COMMISSIONER OF INLAND REVENUE DEPARTMENT v PARORE [2021] NZHC 3405

COMMISSIONER OF INLAND REVENUE DEPARTMENT v PARORE [2021] NZHC 3405 [13 December2021]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECRI-2021-404-000474[2021] NZHC 3405BETWEEN COMMISSIONER OF INLANDREVENUE DEPARTMENTApplicantAND RICHARD ALLEN PARORERespondentHearing: 7 December 2021Appearances: D G Johnstone and N B Goodger for ApplicantD P Weaver and A F McClellandJudgment: 13 December 2021Reissued: 14 February 2022JUDGMENT OF WYLIE JThis judgment was delivered by Justice WylieOn 13 December 2021 at 11.30amPursuant to r 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Solicitors/counsel:Crown Solicitor, AucklandHolland Beckett Law, TaurangaDP Weaver, TaurangaIntroduction[1] The applicant, the Commissioner of Inland Revenue ("the Commissioner"),seeks leave to appeal a decision given by Judge Clarkson in the District Court atAuckland on 14 September 2021.1 The Judge stayed 13 charges brought by theCommissioner against the respondent, Richard Parore, alleging that he evaded orattempted to evade the assessment or payment of goods and services tax ("GST").[2] The Commissioner says that the Judge made errors of law. She seeks an ordergranting a new trial pursuant to s 300(1)(b)(ii) of the Criminal Procedure Act 2011.[3] Mr Parore opposes the appeal. He says that the Judge's decision was correctand the appropriate response to protect his fair trial rights.Leave[4] The appeal is brought pursuant to s 296(3)(b) of the Criminal Procedure Act.Such appeals are limited to questions of law and leave is required to bring an appeal.[5] Mr Parore did not oppose the grant of leave. The issues which theCommissioner wishes to raise involve questions of law and they have arisen in thedetermination of the charges. They raise matters of general importance and I amsatisfied that it is appropriate to grant leave. I order accordingly.BackgroundThe bankruptcy[6] Mr Parore was adjudicated bankrupt in 2009. He had previously been a self-employed real estate agent and, following his bankruptcy, he continued to work assuch. He filed GST returns and paid GST during the first two or so years of hisbankruptcy.1 Commissioner of Inland Revenue v Parore [2021] NZDC 17946.[7] Under s 290 of the Insolvency Act 2006, the presumptive term of Mr Parore'sbankruptcy was three years from the date he filed a statement of his affairs. Mr Paroredid not file his statement of affairs until September 2011.[8] Within a few days of receiving Mr Parore's statement of affairs, the OfficialAssignee ("the OA") notified Mr Parore that he was required to obtain the OA'sconsent to trade while a bankrupt.[9] In late October 2011, Mr Parore applied for the OA's consent. He advised thathe would retain a named accountant to act as his financial supervisor.[10] On 24 January 2012, an insolvency officer employed by the OA met Mr Paroreand explained that the accountant would need to monitor his finances and pay him awage. On the same day, Mr Parore was sent a form to sign to confirm that he wasaware of the conditions upon which the consent to trade would be granted. Theconditions included a requirement that the accountant would be a joint signatory onthe bank account into which all monies were to be banked, that the accountant wouldprepare financial statements, PAYE and GST returns and that no tax obligations wereto be in arrears at any time.[11] Mr Parore did not sign and return this form. The Commissioner took the viewthat he instead continued trading without the OA's consent. The Commissioner alsoconsidered that Mr Parore was obliged to but did not file GST returns throughout theremaining period of his bankruptcy nor for the three and a half years following hisdischarge from bankruptcy on October 2014. In March 2017, the Commissionercommenced an audit of Mr Parore's tax affairs.The civil tax dispute[12] The Commissioner's officer in charge of the investigation into Mr Parore's taxaffairs was Clint Tully.[13] On 22 January 2018, Mr Tully wrote to Mr Parore notifying him that he wasrequired to be registered for GST and to file GST returns. Mr Tully advised that hewould be issuing default GST assessments for the various GST periods ending 31 May2011 through to 31 March 2017. Mr Tully also advised Mr Parore that theCommissioner was considering bringing a prosecution against him for failing toregister for GST. Mr Tully invited Mr Parore to explain why he did not register forGST, why he did not file GST returns and why a prosecution should not occur. Theletter also stated that Mr Parore did not have to comment or answer but that if he choseto do so, the information might be used by the Commissioner as evidence if a decisionto prosecute was made.[14] On the following day, 23 January 2018, the Commissioner issued default GSTassessments against Mr Parore. They covered the various GST periods ending 31 May2011 through to 31 March 2017. They were issued under s 106 of the TaxAdministration Act 1994 (the "TAA") and Mr Parore was advised that if he did notpay the amounts assessed by due date, the Commissioner could start action to collectthe debt. The letter included the following paragraph:If you wish to dispute the assessments you must file a notice of proposedadjustment along with your tax returns within four months of the assessmentissue date shown on the notice(s) of assessment. [15] On 2 March 2018, Mr Parore filed a notice of proposed adjustment ("NOPA")and 13 GST returns for the period from 10 October 2014 (when he was dischargedfrom bankruptcy) through to 30 September 2017. The NOPA also set out what wasdescribed as part of Mr Parore's defence for the various GST tax periods during hisbankruptcy. He asserted that he was not liable for GST during these periods because,as a bankrupt, he was an incapacitated person as defined in s 58(1) of the GST Act1985. He said that the OA was deemed to be carrying on the taxable activity as hispersonal representative and that the OA was liable for any GST payable as his specifiedagent. It was asserted that Mr Parore was not a registered person during the period ofhis bankruptcy and that he was therefore not required to file GST returns until 10October 2014.[16] On 21 March 2018, Mr Tully acknowledged receipt of Mr Parore's NOPA. TheGST adjustments proposed by Mr Parore in the returns he had filed for the GSTperiods ending 31 March 2015 through to 30 September 2017 were accepted as beingcorrect but Mr Tully rejected the adjustments proposed for the GST periods ending 31May 2011 to 30 September 2014.[17] On 21 March 2018, Mr Tully wrote to Mr Parore's accountants, requestingcomment and explanation in relation to a number of matters and, on 22 March 2018,Mr Parore's accountants provided a detailed response.[18] On 12 April 2018, Mr Tully issued a notice of response (a "NOR") toMr Parore's accountants in accordance with s 89G of the TAA. On 26 April 2018, theCommissioner's NOR was formally rejected by Mr Parore's accountants pursuant tos 89H(3).[19] The civil dispute then moved to the "conference phase" of the statutory taxdispute resolution process put in place by the TAA.[20] The conference took place on 19 June 2018. It was facilitated by a Mr Baxter.Mr Tully and Gary Swain (in-house counsel for the Commissioner) attended. So didMr Parore and two accountants retained by him. There is no record of what took placeat the conference, but it is noteworthy that Mr Tully, in an affidavit filed in oppositionto the stay application, referred to a meeting held as part of the conference phase andsaid that during "the meeting" Mr Parore's advisors voluntarily provided him with amore detailed version of the submission made by Mr Parore in his NOPA whichincluded references to case authorities as well as excerpts from the Commissioner'spolicy statements. Further, in a letter to Mr Parore's accountants thanking them fortheir attendance Mr Tully noted as follows:Questions were also raised at the conference in respect of potential criminalcharges that may be laid by the Commissioner in respect of alleged offendingby Mr Parore.[21] On 26 June 2018, Mr Tully made the following entry in the IRD's computersystem under Mr Parore's case notes:After discussions with my TL [team leader] it was agreed to park the disputeat the conference stage and proceed with prosecution.[22] On 27 June 2018, Mr Parore's accountants wrote to Mr Tully in relation tovarious matters which had been raised by Mr Tully at the conference, including thepossibility of prosecution. On the same day, Mr Tully made the following file note inthe IRD's computer system:Gary Swain (LTS) [legal and technical services] and I met with Chris ViljoenDeputy Assignee and Charles Jones (Legal Team) from the Official Assignee'soffice. We briefed them on the s 58 GST Act argument being put forth by [MrParore's accountants]. We advised them that a potential prosecution is beingconsidered and that we may require them as a witness.Chris to check Parore's file to see of the case officer is still employed by theTrustees and Insolvency Service.[23] In his affidavit filed in opposition to the stay application, Mr Tully said that thereason he and Mr Swain met with senior officials from the OA's office and briefedthem on the argument raised by Mr Parore's advisors was because they wanted toenquire about the OA's processes relating to their tax treatment of bankrupts. He wenton to say that his advice to the OA's officers that the Commissioner might requirerepresentatives as witnesses in a potential prosecution of Mr Parore was not made inthe context of any discussion relating to s 58 of the GST Act. He says it was simplynotification to the OA that the investigation of Mr Parore had progressed to the stagewhere prosecution was a possibility and that if it went ahead, the Commissioner wouldrequire OA representatives as witnesses.[24] On 28 August 2018, Mr Tully wrote to Mr Parore advising him that theCommissioner had decided to commence the prosecution. He advised that the civilprosecutions would be "parked" at the conference stage pending the outcome of theprosecution.The criminal proceedings[25] On 26 August 2019, 13 charges were laid against Mr Parore. It was assertedthat he had evaded or attempted to evade the assessment or payment of GST contraryto ss 143B(2), 149B, 150 and 150C of the TAA. Particulars were given identifyingvarious six monthly GST periods, seven during and six after the bankruptcy.[26] The Commissioner alleged that Mr Parore had collected $84,226.05 of GSTwhich he failed to report or pay to the Inland Revenue Department (the "IRD").[27] Mr Parore's trial commenced on 14 July 2020 before Judge Clarkson. Twowitnesses from the OA's office were called by the Commissioner. One of them, a[REDACTED], gave brief evidence relevant to the application of s 58 of the GST Act.Mr Tully also gave evidence. At the end of the Crown case, but before closings,Mr Parore applied under s 147 of the Criminal Procedure Act to dismiss the sevencharges that related to the period of his bankruptcy. He argued, in reliance on s 58 ofthe GST Act, that there was no case to answer in respect of these charges.[28] The trial was then adjourned. On 24 August 2021, Judge Clarkson grantedMr Parore's application.2 She dismissed the seven charges relating to the period whenMr Parore was a bankrupt but directed that the trial on the remaining six charges wasto continue.[29] The Commissioner appealed the Judge's decision to this Court. The appealwas allowed by Jagose J.3 He ordered a new trial of the dismissed charges inconjunction with the conclusion of the trial on the remaining charges.[30] Neither Jagose J nor Judge Clarkson came to any conclusion on the applicationof s 58 of the GST Act.[31] Mr Parore sought leave to appeal Jagose J's decision to the Court of Appeal.That application was declined.4[32] The trial resumed. Counsel for Mr Parore had in the interim become aware ofthe decision in R v Safi.5 It involved a similar situation and Judge Collins, in theDistrict Court at Auckland, had held that the defendants' fair trial rights in that casehad been impugned as a result of the way the civil tax disputes process had interactedwith the criminal proceedings. Judge Collins had stayed the charges laid against thedefendants.[33] Before the Judge could consider counsel's closing submissions and deliver herverdicts, Mr Parore applied to stay the further prosecution of all charges against him.2 Commissioner of Inland Revenue v Parore [2021] NZDC 16363.3 Commissioner of Inland Revenue v Parore [2021] NZHC 420.4 Parore v Commissioner of Inland Revenue [2021] NZCA 312.5 R v Safi [2018] NZDC 19698.District Court decision[34] The Judge outlined the issues as follows:(a) had any of the rights fundamental to a fair trial been breached?(b) was a stay of the prosecution the only proportionate remedy?(c) should a stay apply to all 13 charges, or only those where a defence hadto be disclosed in advance?She then set out the background to the application. She next turned to discuss theinterplay between the civil tax assessment processes and criminal proceedings. Shenoted that, in the criminal proceedings, Mr Parore was entitled to the presumption ofinnocence, that he enjoyed the right to silence, and that he could not be compelled todisclose his defence. The Judge recorded that Mr Parore was however compelled toprovide a NOPA to protect his position in relation to the default tax assessments issuedby the Commissioner. She cited comments by Judge Collins in Safi to the effect thatcompelling the provision of a NOPA before the conclusion of a criminal trialeffectively compels a defendant to disclose his or her defence in the criminal trial. TheJudge also referred to Skinner v R,6 when the Supreme Court noted in the tax contextthat hearing civil proceedings before a criminal trial carries the risk of interfering withfair trial rights. The Judge considered that the position was thus "well understood" in2016, well before the civil dispute process was commenced in Mr Parore's case.7[35] The Judge concluded that there had been a breach of Mr Parore's fair trialrights, that it was an important and fundamental breach and that the risk of breach wasknown to the Commissioner. She rejected the submission that granting a stay wouldbe disproportionate because there was only a 'risk' of prejudice to Mr Parore's fairtrial rights. She referred to Judge Collins's comments in Safi where he had observedthat, in that case, the risk had "move[d] from risk to fact". She reached the sameconclusion. She observed that Mr Parore had been compelled to provide a NOPA, that6 Skinner v R [2016] NZSC 101, [2017] 1 NZLR 289.7 Commissioner of Inland Revenue v Parore [2021] NZDC 17946 at [38].he was not advised of his right not to do so and that did not have an opportunity toconsult with counsel in relation to the suggested criminal prosecution.[36] The Judge rejected a submission that Mr Parore has not disclosed a 'defence'as the s 58 defence was a legal one only. She noted the information Mr Parore hadprovided in his NOPA, in his further reply to the NOPA, and at the conference andsaid that it could not be concluded with any certainty that that no information had beenprovided. She held that a stay was not a disproportionate response because of theimpropriety of the Commissioner's conduct and because that conduct had caused aserious breach of fair trial rights. She considered that the impropriety related to all 13charges as Mr Parore had been compelled to provide information which concerned allof the charges against him. Consequently, the Judge found that the prosecution of allthe charges should be stayed.SubmissionsAppellant's submissions[37] Mr Johnstone, for the Commissioner, submitted that the Judge erred by:(a) failing to apply the correct legal test for granting a stay, in particular byfailing to identify any prejudice occasioned to Mr Parore by hisdisclosure, and/or by failing to consider whether the trial was renderedunfair;(b) adopting a backward-looking approach which sought to 'discipline' theCommissioner for her perceived shortcomings, instead of a forward-looking approach considering the effect of the disclosure on the fairnessof the trial and/or the integrity of the justice process; and(c) failing to consider alternative remedies short of stay.[38] Mr Johnstone argued that the Judge should have applied Wilson v R as theleading decision on stay applications in the context of alleged breaches of fair trialrights in criminal proceedings.8 He pointed out that she did not refer to Wilson.[39] Mr Johnstone accepted that the Commissioner's actions might be considered"inadvertent state misconduct", and that if it was so considered, this case fell into thefirst category discussed in Wilson, but he put it to me the Judge should have identifiedthe specific prejudice caused to Mr Parore. He argued that the Judge wrongly foundthat the loss of the right to silence itself constituted a breach of Mr Parore's right to afair trial. He contended that Mr Parore did not disclose a factual defence in his NOPAnor any evidence he intended to rely upon. It was suggested that Mr Parore's provisionof a NOPA did not cause prejudice to the fairness of his trial for three reasons – first,his assertion under s 58 of the GST Act was incorrect at law and not a defence to thecharges; secondly, the assertions as to the relevance of s 58 could not have been usedby him to obtain any tactical advantage at trial; and thirdly, the Commissioner'sevidence at trial only incidentally referred to s 58.[40] It was also submitted that the Judge focused on what the Commissioner shouldhave done rather than the effect of the misconduct. Mr Johnstone suggested that theJudge's criticisms of the Commissioner were misplaced given that there was no actualprejudice to the fairness of Mr Parore's trial. He submitted that the Judgedemonstrated a backward-looking focus and erroneously used the stay to discipline"the Commissioner.[41] Finally, Mr Johnstone submitted that as a result of failing to consider whetherthere was any prejudice to the fairness of Mr Parore's trial, the Judge failed to considerwhether any other remedy short of a stay would have been appropriate. He submittedthat, if there was in fact prejudice to Mr Parore, the appropriate remedy would havebeen to exclude the Commissioner's evidence concerning s 58 at trial.8 Wilson v R [2015] NZSC 189, [2016] 1 NZLR 705.Respondent's submissions[42] Mr Weaver, on behalf of Mr Parore, noted that although the Judge did notspecifically refer to Wilson, she cited Safi, which in turn had considered and appliedWilson. He said that the Judge did, in effect, consider the Wilson principles.[43] Mr Weaver argued that this case could be considered under the first categorydiscussed in Wilson. He suggested that the facts reveal state misconduct and that thiswas displayed not only through requiring Mr Parore to provide a NOPA but alsothrough the Commissioner's subsequent conduct, which required Mr Parore todisclose more information in respect of his defence at every stage. In Mr Weaver'ssubmission:(a) the Commissioner engaged in a fact finding process;(b) Mr Parore was required to respond to protect his position;(c) as part of Mr Parore's NOPA, he was compelled to disclose his defenceunder s 58;(d) Mr Parore conceded through the civil process elements of some of thecharges which the Commissioner was required to prove beyondreasonable doubt.It was submitted that the Judge correctly found that prejudice was caused to Mr Parore.[44] Mr Weaver contended that, contrary to the Commissioner's submission, thecorrectness of Mr Parore's s 58 defence did not govern whether or not he sufferedprejudice – rather that is for a Court to determine when and if necessary. He submitted,relying on Skinner, that the risk of prejudice where a defendant is required to disclosehis or her defence in advance of a criminal trial to protect their position in a civilproceeding materialised here when Mr Parore provided detail of his defence in hisNOPA.[45] Mr Weaver submitted in the alternative that this case satisfies the highthreshold for a stay as a category two case under Wilson. He argued that theCommissioner ignored the line of authority warning against the commencement ofcivil processes of this nature prior to the conclusion of a criminal prosecution. Hesubmitted that to allow the criminal trial to proceed where such misconduct hasoccurred would undermine the integrity of the criminal justice system and leave thedoor open for this to happen again in future.[46] Mr Weaver dealt with the second ground of appeal, namely that the Judge didnot adopt a forward-looking approach. He argued that she did not comment on whatCommissioner should have done but rather discussed the Commissioner's conduct inlight of the authorities. Even if the Judge had not taken a forward-looking approach,he submitted that the outcome would have been the same due to the obvious prejudiceto Mr Parore and the threat to the integrity of the justice system. He accepted that astay should not be granted for the purpose of disciplining a state agency.[47] Mr Weaver also put it to me that a stay was the only appropriate remedy in thiscase.Analysis[48] A defendant's right to a fair trial is absolute9 and the right to a fair trial is oneto be enjoyed by the guilty as well as the innocent because a defendant is presumed tobe innocent until proved to be otherwise in a fairly conducted trial.10[49] The right to a fair trial is enshrined in the New Zealand Bill of Rights Act 1990.Relevantly, s 25 of that Act provides as follows:25 Minimum standards of criminal procedureEveryone who is charged with an offence has, in relation to the determinationof the charge, the following minimum rights:(a) the right to a fair and public hearing by an independent and impartialcourt:9 R v Burns [2002] 1 NZLR 387 (CA) at [10]; Stewart v R [2009] NZSC 53, [2009] 3 NZLR 425.10 Randall v R [2002] 1 WLR 2237 at [28].(c) the right to be presumed innocent until proved guilty according to law:(d) the right not to be compelled to be a witness or to confess guilt:(e) the right to be present at the trial and to present a defence:[50] The rights set out in s 25 are minimum rights and there are other associatedrights which defendants enjoy as part of the right to a fair trial – the right to remainsilent, the right not to be compelled to disclose a defence, the right to put theprosecution to proof and the right to require the prosecution to prove its case beyondreasonable doubt.[51] A stay of criminal proceedings is a serious step. It does not amount to adismissal of the charge or an acquittal. Rather, it forbids further steps being taken.11[52] The leading decision in this country in respect of stay applications in thecontext of the infringement of fair trial rights is the decision of the Supreme Court inWilson v R.12 The Court there stated as follows:[39] The power of a court to grant a stay of proceedings has long beenrecognised as necessary to enable a court to prevent an abuse of its processes.In New Zealand, the existence of this power was confirmed in severaldecisions of the Court of Appeal, most notably Moevao v Department ofLabour, where it was accepted that the power applies in respect of bothcriminal and civil proceedings.[40] In relation to criminal proceedings, a stay may be granted where thereis state misconduct that will:(a) prejudice the fairness of a defendant's trial ("the firstcategory"); or(b) undermine public confidence in the integrity of the judicialprocess if a trial is permitted to proceed ("the secondcategory").It follows that the analysis is not backward-looking, in the sense of focussingon the misconduct, but rather forward-looking, in that it relates to the impactof the misconduct on either the fairness of the proposed criminal trial or theintegrity of the justice process if the trial proceeds.11 D v R HC New Plymouth T3/96, 24 September 1997; R v Glover [2010] 2 NZLR 698 (HC) at[23].12 Wilson v R [2015] NZSC 189, [2016] 1 NZLR 705.(citations omitted)[53] The Court went on to explain that the purpose of terminating the proceedingsby way of stay is to uphold the integrity of the criminal justice system, rather than topunish the police or state agency for the misconduct. A stay can also provide a remedyto a defendant in cases where the conduct involves a breach of a defendant's rights.13[54] Where it is alleged that the misconduct has prejudiced a defendant's right to afair trial, a connection between the misconduct and the prejudice is required. TheCourt must also consider whether there is any remedy short of a stay which will enablea defendant to have a fair trial.14[55] In the taxation context, the risk of the Commissioner triggering the civildisputes process under the TAA ahead of a prosecution in a criminal trial has beenrecognised for some years, both in the legislation and in the case law. In Skinner v R,15 the Supreme Court commented as follows:[64] Mr Ebersohn pointed to s 149 of the TAA, which deals with theimposition of civil and criminal penalties. Section 149(1) makes it clear thata taxpayer may be liable for both a civil penalty and a criminal penalty.Section 149(4) empowers the Commissioner to assess and impose civilpenalties after a taxpayer has been prosecuted whether or not the prosecutionis successful. So it contemplates the possibility that the civil proceedings willfollow the criminal proceedings. However, if the Commissioner is forced toreassess prior to the criminal proceedings, a case could then be made for thecriminal proceedings to be deferred until after the civil proceedings resolvinga defendant's challenge to the Commissioner's assessment have been disposedof.[65] Hearing the civil proceedings before the criminal trial would carry therisk of interfering with the fair trial rights of the defendant. As he or she wouldhave the burden of proof in the civil proceedings, he or she would be requiredto disclose information supporting his or her position and, in effect, disclosehis or her defence to the criminal charge in advance of the trial. In a differentcontext, these risks led the Court of Appeal to uphold the adjournment of civilproceedings until after criminal proceedings were completed in Commissionerof Police v Wei. In that case, the civil proceedings were applications by theCommissioner of Police for asset forfeiture orders under the CriminalProceeds (Recovery) Act 2009.[67] As mentioned earlier, if the Commissioner had reassessed theappellants before their trial, they would have been prevented from advancing13 At [43]-[50]. See also Fox v Attorney General [2002] 3 NZLR 62 (CA) at [37].14 At [62].15 Skinner v R [2016] NZSC 101, [2017] 1 NZLR 289.a defence that the actus reus of the offence was not made out because their taxreturns correctly stated their incomes and their liability for income tax. Suchan outcome would have been inconsistent not only with the burden of proofprovided for in s 149A(4) of the TAA, but also the appellants' rights unders 25 of the Bill of Rights. These include the right to a fair hearing (s 25(a)),the right to be presumed innocent until proven guilty according to law(s 25(c)) and the right to present a defence (s 25(e)). The Commissioner'sadministrative act in reassessing the appellants would have, in effect, deemedan element of the offence to be met contrary to the Crown's obligation to proveit.(citations omitted)[56] These risks have been acknowledged and accepted by the Commissioner. In aStatement issued on 22 July 202016 (after the charges in this case were filed) theCommissioner noted as follows:Introduction1. Everyone who is charged with an offence (including offences under theInland Revenue Acts) has the right to a fair trial. A taxpayer also has anumber of other related rights in criminal proceedings. For example, adefendant cannot "be compelled to be a witness or to confess guilt" andthey are entitled to adequate time to prepare their defence.2. The Disputes Resolution Process in Part 4A of the TAA (the DisputesProcess) contains provisions that potentially compel a taxpayer todisclose his or her defence to criminal proceedings in the course ofresponding to the civil tax dispute.3. This Commissioner's Statement sets out the broad approach that theCommissioner is taking to preserve a taxpayer's fair trial rights incriminal proceedings when there is a contemporaneous civil dispute.Disputes Process4. The Commissioner considers that it is important to ensure that onceprosecution has commenced or is contemplated a taxpayer is notcompelled to respond to an assessment or disputes document issued bythe Commissioner.5. The general approach is that when criminal proceedings havecommenced or are contemplated the taxpayer will be advised of thatposition before they are next required to issue a disputes document tocommence or continue the Disputes Process. For example, by issuinga NOPA in response to an assessment.6. Under section 89K a taxpayer can issue a response outside the responseperiod in "exceptional circumstances". They must issue the response16 The Disputes Resolution Process and Fair Trial Rights (Inland Revenue, Commissioner'sStatement CS 20/04, 22 July 2020).to the Commissioner as soon as reasonably practicable after becomingaware of the failure to issue the response within the required timeframe.7. The Commissioner accepts that preserving a taxpayer's rights in currentor potential criminal proceedings is an "exceptional circumstance"which prevents a taxpayer from responding to the assessment or noticewithin the applicable response period.8. The Commissioner considers that a taxpayer can elect not to file anoutstanding disputes document until the question of prosecution isresolved. This will delay the requirement to respond and thereforeeither delay the start or pause the Disputes Process.9. Once the question of prosecution has been resolved then the DisputesProcess can resume (or in some cases commence) and theCommissioner will advise the taxpayer of this. The taxpayer will needto issue their outstanding disputes document by the later of 2 monthsfrom date of this advice or the original due date for that outstandingdisputes document.10. Another way that taxpayer rights can be protected is by the partiesagreeing to pause (sometimes known as "park") the dispute at theconference stage until after the question of prosecution has beenresolved.[57] The various risks came to pass in Safi. That case concerned charges allegingthe deliberate failure to declare income and consequential tax evasion. TheCommissioner also invoked the civil tax disputes process and the defendants arguedthat as a result, in order to protect their position in the civil litigation, they werecompelled to disclose their defence to the criminal charges. Judge Collins reviewedthe actions of the Commissioner's investigator, discussed the procedural history andconcluded that the Commissioner had breached various of the defendants' fair trialrights. He discussed both Skinner and Wilson and found that, whether deliberately orcarelessly, the Commissioner's officers had brought about a situation where thedefendants, in order to preserve their position in the civil proceedings, were requiredto disclose their defence to the criminal proceedings. He considered that the trial waspresumptively unfair and that the only appropriate remedy was to stay the proceedings.[58] Against this background, I turn to consider the present case.[59] The Judge did not refer to Wilson. Rather, she referred to the judgment ofJudge Collins in Safi. Judge Collins in Safi did however consider the relevantprinciples set out in Wilson and I accept the submission made by Mr Weaver that it isclear that the Judge in this case, via her consideration of Safi, also considered theWilson principles.[60] It was common ground between counsel that this is a first category case andboth counsel agreed that there has to be prejudice to Mr Parore's fair trial rights and aconnection between the misconduct and the prejudice.[61] It is clear from the factual summary I have set out that the Commissioner wascontemplating a criminal prosecution from the outset. Mr Tully made this clear in hisletter of 22 January 2018. Nevertheless, the Commissioner went ahead and issueddefault assessments on 23 January 2021. The Commissioner did not advise Mr Parorethat he could postpone any response under the exceptional circumstances provisioncontained in s 89K of the TAA. Rather, the Commissioner informed Mr Parore that ifhe wished to dispute the assessments, he had to file a NOPA along with his GST returnswithin four months of the issue date of the default assessments.[62] The Commissioner accepted that the default assessments, issued without asuitable rider indicating that the statutory disputes process could be delayed until afterany prosecution was resolved, can be described as state misconduct (albeit, theCommissioner says, inadvertent misconduct).[63] Once the default assessments were issued, the onus in the civil proceedings fellon Mr Parore.17 Unless he issued a NOPA, the GST assessed by the Commissionerwould crystallise and Mr Parore would have lost the right to dispute theCommissioner's assessments.18 Had the charges been laid at this point, the effect ofthe Commissioner's letter of 23 January 2018 and the default assessments would havebeen to deprive Mr Parore of his right to remain silent, of his right not to be requiredto disclose his defence, and to reverse the burden of proof.[64] The NOPA had to comply with s 89F of the TAA. Mr Parore had to identifythe adjustment or adjustments he proposed to the Commissioner's assessments andprovide a statement of the facts and law in sufficient detail to inform the Commissioner17 Tax Administration Act 1994, s 149A(2)(b).18 Sections 89D(2C) and 106(1E).of the grounds on which he was disputing the Commissioner's proposed adjustments.He also had to state how the law applied to the facts.[65] Mr Parore did provide a NOPA, as well as GST returns for the various GSTperiods 1 October 2014 to 30 September 2017. He also set out his defence for theperiod up to 10 October 2014. His NOPA appears to have been complied with s 89F.[66] Although Mr Tully denied it, it is hard to escape the conclusion that theCommissioner was engaged in a fact-finding process aimed at obtaining informationto determine whether Mr Parore had a reasonable explanation for the Commissioner'sallegations and whether criminal prosecution was appropriate. Mr Tully met withrepresentatives from the OA's office. He sought and obtained information fromMr Parore's accountants. He commenced the conference phase and in the course ofthe conference, it seems as though the assertions made in the NOPA were discussed.[67] By filing the GST returns, Mr Parore acknowledged the actus reus of thecharges that were later laid in relation to the post-bankruptcy period. He therebyacknowledged that he was required to file GST returns and he set out the amounts hesaid should have been returned. Had the charges then been laid this would haveinfringed the presumption of innocence, his right to require the Commissioner to proveher case and his right to remain silent.[68] Mr Johnson argued that the s 58 defence was an assertion of law, that it wasclearly wrong, and that Mr Parore, at least in regard to the offending alleged to havetaken place while he was a bankrupt, offered no factual information. He suggests thatin these circumstances there can be no prejudice.[69] I do not agree. First, it seems reasonably clear from the documents providedand from Mr Tully's affidavit that the Commissioner was put on a train of enquiry asa result of disclosure of the s 58 defence. Secondly, whether or not the s 58 defenceis good or bad falls to be assessed by reference to all of the evidence because, whenthe Commissioner later charged Mr Parore, she alleged evasion. She had to provebeyond reasonable doubt that Mr Parore intended to evade GST. Mr Parore's s 58defence was relevant to his intention and what he intended and why it cannot be judgedin a vacuum. Intention is a question of fact, to be proved just like any other fact,beyond reasonable doubt. Thirdly, were I to rule on the application of the s 58 defencenow, hold that it was legally flawed and send the charges back for retrial, the effectcould be to deprive Mr Parore of a defence which may be open to him. That wouldundermine his rights under s 25(c) of the New Zealand Bill of Rights Act. Finally, inthis regard I agree with the Judge that it cannot be said with any certainty that noinformation was provided, or that none was provided that the Commissioner relied on.Mr Parore is entitled to defend this aspect of the charges and to rely on what heunderstood s 58 to mean.[70] I agree with the Judge that the civil tax dispute process proceeded a significantway down its path before the prosecution commenced, and that as a result, as he wasobliged to do, Mr Parore had either directly or through his advisors disclosed aconsiderable amount of information on the basis on which he would defend some ofthe charges and that he had admitted the actus reus of other of the charges.[71] The minimum standards of criminal procedure recognised in s 25 of the NewZealand Bill of Rights Act are available only to a person who has been charged withan offence.[72] When the Commissioner was dealing with the civil dispute, she had notcharged Mr Parore. However, when she subsequently charged him on 26 August 2019,in my judgement, she put Mr Parore in an impossible position. She had used herstatutory powers under the TAA to effectively require Mr Parore to disclose hisprospective defence, to deprive him of the right to remain silent, to get him toacknowledge the actus reus of certain of the offences and to disclose his hand inrelation to other of the offences. When the charges were laid, a fair trial for Mr Parorewas already an impossibility. I agree with observations made by Judge Collins in Safithat, whether innocently or deliberately, the Commissioner cannot bring about asituation where she is forewarned ahead of trial what defences will be run, whatevidence the defence will call and then, being so forewarned, assert that the trial isfair.[73] In my view, there was prejudice to Mr Parore when the charges were laidbecause his fair trial rights were then engaged but they had already been compromised.[74] Looking forward, any trial was going to be unfair and it would be unfair werethe trial allowed to go through to its conclusion because Mr Parore's fair trial rightswere undermined from the outset.[75] I now turn to consider whether there is an alternative remedy to a stay.[76] The Commissioner's answer is to say that she should not be allowed to call anyevidence in regard to the s 58 defence. This solution however does not deal with theGST returns which Mr Parore filed with his NOPA and the acknowledgements inherentin those returns.[77] If an order is made that the Commissioner cannot lead any evidence in relationto the s 58 defence, a retrial in relation to those seven charges relating to thebankruptcy period could proceed and Mr Parore could still advance his defence. Incontrast, if an order were to be made that the Commissioner cannot lead any evidencein relation to the GST returns for the GST periods post-bankruptcy, then theCommissioner's case in regard to those returns would necessarily fail. The trial inrelation to those charges would become a farce, achieving nothing.[78] Nevertheless, in my judgement, in relation to all charges a stay is the onlyappropriate remedy.[79] A stay is warranted because the Commissioner breached Mr Parore's fair trialrights from the outset. To grant a stay is not to discipline the Commissioner for thatbreach; rather it serves to recognise the importance of fair trial rights and theadministration of criminal justice in this country generally. There is a clear connectionbetween the misconduct that occurred and the prejudice that would be suffered byMr Parore were the matter sent back for a retrial. The rights breached were importantand the intrusion on fair trial rights was serious. Granting a stay upholds the integrityof the criminal justice system and it may well have a deterrent effect, not only on thosewho committed the misconduct but on others more generally, in the sense that, as aconsequence of the granting of a stay, but they are likely to take greater care in thefuture.19[80] It also has to be borne in mind that Mr Parore has already faced, at least in part,two trials in relation to these charges already. Any retrial would likely be significantlydelayed because of its low priority as a tax case and because of the backlog in theCourts arising from the Covid-19 pandemic. The allegations made are not particularlyserious. They do not involve any risk to public safety. They involve a relatively smallsum. The alleged offending occurred some years ago. Mr Parore is now 78 years oldand he has never previously appeared before the Courts. There is an alternativeremedy for the Commissioner. She retains the ability to pursue the alleged GSTliabilities through the civil disputes process and she can impose penalties ifappropriate.Result[81] For the reasons I have set out, I conclude, albeit by a slightly different path,that the Judge did not err when she concluded that the criminal proceedings should bestayed. The appeal is dismissed._______________________________Wylie J19 ,See Wilson v R, above n 8, at [47].