CONTRACT PACIFIC LTD V COMMISSIONER OF INLAND REVENUE HC AK CIV-2006-404-001193

CONTRACT PACIFIC LTD V COMMISSIONER OF INLAND REVENUE HC AK CIV-2006-404-001193 11 November 2008IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV-2006-404-001193BETWEEN CONTRACT PACIFIC LIMITED Plaintiff AND COMMISSIONER OF INLAND REVENUE Defendant Hearing: 11-15 February 2008 Appearances: R B Stewart QC together with G J Harley and A A H Low for the Plaintiff M T Scholtens QC together with M Deligiannis for the Defendant Judgment: 11 November 2008JUDGMENT OF DUFFY JThis judgment was delivered by Justice Duffy on 11 November 2008 at 12.00 noon, pursuant to r 540(4) of the High Court Rules Registrar/Deputy Registrar Date:Counsel: R B Stewart QC P O Box 2302 Auckland 1001 for the Plaintiff M T Scholtens QC P O Box 5454 Wellington 6145 for the Defendant Copies To: G J Harley P O Box 5241 Wellington 6001 Chapman Tripp (A A H Low) P O Box 2206 Auckland 1140 Crown Law (M Deligiannis) P O Box 2858 Wellington 6140[1] The plaintiff, Contract Pacific Limited ("Contract Pacific"), is a registered person under the Goods and Services Tax Act 1985. The defendant is the Commissioner of Inland Revenue. The issues for determination in this proceeding arise from Contract Pacific's claim that it is and always has been entitled to an adjustment to its Goods and Services Tax returns (GST returns) for the period between June 1993 and April 1999. Originally, the adjustment amounted to approximately $7.3m. Some of the claimed adjustment has been refunded. The balance still outstanding is approximately $6.3m. Contract Pacific contends that on the grounds advanced in its amended statement of claim, it is entitled to the balance. The Commissioner of Inland Revenue ("the Commissioner") disputes this. [2] The issues for determination are layered. The first issue is whether or not Contract Pacific has an action under s 27 of the Bills of Exchange Act 1908 for a computer generated cheque it received from the Commissioner that was dishonoured before payment was made. The cheque was for the sum of approximately $7.5m and included the GST credit adjustment refund of $7.3m, which Contract Pacific claimed it was owed. This issue requires consideration of the statutory obligations s 20(5) and s 46 of the Goods and Services Tax Act 1986 impose on the Commissioner following receipt of a registered person's assessment of GST for a particular period. Contract Pacific relies on an interpretation of those provisions to establish there is valuable consideration to support its action on the cheque. Contract Pacific also relies on an interpretation of s 241(6) of the Taxation (Taxpayer Assessment and Miscellaneous Provisions) Act 2001 to establish it comes within the first limb of the provision's savings provision and is, therefore, immune to that Act's retrospective scope, with the result that Contract Pacific's entitlement to a refund remains as it was on 5 February 2001 when the refund cheque was issued. [3] The second issue, which is an alternative argument to support Contract Pacific's entitlement to a refund of $7.3m, is whether or not Contract Pacific comes within the third limb of s 241(6). This turns on whether or not before 14 May 2001, the Commissioner reduced the amount that would otherwise be payable by Contract Pacific for the relevant GST period. A preliminary issue to be determined here is the Court's jurisdiction to make a determination of this type in a proceeding of this nature.[4] The third issue is whether or not Contract Pacific entered into credit adjustment agreements with the Commissioner that preclude it from pursuing its two causes of action. [5] The final issue is whether or not, independently of the agreed credit adjustments, the Commissioner has made an assessment of Contract Pacific's liability to pay GST which is for an amount that is approximate to the balance of the refund claim and, if so, whether or not he has issued a notice of assessment to Contract Pacific for that amount. The Commissioner, who makes this assertion, relies on it as a set-off if I should find he can be sued on the stopped cheque and that the credit adjustment agreements do not bar Contract Pacific from pursuing its claims for the balance of the $7.3m refund. However, the Commissioner has neither pleaded the set-off nor some of its key elements in his statement of defence. Contract Pacific disputes his right to claim the set-off in the absence of an express pleading. [6] Since the Commissioner contends that the credit adjustment agreements are a complete bar to Contract Pacific's legal claims against him, I propose to deal with that issue first.Facts[7] At all relevant times Contract Pacific carried on the business of an inbound tour operator. This involved selling New Zealand based holiday packages to overseas wholesalers who then on-sold the holiday packages to overseas retailers. Those retailers in turn sold the services to overseas-based holidaymakers who were to visit New Zealand. The persons who ultimately enjoyed the benefit of the services did so in New Zealand. [8] Between July 1993 and April 1999, Contract Pacific included GST in the sale prices for the services it sold to overseas wholesalers of New Zealand based holiday packages. Over this period some other inbound tour operators, in a like position to Contract Pacific, did not include GST in their sale prices. The same divergence in the treatment of GST occurred amongst providers of educational services inNew Zealand who sold their services to overseas wholesalers and retailers. Some such providers included GST in their prices, others did not. [9] In May 1999 the law was changed to remove any ambiguity over liability to include GST in the sales prices for New Zealand based services sold to overseas persons for the purpose of on-sale to New Zealand bound visitors. The Commissioner had always maintained that GST was payable on such services; the law change put the matter beyond doubt. The law change was prospective in its effect, leaving the ambiguities of the past intact. [10] On 26 June 2000, as a result of advice from Ernst & Young, Contract Pacific filed a GST return in which it, inter alia, sought a readjustment and refund of the GST it had paid between 1 July 1993 and 30 April 1999. Other persons in a like position to Contract Pacific followed suit. The Commissioner found that inbound tour operators and providers of educational services to overseas persons (the GST claimants) disputed his ability to charge GST on the services he considered were subject to that tax. [11] The Commissioner's internal computer records for 28 June 2000 record a GST assessment from Contract Pacific for a refund of $7,345,396.94. The effect of other additional sums brought the entire refund amount up to $7,542,295.51. [12] On 10 July 2000 the Commissioner wrote to Contract Pacific advising it that payment of the GST refund had been withheld pending investigation of the readjustment claim. This communication constituted notice of the Commissioner's intention to investigate as required by s 46(5) of the Goods and Services Tax Act. It is common ground between the parties that this notice was given within the required statutory timeframe. [13] Some time between July and August of 2000 the Commissioner established a project team to examine the claims for readjustment that he was now facing. The project ran from this time until October 2001.[14] On 19 and 23 January 2001 Contract Pacific and its advisers met with the IRD personnel on the project team. At the meeting on 19 January 2001 the Commissioner requested further information about Contract Pacific's refund claim. This was given to the Commissioner in a letter dated 24 January 2001. The letter conveys that from Contract Pacific's perspective, it considered it had answered all the Commissioner's concerns and was, therefore, awaiting the payment of its refund. [15] Then on 5 February 2001 Contract Pacific received from the Commissioner a notice of assessment and refund cheque for the sum of $7,542,295.51. Of this amount, approximately $7.3m represented the credit readjustment on the GST paid between 1993 and 1999. On the same date the Commissioner's internal computer records were adjusted to record the payment of $7,542,295.51, which left a nil balance. [16] The Department's computerised accounting system is set up in such a way that unless, while inquiries are pending, a halt is placed on the transactional account for a registered person, the system will automatically generate a notice of assessment and, if a refund is recorded, a refund cheque as well. While Contract Pacific's refund claim was under investigation, an account halt for Contract Pacific had been placed on this system. Through administrative error, the account halt expired on 5 February 2001. The result was the automatic generation of a notice of assessment which took into account Contract Pacific's readjustment claim and recorded a refund of approximately $7,542,295.51, coupled with a refund cheque for that amount. On 9 February 2001 the Department became aware of the error and took steps to stop payment on the refund cheque. On 14 February 2001 Contract Pacific sought a special answer on the IRD's cheque. On the same day payment on the cheque was stopped and the cheque dishonoured. The proceeds of this cheque never became available to Contract Pacific. [17] The Commissioner's transaction account for Contract Pacific recorded the refund of $7,542,295.51 as a credit for Contract Pacific on 5 February 2001. The payment of that amount is recorded for that day. Then on 14 February 2001 the payment is reversed (consistent with stopping the cheque) and the $7,542,295.51was again recorded as a credit to the company. This credit was not removed from the transaction account until 18 May 2001. [18] Until 2 April 2001 the Commissioner advised the GST claimants that further investigation of their claims was required. Then on 2 April 2001 the Government introduced the Taxation (Annual Rates, Taxpayer Assessment and Miscellaneous Provisions) Bill. At this stage the Bill's provisions did not include amendments that would retrospectively apply the GST rating provisions enacted in May 1999 to earlier transactions. The Bill had its first reading and was referred to the Finance and Expenditure Committee. [19] The Commissioner had sought advice on the disputed GST claims from the Solicitor-General. His written opinion of 20 April 2001 included the view that as the law presently stood, facilitation fees charged for services inbound tour operators provided to overseas operators incurred no liability for GST, but other charges for those services did. The inbound tour operators did not accept the Solicitor-General's view of the law and continued to dispute their liability to pay GST on payments they received for any services provided to overseas operators on or before 30 April 1999. [20] By May 2001 Contract Pacific was becoming frustrated with what it perceived to be the Commissioner's delay in resolving its readjustment claim. In early May 2001 Contract Pacific began advancing alternative grounds for its readjustment claim that had the effect of splitting the claim in two. One part sought a readjustment by zero-rating facilitation fees received over the relevant period (in keeping with the Solicitor-General's view). The other part, which was the more contentious part, sought to have the balance of the claimed readjustment treated as zero-rated for GST purposes. Contract Pacific and the Commissioner discussed this split on 4 May 2001. [21] In May 2001 the question of the GST claimants' liability to pay GST on all services in dispute was still very much alive. If their view of the law was correct, the Commissioner could have been required to refund GST paid for all services sold before 30 April 1999 to overseas persons. The size of the potential refund came to several billions of dollars. The Government wanted to avoid this outcome. On14 May 2001 the Minister of Revenue announced that the Government intended to amend the Bill to make it retrospective so as to put beyond doubt the liability of registered persons to pay GST in the circumstances giving rise to the dispute. [22] On 18 May 2001 the Department's internal transaction account for Contract Pacific was amended to reverse the 5 February 2001 notice of assessment and consequential refund. This was done to prevent any further computer generated refund cheques from being issued. [23] After the proposed retrospective amendment was announced, the GST refund claimants, including Contract Pacific, and/or their representatives met with the Commissioner. Submissions were made on the GST claimants' behalf to the Finance and Expenditure Committee. Attempts were also made to resolve the disputed refund claims through negotiations between the claimants and the Commissioner. Because the proposed legislation's full scope remained unknown, considerable effort went into seeing if a negotiated solution to the dispute could be achieved. Furthermore, the treatment of facilitation fees and the use of money interest claims which arose from some registered persons having paid GST on those fees were distinct live issues that required resolution. [24] From June 2001 the focus of discussions between Contract Pacific and the Commissioner, as with the other GST claimants, moved to the part of the readjustment claim that sought to have facilitation fees zero-rated for GST. Then on 2 July 2001 the account halt on Contract Pacific's transaction account expired again. This time a notice of assessment was sent which disallowed the credit adjustment and consequential refund Contract Pacific sought. On 18 July 2001 the transaction account was set at nil. Later, on 1 August 2001, an officer of the Department contacted Contract Pacific through its adviser, Mr Blakely, to advise that the notice of amended assessment had been generated in error. Mr Blakely was advising a number of the inbound tour operators on this issue. He responded in writing on 13 September 2001 advising that, in view of the Department's admitted error, Contract Pacific would be taking no steps to protect its position in relation to the amended notice of assessment. It was common ground between the parties at the hearing that what occurred at this time did not legally constitute an assessment.[25] On 27 July 2001 the Commissioner's representatives met with Contract Pacific at its offices in Christchurch. The meeting is described in an internal report of the Department as being "very convivial and conducted in a good tenor". The report reveals that Contract Pacific was experiencing financial liquidity problems. This was confirmed in evidence I heard from the company's managing director, Mr Doody. Throughout the period for which payment of GST was in dispute, Contract Pacific had paid GST on payments received for all its services. Some of its competitors had not done so. Mr Doody gave evidence of how Contract Pacific had been unable to match the lower charges set by some of its competitors and this had resulted in a loss of business for Contract Pacific. He surmised that the lower charges against which Contract Pacific could not compete were the result of competitors setting prices that did not include a GST component. Secondly, and perhaps because of the liquidity problems it was suffering, Contract Pacific wanted to expedite the finalisation of its readjustment claim for the zero-rating of facilitation fees. The report shows that the Department was disposed to considering this approach and releasing a partial refund of the readjustment claim. Thirdly, the report records Contract Pacific's stated intent to pursue an action under the Bills of Exchange Act on the cancelled refund cheque issued on 5 February 2001. [26] Throughout August 2001 the parties communicated over the refunding of the GST payments on the facilitation fees. The possibility of a partial refund was growing stronger. I have the impression that during this time the GST claimants were maintaining their entire claims for a credit readjustment should be allowed, whereas the Commissioner was waiting for the curative legislation, which would remove the foundation for those claims, to be passed. It was commonly accepted that the GST paid on facilitation fees and the use of money interest therefrom would be readjusted. The zero-rating of those fees for GST was unaffected by the proposed legislation. [27] From the mid to later part of 2001, the passage of the proposed new legislation continued. By early October 2001 it would have been clear to all persons with an interest in the topic that the retrospective elements of the proposed legislation were going to be enacted. The likelihood of these elements removing any room for argument over liability to pay GST on the services in dispute must havebeen obvious by 4 October 2001 when three supplementary order papers introduced, amongst other things, the Taxation (Taxpayer Assessment and Miscellaneous Provisions) Bill. The Bill came into force on 24 October 2001 as the Taxation (Taxpayer Assessment and Miscellaneous Provisions) Act. [28] The general effect of the new legislation was to make clear there was and always had been liability to pay GST on the services in dispute. Any registered person who had paid GST and then sought to obtain a readjustment on the strength of the arguments that had led to the passing of the legislation lost the foundation to do so. There was a savings provision that exempted a small category of persons from its effect. Those persons' rights under the original law were left intact. [29] Contract Pacific could only avoid the legislation's effect if it could bring itself within the savings provision. The company was in the special position of having received a refund cheque from the Commissioner that had later been stopped and dishonoured. If this circumstance meant that the company had been paid a refund, it would come within the savings provision. [30] After the legislation was passed, the claims for credit readjustment of GST paid on facilitation fees and quantification of the Commissioner's liability to pay use of money interest on the credit adjustments still had to be resolved. The Commissioner set about resolving these outstanding disputes. The Commissioner did this by entering into written agreements with the various GST claimants pursuant to s 89I of the Tax Administration Act 1994. In the case of Contract Pacific the resolution process began on 24 October 2001. [31] On 24 October 2001 Mr Blakely sent an email to the Commissioner advising that the credit readjustment for the "total margin claim" (which was a reference to the facilitation fee component of the refund claim) for the relevant periods came to a total of $1,075,169.99. The email records he anticipated receiving the "Agreed Credit Adjustment Form following the procedure adopted for other claimants". [32] The Commissioner responded on 26 October 2001 in an email sent by one of his officials, Brenda Kearns. Ms Kearns appears to have accepted the total sum ofthe "margins claim" and the basis on which it had been calculated. She requested that the total adjustment figure be split into two parts. Her email attached two Agreed Credit Adjustment Forms for the proposed split adjustments. The first agreement covered the period from the year ended 30 June 1993 to 30 April 1999 and came to the sum of $873,233.77. This was to be adjusted in the GST period to 28 February 2001. The second part covered the period from 1 May 1999 to 30 April 2001 and came to the sum of $201,936.22. This was to be adjusted in the GST period to 31 April 2001. The GST periods in which the adjustments were to be made were much later in time than the periods for which the credit adjustments were claimed. This was done to avoid the Commissioner facing large "use of money" interest claims. [33] Ms Kearns' email ended with the statement that she had also included the standard disallowance clause relating to the substantive claim of a $7.3m adjustment. However, the electronic Agreed Credit Adjustment Form relating to the period for which the substantive claim had been made (30 June 1993 to 30 April 1999) did not contain any such standard disallowance clause. The Agreed Credit Adjustment Form for the later period (1 May 1999 to 30 April 2001) did contain a standard disallowance clause, however, the substantive claim did not relate to this later period. [34] On 26 October 2001 Mr Blakely advised Contract Pacific he had received the written Agreed Credit Adjustment agreements. His email refers to part of the agreement providing that Contract Pacific agreed to the disallowance of its original refund claim of $7.5m. The email records that he wanted to consider the effect that provision might have on the potential Court action on the stopped refund cheque. [35] Any concerns Mr Blakely had about the form of the written agreements and how it might affect the potential Court action on the refund cheque must soon have been allayed as Contract Pacific signed the first adjustment agreement on 26 October 2001. The Commissioner signed it on 30 October 2001. This was the agreement that omitted any express clause disallowing Contract Pacific's input credit adjustment claim of $7.3m for the period from 30 June 1993 to 30 April 1993.[36] Contract Pacific returned the signed first agreement to Mr Blakely on 29 October 2001. At the same time Mr Doody sent Mr Blakely a letter stating "first letter signed as discussed with Andrew". The same day Mr Blakely sent this agreement to the Commissioner. The letter that accompanied the signed agreement records Mr Blakely was "chasing up" Contract Pacific for the second agreement. On 30 October 2001 the Commissioner paid the $892,923.42 refund by direct credit to Contract Pacific's bank account. [37] Mr Blakely gave evidence of having a telephone conversation with Ms Kearns around this time, during which he informed her of Contract Pacific's intent to preserve its option to sue on the dishonoured refund cheque. No note of the conversation was kept. Ms Kearns has no recall of the conversation, nor does she have any record of it taking place. [38] Then on 1 November 2001 the parties executed an Agreed Credit Adjustment agreement for the period commencing from 1 May 1999 to 30 April 2001. When Mr Blakely received this agreement, it had contained a clause which expressly disallowed the substantive claim of a $7.3m GST adjustment. Mr Blakely removed this clause from the electronic version of the agreement he had received and advised Contract Pacific accordingly. On 1 November 2001 Mr Blakely wrote to Contract Pacific expressing his uncertainty as to how the Commissioner might react to the removal of the disallowance clause and whether the Commissioner would accept the argument that this clause did not relate to the time period covered by the second agreement. Matters were moving quickly at this stage. Mr Doody accepted the advice, signed the second agreement as amended by Mr Blakely, and returned it to him the same day. Later that day Mr Blakely sent the signed second agreement as amended by him to the Commissioner. A letter accompanying the agreement explained that clause 3 had been removed because Mr Doody was not comfortable with it since the adjustment it referred to did not relate to the period covered by the second agreement. The same day the Commissioner executed the agreement as amended by Mr Blakely. On 2 November 2001 Ms Kearns, in the course of discussing another matter with Mr Blakely, acknowledged receipt of the second agreement, apologised for the "oversight" in including the disallowance clause in it and indicated the refund would be processed. This was done. Mr Blakely had a filenote of this conversation and in her evidence Ms Kearns did not dispute his record of it. [39] In her evidence Ms Kearns described the inclusion of a clause expressly disallowing Contract Pacific's $7.3m substantive refund claim as a "belt and braces" clause that in general was included in all the credit adjustment agreements the Commissioner reached with the GST claimants. Her evidence was that the retrospective legislation enacted in October 2001 was seen as removing any foundation for argument over the GST rating of all services that inbound tour operators had provided to overseas persons between June 1993 and 30 April 1999. Hence, an express disallowance clause was seen as unnecessary, but included in most agreements out of caution. The omission to include such a clause in the Credit Adjustment Agreement covering the period June 1993 to 30 April 1999 for Contract Pacific was put down to an error on the Commissioner's part. [40] On 11 December 2001 the Commissioner sent a letter to Contract Pacific. The letter stated that the Commissioner's investigation into the inbound tour component of Contract Pacific's "GST affairs" had been completed. It stated that the GST returns for the periods ended 28 February 2001 and 30 April 2001 had been reassessed to allow a refund that reflected the overpaid GST for the period 30 June 1993 to 30 April 2001. No quantification of this amount was stated. The letter confirmed the choice of GST periods ending 28 February 2001 and 30 April 2001 was to deal with the use of money issues that would have arisen had the GST periods chosen related to the timeframe when the overpayments had been made. Copies of the executed written adjustment agreements accompanied the letter. [41] Later, on 8 February 2002, the Commissioner issued a "statement enquiry detail" which recorded the period in which the credit adjustment of approximately $7.3m was claimed but without any reference to that amount or the previously recorded credit and debit balances that had been taken into account. The statement recorded a nil balance existing as at 18 July 2001. Contract Pacific denied ever receiving this document or any document containing its contents. The "statement enquiry detail" that was in evidence has all the appearance of a print-out version of an internal screen dump.[42] Nothing occurred after this for some time. Then on 18 April 2005 Mr Stewart QC wrote to the Commissioner requesting payment of $6,281,767 plus interest, this being the balance of the dishonoured refund cheque of $7,542,295, after payment of the facilitation fee credit adjustment is deducted. The letter contended that the money had been properly paid when the refund cheque was issued on 5 February 2001 and remained owing. On 9 June 2005 the Commissioner wrote to Mr Stewart rejecting Contract Pacific's claim. Then Contract Pacific issued this proceeding.Findings of fact[43] Whilst the parties have a common view on much of the background, there is a real tension between them as to the understandings they each had throughout 2001, and in particular around the time the two credit adjustment agreements were executed in late October and early November 2001. Contract Pacific now says that throughout the period between May 2001 and November 2001, it conveyed to the Commissioner its intent to keep its potential action on the dishonoured refund cheque alive. The Commissioner's evidence is to the contrary. [44] The contemporaneous documentary evidence provides the best view of what each party would have understood at the time. Some of the evidence I heard from witnesses was more a reflection of their subjective interpretation of events rather than a purely factual account of what had transpired. Such evidence is unhelpful and does not assist a court to resolve factual conflicts. Indeed, it was difficult to see the purpose of some of the evidence adduced as it belonged more in a case of rectification or contractual mistake than in an interpretation case. However, no objection was made to evidence of this sort. I have, therefore, considered it and made findings where necessary. [45] It is clear to me that by July 2001 all the parties involved in the GST refund dispute knew there was good reason for inbound tour operators to treat the GST rating of their facilitation fees differently from the bulk of their readjustment claims. One of the Commissioner's witnesses, Mr Humphries, who was an active participant in the resolution of the general dispute, said in his evidence that by June 2001 theCommissioner had accepted facilitation fees should be zero-rated for GST purposes. By then the inbound tour operators had been waiting for some months to have their readjustment claims resolved and I expect most of them would have welcomed a resolution which saw them receiving some portion of their claimed refunds. I expect that the Commissioner would also have been keen to achieve some resolution. By July 2001 everyone also knew legislation was going to be passed in order to remove the confusion the existing legislation had caused. Everything else would have been uncertain. [46] Given the strong opposition from the inbound tour operators and other affected persons, the exact retrospective scope of the proposed legislation may have been unclear. Retrospective legislation is unusual and this in itself could have given the inbound tour operators stronger grounds for hoping their opposition to the legislation would be successful. I think that, in an environment like this, all parties would have been keen to preserve their own positions as much as possible. The inbound tour operators would have been keen to ensure nothing was done which prevented them from pursuing the "substantive issue" if the law allowed them to do so. Those claimants that had potential claims based on grounds peculiar to their circumstances would have wanted to preserve those grounds as much as they could. I also think that by July 2001 the Commissioner may well have anticipated that the dispute over the "substantive issue" would be resolved by the proposed legislation and so a negotiated outcome on that issue was ultimately going to be unnecessary. [47] Throughout most of 2001 Contract Pacific's individual circumstances set it apart from most others. Unlike most inbound tour operators, Contract Pacific had received a refund cheque. It had received legal advice that it had an available court action against the Commissioner on the dishonoured refund cheque. This meant the company had two potential legal claims open to it. The first was under the Goods and Services Tax Act for a readjustment of its GST assessment based on a legal interpretation that all services provided to overseas based persons should be zero- rated for GST purposes. The second was an action on the dishonoured refund cheque under the Bills of Exchange Act. The proposed legislation to remove the grounds for dispute on GST rateability of the subject services would directly remove the first claim, if Parliament was prepared to legislate to that effect. However, theproposed legislation could not directly extinguish Contract Pacific's potential court action on the dishonoured refund cheque. The existence of that separate claim, its relevance for Contract Pacific and the separate response that this claim required is something I think the Commissioner overlooked. [48] There is no doubt that on 27 July 2001, Mr Doody communicated to the Commissioner Contract Pacific's intent to pursue an action on the dishonoured refund cheque. That is apparent from one of the Commissioner's internal documents. The evidence from Contract Pacific was that it was alive to the legal action available to it and to the need to ensure it remained free to pursue this action if it decided to do so. I accept that was so. [49] Once the retrospective legislation was enacted, the relevance of the action on the dishonoured refund cheque and its potential to bring Contract Pacific within the legislation's savings provision would have been clear to Contract Pacific and its advisers. In this environment I would expect a party in the position of Contract Pacific to do all it could to preserve its ability to sue on the cheque. The evidence from Mr Doody and Mr Blakely on this topic was to this effect. Their evidence was clear, reliable and consistent with the circumstances as they existed in the lead-up to the execution of the credit adjustment agreements as well as with the available records. I very much doubt that Contract Pacific would have entered into the agreed credit adjustment agreements if they had effectively extinguished Contract Pacific's ability to pursue its action on the cheque to recover the bulk of the GST refund. [50] The Commissioner's witnesses rejected Contract Pacific's evidence that communications of its position throughout 2001 informed the Commissioner that the company was reserving its right to sue on the dishonoured cheque and never indicated a retreat from that position. The Commissioner's evidence is that in mid 2001 Mr Blakely was reserving the "substantive issue" for all his clients, pending the outcome of the proposed legislation, and no distinction was drawn between them and Contract Pacific. The Commissioner's evidence is also to the effect that after the legislation was passed, Contract Pacific never once advised the Commissioner that it was intent on pursuing its action on the dishonoured refund cheque.[51] The overall tenor of the Commissioner's evidence reveals that during 2001 the Commissioner had a different construct of Contract Pacific's position from that held by the company. The Commissioner's witnesses presented the issuing of the refund cheque in February 2001 as a systems error that was capable of being corrected through the stopping of the cheque and later the reverse entries recorded in the transaction account. I think that throughout 2001 the Commissioner was never aware of the full implications of how the dishonoured cheque could give rise to an action under the Bills of Exchange Act. It would follow from this that the Commissioner might not have recognised the true import of statements from Contract Pacific of its intention to pursue its action on the dishonoured cheque. [52] I gained the impression from the Commissioner's witnesses that the Commissioner saw the enactment of the retrospective legislation as the solution to the credit adjustment dispute he was facing. I also think that the Commissioner's view on the status of the dishonoured refund cheque would have blinded him and his officials from realising that Contract Pacific had two potential claims against the Commissioner, and that the legislative solution of one claim might not necessarily remove the other. This in turn may have caused the officials to dismiss the continuing importance of Mr Doody's statement to them on 27 July 2001 that the action on the cheque was still to be pursued. [53] There was some evidence from Mr Blakely that during a telephone conversation he had with Ms Kearns in mid October 2001, before the execution of the credit adjustment agreements, he informed her that Contract Pacific intended to pursue its action on the cheque. There is no contemporaneous record of this conversation. Neither Mr Blakely nor Ms Kearns have any record of it. I can accept that it is probable such a conversation may have taken place at some time during that year. But the absence of any record of the conversation taking place in mid October 2001 and the passage of time between October 2001 and February 2008 when Mr Blakely gave his evidence cause me to think his memory of the time of the conversation may not be reliable. I am not, therefore, prepared to accept his evidence on this point.[54] I find, therefore, that after Contract Pacific informed the Commissioner on 27 July 2001 that it would be pursuing its action on the cheque, it never expressed this view again. However, I also find that it did not expressly communicate anything to the contrary after that date. There is no evidence to suggest that between August and 26 October 2001 (when Contract Pacific executed the first credit adjustment agreement) there were communications between the parties that were capable of informing the Commissioner that Contract Pacific had abandoned the idea of an action on the cheque. [55] At the time Contract Pacific executed the written credit adjustment agreements, I find that it had the following knowledge. It knew the action on the dishonoured refund cheque was available to it. It had received credit adjustment agreements from the Commissioner that did not expressly preclude the action on the cheque. It had sought advice on the consequences of executing these agreements. It had obviously received advice that it could safely enter into the adjustment agreements without harming the action on the cheque. Lastly, it would have been anxious to receive the refund resulting from the credit readjustment of the GST payable on facilitation fees. In such circumstances, I consider that Contract Pacific would not have acted in a way that it knew would extinguish its rights to sue on the cheque. [56] The Commissioner's evidence on the topic of his understanding of how the adjustment agreements could affect Contract Pacific lacked clarity and specificity. The Commissioner's witnesses tended to refer to Contract Pacific's "substantive claim" as if it only had a single legal claim, rather than what between February and October 2001 would have been two potential legal claims. [57] My impression is that the Commissioner was of the view that the retrospective legislation cured all issues relating to the substantive claim for readjustment of GST. This meant he would have given no thought to the possibility that Contract Pacific might be different from the other GST claimants in this regard. I think that the Commissioner never realised Contract Pacific had a second legal claim available to it; and that the pursuit of this claim might bring Contract Pacific within the savings provision of the new legislation. This may explain his failure toensure that the credit adjustments agreements sent to Contract Pacific were drawn up in a way that clearly extinguished all possible claims howsoever they might arise in relation to the substantive refund claims that had triggered the retrospective legislation. [58] The Commissioner's witnesses gave evidence to the effect that had it been expressly drawn to their attention that Contract Pacific intended to preserve its potential action on the dishonoured refund cheque, the Commissioner would not have entered into the adjustment agreements. Such evidence is speculative. Moreover, I have difficulty accepting that this evidence properly describes how the Commissioner might have acted had he known of Contract Pacific's intent to preserve its action on the dishonoured cheque. [59] As early as April 2001, the Solicitor-General had provided an opinion which recognised that facilitation fees should be zero-rated for GST purposes. The evidence I heard from one of the Commissioner's witnesses (Mr Humphries) was that by June 2001 the Commissioner accepted that facilitation fees earned by inbound tour operators should be zero-rated for GST purposes. The new legislation did not change the law in this regard. By October 2001 the Commissioner was entering into agreements with other inbound tour operators that resulted in their receiving a refund on GST previously paid on facilitation fees. [60] There is no evidence to suggest that by October 2001 the Commissioner had any doubt that facilitation fees should be treated as zero-rated for GST purposes. This was not a situation where there was some uncertainty over the law and the Commissioner and the registered persons had been prepared to compromise their rights to achieve a final resolution of the matter. Here, by October 2001, the appropriate legal treatment of the GST rating of facilitation fees was known and recognised by all the parties. The Commissioner had received legal advice that certain GST payments he had received were made incorrectly because they were assessed on fees that were properly zero-rated. The Commissioner had accepted and acted on that advice in relation to other inbound tour operators who had claimed a credit readjustment of GST paid. Contract Pacific's entitlement to the refund was no different from the other inbound tour operators. Consequently, Contract Pacific hadto be treated in the same way. In such circumstances, I cannot see how the Commissioner could properly and lawfully use the payment of the refund as a lever to extract from Contract Pacific its agreement to forego pursuit of the action on the cheque. [61] Certainly, in general the other inbound tour operators did agree to forego their claims on the "substantive issue" but in their cases the retrospective legislation had clearly removed the foundation for those claims. As Ms Kearns said, the inclusion of a reference to those claims in the written credit adjustment agreements was a "belt and braces" approach. For those inbound tour operators who fell into the general category of claimants, the clause was unnecessary as the effective barrier was to be found in the legislation. [62] There was one other inbound tour operator to whom the Commissioner had earlier issued a refund in error but paid by direct credit. This operator was treated as coming within the savings provision. How matters were finally resolved between the Commissioner and this operator was not placed in evidence before me. [63] I do not accept the evidence of the Commissioner's witnesses that he would not have entered into the adjustment agreement with Contract Pacific if he had known the company would be pursuing its action on the cheque. This evidence is tantamount to suggesting that the Commissioner would knowingly not discharge his lawful obligations to refund money that he had no authority to retain. Insofar as hypothetical evidence of this sort has any place in an interpretation case, in this case it fails for lack of proof. [64] Once the credit adjustment agreements were executed, the next step the Commissioner took was the letter of 11 December 2001 that accompanied the copies of the agreements sent to Contract Pacific. The Commissioner now contends that the letter constituted a notice of assessment and that Contract Pacific's failure to initiate the disputes process within the legislation's timeframe for doing so now precludes it from pursuing its action on the cheque. I consider this argument fails on the facts.[65] I think that as at 11 December 2001, the Commissioner would have considered a notice of assessment was unnecessary. His letter of that date has all the hallmarks of a wash-up letter. When the letter was sent the Commissioner would have considered the retrospective legislation, coupled with the written adjustments agreements accompanying the letter, achieved the removal of any right to object to the quantification of the refund. Section 89I of the Tax Administration Act 1994 made it clear that entry into written agreements precluded any later challenge to the adjustments covered by agreement. [66] In most cases of the inbound tour operators' claims for credit adjustments, the Commissioner had withheld payment of the disputed credit adjustments. In one case where a refund had been made by direct credit, he accepted that this fell within the savings provision of the retrospective legislation. Thus there were no cases where the Commissioner had to act to recover any money. He had not turned his mind to the full implications of dishonouring Contract Pacific's refund cheque. In this circumstance the issue to Contract Pacific of a formal notice of assessment giving notice of rights of dispute would no doubt have been considered otiose. That type of document was something to be issued before issues were resolved or when some issues remained in dispute; whereas, here, in the Commissioner's mind, the issues had all been resolved. The evidence of Mr Humphries, an officer of and witness for the Commissioner, confirms this view. Mr Humphries described the letter as "the final action to be taken on this file and it advised that the audit was completed. It [the letter] was issued on the basis the case was concluded and there were no more outstanding matters to be dealt with". [67] Furthermore, the Tax Administration Act imposed certain requirements on notices of assessment. The Act as it was in 11 December 2001 provided in s 111(1) for a notice of assessment to specify the amount of tax to be paid by the taxpayer (including registered person where GST was in issue) or refunded as the case may be. For reasons I come to later I do not propose to make a finding as to whether the letter was legally capable of being a notice of assessment under that section. However, the section's requirements are relevant to the question of whether the Commissioner in fact sent the letter as a notice of assessment.[68] The letter of 11 December 2001 did not specify the amount to be refunded. More importantly the letter did not expressly disallow the bulk of the credit adjustment Contract Pacific sought on the ground that GST was payable and then go on to quantify the amount of GST payable. Section 111's requirements appear not to have been met. This serves to confirm for me that the Commissioner did not send the letter as a notice of assessment. [69] There is also the Commissioner's evidence that on or about 8 February 2002 a statement of account setting out the information shown on the Department's internal "screen dump" was sent to Contract Pacific. The internal record, which was still available, shows a nil balance existing as at 18 July 2001. But there is no documentary evidence to confirm a statement of account showing this information was ever sent out. The Commissioner's officers gave oral evidence that it was; Contract Pacific says it never received the information. [70] Without contemporaneous evidence, there is only the witnesses' recall some seven years later. I cannot see why, given the Commissioner's view of the credit adjustment agreements' effect and after the letter of 11 December 2001, he would have considered it necessary to send out a statement of account showing Contract Pacific's GST balance as at the earlier period of 18 July 2001. I am not prepared to accept as reliable the witnesses' recall of events so long ago when there is nothing else in the evidence that is consistent with such an event occurring and I can see no sensible reason why it would have occurred.The written adjustment agreements[71] The Commissioner contends that the credit adjustment agreements resolved all issues outstanding between him and Contract Pacific with regard to the entire disputed refund claim, which came to approximately $7.3m, and that this was the common understanding of the parties when they executed the agreements. The Commissioner submits that this much is clear from the written agreements when they are interpreted against the factual matrix of this case. He submits that, in essence, by the time the written agreements were executed, all that was left of the entire refund dispute was the issue over the refund of the facilitation fee.[72] Contract Pacific strongly rejects any suggestion that the written adjustment agreements resolved the disputed refund claim or that this was commonly understood by the parties at the time they entered into the agreements. Contract Pacific contends that it has always considered its rights to claim a refund were protected under the new legislative savings provisions and, therefore, it would never have agreed to give away those rights. It submits that the proper interpretation of the written agreements is that they do not present an obstacle to Contract Pacific pursuing its action on the refund cheque. [73] The material clauses in the first credit adjustment agreement read:1. Total agreed input credit adjustment for the period commencing from the year ended 30 June 1993 to 30 April 1999 is $873,233.77 2. The input credit adjustment is due to the zero-rating of a facilitation fee for the period from the year ending 30 June 1993 to 30 April 1999. This facilitation fee is for services provided in arranging inbound tour packages for overseas tourists, and is the profit margin for each in bound tour.The agreement records Contract Pacific's acknowledgement that by signing the agreement, Contract Pacific forfeits any rights to further challenge "this adjustment" in accordance with s 89I of the Tax Administration Act 1994. The agreement also records acknowledgements by each party of having made full and true disclosure of all facts subject to the agreement. The second agreement as executed reflected the first, save for a difference in the applicable GST period, which in the case of the second agreement was from 1 May 1999 to 30 April 2001 and was for an adjustment of $201,936.22.[74] Tipping J in Wholesale Distributors Ltd v Gibbons Holdings Ltd (2007) 5 NZ ConvC 194,493 SC recognised at [56] that:Interpretation difficulties arise when the parties have used words of uncertain meaning and they assert competing meanings for those words.This is what has occurred in this case in that the language used in the credit adjustment agreements fails to put beyond doubt the agreements' effect on GST refund issues beyond the zero-rating of facilitation fees. Contract Pacific asserts the written agreements cannot preclude it from pursuing its action on the cheque,whereas the Commissioner asserts the agreements are an effective foil to this action. In Wholesale Distributors Ltd Tipping J said of this circumstance (at [56]):In this situation the traditional view has been that the court must ascertain what meaning the words bear, taking into account the document as a whole and all relevant circumstances that would have been apparent to the parties at the time they contracted. The traditional phase "matrix of facts" means all the objectively relevant surround circumstances.[75] The first step is to look at the wording of the written agreements in the context of those documents as a whole. In Pyne Gould Guiness Ltd v Montgomery Watson (NZ) Ltd [2001] NZAR 789 the Court of Appeal said, at [29], that a proper approach to take to interpreting a contract was to consider the words of the contract, ascertain their natural and ordinary meaning in the context of the document as a whole and then to use the factual background to cross-check whether some other or modified meaning was intended. This is what I propose to do. [76] There is nothing expressed in the agreements that disallows the wider refund claim. Clause 1 refers to the total agreed input adjustment credit for a specified period. In the first agreement the period is 30 June 1993 to 30 April 1999. Clause 2 then explains the purpose of clause 1 by reference to the zero-rating of the facilitation fees for the relevant GST period. When clauses 1 and 2 are read together, their natural meaning can be read as recording the parties' agreement on no more than the appropriate treatment of facilitation fees over the relevant GST period. Thus the "total agreed input credit adjustment" is for GST on facilitation fees only and there is no agreement beyond the GST rating of those fees. [77] The clause dealing with "effect of signing", in which Contract Pacific acknowledges that by entering into the agreement it has forfeited all its rights to further challenge the adjustment, cannot be read as embracing more than the adjustment achieved in clauses 1 and 2. Hence, that clause adds nothing more to those clauses in understanding the agreements. Similarly, the clause requiring Contract Pacific to have made full disclosure of all known facts cannot assist in understanding the agreement because the disclosure is limited to facts that are the subject of the agreement. If the subject of the agreements is facilitation fees, facts that relate to the wider refund claim or the intention to pursue an action on thecheque to enjoy reimbursement of the wider refund claim are not relevant to the agreements reached on the zero-rating of facilitation fees. [78] Everything comes back to clauses 1 and 2 of the written agreements. When I look at these clauses, I consider that a reasonable person could not understand them to extinguish Contract Pacific's rights to sue on the cheque as part of its claim for the substantive refund. I think that a reasonable person would read the agreements as expressing no more than the parties' agreement on the treatment of the GST rating of facilitation fees. That the agreements might go further and disable Contract Pacific from pursuing its action on the cheque is not something that I think a reasonable person could understand from the agreements. To have that effect, I consider that something expressly disallowing Contract Pacific's two claims relating to the substitute refund would need to be included in the agreements. [79] I now propose to look at the factual background as a cross check to see if a reasonable person would conclude that the agreements were intended to have some other meaning from the one I have reached. Both parties accepted that the credit adjustment agreements should be interpreted in the context of their factual matrix. However, when interpreting a contract against the factual matrix, it is not for the Court to take into account what the parties intended the contract to mean or what they thought it meant. As recognised in Pyne Gould Guiness Ltd at [17]:The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification.[80] Part of the factual matrix of this case is that the first written agreement omitted a clause that the Commissioner had included in other such adjustment agreements. If the clause had been included in the first adjustment agreement in the same form in which it was used in other agreements, it would have read as follows:3. The input credit adjustment of $7,356,937.80 previously claimed in the GST return period ended 31 May 2000 is disallowed by agreement. This input credit adjustment was claimed to zero-rate the GST previously returned on the sale of inbound tour packaged holidays to overseas tourists. Proposed changes to the Goods and Services Tax Act 1985, section 11A(2), exclude from the zero-rating provisionservices that are supplied to a non-resident if another person receives the performance of the services in New Zealand. The amendment applies to services from the date of the introduction of that Act to 20 May 1999. This amendment was announced on 14 May 2001.[81] Clause 3 made it clear that the credit adjustment agreement excluded the registered person's ability to pursue any aspect of the refund dispute for the period 30 June 1993 to 30 April 1999 beyond the refund of GST paid on facilitation fees. 30 June 1993 to 30 April 1999 was the key period for which the uncertainties about the inbound tour operators' liability for GST on certain services had been removed by the retrospective legislation. [82] The second credit adjustment agreement covered a GST period that was later than and outside of the key period. Even so, the second written agreement between Contract Pacific and the Commissioner originally included the disallowance clause 3. But this clause was removed from the second agreement before it was executed. The steps that led to the removal of the disallowance clause from this agreement have already been described. The Commissioner, when presented with the signed agreement minus clause 3, did not demur from the course of action Contract Pacific had taken and he also executed the agreement. [83] The omission of clause 3 from the first written agreement, which is where it was most needed from the Commissioner's perspective, appears to have been inadvertent on the part of the Commissioner. Although he knew the retrospective legislation provided a general protection against wider refund claims, he was, nonetheless, inserting a belt and braces clause with that effect into other credit adjustment agreements. [84] Despite the omission of clause 3 from the first credit adjustment agreement, the Commissioner did not plead either rectification or contractual mistake in this proceeding. He sought instead to achieve the result he would have obtained had clause 3 been included in the first written agreement by reliance on the legal principle that contracts should be interpreted against the background of their factual matrix. In essence, he invites the Court to read the parties' first credit adjustment agreement as if it had the effect it would have had if it included the clause 3 disallowance clause. He submits that against the factual background that led to theexecution of the two agreements, the only possible interpretation is that the agreements have the effect of disallowing the input credit adjustment of $7,356,937.80 for the GST period from 30 June 1993 to 30 April 1999. He further submits that at the time of the agreements' execution this was the common understanding of their effect. [85] The problem the Commissioner now faces is that the legal principle of interpretation he relies upon to achieve the interpretation for which he contends makes it clear that evidence of the parties' negotiations; their subjective intent and what they intended the contract to mean is not admissible for the purpose of interpreting the contract. That sort of evidence is only admissible in cases of rectification and contractual mistake. The case law on interpretation of contracts makes it clear that I am to approach this issue excluding evidence of that sort from my mind. In general, I should look for a construction that accords with business common sense (Pyne Gould Guiness at [23]) and I should seek to ascertain the meaning the contract would convey to a reasonable person having all the admissible background knowledge available to the parties in the situation they were in at the time of the contract: Jowada Holdings Limited v Cullen Investments Limited and Pacific Retail Group CA248/02 5 June 2003 at [33]. That background knowledge cannot include inadmissible information about the parties' intent, their pre-contract negotiations and what they intended the contract to mean: Pyne Gould Guiness at [17]. [86] I now turn to identifying the admissible background knowledge that would have been available to a reasonable person between 26 October 2001 and 1 November 2001, this being the period over which both agreements were executed. I consider this to be: a) the Commissioner's duties under the Revenue Acts, including his duties to ensure that the correct tax is assessed and paid and to ensure he conducts himself in accordance with the legal obligations and duties those Acts impose on him;b) the relevant provisions of the Goods and Services Tax Act, including the requirements in ss 20 and 46; c) the existence of the wider refund claim of the inbound tour operators (including Contract Pacific) that had necessitated the enactment of retrospective legislation; d) the fact that on 5 February 2001 the Commissioner had issued a refund cheque for the wider refund claim in error to Contract Pacific and then stopped payment on that cheque; e) the provisions of the Bills of Exchange Act which enable an action on a dishonoured cheque; f) the enactment of the retrospective legislation, which apart from the limited category of persons within the savings provision, removed the foundation for the wider refund claim referred to in (c) herein, thereby effectively extinguishing such refund claims; g) the narrower aspect of the refund claim regarding the zero-rating of facilitation fees paid to the inbound tour operators and the Commissioner's acceptance of this being the appropriate way to characterise those fees; h) the need to resolve the quantification of use of money obligations the Commissioner owed the inbound tour operators as a result of accepting their credit adjustment claim for facilitation fees; i) the fact that the Commissioner chose the route of written adjustment agreements under s 89I of the Tax Administration Act to resolve the credit adjustments for GST paid on the facilitation fees by the inbound tour operators; j) the fact (made known to Mr Blakely in the Commissioner's email of 26 October 2001) that the Commissioner had included a disallowanceclause in the adjustment agreements with other inbound tour operators that expressly excluded them from pursuing the broader refund claims; k) the fact that the Commissioner could not lawfully use the retention of the refund following the credit adjustment of GST paid on facilitation fees as a bargaining point to persuade Contract Pacific to abandon its action on the cheque. [87] Facts I am not taking into account because I consider they relate to a party's subjective intent or form part of the pre-contractual discussions and negotiations are: a) Contract Pacific's statement on 27 July 2001 that it intended to pursue its action on the dishonoured refund cheque that was issued in error; b) the absence of a subsequent retraction from Contract Pacific of its expressed intent on 27 July 2001 to pursue its action on the cheque; c) the email of 26 October 2001 accompanying the written agreements insofar as it informed Contract Pacific that the Commissioner intended to include a disallowance clause (clause 3) in respect of the substantive refund in the agreement he reached with Contract Pacific; d) the Commissioner's willingness to remove the disallowance clause (clause 3) from the second agreement for the reason given that the GST period covered by that agreement did not match the period in which the substantive refund was sought; e) the evidence of either party of their understanding of, and their subjective intent as to, what the agreements were intended to achieve; and f) the evidence of either party as to how they would have acted had they realised the agreed adjustment agreements did not mean what each of them thought the agreements meant.[88] The parties also referred to recent authority, includingWholesale Distributors, that recognises the gathering acceptance of the use of post- contract conduct to assist with interpreting a contract. [89] In Wholesale Distributors the majority held that subsequent conduct could be taken into account when interpreting contractual terms. Tipping J emphasised, however, the limits of subsequent conduct as an interpretative aid to the parties' intention. Shared conduct that suggested a particular meaning, or conduct that suggested a shared interpretation, would be relevant, but conduct that showed different subjective intentions would not:[60] The focus must still be on objective conduct rather than expressions of subjective intention or understanding. But if the parties have together conducted themselves in the performance of their contract in a way that is relevant to the meaning of the disputed provision, the court should be able to take that into account. [63] Even if the meaning suggested by the post-contract conduct is not the most immediately obvious objective meaning, the parties' shared conduct will be helpful in identifying what they themselves intended the words to mean. That, after all, must be the ultimate determinant. If the court can be confident from their subsequent conduct what both parties intended their words to mean, and the words are capable of bearing that meaning, it would be inappropriate to presume that they meant something else.Similarly, Anderson J held at [73]:A party seeking to rely on post-contract conduct would have to show conduct on the part of all the contracting parties in order to demonstrate a shared and not merely an individually held meaning.[90] Here, the parties' post-contract conduct does not reveal that the parties shared an understanding as to whether the contract disallowed any other claims by Contract Pacific. The Commissioner acted as if the issues between him and Contract Pacific were all resolved. Contract Pacific did nothing further except to commence its action on the cheque within the time limits permitted under the Limitation Act 1950. [91] A reasonable person having the knowledge I have outlined in [83] would have concluded that by 26 October 2001 and later, there was a common understanding of how GST paid on facilitation fees should be treated. Such a personwould also have concluded that for inbound tour operators in general, the retrospective legislation had removed any possibility of pursuing the bulk of their GST refund claims. A reasonable person would also have recognised that the refund cheque Contract Pacific received might enable it to qualify under the legislation's savings provision even though the cheque had been dishonoured. Since Parliament had provided a savings provision in the retrospective legislation, a reasonable person would have concluded that there may be persons who would qualify under that provision. I also consider that a reasonable person would not have contemplated the circumstance of the Commissioner requiring someone who might qualify under the savings provision to abandon any claim to do so in return for a refund of the GST paid on facilitation fees. When I stand back and consider all the facts identified in [83], there is nothing that would cause me to conclude that a reasonable person could interpret the agreed adjustment agreements between Contract Pacific and the Commissioner as having the effect of extinguishing Contract Pacific's action on the dishonoured cheque. [92] I consider that a reasonable person would view an action on a dishonoured cheque issued on 5 February 2001 as being separate from and, therefore, outside of any agreed credit adjustment in October 2001 due to zero-rating of facilitation fees. A reasonable person would conclude that the commercial purpose of the credit adjustment agreement between Contract Pacific and the Commissioner was to resolve issues arising from the Commissioner's acceptance of the zero-rating of facilitation fees. His acceptance of this issue meant there was a need to resolve his liability for use of money interest arising from him having received GST for what should have been zero-rated supplies. The implications for the Commissioner of the possible action on the dishonoured cheque also needed to be addressed but this did not have to be done in the credit adjustment agreements. If it was to be done in these agreements, a reasonable person would expect to see an express disallowance clause to that effect included in the agreements. It follows that I find that the agreed adjustment agreements are not a barrier to Contract Pacific's action on the dishonoured cheque. [93] There is another aspect to this issue. In CIR v Sea Hunter Fishing Limited(2002) 20 NZTC 17478 at [26], the Court of Appeal found that an action on a chequefor an amount the Commissioner was obliged to refund under s 46 did not amount to challenging any assessment the Commissioner might have made regarding the registered person's entitlement to the refund. The action on the cheque is independent of any assessment. Hence, any compromise agreement the Commissioner reached with Contract Pacific would have needed to exclude expressly the action on the cheque if that was to be part of the agreement between the parties. A compromise agreement that only excluded the right to challenge the amount of the agreed refund could not preclude the action on the cheque. [94] The result I have arrived at has been affected by the approach the Commissioner took to this proceeding. Had I been asked to consider the evidence in the context of a pleading for rectification or contractual mistake, the outcome may have been different. I could then have looked at the evidence to determine if the credit adjustment agreements resulted from a common mistake of the parties or if the agreements resulted from a unilateral mistake on the part of the Commissioner, of which Contract Pacific was aware. Evidence that I heard which touched on these topics would then have been relevant and probative, whereas on the case as pleaded such evidence has been neither relevant nor probative. [95] Another, less common, approach to the circumstance where a written contract is alleged to not reflect the parties' true bargain is to claim the existence of a common understanding of what the agreement was intended to mean and to then allege an estoppel preventing any departure from that understanding: see Air New Zealand Ltd v Nippon Credit Bank Ltd [1997] 1 NZLR 218 at 224. [96] Had Contract Pacific found itself facing a counterclaim for rectification or a defence based on mistake or estoppel, its evidence and its cross-examination of the Commissioner's witnesses may have been different. Since the parties' subjective intent and their understandings common or otherwise have not been relevant to the Commissioner's case, as pleaded, Contract Pacific has not needed to respond to evidence of this type. It has done so in part but its response may have been far stronger had it found itself facing a counterclaim of rectification or contractual mistake or defences of estoppel. The problem the Commissioner's pleading has presented for him has also deprived Contract Pacific of a proper opportunity toaddress adverse material that lurks in the background of this case, but which is not relevant to or probative of the pleaded defence. [97] Consequently, I conclude that the credit adjustment agreements do not bar Contract Pacific from suing for the balance of the credit adjustment it claims it is due.The action on the cheque: the first cause of action[98] Under the Bills of Exchange Act, a person can enforce payment of a cheque that has not been honoured where valuable consideration has at any time been given for the bill of exchange. Section 27 sets out what may constitute valuable consideration. It includes an antecedent debt or liability. This is the only possible valuable consideration for the 5 February 2001 refund cheque that was dishonoured on 14 February 2001. [99] Whether or not in this case there is an antecedent debt or liability that is capable of constituting valuable consideration under the Bills of Exchange Act turns on the interpretation of s 20(5) and s 46 of the Goods and Services Tax Act. Those provisions impose certain obligations on the Commissioner that are capable of establishing an antecedent debt or liability. If those provisions can be interpreted in the way for which Contract Pacific contends, they will provide the necessary valuable consideration to support the action on the dishonoured cheque. All the other necessary elements of an action on the cheque under the Bills of Exchange Act are fulfilled. [100] Section 20(5) requires the Commissioner to refund any excess where the total amount that may be deducted for a taxpayer's output tax exceeds the aggregate amount of the output tax for that taxable period. Section 46(1) mandates that if the Commissioner is required to refund an amount under s 20(5), he shall do so within 15 days of receipt of the registered person's return subject only to his powers under s 46(2) to withhold payment of the excess. [101] Section 46 provides:46 Commissioner's right to withhold payments:(1) Subject to this section, if the Commissioner is required to refund an amount to a registered person under section 19C(8) or section 20(5) of this Act, the Commissioner shall refund the amount— (a) Except when paragraph (b) applies, not later than 15 working days following the day on which the registered person's return was received by the Commissioner; or (b) The day after the working day on which the Commissioner— (i) Determines the amount is refundable, after first having— (A) Investigated the circumstances of the return in accordance with subsection (2); or (B) Reviewed the information requested in accordance with subsection (2); and (ii) Is satisfied that the registered person has complied with the person's tax obligations. (2) If the Commissioner is not satisfied with a return made by a registered person, the Commissioner— (a) May investigate the circumstances of the return: (b) May request the registered person to provide further information concerning the return. (3) If a registered person fails to provide a return for any taxable period as required by this Act, the Commissioner may withhold payment— (a) Of any tax otherwise refundable under this Act or the Tax Administration Act 1994; or (b) Of any interest payable under Part 7 of the Tax Administration Act 1994— until the registered person complies with the requirement. (4) The Commissioner must give a request for information concerning a return under subsection (2)— (a) Within a period of 15 working days following the day on which the return is received by the Commissioner (in the case of an initial request for information); and (b) Within a period of 15 working days following the date of receipt of any information previously requested by the Commissioner (for subsequent requests for information). (5) The Commissioner must notify the registered person—(a) Of the Commissioner's intention to investigate the circumstances of the return under subsection (2); and (b) Of the Commissioner's intention to withhold payment under subsection (3)— within 15 working days following the day on which the return is received by the Commissioner. (6) If, but for this subsection, a registered person would be entitled to an amount as a refund under section 19C(8) or 20(5) or 45 or under the Tax Administration Act 1994, or as a payment of interest under Part 7 of the Tax Administration Act 1994, the Commissioner may apply the amount, in accordance with a request under section 173T of the Tax Administration Act 1994 or in the absence of a request in such order or manner as the Commissioner may determine, in payment of— (a) tax that is payable by the person: (b) an amount that is payable by the person under another Inland Revenue Act. (7) If, but for this subsection, a person who is a specified agent of an incapacitated person, as those terms are defined in section 58(1), would be allowed an amount as a deduction under section 20(3) by virtue of section 58(1C), the Commissioner may apply the amount in payment of— (a) tax that is payable by the incapacitated person: (b) an amount that is payable by the incapacitated person under another Inland Revenue Act.][102] Section 46 is a code that prescribes the circumstances and conditions in which the Commissioner may withhold or must refund the GST payments made by registered persons. The Goods and Services Tax Act subjects registered persons to a self-assessment tax regime whereby they periodically file returns that result in them either paying GST (when the output tax exceeds the input tax) or being entitled to a refund of GST they have already paid on goods and services they have received. The latter circumstance arises when the input tax paid exceeds the self-assessed output tax. When this occurs, s 46(1)(a) requires the Commissioner to pay a refund of the excess no later than 15 working days after the day on which the Commissioner received the GST return. [103] When the Commissioner is not satisfied with the GST return of a registered person, s 46(2) gives him two options:a) He may investigate the circumstances of the return; b) He may request the registered person to provide further information concerning the return. [104] If the Commissioner is not satisfied that the GST return is correct, he must act strictly in accordance with the procedural requirements s 46 imposes on him if he wants to withhold payment of the claimed refund until he is so satisfied. These requirements only affect the Commissioner's ability to withhold payment of the claimed refund; they do not curtail the Commissioner's broad powers of investigation under the various statutes dealing with tax. All this was made clear in the Court of Appeal's judgment in Sea Hunter. [105] In Sea Hunter the Commissioner had issued a notice of his intention to investigate and a request for further information on the last working day of the 15 working day periods in s 46(5) and s 46(4) respectively. The notice reached Sea Hunter Fishing outside this timeframe. The Court of Appeal concluded that in this circumstance, there was no compliance with s 46 and so the Commissioner lost his authority to withhold payment of the refund. The Court held at [18]:Parliament has deliberately chosen a short period for the Commissioner to make up its mind whether he needs further information or wishes to investigate the circumstances of the return. If he does not do so in due time, he is not precluded from taking the matter further but, in the mean time, must promptly make the claimed refund.[106] In Sea Hunter, as in the present case, the halt that had been placed on the IRD's computer system to prevent automatic payment of the refund was not renewed owing to an administrative error. This meant that on a given date a refund cheque was automatically generated. Once the error was detected the cheque was stopped. [107] Sea Hunter Fishing reacted by issuing summary judgment proceedings suing on the cheque. The Commissioner opposed these proceedings. He argued that Sea Hunter Fishing was not entitled to a refund and, therefore, there was no underlying obligation that could constitute valuable consideration for the cheque issued in error. Summary judgment was granted. The High Court found that the Commissioner was under an obligation to pay the refund claimed. The obligationarose through the Commissioner's failure to comply with the time limits imposed on him by s 46. The obligation to refund the money claimed under the GST return was enough to create an antecedent liability for the purposes of s 27 of the Bills of Exchange Act. [108] The Commissioner appealed to the Court of Appeal. The appeal was dismissed. The Court of Appeal found at [17]: whilst we accept, as we have already indicated, that the Commissioner is not precluded from commencing an investigation and making a request for information after the expiry of the 15 working days period, for there is no time limit applicable to subs (2), it is plain to us that subs (1) has to be read subject to subss (4) and (5). Subsection (1) obliges the Commissioner to refund an amount under s 19C(8) or s 20(5) not later than 15 working days following the day in which the return was received by the Commissioner, unless (b) applies. Section 46(1)(b) applies where the Commissioner has determined that the amount is refundable after an investigation or review of information in accordance with subs (2). In those circumstances the Commissioner must make the refund on the day after the working day in which he determines that the amount is refundable and is satisfied that the registered person has complied with the person's tax obligations. But (b) necessarily presupposes that the Commissioner has complied with subs (4) or subs (5) by giving a request for information, or a notification of intention to investigation the circumstances of the return, within the 15 working days. There would be little point in imposing the 15 working days period upon the Commissioner under subss (1), (4) and (5) if the Commissioner could nevertheless defer making a refund of the amount in question without giving a request for information or notifying an intention to investigate during that period.[109] In Sea Hunter, the Commissioner argued that to allow Sea Hunter Fishing's claim would subvert the dispute resolution process of the Tax Administration Act. The Court of Appeal rejected this submission at [25]:When s 46 is applied to the circumstances of this case, it is clear that the cheque was issued at a time when the Commissioner was obliged to make a refund of the input credit of $2,495,850. Interest was also due to the taxpayer. Whether characterised as debts or liabilities, the Commissioner's obligations were "valuable consideration" for the cheque in terms of s 27(1)(b) of the Bills of Exchange Act 1908. The taxpayer was therefore entitled to seek judgment in the amount of the cheque.[110] Contract Pacific argues that as regards its right to a $7.3m refund, the reasoning applied in Sea Hunter should be applied to Contract Pacific. If Contract Pacific can establish that the Commissioner failed to comply with all the requirements of s 46, that will mean he had no authority to withhold the refund. Ifthe authority to withhold the refund was lost before the refund was issued on 5 February 2001, as at that date there would have been an antecedent liability that could provide valuable consideration for the cheque. [111] However, there is a difference between the circumstances in Sea Hunter and this case. Whether the difference will be pivotal to the outcome of this case is a key issue for determination. In Sea Hunter notice under neither s 46(2)(a) nor s 46(2)(b) was sent within the time prescribed in s 46(5) (for the s 46(2)(a) notice) or s 46(4) (for the s 46(2)(b) notice). Here the Commissioner gave notice of his intention to investigate under s 46(2)(a) within the time prescribed in s 46(5). He did not request Contract Pacific to provide further information within the time prescribed in s 46(4). But he did make requests for further information (outside the time limits prescribed in s 46(4)) before 5 February 2001, when the refund cheque was issued in error. [112] Contract Pacific contends that s 46 is a comprehensive code in relation to the withholding of disputed GST refunds. It submits that once the Commissioner commences an investigation into a GST return under s 46(2)(a), any request he might make for further information has to be treated as a request that falls within s 46(2)(b). It follows that his request(s) for information must comply with the s 46(4) time limits if he is to retain his authority to withhold the disputed refund pending the completion of his investigation. Since it is common ground that the Commissioner's requests for further information were made outside the prescribed time in s 46(4), on Contract Pacific's view of the law, by 5 February 2001 when the refund cheque was issued he would have lost his authority to withhold the $7.3m refund. Thus, the refund cheque was properly payable and so there was no basis for stopping payment on it. [113] The Commissioner contends that for him to be entitled to withhold the disputed refund, it was enough in this case that he give notice of his intention to investigate under s 46(2)(a). He says that once a properly notified investigation is underway, he is then at liberty to request further information from the registered person unaffected by the time limits in s 46(4). In this regard he asserts that his authority to request further information in respect of filed returns is not derived from s 46(2)(b) but comes instead from various tax statutes which provide him withauthority to request information. The parties accept that various tax statutes provide the Commissioner with general powers to investigate filed returns and to request further information in relation to those returns. [114] The Commissioner's view of s 46(2) is that he can choose to act in accordance with either limb of the section. If he chooses to notify his intention to investigate the return under s 46(2)(a), the only time limit s 46 imposes on him is that under s 46(5). The Commissioner submits that with an investigation, once he has given notice in accordance with s 46(5), he is free to request additional information about the return whenever he wishes. The only constraint he accepts in this circumstance is the administrative law constraint of reasonableness, which the common law imposes on the exercise of discretionary authority. On this view of the section, the time constraints s 46(4) imposes would only apply if, on receipt of a GST return, he withheld a claimed refund and requested further information about the return in accordance with s 46(2)(b). [115] In Sea Hunter the Court of Appeal's findings on compliance with the time limits in s 46 were made in a context where the Commissioner acknowledged he had acted under both s 46(2)(a) and s 46(2)(b) and where he had failed to comply with the time limits relating to both those provisions. Consequently, the Court of Appeal did not have to consider the relationship between the two limbs of s 46(2) and whether they could operate disjunctively. However, the comments and findings of the Court of Appeal on s 46 provide a helpful basis from which to approach the present problem. [116] Almond Properties Ltd v Commissioner of Inland Revenue (2003) 21 NZTC 18290 (CA) is another case that assists with understanding how s 46 operates. Almond Properties argued that once notice under s 46(2)(b) of a request for information was given in accordance with s 46(4)(a), on receipt of the requested information, unless the Commissioner issued a further notice that complied with s 46(4)(b), he was obliged to pay the disputed refund forthwith. The argument was based on the reasoning in Sea Hunter. The Court of Appeal described the argument as misconceived. It found (at [22]) that when the Commissioner's initial request for information complied with s 46(4)(a), if, on receipt of the information requested, hemade no further requests for information, s 46(4) imposed no further time limits on him:The time limit in para (b) of subs(4) only applies if the Commissioner wants further information subsequent to his first request. He did not do so in this case. That being so the section places no further time limit upon the Commissioner.How long the Commissioner took to make up his mind on payment of the refund was then subject only to judicial review, if there was inordinate delay. [117] In Almond Properties the Court of Appeal was also asked to determine if the Commissioner's notice to the registered person was a s 46(2)(a) or (b) notice or both. The Commissioner contended that the notice was issued under both limbs of s 46(2), whereas Almond Properties Ltd contended that it was only a s 46(2)(b) notice. The company argued that the Commissioner had confined himself to the narrow ambit of what that limb permits. The Court of Appeal held that it was unnecessary to determine the scope of the notice as the result for the company would be the same. This conclusion was reached without any consideration being given to whether the two limbs of s 46(2) could be used disjunctively as the point was never raised. [118] A study of the relevant case law supports the following propositions. First, s 46 is a code for the authority to withhold payment of disputed GST refunds pending the Commissioner's satisfying himself that payment of the refund is in order. The Commissioner's powers of investigation and requisition of information are derived from both s 46 and from other provisions of the tax statutes. Section 46 does not derogate from his other powers of this type. All it does is to impose a timeframe for when those powers are to be exercised if the Commissioner is to withhold payment of the disputed refund. This is what was held in Sea Hunter. [119] Secondly, if, on receipt of a return, the Commissioner issues a notice that falls under both limbs of s 46(2), he must ensure that any requests he makes for information meet the s 46(4) time limits: Sea Hunter. [120] Thirdly, if the Commissioner issues a notice under s 46(2)(a) and (b) within the time required; and makes no further requests for information, there is no statutorylimit on how long he then can take to decide if the refund is payable. This is what was held in Almond Properties. [121] Whilst in Sea Hunter and in Almond Properties the Commissioner purported to issue notices under both limbs of s 46(2), in this case the Commissioner only gave notice under s 46(2)(a) of his intention to investigate Contract Pacific's GST return. Later, after the s 46(2)(b) time limits had expired, the Commissioner sought further information from Contract Pacific about the return. Can he do this and still be entitled to withhold payment of the disputed refund? [122] Section 46(2) imposes clear time limits for issuing a notice of investigation and for issuing requests for further information. But it does not clearly express whether all requests for information (following the issue of a notice to investigate under s 46(2)(a)) are to be treated as coming within the scope of s 46(2)(b) and, therefore, subject to the s 46(4) time limits. Those limits only apply to requests for information that fall under s 46(2)(b). It follows that the section does not make clear what is to occur when, following the timely issue of a notice of investigation, there are subsequent requests for information that fall outside the time limits s 46(4) imposes on requests for information under s 46(2)(b). [123] It is interesting that in both Sea Hunter and Almond Properties the Commissioner utilised both limbs of s 46(2). In Almond Properties he went so far as to mount an argument, in opposition to that of Almond Properties, that his notice qualified under both limbs. Now he contends that s 46(2) can operate disjunctively. [124] If the two limbs of s 46(2) are read to operate conjunctively, this means the Commissioner must issue both a notice of intention to investigate and a request for information, if he wants to withhold payment of a refund until satisfied it is payable. Any further requests for information from the registered person must then be made in accordance with the s 46(4) time limits. On this view of the section, the Commissioner's requests for information from Contract Pacific would have been made out of time. This would mean that once the out of time request was first made, it rendered the refund payable.[125] If the two limbs of s 46(2) are read to operate disjunctively, this has the effect of permitting the Commissioner, on receipt of the return, to elect whether to use both limbs or just one if he wants to withhold payment. He could choose to issue a notice of intention to investigate only and, subject to compliance with s 46(5), he would not be subject to any statutory time constraints. Conversely, he could choose to issue a request for further information and be subject to the s 46(4) time limits or choose both limbs and be subject to the time limits in s 46(4) and s 46(5). The structure of s 46(1)(b), which requires the Commissioner to refund an amount the day after having determined an amount to be refundable after having investigated the circumstances of the return in accordance with subsection (2) or reviewed the information requested in accordance with subsection (2), permits such a disjunctive approach. [126] However, this raises the further question of whether, when he issues a notice of intention to investigate only, the Commissioner can later request additional information without the need for compliance with s 46(4). If the request for information is seen as part of the investigation and carried out under the authority of a statutory requisition power that is unaffected by s 46(2)(b), the answer is yes. Otherwise, the answer is no. [127] If the Commissioner can notify his intent to investigate under s 46(2)(a) and later request information outside the time limits that apply to a request under s 46(2)(b), it follows that the timing of the Commissioner's requests for information from Contract Pacific would not affect his authority to withhold the refund. But, if s 46(2) can operate in this way, the Commissioner could always avoid the burden of compliance with the s 46(4) time limits simply by choosing to commence an investigation under s 46(2)(a). Since his action of looking into a return would be within the natural meaning of an "investigation" under s 46(2)(a), he could simply issue a notice of investigation whenever he was not satisfied with the information provided in a return. Then he could follow up the s 46(2)(a) notice at any later time with request(s) for information that were reliant on his other information gathering powers under the Inland Revenue Acts. On this view, his requests for information would be seen as part and parcel of his investigation under s 46(2)(a) and, therefore, separate from the type of request contemplated by s 46(2)(b).[128] But if the Commissioner can use s 46(2)(a) in a way that enables him both to investigate and then to request further information as part of that investigation, why would he ever engage s 46(2)(b) when by doing so he would be subjecting himself to the strict time limits that s 46(4) imposes on issuing requests for information under s 46(2)(b)? An interpretation of s 46(2) that permitted this approach would make s 46(2)(b) redundant. It is difficult to see how Parliament could have intended this outcome. As was recognised in Sea Hunter at [18], Parliament has gone to the trouble of imposing strict time limits in s 46(4) on requests for information:The GST Act also has to operate in a business environment where undue delay in the making of tax refunds may have very considerable adverse effects on taxpayers. Parliament has deliberately chosen a short period for the Commissioner to make up his mind whether he needs further information or to investigate the circumstances of the return. If he does not do so in due time, he is not precluded from taking the matter further but, in the meantime, he must promptly make the claimed refund.Parliament could not have had this general intent in mind for the Goods and Services Tax Act and at the same time have provided an alternative statutory route (via the use of s 46(2)(a) investigations) that allowed the strict time limits placed on requests for further information to be by-passed. I cannot accept that Parliament could intend an interpretation of s 46(2) that left s 46(2)(b) redundant. [129] I consider there is only one interpretation of s 46(2) that does not undermine Parliament's intent to impose strict limits on the Commissioner's authority to withhold a refund. This is that whenever the Commissioner is faced with a refund issue under s 46 that requires both investigation and the collection of further information, the two limbs must be used in conjunction. Thus in any investigation of a refund claim that engages s 46(2)(a), requests for information will engage s 46(2)(b) as well. Any such requests that do not comply with s 46(4) will cause the Commissioner to lose his authority to withhold the refund while he carries out his investigation. [130] This is not to say that the Commissioner's actions will always engage the two limbs in conjunction. He can choose just to ask for further information or to investigate a claim. But when his actions entail both investigation and requests for further information, both limbs will be engaged and he must comply with the timelimits and other requirements that both limbs impose. The likely outcome of this interpretation is that in most cases the Commissioner will act in accordance with the requirements of both limbs, otherwise he will find that acting in accordance with one limb will preclude him from withholding a disputed refund if he later acts in a manner that engages the other limb. [131] This interpretation achieves Parliament's purpose of avoiding protracted inquiries into GST returns while the claimed refund is withheld. It needs to be remembered that when a registered person claims a refund, he or she does so because GST has already been paid and those inputs exceed the registered person's outputs. Hence, the Commissioner may be holding GST to which he has no long-term entitlement. In this circumstance it is understandable that Parliament would seek to ensure that the resolution of disputed refunds was not delayed by protracted inquiries. This purpose can only be achieved if the two limbs of s 46(2) are understood to work conjunctively when both investigation and information gathering powers are exercised. [132] In general, this interpretation will not result in a windfall for registered persons. The return of the disputed amount following a failure on the part of the Commissioner to comply with the time limits in s 46 will not deprive the Commissioner of tax that he later assesses to be payable. The tax will be recoverable under the powers available to the Commissioner under the Revenue Acts. The difficulties he faces in this case are the result of a conflux of factors: failure to comply with s 46 time limits; the mistaken issue of a refund cheque; and the nature of the savings provision in s 241(6) of the Taxation (Taxpayer Assessment and Miscellaneous Provisions) Act. The unique circumstances of this case should not be allowed to influence the way in which s 46(2) is interpreted. [133] It follows that the Commissioner's requests for information from Contract Pacific should have been made within the time prescribed in s 46(4). Since that was not done, he lost his authority to withhold the disputed refund from Contract Pacific. Whilst the interpretation of s 46(2) that I have reached will, for the reasons set out below, result in the Commissioner having to pay the claimed refund, in general this interpretation should not cause him too much difficulty. First, he cancomply with the time constraints s 46 imposes on him. Secondly, if he overruns those time limits, in general the consequence will only be the loss of authority to withhold the disputed refund. In such cases if he later disallows the refund claim in an assessment of the GST payable, he can generally recover the money through his powers of recovery under the Inland Revenue Acts. This is what ultimately occurred in Sea Hunter. It is only in this case through a combination of unique circumstances that he may be unable to proceed to assess Contract Pacific's entitlement to its credit adjustment and to recover any money assessed as properly owing under the GST Act.Consideration under the Bills of Exchange Act[134] In Sea Hunter at [25] the Court of Appeal found that the same loss of authority and the Commissioner's consequential obligations under s 46 to pay the refund were valuable consideration to support the refund cheque in terms of s 27(1)(b) of the Bills of Exchange Act. That was enough to entitle Sea Hunter Fishing to its judgment in the amount of the cheque. In an action like this the subjective intent of the drawer of the cheque is irrelevant. Hence, the fact the cheque was issued in error is no defence. [135] The effect of finding that the Commissioner lost his authority to withhold payment of Contract Pacific's refund is that as at 5 February 2001, when the refund cheque was issued, the Commissioner was under an antecedent liability to pay the refund to Contract Pacific. This was sufficient to provide valuable consideration for the cheque. Consequently, on that day all the ingredients were present for Contract Pacific to sue successfully on the cheque under the Bills of Exchange Act. Its position in this regard was no different from that of the registered person inSea Hunter. [136] A later failure of consideration is a defence to an action on a cheque: Byles on Bills of Exchange and Cheques at 19-041 and 19-042. Byles states at 19-041 states that "as between immediate parties the entire failure of consideration has the same effect as its original and total absence and is a defence to an action brought on a bill or note."[137] In this case the Commissioner contended that the Commissioner's obligations in s 20(5) and s 46 could not provide the necessary valuable consideration. Nothing was said about the possibility of events after the issue of the cheque causing a failure of consideration. The Commissioner has not raised the issue and so Contract Pacific has not responded to it. Although Contract Pacific did not frame its discussion of s 241(6)(a) as being in relation to failure of consideration, it is a relevant factor in checking that the passing of the section has not affected Contract Pacific's ability to sue on the cheque under the Bills of Exchange Act. I propose, therefore, to address the issue for the purpose of determining if the section creates an obvious legal event that has caused a failure of consideration. [138] The refund cheque was sent while the bulk of Contract Pacific's credit adjustment claim was outstanding. The passage of s 241 of the Taxation (Taxpayer Assessment and Miscellaneous Provisions) Act removed the basis for certain credit adjustment claims but saved some of those claims where the conditions of s 241(6) were met. All that s 241 did was to remove any doubt over the liability of certain registered persons to pay GST on the services they provided to others. Any effect s 241 had on Contract Pacific's claim was inchoate until such time as the Commissioner assessed Contract Pacific's credit adjustment claim in the light of s 241. The passing of s 241 could not of itself cause a failure of consideration. It follows that after the enactment of s 241 the Commissioner's obligation under s 20(5) and s 46(1) to pay the refund remained alive. This means there has been no failure of valuable consideration that could undermine the action on the cheque.Section 241(6)(a)[139] As part of its argument on the action on the cheque, Contract Pacific submitted that it was someone to whom the savings provision in s 241(6)(a) applied. Contract Pacific contended that if it was covered by this provision it would be immune from the general and retrospective effect of s 241, which in turn would mean that Contract Pacific's entitlement to the bulk of the credit adjustment it sought remained as it always was. Such cover would provide another reason why s 241 could not affect the valuable consideration to support the action on the cheque and it is for this purpose that I have considered the subsection's application to Contract Pacific.[140] Section 241 of the Taxation (Taxpayer Assessment and Miscellaneous Provisions) Act provides:Zero-rating(1) This section amends section 11 of the Goods and Services Tax Act 1985 as it was before its replacement by section 90 of the Taxation (GST and Miscellaneous Provisions) Act 2000 and before its amendment by section 80 of the Taxation (Remedial Matters) Act 1999. (2) After section 11(2)(ca), the following is inserted: "(d) the services are physically performed outside New Zealand or are the arranging of services that are physically performed outside New Zealand; or." (3) After section 11(2), the following is inserted: "(2A) Subsection (2)(e) does not apply to a supply of services under an agreement that is entered into, whether directly or indirectly, with a person, 'person A', who is not resident in New Zealand if— "(a) the performance of the services is, or it is reasonably foreseeable at the time the agreement is entered into that the performance of the services will be, received in New Zealand by another person, 'person B', including— "(i) an employee of person A; or "(ii) if person A is a company, a director of the company; and "(b) it is reasonably foreseeable, at the time the agreement is entered into, that person B will not receive the performance of the services in the course of making taxable or exempt supplies." (4) Subsection (3) applies to a supply made by a registered person between 1 October 1986 and 19 May 1999 (both dates inclusive) if, on or after 15 September 1995, the registered person has sought an adjustment on any basis to a calculation of tax payable in respect of the supply. (5) Subsection (2) applies only if subsection (3) applies. (6) Subsection (4) does not apply to a supply made by a registered person if the Commissioner has, on or before 14 May 2001— (a) paid a refund in respect of the supply; or(b) set off against unpaid tax, an amount otherwise refundable in respect of the supply; or (c) reduced the amount that would otherwise be the tax payable for a taxable period in respect of the supply.[141] Contract Pacific contends that the issue of the refund cheque on 5 February 2001 means that it is a registered person for whom the Commissioner has paid a refund on or before 14 May 2001. It says that receipt of a cheque is the same as receipt of cash funds. [142] The Commissioner contends the words "paid a refund" in s 241(6)(a) mean an unconditional completed payment such as would occur if funds were direct credited to Contract Pacific or if it had received the payment in cash. The Commissioner further contends that payment by cheque is no more than a conditional payment that is capable of enforcement by legal action. As such, this form of payment is outside the meaning of s 241(6)(a). [143] The answer to the question raised by this part of the case is to be found in the way in which the law views bills of exchange, including cheques. Byles on Bills of Exchange and Cheques has this to say (at 26-018) about the status of a cheque provided to discharge an obligation:The courts have repeatedly emphasised the commercial importance of the independence of the contract upon a bill from its underlying subject matter. In the words of Lord Denning M.R. in Fielding & Platt v Najjar ([1969] 1 WLR 357 at 361) " a bill of exchange or promissory note is to be treated as cash."Much the same was said by Bridge LJ in Montecchi v Shimco (UK) Ltd [1979] 1 WLR 1180 at 1183 where he described a bill of exchange as the equivalent of cash. Later in the judgment (also at 1183), Bridge LJ rejected the availability of a counterclaim for unliquidated damages as a defence in a bill of exchange action to raise a counterclaim stating:If that were the situation, it seems to me it would have the widest and most undesirable repercussions by way of undermining the well known principle of international commerce, which the courts have repeatedly upheld, that a bill of exchange is to be treated as having the same value as the equivalent cash.[144] In New Zealand the English approach to bills of exchange was applied inFinch Motors Ltd v Quin [1980] 2 NZLR 513. In that case Hardie Boys J said:The cheque is accepted as a mode of payment which is more convenient for both parties than cash. There is therefore no reason why, except in exceptional circumstances, the payer should be in any better position than he would have been had he paid cash.The circumstances the court would accept as exceptional, thereby permitting a drawer facing the old bill writ procedure (similar to the present summary judgment procedure) to defend the action on the cheque were fraud, invalidity or failure of consideration. [145] The Commissioner referred me to a number of cases in which the courts have permitted the holder of a dishonoured cheque to sue on the underlying subject matter rather than on the cheque. I do not find those cases of assistance in determining the meaning of "paid" in s 241(6). The law has always been that the issue of a dishonoured cheque will not extinguish the right to sue on the underlying subject matter. The ability of holders of dishonoured cheques to choose their cause of action, either to sue on the cheque or to sue on the underlying subject matter, has always been recognised. Hence a party to a contract who is owed money under the contract and has received payment in the form of a dishonoured cheque can choose to sue in debt or on the cheque. That is a different circumstance from the present, which involves the drawer of a cheque that has been dishonoured. The legal principle that permits a holder of a dishonoured cheque to act as if the cheque had never been given cannot protect a drawer of a dishonoured cheque from the legal consequences of having issued the cheque. [146] The Court of Appeal in Sea Hunter had no difficulty treating the payment by cheque in that case as being the same as a payment in cash. In the High Court, Sea Hunter Fishing had argued that the cheque it had received from the Commissioner should be treated as cash. That is how the cheque was treated both in the High Court and subsequently in the Court of Appeal. There was never any suggestion that the dishonouring of that cheque resulted in the issuing of the cheque being negated.[147] I consider that I am bound to follow the approach in Sea Hunter and inFinch Motors v Quin insofar as it relates to the common law consequences of payment by cheque. There is nothing in the Taxation (Taxpayer Assessment and Miscellaneous Provisions) Act or s 241 itself that suggests that Parliament intended that the word "paid" in s 241(6) should be understood any differently from the common law understanding of "paid". The Commissioner has accepted that payment by direct credit meets the provisions' requirements. It is hard to see why Parliament would intend payment in cash or by direct credit to satisfy the provision's requirements and at the same time exclude other forms of payment, which the common law treats as being the same as a payment in cash. As was recognised by Hardie Boys J in Finch Motors, a cheque is a mode of payment. Furthermore, there is no reason why the holder of a cheque should be in a different position than if he had received payment in cash or by direct credit. The Commissioner would no doubt say that the cheque had been issued in error, however, under the common law the drawer's subjective intent is not relevant. The common law is that provided there is no invalidity, fraud or failure of consideration, the issue of a cheque is viewed in law as a payment that is no different from other forms of legal payment. There is nothing in the Taxation (Taxpayer Assessment and Miscellaneous Provisions) Act to cause me to conclude that Parliament intended to depart from the common law in this regard. [148] As at 14 May 2001 nothing had changed from the time the cheque was issued on 5 February 2001. I have already found that on 5 February 2001 there was valuable consideration to support the cheque. That position is unaffected by s 241(6) and remains the same today as it was then. [149] The result on the first cause of action is that I find there was an antecedent debt or liability to provide valuable consideration for the cheque Contract Pacific received on 5 February 2001. I find, therefore, that Contract Pacific is entitled to judgment on its first cause of action under s 27 of the Bills of Exchange Act.Section 241(6) of the Taxation (Taxpayer Assessment and Miscellaneous Provisions) Act 2001: the second cause of action[150] As an alternative argument, Contract Pacific also contends that it qualifies under s 241(6)(c). This provision exempts from the general effect of s 241 registered persons for whom the Commissioner has, before 14 May 2001, reduced the amount that would otherwise be the tax payable for a taxable period in respect of the supply. [151] In support of this part of its case, Contract Pacific relies on two facts. First, the notice of assessment accompanying the refund cheque of 5 February 2001, which Contract Pacific contends, constituted a valid notice of a properly executed assessment by the Commissioner. This notice of assessment advised Contract Pacific of its $7.5m refund, which included the $7.3m credit adjustment. The refund and the notice of assessment were generated as a result of the Commissioner's failure to ensure a halt was placed on the programme. Secondly, the Department's internal records of June 2000 which record Contract Pacific's of its credit adjustment refund of approximately $7.3m. The Commissioner's records remained like this until 18 May 2001 when they were altered by a reversal of the credit adjustment. This occurred four days after 14 May 2001. [152] To support the assertion it qualifies under s 241(6)(c), Contract Pacific submits that, for the same reasons as were advanced to establish the first cause of action, s 20(5) and s 46 obliged the Commissioner to make the credit adjustment and to pay the refund. He did this on 5 February 2001 and the Commissioner's records were altered to reflect the credit adjustment. Contract Pacific now relies on the computer generated changes to assert that there has been a reduction of its tax liability that enables it to qualify under s 241(6)(c). At the key point in time – 14 May 2001 – the Commissioner's internal records for Contract Pacific show the credit adjustment and, therefore, a reduction in the GST that would otherwise be payable. [153] The Commissioner contends that he has not made the necessary reduction. The Commissioner rejects the argument that the obligations s 20(5) and s 46 imposeon him made him liable to pay the credit adjustment refund of approximately $7.3m. He argues that in the absence of any liability to pay the refund, he cannot be said to have effected a reduction in terms of s 241(6)(c). He further says that before any reduction can be found to exist, there must be evidence of his having turned his mind to this question and having taken some purposeful action to make a reduction. Here there is none. He says that simply keying information into his computer records as returned by a taxpayer, with the computer generating a subsequent credit adjustment, could not be the type of reduction that Parliament contemplated when it passed the retrospective legislation achieved through s 241. He goes on to argue that the entire purpose of the retrospective legislation was to protect the tax base and to ensure that the type of credit adjustments sought by Contract Pacific were excluded. [154] I do not doubt the Commissioner's argument that the intention of the retrospective legislation was to ensure that in general inbound tour operators could not pursue their credit adjustment claims insofar as those claims rested on a challenge to their liability to pay GST on all the services they had supplied to overseas based persons. Nonetheless, when Parliament passed s 241, it did allow a savings provision. The Commissioner contends that those savings provisions were to protect persons who had already received an actual cash refund so that they were not required to repay those monies. Such persons clearly come within the savings provision. However, if the circumstances of Contract Pacific, or any other registered person, also met the language of the savings provisions, I have difficulty seeing why they can be excluded from their benefit. [155] However, I consider it unnecessary to determine the second cause of action at this time. First, Contract Pacific accepted that the success of both causes of action depended on whether or not I found the refund cheque issued on 5 February 2001 was a payment of the credit adjustment refund the company claimed. There is no need to determine the second cause of action when the outcome depends upon the findings I have made in the first cause of action and Contract Pacific's position will not be enhanced by a finding on the second cause of action.[156] Secondly, and more importantly, I have some concerns about my jurisdiction to grant the relief sought in the second cause of action. Neither party addressed this issue in submissions. [157] Contract Pacific seeks a judgment in the sum of $6,281.767. No jurisdictional basis for entering this judgment is identified. Contract Pacific also seeks an order under s 138P of the Tax Administration Act 1994 confirming the Commissioner's assessment of 5 February 2001. There is no doubt that a notice of assessment was sent on 5 February 2001. However, whether that was preceded by an assessment is problematic. In any event, I have doubts as to whether in the context of a civil proceeding such as this I can proceed to determine if the Commissioner has made an assessment that I can confirm through the making of a s 138P order. [158] Section 138A to s 138S form Part 8A of the Tax Administration Act. Section 138P sits within this framework. Part 8A sets out a codified disputes procedure for persons seeking to dispute tax assessments and other disputable decisions under Part 8A. [159] I do not think that this proceeding fits within the Part 8A procedure. Section 138P governs a hearing authority's powers in "challenges" to assessments or disputable decisions. A "hearing authority" includes this Court. "Challenges" are defined by s 3 of the Tax Administration Act as proceedings or the commencement of proceedings under Part 8A. It seems, therefore, that this Court can only make an order under s 138P where the Court is seized of a proceeding that is brought under Part 8A. [160] I do not think that this proceeding fits within the Part 8A procedure. A taxpayer cannot commence a proceeding under Part 8A without first following the disputes procedure in Part 4A: Commissioner of Inland Revenue v Taxation Review Authority (2004) 21 NZTC 18,634. In particular, s 138B(1) requires an exchange of a notice of proposed assessment and notice of response, as provided for in Part 4A, between the Commissioner and the taxpayer before the latter can bring a challenge proceeding: Commissioner of Inland Revenue v Taxation Review Authority at [56].Contract Pacific has not brought its second cause of action in accordance with the statutory scheme. [161] Contract Pacific also seeks an order requiring the Commissioner to refund the amount of the credit adjustment in conformity with the assessment of 5 February 2001. However, s 109 of the Tax Administration Act prohibits the correctness of an assessment from being disputed in proceedings other than those brought under Part 8 or Part 8A of the Act. The relief sought in the second cause of action is in the nature of seeking an order to confirm the correctness of an assessment allegedly made on 5 February 2001. The Commissioner contends that no such assessment was made. It seems to me that Contract Pacific is seeking to obtain a court order that confirms the correctness of an alleged assessment. I cannot see how there is jurisdiction to do that outside of the Part 8 and Part 8A procedure. [162] The jurisdictional doubts I have, coupled with the view that the second cause of action is dependent on and not additional to the first cause of action, cause me to conclude that there is no need at the present time to deal with the second cause of action. However, since the parties have not had the opportunity to deal with the jurisdictional issue, leave is reserved to them to come back to the Court on this point and on the second cause of action should they wish to do so.Set-off: assessment of Commissioner[163] At the end of the hearing the Commissioner sought to argue that even if Contract Pacific could succeed in the action on the cheque, the consequential liability to pay the proceeds of the cheque could be negated by a set-off. The set-off was based on an argument that the Commissioner had assessed Contract Pacific as being liable for GST on the bulk of its credit readjustment claim. He contends that the notice of that assessment was given in the form of the Commissioner's letter of 11 December 2001 and subsequently a communication on or about 8 February 2002. Furthermore, since Contract Pacific did not file an objection to the notice of assessment, it is too late now for the company to dispute the assessment.[164] I have already found on the facts that the letter of 11 December 2001 was not sent as a notice of assessment. I have also found on the facts that I am not satisfied that any communication containing information recorded on an internal screen dump of the Commissioner's records dated 8 February 2002 was ever sent or, if sent, ever received by Contract Pacific. It follows that I do not find anything that could constitute a notice of assessment was sent on or about 8 February 2002. [165] An assessment is distinct from a notice of assessment. For the purpose of determining Contract Pacific's claim I have not had to consider if the Commissioner made an assessment of the balance of the credit adjustment claim that was not communicated to Contract Pacific or, if communicated, is to be found in some document that was not in evidence before me. I have also avoided making any findings on whether or not the letter of 11 December 2001 could in law constitute a notice of assessment. I did this because it was unnecessary to do so for the purpose of determining if the letter could be a post-contract aid to interpreting the credit adjustment agreements. Furthermore, I did not want to risk offending against the proscriptions in the Tax Administration Act which place limits on the power of a Court to make determinations outside of the Part 8A regime in relation to disputed assessments. [166] The alleged assessment the Commissioner relies on in his set-off is said to disallow the bulk of the credit adjustment claim. Section 29 of the Goods and Services Tax Act deems assessments to be correct except in challenge proceedings. This case is not a challenge proceeding. As part of my judgment I have found that the company is within the savings provisions of s 241(6). I made that finding as part of my decision on whether or not the passage of s 241 had extinguished the antecedent liability to support Contract Pacific's action on the cheque. However, the set-off the Commissioner now seeks leave to raise would, if successful, extinguish for Contract Pacific the practical benefit of the judgment it has obtained in this case. This would come about not because the set-off has merit (I consider that s 241(6) enables the company to claim the full credit readjustment) but through the inability in this proceeding to consider a challenge to the correctness of any assessment which the Commissioner could prove had been made. Furthermore, if the letter of 11 December 2001 could be said in law to constitute a notice of assessment, it wouldmean that the time limit that would enable Contract Pacific to establish in a challenge proceeding that it qualified under s 241(6) had long expired. [167] The set-off raises a number of problems. It was never pleaded. The Commissioner was given leave to file a memorandum after the hearing in which he sought leave to amend his pleading to include the set-off. The application to amend his pleading is opposed. [168] There is a dispute raised in the current pleadings as to whether or not the letter of 11 December 2001 is a notice of assessment, but the full implications of that in terms of a set-off are not made known in the current pleadings. In the Commissioner's statement of defence he had pleaded the 11 December 2001 letter was a notice of assessment. During the hearing he argued, as part of his argument based on the factual matrix principles for interpreting contracts, that the subsequent conduct of the parties could be relied on as an aid to interpretation. Part of the subsequent conduct he relied on was the sending of the letter of 11 December 2001, which he said was a notice of assessment, as well as the alleged failure of Contract Pacific to take any appropriate action to challenge the alleged notice of assessment. [169] Contract Pacific does not accept an assessment was made in December 2001 or that the letter of 11 December 2001 can constitute a notice of assessment. Contract Pacific argued that post-contract conduct in this case was not helpful in interpreting the credit adjustment agreements and, in any event, the 11 December 2001 letter was not a notice of assessment. The importance of the reliance the Commissioner placed on the letter and its relevance to interpreting the agreements was not treated by Contract Pacific as a vital part of the defence it faced. In the context of an argument on contract interpretation, this is understandable. [170] However, the potential adverse impact of there having been an assessment followed by a notice of assessment in December 2001 is much greater for Contract Pacific if these matters are raised as a set-off against the judgments Contract Pacific has obtained in this proceeding. Had the set-off been pleaded,Contract Pacific may well have treated the implications in relation to the occurrence of an assessment and a notice of assessment differently. [171] The hearing started out with the Commissioner arguing that the credit adjustment dispute was concluded through compromise agreements pursuant to s 89I. The Commissioner's case was that those agreements resolved all issues outstanding between the parties. In such circumstances there would be no need for a notice of assessment. There has always been a dispute as to the credit adjustment agreements' meaning but the focus has been on their interpretation, rather than on alleging that irrespective of the agreements the Commissioner had separately assessed and issued a notice of assessment relating to the bulk of the credit adjustment claim. [172] Whether it is proper for the Commissioner to alter course so late in the day or to argue now that his alleged assessment is an effective protection which not only extinguishes liability for the two causes of action but also denies Contract Pacific the benefit of the savings provision into which the company falls, are issues that Contract Pacific may have raised. This could have been done either in this proceeding or in separate judicial review proceedings for abuse of process. Had Contract Pacific been aware from the outset that it was facing a set-off, it may have led additional evidence and cross-examined the Commissioner's witnesses on matters relating to the existence of an assessment and the issue of a notice of assessment. The Commissioner's late raising of this shield has denied Contract Pacific the opportunity to shape its case in a way that would enable a best attempt at counter attack. [173] In Page & Griebel v BMH Limited HC HAM CIV 2007-419-1584 19 February 2008, Stevens J carried out a careful study of authorities on the importance of pleadings. At [30]-[32] he refers to and cites the relevant authorities:[30] Before dealing with that issue in the appeal, it is worth pausing to emphasise the importance of the pleadings in the context of the present task. The primary purpose of pleadings was conveniently summarised by Lord Edmund-Davies in Farrell v Secretary of State [1980] 1 WLR 172 (HL) at 180 as being "to define the issues and thereby to inform the parties in advance of the case they have to meet and so enable them to take steps to deal with it". His Lordship had earlier stated:It has become fashionable in these days to attach decreasing importance to pleadings, and it is beyond doubt that there have been times when an insistence on complete compliance with their technicalities put justice at risk, and, indeed, may on occasion have led to its being defeated. But pleadings continue to play an essential part in civil actions. [31] The Court of Appeal in Price Waterhouse v Fortex Group LtdCA179/98 30 November 1998 returned to the same theme. McGechan J expressed concern at p 17 at the propensity:in some quarters to regard the pleadings as being of little importance. There was an echo of that approach in the implicit suggestion floated in this case that exchange of briefs-of-evidence before trial might be seen as curing any lack of particularity in the pleadings. Any such view is misguided. Pleadings which are properly drawn and particularised are, in a case of any complexity, if not all cases, an essential road map for the Court and the parties. They are the documents against which the briefs-of-evidence are or should be prepared. They are the documents which establish the parameters of the case, not the briefs-of-evidence.[32] To similar effect are the observations of the Court of Appeal inHopper Group Ltd v Parker (1987) 1 PRNZ 363. At 366, Bisson J stated:One essential part of pleadings is to state precisely the basic facts on which the plaintiff relies so as to clearly define the issues which the defendant has to meet. If that is not done, it is difficult for a defendant to prepare for trial and questions such as payment into Court or offers of settlement can hardly be considered. Furthermore, if the case goes to trial without precise pleadings, much time can be wasted and a defendant might be taken by surprise when the real issue not previously stated clearly suddenly emerges.[174] The set-off and the issues it involves can be raised in separate proceedings. Separate proceedings will enable both parties to have a fresh approach to the issues untrammelled by the confines that inevitably will affect the issue if raised so late in the day in this proceeding. This is not a case where the Commissioner is in danger of facing estoppel or abuse of process arguments for failing to raise the new issues as a set-off in this proceeding. In Page & Griebel at [42]-[44] there is a helpful discussion of the principles for estoppel per rem, issue estoppel and abuse of process. None of those principles would prevent the Commissioner commencing a separate proceeding to establish the existence of an assessment, notice of assessment and consequential entitlement to a set-off. Indeed, the old cases on actions on bills of exchange make it clear that there was little scope for resisting judgment on the ground of the existence of countervailing liabilities. For example, it was impermissible to bring an unliquidated cross-claim to forestall an action on a cheque; a defendant had instead to bring a separate action to establish the countervailingliability: see Byles on Bills of Exchange and Cheques at 26-019. I cannot see why the Commissioner's new issues cannot be viewed as analogous to an unliquidated claim and so treated in the same way. [175] I see no real prejudice to the Commissioner if he is refused leave to amend his statement of defence to include a set-off based on the new issues arising from his alleged assessment and notice of assessment. On the other hand, for the reasons I have already outlined, I see real prejudice to Contract Pacific if the amendment is permitted. It follows that the Commissioner's application for leave to amend his pleading to include the proposed set-off is refused.Result[176] Contract Pacific is entitled to judgment, in the sum of $6,281,767, on its first cause of action. This is the balance of the credit adjustment claim once the payment of the adjustment in relation to GST paid on facilitation fees is taken into account. [177] Leave is reserved to the parties to come back to Court on the second cause of action should there be a need to do so. [178] Contract Pacific has also sought interest on the sum of $6,281,767, together with an award of costs. It has 15 days from the date of receipt of this judgment to file a memorandum setting out the quantification of its interest and its costs claims. The Commissioner has 15 days from his receipt of Contract Pacific's memorandum to file a memorandum in response. Duffy J