional and non-jurisdictional errors.6 In this way, the courts sought to identify those decisions which were entitled to the protection of an ouster clause (being incorrect decisions made within the decision-maker's jurisdiction) and those whichwere not, because the decision maker had transgressed his or her jurisdiction.[49] This distinction was abolished by the House of Lords in the Anisminicdecision, where the majority accepted the argument that a "determination" (thelanguage used in the relevant ouster clause) could only mean a real determination and not one which, due to an error, was a nullity.7 In this way, the Court4 Section 138B sets out the criteria a disputant is required to meet before qualifying for entitlement to challenge an assessment.5 In writing this section I have been assisted by the thorough treatment of the topic given by LukeSizer "Privative Clauses: Parliamentary Intent, Legislative Limits and Other Works of Fiction"(2014) 20 AULR 148.6 See for example Smith's Case (1670) 1 Ventris 66, 86 ER 46 (KB).7 Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147 (HL)significantly expanded the availability of judicial review in the face of an apparent legislative ouster. The full effect of this decision was later summarised as:8"Virtually to abolish the distinction between errors within jurisdiction thatrendered voidable a decision that remained valid until quashed, and errorsthat went to jurisdiction and rendered a decision void ab initio"[50] This decision was further expanded in New Zealand in the Court of Appeal'sdecision in Bulk Gas Users Group v Attorney-General.9 There, the Court reduced both jurisdictional and non-jurisdictional errors to a single category: errors of law. The Court further applied a presumption that Parliament did not intend to apply an ouster clause to protect errors of law, where the decision maker was not empowered to decide the law conclusively. In this way, the Court created a strong presumption against the exclusion of judicial review in the case of all errors, jurisdictional or otherwise.Tannadyce and the TAA Ouster Clause[51] The present case involves the effectiveness of the ouster provisions contained in the TAA. In particular, ss 18 and 109 of the TAA which provide:"18 Grounds of objection and burden of proofOn the hearing and determination of any objection, the objector shall be limited to the grounds stated in the objector's objection, and, subject to section 190(2) of the Tax Administration Act 1994, the burden of proof shall be on the objector.[]109 Disputable decisions deemed correct except in proceedingsExcept in objection proceedings under Part 8 or a challenge under Part 8A(a) no disputable decision may be disputed in a court or in any proceedings on any ground whatsoever; and(b) every disputable decision and, where relevant, all of its particulars are deemed to be, and are to be taken as being,correct in all respects."8 O'Reilly v Mackman [1983] 2 AC 237 (HL) at 283.9 Bulk Gas User Gas v Attorney-General [1983] NZLR 129 (CA).[52] These provisions have existed in one form or another since at least 1923, where they formed ss 14 and 18 of the Land and Income Tax Act 1923. They and their successors have been considered in various decisions where the Courts haveconsistently held that the Commissioner's assessment of tax cannot be questionedexcept by way of the statutory objection procedure.10 This, notwithstanding the inescapable fact that: 11"In the absence of some record in the mind or in the books of the taxpayer, it would often be quite impossible to make a correct assessment. The assessment would necessarily be a guess to some extent, and almost certainly inaccurate in fact. There is every reason to assume that the legislature did not intend to confer upon a potential taxpayer the valued privilege of disqualifying himself in that capacity by the simple andrelatively unskilled method of losing either his memory or his books."[53] Indeed, these decisions have been met with such uniform acceptance, that inBen Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue the majority of the Supreme Court was prepared to conclude:12"Furthermore, when taxpayers challenge an assessment based on areconstruction adopted by the Commissioner, the onus is on them to demonstrate, not only that the reconstruction was wrong, but also by how much it was wrong. Unless the taxpayer can demonstrate with reasonableclarity what the correct reconstruction ought to be, the Commissioner'sassessment based on his reconstruction must stand. This is settled law.13"[54] Generally speaking, therefore, the Commissioner's assessments cannot bequestioned outside the statutory procedure provided for such challenges. Despitethis evidently "settled law", there remains some debate around the precise extent of this restriction to judicial review. The extent of the debate is evident from theTannadyce decision, where the Supreme Court considered when, if ever, a disputable decision could be judicially reviewed.10 Aspro Ltd v Commissioner of Taxes [1923] AC 683 (PC); Commissioner of Taxes v McCoard[1952] NZLR 263 (SC); Babington v Commissioner of Inland Revenue [1957] NZLR 861 (SC);Lancaster v Commissioner of Inland Revenue [1969] NZLR 689 (SC) at 590; Duggan v Commissioner of Inland Revenue [1973] 1 NZLR 682 (SC) at 686; Europa Oil (NZ) Ltd (No 2) v Commissioner of Inland Revenue (1974) 1 NZTC 61,169 at 61,195; Buckley & Young Ltd v Commissioner of Inland Revenue [1978] 2 NZLR 485 (CA) at 498; Commissioner of Inland Revenue v New Zealand Wool Board (1999) 19 NZTC 15,476 at [47].11 Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63 at 87.12 Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2008] NZSC 115, [2009] 2 NZLR 289 at [171].13 Buckley & Young Ltd v Commissioner of Inland Revenue [1978] 2 NZLR 485 (CA) at 498. See also to the same effect Commissioner of Taxes v McCoard [1952] NZLR 263 (SC).[55] In Tannadyce the Supreme Court unanimously rejected an application forjudicial review of the Commissioner's refusal to accept a global return for the 1993to 1998 tax years, in lieu of separate returns for each year.14[56] The majority held that assessments could not be challenged by way ofjudicial review unless the taxpayer's concerns could not practically be addressed via the relevant statutory procedure. This did not include any exception for "exceptional circumstances", but effectively required the challenge to be of a sort not capable of being resolved by the statutory challenge mechanism. In this way, the ouster sections of the TAA effectively enforce an alternative remedy to judicial review, and make judicial review only available when that remedy has failed.15[57] The minority were unwilling to accept this broad exclusion, and instead considered that judicial review should remain available in circumstances where it isnecessary to ensure that the taxpayer will have its tax position determined "fairly,impartially and according to law." As such, it will be available in circumstanceswhere the statutory challenge procedure is practically inaccessible or where requiring the taxpayer to submit to that process may cause significant prejudice.16 However, in that case, the minority did not accept that the fact that the taxpayer was time barred from accessing the statutory procedure was sufficient, commenting:"[45] The appellant, of course, preferred not to challenge the assessment in this way within the time allowed. We are satisfied that it was not precluded from doing so effectively. This is an approach which the courts have discouraged and ultimately is fatal if the Court considers that, in the circumstances considered objectively, the statutory challenge approach is to be preferred."14 Tannadyce Investments Ltd v Commissioner of Inland Revenue [2011] NZSC 158, [2012] 2 NZLR 153.15 At [39], [61]-[63] and [72]-[73].16 At [38].[58] Tipping J, delivering the judgment of the majority, found the following factors to be significant in reaching the conclusion that judicial review was not available:17(a) The wording of s 109 indicates that Parliament was concerned to ensure disputes and challenges capable of being brought under the SDCP were brought in that way and were not made the subject of any other form of proceeding in a Court or otherwise.18(b) Using the words "on any ground whatsoever" must have beenintended by Parliament to emphasise the comprehensive nature of the embargo on bringing proceedings outside the SDCP. Conversely, Parliament must have contemplated that disputable decisions could and should be contested and challenged under the SDCP on any ground whatsoever, including on the grounds usually raised in judicial review. The hearing authority has the power under s 138P of the TAA to confirm, cancel or vary an assessment. That overcomes the potential for separation of matters of legality from matters of correctness.19(c) Giving effect to s 109 does not preclude a taxpayer's access to the High Court, because the definition of "hearing authority" includes theHigh Court, and both issues that could be dealt with in the statutory procedures and through judicial review can be raised and appropriate relief ordered.20(d) There may be rare cases where judicial review is not precluded if a hearing authority does not have the ability to consider any challenge on whatever grounds, e.g. alleged bias by a Taxation Review Authority.2117 At [73].18 At [53].19 At [54] to [55].20 At [57].21 At [59].(e) The SDCP gives a taxpayer broader rights and remedies than would be available on judicial review and allows for all matters to be dealt with at the same time. This removes the opportunity for gaming the system which the availability of judicial review would present and has presented.22[59] Tannadyce has established a settled practice that the High Court must refusejudicial review except when the statutory process "could never be invoked".23 It will be a: 24"rare case indeed in which it will be appropriate to hold that compliance with the statutory requirements was not possible, with the result that the matter in issue was never capable of being resolved under the processes prescribed inthe Tax Administration Act".[60] Tannadyce has been considered by this Court in the context of an attempt tojudicially review the Commissioner's decision under s 113 of the TAA in Arai Korp Ltd v Commissioner of Inland Revenue.25[61] Arai Korp was a property development company, which sought to judicially review a decision of the Commissioner not to invoke s 113 of the TAA in respect of default income tax assessments issued in lieu of tax returns. A letter accompanied the default assessments advising Arai Korp of its right to dispute the default assessment and, in the event it intended to adopt that course, it was required to file a notice of proposed adjustment along with its tax returns within four months of the default assessments. Arai Korp did not dispute the default assessments within the statutory timeframes. Instead, it requested the Commissioner to agree to fresh tax returns being completed and accepted in place of the default assessments. It requested the Commissioner to consent to an appeal out of time to the TRA against the default assessments. The Commissioner responded by advising Arai Korp that its letter had been treated as a request under s 113 of the TAA. The Commissioner considered the request and exercised her discretion to decline it. The Commissioner22 At [71].23 At [73].24 At [76].25 Arai Korp Limited v Commissioner of Inland Revenue [2013] NZHC 958; (2013) 26 NZTC 21,014.observed the request was not made in regard to a consequential or genuine error but rather, was an attempt to re-open the disputes process.[62] In discussing s 113 of the TAA, Wylie J observed at [34] and [35]:"[34] Section 113 is clear in its terms. It confers a wide ranging discretion on the Commissioner. The discretion may be exercised from time to time and at any time. It can be exercised by the Commissioner on her own motion. It can also be exercised at the request of the taxpayer. Thediscretion is available in order to ensure that an assessment is correct. Thediscretion is not constrained in any way. It does not distinguish betweenconsequential errors and genuine errors. The focus is on the correctness of an assessment, not on the errors which lead to an assessment being incorrect. The section can be considered to be a 'back stop' provision.[35] In exercising the discretion the Commissioner must use her best endeavours to protect the integrity of the tax system. Inter alia, this requires the Commissioner to use her best endeavours to protect the rights of taxpayers to have their liability determined fairly, impartially and accordingto law."[63] Against the background of Tannadyce he observed:26"It is clear that s 109 precludes any assessment from being disputed exceptthrough the objection provisions in Part 8 of the Act, or the challengeprovisions in Part 8A. If the taxpayers' argument go to the substance of theassessments and not to the procedure followed by the Commissioner then they can be raised only in challenged proceedings under the Act and not by way of judicial review."[64] Wylie J observed that this was not one of the extremely rare situations contemplated in Tannadyce. The dispute procedure was clearly available to Arai Korp. Its real challenge was to the correctness of the default assessments. The accuracy of those assessments should have been challenged through the disputes procedure, and if necessary, the challenge procedure. While a decision by the Commissioner not to utilise the discretion available under s 113 can be subject to judicial review, except in extremely rare circumstances, judicial review cannot be used as a back door means of considering the merits of the assessments by circumventing the statutory disputes procedure.[65] If it were allowed to do so it would undermine the statutory scheme and Arai Korp would have been treated more favourably than other taxpayers. Section 6(2)(c)26 At [65].of the Act requires the Commissioner to protect the rights of a taxpayer to have their tax affairs treated with no greater or lesser favour than the tax affairs of other taxpayers. Wylie J observed, a taxpayer who has sat on their hands and done nothing is not entitled to expect preferential treatment.[66] Wylie J concluded that the Commissioner's decision to decline Arai Korp'sapplication under s 113 was not manifestly unreasonable. Section 113 was not meant to be used as a mechanism to bypass the disputes procedure or the challenge procedure. In his judgment that was what Arai Korp had attempted to do against a background where, for an extended period of time, it had failed to comply with its statutory obligations.[67] Ms Courtney relies on Arai Korp as emphasising the principle that before a taxpayer can engage in the SDCP it needs to file a tax return and have issued a NOPA within the statutory timeframes. If Arai Korp sought to correct the assessments it should have utilised the SDCP regime rather than seek to judicially review the decision under s 113 of the TAA not to amend the assessments. Ms Courtney argues that the same conclusion should be reached here.[68] Mr Land submits that Arai Korp is distinguishable on its facts. He submits that unlike Arai Korp there was no opportunity for Charter Holdings to make use of this statutory procedure. He submits it was unavailable[69] I agree with Ms Courtney that Arai Korp has direct application. For the reasons which follow I am satisfied Charter Holdings had the opportunity to engage in the SDCP process. The regime was available.Was the SDCP regime available?[70] Mr Land submits there was no ability or opportunity for Charter Holdings to use the statutory objection procedure. He submits that the factual basis for that claim is apparent from the chronology. On 10 April 2013 Charter Holdings made the request to supply corrected new assessments but it was not until 19 July 2013 that the Commissioner responded by which time the NOPA periods for 2005, 2006, 2009, 2010, 2011 and 2012 tax years had expired. However, although the response pre-dated the expiry of the NOPA periods for 2007 and 2008 the Commissioner suggested Charter Holdings take a different course to filing a NOPA, namely to file the 2004 return and seek to have the losses carried forward. By the time the Commissioner responded declining to re-assess under s 113 the statutory objection procedure was no longer available.[71] Ms Courtney submits that the SDCP was available and no proper explanation has been proffered for why it was not engaged by Charter Holdings.[72] Before examining the issue of the availability of the SDCP more closely it is necessary to consider the central importance of complying with statutory time limits in tax administration.[73] Taxpayers have an obligation to correctly self-assess their liability.27 They bear the risk if they fail to do so or fail to take the prescribed steps to correct it. This principle was emphasised by the Court of Appeal in Commissioner of Inland Revenue v Wilson.28 Although the decision predates the present self-assessment system the judgment contains helpful comments on the issue of the imposition of and adherence to time limits as a central feature of tax administration in New Zealand. The Court observed:29"Without time constraints, administrative chaos and uncertainty wouldensue. The Commissioner could not close the books. Taxpayers would not know where they stood. The setting of time limits and other constraints through the legislation recognises that the correctness and quantification of tax liability is not an absolute value. It is crucial in the making of an assessment. Once an assessment is made, in the absence of a timely objection the assessment is determinative of liability. The focus then shifts. If a late objection [now dispute and challenge process] application is made the Commissioner has to weigh and balance the relevant public policy considerations applicable at that time in the particular circumstances of thecase. The enquiry calls for some explanation of the taxpayer for failure to maketimely objection and, where there is significant delay involved, the reasons for the failure to make the application earlier."27 S 15, TAA.28 Commissioner of Inland Revenue v Wilson (1996) 17 NZTC 12,512 (CA) at [8] to [9].29 At page 8.[74] I turn now to consider whether, in fact, Charter Holdings could have invoked the SDCP process. I am satisfied that at all relevant times Charter Holdings had actions available to it which would have allowed it to engage it in the SDCP. Through its own defaults it did not take the steps necessary to engage in the statutory process.[75] The chronology of events described earlier shows it was on 10 April 2013 that Charter Holdings first opened discussions with the Commissioner about utilising the losses from the 2000 to 2005 years. This is the date which Mr Lands emphasises as significant. Charter Holdings' correspondence must have been provoked by events which occurred several weeks before. On 17 March 2013 the Commissioner issued assessments for the 2005, 2006 and 2009 years. These were followed the next day by assessments for the 2010, 2011, 2012 and 2013 years. It must have been obvious to Charter Holdings that by these assessments the Commissioner had determined not to carry forward the previous losses. This had been Mr Padfield'sprimary purpose in completing the returns in the way he did, albeit incorrectly. Undoubtedly it was the realisation that the Commissioner was not carrying forward the previous losses which lead Charter Holdings to write to the Commissioner about three weeks later on 10 April 2013 requesting her to correct the assessments. Even by that time Charter Holdings still had ample opportunity left to issue NOPAs.[76] I agree with Ms Courtney's submission that for an obviously experiencedbusinessman such as Mr Padfield, it is inconceivable he would not know there was a procedure available for determining disputes over tax liability. Furthermore, as she points out, the reverse side of every notice of assessment there is a general description of what a taxpayer needs to do to engage in the SDCP process if it does not agree with the assessment. Similar information is available on the department'swebsite.[77] Furthermore, even after the statutory response period had expired Charter Holdings could have requested an extension of time under s 89K of the TAA. Suchextensions of time are available in "exceptional circumstances" or where thetaxpayer has clearly indicated an intention to dispute an assessment. If an extension had been granted this would have allowed Charter Holdings to issue a NOPA and forit to be deemed to have been issued within the statutory response period. No application of extension of time has been made nor, it seems, any reason given for this failure.[78] It should not be overlooked that Charter Holdings failed to file any of its tax returns within the statutorily required timeframes. I also note that in respect of the 2000 to 2003 tax years the last dates by which NOPAs were required to be filed had passed years before Mr Padfield ever became aware he had not done what he was required to do when completing the returns for those years he wished to carry forward the claimed losses.[79] Charter Holdings' obligation was to put itself into a compliant position andengage in the SDCP to seek any necessary adjustments so that its tax position in each of the relevant years was correct. Furthermore, despite apparently being advised on 19 July 2013 that the 2004 return needed to be filed it was not filed until 3 February 2014, nearly seven months later. Until the outstanding 2004 return was received the request to carry forward losses could not be considered because the process does not permit a taxpayer to leap frog losses forward into non-consecutive tax years, i.e. from the 2003 tax year into the 2005 tax year. If by 10 April 2013 Charter Holdings had filed its 2004 return it could have proposed adjustments requesting that its tax position be corrected and it could then have engaged in the SDCP.[80] Applying the principles in Tannadyce I am not satisfied this is one of those rare cases where judicial review is not precluded where a hearing authority does not have the ability to consider any challenge on whatever grounds. Judicial review must be refused except when the statutory process could never be invoked. For the reasons set out above I am satisfied the statutory process could have been invoked by Charter Holdings. It was not invoked and Charter Holdings cannot now mount what is, in effect, a collateral challenge to the Commissioner's assessments.Conclusion[81] It follows I am satisfied that there were remedies available to Charter Holdings which would or could have engaged the SDCP dispute process.[82] It is also apparent that Charter Holdings is, in fact, attempting to use the judicial review avenue to dispute the quantification of its tax liability in the 2006 to 2012 income tax years. It seeks to reduce its assessable income by the amounts of the alleged tax losses claimed.[83] That its principal focus is on the correctness of its liability in the relevant years is apparent from the relief it seeks. These include orders setting aside the 2006 to 2012 assessments and any consequential interest and penalties. It seeks a direction that the request to have tax losses for the 2000 to 2005 tax years applied tosubsequent years' assessment be allowed. It seeks orders directing theCommissioner to issue reassessments for the 2006 to 2012 years.[84] These are all issues which go to the questions which the SDCP regime was established to deal with under the TAA. They are matters which go to quantifying the amount of tax Charter Holdings is liable to pay under the income tax legislation. This Court on a judicial review has no jurisdiction to deal with or determine matters of tax liability or quantum. They are properly matters which should have been pursued through the SDCP.[85] Section 109 precludes Charter Holdings from raising them and the Court from granting relief in terms of that sought in these proceedings.Result[86] The application for judicial review is dismissed.Costs[87] The Commissioner is entitled to costs.[88] In that regard I direct as follows:(a) If the Commissioner wishes to seek costs she is to file a memorandum in that regard within 10 working days of the date of this judgment.(b) In that event Charter Holdings is to file a memorandum in response within a further 10 working days.[89] I shall then deal with the issue of costs on the papers unless I require further assistance from counsel.Moore JSolicitors/Counsel:Mr Land, AucklandCrown Law, Wellington