JACOBS V COMMISSIONER OF INLAND REVENUE COA CA771/2011

JACOBS V COMMISSIONER OF INLAND REVENUE COA CA771/2011 [22 February 2012]IN THE COURT OF APPEAL OF NEW ZEALANDCA771/2011[2012] NZCA 30BETWEEN HEATHER ANNE JACOBSAppellantAND COMMISSIONER OF INLANDREVENUERespondentHearing: 9 February 2012Court: Arnold, Randerson and Stevens JJCounsel: D G Hayes for AppellantM Deligiannis and L A Herbert for RespondentJudgment: 22 February 2012 at 12.30 p.m.JUDGMENT OF THE COURTA The appeal is dismissed for want of jurisdiction.B If the appellant wishes to pursue an appeal, she must apply to the High Court for leave to appeal under s 67 of the Judicature Act 1908.C The appellant must pay costs to the respondent as for a standard appeal on a band A basis together with usual disbursements.___________________________________________________________________REASONS OF THE COURT(Given by Randerson J)Introduction[1] The appellant appeals against a decision by Heath J1 in which he dismissed her appeal against a decision of the Taxation Review Authority (the TRA).2[2] In brief, the appellant owed substantial arrears of income tax to the respondent Commissioner. Following a meeting with Inland Revenue officials on 27 November 2009 to discuss her tax affairs, the appellant lodged a Notice of Proposed Adjustment (NOPA) on 3 December 2009 seeking adjustments for the 1999, 2000 and 2001 tax years. The NOPA was rejected forthwith by the Commissioner on the grounds that it had been lodged outside the required response period under the Tax Administration Act 1994.[3] At no time has the appellant relied on the exceptional circumstances provisions set out in the Tax Administration Act under which the Commissioner has a discretion to accept a NOPA despite the fact that it has been lodged out of time.Instead, the appellant alleged that the Commissioner's officials agreed at theNovember 2009 meeting to accept a NOPA out of time. That allegation is denied by the Commissioner.[4] The appellant then launched proceedings before the TRA effectively seeking a ruling that the Commissioner had agreed to accept the late NOPA. Her case was that if there had been such an agreement, then s 89H(2) of the Tax Administration Act meant that the Commissioner was deemed to have accepted the proposed adjustment since he did not reject the NOPA within the relevant response period.[5] The Commissioner opposed the appellant's claim on the basis that there hadbeen no agreement to accept the late NOPA and that a valid timely NOPA was a pre- requisite to deemed acceptance under s 89H(2).1 Jacobs-Maxwell v Commissioner of Inland Revenue HC Hamilton CIV-2011-419-559,25 October 2011.2 Jacobs-Maxwell v Commissioner of Inland Revenue [2011] NZTRA Hamilton 04 (Judge Barber).[6] The TRA found as a fact that the Commissioner had not agreed to accept a late NOPA and also accepted the Commissioner's argument that he was not deemed to have accepted the NOPA under s 89H(2) since it was lodged out of time and was invalid for that reason. Those findings were upheld by Heath J in the High Court.The jurisdiction issue[7] For the Commissioner, Ms Deligiannis submitted that this Court had no jurisdiction to entertain the appeal. Her argument was straightforward:(a) In order to have an appeal as of right to this Court, the appellant must fall within ss 26A and 28 of the Taxation Review Authorities Act 1994. Section 26A(3) of that Act provides that appeals are only available in respect of challenges commenced under Part VIIIA of the Tax Administration Act. Mr Hayes for the appellant now accepts that the proceedings brought before the TRA did not amount to a challenge commenced under Part VIIIA of the Tax Administration Act.3(b) The only possible pathway for an appeal in the circumstances was by seeking leave of the High Court to appeal to this Court under s 67 of the Judicature Act 1908 against decisions of the High Court on appealfrom an ―inferior court. For the purposes of this section, the TRAwas an inferior court.[8] Mr Hayes did not strenuously resist the proposition that the TRA was an inferior court for the purposes of s 67 of the Judicature Act. It is well establishedthat the mere application of the ―court label does not determine the issue; the functions and processes of the body at issue must be examined. Lord Scarman has described a court of law (sometimes referred to as a court of judicature) as ―a bodyestablished by law to exercise, either generally or subject to defined limits, the3 This follows because the absence of a valid NOPA lodged within the relevant response period meant the appellant did not meet the requirements of s 138B of the Tax Administration Act (thenin force) which would have entitled her to challenge the assessments by the commencement ofproceedings under Part VIIIA of that Act.judicial power of the state. In this context, judicial power is to be contrasted with legislative and executive (ie administrative) power.4[9] Although, as Lord Edmund-Davies noted in the same case,5 there is no unmistakeable hallmark by which a court or inferior court may unerringly be identified, a number of characteristics are commonly considered. The body should have been created by the state; its decisions are concerned with the adjudication of legal rights; it conducts its procedure in accordance with the rules of natural justice; its procedures normally involve a public hearing with the power to receive evidence with cross-examination of witnesses and the hearing of argument on the issues before it; and it adjudicates in a final and binding way on the issues before it (subject to any appeal).[10] We have no doubt that a TRA is a court of inferior jurisdiction for the purposes of s 67 of the Judicature Act. Under the Taxation Review Authorities Act, every TRA is appointed by the Governor-General on the recommendation of the Minister of Justice.6 Importantly, s 13 provides:13 Functions of an AuthorityThe functions of an Authority are to sit as a judicial authority for hearing and determining objections and challenges—(a) To assessments of tax; and(b) To other decisions or determinations of the Commissioner—authorised by the Inland Revenue Acts.[11] This section makes it clear that a TRA is to function as a judicial authority to hear and determine objections and challenges to assessments or determinations of the Commissioner under taxation legislation. The scope of a TRA's jurisdiction isfurther elaborated by other sections.7 A TRA is deemed to be a Commission of Inquiry under the Commission of Inquiry Act 1908 within the scope of the TRA'sjurisdiction and may summon witnesses.8 Subject to any Act or regulations, a TRA4 Attorney-General v British Broadcasting Corporation [1981] AC 303 at 359–360.5 At 351.6 Taxation Review Authorities Act 1994, s 5(4).7 Taxation Review Authorities Act 1995, ss 13A and 13B.8 Taxation Review Authorities Act 1994, s 15.determines matters of procedure. An objector and the Commissioner are entitled to appear personally or by counsel and cross-examination of witnesses is routinely permitted. A TRA has wide powers to receive evidence but is otherwise subject to the provisions of the Evidence Act 2006 as if it were a court.9 Although the hearing of an objection or challenge before a TRA is not open to the public,10 we do not see that as a bar to a conclusion that a TRA is an inferior court. The holding of closed hearings is consistent with the general approach adopted in revenue legislation which is to maintain the privacy in respect of taxpayers' affairs. A TRA gives decisions in writing, including any findings of fact and reasons in law for the decision. Any such decision is final subject to available appeal rights.11 A TRA may also state a case for the High Court.12[12] It is clear from these provisions that a TRA is appointed by the state to exercise judicial authority to determine challenges and disputes under relevant taxation legislation and to adjudicate finally thereon, subject to any appeal. The processes adopted are consistent with those adopted by courts exercising judicial authority. We conclude that a TRA is an inferior court for the purposes of s 67 of the Judicature Act.Conclusions[13] While there is a right of appeal to this Court in respect of challenges under Part VIII of the Tax Administration Act, it is now accepted that the proceeding before the TRA was not such a challenge. In consequence the appellant does not have a right of appeal and the Court has no jurisdiction to entertain the present appeal. Accordingly the appeal is dismissed.[14] If the appellant wishes to pursue an appeal, the proper course is to apply to the High Court for leave to appeal to this Court under s 67 of the Judicature Act 1908.9 Taxation Review Authorities Act 1994, s 17.10 Taxation Review Authorities Act 1994, s 16(4).11 Taxation Review Authorities Act 1994, ss26–28.12 Taxation Review Authorities Act 1994, s 24.[15] The appellant must pay costs to the respondent as for a standard appeal on a band A basis together with usual disbursements.[16] We add that we have some reservations about the jurisdiction of the TRA (and therefore of the High Court on appeal) to hear and determine the claim made by the appellant. In substance, the appellant appeared to be seeking a declaration from the TRA that the Commissioner was deemed to have accepted the NOPA issued by the appellant. She did not challenge any assessment or decision of the Commissioner. Whether a TRA has power to make declaratory orders of this nature is unclear. However, in the absence of full argument on this point, we do not express any final view on it.Solicitors:Brook Law, Hamilton for AppellantCrown Law Office, Wellington for Respondent