COMMISSIONER OF INLAND REVENUE v DT AUSTRALIA LTD [2013] NZHC 3387

COMMISSIONER OF INLAND REVENUE v DT AUSTRALIA LTD [2013] NZHC 3387 [16 December 2013]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2013-404-004103[2013] NZHC 3387UNDER Tax Administration Act 1994IN THE MATTER of an application for Transfer ofProceeding to the High CourtBETWEEN THE COMMISSIONER OF INLANDREVENUEApplicantAND DT AUSTRALIA LIMITEDRespondentHearing: 29 November 2013Appearances: H Ebersohn and S Osborne for ApplicantK Dobson in personJudgment: 16 December 2013JUDGMENT OF ELLIS JThis judgment was delivered by Justice Ellison 16 December 2013 at 4.00 pmpursuant to R 11.5 of the High Court RulesRegistrar / Deputy RegistrarDate.................................[1] DT Australia Ltd (DTA) has filed proceedings in the Taxation Review Authority (the TRA) challenging reassessments that have been issued to it by the Commissioner of Inland Revenue (the Commissioner). Underlying thosereassessments is the Commissioner's view that DTA has been a party to a tax avoidance arrangement. Reassessments have been issued for a number of income tax years (although, as I understand it, not all are yet the subject of challenge).[2] Mr Dobson is the sole director and shareholder of DTA. Although he has a law degree, he has never practised as a lawyer and does not have a practising certificate. But there is no dispute that, in the TRA, he would be entitled to advance the challenge proceedings on behalf of his company. He says that, for reasons of cost, that is what he wishes to do.[3] But as appears to be common practice in relation to disputes involving alleged tax avoidance, the Commissioner has applied under s 138N of the Tax Administration Act 1994 to have the TRA proceedings transferred to this Court, principally on the ground of their complexity. DTA opposes any transfer. There will therefore need to be a hearing of the application.[4] The difficulty that then arises is that in the High Court Mr Dobson is not permitted as of right to represent his company. Indeed, the opposite is the case. It is only in exceptional circumstances that this Court will permit a company to be represented by a layman.[5] Mr Dobson therefore needs to apply for and obtain leave, in the first instance, to represent DTA in relation to the transfer application. In the event that a transfer is granted, he would also need leave to represent the company in the substantive challenge proceeding, if that is what he wishes to do.[6] This decision relates only to the first issue, namely whether or not Mr Dobson should be permitted to represent his company in relation to the transfer application itself. I record at the outset that the grant of leave in that respect would by no means be determinative of any later application in relation to the substantive proceedings; I consider that quite different considerations may, at that point, arise.[7] There was no dispute as to the relevant law. The guiding authority continues to be the decision in Re G J Mannix Ltd.1 There, the Court of Appeal held that the Court may exercise its inherent jurisdiction to permit someone other than a properly appointed legal representative to appear for a body corporate. For reasons that I do not propose to repeat here, that discretion will be exercised sparingly, and only in exceptional circumstances.2[8] In the present case, I have formed the view that Mr Dobson should be granted leave for the limited purpose of the transfer application. In reaching that conclusion I have taken into account the following matters.[9] First, the transfer application is a discrete one, with narrow parameters. DTAis also, as I have mentioned, a "one man" company. For these reasons, a number of the policy considerations that favour a company involved in litigation being legally advised and represented do not apply, or apply with less force, in relation to the present application.3 Those considerations may well play out differently in the context of the substantive challenge, particularly in relation to the need for objective counsel, and for knowledge of more complex court processes. But they do not yet, in my view, arise.[10] Secondly, although the Commissioner's position was that the alleged tax avoidance arrangement was complex (a position with which Mr Dobson does not agree), the reality is that the Court hearing the transfer application will need only to form a broad overview of the arrangement and its complexities. Moreover, it seems to me that Mr Dobson is as well acquainted with the facts of the matter as any (lately instructed) lawyer is likely to be, and will be quite able to explain to the Court the taxpayer's position in that regard.1 Re G J Mannix Ltd [1984] 1 NZLR 309 (CA).2 See also Commissioner of Inland Revenue v Chesterfields Preschools Ltd (2009) 24 NZTC 23,721 (CA); Commissioner of Inland Revenue v Chesterfields Preschools Ltd (2012) 25 NZTC 20,453 (HC); Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] 2 NZLR 679 (CA); and Commissioner of Inland Revenue v Giovanni Holdings Ltd (2011) 25 NZTC 25,158 (HC).3 See CIR v Chesterfields Preschools Ltd [2013] 2 NZLR 679 (CA) at [34] and GB & JZ Chambers Ltd v AEL Corporation Ltd (1994) 7 PRNZ 35 (HC) at 640.[11] Thirdly, there is the matter of Mr Dobson's own legal training and ability. As I have said, he has some background in law and is clearly intelligent and articulate. Although Mr Ebersohn sought to point out certain errors of process and law that he has made to date they were, in my view, neither egregious nor particularly prejudicial. Indeed, they appeared to me to be errors of a kind that are not uncommonly made by barristers and solicitors of this Court.[12] Fourthly, although Mr Dobson has sworn an affidavit in opposition to the transfer, Mr Ebersohn accepted that there will be no need for cross-examination on it. So the difficulties that will inevitably be presented when Mr Dobson gives evidence in the substantive challenge proceedings do not yet arise.[13] I accept that none of the matters I have referred to above individually qualify as exceptional circumstances in terms of the Mannix test. That said, however, they are matters which provide support for (or at least do not undermine) the conclusionthat the Court's discretion should be exercised in Mr Dobson's favour in the presentcase.[14] The circumstance which I regard as tipping this case over the "exceptional"threshold is that DTA had, as I have said, a right to file in the TRA and, in that forum, it has a right to be represented by Mr Dobson. Mr Dobson's ability torepresent his company is effectively the default position in challenge proceedings.[15] The Commissioner, of course, also has a statutory right to apply for transfer in appropriate circumstances. But such an application may or may not succeed. If it does, then Mr Dobson is likely to have a considerable hurdle to overcome in order to continue to represent DTA in the substantive challenge proceedings. I have already foreshadowed some of the reasons why that might be so. But if the challenge is not transferred then Mr Dobson will continue to be able to represent his company in the TRA.[16] So there seems to me to be something of a "catch 22" in the proposition that Mr Dobson should be prevented from representing his company prior to the resolution of the very application which will, quite possibly, determine whether hewill be able to continue to act in that representative capacity. It would, in my view, be wrong in principle to deprive DTA of its present right to be represented by Mr Dobson before any decision to order the transfer has been made.[17] Mr Dobson is therefore granted leave to represent DTA in relation to the transfer application. As I have made clear, if transfer is granted, he will need to apply again if he wishes to continue to represent the company in the substantive challenge proceeding.[18] In light of Mr Dobson's status there can be no order as to costs.____________________Rebecca Ellis J