COMMISSIONER OF INLAND REVENUE V MICHAEL HILL FINANCE (NZ) LIMITED [2016] NZCA 276

COMMISSIONER OF INLAND REVENUE V MICHAEL HILL FINANCE (NZ) LIMITED [2016] NZCA 276 [21 June 2016]IN THE COURT OF APPEAL OF NEW ZEALANDCA30/2016[2016] NZCA 276BETWEEN COMMISSIONER OF INLANDREVENUEAppellantAND MICHAEL HILL FINANCE (NZ)LIMITEDRespondentHearing: 7 April 2016Court: Harrison, Miller and Cooper JJCounsel: M R Heron QC and H W Ebersohn for AppellantS E Fitzgerald and M F Mabbett for RespondentJudgment: 21 June 2016 at 3 pmJUDGMENT OF THE COURTA The appeal is allowed. The respondent's cause of action based on the ground of inconsistency is struck out.B The respondent is ordered to pay the appellant costs for a standard appeal on a band A basis together with usual disbursements. We certify for second counsel.____________________________________________________________________REASONS OF THE COURT(Given by Harrison J)Table of ContentsIntroduction [1]Strike-out principles [4]Michael Hill's claim [6]Tax Administration Act 1994 [16]Decision [21](1) Legislative framework [21](a) Introduction [21](b) Sections 6 and 6A [23](c) Tannadyce [32](d) Summary [43](2) New Zealand authorities [44](a) Reckitt and Colman [44](b) Subsequent authorities [54](c) Summary [59](3) English authorities [60](4) Additional component [73](5) Remedies [79](6) Reconstruction [86]Result [92]Introduction[1] The Commissioner of Inland Revenue has ruled that Michael Hill Finance (NZ) Ltd is liable to pay income tax on a financing transaction. In the Commissioner's view,it was part of a tax avoidance scheme. Michael Hill has filed a challenge in the High Court to the Commissioner's consequential assessments of its liability to tax. The company relies on the orthodox ground that her ruling is incorrect in law.[2] Michael Hill separately challenges the Commissioner's ruling on the ground of its inconsistency with her earlier assessment that materially similar transactions entered into by another taxpayer are not liable to tax. Michael Hill claims the Commissioner has breached a duty owed to it of consistency of taxation treatment of comparable transactions. Toogood J dismissed the Commissioner's application to strike out Michael Hill's inconsistency claim.1 The Commissioner now appeals.[3] The conceptual nature of Michael Hill's inconsistency claim is best understood by reference to its ultimate objective. The company's claim necessarily presupposes1 Michael Hill Finance (NZ) Ltd v Commissioner of Inland Revenue [2015] NZHC 3144 [HC decision].that when undertaking its comparative assessment the High Court will use the materially similar transactions as the benchmark. Michael Hill's commercial purpose can only be to secure cancellation of its liability as the equivalent measure of the Commissioner'sinconsistency even if she has otherwise calculated the company's liability correctly according to law. Mr Heron QC for the Commissioner describes Michael Hill as running "a race to the bottom".Strike-out principles[4] The parties are at one about the principles to be applied on an application to strike out a claim.2 Michael Hill's allegations of fact must be accepted at this interimstage unless there is plain evidence that they are unsupportable — that is, entirely speculative and without foundation. The jurisdiction to strike out a pleading if it discloses no reasonably arguable cause of action is to be exercised only in plain and obvious cases.3 Special caution is required where a claim involves a developing area of the law.4[5] The rationale for these principles is obvious. A party should not be deprived of the opportunity to have its pleaded claim considered and determined in the ordinary way on evidence given at trial. However, that factor carries less weight where, as here, the tenability of a cause of action is not dependent upon evidence but can be determined solely by reference to settled legal principles.Michael Hill's claim[6] In dismissing the Commissioner's application, Toogood J succinctly summarised the background circumstances to Michael Hill's claim as follows:[5] In December 2008, the Michael Hill group of companies entered into a transaction in which it transferred its intellectual property and franchisingoperations within the group from New Zealand to Australia ("the Michael Hilltransaction"). An Australian Limited Partnership ("ALP"), established underQueensland law, was used as part of the finance structure. Michael Hill owns 99.95 per cent of the ALP. The ALP was used to create asymmetric tax treatment in the relevant years. The effect of this was that in both Australia and2 At [11].3 Miller v Commissioner of Inland Revenue [1995] 3 NZLR 664 (CA) at 668–669.4 Queenstown Lakes District Council v Charterhall Trustees Ltd [2009] NZCA 374, [2009] 3 NZLR 786 at [16].New Zealand there were deductions, and that the Australian deduction was not assessable income in New Zealand.[6] Michael Hill applied for a binding ruling from the Commissioner on theapplication of sections of the Income Tax Act 2007 ("ITA"), including s BG 1 (the tax avoidance provision), to the transaction. A binding ruling was providedin relation to the "black letter" tax treatment of the structure, but theCommissioner formed the view that s BG 1 applied; that is, that the transfer of the intellectual property and/or the financing of its acquisition was a tax avoidance arrangement.[7] Michael Hill amended its application for a binding ruling to exclude consideration of s BG 1. Michael Hill then self-assessed the tax liability on the basis that s BG 1 did apply, but subsequently proposed an adjustment to its self-assessments. The Commissioner rejected the proposed adjustment by issuing a notice of response. Accordingly, Michael Hill initiated the challenge proceeding.[7] Michael Hill brought its proceeding in the High Court as the appropriate hearing authority under pt 8A of the Tax Administration Act 1994 (TAA). The company challenges the correctness of the Commissioner's assessment in her notice of response — effectively a challenge to the Commissioner's binding ruling that its transaction was a tax avoidance arrangement. Both parties accept that Michael Hill's correctnesschallenge must be determined on its merits at trial.[8] Toogood J explained the evidential foundation for Michael Hill's inconsistencychallenge as follows:[13] Michael Hill's advisers raised the inconsistency of treatment between the Michael Hill transaction and other "IRD Approved Structures" with theCommissioner on several occasions. The Commissioner initially indicated that she was reviewing other ALP arrangements and, if there were no materially distinguishing features, she would act consistently. Following furthersubmissions from Michael Hill's advisers, the Commissioner suggested that thequestion of consistency be removed from the agenda for future discussions. She has since declined to discuss the matter further.[14] The similarity between the Michael Hill transaction and other transactions is said by the plaintiff to be demonstrated by an inadvertent disclosure by the Inland Revenue Department ("IRD") of another taxpayer'sidentity to Michael Hill when drafting the Michael Hill binding ruling. TheCommissioner has since said that there are "significant differences" between thetransactions entered into by the other taxpayer and those entered into by Michael Hill, but the Commissioner has not provided any further explanation ofthe claimed "significant differences". The similarity between the Michael Hill transaction and the other transactions is said to have been observed by a member of the Commissioner's staff who, in a file note about the inadvertent disclosure, noted that "it could be deduced from the text that [redacted] had entered into a similar arrangement".[9] In this respect, we note Mr Heron's point that the mechanism for Michael Hill'schallenge is the Commissioner's refusal to invoke s 113 of the TAA to amend thecompany's self-assessments and that under this provision the Commissioner can onlyamend an assessment "in order to ensure its correctness". While Mr Heron may beright, we must determine the arguability of Michael Hill's underlying claim ofinconsistency.[10] In more detail, Michael Hill pleads these elements of its inconsistency claim:(1) Other taxpayers had entered into transactions or arrangements with eight itemised features (the IRD Approved Structures) which were materially the same as Michael Hill's restructuring transaction.(2) The tax effects of the IRD Approved Structures and Michael Hill'stransaction were materially the same in that (a) dividends derived through its associated company and an Australian limited partnership in the IRD Approved Structures are exempt under s CW 9 of the ITA and in a particular income year not subject to a foreign dividend payment liability; and (b) interest payable by those entities is deductible for Australian tax purposes and also for New Zealand tax purposes for Michael Hill and the New Zealand company, the latter being the limited partner of the Australian limited partnership.(3) The Commissioner provided binding rulings that s BG 1 does not apply to certain of the IRD Approved Structures, decided not to investigate certain of them, and investigated certain of them but concluded that s BG 1 does not apply. Full particulars are to be provided following discovery.(4) The Commissioner has thus taken an inconsistent approach to similarly placed taxpayers by asserting that s BG 1 applied to Michael Hill'stransaction while taking different positions in assessing the IRD Approved Structures.[11] Michael Hill claims the Commissioner owed it an enforceable duty when assessing its liability to income tax on the transactions by applying the same approach which she adopted for the IRD Approved Structures. The source of this underlying duty is said to be an obligation to act fairly, impartially and consistently as between similarly placed taxpayers. It follows that while correctness of assessments remains an important requirement it does not trump all other considerations: where the Commissioner has arguably breached her duty of consistency, a taxpayer's claim ought to be brought before a hearing authority in a challenge proceeding to determine the appropriate interaction between the results of the correctness and consistency challenges. Thus, even if the hearing authority finds that the Commissioner's assessment of Michael Hill's transaction was correct, it retains a discretion in terms of s 138P of the TAA to confirm, cancel or vary the assessment on the ground that the Commissioner has acted inconsistently as between Michael Hill and another taxpayer.[12] Michael Hill emphasises the absence of the Commissioner's affirmative plea ofthe reasons which might otherwise justify an incorrect treatment of the IRD Approved Structures. The company says the only available inference is that the Commissioner has without a rational or reasonable basis knowingly and contemporaneously adopted an inconsistent position when assessing similarly placed taxpayers. This is said to amount to irrational conduct in administrative law terms. Michael Hill seeks the remedies of (a) a declaration that the Commissioner has acted unlawfully; and (b) an order cancelling, reducing, modifying or otherwise varying the Commissioner's assessment.[13] Toogood J was satisfied that the Commissioner was arguably subject to a duty enforceable by Michael Hill to act with consistency between taxpayers in the way pleaded. Accordingly, he declined to strike out Michael Hill's inconsistency cause ofaction.5[14] Ms Fitzgerald for Michael Hill supports the judgment and its reasoning. Before us she relied primarily on common law authorities in New Zealand and the United Kingdom to support the existence of a duty of consistency, which she submitted is codified by ss 6 and 6A of the TAA. When reduced to its essential elements, her submission is that (a) a duty of consistency is recognised in administrative law; (b) a5 HC decision, above n 1, at [81]–[82].taxpayer can pursue a challenge to the correctness of an assessment by relying on traditional administrative law grounds; and (c) while proof of inconsistency is not in itself sufficient to establish such a claim, it is arguable here because the Commissioner has acted irrationally.[15] Before addressing the issue in more detail we shall recite the relevant provisions from the TAA.Tax Administration Act 1994[16] Section 6 of the TAA provides:6 Responsibility on Ministers and officials to protect integrity of tax system(1) Every Minister and every officer of any government agency having responsibilities under this Act or any other Act in relation to the collection of taxes and other functions under the Inland Revenue Acts are at all times to use their best endeavours to protect the integrity of the tax system.(2) Without limiting its meaning, the integrity of the tax systemincludes—(a) taxpayer perceptions of that integrity; and(b) the rights of taxpayers to have their liability determined fairly, impartially, and according to law; and(c) the rights of taxpayers to have their individual affairs kept confidential and treated with no greater or lesser favour than the tax affairs of other taxpayers; and(d) the responsibilities of taxpayers to comply with the law; and(e) the responsibilities of those administering the law to maintain the confidentiality of the affairs of taxpayers; and(f) the responsibilities of those administering the law to do so fairly, impartially, and according to law.(Our emphasis.)[17] Section 6A materially provides:6A Commissioner of Inland Revenue(1) The person appointed as chief executive of the department under theState Sector Act 1988 is designated the Commissioner of Inland Revenue.(2) The Commissioner is charged with the care and management of the taxes covered by the Inland Revenue Acts and with such other functions as may be conferred on the Commissioner.(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.(Our emphasis.)[18] Sections 109, 113 and 114 of the TAA deal with assessments as follows:109 Disputable decisions deemed correct except in proceedingsExcept in objection proceedings under Part 8 or a challenge under Part 8A,—(a) no disputable decision may be disputed in a court or in any proceedings on any ground whatsoever; and(b) every disputable decision and, where relevant, all of its particulars are deemed to be, and are to be taken as being, correct in all respects.113 Commissioner may at any time amend assessments(1) Subject to sections 89N and 113D, the Commissioner may from time to time, and at any time, amend an assessment as the Commissioner thinks necessary in order to ensure its correctness, notwithstanding that tax already assessed may have been paid.(2) If any such amendment has the effect of imposing any fresh liability or increasing any existing liability, notice of it shall be given by the Commissioner to the taxpayer affected.114 Validity of assessmentsAn assessment made by the Commissioner is not invalidated—(a) through a failure to comply with a provision of this Act or another Inland Revenue Act; or(b) because the assessment is made wholly or partially in compliance with—(i) a direction or recommendation made by an authorised officer on matters relating to the assessment:(ii) a current policy or practice approved by the Commissioner that is applicable to matters relating to the assessment.[19] A hearing authority, whether a Taxation Review Authority or the High Court, has these powers under pt 8A when determining a challenge by the taxpayer to the Commissioner's assessment:138P Powers of hearing authority(1) On hearing a challenge, a hearing authority may—(a) confirm or cancel or vary an assessment, or reduce the amount of an assessment, or increase the amount of an assessment to the extent to which the Commissioner was able to make an assessment of an increased amount at the time the Commissioner made the assessment to which the challenge relates; or(b) make an assessment which the Commissioner was able to make at the time the Commissioner made the assessment to which the challenge relates, or direct the Commissioner to make such an assessment.(1B) If a taxpayer brings a challenge and proves, on the balance of probabilities, that the amount of an assessment is excessive by a specificamount, a hearing authority must reduce the taxpayer's assessment bythe specific amount.(2) If the challenge relates to a disputable decision that is not an assessment, the hearing authority—(a) must not make or alter the disputable decision; and(b) may direct the Commissioner to alter the disputable decision to the extent necessary to conform to the decision of the hearing authority with the effect the hearing authority specifies.(3) Subject to subsection (4), the Commissioner must make or amend an assessment or other disputable decision in such a way that it conformsto the hearing authority's determination.[20] Finally, under s 91E(1) of the TAA the Commissioner must give a private binding ruling on request from a taxpayer on the proposed taxation treatment of a fully particularised transaction. The purpose of binding rulings is described as follows:91A Purpose of this PartThe purpose of this Part is to—(a) provide taxpayers with certainty about the way the Commissioner will apply taxation laws; and(b) help them to meet their obligations under those laws,—by enabling the Commissioner to issue rulings that will bind the Commissioner on the application of those laws. The Part also recognises the importance of collecting the taxes imposed by Parliament and the need for full and accurate disclosure by taxpayers who seek to obtain binding rulings.Decision(1) Legislative framework(a) Introduction[21] We agree with Mr Heron that the statutory scheme must be the starting point fordetermining whether Michael Hill's inconsistency claim is arguable. The revenue statutes are the source of the Commissioner's powers and the taxpayer's obligations:Parliament imposes tax, the Commissioner collects tax and the taxpayer pays tax. It might be expected that in an area of such constitutional importance the statutory scheme would codify the nature and extent of all duties and responsibilities imposed by law on the Commissioner.[22] In Mr Heron's submission, a challenge under pt 8A of the TAA to the Commissioner's determination must be decided solely by whether an assessment correctly reflects a taxpayer's statutory liability, and not by whether the Commissioner has failed to comply with any other duty. In the event that a hearing authority upheldMichael Hill's inconsistency claim by cancelling, reducing, modifying or otherwise varying the Commissioner's assessment, even if it was correct according to law, the Commissioner would be compelled to assess to an incorrect liability because an administrative law cause of action had overridden an express statutory scheme.(b) Sections 6 and 6A[23] Ms Fitzgerald countered that ss 6 and 6A — the "care and maintenance" rules —recognise a taxpayer's right to challenge the validity of a disputable decision on traditional administrative law grounds within the pt 8A procedure if it is supported by evidence. A challenge of this nature is conceptually separate from a challenge for correctness according to law. Ms Fitzgerald emphasised its availability to invalidate both the process and the resulting decision, characterising it generically as a challenge to lawfulness.[24] In Ms Fitzgerald's submission:(1) Sections 6 and 6A displace correctness as the sole or governing criterion on an assessment. Before their introduction, the Commissioner had limited if any scope to do anything other than assess and collect the correct amount of tax.6 For example, the Commissioner had no power to enter into settlements or compromises reflecting an acceptance of something less than what in his or her view was the correct amount of tax then due.7 Similarly, the Commissioner could not through an estoppel bind him or herself or contract out of what was otherwise the correct amount of taxation due.8(2) As confirmed by a number of authorities,9 ss 6 and 6A mark a significantshift in the scheme of the Commissioner's powers away from the6 Brierley Investments Ltd v Bouzaid [1993] 3 NZLR 655 (CA) at 659–662.7 Accent Management Ltd v Commissioner of Inland Revenue (No 2) [2007] NZCA 231, (2007) 23 NZTC 21,366 at [10].8 Brierley Investments Ltd v Bouzaid, above n 6, at 662.9 Auckland Gas Co Ltd v Commissioner of Inland Revenue [1999] 2 NZLR 409 (CA) at 417; Westpac Banking Corporation v Commissioner of Inland Revenue [2008] NZSC 24 at [52]; Tannadyce Investments Ltd v Commissioner of Inland Revenue [2011] NZSC 158, [2012] 2 NZLR 153 [Tannadyce] at [32]–[33].absolute primacy of assessing and collecting the correct amount of tax according to law and towards a recognition that the duty to collect tax coexists with broader public law duties. These provisions are the statutory expression of long-settled principles of common law that impose strict standards of conduct on those exercising public powers.10[25] In apparent recognition of this Court's decision in Russell v Taxation Review Authority,11 Ms Fitzgerald accepted that s 6 does not of itself create a series of enforceable rights and obligations similar to those created under the New Zealand Bill of Rights Act 1990. She submitted, however, that it codifies existing common law rights and is significant for that reason. She relied on Toogood J's conclusion that "aproved breach of a duty to uphold the integrity of the tax system by acting consistentlymay not be cured by the correctness of the Commissioner's decision".12[26] In our judgment Toogood J's conclusion exposes the conceptual obstacle faced by Michael Hill. Its claim presupposes that the Commissioner's s 6(1) obligation to protect the integrity of the tax system imports a duty to act consistently as between taxpayers. Ms Fitzgerald's submission before us that the Commissioner's duty is to actfairly, impartially and consistently was to the same effect. But that is not what the TAA says.[27] Without limiting the meaning of "the integrity of the tax system", s 6(2) specifies two discrete rights vested in the taxpayer and three discrete responsibilities imposed on the taxpayer and the Commissioner. A taxpayer's only right on an assessment is to have its liability "determined fairly, impartially and according to law"(s 6(2)(b)); the Commissioner's correlative duty must be limited to the same three elements when determining liability to tax. The first two duties of fairness and impartiality affirm administrative law principles of natural justice; the third duty refers to legal or substantive correctness.[28] Michael Hill's correctness challenge alleges that the Commissioner has failed toassess its liability on the transaction according to law. Ms Fitzgerald confirmed that the10 Miller v Commissioner of Inland Revenue (2003) 21 NZTC 18,243 (HC) at [47].11 Russell v Taxation Review Authority (2003) 21 NZTC 18,255 (CA).12 HC decision, above n 1, at [69].company does not otherwise challenge the Commissioner's determination for breach of either of her other two statutory duties of fairness or impartiality towards Michael Hill.Ms Fitzgerald also accepted that the English authorities do not identify inconsistency as a ground of challenge in itself but as symptomatic of another recognised ground.13[29] To the extent that the English authorities have spoken of inconsistency, it has fallen within the conceptual characterisation of unfair treatment, which Michael Hill does not assert, and then only when applied to the Commissioner's treatment of a particular taxpayer. On a principled analysis the existence of an inconsistency may be relevant in alerting the Commissioner to a possible error in the correctness of herassessment of a particular taxpayer's liability. It is otherwise telling that s 6(2) omits any reference to a fourth standalone duty of consistency and we cannot see any warrantfor reading that requirement separately into the meaning of the "integrity of the taxsystem". To the contrary, we are satisfied that the Commissioner is using her best endeavours to protect the integrity of the tax system when she determines liability on a transaction according to law.14[30] We also reject Ms Fitzgerald's submission that the pleaded duty must beimported into the statutory framework to ensure the Commissioner's conduct is subjectto public scrutiny. Other channels are expressly designed to promote theCommissioner's public accountability: she is accountable to the Minister of Revenue, Parliament and the public at large for the performance of her duties under ss 6 and 6A, which are supplemented by safeguards under the State Sector Act 1988 and the Ombudsmen Act 1975. These avenues are available to Michael Hill if it so wishes to pursue its interest as a responsible corporate citizen in ensuring that the Commissioner assesses all other taxpayers to liability according to law.[31] Moreover, even though the Commissioner is subject to strict standards of conduct because she is exercising highly coercive powers for the purpose of collecting revenue, her responsibility under s 6(1) to protect the integrity of the tax system is not of an absolute nature. The Commissioner is required instead to use her "best endeavours". The aspirational nature of this standard reflects Parliament's recognition13 See our discussion at [60]–[72] below.14 Russell v Taxation Review Authority, above n 11, at [36].of the limitations imposed upon the Commissioner by various factors including the availability of resources, the prospect of revising an interpretation of relevant statutory provisions, and the inevitability of differing views within the IRD about the interpretation of those provisions, particularly s BG 1 of the ITA. Those limitations may well result in a degree of inconsistency among taxpayers, viewed at any point in time. Such inconsistency may alert professional advisers to taxpayers, or the Commissioner, to an error in one assessment or another, as we have explained above. But any resulting adjustment must be directed to correctness. By that means an appropriate degree of consistency should be maintained.(c) Tannadyce[32] Ms Fitzgerald sought support from the Supreme Court's decision in Tannadyce Investments Ltd v Commissioner of Inland Revenue for her argument that other provisions in the TAA suggest a consistency duty.15 It is necessary to say a little about the background to that case. Tannadyce Investments Ltd alleged that the Commissioner had misconducted herself by deliberately withholding documents material to its assessment of taxable income. The taxpayer claimed that it was prevented from filing returns. The Commissioner's subsequent default assessments were said to be acts of conscious maladministration including abuse of power and breach of natural justice.16The company failed to invoke the dispute process under pt 4A of the TAA. The assessments were thus unchallenged and could not be disputed under pt 8A.17It sought to set the assessments aside by applying for judicial review. Both the majority (Blanchard, Tipping and Gault JJ) and minority (Elias CJ and McGrath J) agreed in the result that the application could never succeed on the facts.[33] Toogood J found that support for the existence of a consistency duty was available from the concurring minority's statement in Tannadyce that:18[35] In this context, defective administration in the exercise of what can be highly intrusive statutory powers can give rise to departures from the statutory purposes of such significance that resulting assessments, or other decisions affecting taxpayers, should be invalidated. That may be the case if fresh15 Tannadyce, above n 9.16 At [40].17 At [41].18 HC decision, above n 1, at [29], quoting Tannadyce, above n 9.appellate determination of the correct tax liability is not adequate to upholdParliament's requirements in tax administration. [34] On this basis, Toogood J concluded:[30] Since the majority of the Supreme Court in Tannadyce did not comment on these expressions of opinion by the minority, they should be regarded as persuasive rather than binding on this Court. If these views are adopted, it would seem to be arguable at this stage of the proceeding that a significant departure by the Commissioner from her duty under s 6 of the Act to protect the integrity of the tax system may well provide grounds to invalidate the decision.[35] However, the Judge's citation from the minority's judgment is incomplete. The two sentences to which he referred were followed by the minority's conclusion that:[35] It follows that at times, when allegations are made of such situations, judicial review will be available, where proper grounds are made out, as the better means of providing the necessary judicial scrutiny of departmental actions.(Our emphasis.)Contrary to the Judge's conclusion, the majority expressly rejected the minority'sstatement when confirming that the plain words of s 109 of the TAA excluded the right to challenge a disputable decision on judicial review even where the circumstances aresaid to provide "proper grounds" for that purpose.19[36] It is trite that context is decisive. The minority's statement in Tannadyce was in the limited context of its disagreement with the majority about whether and to what extent ss 109 and 114 excluded the availability of judicial review to challenge theCommissioner's disputable decisions — an issue earlier addressed by this Court inWestpac Banking Corporation v Commissioner of Inland Revenue.20 The majority inTannadyce favoured a restriction of the right of review outside the statutory challenge procedure to rare cases such as allegations of bias.21 In adopting a more expansive approach, the minority was satisfied that the assessment of liability to tax is an area of public administration where in particular circumstances ss 109 and 114 do not exclude judicial review.22 That difference and the reasons for it are not in issue on this appeal:19 Tannadyce, above n 9, at [70].20 Westpac Banking Corporation v Commissioner of Inland Revenue [2009] NZCA 24, [2009] 2 NZLR 99.21 Tannadyce, above n 9, at [59]–[61].22 At [35].Michael Hill is not seeking judicial review of the Commissioner's assessment but hasconfined its challenges to pt 8A of the TAA.[37] We note also that the minority in Tannadyce gave the example of "defective administration" in exercising statutory powers where the Commissioner is required to exercise independent judgment "in all decisions involving the tax affairs of individual taxpayers".23 The minority was addressing the right to judicial review with reference to the administration of the law, not the Commissioner's determination of liability imposed by statute. Both approaches in Tannadyce recognised the possibility of the process being so tainted by the existence of bias or gross misconduct that a court must invalidate the decision. Ultimately, it may be said, their differences were matters of degree.[38] Ms Fitzgerald sought separate support from the majority's statement inTannadyce that:[54] The words "on any ground whatsoever" [where used in s 109(a) of the TAA] must have been designed to emphasise the comprehensive nature of the embargo on bringing proceedings outside the statutory framework. Conversely, Parliament must have contemplated, by the use of those words, that disputable decisions could and should be contested and challenged under the statutory procedures on any ground whatsoever, including the ground that what the Commissioner claimed to be a decision or assessment was not a decision orassessment at all. If that could be established, the hearing authority's power tocancel on any ground whatsoever would appropriately be invoked.[55] The advantage Parliament saw in this approach must have been that, whatever the claimed ground of error, illegality or invalidity, a hearing authority, which will be the High Court if the taxpayer so elects, is empowered to adjudicate upon it. Furthermore, the hearing authority can go on in the same proceeding, as far as necessary or appropriate, to determine whether theCommissioner's assessment is correct and, if not, what the correct assessmentought to be. There is thereby no potential for separation of matters of legality from matters of correctness. This leads to a much more efficient and satisfactory process overall, particularly when regard is had to the various time limits that apply throughout the tax administration processes.(Footnote omitted.)[39] In Ms Fitzgerald's submission, the majority's acceptance in Tannadyce that process or invalidity claims can be brought within the pt 8A statutory challenge procedure "on any ground whatsoever" arguably supports the existence of an underlying duty of consistency.23 At [34]–[35].[40] We disagree. The majority's discussion of the availability of "any ground whatsoever" for disputing an assessment was on the obvious premise that the groundcrossed the threshold of arguability — it did not open the door to any ground, regardless of its tenability. The Court's recognition that challenges on procedural or substantive grounds should be heard under the same statutory umbrella provided by pt 8A begs the question of whether an underlying ground of challenge is arguable in law.[41] Of more importance is the Court's recognition in Tannadyce that challenges should be separated only in rare cases. That is because a challenge is in law an appeal by way of hearing de novo of the facts and law. The hearing authority is free to form its own view on the merits, which will of itself normally cure any process defects by the Commissioner. The Court said nothing to suggest that a failure to act consistently can amount to such a defect.[42] The older authorities cited by Ms Fitzgerald do not assist Michael Hill. They were addressing the possible displacement of the correctness criterion within the context of the availability of judicial review beyond the challenge process. Tannadyce has since settled that issue. We accept that correctness may not be the sole consideration when the Commissioner exercises her administrative powers within the TAA at large. But that factor does not displace its primacy within the process of challenging her determination of a taxpayer's liability.(d) Summary[43] In summary, we are not satisfied that ss 6 and 6A arguably recognise a standalone duty of consistency owed by the Commissioner to a taxpayer when exercising her statutory powers in assessing its liability to tax by reference to her assessment of materially similar transactions undertaken by another taxpayer. In our judgment there is nothing in ss 6 and 6A to displace correctness as the sole criterion for determining liability to tax. The statutory regime is the exclusive machinery for determining an appeal from an assessment.24 There is no scope for importing an absolute duty of consistency into that framework where it may undermine a discrete24 Inland Revenue Commissioner v Aken [1990] 1 WLR 1374 (CA) at 1380, approved in Golden Bay Cement Co Ltd v Commissioner of Inland Revenue [1996] 2 NZLR 665 (CA) at 672–673.process for deciding a challenge to a determination of liability made according to law. The judgments in Tannadyce do not affect this conclusion.(2) New Zealand authorities(a) Reckitt and Colman[44] However, if our conclusion on the statutory regime is wrong, we must addressMichael Hill's argument that the Commissioner as a decision-maker is subject to a standalone duty imposed by administrative law principles to act with both procedural and substantive consistency.25 Ms Fitzgerald relies on two separate lines of authority in New Zealand and England. We shall address the New Zealand cases first.[45] Ms Fitzgerald submitted that the Commissioner's duty is to treat similarly placed taxpayers alike or, put another way, not to differentiate among taxpayers. Its source is said to be Turner J's statement in Reckitt and Colman (New Zealand) Ltd v Taxation Board of Review:26I have come to the firm conclusion that the public has an interest in the due compliance with every requirement of a revenue statute — and if there can be any distinction between revenue statutes I would think that this conclusion is peculiarly applicable to income tax provisions. It is of the highest public importance that in the administration of such statutes every taxpayer should be treated exactly alike, no concession being made to one to which another is not equally entitled. This is not to say that in cases where the statute has so expressly provided the Commissioner has not a discretion to differentiate between cases — but this is in my opinion only to be done when provision for it is expressly, or may be impliedly, made in the legislation. Where there is no express provision for discretion, however, and none can properly be implied from the tenor of the statute, the Commissioner can have none; he must with Olympian impartiality hold the scales between taxpayer and Crown giving to no one any latitude not given to others.[46] The immediately following passage in Turner J's judgment is also material:27The due and impartial administration of a revenue statute seems to me a matter in which every citizen has an interest, and, insofar as the rights of Commissioner25 Philip A Joseph Constitutional and Administrative Law in New Zealand (4th ed, Thomson Reuters, Wellington, 2014) at [23.2.4].26 Reckitt and Colman (New Zealand) Ltd v Taxation Board of Review [1966] 2 NZLR 1032 (CA) [Reckitt and Colman] at 1042. Cited with approval in Brierley Investments Ltd v Bouzaid, above n 6, at 659; Miller v Commissioner of Inland Revenue [1999] 1 NZLR 275 (CA) at 296; andLemmington Holdings Ltd v Commissioner of Inland Revenue [1984] 2 NZLR 214 (HC) at 221.27 Reckitt and Colman, above n 26, at 1042–1043.and taxpayers are prescribed in a revenue statute, I do not think that, as regards any provision prescribed therein, it can be said by the taxpayer, of the Commissioner, that it is pro se introducto. Such provisions are prescribed in the process of promulgating a code of rules for the impartial and identical treatment of all taxpayers.[47] In Reckitt and Colman the issue was whether the Commissioner had acted lawfully in waiving a taxpayer's strict compliance with a statutory 30-day appeal period. The Commissioner argued that, as the object of the statute was not one of general policy and the indulgence granted would only benefit a particular taxpayer, the statutory conditions were dispensable and he was empowered to waive compliance.[48] The three members of the Court in Reckitt and Colman (North P, Turner and McCarthy JJ) unanimously rejected the Commissioner's argument. North P identified an overriding public interest in ensuring that all taxpayers pay the tax for which they are liable according to law, with a consequential interest in seeing that the Commissioner enforced statutory time limits for appealing against an assessment.28 By purporting to waive that limit, the Commissioner was putting the Crown in jeopardy once more to the potential disadvantage of other taxpayers. Turner J reached the same conclusion after a more extensive recitation of the leading authorities.29 So too did McCarthy J, noting that the Commissioner "purported to renounce something of real substance, and at thesame time to confer on the taxpayer something which the statute did not confer uponit".30 He also referred to Parliament's intention that the Commissioner should not have the power to give away the benefit of what the statute intended, "not merely as a procedural step" but as "the statutory establishment of a debt".31[49] In the High Court Toogood J dismissed Mr Heron's submission that Turner J's statement of principle was restricted to the Commissioner's administration of procedural provisions of a revenue statute, holding that:[36] It is at least arguable, however, that Reckitt and Colman is not limited in the manner Mr Heron suggests. First, as Ms Fitzgerald points out for theplaintiff, the phrase "administration of such statutes" is a reference to the entirety of the Commissioner's statutory functions, at the time pursuant to s 4(1)of the Inland Revenue Department Act 1952. That provision appointed the28 At 1038–1039.29 At 1039–1044.30 At 1046.31 At 1047.Commissioner "to be charged with the administration of the Inland RevenueActs and such other functions as may be from time to time lawfully conferredon him". The administration of the tax legislation clearly includes makingdecisions as to substantive tax obligations, as well as all other "procedural"decisions pursuant to statutory authority.[50] We disagree with the Judge. As Turner J himself noted, the issue in Reckitt and Colman was one of the "due and impartial administration of a revenue statute"; that is, its application or enforcement. The Court was not addressing the very different issue ofthe Commissioner's determination of a taxpayer's liability arising from her interpretation of the relevant taxing provisions. This critical distinction is implicit in s 6(2) of the TAA: it is between "the rights of taxpayers to have their liability determined fairly, impartially and according to law" (s 6(2)(b)); and "the responsibilities of those administering the law to do so by [the same criteria]" (s 6(2)(f)) (emphasis added). The determination of liability to tax requires the Commissioner'snondiscretionary assessment of a statutory result, whereas administration encompasses executive tasks performed in accordance with the broader demands on the IRD.[51] Reckitt and Colman stands as authority for the principle that when administering the revenue laws the Commissioner cannot grant one taxpayer an indulgence to which it is not lawfully entitled where it might operate to the disadvantage of the general body of taxpayers. In the absence of an express power she cannot place at risk recovery of tax fixed in accordance with the law by waiving compliance with a procedural step. In this context the Commissioner is bound to treat all taxpayers alike. Turner J's statementmust be read accordingly, not as founding a principle that the Commissioner owes one particular taxpayer an enforceable standalone duty to assess its transactions consistently with her assessment of materially similar transactions entered into by another taxpayer.[52] Reckitt and Colman is, if anything, authority against Michael Hill's argument intwo important respects. First, the rationale for this Court's finding that the Commissioner acted unlawfully in the absence of an express power was the general interest in the proper enforcement of the revenue provisions. The Commissioner's dutywas owed to the public at large. The proposition that breach of such a duty might vest a correlative right of action in favour of a particular taxpayer would be antithetical to the ratio of the decision.[53] Second, even if we accept for these purposes that the ratio of Reckitt and Colman might be cast in affirmative terms, it stands as an absolute bar to Michael Hill'sclaim. If the Commissioner is subject to a duty of consistency as pleaded, on the reasoning of all three judges the substantive comparative analysis required by Michael Hill's claim could logically lead to only one result. While the other similarly placed taxpayer would lose the benefit of an assessment to which it was not entitled (assuming the absence of either a binding ruling by the Commissioner or a time bar inthe other taxpayer's favour, as well as her correct assessment of Michael Hill'stransaction), Michael Hill could not acquire a converse benefit to which it was not legally entitled in the nature of cancellation of its liability otherwise assessed in accordance with the law.(b) Subsequent authorities[54] Ms Fitzgerald relied upon subsequent citations of Turner J's statement in Reckitt and Colman. But they do not assist Michael Hill's case. In Brierley Investments Ltd v Bouzaid Richardson J referred to Turner J's statement to reinforce that the Commissioner has no discretion unless empowered by statute.32[55] Miller v Commissioner of Inland Revenue points directly against the existence of a duty of substantive consistency.33 The Commissioner had applied the tax avoidance provision differently to materially-similar transactions entered into by a taxpayer. On the first set of a series of transactions the Commissioner assessed the company rather than the shareholders to tax; on the second set, sometime later, he took the oppositeapproach and assessed the shareholders directly to tax. In dismissing the taxpayer'sclaim of inconsistency the Court said this:34The appellants refer to the well-known passage in Reckitt and Colman (New Zealand) Ltd v Taxation Board of Review [1996] NZLR 1032 at p 1042 where Turner J said that it was of the highest public importance that in the administration of revenue statutes every taxpayer should be treated exactly alike, no concession being made to one to which another is not equally entitled. There is no doubt about the general principle, but in this case the Commissioner, when faced with situations of great complexity created by Mr Russell, was within his powers in utilising s 99 as seemed most appropriate to him in the particular circumstances of each taxpayer. He was also entitled to change his32 Brierley Investments Ltd v Bouzaid, above n 6, at 659.33 Miller v Commissioner of Inland Revenue, above n 26.34 At 296.mind. We agree with Baragwanath J as well that "it would not be the intentionof Parliament to relieve one taxpayer of liability because error had been made in the assessment of another." Baragwanath J concluded that this ground wasnot supported by "significant" evidence of unfair discrimination. We see nobasis for disturbing that finding.(Our emphasis.)[56] Accent Management Ltd v Commissioner of Inland Revenue (No 2) also counters Michael Hill's claim.35 The Commissioner settled disputes with some investors in the Trinity tax avoidance scheme on terms more favourable than the liability subsequently imposed by this Court on those taxpayers who challenged the Commissioner'sassessments. Despite the Court's judgment, the challengers submitted that consistency required the Commissioner to offer them the same terms as those agreed with the settling investors. In dismissing that argument, this Court asked rhetorically why the Commissioner's under-taxation of the settling taxpayers would justify the Court requiring him to make the same concession to the challengers.36[57] In Lemmington Holdings Ltd v Commissioner of Inland Revenue Eichelbaum J cited Turner J's statement in Reckitt and Colman as authority for an obligation for the Commissioner to act consistently in his dealings with a taxpayer — but this was subject to an express acknowledgement that such a duty was subject to the limitations imposedby the Commissioner's overriding duty to exact the correct amount of tax.37 A duty of fairness in this context would not prevent the Commissioner, for example, from changing his mind about the tax treatment of a transaction. In that case, the taxpayer's only remedy would be through the objection procedure.[58] Finally, Ms Fitzgerald referred to this Court's observation in Simunovich Fisheries Ltd v Commissioner of Inland Revenue that the Commissioner's failure to actconsistently in his treatment of the GST classification of an asset held by the taxpayer undermined the integrity of the tax system he was duty bound to protect.38Richardson P described the situation as rare. The Commissioner had characterised a fishing vessel on purchase as a taxable supply good. The taxpayer did not return GST on sale of the asset some three years later for the reasons that the transaction was zero35 Accent Management Ltd v Commissioner of Inland Revenue (No 2), above n 7.36 At [19].37 Lemmington Holdings Ltd v Commissioner of Inland Revenue, above n 26, at 221–222.38 Simunovich Fisheries Ltd v Commissioner of Inland Revenue [2002] 2 NZLR 516 (CA) at [50].rated. The Court found that the Commissioner acted unlawfully in changing the vessel'scharacterisation on sale without altering the original assessment.39 That conclusion cannot be questioned but it does not assist in this very different context.(c) Summary[59] In our judgment Turner J's statement in Reckitt and Colman in a different factual and legal setting does not provide a tenable foundation for asserting the existence of a common law duty owed by the Commissioner to Michael Hill to assess its liability to tax on a transaction consistently with her assessment of a materially-similar transaction entered into by another taxpayer.(3) English authorities[60] Alternatively Ms Fitzgerald sought support for Michael Hill's case from threeEnglish authorities: HTV Ltd v Price Commission,40 R v Inland Revenue Commissioners, ex parte Preston41 and R v Inland Revenue Commissioners, ex parte MFK Underwriting Agents Ltd.42[61] In HTV the Price Commission was responsible for charging what was known as the Exchequer fee. HTV had fixed its advertising charges on the basis of the levy as originally set. The Commission later increased the levy and HTV applied to review its decision. There was no right of appeal.[62] Lord Denning MR found against the Commission on an estoppel principle because of its departure from its previous course of conduct on which HTV had relied on setting its prices. He noted the Commission's duty to "act with fairness and consistency" in these circumstances.43 He accepted that the Commission had in any event erred in law.44 Scarman LJ also recognised a duty on the Commission to act fairly and consistently, justifying intervention if the authority had acted unfairly, but he too39 At [57].40 HTV Ltd v Price Commission [1976] ICR 170 (CA) [HTV].41 R v Inland Revenue Commissioners, ex parte Preston [1985] 1 AC 835 (HL) [Preston].42 R v IRC ex parte MFK Underwriting Agents [1990] 1 WLR 1545 (QB) [MFK Underwriting Agents].43 HTV, above n 40, at 185.44 At 186.recognised that the Commission had erred in law.45 The third member of the Court, Goff LJ, confined his judgment solely to a finding of error of law.46[63] Preston was again an application for judicial review, on this occasion of a statutory notification procedure initiated by the Revenue Commissioners. The taxpayer claimed that the Commissioners had purported to contract or represent that they would not later reopen tax assessments for earlier years providing the taxpayer withdrew claims for deductions in them. The House of Lords dismissed this claim. In delivering the leading speech, Lord Templeman accepted the availability of judicial review if the Commissioners' decision was unfair in that their conduct was equivalent to a breach ofcontract or representation amounting to an abuse of power.47 There was no evidential basis, however, for such a claim. HTV was distinguished on the ground that the unfairness arose from the Price Commission's error of law when changing its mindabout the treatment of the Exchequer levy.[64] MFK Underwriting Agents was another challenge on judicial review to the Commissioner's assessment of taxation payable as income. The Court of Appeal held unanimously that the Commissioner did not give a clear and unambiguous representation to the taxpayer about the future tax treatment of income.48 The Commissioners had not acted unfairly in the sense that they had promised to follow a certain course so as to render any departure from it unfair.[65] Ms Fitzgerald relied particularly upon Judge J's statement in MFK Underwriting Agents that:49I accept without hesitation that (a) the revenue has no dispensing power and (b) no question of abuse of power arises merely because the revenue is performing its duty to collect taxes when they are properly due. However, neither principle is called into question by recognising that the duty of the revenue to collect taxes cannot be isolated from the functions of administration and management of the taxation system for which it is responsible.45 At 191–192.46 At 193–195.47 Preston, above n 41, at 866–867.48 See, for example, MFK Underwriting Agents, above n 42, at 1570 per Bingham LJ.49 At 1574–1575.If the argument for the Inland Revenue were correct any application for judicial review on the ground of unfair abuse of power would be bound to fail if the revenue were able to show that its actions were dictated by its statutory obligation to collect taxes. [A]lthough the Inland Revenue may not indulge in"ultra vires" relaxation of the relevant statutory fiscal provisions, it is not "ultravires" the revenue to administer the tax system fairly.If contrary to my conclusion it had been established that the revenue had abused its powers the case for granting judicial review as a matter of discretion would have been clear. In expressing that view I have recognised that it is only in an exceptional case of this kind that the process of judicial review is permitted and the court should be extremely wary of deciding to be unfair actions which the commissioners themselves have determined are fair.The suggestion that a huge amount of tax would be lost to general funds as a consequence of an order for judicial review is an argument without force. The remedy of judicial review for improper abuse of power — if established —should be available equally to all taxpayers irrespective whether their potential liability is huge or small. If persuaded that judicial review would otherwise have been appropriate I should have exercised my discretion in favour of granting it.(Ms Fitzgerald's emphasis added.)[66] Judge J's statement must be read in the context of his judgment as a whole. He accepted Preston's authority that judicial review is available against the Commissioner for abuse of power, a position now settled in New Zealand byTannadyce. The obiter passages cited by Ms Fitzgerald were Judge J's answer to what he apparently regarded as an extreme argument for the revenue. It was to the effect thata taxpayer had no right of relief "for judicial review on the ground of unfair abuse of power if the revenue were able to show that its actions were dictated by its statutory obligation to collect tax" because the fiscal consequences may be severely adverse.50His response to that absolutist proposition may be thought uncontroversial in this country.[67] Judge J's statement also reflects the very different issues raised by all three English decisions and Michael Hill's claim. In each English case the complaint was that the levying authority had gone back on its word upon which the taxpayer had earlier relied to its detriment. The English revenue laws did not provide the Commissioner with a similar power to that vested by pt 5A of the TAA to issue binding rulings. The50 At 1574.claims were founded upon analogies with the private law doctrine of estoppel or the public law doctrine of legitimate expectation. All the Courts recognised that theCommissioner's misconduct in those respects might constitute an abuse of process amounting to unfairness.[68] In the New Zealand setting Judge J's statement in MFK Underwriting Agentsconfirms that the Commissioner could not lawfully resile from a position on the tax treatment of a transaction to which she had unequivocally bound herself and the taxpayer had relied to its detriment, just as if in response to Michael Hill's request theCommissioner had issued a binding ruling that s BG 1 did not apply to the transaction but during the term of the ruling had sought to assess the transaction to tax.[69] Only Lord Denning MR and Scarman LJ in HTV recognised a duty of consistency but limited expressly to the treatment of the same taxpayer, which is an essential component of the obligation to act fairly under English law. That limited duty of fairness is subsumed within the estoppel type of ground because it is an element of the requirement for consistency of conduct towards the particular taxpayer. Simunovichwas decided on an analogous principle without reference to the English authorities. None of the authorities suggest an obligation of consistency in the treatment of the same taxpayer might possibly extend to consistency of treatment as between taxpayers.[70] We add three further points. First, New Zealand courts have refused to countenance a public law doctrine of estoppel against the operation of a statute imposing a duty of a positive kind.51 The closest administrative law parallel is the doctrine of legitimate expectation, which is not at issue here. Even if there can be a legitimate expectation of a substantive as opposed to a procedural nature, such an expectation could not possibly be raised to defeat a statutory obligation to pay tax according to law.[71] Second, the rationes of the judgments of Scarman and Goff LJJ in HTV were firmly founded on an orthodox error of law. The Price Commission's decision was wrong not because it was unfair; it was unfair because it was wrong. The unfairness lay in the consequences of applying an incorrect decision to a company that had arranged its51 Brierley Investments Ltd v Bouzaid, above n 6, at 661.financial affairs in accordance with an earlier correct interpretation of the law.52 This reasoning parallels the primacy of correctness in the present appeal. We repeat that consistency is the conceptual corollary of legal correctness in that its absence can alert parties to a possible error of law in the Commissioner's determination of liability to tax. That is how Lord Templeman viewed its relevance in the HTV case: "[T]he inconsistentand unfair results to which Scarman LJ drew attention were themselves powerful support for the contention that the Price Commission must have misconstrued thecode."53[72] Third, imposition of a duty of consistency of treatment as between taxpayers would raise problems of policy and principle. Inconsistency in the Commissioner'streatment of a transaction or transactions entered into by a particular taxpayer can be readily identified and measured. However, an inconsistency in her comparative treatment of taxpayers would only come to light through inadvertent disclosure as it hasin Michael Hill's case, leaving the consistency duty to be applied in a random manner.(4) Additional component[73] Ms Fitzgerald accepted that inconsistency is not of itself unfair in a public law sense.54 Proof of an inconsistency will not of itself be enough to invalidate an assessment.55 Something more is required to establish an arguable claim in private law. She accepted the inevitability of cases of inconsistency given the IRD's size.[74] Ms Fitzgerald submitted that the added dimension in this case is the Commissioner's irrationality.56 It is said to be analogous to improper motive, conscious maladministration or a departure from an earlier assurance or representation leading to alegitimate expectation. In this case the Commissioner's irrationality allegedly arises from her failure to plead (a) a change of mind or (b) an error in her assessment of the other taxpayers' liability or (c) the existence of material differences between the52 See also Westpac Banking Corporation v Commissioner of Inland Revenue (2008) 23 NZTC 21,694 (HC) at [75].53 Preston, above n 41, at 866.54 HTV, above n 40, at 192; Westpac Banking Corporation v Commissioner of Inland Revenue, above n 20, at [75].55 Westpac Banking Corporation v Commissioner of Inland Revenue, above n 20, at [80].56 Pharmaceutical Management Agency Ltd v Roussel Uclaf Australia Pty Ltd [1988] NZAR 58 (CA) at 67.respective transactions that might justify otherwise inconsistent treatment. This omission, it is said, leads necessarily to a conclusion that the Commissioner has contemporaneously and knowingly adopted two fundamentally inconsistent positions for no apparent reason.[75] Ms Fitzgerald submitted that on this thesis the Commissioner must consider her assessment of the IRD Approved Structures to be correct (and inferentially Michael Hill's assessment to be incorrect) and that the Commissioner has acted irrationally by deliberately applying a different and inconsistent assessment to its transaction. Ms Fitzgerald relied on Toogood J's finding that "on the current pleadings the Commissioner appears to have adopted two fundamentally inconsistent approaches, with no logical or rational explanation".57[76] We reject Ms Fitzgerald's submission of irrationality for two reasons. First,Michael Hill's case is advanced on the factual premise that the Commissioner hadassessed the IRD Approved Structures before issuing her binding ruling to the company in this case. There was no contemporaneity. The Commissioner's conscious knowledgeof her earlier assessment of the other taxpayer's materially similar transactions does not disqualify her from assessing Michael Hill's transaction differently. This state of relative knowledge cannot possibly support an inference that when assessing Michael Hill's liability the Commissioner believed her assessment of the IRD Approved Structures to be correct. An equally available inference is that with the benefit of reconsideration she believed her assessment of Michael Hill's liability to be correct and her assessment of the IRD Approved Structures to be incorrect or the transactions themselves to be materially different.[77] The Commissioner's overriding duty is, we repeat, to determine Michael Hill'sliability on its transaction correctly according to law. Ms Fitzgerald accepted the Commissioner's entitlement to change her mind on questions of statutory constructionand in particular about the application of s BG 1 of the ITA. The Commissioner'sinterpretation of the relevant taxing provisions in a similar case involving another taxpayer may inform her in determining Michael Hill's particular liability but otherwise it is of no moment. The Commissioner is not obliged to justify to one taxpayer her57 HC decision, above n 1, at [44].taxation treatment of a transaction entered into by another taxpayer. The degree of similarity between the two transactions is immaterial. It follows that we disagree with Toogood J that the Commissioner is not entitled to adopt two fundamentally inconsistent approaches when assessing different taxpayers' liability to tax on materially similar transactions. It will be appropriate for her to do so if she considers the earlier approach wrong.[78] Second, even if the Commissioner's approach was irrational in public law terms, Michael Hill does not have a resulting right of action for the reasons already given. We repeat that a duty of consistency of taxation treatment or interpretation, if it exists, is owed to the public at large. An individual taxpayer does not acquire a correlative right of action for breach. If the Commissioner's assessment of Michael Hill's liability to tax is correct, the company has no greater interest than the general public in ensuring rectification of her incorrect assessment of the other taxpayer.(5) Remedies[79] The extent to which Michael Hill's consistency claim runs contrary to the TAA is exposed by the remedies sought. Ms Fitzgerald emphasised the discretionary nature ofthe hearing authority's powers under s 138P to confirm, cancel or vary the Commissioner's assessment. In her submission, it would be for the hearing authority on a pt 8A challenge to determine the appropriate interaction between the results of the correctness and consistency challenges. Michael Hill's high point is that the hearingauthority would uphold the inconsistency claim by cancelling the liability assessment even if it finds that the Commissioner's tax treatment is correct.[80] This argument could not possibly succeed. We repeat our agreement with Mr Heron that liability under the revenue legislation is imposed by statute, not by the Commissioner.58 There is no discretion to be exercised when assessing the amount of liability.59 In performing her duty to collect revenue the Commissioner must determinea taxpayer's liability fairly, impartially, and according to law.58 Commissioner of Inland Revenue v Canterbury Frozen Meat Co Ltd [1994] 2 NZLR 681 (CA) at 689; MFK Underwriting Agents, above n 42, at 1569, quoted in Brierley Investments Ltd v Bouzaid, above n 6, at 669.59 Commissioner of Inland Revenue v Lemmington Holdings Ltd (1982) 5 NZTC 61,268 (CA) at 273.[81] The hearing authority must be bound by the same statutory obligation on an appeal: its power to cancel, vary or reduce is limited to the degree, if any, necessary torectify the incorrectness of the Commissioner's assessment. The s 138P power is not atrue discretion in the orthodox sense. It is, rather, an obligation to act upon satisfaction of a statutory precondition that the Commissioner's determination of liability to tax wasincorrect.60[82] In argument Ms Fitzgerald suggested that if something has gone wrong in the decision-making process leading to a tax assessment the High Court may, in exercisingits supervisory function, grant a remedy cancelling the taxpayer's liability. However, the Supreme Court's recognition in Tannadyce of the taxpayer's right to rely on administrative law grounds within the challenge process does not transform the essential nature of that process into an application for judicial review. The majority construed s 109 as giving the hearing authority the same if not wider powers as the High Court on judicial review and with correspondingly wider remedies.61 There was no suggestion that a hearing authority is exercising a supervisory power on a pt 8A appeal where the inquiry is primarily into the correctness, lawfulness or validity of the decision. Judicial review as a standalone remedy is confined to the lawfulness of the process outside of the statutory regime, which is why when exercising its powers the High Court does not decide the merits or substitute its decision for the impugned decision but sets the decision aside and requires the decision-maker to repeat the process lawfully.[83] We accept that a hearing authority may invoke its power to cancel in the extreme examples cited in Tannadyce where the Commissioner's assessment was not anassessment at all or the Commissioner acted outside or abused her powers in making the assessment. But Michael Hill does not assert that the Commissioner's assessment fellinto that rare or extreme category or that she acted ultra vires or abused her powers in determining its liability. It alleges she acted unlawfully because the assessment was inconsistent with another assessment. The hearing authority would have no justifiable basis for cancelling or invalidating an assessment on this ground alone if it was correct in law.60 Harley Development Inc v Commissioner of Inland Revenue [1996] 1 WLR 727 (PC) at 732, approved in Golden Bay Cement Co Ltd v Commissioner of Inland Revenue, above n 24, at 672.61 Tannadyce, above n 9, at [57] and [71].[84] As this Court said in Westpac Banking Corporation in rejecting an argument that the Commissioner owed a consistency duty to a taxpayer when assessing its ownmaterially similar transactions, the assessment on any transaction should reflect the correct tax position and complaints about process deficiencies should not relieve the taxpayer of that liability.62 The same reasoning must apply equally to assessments as between taxpayers.[85] In apparent recognition that cancellation would be an unarguable option, Ms Fitzgerald postulated a middle ground of remedy between the extremes ofaffirmation and cancellation of the Commissioner's assessment. She spoke of a generaldiscretion vested in the hearing authority by s 138P to decide the appropriate interaction between the results of the correctness and consistency challenges. However, she was unable to identify any objective criterion by which a hearing authority might exercise a general discretion within the statutory framework other than on the ground of correctness.(6) Reconstruction[86] On appeal Michael Hill supported Toogood J's judgment on a new ground notraised in the High Court.[87] Michael Hill relies on the Commissioner's opposition to the existence of a dutyon the ground that she has no discretion when assessing a transaction to tax. She must determine liability according to the law as it is imposed by the relevant statutory provisions. However, Michael Hill now says, this line of argument could not apply where the Commissioner exercises a statutory power importing a degree of discretion. She would be exercising a discretion when acting under s GA 2 of the ITA to determine the appropriate reconstruction of a tax avoidance arrangement to counteract a tax advantage obtained by Michael Hill.[88] Ms Fitzgerald observes that the sole purpose for which the reconstruction power is exercised is to ensure that the tax advantage derived from the arrangement is counteracted. Given that the Commissioner is exercising a broad discretion after62 Westpac Banking Corporation v Commissioner of Inland Revenue, above n 20, at [61].annihilating under s BG 1(1) the arrangement and its tax consequences,63 she is bound to take into account the manner in which she has treated other similarly placed taxpayers and adopt a reconstruction having the effect of treating Michael Hill, in terms of tax consequences, no less favourably than other similarly placed taxpayers.[89] Michael Hill's inconsistency challenge relating to the Commissioner'sreconstruction in exercise of her discretion under s GA 1(2) is said to arise given that (a) the taxation result for the IRD Approved Structures are not subject to s BG 1; (b) therefore the results cannot give rise to a "tax advantage" as that term is used ins GA 1; (c) the taxation results for Michael Hill are the same as for the IRD Approved Structures' taxation results; (d) in order to ensure consistency of treatment of taxpayers when exercising her discretion, the Commissioner must consistently treat the tax results for Michael Hill under its arrangement as not giving rise to a "tax advantage" for thepurposes of s GA 1; (e) the Commissioner has exercised her reconstruction discretion in notices of response issued to Michael Hill by not reinstating the same tax results as for the IRD Approved Structures; and (f) the Commissioner's exercise of a discretion must necessarily result in an inconsistent treatment as between taxpayers.[90] Thus, it is said, it is at least tenably arguable for the purposes of the strike-out application that the Commissioner has knowingly exercised a downstream discretion in a manner that is inconsistent and for no explained reason.[91] This complex argument does not, in our judgment, advance Michael Hill's claim.The absence of a pleading to this effect is not fatal because it could be rectified, although not without difficulty as Mr Heron points out. The more fundamental problem is that when analysed Michael Hill's new argument is no more than a variation on its existing theme. The defining inconsistency for Michael Hill's purpose is the Commissioner's failure to reinstate Michael Hill's tax advantages to the same extent asthose enjoyed by the other taxpayer. But this presupposes an underlying duty of substantive consistency which we have rejected. Its only difference is its focus on theconsequences of the Commissioner's alleged failure to act consistently. It does not assist in determining whether a consistency duty exists.63 Alesco NZ Ltd v Commissioner Inland Revenue [2013] NZCA 40, [2013] 2 NZLR 175 at [119].Result[92] The appeal is allowed. Michael Hill's cause of action based on the ground of inconsistency is struck out.[93] Michael Hill is ordered to pay the Commissioner costs for a standard appeal on a band A basis together with usual disbursements. We certify for second counsel.Solicitors:Crown Law Office, Wellington for AppellantRussell McVeagh, Auckland for Respondent