THE COMMISSIONER OF INLAND REVENUE v GREAT NORTH MOTOR COMPANY LIMITED (IN RECEIVERSHIP) [2015] NZHC 1645

THE COMMISSIONER OF INLAND REVENUE v GREAT NORTH MOTOR COMPANY LIMITED (IN RECEIVERSHIP) [2015] NZHC 1645 [14 July 2015]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2014-404-3120[2015] NZHC 1645BETWEEN THE COMMISSIONER OF INLANDREVENUEApplicantAND GREAT NORTH MOTOR COMPANYLIMITED (IN RECEIVERSHIP)RespondentHearing: 22 April 2015Appearances: M Deligiannis and K Naik-Leong for ApplicantS Judd for RespondentJudgment: 14 July 2015JUDGMENT OF TOOGOOD J [Application to transfer proceedings from Taxation Review Authority toHigh Court]This judgment was delivered by me on 14 July 2015 at 4:45 pmPursuant to Rule 11.5 High Court RulesRegistrar/Deputy RegistrarTable of Contents ParagraphNumberIntroduction [1]Mr John George Russell [2]The background to this proceeding [6]Procedural history [16]Orders sought by the Commissioner [17]Should leave be granted to the Commissioner to commencethis proceeding by way of originating application underPart 19 of the High Court Rules?[18]Should the proceeding be transferred to this Court unders 138N(2) of the Tax Administration Act 1994?[21]Legal principles [21]Summary of Commissioner's reasons [23]Complexity [25]Importance of the proceeding from the Commissioner'sperspective[30]Likelihood of appeal [46]Amount of money at stake [50]Vendetta allegations [51]Advantages to Great North of the proceedingsremaining in the TRA[59]Conclusion [61]Orders [62]Costs [63]Introduction[1] The Commissioner of Inland Revenue ("Commissioner") seeks to transferinto this Court proceedings currently before the Taxation Review Authority ("the TRA").Mr John George Russell[2] John George Russell is the sole director and receiver of the respondent, GreatNorth Motor Company Ltd ("Great North").[3] This is the fourth application by the Commissioner over the last two years to transfer challenges from the TRA to the High Court where the tax challenge has involved a company controlled by Mr Russell which accumulated tax losses by accruing interest liabilities under loan contracts.1 In each of the four cases, theinterest liability had been accrued in the borrower company's accounts causing the borrower company's loss position to increase year on year, even though the borrowerdid not in fact pay the interest.[4] The Commissioner has locked horns in litigation with Mr Russell over the past 30 years. The majority of this litigation has been concerned with a template scheme invented by Mr Russell as a tax agent, which was been held, ultimately, to be a tax avoidance arrangement.2 Mr Russell has also brought unsuccessful proceedings against the Commissioner and the TRA alleging bias by the TRA.3 In addition, he has initiated several judicial review proceedings against the Commissioner by entities of which he is tax agent, director or receiver or with which he is otherwise involved.4 Most recently the assessments made by the Commissioner1 See Commissioner of Inland Revenue v Kensington Developments Limited [2013] NZHC 3537, (2013) 26 NZTC 21-059 and Commissioner of Inland Revenue v Bell Road Developments Limited [2014] NZHC 1841, (2014) 26 NZTC 21-090.2 O'Neil v Commissioner of Inland Revenue [2001] UKPC 17, [2001] 2 NZLR 316.3 Russell v Taxation Review Authority (2009) 24 NZTC 23,284 (HC); Russell v Taxation Review Authority [2011] NZCA 158, (2011) 25 NZTC 20,044. Mr Russell was denied leave to appeal the decision of the Court of Appeal to the Supreme Court: Russell v Taxation Review Authority[2011] NZSC 96, (2011) 25 NZTC 20,077.4 M&J Wetherill Company Ltd v Taxation Review Authority (2003) 21 NZTC 18,311 (HC); Wire Supplies Ltd v Taxation Review Authority (2005) 22 NZTC 19,395 (HC); Miller v Commissioner of Inland Revenue (1997) 18 NZTC 13,001 (HC); FB Duvall Ltd v Commissioner of Inland Revenue (2011) 25 NZTC 20,101 (HC).in respect of Mr Russell's personal tax affairs were the subject of a challengeproceeding in which the Commissioner was successful in her contention that Mr Russell was a person affected by a tax avoidance arrangement.5[5] The scale of Mr Russell's tax avoidance was illustrated, on 10 June 2014,when Associate Judge Doogue delivered summary judgment for the Commissioner against Mr Russell in the sum of $367,204,207.41.6The background to this proceeding[6] The Commissioner's adjudication report helpfully summarises the factualbackground to the TRA proceeding which I paraphrase in the paragraphs that follow.7[7] The Commissioner alleges that Mr Russell has structured the ownership of Great North so that no ultimate shareholding is owned by a natural person:(a) 99.9% of the shares in Great North are held by Glen Eden HoldingsLtd ("Glen Eden"). Glen Eden is wholly owned by Commercial Management Limited ("Commercial Management"). Commercial Management is wholly owned by Commercial Administration Limited (Commercial Administration). Commercial Administration is wholly owned by Glen Eden.(b) Downsview Nominees Limited ("Downsview") owns the remaining0.01% of the shares in Great North. Downsview is wholly owned by Commercial Administration.(c) Glen Eden, Commercial Management and Commercial Administration are companies controlled by Mr Russell. All the5 Russell v Commissioner of Inland Revenue (2010) 24 NZTC 24,436 (HC); Russell v Commissioner of Inland Revenue [2012] NZCA 128, (2012) 25 NZTC 20,120. Mr Russell was denied leave to appeal the decision of the Court of Appeal to the Supreme Court: Russell v Commissioner of Inland Revenue [2012] NZSC 73, (2012) 25 NZTC 20,140.6 The Commissioner of Inland Revenue v Russell [2014] NZHC 1296 at [79].7 Office of the Chief Tax Counsel Great North Motor Company Limited (in Receivership) (Adjudication Report, 11 February 2014).shares in Great North are held on trust for the benefit of Mr Anthony Radisich.[8] According to the register kept by the Registrar of Companies, the company registration history of the taxpayer includes the following:Period Status1/9/1994 – 8/5/1996 In liquidation8/5/1996 Struck off the CompaniesRegister18/11/1997 Reinstated to the CompaniesRegister24/6/1998 - 28/5/2005 In liquidation28/5/2005 Struck off the CompaniesRegister8/10/2010 Reinstated to the CompaniesRegister8/10/2010 – present In receivership[9] Great North ceased trading on 10 December 1993. Mr Russell advised Inland Revenue in a letter dated 16 May 2011 that the taxpayer intended to commence business as a motor car dealer. This has not occurred.[10] On 20 August 1993, Great North issued a debenture to Glen Eden ("the Debenture"). Glen Eden held the debenture as nominee for Downsview. At 31 March 1994, the amount owed on the Debenture was $393,879. The terms of the debenture are:(a) Glen Eden agrees to advance the principal sum to Great North on its request.(b) The principal sum will be repaid on demand.(c) Interest is payable at a rate to be advised by Glen Eden. If no rate is advised the interest will be 28% per annum.(d) Great North has the right to make repayments at any time.[11] Great North has made no actual interest or principal payments on the Debenture. Nevertheless, Great North has claimed annual income tax deductions for the interest payable. According to the tax returns filed by Mr Russell on behalf of Great North, these deductions have resulted in income tax losses that have accumulated over the years.[12] On 25 May 2005, Glen Eden assigned the debenture to KensingtonDevelopments Limited ("Kensington"). When assigned, the amount owed on thedebenture was approximately $5.9 million. Kensington did not pay anything for the debenture.[13] At 28 November 2012, according to the receiver's report filed with theCompanies Office by Mr Russell, Great North owed Kensington $20,738,717 on the debenture. The Commissioner now calculates the amount owing to be nearly $22 million. It appears that no steps have been made to recover the amount owing.[14] The Commissioner reassessed the returns that Mr Russell filed on behalf of Great North and concluded that this arrangement is a tax avoidance arrangement that is void under s BG1 of the relevant Income Tax Acts.[15] The primary issue in the substantive proceeding is whether Great North has entered into an arrangement which has the purpose or effect of tax avoidance.Procedural history[16] On 11 February 2014, the Commissioner reassessed the disputed years, and on 5 March 2014 she issued a notice disallowing the losses claimed by Great North. Mr Russell commenced proceedings on behalf of Great North in the TRA on 9 April 2014. On 25 September 2014, the Commissioner advised the TRA that she intended to apply to the High Court for an order transferring the proceeding to the High Court. On 2 October 2014, the TRA adjourned the proceeding to allow the application to be made.Orders sought by the Commissioner[17] The Commissioner seeks orders:(a) For leave to commence this proceeding by way of originating application under Part 19 of the High Court Rules (HCR);(b) Transferring the proceedings in the TRA to the High Court under s 138N(2) of the Tax Administration Act 1994 ("the TAA");(c) Subject to the orders above, directing that the provisions of HCR 5.64 to 5.68 shall apply to the transferred proceeding as if it had been an action transferred from the District Court to this Court; and(d) For the respondent to pay the costs of and incidental to the application.Should leave be granted to the Commissioner to commence this proceeding by way of originating application under Part 19 of the High Court Rules?[18] Ms Deligiannis for the Commissioner identifies that s 138N(2) of the TAAprovides that the Commissioner "may apply to the High Court to have the challengetransferred to the High Court" without stipulating how that is to be done. She also directs me to r 19.5(1) of the HCR which provides that "the court may, in theinterests of justice, permit any proceeding not mentioned in rules 19.2 to 19.4 to be commenced by originating application".[19] There are numerous High Court cases which have confirmed that an originating application under Part 19 of the HCR is the appropriate way to commence proceedings under s 138N(2) of the TAA8 and Great North does not oppose the application.8 Commissioner of Inland Revenue v Erris Promotions (2002) 20 NZTC 17,818 (HC) at [7];Commissioner of Inland Revenue v McIlraith (2003) 21 NZTC 18,112 (HC) at [14]-[17];Commissioner of Inland Revenue v Deepsea Seafoods (No 1) Limited & Ors (2004) 21 NZTC 18,469 (HC) at [7]; Commissioner of Inland Revenue v Kensington Developments Ltd, above n 1, at [11] and [76]; Commissioner of Inland Revenue v Bell Road Developments Ltd, above n 1,at [6] and [59].[20] Accordingly, leave shall be granted to the Commissioner to commence this proceeding by way of originating application.Should the proceeding be transferred to this Court under s 138N(2) of the Tax Administration Act 1994?Legal principles[21] Section 138N(2) of the TAA provides that, if a disputant commences a challenge in the TRA, the Commissioner may apply to the High Court to have the challenge transferred to the High Court.[22] It has been left to the courts to establish a number of principles that are relevant to considering when a transfer application should be granted. The principles discussed by the Court of Appeal in Commissioner of Inland Revenue v Erris Promotions9 were summarised by the High Court in Commissioner of Inland Revenue v McIlraith10 and were recently affirmed by the Court of Appeal inKensington Developments Ltd (In Receivership) v Commissioner of Inland Revenue.11 I restate the principles:(a) Although there are no statutory criteria set out for transfer applications to the High Court under s 138N(2), there is no legislative intent to change the roles of the TRA and the High Court in taxation matters.(b) Factors that bear on whether transfer is appropriate include but are not limited to:(i) that the challenge involves or may involve significant legal issues of precedent;9 Commissioner of Inland Revenue v Erris Promotions [2003] 1 NZLR 506 (CA).10 Commissioner of Inland Revenue v McIlraith, above n 8, at [18].11 Kensington Developments Ltd (In Receivership) v Commissioner of Inland Revenue [2015] NZCA 60 at [9].(ii) that the facts of the challenge are either not clear or are in dispute;(iii) that the amount of the tax in dispute between the parties is high;(iv) that the matter is of general or public importance;(v) that the matter is complex;(vi) that the decision is likely to be appealed;(vii) that the taxpayer has mounted administrative law challenges against the TRA or the Commissioner; in particular, allegations that the Commissioner was pursuing a vendetta against the taxpayer, abused her power or committed fraud on the taxpayer;(viii) that the applicant delayed the bringing of transfer proceedings in such a way that prejudices the other party.(c) The taxpayer has the initial choice of forum and the onus is on the Commissioner in seeking a transfer to show good cause for why that should occur.(d) The Court is required to consider the factors relied upon by the Commissioner and the reasons for the taxpayer's choice of forum against the background of the scheme of the legislation and the roles of the TRA and the High Court in taxation disputes.(e) The TRA was designed to provide a more informal and less complex forum as evidenced by the anonymity provisions, and the fact that costs cannot be awarded in favour of any party. Although it is a specialist tribunal for dealing with taxation disputes, there is nopresumption in the legislation that taxation disputes should normally be dealt with in the TRA at first instance.(f) The High Court is the court of first instance jurisdiction for major litigation and, in particular, where matters are complex and involve matters of major legal significance. That is also the case for taxation litigation.(g) The amount of money involved does not necessarily equate with complexity but it does bear upon the issue of significance, both for the Commissioner and the taxpayer.Summary of Commissioner's reasons[23] The Commissioner submits that the High Court is the appropriate forum to hear the proceeding for the following reasons:(a) The proceeding is of moderate complexity requiring consideration of matters more suited to the general jurisdiction of the High Court.(b) The precedential value of the proceeding is important from theCommissioner's perspective as it involves a decision on the effect ofs 330 of the Companies Act 1993 (concerning restoration of a company to the register) in relation to the application of the time bar in s 108 of the TAA.(c) A considerable amount of money is at stake: $21,717,813.79.(d) The likelihood of an appeal means that it is preferable for the proceeding to be heard in the High Court in the first instance.(e) The proceeding involves allegations by the respondent that the assessments in issue are invalid and unlawful for administrative law reasons, including allegations of fraud on Great North by theCommissioner's officers.(f) The transfer of the challenge proceeding is a just, expeditious andeconomical use of the parties' and the Court's resources.[24] I turn now to consider these grounds individually.Complexity[25] Transfer to the High Court may be justified where matters are complex.12[26] Ms Deligiannis for the Commissioner submitted that the moderate complexity of the proceeding requires the decision-maker to consider matters that are better suited to the general jurisdiction of the High Court. She identifies that the following factors complicate the proceedings:(a) The parties dispute the factual matrix of the proceeding.(b) In order to ascertain whether Great North entered into a tax avoidance arrangement, the decision-maker will have to make findings inrelation to Great North's status under the Companies Act 1993; Mr Russell's appointment and role as receiver of Great North; theacquisition of the debenture by Kensington Developments Ltd; the legitimacy of the debentures; and the shareholdings of the companies involved in the proceedings.(c) The proceeding involves a convoluted series of interlocking contracts, agreements, understandings and plans between various companies.(d) The Commissioner's tax avoidance case against Mr Russell requiresconsideration of whether the arrangement, viewed in a commercial and economically realistic way, makes use of the specific provisionsapplicable in a manner that is consistent with Parliament's purpose.13One feature of the arrangement that sheds light on its commercial and12 Commissioner of Inland Revenue v Erris Promotions (CA), above n 9, at [22].13 Ben Nevis Forestry Venture Ltd v commissioner of Inland Revenue [2008] NZSC 115, [2009] 2 NZLR 289 at [109] (per Tipping, McGrath and Gault JJ).economic effects is Mr Russell's role as both director and receiver of the Great North. Mr Russell was receiver of Great North for over 19 years. Mr Russell may well be in breach of his duties under the Receivership Act 1993 due to the fact that Great North has been unable to pay interest on loans while in receivership and has little, if any, business activity.[27] Mr Judd for Great North submits that the TRA, as a specialist tax tribunal, is quite capable of coping with tax challenge proceedings involving moderate complexity. He argues that, in any event, the issues in the present case are not complex at all and involve the application of well settled law relating to tax avoidance to the facts of the case. In addition, Mr Judd identifies that the TRA has already spent several days dealing with objections by the same taxpayer relating to the same issues for earlier tax years, so the TRA has been seized of the underlying issue.14[28] I acknowledge that the Court of Appeal in Kensington v Commissioner of Inland Revenue attached no weight to the argument raised by the Commissioner that the court hearing the challenge will have to consider the duties of a receiver and best practice of a receiver under the Receivership Act because this bears upon the commerciality of the arrangements.15 The Court observed:16Although the law in connection with the duties and obligations of receivers is traditionally administered in the High Court, we expect that the TRA would have no difficulty in interpreting the statutory framework and the body of case law that has emerged in the 20 plus years since the Receivership Act came into force.I am therefore bound to give little weight to that point.[29] But I acknowledge that the other factors raised by Ms Deligiannis do indicate that the substantive proceeding will involve some complexity. As the Court of14 The matter was ultimately determined on procedural grounds. See XXX v Commissioner of Inland Revenue [2014] NZTRA 1, (2014) 26 NZTC 2-011 and XXX v Commissioner of Inland Revenue [2014] NZTRA 14, (2014) 26 NZTC 2-023.15 Kensington Developments Ltd (In Receivership) v Commissioner of Inland Revenue, above n 11,at [28].16 Above.Appeal in Kensington noted, although the law in the area may be relatively settled, it does not follow that its application to new fact situations will be straightforward.17The Court identified in that case that "the moderate complexity weighed in favour oftransfer to the High Court but could not on its own be decisive".18 Accordingly, I look at the other factors identified by the Commissioner.Importance of the proceeding from the Commissioner's perspective[30] The Court of Appeal in Kensington held that the determinative consideration in support of transferring the proceeding was the precedent that the decision in the challenge proceeding would establish.19[31] One of the issues that will have to be determined during the proceedings in whether the reassessments for the 1996 – 2005 income tax years were statute barred under s 108(1).[32] Section 108(1) provides:(1) Except as specified in this section or in section 108B, if—(a) a taxpayer furnishes an income tax return and an assessment has been made; and(b) 4 years have passed from the end of the tax year in which the taxpayer provides the tax return,—the Commissioner may not amend the assessment so as to increase the amount assessed or decrease the amount of a net loss.[33] The time bar does not apply where the return is fraudulent or wilfully misleading,20 or does not mention income which is of a particular nature or was derived from a particular source, and in respect of which a tax return is required to be provided.2117 At [27].18 At [29].19 At [23]-[24].20 Tax Administration Act 1994, s 108(2)(a).21 Section 108(2)(b).[34] In her reassessment, the Commissioner treated the tax returns for the 1996 –2005 periods as a nullity because during that period Great North had been taken off the company register and did not exist. Great North argues that the returns are not a nullity because Mr Russell restored Great North to the company register in 2006 and s 330(2) of the Companies Act 1993 provides:A company that is restored to the New Zealand register shall be deemed to have continued in existence as if it had not been removed from the register.So, according to Great North, the effect of s 330(2) is to render the returns validly filed. It argues that the Commissioner cannot make assessments to re-assess the losses that were claimed because she is out of time under s 108.[35] Ms Deligiannis submits that the Court's determination in this proceeding is ofimmense significance to the Commissioner and is highly precedential. If it is held that s 330(2) deems returns to have been validly filed and allows the time bar to run while a company is off the Companies Register, assessments can become time barred in circumstances when the Commissioner cannot meet an exception to s 108(1). This would potentially deprive the Commissioner of the ability to dispute a self- assessment where she has not taken action to have the company restored to the Register and the company is later restored to the Register by someone else.[36] Ms Deligiannis acknowledged that the Commissioner has the ability to apply to the Registrar of Companies or the High Court under s 328(6) or s 329(4) for directions or orders for the purposes of placing the company and any other person as close as possible in the same position as if the company had not been removed from the Companies Register. But she argues that, in order to make such an application, the Commissioner would need to be aware that a particular company had applied to be restored to the Companies Register. Ms Deligiannis submits the decision in these proceedings will affect how the Commissioner treats tax returns filed by struck-out companies or bankrupt taxpayers in the future. It may require the Commissioner to consider whether additional resources are required, and Companies Act surveillance, to ensure she is aware when applications are made for companies to be restored to the Companies Register.[37] In support of her submission that the proceeding will carry precedential value, Ms Deligiannis directed me to the case law on s 330(2) of the Companies Act 1993.22 The leading case on s 330 is the Court of Appeal's decision in Clarke v Libra Developments which held that a company is in existence as if it had not been removed and that the section extends to validate all matters the only defect in which stemmed from the non-existence of the company.23 The issue in Clarke was whether a company that was taken off the register and later restored could have been capable of continuing to participate in a partnership in the years it was struck off.[38] Prior the decision in Clarke, the effect of s 330(2) on income tax assessments had been considered by the High Court in Spencer v CIR. The Court held that the assessment issued by the Commissioner in the period during which the Company was removed from the Companies Register was a nullity.24 The Court of Appeal inClarke considered Spencer and seemed to indicate that it should be seen as a decision on its own facts or confined to the operation of the TAA.25 The decision inSpencer has not, however, been tested since the decision in Clarke. Consequently, Ms Deligiannis submits that the TRA is not going to be able to make an authoritative statement on how s 303 of the Companies Act 1993 interacts with the time bar contained in s 108 of the Tax Administration Act 1994 and that the case belongs in the High Court.[39] Mr Judd for Great North attempted to argue that, if the Commissioner believed the case was of important precedent value, then she should have designated the case as a test case under s 138Q of the Tax Administration Act. I made it clear during the hearing that I saw little merit in this argument and that Mr Judd wasconflating the concept of "test cases" with cases that are of precedential value. Testcases are those where there is an issue of law that affects several cases currently before courts or tribunals, and that issue is referred to the High Court for determination. Everything else will be held in abeyance in the interim. A case has22 Natural Selection Clothing Ltd v Commissioner of Trade Marks [1996] 2 NZLR 148 (CA);Spencer v Commissioner of Inland Revenue (2004) 21 NZTC 18,818 (HC); Clark v Libra Developments Ltd [2007] 2 NZLR 709 (CA); R v Woodward DC Tauranga CRI 2011-070-3626, 12 March 2013.23 Clark v Libra Developments Ltd, above n 22, at [202].24 Spencer v Commissioner of Inland Revenue, above n 22, at [63].25 Clark v Libra Developments Ltd, above n 22, at [203].precedential value if it is addressing issues which have not been authoritatively determined previously, even though it might not immediately affect the outcome of other proceedings presently before the Court. I indicated also to Mr Judd that I wasbound by the Court of Appeal's decision in Kensington, which held that the likely precedential value of the proceeding was sufficient to justify transferring it from the TRA to the High Court.[40] In response, Mr Judd reframed his submission. He argued that given the similarities between this case and the earlier cases of Kensington and Bell Roadwhich are presently before the High Court, it does not make sense for the present proceedings to be transferred to this Court. He submitted that this is a single issue case which will be resolved on the legal question on whether or not the taxpayer is entitled to deduct as expense interest payments which it has never made. He highlighted that this is how the dispute was framed in the Commissioner'sadjudication report.[41] This argument is unpersuasive. If one similar case has been determined by the Court of Appeal to be appropriate to be heard in this Court, it makes little sense to direct that a similar case should be heard by the TRA. Because the Authority is bound by the decisions of the High Court, it would result in the Authority having to defer the hearing until the High Court has decided the issue and then simply apply the High Court's ruling.[42] In addition, Mr Judd argued that the adjudication report records that s 330(2) of the Companies Act validates the returns filed by Great North so that the time bar in s 108(1) applied, subject to the exceptions. In reply, Ms Deligiannis informed me that the Commissioner has decided not to follow the reasoning in the adjudication report and wants to raise the issue of the interplay in this Court. She pointed out that the Commissioner is not bound by an adjudication report in proceedings, only by her statement of position.26[43] Finally, Mr Judd argued that the Court of Appeal and Supreme Court had clarified the meaning of s 330(2). He said that the section plainly validates the26 Tax Administration Act 1994, s 138G.returns filed and directed me to the Supreme Court's decision to refuse to grant an application for leave to appeal the decision in Clarke. In its judgment, the SupremeCourt upheld the Court of Appeal's decision and said: "The section means what it says".27[44] It is not clear to me that Clarke is decisive of the interplay between s 108 of the TAA and s 303(2) of the Companies Act and that the law should be regarded as settled in the taxation context. A decision that Clarke has the effect argued by the taxpayer in this case would have far reaching implications for the way in which the Commissioner deals with companies that have been struck off the register.[45] That is a factor that favours the transfer of the proceedings to the High Court.Likelihood of appeal[46] The Court of Appeal in Kensington held that the likelihood of appeal is relevant to consideration of an application for transfer under s 138(N).28[47] Ms Deligiannis submits that, if the Commissioner were to be unsuccessful in the substantive proceeding, she will most likely appeal because of the implications of the decision generally in respect of the time bar issue, to other similarly placed taxpayers, and also to wider disputes where taxpayer companies related to Mr Russell have accrued millions of dollars of losses.[48] Mr Judd in response submits that the parties will not decide whether to appeal until the case has been heard and the judgment has been given. He says an appeal should depend on whether the process of the hearing was fair and on whether the reasoning for the judgment was sound or not. While that may be a relevant point in many cases, this case has its own character. Kensington Developments Ltd has recently filed an application for leave to appeal the Court of Appeal's decision in relation to it, despite the Court having applied recognised principles applicable to27 Clark v Libra Developments Ltd [2007] NZSC 16, 2 NZLR 709 at [11].28 Kensington Developments Ltd (In Receivership) v Commissioner of Inland Revenue, above n 11, at [32].transfer applications. Similarly, the decision in Bell Road Group is also being appealed.[49] Given the importance of the case to the Commissioner and Mr Russell'slitigation history, it is almost certain that the decision will be appealed by the unsuccessful party. That favours the High Court hearing the matter in the first instance.Amount of money at stake[50] The Commissioner identified that $21,717,813.79 is at stake in the proceeding. I agree that this factor goes to the significance that the parties attach to the proceeding and the likelihood of an appeal. It favours transfer.Vendetta allegations[51] The Court of Appeal in Kensington considered that allegations of a vendetta, abuse of power and fraud on a taxpayer may weigh in favour of transfer to the High Court.29 Implied criticism of the conduct of the Commissioner's officers in a tax payer's pleadings may also be enough to support transfer.30[52] In Dandelion,31 the Court of Appeal examined the role of the TRA and the scope of inquiry available to it in the objection process. The Court considered that the role of the TRA encompassed hearing and determining matters raised in an objection proceeding, in which questions of validity as well as correctness of theassessments could be considered, but "did not extend to conducting what was effectively a broad based judicial review of the process leading up to therespondent's assessment and disallowance of the objection and subsequent conduct of the proceeding before the Authority".3229 At [15] and [30].30 Commissioner of Inland Revenue v Deepsea Seafoods (No 1) Limited & Ors, above n 8, at [18] and [22].31 Dandelion Investments Limited [2003] 1 NZLR 600; (2003) 21 NZTC 18,010 (CA).32 At [90].[53] In McIlraith33 the High Court was concerned with an application for transfer in a case in which the taxpayer had made wide ranging allegations of bias and bad faith against officers employed by the Commissioner in the investigation into thetaxpayer's affairs. Justice Randerson held that the fact that a concerted attack was made on the integrity of the departmental officer or officers concerned with serious allegations of bias, bad faith, and abuse of power strongly favoured transfer.34[54] In this case the disputant's Notice of Response records, under the heading"Any facts and legal arguments relied on by you":The facts relevant to the previous investigation (1990 to 1995) show manipulation, bad faith, and invalidity and conduct contrary to the Bill of Rights and section 6 Tax Administration Act 1994.[55] The following is alleged in the Statement of Position, under the heading"Outline of the documentary evidence relied upon":Determination held by the Commissioner provides evidence of failure to consider section 6 of the TAA 1994, NZBORA 1990; and of attempts to commit a fraud on this taxpayer and other taxpayers which are associated. Documentation held by the Commissioner showing lack of impartialtreatment of Mr Russell and Mr Radisich.And under the heading "Outline of the issues that the disputant considers will arise":The true reason for this dispute is that the Commissioner does not want to allow associated companies also owned by Mr Radisich an offset of losses which Parliament clearly intended they should have. Such conduct is improper, unlawful and a fraud against these taxpayer.[56] Mr Russell alleges in his affidavit in the proceeding that not only were theCommissioner's submissions evidence of her attitude against lay representationgenerally, and Mr Russell in particular, in the TRA but her attitude is directly contrary to what Parliament has decreed when it set up the Authority in the firstplace. He claims to be amazed that the Commissioner "can be so out of step in the performance of her duties as to not be able to see it" and puts it down "to the fact that the Commissioner is blinded by vendetta considerations" in his cases. He refers to "a campaign of harassment" which has led to taxpayers he has represented "being33 Commissioner of Inland Revenue v McIlraith, above n 8.34 At [19].assessed for taxes that they are not properly liable for, simply because of theirassociation" with him, such conduct amounting "to acting with an improper purpose and a fraud on the taxpayer."[57] In Kensington, Allan J said:35[72] Finally, there is the question of the so called vendetta. Mr Judd urges the court not to make too much of the serious complaints about the behaviour of the Commissioner and her staff in the challenge proceeding before the TRA. He says that Mr Russell has been making such allegations for many years without discernible impact on the ability of the TRA to discharge her functions. In effect, as I understand him, Mr Judd issuggesting that Mr Russell's bark is worse than his bite.[73] But in my view, the contents of Kensington's notice of claim in theTRA cannot be so easily dismissed. Grounds 1, 3, 5, 10 and 11 inKensington's notice of claim all raise administrative law issues; some ofthem contain outright allegations of bad faith on the part of the Commissioner. The authorities very strongly suggest that where allegations such as these are made, the proper forum is this Court rather than the TRA. If Kensington had wished to reduce the likelihood of a transfer to this Court, then it could easily have framed its points of claim in a less strident fashion.[58] I respectfully adopt the same view as Allan J in relation to this proceeding. In this case also, administrative law arguments asserting Wednesburyunreasonableness are advanced in conjunction with the allegations of harassment, bias and fraud. The nature of the allegations on behalf of the taxpayer weighs strongly in favour of transfer to the High Court.Advantages to Great North of the proceedings remaining in the TRA[59] The TRA functions as a judicial authority for determining objections to assessments of tax or determinations of the Commissioner as authorised under the Inland Revenue Acts. Mr Judd submitted that the Court needs to give far more weight to the benefits conferred by Parliament on a disputant having a case heard in the Authority than on the non-statutory factors put forward by the Commissioner in support of transfer. The benefits to the taxpayer, he submits, are that proceedings are confidential; costs are not awarded against either party; and anything can be received into evidence irrespective of whether it is admissible in a court of law. He argued that if the exercise in deciding whether to transfer proceedings is a balancing35 Commissioner of Inland Revenue v Kensington Developments Ltd, above n 1.exercise, the advantages for staying in the TRA created by Parliament must be given much more weight on the scales than the issues of moderate complexity, precedent value, and likelihood of appeal put forward by the Commissioner in support of her transfer application.[60] Those considerations are not persuasive. As was submitted on behalf of the Commissioner:(a) There has been no application for confidentiality orders in the courts to protect the identity of the taxpayer in any proceeding in which Mr Russell has been involved.(b) Although the TRA has all the powers of a commission of inquiry, those powers remain subject to the applicability of the Evidence Act 2006.36 The claim that the TRA can get to the factual truth of a matter when the High Court cannot do so, because of the established rules of evidence, is wrong.(c) Since Great North has instructed a barrister as counsel in the proceedings at the Authority level, a saving in legal costs is not a particular advantage in this case.Conclusion[61] For the reasons given, I am satisfied that this is an appropriate case for transfer to the High Court. The ancillary orders sought by the Commissioner should also be made. They will require Great North to file and serve on the Commissioner statements of claim in the transferred proceeding to ensure conformity with the requirements of the High Court Rules and with relevant decisions of this Court, the Court of Appeal, and the Supreme Court, and to apply the relevant provisions of rr 5.64 to 5.68 to the transferred proceedings as if they had been proceedings transferred from the District Court.36 Taxation Review Authority Act, s 17(3).Orders[62] The formal orders are:(a) The Commissioner has leave to bring this application by way of an originating application under Part 19 of the High Court Rules.(b) The proceeding Great North Motor Company Limited (In Receivership v Commissioner of Inland Revenue TRA 003/14, filed in the Taxation Review Authority, shall be transferred to the Auckland Registry of this Court.(c) By 21 August 2015, the respondent shall file and serve on the Commissioner statements of claim in the proceeding which conform to the requirements of the High Court Rules.(d) By 25 September 2015, the Commissioner shall file and serve statements of defence to the statements of claim.(e) Rules 5.64 to 5.68 of the High Court Rules shall be applied to the transferred proceeding as if the proceeding had been transferred to this Court from the District Court.(f) The parties shall have leave to apply for such further orders or directions as may be necessary to give effect to the purpose of the orders for transfer.Costs[63] The Commissioner is entitled to costs calculated on a category 2B basis. Any application for costs shall be made by way of memorandum filed and served no later than 14 August 2015. Any costs memorandum in opposition shall be filed and served no later than 18 September 2015.[64] Costs shall be determined on the papers, unless the Court directs otherwise...Toogood J