INBOUND v INLAND REVENUE [2013] NZHC 3004

INBOUND v INLAND REVENUE [2013] NZHC 3004 [13 November 2013]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV 2012-404-5445[2013] NZHC 3004BETWEEN INBOUND TOUR SERVICES SOUTHPACIFIC LIMITEDPlaintiffAND THE COMMISSIONER OF INLANDREVENUEDefendantHearing:SupplementarySubmissions:16 September 2013Plaintiff, 2 October 2013Defendant, 15 October 2013Counsel: A A H Low and S Eathorne for PlaintiffM Deligiannis and M Stapleton for DefendantJudgment: 13 November 2013JUDGMENT OF RONALD YOUNG JTable of ContentsParagraph No.Introduction [1]Causes of action [8]Background facts [15]Sequence of events [19]Agreed adjustments and "duress" [35]Liquidation and subsequent efforts to obtain redress [45]Limitation period [50]Should leave be given to file limitation defences? [51]Are Inbound's claims time-barred? [58]Is the limitation period postponed? [74]DISABILITY [74]FRAUDULENT CONCEALMENT [78]MISTAKE [84]Did IR breach s 46 of the GST Act 1985? [89]Agreed adjustments [117]Is Inbound's claim set off by the agreed adjustments? [118]Retrospective legislation and the savings provision [138]Legislative history [141]Application to Inbound's claim [146]Fourth cause of action: judicial review [159]Is review available in these circumstances? [164]Grounds of review [175]DISCLOSURE OF RELEVANT INFORMATION [176]ALLEGED UNDERTAKING TO PAY BY 31 MARCH 2001 [185]MALADMINISTRATION [194]Conclusion on first, second and third causes of action [201]Summary [207]Costs [208]Introduction[1] Inbound Tour Services South Pacific Limited (Inbound) arranged New Zealand tour packages for overseas wholesalers up until 2001 when it was placed in liquidation by its major shareholder, Mr Cleary.[2] Inbound charged Goods and Services Tax (GST) to its overseas clients and accounted for the GST to the Inland Revenue Department (IR). In 2000 Mr Bullot of Ernst & Young, an accountancy firm, told Mr Cleary they believed Inbound should have zero-rated its packages rather than charging and paying GST at the standard rate (then) of 12.5 per cent.[3] Mr Cleary, therefore, claimed a refund from IR of over $544,000. Subsequently Mr Cleary received a refund from IR of over $119,000. Mr Cleary was not satisfied with that payment and in 2012 issued these proceedings, the aim of which is to obtain over $420,000, the difference between his original claim for reimbursement and the sum paid by IR. The Commissioner's case is that no furtherreimbursement is payable to Inbound. As an additional matter she seeks leave to raise Limitation Act 1950 (Limitation Act) defences. Inbound has six causes of action although the fifth and sixth arise only if leave is given to raise the limitation issue. Three are based on a statutory debt claim and one is an application for judicialreview of the Commissioner's relevant decisions.[4] On 31 August 2000 Ernst & Young, on Inbound's behalf, filed a GST return for the period ended 31 July 2000. In that return it claimed a refund of $544,507.01. This sum reflected GST collected from Inbound's clients and accounted for in returns filed with IR from 1993–1999.[5] Pursuant to s 46 of the Good and Services Tax Act 1985 (the GST Act) IR had 15 working days within which to advise Inbound that it wished to further investigate the claim and would not immediately pay the refund. If it failed to do so within the requisite time it was obliged to pay the refund to Inbound immediately butcould later dispute Inbound's GST return and the refund paid.[6] At this time a number of tour operators in similar situations were making claims for GST refunds, mostly through Ernst & Young. Inbound's case is that the Commissioner failed to give notice advising the GST return was disputed within the 15 day period. This meant the Commissioner had to pay the GST refund to Inbound. It did not do so. At the time, however, both IR and Inbound thought the Commissioner had complied with the time limit.[7] The Commissioner gave notice to Inbound on 28 September 2000 she intended to further investigate its claim believing it to be invalid. But to avoid uncertainty the Government decided to introduce retrospective legislation (but with savings provisions) to make it clear GST was payable by Inbound and other tour operators with similar businesses.Causes of action[8] Inbound's causes of action one, two and four are based on the proposition that IR should have paid Inbound the full GST refund and that the savings provisions applied to Inbound. That meant the retrospective legislation did not apply to Inbound. Because the Commissioner had not subsequently disputed Inbound's GSTreturn by the appropriate statutory process Inbound was now entitled to the full refund.[9] The third cause of action is judicial review. Inbound alleges breaches of natural justice and fairness by the Commissioner arising from the GST returns and the subsequent conduct of the Commissioner.[10] The fifth and sixth causes of action are responses to the Limitation Act claim of IR. The fifth cause of action alleges that the Commissioner's actions amounted toconscious maladministration by misleading Inbound as to the effect of a breach of s 46 of the GST Act and alleges that the actions of the Commissioner are fraudulent concealment for the purpose of s 28 of the Limitation Act. Thus, Inbound says time should not run for the purpose of the Limitation Act until 2008. These proceedings, filed in 2012 would, therefore, have been within time (six years).[11] The sixth cause of action is an allegation that the Commissioner will be unjustly enriched based on mistake if she is able to keep the benefit of the refund in the circumstances. Again an extension of time for filing these proceedings is sought based on mistake.[12] IR says the non judicial review causes of action are all based on one essential premise: that the Commissioner wrongly failed to pay the GST refund when obliged to do so by s 46. Inbound's causes of action therefore all essentially allege a breach of this statutory obligation giving rise to a debt.[13] IR's case is that these proceedings are time barred by the Limitation Act. IR says these proceedings are an action to recover a sum by virtue of an enactment1 and so the limitation period is six years from the date on which the cause of action accrued, namely the day after the refund was due to be paid, 22 September 2000.[14] Inbound's response to IR's Limitation Act submission is:(a) the Limitation Act 1950 does not apply to such claims. The GST Act and the Tax Administration Act 1994 provide for a limitation period in such circumstances and the plaintiff's claim was madewithin such period; and(b) in the alternative, if the Limitation Act does apply then the date for assessing when the causes of action arise should be postponed (the fifth and sixth causes of action).2Background facts[15] First some preliminary observations. Mr Bullot and Mr Cleary gave evidence on behalf of Inbound. Mr Bullot was (and still is) a tax adviser for Ernst & Young. He was intimately involved with Inbound's tax arrangements and the claim for GST in 2000 and 2001. Mr Cleary was the primary shareholder, director and manager of Inbound at the relevant time.1 Limitation Act 1950, s 4(1)(d).2 Limitation Act 1950, ss 24 and 28.[16] Ms Mikaere and Ms Monk are IR investigators who gave evidence. Both were employed in the Manukau office of the Commissioner in the 2000/2001 tax period. The Manukau office had the responsibility for dealing with Inbound's GSTclaim (and indeed most other similar claims from travel companies) in 2000/2001. An affidavit and brief of evidence (which was accepted by Inbound without cross-examination) from Mr Graeme Tubb, a lawyer then employed by IR, was also in evidence.[17] Inbound's case is partly dependent upon the credibility and reliability of evidence given by Mr Cleary as to discussions he had with both Mr Bullot, the Ernst & Young tax adviser, and IR in the 2000/2001 period. Having had the opportunity of hearing Mr Cleary's evidence and cross-examination and comparing his evidence with the contemporary documentary evidence, I did not find, as a general observation, Mr Cleary's evidence reliable. I consider that to a significant degreeMr Cleary has reconstructed what happened 13 years ago to fit with his view that he has been unfairly dealt with by IR who have taken money that he is entitled to. I will consider Mr Cleary's evidence in detail later in this judgment where his evidence is important to the ultimate outcome of this case.[18] Some mention should be made of an investigation of these matters that was undertaken by the Ombudsman. The common bundle of documents contains exchanges of correspondence between Mr Cleary and the Ombudsman as well as a final report from the Ombudsman. The Ombudsman concluded that within the limits of the matters that he could consider, Mr Cleary had no valid complaint about the way in which he had been treated. I do not base any of my conclusions on theOmbudsman's conclusions. It is for me to consider the issues of this litigation and reach an independent assessment in the context of Inbound's claims against the Commissioner.Sequence of events[19] In 2000 Ernst & Young believed that a number of tour operators who arranged New Zealand tour packages for overseas wholesalers had been wrongly paying GST at the standard rate when they believed the service should have beenzero-rated for GST. This seems to have been based on an analysis of the Court of Appeal decision in Wilson & Horton Ltd v Commissioner of Inland Revenue3 and s 11(2A) of the GST Act subsequently passed in 1999.4 They approached Inbound and other travel companies. Mr Cleary, on behalf of Inbound, agreed to participatein Ernst & Young's approach to the Commissioner seeking reimbursement of the GST paid by some tour operators.[20] The initial letter from Ernst & Young to Mr Cleary in April 2000 said they proposed to review Inbound's GST position and advise whether or not it may have a claim to overpaid GST. That letter made it clear that they could not guarantee that their advice would be accepted by IR.[21] In July 2000, on behalf of Inbound, Ernst & Young wrote to IR advising them of the potential claim. They were seeking confirmation from IR that documentation they had identified would be acceptable in making the refund claim.[22] On 30 August 2000 Ernst & Young wrote to Mr Cleary setting out their interpretation of the relevant law. The detailed letter (of over 20 pages) identified why Ernst & Young believed their services were properly zero-rated.[23] In the letter (under the heading "Risks") Ernst & Young said:Given the complex nature of the issues involved we cannot guarantee that IR will accept our advice.[24] Ernst & Young acted for a number of similar businesses with similar claims. It was in regular discussion with IR during this time about the zero-rating claim. It did not expect any of the claims for refunds to be paid immediately. Ernst & Young understood IR would need some time to consider their GST arguments before a final decision on the reimbursement claims would be made. Mr Bullot said in evidence that he had conveyed those expectations to Mr Cleary.3 Wilson & Horton Ltd v Commissioner of Inland Revenue [1996] 1 NZLR 26 (CA).4 Taxation (Remedial Matters Act) 1999, s 80.[25] The following day with Mr Cleary's approval Ernst & Young submitted the GST return for the two month period ending 31 July 2000, seeking a refund for GST previously paid from 1993 to 1999. In an accompanying letter they set out why they were seeking such a refund for Inbound. The GST return sought a reimbursement of $544,507.01. That figure was made up of $545,225.48 for GST already paid, less GST of $748.47 owing by Inbound to IR for the immediate GST return period, leaving a net sum of $544,507.01.[26] On 21 September 2000, IR produced (at least internally) a letter to Inbound. It acknowledged receipt of the GST return on 31 August 2000. It said:Under the provisions of s 46(1)(b) of the Goods and Services Act 1985, your refund will be delayed until we have reviewed the GST return and supporting documentation. If you have any questions or have not been previously contacted about this review, please call me on [telephone number provided].[27] Although the letter was addressed to Inbound it was sent to Ernst & Young asInbound's tax agent and was date stamped as received by them on 28 September 2000.[28] Ernst & Young reported regularly to Mr Cleary. By early October 2000 they told Mr Cleary that they had not received a substantive response in writing from IR but discussions were ongoing. They said that the focus with IR was "on thecontractual relationship between the inbound operators and the New Zealand suppliers of individual components of the tour package". This went directly towhether the supply should be zero-rated or GST paid at the standard rate. They also said (referring to IR) "they have told us they do not, at this stage, intend examining the numbers in detail because they are satisfied our calculations had been thorough".[29] A few weeks later, on 16 October 2000, IR wrote to Ernst & Young advising they had not reached any final conclusions in respect of the claim but that their preliminary view was against the claim.[30] By early 2001 Inbound was in financial difficulties. Mr Cleary said that he had counted on receiving the GST reimbursement to keep his company operating. He accepted in evidence (reluctantly) that Ernst & Young had made no promisesabout reimbursement. At the time, however, Mr Cleary took the view that the GST reimbursement was going to be made and would pay off the company's creditors aswell as provide the company with some working capital to further develop the business. He said that he had made a business decision that the GST reimbursement would be paid and had made further decisions in reliance on that payment.[31] On reflection Mr Cleary seemed to accept that he had taken an overly optimistic view of the chances of reimbursement. Perhaps that was understandable in the circumstances given the financial pressure his business was under. This appeared to be the only realistic hope of keeping the business alive.[32] On 2 April 2001 the Government introduced the Taxation (Taxpayer Assessment and Miscellaneous Provisions) Bill. While IR had concluded that most of the reimbursement sought by the tour operators was not justified, there was sufficient uncertainty about the point that the Government decided retrospective legislation (to remove any doubt) was required. The potential GST reimbursement (should all tour operators successfully claim reimbursement) was between $150 and $200 million.[33] Ernst & Young took the view that this retrospective legislation would effectively deprive Inbound, and other tour operators in such a situation, of reimbursement of GST paid.[34] IR had obtained an opinion from Crown Law as to whether it considered any part of the GST was zero-rated. Crown Law concluded that GST could be properly zero-rated on the "profit" portion of the tourism packages (called the facilitation fee)but not on the remaining value of the package. That opinion concluded that given the ultimate service was consumed in New Zealand, GST at the standard rate should be payable on this remaining value.Agreed adjustments and "duress"[35] By September 2001 Inbound was in serious financial difficulties. Ernst & Young, on Inbound's behalf, asked IR if the partial GST refund for the facilitation fee could be urgently paid to Inbound. IR cooperated and arranged the reimbursement. After discussion with both Ernst & Young and Mr Cleary on behalf of Inbound, IR sent two documents each described as "agreed adjustment" forms toMr Cleary, inviting him to sign them. One form disallowed the GST refund sought by Inbound of $545,255. The other provided an agreed reimbursement of $119,236 for the facilitation fee. Mr Cleary signed and returned both.[36] In his brief of evidence and initially in his oral evidence Mr Cleary claimed that he had signed the agreement disallowing the $545,000 refund under duress,although this was not part of Inbound's pleadings. In his brief of evidence Mr Cleary said:Inland Revenue officers visited Inbound on 24 September 2001 and agreed to pay the refund in respective facilitation fees, but only if we signed an agreed adjustment. I had no alternative but to agree to this because by this stage the payment of a refund (even if only part of it) had become critical toInbound's ongoing survival.[37] And further:Even if I wanted a refund with respect to the facilitation fees to be paid as a matter of urgency, I had to sign both forms and return them to InlandRevenue. I didn't intend to give up my claim to the refund but understood atthis point that the retrospective legislation was going to take it away in any event and as such it made no difference whether I signed the form or not. If I did not sign the form I would not get the refund on the facilitation fee and that would be the end of my business.[38] In his evidence Mr Cleary said that Mr Bullot had told him that he would not get the GST refund on the facilitation fee unless he signed both forms. And in evidence Mr Cleary said that he told one of the women from IR, who had attended a meeting at which the agreements were signed, that he was not happy about signing the document.[39] There were two difficulties with respect to Mr Cleary's evidence in this regard. First, as he had noted in his brief and as was identified in the documentary evidence, Mr Cleary did not sign the agreed adjustment forms in front of IR employees. IR faxed the forms to Mr Cleary on 25 September. He signed them and faxed them back to IR. (This enabled IR to publish assessments based on the agreements.)5[40] Further, Mr Bullot's evidence was that he did not tell Mr Cleary that he would have to sign both agreed adjustments if he was to receive the facilitation fee adjustment. Later in evidence Mr Cleary also appeared to accept that he had not signed the agreed adjustment forms in front of IR personnel after seeing the relevant documentary evidence.[41] I prefer the evidence of Mr Bullot as to his recollection of the discussion with Mr Cleary about signing the agreed adjustment forms. I accept that Mr Cleary was anxious to have any money to assist his business. IR cooperated in early payment of the reimbursement relating to the facilitation fee. But there is nothing to suggest in any of the evidence from either Mr Bullot or IR that Mr Cleary was told that he would have to sign both agreed adjustments before he would get any reimbursement.[42] There is evidence that Mr Cleary had been told by Ernst & Young that he would not be entitled to any further reimbursement of GST as a result of the proposed retrospective legislation.[43] I accept that there was pressure on Mr Cleary. But the pressure came from his business difficulties. It did not come from IR or Ernst & Young suggesting that he would not receive the facilitation fee reimbursement if he disputed the remaining GST claim.[44] I therefore reject Mr Cleary's fundamental assertion that unfair pressure wasput on him to sign both agreements. Rather, his was an informed choice. Mr Cleary had advice from Ernst & Young about what they believed to be the position in law as far as GST reimbursement was concerned. He also had advice from Ernst & Young5 Tax Administration Act 1994, s 89I.as to the effect of the proposed retrospective legislation. I am satisfied IR did not say he would only be reimbursed for the facilitation GST fee if he agreed to abandon his other refund claim.Liquidation and subsequent efforts to obtain redress[45] Unfortunately the facilitation fee GST reimbursement did not solve Inbound'ssolvency issues. Two days after the agreements were signed, on 27 September 2001 Mr Cleary contacted insolvency specialists Ferrier Hodgson and by late October 2001 he placed Inbound into voluntary liquidation. This had a serious affect on his personal finances. Many years later Mr Cleary was able to take Inbound out of liquidation to bring these proceedings.[46] The retrospective legislation was finally passed by Parliament in October 2001. It contained a savings provision for some tour operators who had filed GST zero-rated returns between 1993–1999 and for those who had been paid a GST refund by IR before a certain date.[47] After the September 2001 agreed adjustments were signed, Mr Cleary wrote (protesting against the retrospective legislation which had in his view so seriously affected him) to: the Ombudsman; the then Commissioner of Inland Revenue; the Revenue Minister, Sir Geoffrey Palmer; the Human Rights Commissioner; MPs –both Government and Opposition and the news media.[48] During the course of these various complaints Mr Cleary says he become aware of IR's letter of 21 September 2000 and its alleged failure to comply with the time requirements of s 46 of the GST Act. He raised that issue in a letter to IR of 22 March 2007. Mr Cleary pointed out that IR had not complied with s 46 of the GST Act when it failed to either give him notice of a dispute about his GST return or to pay the GST refund claimed with the statutory 15 day period.[49] IR rejected Mr Cleary's claim saying that they had complied with the law asthey understood it to be at the time of his GST refund. They accepted thatsubsequently the Courts had interpreted IR's obligations under s 46 differently than IR had then understood them to be.Limitation period[50] IR seeks leave to file an amended statement of defence which covers Limitation Act defences.6 IR's allegation can be simply expressed. This is an action for a sum payable under an enactment. The cause of action, IR says, accrued on 22 September 2000 and so the limitation period expired on 21 September 2006, almost six years before these proceedings were issued.7Should leave be given to file limitation defences?[51] The application for leave is necessary because on 8 March 2013, when these proceedings were set down for trial, IR's pleadings contained no reference to the Limitation Act. On 17 June 2013 IR made an application for leave to file an amended statement of defence to include the limitation defences.[52] The application is opposed. Inbound points out that IR could have raised the defence at any time between from the filing of the statement of defence on 25 October 2012 through until the close of pleadings in March 2013.[53] If the application is successful and I am satisfied the Limitation Act applies then Inbound submits time for filing these proceedings should be extended by disability, fraud and or mistake.[54] The parties agree that essentially three issues are important in considering whether this Court should give leave:(a) the merits of the defence;(b) the reason for the delay; and(c) any prejudice to Inbound.6 Given the events which give rise to these "defences" occurred in 2000 the applicable Act is theLimitation Act 1950, s 2A.7 Limitation Act 1950, s 4(1)(d).[55] As to the reason for delay, the IR accepts that it simply overlooked the availability of the defence.[56] As to prejudice I do not think Inbound can point to any real prejudice here other than the prejudice they will face from having to meet a positive defence. Inbound has had ample notice pre-trial of the limitation defence. There was an opportunity for Inbound to include any evidence relevant to their response to the defence. It has been able to replead. There was time for the preparation of submissions by Inbound in response to the limitation point.[57] Other than the merits based argument, there is no impediment to allowing the defendant to plead this defence. I therefore consider the merits of the Limitation Act defence.Are Inbound's claims time-barred?[58] I accept that if the Limitation Act applies to GST reimbursement claims then the non-judicial review causes of action were brought well after the relevant six year Limitation period. Three of Inbound's causes of action involve an attempt to recover a sum due by virtue of an enactment (a statutory debt under s 46 of the GST Act). In those circumstances s 4(1)(d) of the Limitation Act provides that a claim should not be brought after the expiry of six years from the date on which the cause of action accrued.[59] Here, the cause of action arose on the 16th working day after Inbound filed their GST return. The cause of action, therefore, accrued on 22 September 2000 and the six years expired on 21 September 2006. Thus, if the Limitation Act applies to these proceedings, given they were filed in 2012, they were filed approximately six years beyond the time allowed for in the Limitation Act.[60] Inbound's first response is that the Limitation Act has no application to GSTrefunds. The limitation period on actions to recover GST refunds from IR is prescribed by s 45 of the GST Act and s 163 of the Tax Administration Act 1994.[61] Section 45 of the GST Act provided, at the relevant time:8Refund of excess tax(1) Subject to this Part of this Act and Part 11 of the Tax Administration Act 1994, where any registered person has paid to the Commissioner any amount in excess of the amount of tax assessed under section 27 of this Act in respect of any taxable period, the Commissioner shall refund the amount paid in excess:Provided that, subject to subsection (2) of this section, no refund shall be made after the expiration of the period of 8 years immediately after the end of the taxable period, unless written application for the refund is made by or on behalf of the registered person before the expiration of that period....[62] Section 163 of the Tax Administration Act 1994 provided, at the relevant time:9No limitation of action to recover taxNo statute of limitations shall bar or affect any action or remedy for the recovery of tax.[63] Section 163 therefore appears to oust the Limitation Act where, as here,reimbursement of overpaid GST is sought, it being an action "for the recovery of tax".10[64] IR submits that s 163 relates only to the Commissioner's power to recover taxand is not concerned with a taxpayer's ability to recover tax. Further, they sayInbound's claim is an action for payment of a statutory debt rather than the recovery of tax and so s 163 would not apply. As far as s 45 is concerned IR says that this is not a limitation provision at all because it does not limit the time within which causes of action may be brought.8 The amended wording of s 45 only applies to claims relating to taxable periods beginning on or after 1 April 2005: Taxation (Venture Capital and Miscellaneous Provisions) Act 2004, s 155(2). Therefore the applicable wording is as set out above.9 Section 163 was amended by s 58 of the Limitation Act 2010. It now only explicitly refers to the 2010 Act. But it is common ground that s 163 also disengages the Limitation Act 1950. Because s 2A of the Limitation Act 1950 provides that a cause of action based on an act committed before 1 January 2011 should be dealt with only under the provisions of the 1950 Act, it follows that s 163 applies as it stood pre-amendment (as set out above).10 Such ouster is permissible under s 33 of the Limitation Act 1950 where another Act prescribes a period of limitation.[65] I am satisfied that the Limitation Act 1950 does not apply to Inbound's s 46 causes of action and that, in combination, s 163 of the Tax Administration Act 1994 and s 45 of the GST Act are the relevant statutory provisions which limit time for the refund of GST overpayments. I am satisfied that although identified as a claim for a statutory debt this is, in effect, an attempt to recover overpaid GST. My reasons are as follows.[66] I do not consider s 163 is exclusively concerned with the recovery of tax by the Commissioner. Section 163 is not limited in that way by its plain words. While pt 10 of the Tax Administration Act 1994 (in which s 163 falls) does have provisionsrelating to the Commissioner's powers to recover tax there are other sections within that Part which relate to the recovery of tax by those other than the Commissioner.[67] Section 156, the first section in pt 10, does relate to unpaid tax being recoverable by the Commissioner on behalf of the Crown. However, s 165, for example, relates to the recovery of tax by a person who has paid tax on behalf of another. Nor is there any obvious logic in distinguishing between the two situations where the Commissioner owes a refund and the other where the Commissioner is owed tax. There is nothing in pt 10 that illustrates by words or implication that individual sections within that part are limited in the way claimed by IR.[68] As far as s 45 is concerned, IR's argument is that s 45 is not a period of limitation in the way, for example, that s 4 of the Limitation Act 1950 is. The opening words of s 4 are:Except as otherwise provided in this Act, the following actions shall not be brought after the expiration of 6 years from the date on which the cause of action accrued ...[69] IR submits that the Limitation Act is concerned with limiting proceedings in a court of law after the passage of a certain time. Section 45 simply provides that the Commissioner is not obliged to pay a GST refund eight years after the end of the taxable period unless an application for a GST refund is made before the expiration of that period.[70] I consider that s 163 effectively disengages the Limitation Act 1950. That means without further specific provisions there would be no limit on the time a taxpayer would have to claim an overpayment of tax. Section 45 is that limit. This limitation may not be expressed in the same way as the Limitation Act. However, if my assessment of the effect of s 163 is correct then it is the only restriction on the time for a refund or to collect overpaid tax. I am satisfied that s 45 does in effect describe a period of limitation.[71] Finally, if IR's submissions are correct as to the effect of s 163 and s 45, then there would be a strange incompatibility between the sections. On IR's submission the taxpayer cannot sue the Commissioner for the return of overpaid tax after six years, however, the Commissioner is obliged to repay such overpayments for up to eight years without any apparent entitlement by a taxpayer to bring proceedings to enforce this obligation.[72] In summary:(a) the Limitation Act does not apply to claims for reimbursement of allegedly overpaid GST;(b) section 45 of the GST Act does limit claims for reimbursement of overpaid GST in the terms described in that section.[73] In the circumstances, I grant leave to amend the statement of defence toinclude the Limitation Act "defence" but I reject the application of the Act to thefacts in this case. I am satisfied the limitation on any claim to pay unpaid tax to IR or for IR to reimburse overpaid tax is as set out in s 45 of the GST Act. There is no dispute Inbound sought a refund within the eight year period.Is the limitation period postponed?DISABILITY[74] If I am wrong on the limitation point (and the Limitation Act applies toInbound's claim) then Inbound first says that it was suffering under a disability11 (its insolvency) which should postpone the commencement of the limitation period, and second, says that s 28 of the Limitation Act (relating to mistake and fraud) applies. Given my view that the Limitation Act has no application to the facts of this case, I deal with these issues only briefly.[75] Disability is not exclusively defined in the Limitation Act.12 I agree with IR'ssubmission that the insolvency of a company is not a disability in terms of s 24 of the Limitation Act. I doubt a company can be under a disability for the purpose of the Limitation Act. If a company insolvency is a disability then it has the capacity to extend the limitation period for an indeterminate period. The limitation period commences only when the disability ends. An insolvency may last forever. And so if Inbound is correct, a company in liquidation is able to effectively postpone any right of action for an indeterminate period in the future without vulnerability to limitation periods.[76] Secondly, s 24 and the non-exhaustive definition in s 2(2) are concerned withthe disability of a "person". That does not sit comfortably with the notion of a company being under a disability.[77] I, therefore, reject the claim that insolvency constitutes a disability entitling Inbound to an extension of the limitation period.11 Limitation Act 1950, s 24.12 However, s 2(2) provides that "for the purposes of this Act a person shall be deemed to be under a disability while he is an infant or of unsound mind".FRAUDULENT CONCEALMENT[78] Inbound's case is that the Commissioner is "guilty" of fraudulent concealment and, therefore, time for bringing these proceedings should be postponed.13 This is said to arise because "the Commissioner through her officersactively and repeatedly misled the plaintiff as to the effect of a breach of s 46 and thereby concealed the existence of the action".[79] Thus, it is said, given the Commissioner's statutory duties in s 6 and s 6A of the Tax Administration Act 1994,14 the Commissioner fraudulently concealedInbound's causes of actions arising from the failure to pay the GST refund pursuant to s 46.[80] I reject the plaintiff's claim that the Commissioner fraudulently concealedany cause of action from Inbound.[81] Fraudulent concealment requires the Commissioner to be aware of Inbound'scause of action arising from s 46 and to dishonestly or deliberately "conceal" thatcause of action from Inbound.15 There is no evidence to support the claim that the Commissioner concealed anything from Inbound, let alone did so dishonestly or deliberately.[82] Both Inbound and the Commissioner had the same information about thefacts arising from Inbound's GST claim. Both knew the law. The Commissioner took a particular view of the application of the facts to the law relating to s 46 as he was entitled to. Indeed, at the time (and for some time afterward) Inbound's ownprofessional advisers seemed to take the same view as the Commissioner. Prior to the Commissioner of Inland Revenue v Sea Hunter Fishing Ltd decision both IR and13 Limitation Act 1950, s 28.14 Section 6 is concerned with the obligation of the Commissioner to protect the integrity of the tax systems. It includes at subs (2)(a), (b) and (f) obligations to protect taxpayer perceptions of integrity of the tax system, and the rights to have liability determined and the scheme administered, fairly, impartially, and according to law. Section 6A(3) confirms the duty of the Commissioner is to collect the highest net revenue that is practical taking account compliance issues.15 Inca Ltd v Autoscript (New Zealand) Ltd [1979] 2 NZLR 700 (SC) at 711.Ernst & Young believed IR had complied with its statutory obligation under s 46 inrelation to Inbound's case.16[83] When Inbound and the Commissioner signed the agreed adjustment there is nothing to suggest that Inbound or the Commissioner thought the adjustments reflected anything but their view (including Ernst & Young's view) of what Inbound was and was not entitled to in law. At that time retrospective legislation was proposed. Both parties knew its proposed content. Inbound had professional tax advisors. There is no evidence to support the claim that IR concealed anything from Inbound. I reject the claim that there was any fraudulent concealment by IR.MISTAKE[84] Finally, mistake. Inbound says that it did not know it had a cause of action arising from IR's failure to pay the s 46 reimbursement because it mistakenly believed IR had complied with the notice period required by the Act when it"triggered" the sending of the letter on 21 September 2000, 15 working days afterInbound's GST return was filed.[85] Inbound says its cause of action would have arisen on 22 September when neither notice had been given by IR to Inbound disputing the GST claim, nor reimbursement of the GST paid. But Inbound claims its cause of action is postponed until this mistake (as to timing) was reasonably able to be discovered by Inbound.[86] On 13 December 2001 the Court of Appeal released the Sea Hunterjudgment. This judgment made it clear that IR's obligation under s 46 was for it to send the relevant notice and for the taxpayer to receive (in the ordinary course of post) the s 46 notice within the 15 working days provided. Previously IR had assumed sending the notice on the 15th day complied.[87] Thus, as at the date of the release of the Sea Hunter decision in December 2001, Inbound could reasonably have known that IR had apparently failed to comply with s 46. Its cause of action would then accrue. The December 2001 date of accrual was 11 years before the proceedings were filed, well outside any16 Commissioner of Inland Revenue v Sea Hunter Fishing Ltd (2002) 20 NZTC 17, 478 (CA).limitation period. I am satisfied any mistake made by Inbound would not have sufficiently postponed its cause of action to bring it within the six year limitation period.[88] In summary, I am satisfied the Limitation Act 1950 does not apply toInbound's first three causes of action. The limitations in the Tax Administration Act 1994 and the GST Act do not operate to prevent Inbound's claim. If I am wrong in this, Inbound's claims of disability, fraudulent concealment and mistake are not made out. Therefore the three relevant causes of action would not have been brought within six years of the cause of action accruing.Did IR breach s 46 of the GST Act 1985?[89] Section 46 of the GST Act provides as follows: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....[90] A s 46(5) notice did not have to be in writing in 2000. Section 14 of the Tax Administration Act 1994 provided that such notice only needed to be "given to theperson personally" 17 or (amongst other forms of notice) given personally to a person who was authorised to act for the taxpayer.18 In this case Ernst & Young both in their letter of July 2000 and in the GST return of 31 August made it clear to IR theywere Inbound's tax agents and authorised to act for Inbound on the GSTreimbursement claim.17 Tax Administration Act 1994, s 14(1)(a) (as at September 2000).18 Section 14(1)(c) (as at September 2000).[91] To reiterate the relevant facts, Inbound's GST return was lodged with IR on 31 August 2000. Pursuant to s 46, IR then had 15 working days within which to either refund the amount claimed in Inbound's GST return or to request further information from Inbound or to give notice that IR was intending to investigate the claim and that it intended to withhold reimbursement. If IR failed to give such notice, then the refund was payable, although IR could still dispute the refund claim.[92] On 21 September 2000 IR triggered an internal process which produced a letter dated 21 September to Inbound. That letter advised that under the provisions of s 46(1)(b) of the GST Act their refund would be delayed until IR had reviewed the GST return and supporting documentation. The letter was received by Ernst & Young, who were acting as Inbound's tax agents on 28 September.19 IR had assumed that this process complied with its obligations under s 46(4) of the Act. Ernst & Young also believed it complied.[93] However, on 13 December 2001 in Sea Hunter the Court of Appeal concluded that for s 46 to be complied with, notices required by the section would have to be sent, and in the normal course of post have reached the taxpayer, within the 15 working day period. When IR's letter was received by Ernst & Young on 28 September 2000 it was outside the 15 working day period for this notification.Inbound's case is that given the s 46 letter was not received within the prescribed period, s 46(1) required IR to pay to Inbound the claimed GST reimbursement. IR'sfailure to pay was, Inbound says, a breach of s 46 and, therefore, the statutory basis for its first cause of action.[94] IR's response is that it complied with the intent behind s 46 and that within 15 days of filing its claim Inbound knew that IR would not pay out but would be investigating the return. This, IR say, was sufficient notification in terms of s 46(5).19 It was clear from the letter of 5 July 2000 from Ernst & Young to IR that Ernst & Young were authorised to act for Inbound by Mr Cleary. See Tax Administration Act 1994, s 14(3)(b) –notice may be given to "a representative authorised to act on behalf of the person". There wasno obligation for Inbound or Ernst & Young to serve any "authority" on IR. As long as they hadauthority to act for Inbound, as they had, that was sufficient.[95] I am satisfied that the facts establish that prior to the expiry of the 15 day working period after the GST return was filed, Inbound knew that IR would be carrying out further investigation into the GST refund claim and would not then pay the claimed refund. I consider this was sufficient compliance by IR with the s 46 notice requirement that they "notify" Inbound of the s 46(5) matters and therefore Inbound has no claim for unpaid GST pursuant to s 46.[96] In Contract Pacific v Commissioner of Inland Revenue the Supreme Court discussed the policy behind s 46.20 The Court held that s 46 is concerned with the timing of payments rather than whether the claim for reimbursement was justified. A delay in a legitimate GST refund could cause significant financial pressure for a business. On the other hand GST is essentially an honesty based system. Taxpayers complete and file GST returns which became either "to pay" tax or a refund in the absence of IR investigation.[97] Section 46 allows taxpayers to have the use of money they claim is owing as a GST refund unless IR identifies a dispute or further information is sought within a 15 day time limit. If IR does not give such notice but still wishes to dispute the GST claim it may do so pursuant to the dispute process. But in the meantime the taxpayer can use the money. Thus, prompt decisions are required of IR as to whether to pay or investigate. Even if IR does pay, it could still challenge the return later.[98] Inbound knew from the outset that it was unlikely to be paid a refund within the 15 day period, and that it was inadvisable to attempt to force IR to do so.[99] Mr Bullot said that he told Mr Cleary that even if IR breached s 46 by not paying a refund or issuing a notice within the required period, no issue should be taken with this failure. There was in his view no advantage to a taxpayer insisting on payment in such circumstances. A negotiated settlement with IR was preferable. If payment was insisted upon in terms of s 46, then IR would typically invoke the disputes procedure which was often costly and time consuming.20 Contract Pacific v Commissioner of Inland Revenue [2010] NZSC 136, [2011] 1 NZLR 302.[100] Inbound also knew that the claim was likely to provoke a lengthy investigation. Ernst & Young had discussed similar refunds with IR. They knew IR wanted to consider these claims carefully given the significant potential tax implications. In its letter of 12 April 2000 to Mr Cleary, Ernst & Young said it would attend any meetings required by the IR during its "investigation of the claim"on behalf of Inbound. And further, Ernst & Young would be "corresponding withand following up IR during its investigation and review". That letter also noted "wecannot guarantee our advice would be accepted by the Inland Revenue Department".[101] On 5 July 2000 Ernst & Young wrote to IR on Inbound's behalf. They told IR Inbound was considering seeking a refund for what they said was overpayment of GST.[102] At the end of their letter of 5 July Ernst & Young said:We seek confirmation from the IRD that our approach, and the above documentation will be acceptable in making a refund claim. Obviously if a refund claim is made, we appreciate that a comprehensive investigation will be required. ITS (Inbound) expects such a review and will collate all supporting documents to facilitate the process.[103] On 30 August Ernst & Young wrote to Mr Cleary. The letter set out in detail why Ernst & Young said that the relevant GST should have been zero-rated and why Inbound, therefore, were entitled to a refund. It said:given the complex nature of the issues involved we cannot guarantee the IR will accept our advice.[104] And further:In seeking a refund from the IRD, ITS South Pacific will make full disclosure of the reasons for the refund and in the manner in which it has been calculated. A complete investigation by the IRD should be sought before the refund is approved. This will substantially minimise the risk of IRD changing its mind after approving a refund and should mitigate any penalty exposure.[105] The next day, on 31 August 2000, Ernst & Young sent a letter to Mr Barry Kaye, an investigations officer at IR, enclosing Inbound's GST claim. Theaccompanying letter explained that the GST return covered what Ernst & Young considered to be output tax incorrectly accounted for between 1993 and 1999.[106] Mr Bullot in his evidence confirmed his understanding was that there would be a comprehensive investigation of the claims being made (from Inbound and a number of other tourist operators) by IR before any refunds would be paid.[107] Mr Bullot said in his evidence that he expected a national policy to bedeveloped by IR over the GST claims and that "senior Inland Revenue resourcewould be committed to it given the scale that was involved and that's the way, you know, they like to operate". The potential scale of the refunds if the GST was zero- rated was between $150 and $200 million for all potential claimants. Mr Bullot confirmed in evidence that he understood it would take some months for IR to work through the claims.[108] Prior to the filing of any returns Ernst & Young had discussed the potential claims and the rationale for them with IR. Mr Bullot said that IR had accepted that Ernst & Young had undertaken a comprehensive review of the relevant GST figures for each claimant but the real issue between IR and Ernst & Young was the underlying law as to whether the GST was properly zero-rated or standard rated.[109] Ernst & Young, therefore, were not only expecting a review by IR of the GST returns but welcomed one to ensure that any refund paid would not be ultimately disputed.[110] Ernst & Young had also been expecting the s 46 letter (notifying them of IR'sintention to investigate) in advance of its arrival. IR had told Mr Bullot to expect s 46 letters for all of Ernst & Young's clients who had made similar claims.[111] In evidence Mr Bullot said:Question: And this is what Inland Revenue was doing with all your clients was it?Answer: Yes. From recollection and unfortunately due to the passage of time I can [sic] recall the specific Inland Revenue Department officer that said this but I have recollections that there was some type of discussion that they would be sending out s 46 letters to us and ...Question: So this was ?Answer: That there'd be something for one of each place.Question: So this was before 28 September?Answer: I can't recall the specifics of the timing I am sorry but that would seem logical but I can't recall the specifics. It is overa decade ago.[112] While there is uncertainty over the exact timing of such discussion with IR such advice would logically come before the s 46 letter was sent (on 21 September 2000). The advice from IR that Mr Bullot gave evidence about matches his other evidence and the contemporaneous correspondence from Ernst & Young to both Mr Cleary and IR.[113] There can be no doubt, therefore, that immediately after Inbound's GSTreturn was filed on 31 August 2000, Ernst & Young and Mr Cleary knew IR would not be paying the GST refund immediately but would wish to further investigate the claim. Any reimbursement, if made, would be months away.[114] Ernst & Young (and therefore Inbound) were not given any such advice by formal letter from IR. But as I have noted, the form of the s 46 notice did not need to be by letter or other formal communication.21 Personal notification was achieved by IR bringing the matter to the attention of Mr Bullot of Ernst & Young asInbound's authorised agent.22[115] In these circumstances I am satisfied that IR did give "notice" in terms of s 46(5) and therefore there was no breach of its statutory duty.[116] Inbound's causes of action one, two and three are all based on the proposition that IR breached s 46. For the reasons given I reject that claim. Each of these causes of action must, therefore, fail.21 At [92].22 Tax Administration Act 1994, s 14.Agreed adjustments[117] If I am wrong in my conclusion with respect to s 46 and Inbound was entitled to payment pursuant to s 46, then IR submits, given the agreed adjustments, all Inbound is entitled to is interest on the $545,000 from September 2000 (at the expiry of 15 days) until September 2001 (when the agreed adjustment was signed). IR accepts if these use of money interest circumstances apply $30,958.56 is payable to Inbound. This "set off" argument is dependent on a finding that the agreed adjustment settled the GST disputes between Inbound and IR.Is Inbound's claim set off by the agreed adjustments?[118] This part of the judgment proceeds on the basis that IR should have paid the GST refund under s 46 in September 2000.[119] IR's case is that when the agreed adjustment was signed in September 2001, Inbound acknowledged it was not entitled to the full GST refund sought in August 2000. However, Inbound was entitled to have the use of the refund claimed from September 2000 to September 2001. Thus, Inbound's "loss" is a use of moneyloss for the 12 months or so. This loss can be calculated at an appropriate interest rate on the GST refund claim.[120] Inbound's response is essentially twofold. It is based on the proposition that the agreed adjustment and the consequential assessment by IR did not determineInbound's permanent entitlement to a refund. In the circumstances the agreed adjustment relating to the $545,000 was of no effect.[121] First, Mr Cleary said he had been told by IR that the facilitation fee was all that Inbound could hope to have refunded. He also claimed that IR told him that they would only pay the facilitation fee refund if he signed both agreed adjustments. And so Mr Cleary said he had no alternative but to sign the adjustments. I have already considered that proposition and rejected it. I do not accept that Mr Cleary was ever placed in that position by IR.2323 See at [37]–[45].[122] Second, Inbound says that the agreed adjustment was intended to reflect IR and Mr Cleary's understanding, that the retrospective legislation would preventInbound's refund claim succeeding. Inbound says both parties were mistaken. Thus the agreed adjustment was based on a misapprehension as to the effect of the retrospective legislation. Both parties believed that the legislation removed any rights that Inbound would have to a refund. Inbound says that was wrong and this mutual mistake meant the agreed adjustment was of no effect. Inbound's case is thatthe savings provisions in the retrospective legislation meant Inbound was entitled to the full GST refund from IR.[123] There are two "agreed adjustment" documents. One covering the $545,000,the other the $119,000 refund. They have some features in common and others are different. The introduction to both agreements begins:This document records the terms of agreement between Inbound Tour Services South Pacific Limited and the Commissioner of Inland Revenue in relation to an adjustment proposed by the Commissioner on 25 September 2001.[124] As to the major GST claim, the document is headed:AdjustmentDetailsThe input credit adjustment of $545,255.47 disallowed by agreement.This adjustment was claimed to zero rate the GST previously returned on the sale of Inbound tour package holders to overseas tourists.Proposed changes to the GST Act, s 11A(2) excludes from the zero rating provisions services 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 introduction of that Act to 20 May 1999. This amendment was announced on 14 May 2001.[125] Two further paragraphs in this agreement are relevant. First, Inbound forfeited all rights to challenge that assessment:Effective signingInbound Tour Services South Pacific Limited acknowledges that by signing this agreement all rights to further challenge this adjustment are forfeited in accordance with s 89I of the Tax Administration Act 1994 and has had the implications of this explained.[126] Second, the agreement records that Inbound says it has made a true and full disclosure to the Commissioner who has relied upon that disclosure.[127] The second agreement, which relates to the facilitation fee, has the same introduction but understandably the adjustment section is different. It states:Details1. A detailed schedule of adjustments is included in the attached spreadsheet.2. Total agreed to is an input credit adjustment is $119,236.52.3. The input credit adjustment is due to the zero rating of a facilitation fee. This facilitation fee is for services provided in arranging Inbound tour packages for overseas tourists and is the profit margin for each Inbound tour.[128] IR and the others thought that the retrospective legislation took awayInbound's rights to reimbursement of the GST. But it did not do so, Inbound says because of the savings provision. Therefore Inbound says the Commissioner signed the agreed adjustment on the basis of an erroneous belief as to the law.[129] Agreed adjustments are, Inbound submits, intended to be adjustments basedon the Commissioner's view of the law. In 2001 s 6A of the Tax Administration Act 1994, which now permits the Commissioner to settle tax cases on what he considers to be the "most appropriate basis", had not been passed. In 2001, therefore, any agreement between the taxpayer and the Commissioner had to bebased on the Commissioner's view of the law, Inbound submits.[130] I am satisfied that the heading and the substance of the agreed adjustments make it clear that they contained a settlement of outstanding GST reimbursement issues between IR and Inbound that precluded further challenge. The fact that for statutory purposes the agreement is called an agreed adjustment is of no importanceto the parties' intent.2424 An agreed adjustment triggers the Commissioner's duty to give a notice of assessment whichdetermines the tax Inbound had to pay: Tax Administration Act, s 89I.[131] The agreement is said to be based on proposed changes to the GST Act. Those proposed changes would exclude from zero-rating the services that Inbound supplied. The agreement notes that Inbound forfeits all rights to further challenge the adjustment that it has agreed to.[132] At the time the agreement was signed, both parties believed the Bill beforeParliament would retrospectively remove most of Inbound's GST claim. However, they would have known that Parliament could have voted against the change, the government could have decided to withdraw the legislation or the legislation could have been changed. And so it could not be said that at the time this agreement was entered into either party mistook the law as it then was. Both parties had their view as to the meaning of the existing law. They knew what the proposed law was and would have appreciated the uncertainty of what legislation might ultimately be passed. (Inbound had professional advice on the matter from Ernst & Young.)[133] In the $545,000 agreed adjustment Inbound accepted that its claim to the full GST refund should be disallowed. This was part of the overall compromise. The documents were recorded as agreements in relation to an adjustment proposed by the Commissioner. The agreement between the parties had consideration. Mr Cleary compromised his tax claim by accepting less than the whole of his claim. IR compromised by paying out part of the claim. No penalty taxes were to be levied. Both parties agreed that that was the end of the dispute between them.[134] This was, therefore, an agreement between two parties both compromising their claims, both understanding that the Bill before Parliament was only proposed legislation. There was no mistake as to the meaning of the existing law, nor was Mr Cleary told by IR that the overall settlement was conditional on him giving away the part of his claim.[135] The fact that the agreement was called an agreed adjustment was designed to facilitate the taxation consequences in terms of the legislation. Both adjustments read together show that the parties had reached a settlement of all of Inbound's taxrefund claim disputed by IR.[136] Therefore, if I am wrong in my conclusion about s 46 and there was a breach of that section, then I conclude Inbound is entitled to a payment to reflect the loss of use of the $545,000 which should have been paid to it on 21 September 2000 and repaid to IR on 21 September 2001. This "interest" amounts to $30,958.96 (as calculated by IR).[137] If I am wrong in this conclusion about the agreed adjustments and they did not bind the parties, then Inbound submits the savings provisions in the retrospective legislation entitle Inbound to payment of the full refund sought. I turn now to consider this issue.Retrospective legislation and the savings provision[138] Some background is necessary to understand this aspect of the claim.[139] In Wilson & Horton Ltd v Commissioner of Inland Revenue the Court of Appeal concluded that the fees Wilson & Horton (who published the NZ Herald) charged to foreign clients for advertising in the NZ Herald were properly zero-rated for GST purposes.25[140] The Court's decision triggered Ernst & Young's consideration of tour operators and whether GST was properly payable on their services. After obtaining advice from Crown Law, IR took the view that the Court of Appeal's analysis inWilson & Horton did not apply to tour operators and considered the service they provided required GST to be paid at the standard rate.Legislative history[141] There was, however, some uncertainty about this issue and so the Government introduced the Taxation (Taxpayer Assessment and Miscellaneous Provisions) Act 2001 (TAMP Act). Its purpose was to close this potential loophole. Section 241(3) of the TAMP Act retrospectively amended s 11 of the GST Act. It inserted s 11(2A), providing that GST would be payable at a standard rate where there was a supply of services if the performance of the service was received in25 Wilson & Horton Ltd v Commissioner of Inland Revenue [1996] 1 NZLR 26 (CA).New Zealand. The section covered supplies made by a registered person from 1986 until 1999.[142] There was also a savings provision. Section 241(6) of the TAMP Act provided as follows:241 Zero-rating...(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.[143] The Finance and Expenditure Committee of Parliament provided commentary when it considered the Bill. The Committee had received a significant number of submissions including from Ernst & Young, the GST Group26 as well as Mr Cleary on behalf of Inbound.[144] Three aspects of the Committee's commentary are worthy of note. First, the Committee understood that the total of the potential reimbursement claims was in the region of $150 to $200 million if the TAMP Bill was not enacted. Secondly, most tour operators had in fact charged GST on the service they provided, given the significant number of claims for reimbursement that had been made. And so it could not be said that the retrospective effect of the legislation was catching the tour operators by surprise.[145] Finally, the Committee was aware that some refunds had been paid (apparently two were paid intentionally after consideration by IR, but several more were paid by error). In those circumstances the Committee considered that tour operators who had received the refund could reasonably have had an expectation that26 A group of dissatisfied taxpayers who were affected by the proposed changes.the money was theirs and have spent the money or credited it to a tax debt. This was the justification for the savings provision.Application to Inbound's claim[146] To return to Inbound's claim, Inbound submits IR should have paid the reimbursement to Inbound on the sixth day after its refund claim. If it had done so then the savings provisions in the retrospective legislation would have applied to Inbound and it would have been entitled to keep the refund as its own. In the words of s 241(6), the Commissioner would have "paid a refund" before 14 May 2001.[147] If that submission is correct, then the GST refund would be a windfall payment for Inbound without the merits of its reimbursement claim having ever been decided. Inbound's submissions are that the savings provisions of the retrospective legislation effectively took away IR's entitlement to dispute the claimed GST refund. If IR had (as it was obliged to) paid the reimbursement claim by 22 September, then the savings provision in the retrospective legislation meant the refund had to be paid to Inbound.[148] In those circumstances Inbound says it should have (and was entitled to) received the refund in September 2000. And so, on the basis that IR should not"profit" from their failure to comply with their statutory obligation to pay the refundunder (s 46), Inbound should be treated as having been paid the GST refund in September 2000. Thus, in terms of s 241(6)(a) IR should be treated as having been"paid a refund in respect of the supply" to Inbound.[149] Further, Inbound says that s 241(6)(c) also applies to its situation. When the GST return was filed on 31 August 2000 the return also identified GST to pay for thereturn period of $748.47. The "refund" sought of $545,225.48 was entered into IR'scomputer ledger for Inbound. IR then automatically deducted the tax to pay ($748.47) from the refund sought, reducing the refund to $544,507.01. This, the plaintiff says, in terms of s 241(6)(c), is the equivalent of reducing the GST otherwise payable. This further confirms that Inbound's position was covered by thesavings provision.[150] IR says that the savings provision in s 241(6) is concerned with a determination by the Commissioner that the refund is payable (that is an acceptance by IR that the GST was properly zero-rated), not the legislatively mandated payment under s 46. That approach fits with the policy behind the savings provisions. The savings provision is intended to protect those taxpayers who have received money in circumstances where the taxpayers would have considered they were entitled to spend it. That is, where the Commissioner had positively accepted the taxpayer was entitled to the refund.[151] When a taxpayer files a GST return seeking a refund, the details are entered in the taxpayer's electronic IR file. The refund claim is treated by IR's software ascorrect. A credit in the taxpayer's account is generated. This would "offset" any taxto pay on the taxpayer's electronic file (the s 241(6)(c) situation). A refund will then be paid for the amount sought unless an IR employee intervenes. IR says that this automated process is not what the savings provisions in s 241 could have been intended to apply to. It does not mean IR accepts the taxpayer is entitled to the money IR may still invoke the tax disputes process with the taxpayer.[152] I accept that the purpose of s 241(6) must be to ensure that for those taxpayers who have received a refund (or an appropriate credit for a GST refund sought) because the Commissioner has accepted their reimbursement claim was justified, are entitled to "keep" the money or the tax credit. As the Supreme Court said in Contract Pacific, s 46 was not about whether the claim for GST reimbursement was justified but the timing of payments.27[153] Section 241 refers to a "Commissioner" refund rather than the s 46 type refund generated by legislative obligation. This indicates that only claims affirmatively approved by the Commissioner were intended to be covered. It would also be extraordinary if the savings provision was intended to give a potential windfall to those who had done nothing more than claim a refund where there was no acceptance the refund was payable. On Inbound's argument, even if the GST refund claim had no merit at all, if the Commissioner was obliged to pay under s 46 for whatever reason, the refund was intended to be covered by the savings provision.27 See at [98].[154] Inbound would have known, had it received the refund in September 2000, that it could not count on retaining that money. Inbound knew IR did not accept its claim for the reimbursement. It knew there was a dispute process to go through to establish whether it was entitled to the refund. And so Inbound (and other taxpayers in the same situation) could not say they had altered their position for the worse, relying on their entitlement to the refund.[155] Further, s 241(6)(b) and (c) confirm that interpretation. They are concerned with set off against unpaid tax and reduction in tax otherwise payable. Set offs or reductions in tax otherwise payable would only come about when IR accepted the refund sum properly belonged to the taxpayer or the disputes adjudication process had found in the taxpayers favour. I reject Inbound's assertion that by "processing" Inbound's claim for the refund, IR reduced the amount of tax that was otherwise payable by $748.47, and thereby brought itself within s 241(6)(c).[156] IR's "processing" of Inbound's GST return did not involve any assessment of Inbound's entitlement to the refund. Without an assessment of the merits of therefund claim it cannot be said the Commissioner has done any of the things identified in s 241(6)(a)–(c).[157] The three circumstances described in s 241(6) all illustrate that the Commissioner had to accept the refund sought was payable, or the disputes process had to rule in the taxpayer's favour, and IR had to pay the refund to the taxpayer or to have credited the refund as described in s 241(6)(b) and (c), before the savings provision applied.[158] I am satisfied, therefore, that the savings provision in s 241(6) does not applyto Inbound's circumstances.Fourth cause of action: judicial review[159] The final cause of action is judicial review. I consider the judicial review cause of action in two parts. Is judicial review available in the circumstances pleaded and (irrespective of whether I conclude it is or is not) has Inbound made out the grounds of review pleaded?[160] Inbound's grounds of review are based on allegations of a breach of natural justice by the Commissioner. Inbound seeks: a declaration that the agreed adjustment relating to the $545,000 refund is not enforceable; a declaration the decision not to pay the refund to Inbound is unlawful; orders quashing or setting aside the decision not to pay the fund; and orders requiring the Commissioner to pay the balance of the refund.[161] Inbound says its right to natural justice and procedural fairness was breached when the Commissioner failed to disclose relevant information.[162] Inbound says the Commissioner had an obligation to disclose all relevant information to Inbound and to uphold Inbound's right to have its tax liability determined fairly in accordance with law. Further, Inbound says in the context of the failure by IR to make payment of the GST claim pursuant to s 46, IR made a deliberate decision to delay payment of the refund and to avoid triggering the disputes procedure. This was reviewable maladministration.[163] IR's case is twofold. First, it says that there are no rights of review here and second, even if there are, in this case there was no reviewable error by the Commissioner.Is review available in these circumstances?[164] The availability of judicial review on tax matters is "very largely excluded in favour of the statutory processes" in s 109 of the Tax Administration Act 1994.28Pursuant to s 109, disputable decisions, which include GST assessments, are deemed to be correct and cannot be disputed in a court except in objection proceedings or a challenge under pts 8 and 8A of the Tax Administration Act 1994. This is because:29 objection and challenge proceedings, which contain the ability to elect tohave the matter dealt with by the High Court, give the taxpayer exactly the same forum, and indeed broader rights and remedies than would be available on judicial review; but with the crucial advantage that all matters at issue can be dealt with at the same time.28 Tannadyce Investments Ltd v Commissioner of Inland Revenue [2011] NZSC 158, [2012] 2 NZLR 153 at [60] per Blanchard, Tipping and Gault JJ.29 At [71].[165] So judicial review of the Commissioner's disputable decisions is effectively excluded unless the taxpayer cannot practically invoke the relevant statutory procedure. This, as the Supreme Court in Tannadyce identified, is likely to occur only in extremely rare circumstances.30[166] The equivalent of s 109 of the Tax Administration Act 1994 for GST at the time was s 29 of the GST Act 1985 which provides as follows:29. Assessments deemed correct except in proceedings on objection – Except in proceedings under Part 8A of the Tax Administration Act 1994, no assessment made by the Commissioner shall be disputed in any Court or in any proceedings (including proceedings before a Taxation Review Authority) either on the ground that the person so assessed is not a registered person or on any other grounds; and, except as aforesaid, every such assessment and all the particulars thereof shall be conclusively deemed and taken to be correct, and the liability of the person so assessed shall be determined accordingly.[167] There is every reason therefore to think that the Supreme Court'sobservations in relation to s 109 of the Tax Administration Act 1994 would apply equally to s 29 of the GST Act. And so Inbound can only bring an application for review if it meets the narrow exceptions in Tannadyce.[168] The question in this case is therefore whether this is one of those extremely rare circumstances in which challenge by judicial review should be permitted.[169] The application for review here seeks a series of declarations and orders quashing or setting aside decisions of the Commissioner. The declarations relate to the agreed adjustment, the lawfulness of the decision not to pay a refund, and otherdecisions relating to the Commissioner's decision not to pay the refund.[170] I am satisfied the only decision which could possibly be the subject of judicial review in Inbound's amended statement of claim relates to the agreed adjustment. The other challenged decisions relating to the alleged failure to pay the refund were all susceptible to the disputes procedure in the Tax Administration Act 1994. While there was significant delay by IR in reaching a decision as to whether it would refund the GST claimed there is nothing to suggest that the30 At [61].statutory disputes process, once instituted, (subsequent to an assessment by the Commissioner) could not have properly dealt with the lawfulness of the decision not to pay the refund and any consequences.[171] The agreed adjustment however is potentially in a different category. Once an agreed adjustment is entered into by the parties the Commissioner is bound to issue a notice of assessment.31 That assessment is deemed conclusive of Inbound'sGST liability in any court. Such an assessment could only have been disputed under Part 8A of the Tax Administration Act 1994. However, Inbound forfeited that right of challenge in the agreed adjustment.[172] I accept that given the above statutory regime, the only avenue for a taxpayer who has entered into agreed assessment to dispute that agreed assessment is to bring judicial review proceedings. That is so in this case because Inbound forfeited its challenge rights under the statutory procedure once it entered into the agreedassessment. At the core of the Supreme Court's view in Tannadyce that judicial review could be substantially restricted in tax cases is that there were other hearing bodies which could adjudicate upon the very issues which judicial review could cover.32 Here, there does not appear to be any alternative way of bringing a dispute about an agreed adjustment to Court other than by review.[173] Here, Inbound is challenging the correctness of the process which led to the agreement between the taxpayer and the Commissioner. I accept that ultimately a challenge to that decision puts in issue the assessment made after the adjustments were agreed. The Supreme Court in Tannadyce said such direct challenges were impermissible.33 But I consider that conclusion is contingent on the disputes procedure being available, which in this case it is not.[174] While in my view, for the reasons given, the review grounds are not strong, I am satisfied that (putting to one side the merits of the review claim) this is one of those exceptional circumstances where judicial review is available in the limited way I have identified. If the substantive judicial review had succeeded, then the31 Tax Administration Act 1994, s 89I(2).32 At [55].33 At [59].Commissioner would likely be faced with issuing a fresh assessment regardingInbound's claim and if that was disputed, the disputes process would be triggered. This illustrates that a successful review of the agreed adjustment process would notrule on Inbound's reimbursement claim nor interfere with the tax disputes process.Grounds of review[175] First, I consider the breaches alleged by Inbound of the Commissioner'sfailure to disclose relevant information.DISCLOSURE OF RELEVANT INFORMATION 34[176] The relevant information Inbound says the Commissioner failed to disclose is:(a) that the savings provisions in the retrospective legislation might apply to Inbound;(b) that the Commissioner did not consider Inbound fell within the savings provisions in s 241(6) of the retrospective legislation; and(c) that Inbound was entitled to receive a partial refund for the facilitation fee even if it did not sign the other agreed adjustment in which it would accept no claim could be made to the $545,000.[177] Inbound had an international accountancy firm, Ernst & Young, acting for it which had specialist knowledge of tax law. The evidence shows that Inbound relied upon advice from Ernst & Young.[178] The Commissioner believed the retrospective legislation applied to Inbound'ssituation and indeed believes so today. There is no evidence to establish that the Commissioner knew relevant facts or took a view of the law which might advantage Inbound but failed or refused to disclose this to Inbound.34 See [169] above.[179] The Commissioner made it clear to Inbound by mid-2001 that she would accept a partial refund of the GST relating to the facilitation fee portion of the refund claimed by Inbound. She told Inbound she did not accept that the remaining services were properly zero-rated.[180] This conclusion was based on legal advice from Crown Law. Inbound knewIR's position before Mr Cleary, on behalf of Inbound, signed the agreed adjustment. As I have previously noted in this judgment, I accept that IR did not require Inbound to sign both agreed adjustments and that Inbound was free to sign one or both or none.35[181] Nor did IR suggest that unless Inbound gave up its claim to the reimbursement of the $545,000 it would not make the partial facilitation fee reimbursement.[182] In summary, there is no evidence to suggest that the Commissioner thought the savings provisions in the retrospective legislation might apply to Inbound. In any event Inbound had professional advice about its applicability.[183] Secondly, the Commissioner has throughout taken the position that the retrospective legislation applied to Inbound's position and that the savings provisionsdid not assist Inbound.[184] I have previously rejected Mr Cleary's claim that somehow he was requiredby the Commissioner to sign the agreed adjustment relating to the $545,000 as a condition of obtaining the facilitation fee refund. In my view, there is no evidence to justify that conclusion. I, therefore, reject these grounds of challenge.ALLEGED UNDERTAKING TO PAY BY 31 MARCH 2001[185] Inbound further says that the Commissioner breached natural justice when the Commissioner said to Inbound that (as pleaded) if it was going to pay the refund it would be done by 31 March 2001. I doubt this cause of action is any form of35 At [37]–[45].breach of procedural unfairness. However, for the reasons that follow, there is no merit in the complaint.[186] I am satisfied the context of the comment illustrates that IR was not making binding arrangement with Inbound.[187] The comment was made in the context that if a refund was going to be made Inbound could expect it by March 2001. It was a conditional expression of hope and an indication which by itself could not be reviewable. More fundamentally, however, IR decided before that date that it would not pay the refund sought because it did not believe in law it was payable. And so because IR was not going to pay the refund, the date of 31 March 2001 became irrelevant.[188] IR did not undertake to make a payment. It said if it reached the view that it was payable, it expected to make a payment by 31 March 2001. When it did not reach this situation, that is, it concluded that the refund was not payable, then there was no obligation to pay. I reject this ground of challenge.[189] Inbound also says that the Commissioner acted unlawfully and unfairly in relying upon Inbound signing the agreed adjustment relating to the $545,000 when it was in fact entitled to the refund under s 46.[190] For the reasons I have previously given I do not consider that Inbound was in fact entitled to the refund. In any event, I have also found that at the time the Commissioner signed the two agreed adjustments he considered that the adjustments correctly reflected the law. Inbound, after independent legal advice, signed the agreed adjustments. In these circumstances there is no reviewable error.[191] Inbound says that in correspondence in 2010/2011 "the Commissionerundertook to apply the principles of the Contract Pacific case to Inbound's position". Inbound says the Commissioner failed to do so which amounts to a breach of natural justice.[192] In February 2009 the Commissioner, in reference to Contract Pacific, said:Insofar as the facts are the same, I would anticipate applying the relevant principles determined in the final decision of Contract Pacific to the above taxpayer and to any other client that may be considering making a demand for a GST refund on the same basis.[193] Whatever the similarities between this case and Contract Pacific, IR gave no undertaking it would act in a particular way and so no unfairness can possibly arise under this claim. I note also the February 2009 correspondence is headed "without prejudice". I therefore reject this ground of review.MALADMINISTRATION[194] Inbound complains that IR made a deliberate decision to defer payment ofInbound's refund and also to avoid triggering Inbound's statutory dispute rights bydelaying taking a position on Inbound's GST claim. These "actions" are said to be reviewable maladministration.[195] The evidence in support of this claim is, Inbound says, that Inbound had provided all the information requested by IR by February 2001, and so IR had all the information required to make a decision by then. In May 2001 IR issued an instruction not to pay any GST refund claims under investigation, but to avoid triggering the disputes process. IR representatives were to proceed with the investigation into the GST refunds as if the proposed retrospective legislation did not exist.[196] None of this material, in my view, provides evidence of maladministration. First, this cause of action is dependent upon my conclusion as to s 46. I have already concluded that IR complied with s 46 and on that basis alone this claim must fail. However, if I am wrong in this I note that although IR accepted that whether GST was zero or standard rated on the supply this was the subject of legitimate debate,IR's view was always that GST was properly zero-rated.[197] Further, the instruction by IR to freeze any GST claims under investigation was innocuous. IR would hardly pay out GST claims while the claims were under investigation (save for the s 46 issue). Further, some GST claims had been paid outby IR in error prior to this instruction. Understandably, therefore, IR did not want a repeat of the error.[198] There was significant delay by IR in reaching and communicating a finalview of Inbound's claim. However, as Inbound knew (from advice from Ernst & Young) their claim was not being considered in isolation. There were a number of claims which made up the total of $150 to $200 million of potential tax in issue. This was a substantial tax issue with difficult legal issues. Eventually IR did reach a position on the claims: that they were in part valid (the facilitation fee) and in partnot valid (the rest of Inbound's claim). The suggestion that IR then had "no intentionof allowing matters to be dealt with by way of ordinary process" is, in my view,without evidence to support it.[199] In any event, there was no prejudice to Inbound in IR not processing their claim for GST reimbursement earlier. IR did not have a firm view of the law until many months after the claim was filed. If Inbound's claim had been processedearlier the almost certain result would have been a total rejection of the claim by IR.The disputes process would have been instituted but Inbound's claim would stillhave been subject to the retrospective legislation. The delay would not have changed the outcome.[200] I am satisfied that there is nothing in the evidence which supports the claim of reviewable maladministration here. This ground of review is rejected.Conclusion on first, second and third causes of action[201] The first cause of action alleges the Commissioner had an obligation under s 46 of the GST Act and s 241(6)(c) of the TAMP Act to pay the GST refund to Inbound. Its failure to do so was alleged to a breach of statutory obligation creating a statutory debt. For the reasons given in relation to both s 46 and s 241(6) this cause of action fails.[202] The second cause of action relies upon three errors of law by the Commissioner: failing to pay the GST refund pursuant to s 46, an incorrect application of the savings provisions in the retrospective legislation and improperreliance upon the agreed adjustment. For the reasons given I am satisfied no such errors of law were made by IR.[203] Inbound's fourth cause of action is based in part on the assumption that I would conclude that s 46 had been breached and that the savings provisions in theretrospective legislation applied to Inbound's situation. I have rejected bothpropositions.[204] However, if I am wrong in both those conclusions, then this cause of action alleges: that in terms of s 241(6)(c) of the TAMP Act and s 46 of the GST Act, the Commissioner had an obligation to pay the refund; after 14 May 2001 theCommissioner could not reassess Inbound's return (time having expired to do so); and so the assessment made by the Commissioner consequent upon the agreed adjustment was invalid. Accordingly, there is an undisputed claim for reimbursement of the GST by Inbound which IR should pay.[205] Inbound's submission is based on the proposition I should proceed on the assumption that IR had paid a GST reimbursement to Inbound in terms of s 46. Having received the return claiming a refund in September 2000 IR, in the time available, failed to challenge the refund pursuant to the disputes procedure. The period within which IR could dispute the reimbursement expired on 14 May 2001.From then on IR was obliged to pay Inbound the full refund which was Inbound'swithout challenge rights by IR.[206] The vital assumption is that Inbound was paid the reimbursement sought pursuant to s 46. Behind this assumption is, however, another assumption that IR'sconduct would have been the same even though a vital fact (the payment of the reimbursement) had changed. Self evidently, if in fact IR had paid the reimbursement to Inbound in September 2000, IR would have promptly instigated the dispute procedure. IR have never accepted Inbound was entitled in law to the reimbursement. It did not institute the dispute procedure in fact because IR had not paid the reimbursement to Inbound. The theoretical construct behind Inbound'sfourth cause of action creates a circumstance that would never had occurred. This cause of action must, therefore, fail.Summary[207] In summary, therefore:(a) I give leave to IR to raise the fifth and sixth causes of action but reject the application of the Limitation Act to this claim;(b) if I am wrong in (a) then I reject Inbound's claims to extend time for the filing of causes of action one to three inclusive;(c) I find that IR did comply with the notice obligations in s 46(5) of the GST Act;(d) if I am wrong in (c) then IR's set off argument succeeds. I amsatisfied the agreed adjustment is enforceable and that Inbound is only entitled to interest on the GST refund from September 2000 to September 2001 when the agreed adjustment was signed. The use of money payment is $30,958.96;(e) if I am wrong in (d) the savings provisions in the retrospectivelegislation do not apply to Inbound's circumstances;(f) therefore Inbound's causes of action one, two and four fail;(g) the judicial review claims fail (cause of action three).Costs[208] If IR seeks costs it should file a memorandum within 14 days. Inbound has a further 14 days within which to reply._______________________Ronald Young JSolicitors:Short & Partners, Solicitors, AucklandCrown Law, Wellington