GERARDUS PETER VAN UDEN v COMMISSIONER OF INLAND REVENUE [2019] NZSC 29 [19 March 2019]

GERARDUS PETER VAN UDEN v COMMISSIONER OF INLAND REVENUE [2019] NZSC 29[19 March 2019]IN THE SUPREME COURT OF NEW ZEALANDI TE KŌTI MANA NUISC 108/2018[2019] NZSC 29BETWEEN GERARDUS PETER VAN UDENApplicantAND COMMISSIONER OF INLANDREVENUERespondentCourt: Glazebrook, O'Regan and Ellen France JJCounsel: M S Hinde for ApplicantM Deligiannis and N S Delamore for RespondentJudgment: 19 March 2019JUDGMENT OF THE COURTA The application for leave to appeal is dismissed.B The applicant must pay the respondent costs of $2,500.____________________________________________________________________REASONSIntroduction[1] Mr van Uden is a sea captain employed by a foreign shipping company. TheCommissioner of Inland Revenue (the Commissioner) contended Mr van Uden had apermanent place of abode in New Zealand in the relevant tax years and so was liableto pay tax on his worldwide income. Mr van Uden's challenge to the reassessment ofhis liability for income tax on this basis was unsuccessful in the Taxation ReviewAuthority (the TRA),1 the High Court2 and the Court of Appeal.3 The TRA, the HighCourt and the Court of Appeal found Mr van Uden was resident in New Zealand forthe relevant tax years.[2] Mr van Uden now seeks leave to appeal to this Court on the basis the Court ofAppeal did not apply the principles set out in the relevant authority, Commissioner ofInland Revenue v Diamond, to his case.4 In addition, Mr van Uden challengesdecisions about taxation of his employer's superannuation fund; whether thereassessment was properly made given the position of the officer who made it; and, asto the penalties imposed.Background[3] Mr van Uden has worked at sea for over 40 years. During the period inquestion, the TRA found that he spent the following time in New Zealand: over sixweeks in the 2005 tax year; two months during the 2006 year; five months during the2007 year; four months during the 2008 year; and four months during the 2009 year.5[4] During that time, Mr van Uden filed nil tax returns for the relevant tax yearsapart from filing a non-resident tax return disclosing a small loss in 2007. WhenMr van Uden met his future wife in early 1998 she was living at the property in issue.By that time, the property had been transferred to a family trust of which Mr van Udenbecame a trustee in 1999. Mr van Uden never owned the property. During the periodin question, his typical pattern was to return to New Zealand twice per year duringbreaks from being at sea. It was accepted that he "almost always" stayed at theproperty when he was in New Zealand.61 Case 1/2017 [2017] NZTRA 1, (2017) 28 NZTC ¶4-000 (Judge Sinclair) [TRA decision].2 Van Uden v Commissioner of Inland Revenue [2017] NZHC 2554, (2017) 28 NZTC ¶23-037(Venning J).3 Van Uden v Commissioner of Inland Revenue [2018] NZCA 487, (2018) 28 NZTC ¶23-081(Winkelmann, Brown and Clifford JJ) [CA judgment].4 Commissioner of Inland Revenue v Diamond [2015] NZCA 613, (2015) 27 NZTC ¶22-035.5 TRA decision, above n 1, at [44].6 CA judgment, above n 3, at [34].[5] The Commissioner commenced an audit of Mr van Uden in 2009. Thechallenged assessments were issued in February 2014.[6] The Commissioner assessed Mr van Uden as liable for New Zealand incometax for the 2005 to 2009 tax years. She did this on the basis Mr van Uden had apermanent place of abode in New Zealand for those tax years and so was liable to paytax in New Zealand on his worldwide income. In addition, a 10 per cent penalty wasimposed because Mr van Uden, in not returning his income on that basis, had taken anunacceptable tax position.[7] In upholding the decisions of the High Court and the TRA on the question ofMr van Uden's permanent place of abode, the Court of Appeal concluded thatMr van Uden had made the relevant property his home.7 The Court considered thatthe "individual factors listed in Diamond support this conclusion".8 These includedmatters such as household expenditure.[8] The Court of Appeal then dealt with whether Mr van Uden's interest in hisemployer's non-contributory superannuation fund (the Provident Fund) wouldconstitute an interest in a foreign investment fund (FIF) which was accordingly taxableon the basis of the accrual rules.9 The Court rejected the argument made on behalf ofMr van Uden that because the contributions to the Provident Fund were paid by hisemployer there was no "cost or expenditure incurred by or on behalf of Mr van Uden"as regards that Fund.10 The Court of Appeal concluded the employer was acting onMr van Uden's behalf in making the contributions.[9] The Court also rejected the challenge made to the process followed by theCommissioner in removing the time bar that applied to the assessment for the 2005 to2008 tax years. The issue was whether the relevant officer acting under delegatedpower had made the necessary factual reassessment. The Court of Appeal upheld the7 At [43].8 At [44].9 Income Tax Act 1994, s CG 15.10 At [56].finding of the High Court that the delegate had expressly exercised the delegatedpower.11[10] Finally, the Court rejected Mr van Uden's submission he should not have beenliable for shortfall penalties under s 141B of the Tax Administration Act 1994 (TAA).Under that section a taxpayer "takes an unacceptable tax position if, viewedobjectively, the tax position fails to meet the standard of being about as likely not tobe correct". The Court noted in this respect Mr van Uden had been aware there wasan issue about whether he was a resident for tax purposes since 1995. Mr van Udenhad received advice from his accountants that it appeared he would be treated ashaving a permanent place of abode in New Zealand and, so, as a resident.The proposed appeal[11] On the proposed appeal Mr van Uden wishes to raise the four issues dealt within the courts below.[12] On the first issue relating to Mr van Uden's tax residence status, Mr van Udenwishes to argue, amongst other matters, that the courts below have misapplied the testfor a permanent place of abode set out in Diamond, for example, by adopting aquantitative approach and by treating the various factors identified in Diamond as astandalone checklist.[13] It may be at some point that the Court may wish to revisit the Diamond test,but the present case, where no issues as to that test arise, does not provide anappropriate opportunity for that. The proposed ground of appeal accordingly raisesno point of general or public importance, nor any matter of general commercialsignificance.12 Nor is there an appearance of a miscarriage of justice.13 Rather,Mr van Uden in this respect would seek to revisit concurrent findings in the TRA, the11 At [67]–[68]. The Court of Appeal also considered that the de novo hearing process having beenfollowed in the TRA, and the TRA having confirmed the assessments, there was "no room for anyfurther challenge pursuant to s 108 of the [Tax Administration Act 1994]": at [69].12 Supreme Court Act 2003, s 13; and Senior Courts Act 2016, s 74. The applicant was given leaveto file further submissions on the respective criteria for leave in the two Acts but the submissionsfiled did not address that point. Accordingly, we need not say anything on that matter.13 Junior Farms Ltd v Hampton Securities Ltd (in liq) [2006] NZSC 60, (2006) 18 PRNZ 369at [4]–[5].High Court and the Court of Appeal. Further, the Diamond factors were seen as simplysupporting the Court of Appeal's conclusion, not determining it.[14] The other three proposed grounds raise no questions of general or publicimportance or of general commercial importance. The outcome on these mattersrested on the particular factual circumstances.[15] Taking first the proposed ground relating to the foreign investment fund rules,the applicant wishes to argue that the focus of those rules is on investment behaviour.But the applicant's concern arises from the Court's assessment of the particular factsin light of the direction in s CG 15(2)(d) of the Income Tax Act 1994 that the cost beincurred "by or on behalf of the person". The second question, whether the personwith the delegated powers undertook the reassessment so that the time bar was lifted,is similarly fact-specific. Finally, the Court of Appeal in concluding shortfall penaltieswere payable applied the relevant principles from this Court's decision in Ben NevisForestry Ventures Ltd v Commissioner of Inland Revenue.14[16] Nor is there an appearance of a miscarriage of justice arising from the Court'sapproach to these matters. In terms of the first proposed ground of appeal,s CG 15(2)(d) provides that expenditure incurred by "or on behalf of" the person iscovered. Nothing raised by the applicant in relation to the proposed second groundcalls into question the approach taken in the Courts below. On the last of the proposedgrounds, nothing raised by Mr van Uden indicates there is a risk of a miscarriage ofjustice arising from the application of the principles in Ben Nevis.[17] Finally, Mr van Uden also wishes to pursue the submission that he has not hadaccess to justice. However, the matters he wishes to raise have all been considered bythe Courts below.14 Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2008] NZSC 115, [2009]2 NZLR 289 at [181]–[203].[18] For the reasons given, it is not necessary in the interests of justice for the Courtto hear and determine the proposed appeal. The application for leave to appeal isdismissed. The applicant must pay the respondent costs of $2,500.Solicitors:Vlatkovich & McGowan, Auckland for ApplicantCrown Law Office, Wellington for Respondent