SINGH v COMMISSIONER OF INLAND REVENUE [2016] NZHC 3001

SINGH v COMMISSIONER OF INLAND REVENUE [2016] NZHC 3001 [12 December 2016]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2015-404-1064[2016] NZHC 3001BETWEEN VEENA SINGHFirst ApplicantYAGASHWAR SINGHSecond ApplicantAND THE COMMISSIONER OF INLANDREVENUERespondentHearing: 7 December 2016Appearances: D P Weaver for ApplicantsJ K Gorman and G H H Gordon for RespondentJudgment: 12 December 2016JUDGMENT OF LANG J[on application for judicial review]This judgment was delivered by me on 12 December 2016 at 3.30 pm,pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate[1] Mr and Mrs Singh are each substantially indebted to the Commissioner of Inland Revenue for outstanding taxation in the form of income tax and GST. They say they have no means of meeting judgments the Commissioner has obtained against them in respect of their taxation liabilities.[2] On several occasions between January 2014 and March 2015 Mr and Mrs Singh unsuccessfully asked the Commissioner to grant them financial relief from paying the tax on the ground that such payment would cause them serious hardship. On each occasion the Commissioner declined. This led to Mr and Mrs Singh filingthe present proceeding, in which they sought judicial review of the Commissioner'sdecisions.[3] The Commissioner opposed the application and it was allocated a firm fixture on 8 October 2015. On 1 October 2015, however, the Commissioner advised Mr and Mrs Singh that she proposed to reconsider her decision. The fixture was accordingly vacated so that the reconsideration process could be undertaken.[4] The reconsideration process produced the same result. Mr Richard Philp, a person with the delegated authority from the Commissioner to decide whether or not to grant relief, advised Mr and Mrs Singh by letter dated 13 May 2016 that their latest application for relief had been declined (the reconsideration decision). They then amended their statement of claim so as to include the reconsideration decisionwithin those subject to review.[5] Mr and Mrs Singh ask the Court to intervene on the basis that the reconsideration process was unfair and in breach of the principles of natural justice in several respects. They also contend that in making the reconsideration decision the Commissioner failed to take into account relevant considerations and took into account irrelevant considerations. They ask the Court to set the decision aside, and to require the Commissioner to reconsider their application for relief again in amanner that complies with the Commissioner's obligation to act fairly and impartially in carrying out his obligations under the Tax Administration Act 1994 (the Act).Background[6] It is not necessary for present purposes to traverse in detail the very lengthy background that led to the present proceeding. It has its genesis in the fact that in March 2008 Mr Singh voluntarily disclosed to the Commissioner that he had purchased and sold 16 properties between October 2002 and January 2004. In accepting that he was liable to pay tax in respect of these transactions Mr Singh also sought to be able to deduct expenses he said he had incurred in purchasing and maintaining the properties in question.[7] The ensuing investigation led the Commissioner to conclude that Mr and Mrs Singh had bought and sold a total of 39 properties during the years ending 31 March 2003 to 31 March 2007 inclusive. This led the Commissioner to re-open the existing assessments of Mr and Mrs Singh's taxation liabilities in respect of these years, and to issue adjustments and reassessments to reflect their increased liability by virtue of the property transactions. The Commissioner also applied use of money interest and late payment penalties to the increased taxation payable by virtue of the re- assessments.[8] In February 2011 the Commissioner obtained judgment against Mr Singh in the sum of $574,105.77 and against Mrs Singh in the sum of $619,730.45. In 2012 the Commissioner filed proceedings in the High Court at Tauranga seeking to have Mr and Mrs Singh adjudicated bankrupt. Those proceedings were ultimately withdrawn after Mr and Mrs Singh persuaded the Commissioner to review further information they had provided.[9] This process led the Commissioner to issue amended assessments in which the amounts owed by Mr and Mrs Singh were reduced by approximately $200,000. The Commissioner then filed fresh bankruptcy proceedings against both Mr and MrsSingh. These have been stayed pending disposition of the present proceeding.The statutory scheme[10] Section 6A(3) of the Act prescribes the Commissioner's general duty tocollect taxes as follows:6A Commissioner of Inland Revenue...(3) In collecting the taxes committed to the Commissioner's charge, and notwithstanding anything in the Inland Revenue Acts, it is the duty of the Commissioner to collect over time the highest net revenue that is practicable within the law having regard to—(a) The resources available to the Commissioner; and(b) The importance of promoting compliance, especially voluntary compliance, by all taxpayers with the Inland Revenue Acts; and(c) The compliance costs incurred by taxpayers.[11] Section 176 of the Act deals with the Commissioner's obligation to recoveroutstanding tax from individual taxpayers. It provides as follows:176 Recovery of tax by Commissioner(1) The Commissioner must maximise the recovery of outstanding tax from a taxpayer.(2) Despite subsection (1), the Commissioner may not recover outstanding tax to the extent that—(a) recovery is an inefficient use of the Commissioner's resources; or(b) recovery would place a taxpayer, being a natural person, in serious hardship.(3) Despite subsection (2)(b), the Commissioner may take steps preparatory to, or necessary to, bankrupt the taxpayer, including debt proceedings in the District Court or the High Court.[12] A taxpayer may request financial relief against liability for tax by making a request under s 177 of the Act, which relevantly provides:177 Taxpayer may request financial relief(1) A taxpayer, or a person on a taxpayer's behalf, requests financial relief by either—(a) making a claim stating why recovery of the taxpayer's outstanding tax or a relief company's outstanding tax would place the taxpayer, being a natural person, in serious hardship; or(1B) For the purposes of this section, the Commissioner must consider the taxpayer's financial position at the date on which the request for financial relief is made.(3) Upon receiving a request, the Commissioner may—(a) accept the taxpayer's request; or(b) seek further information from the taxpayer; or(c) make a counter offer; or(d) decline the taxpayer's request.[13] Section 177A prescribes the manner in which the Commissioner is required to decide whether a taxpayer's request for financial relief on the grounds of serious hardship should be granted. Section 177A relevantly provides as follows:177A How to apply serious hardship provisions(1) Subsections (2), (3), and (4) provide the rules for the Commissioner to decide (the decision) whether,—(a) for the purposes of section 176, recovery of outstanding tax would place a taxpayer, being a natural person, in serious hardship:(b) for the purposes of section 177, the Commissioner may accept the taxpayer's request for financial relief on the basis of a claim that recovery of the taxpayer's outstanding tax or a relief company's outstanding tax would place the taxpayer, being a natural person, in serious hardship:(d) for the purposes of section 177C, recovery of the outstanding tax would place the taxpayer, being a natural person, in serious hardship.(2) The Commissioner makes a decision under this section by determining whether financial information, after allowing for payment of a relevant amount of outstanding tax, and subject to subsections (3) and (4), shows that the taxpayer would, after the request under section 177 (the request), likely have significant financial difficulties because, after the request,—(a) the taxpayer or their dependant has a serious illness:(b) the taxpayer would likely be unable to meet—(i) minimum living expenses estimated according to normal community standards of cost and quality:(ii) the cost of medical treatment for an illness or injury of the taxpayer, or of their dependant:(iii) the cost of education for their dependant:(c) other factors that the Commissioner thinks relevant would likely arise.(3) Compliance with, and non-compliance with, tax obligations must not be considered by the Commissioner when making a decision under this section.(4) The Commissioner must use only financial information that the Commissioner has at the date on which the decision is made.[14] If the Commissioner concludes that relief should be granted, the Commissioner may write off all or part of the tax owed by a taxpayer. In this context ss 177C (1BA) provides:177C Write-off of tax by Commissioner(1BA) The Commissioner may use, as a ground for deciding whether or not to write off the outstanding tax of a taxpayer or of a relief company, the basis that recovery of the outstanding tax would place the taxpayer, being a natural person, in serious hardship. The Commissioner is not required to write off the outstanding tax if the ground exists.[15] Section 177C (1BA) took effect on 1 July 2014 and changed the law in relation to financial relief for serious hardship in one significant respect. This was discussed in some detail by Toogood J in P v Commissioner of Inland Revenue.1Under the previous legislation the Commissioner was obliged to grant relief in any case where the taxpayer was able to establish that the payment of outstanding taxation would result in serious hardship in terms of, and subject to the exceptions contained in, the legislation. Under the new wording of s 177C (1BA), the1 P v Commissioner of Inland Revenue [2015] NZHC 2293 at [39-[48].Commissioner may use serious hardship as a basis upon which to grant relief but is not required to do so.[16] In P, Toogood J held that the Commissioner must undertake a two step process when considering an application for financial relief on the ground of serious hardship.2 First, the Commissioner must determine whether payment of tax would result in the taxpayer suffering serious hardship in one or more of the ways set out in s 177A(2). In making that decision the Commissioner is prohibited by s 177(3) fromtaking into account the taxpayer's history of compliance or non-compliance with tax obligations. If serious hardship is established, the Commissioner must go on to make a decision under s 177C whether to write off the outstanding tax. In makingthat decision, the Commissioner may have regard to the taxpayer's compliancehistory because it may be material to the issue of whether the debt should be written off or enforced.The decision that is now subject to review[17] The amended statement of claim purports to seek review of each of the decisions that the Commissioner made to decline to grant financial relief to Mr and Mrs Singh. I accept that the circumstances surrounding earlier decisions to decline financial relief may form part of the relevant background against which theCommissioner's latest decision needs to be examined. In the end, however, theCommissioner's reconsideration decision is that which is currently in effect. It supersedes all earlier decisions. For that reason it is only necessary to decide the application for review in relation to the reconsideration decision.[18] The reconsideration process commenced when Mr Weaver, Mr and MrsSingh's counsel in the present proceeding, wrote to Ms Miranda Law of theDepartment of Inland Revenue's National Collections Enforcement Unit on 19 November 2015 applying for relief based on serious hardship in accordance with s 177 of the Act. Mr Weaver's letter contained lengthy submissions and attached a large amount of supporting documentation. These included documents relating toMr and Mrs Singh's financial position such as bank statements, rates arrears notices,2 At [48].notices regarding outstanding utilities accounts and credit card statements. A few days later, Mr Weaver forwarded to Ms Law copies of the financial statements forMr and Mrs Singh's company Rugs R Us Limited in respect of the 2014 and 2015 financial years.[19] On 22 December 2015, Ms Law sent the following email to Mr Weaver:Hi DavidAs discussed in our earlier conversation, I have reviewed the information provided with the relief application. I have noted that there is no expenditure from the bank accounts and credit cards on general living expense eg supermarkets and other food retailers, clothing etc. Could you please follow up with Mr and Mrs Singh to see if there are records of these transactions and/or bank accounts and credit cards that have not been provided?The bank statements I have received record various credit deposits (see attached document with transactions marked * for examples). Can Mr and Mrs Singh please confirm what these deposits are? If they are cash, what is it for? If it is transactions from other bank accounts, whose account and for what?Can you provide the full name of B R Woolley, who has purportedly lent Mr and Mrs Singh at least $61,465? Is there any further formal documentation of this lending where B R Woolley has acknowledged the loan and its purpose? Has security been provided for the loan?Given that Christmas is upon us, if the information could be provided by 22 January 2016 it would be much appreciated.I hope you have time for a relaxing break over the holidays.Regards[20] Mr Weaver passed Ms Law's request on to Mr and Mrs Singh's accountant, who responded as follows:Hi David,Thank you.Yagaswar has the following response to the queries raised by Inland Revenue:1 Attached copies of bank statements from their son Shaun Singh. Shaun lives with his parents and has been supporting the family from his salary. As you are aware, the Singhs are in a very bad financial status and hardly have enough for living expenses.2 These are not deposits but reversals of dishonours from the company [Rugs R Us Ltd] bank accounts. I have attached copies of bank statements for the Company and marked those transactions with a pen.3 His name is Bruce Ross Woolley.I hope this explains.Please note that Yagaswar has been communicating with Mr Murray Barker regarding clearing the arrears of GST & PAYE for Rugs R Us Limited. We are working on paying this off but at the moment I cannot confirm the time frame within which the arrears could be cleared.Please do contact should further explanations is required.Regards,[21] Mr Weaver forwarded the accountant's email to Ms Law on 19 January 2016with the following message:Hi Miranda,I hope you had a good break.Please see below the responses to your queries and attachments which I have received today.In terms of the first query it seems their son has been helping to pay living costs and the bank statements are attached.In terms of the query relating to formal loan documents I have sent the hand written loan documents already and am not aware of any formal documents.Let me know if you need anything further.Kind regards[22] On 12 February 2016, Mr Weaver forwarded Ms Law a copy of a letter Mr and Mrs Singh had received from their bank requiring repayment of the sum of approximately $12,000 by way of mortgage arrears. This led Ms Law to ask MrWeaver to confirm that all earlier information regarding Mr and Mrs Singh'sfinancial affairs remained current. Mr Weaver confirmed that this was the case by email dated 19 February 2016.[23] On 31 March 2016, Ms Law produced a detailed internal memorandum setting out her recommendations in relation to Mr and Mrs Singh's application forfinancial relief. She referred to P v Commissioner of Inland Revenue, and correctlydescribed the two steps the Commissioner is required to take when dealing with an application for relief on the ground of serious hardship.3 She then went on to deal with the first step, which related to the issue of whether or not Mr and Mrs Singh had established that they would be placed in a position of serious hardship if required tomake a payment in respect of the outstanding taxation. Ms Law used records heldby the Commissioner to demonstrate that their combined net income per month wasapproximately $5,000. Ms Law then pointed out that Mr and Mrs Singh wererequired to make mortgage payments of approximately $4,860 per month.Deducting these from their declared net income meant that they would have just over$150 per month to cover living costs. Ms Law then used figures taken from ahousehold expenditure guide for the Auckland urban area to support her conclusionthat Mr and Mrs Singh would need to spend at least $866.20 per month on householdexpenses exclusive of mortgage or rent payments.[24] Ms Law also observed that the bank statements Mr and Mrs Singh had provided did not show payments being made from their bank account to meet such expenses. This suggested to her that Mr and Mrs Singh must have other sources of income or savings from which they were meeting their living expenses. She also noted that her request for further information from Mr Weaver had resulted in theexplanation that living expenses were being paid by Mr and Mrs Singh's son, whowas employed by their company. The bank statements provided in respect of theirson's account did not show, however, that he was contributing to the living costs ofthe household.[25] Ms Law noted the demand for outstanding mortgage arrears from the bank, but said there was no evidence to suggest Mr and Mrs Singh could not pay that debt. Ms Law then concluded:Given the above, I believe that we have insufficient information of Mr &Mrs Singh's actual income and expenditure to allow us to determine whether payment of all or part of their outstanding tax would place them in serious hardship. I believe that there is likely to be a level of cash or other income that is not being advised to us so that we cannot make the determination. The situation is similar to that of Russell v CIR where the taxpayer had access to further funds, but we were unable to determine the level of those3 P v Commissioner of Inland Revenue, above n 1, at [48].funds, with the result that we could not determine the maximum recovery account.Although Mr & Mrs Singh may not have sufficient funds to pay the whole of their outstanding tax, we are currently unable to determine this with any certainty. We have requested information about how they are meeting their day to day living expenses, but we have not received a satisfactory answer. We have also not received clear advice of the source of one deposit to theSingh's bank account that we queried from bank statements received.[26] Ms Law then went on to consider the second issue, which was whether relief should be granted in the event that serious hardship had been established. This led her to the following conclusions:On-going ComplianceFrom the financial analysis above I believe that there is evidence that Mr and Mrs Singh have continued to suppress their income for tax purposes. We noted in our previous reviews of their applications for hardship relief that we could not determine whether they were in hardship, as their expenses seemed to exceed their declared income and this continues to date. The position hasnot been clarified despite requests to Mr and Mrs Singh for informationshowing how their living expenses are currently being met. This suggeststhat they had undeclared income that we had not been advised of for reviewpurpose and which had not been returned for tax purposes.ConclusionGiven Mr & Mrs Singh's original income suppression, their unwillingness to assist in the assessment of their tax and the fact that they appear to be still suppressing income, I believe that it would be inappropriate to provide write off relief in this case, even if we were able to determine definitively that payment of Mr & Mrs Singh's tax would be likely to cause them significant financial difficulties. It would not promote other taxpayers' compliance if ataxpayer with this level of on-going non-compliant behaviour was to berelief of their resulting tax obligations.I recommend continuing with the bankruptcy proceedings that have beenadjourned or stayed pending this review.[27] Ms Law's memorandum was then reviewed by her Team Leader and theCollections Manager, Operations before it was referred to Mr Philp for a decision to be made. They both endorsed Ms Law's recommendation that the application forrelief be declined.[28] Mr Philp made the following observations at the end of Ms Law'smemorandum:Approving Manager CommentsI have fully deliberated on the background to this application for hardship relief. I too agree that because of the lack of evidence establishing the true financial position of Mr and Mrs Singh and the lack of any explanation as tohow they are able to meet their day to day living expenses taking intoaccount the level of disclosed income, it is not possible to determine that Mrand Mrs Singh would experience significant financial difficulties afterallowing for payment of a relevant amount of outstanding tax.There is a significant amount of tax owed and the basis on which it is owed means that any decision to grant relief must be based on a set of full facts. Itis clear that the Singh's were disinclined to assist in the assessment of their tax and this attitude now appears to be repeating itself with the payment of this tax.On this basis the application for relief is declined.[29] Mr Philp then wrote to Mr and Mrs Singh on 13 May 2016 setting out her reasons for declining the application for relief. He dealt with the issue of serious hardship in the following way:The information you provided to support your application for financial relief showed that your combined declared income was sufficient to make the mortgage payments for your home. However, the balance of your combined income once the mortgage pays are deducted left a very minimal amount to cover living expenses (less than $200.00 per month). As a consequence, further information was requested about how your living expenses were being paid, but the information received did not provide any clarification of this. In respect of your claim that your son assisted with paying your living costs, the information provided did not support this. Further, three deposits into your bank account were queried but one still remains unexplained.Given the lack of evidence demonstrating how you are meeting your living expenses on your current disclosed income, I am unable to conclude that you would likely have significant financial difficulties after allowing for payment of an amount of outstanding tax. Rather, the information suggests that you may be in receipt of undeclared income.[30] Although he was not required to do so, Mr Philp went on to consider whether, had serious hardship been established, it would have been appropriate to exercise the discretion in favour of granting relief. He decided that that issue against Mr and Mrs Singh in the following passage from his letter:Consideration was also given to the fact your debt has arisen as a result of Inland Revenue establishing that you did not disclose all income you hadreceived from property trading activities. This, together with your lack ofcooperation during the audit investigation, means that, notwithstanding yourcurrent financial situation, it would be inappropriate to provide hardshiprelief, particularly when I don't believe that you have fully disclosed yourtrue financial position when making application for relief. It is consideredthat it would not promote other taxpayers' compliance if a taxpayer withyour level of on-going non-compliant behavior was to be relieved of theirresulting tax obligations.Accordingly, the Commissioner will now continue with bankruptcyproceedings.Grounds for review[31] Mr Weaver advances the application for review on an extremely wide- ranging basis. I consider, however, that his essential arguments can be distilled to the following questions:(a) Did the Commissioner conduct the reconsideration process in a manner that was unfair and breached the principles of natural justice?(b) Did the Commissioner fail to take into account relevant considerations?(c) Did the Commissioner take into account irrelevant considerations?Did the Commissioner conduct the reconsideration process in a manner that breached the principles of natural justice?[32] This ground encompasses numerous complaints about the manner in whichthe Commissioner's staff carried out the reconsideration process.The appointment of Mr Philp as the delegated decision maker[33] Mr Weaver argues on that the Commissioner should not have appointed Mr Philp to make the ultimate decision. He says that he understood that Ms Law was tasked with making the final decision, and that he would have objected if he had known that Mr Philp was going to be making the final decision. His objection would have been based on the fact that Mr Philp was responsible for making at least oneearlier decision in which the Commissioner had declined Mr and Mrs Singh'sapplication for relief on the ground of serious hardship.[34] This submission is effectively an argument that Mr Philp was disqualified from participating in the reconsideration process on the grounds of bias. There is no basis in the evidence for any suggestion that Mr Philp was disqualified on the grounds of actual bias. He could therefore only be disqualified on the grounds of apparent bias.[35] An allegation of bias should only be made where there are grounds to support it. Those grounds must be specified with considerable particularity in the pleadings so that the opposing party can understand and meet the allegation.4 The pleadings in the present case do not meet that standard because the amended statement of claim does not directly contain a ground of review based on apparent bias, let alone any particularisation of how the bias is said to have arisen. The only pleadings that come close to such an allegation are the following:118. The previous decision to decline relief was made by Mr Philp. The same person who reconsidered his previous decision.119. The matter was not considered afresh, or properly reconsidered. The respondent has merely attempted to correct an earlier decision which was made in error.[36] In Muir v Commissioner of Inland Revenue the Court of Appeal held that an allegation of apparent bias must be determined by means of a two stage process.5First, it is necessary to establish the actual circumstances that have a direct bearing on a suggestion that a decision maker was or may seen to be biased. That enquirymust be rigorous so as to prevent complainants lightly throwing the "bias" ball in theair. The second inquiry is to then ask whether those circumstances as established"might lead a fair minded lay observer to reasonably apprehend that the [decision maker] might not bring an impartial mind to the resolution of the instant case".[37] In the present case the only allegation discernible from the pleadings is that Mr Philp made his reconsideration decision in order to correct an error he had made in reaching an earlier decision to decline financial relief for serious hardship. The evidence does not support the allegation because it is clear that Mr Philp made his4 Saxmere Co Ltd v Wool Board Disestablishment Co Ltd [2009] NZSC 72, [2010] 1 NZLR 35 at [93]; Chambers v Waitangi Tribunal HC Wellington CIV-2004-485-1170, 23 February 2005 at [33].5 Muir v Commissioner of Inland Revenue [2007] 3 NZLR 495 at [62].reconsideration decision on serious hardship based solely on the evidence producedby Ms Law's analysis of the financial information provided by Mr Weaver on Mr and Mrs Singh's behalf. In addition, Mr Philp was aware of the conclusions reached by Toogood J in P v Commissioner of Inland Revenue because Mr Philp had also made the decision that was in issue in that case. He was therefore well aware of the process that he needed to undertake in order to reach his decision.[38] I do not consider that Mr Philp's involvement in the earlier decision wouldlead a fair minded lay observer to reasonably apprehend that he might not bring an impartial mind to the reconsideration decision.Inconsistency in approach[39] This ground is based on a submission that the Commissioner was wrong to depart from earlier decisions in which delegated Inland Revenue officials had accepted that Mr and Mrs Singh would suffer serious hardship in terms of the legislation if they were required to pay the outstanding tax. This submission overlooks the fact that Mr Philp based his reconsideration decision on the basis of the material that Ms Law received from Mr Weaver in support of the fresh application for financial relief. Mr Philp was entitled to reach a different conclusion to that made by other decision makers based on the material that was available to them.No fresh reconsideration[40] This ground is based on an argument that in reality Mr Philp did not make a fresh decision, and that he merely "rubber stamped" or endorsed earlier decisions in which the Commissioner declined to grant financial relief.[41] There is no evidential basis for this submission. The evidence demonstrates that Ms Law carried out a thorough analysis of the material that Mr Weaver provided in support of the fresh application financial relief, and that Mr Philp made his own decision based on that material.Failure to provide Mr and Mrs Singh a proper opportunity to be heard[42] This ground is based on a submission that Ms Law ought to have provided Mr and Mrs Singh with a greater opportunity to explain issues that were of concern to her.[43] I accept that the Commissioner was under an obligation to deal fairly with Mr and Mrs Singh. This meant that Ms Law was required to identify areas of concern and to give Mr and Mrs Singh a reasonable opportunity to provide explanations for those issues. I consider, however, that Ms Law met that obligation when she wrote Mr Weaver on 22 December 2015 outlining the issues that were of concern to her. The principal issue raised in that letter related to the absence of evidence of expenditure on living expenses. This was an obvious issue of concern because it suggested that Mr and Mrs Singh had other sources from which they were meeting their living expenses.[44] Ms Law put that issue squarely to Mr Weaver in her letter and he then sought instructions from Mr and Mrs Singh via their accountant. The explanation that Mr Weaver received was that Mr and Mrs Singh's son was providing the necessaryfunds to meet their living expenses. The accountant also provided Mr Weaver withthe son's bank statements to support this explanation. Mr Weaver duly passed the explanation and the bank statements on to Ms Law. When she examined the bank statements, however, they did not support the explanation the accountant had given. I consider the Commissioner was entitled to decide the application for financial relief at that point. I do not consider Ms Law was required to go back to Mr Weaver and point out that the explanation was not supported by the material he had provided.[45] This ground fails as a result.Failure to give reasons[46] This ground must relate to earlier decisions and not to the reconsideration decision. There can be no basis for an allegation that Mr Philp failed to give reasons for the reconsideration decision. His letter to Mr and Mrs Singh dated 13 May 2016 comprised two pages or reasons why he had decided to decline the application.Fettering discretion / abdication of authority[47] Mr Weaver submits that Mr Philp effectively abdicated his delegated authority to make the reconsideration decision by leaving it to Ms Law and other officials to make the decision to decline the application for financial relief.[48] The evidence does not provide a basis for this submission. Although Ms Law and others made recommendations, the evidence establishes clearly that Mr Philpmade the actual decision to decline Mr and Mrs Singh's application. That fact is clear from the notes he appended to Ms Law's memorandum and the letter Mr Philpwrote to Mr and Mrs Singh on 13 May 2016.Conclusion[49] I do not uphold any of the grounds advanced in support of the submission that the Commissioner breached the rules of natural justice.Did the Commissioner fail to take into account relevant information?Failure to take into account inability to make mortgage payments[50] Mr Weaver submits that the Commissioner failed to take into account the fact that Mr and Mrs Singh were unable to pay their mortgage. He points out that on 12 February 2016 he had provided Ms Law with evidence that Mr and Mrs Singh were in arrears with their mortgage in the sum of approximately $12,000. He submits that Ms Law failed to take this issue into account in making her recommendation, and Mr Philp also failed to take it into account in making his ultimate decision.[51] I do not consider that this submission can be correct. Ms Law clearly took the issue into account, as is demonstrated by this passage from her recommendation:Mr & Mrs Singh have provided a copy of a letter dated 4 February 2016 from ANZ bank which is a final demand for payment. The letter states that there is $12,908.82 outstanding on the loan account for the property owned by their family trust. However, there is no evidence to say that they cannot pay the debt.[52] Although Mr Philp did not refer to the issue expressly, he obviously read MsLaw's memorandum and would have seen the passage set out above within it. To that extent Mr Philp must have taken the issue into consideration. Furthermore, I do not consider the issue of the mortgage arrears to be of such significance that failureto expressly refer to it calls into question the whole of Mr Philp's decision makingprocess. In reality, the mortgage arrears represented three missed instalments. Mr and Mrs Singh had been able to pay the remaining instalments, although several payments had been initially dishonoured. The real issue here was whether Mr and Mrs Singh had the ability to access sources of income they had not disclosed. Those sources may have been able to be used to meet the mortgage arrears as well as Mrand Mrs Singh's living expenses.Alleged suppression of income[53] Mr Weaver submits that Ms Law and Mr Philp both referred to the possibility that Mr and Mrs Singh had other undisclosed source of income and that neither was qualified to make that assertion.[54] I disagree. The bank statements that Mr and Mrs Singh provided to the Commissioner contain no expenditure that can be attributed to household living expenses. The petty cash withdrawals from their business bank account were manifestly insufficient to meet those expenses. The bank statements that Mr andMrs Singh subsequently provided in respect of their son's account were likewisedevoid of the type of expenditure that would represent the living expenses to be expected of a household comprising four people. Mr and Mrs Singh's son onlyearned approximately $330 per week, and the expenditure from his account is of the type that would be expected for a 23 year old male. It does not support the assertionby Mr and Mrs Singh's accountant that he was supporting the household because his parents were unable to support themselves.[55] The absence of evidence of any expenditure that might relate to living expenses leads to the logical conclusion that Mr and Mrs Singh were meeting those expenses by some means that is as yet unknown. For that reason Ms Law and Mr Philp were entitled to conclude that they must have had another source of funds thatthey have not yet disclosed. They did not need to have any particular qualification to reach that conclusion.Conclusion[56] I do not uphold either of the arguments advanced in relation to this ground of review.Did the Commissioner take into account information that was irrelevant?[57] Mr Weaver submits that Mr Philp took into account Mr and Mrs Singh's prior history of non-compliance with their tax obligations when he determined the issue of serious hardship. He contends that in doing so Mr Philp breached the prohibition identified by Toogood J in P.[58] Mr Weaver relies for this submission on the following passage from MrPhilp's letter to Mr and Mrs Singh dated 13 May 2016:Consideration was also given to the fact your debt has arisen as a result of Inland Revenue establishing that you did not disclose all income you hadreceived from property trading activities. This, together with your lack ofcooperation during the audit investigation, means that, notwithstanding yourcurrent financial situation, it would be inappropriate to provide hardshiprelief, particularly when I don't believe that you have fully disclosed yourtrue financial position when making application for relief. It is consideredthat it would not promote other taxpayers' compliance if a taxpayer withyour level of on-going non-compliant behavior was to be relieved of theirresulting tax obligations.Accordingly, the Commissioner will now continue with bankruptcyproceedings.[59] This allegation cannot be sustained. The passage set out above did not appearin the section of Mr Philp's letter dealing with serious hardship. It appeared in the subsequent section in which Mr Philp explained why he would not exercise his discretion in favour of Mr and Mrs Singh even if they had established serious hardship. As Toogood J explained in P, the Commissioner is entitled to take ataxpayer's prior history into account when exercising the discretion whether or not to grant relief.[60] The comments that Mr Philp made at the end of Ms Law's memorandum andthe letter that he wrote to Mr and Mrs Singh on 13 May 2016 demonstrate that in reaching his decision on the issue of serious hardship Mr Philp only took into account the financial information that Mr and Mrs Singh had provided in support of their application for financial relief. The evidence does not disclose that he took into account their past history of non-compliance when deciding that issue.Result[61] The application for judicial review is dismissed.Costs[62] The Commissioner is the successful party and as such would ordinarily be entitled to an award of costs on a category 2B basis together with disbursements as fixed by the Registrar. If the parties cannot reach agreement regarding costs counsel should file brief memoranda dealing with that issue and I will determine it on the papers.Lang JSolicitors:Burley Attwood Law, TaurangaCrown LawCounsel:D P Weaver, Tauranga