GOH V COMMISSIONER OF INLAND REVENUE COA CA78/2010

GOH V COMMISSIONER OF INLAND REVENUE COA CA78/2010 26 July 2011IN THE COURT OF APPEAL OF NEW ZEALANDCA78/2010[2011] NZCA 344BETWEEN IRENE YEH LENG GOHAppellantAND COMMISSIONER OF INLANDREVENUERespondentHearing: 20 June 2011Court: Randerson, Winkelmann and Keane JJCounsel: Appellant in person (assisted by M Murphy as McKenzie Friend)R L Roff for RespondentJudgment: 26 July 2011 at 10:00 AMJUDGMENT OF THE COURTA The appeal is dismissed.B The appellant must pay the respondent costs as for a standard appeal on a Band A basis with usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Keane J)[1] On 1 August 1997 Irene Goh suffered a spinal injury in a motor accident. Within the month she was provisionally granted weekly compensation by the Accident Compensation Corporation. That continued in the first instance until 14 March 1998, when ACC declined her claim.[2] As from 15 March 1998 Mrs Goh received from the Ministry of Social Development (the Ministry) the domestic purposes and invalid's benefits. That continued until August 2005, when ACC reinstated her weekly compensation. She then became entitled to a retrospective payment of compensation for the period 15 March 1998 - 11 September 2005.[3] Both the Accident Compensation Act 2001 and the Social Security Act 1964 require ACC to refund the Ministry the benefit paid either to the extent of the retrospective compensation payment, if it is less than the benefit paid, or the full benefit paid where, as is more common, the compensation payable exceeds the benefit paid.1 That is given effect to by an inter-agency agreement between ACC, the Ministry, and the Commissioner of Inland Revenue.[4] In terms of that agreement ACC reimbursed the Ministry the net benefit paid to Mrs Goh for the retrospective payment period. To reimburse the Ministry the tax it had paid on Mrs Goh's benefit, ACC paid an equivalent amount to the Commissioner. In terms of the arrangement it was for the Commissioner to credit that sum to the Ministry. That is what happened.[5] Mrs Goh contends that ACC was only entitled to deduct from the retrospective payment the net benefit, because that was all that the Ministry asked ACC to do in its letter dated 18 November 2005. The payment ACC made to the Commissioner on account of the tax the Ministry had paid on that benefit, she contends, was not a sum ACC was entitled to deduct. Moreover, it resulted in the Commissioner receiving the tax payable on the benefit amount twice over.[6] To recover that tax portion of the ACC deduction from the retrospective payment due to her, Mrs Goh claimed a tax credit in the year ended 31 March 2006; the year in which she received the net retrospective payment. When the Commissioner disallowed her claim, ultimately by formal ruling, Mrs Goh brought an application for judicial review in the High Court, in which she challenged both1 Accident Compensation Act 2001, s 252; Social Security Act 1964, s 71A.the validity of the assessment, as it related to the credit she claimed, and the validity of the underlying inter-agency payment.[7] On 11 November 2009, in the decision under appeal, Woodhouse J struck out Mrs Goh's application.2 It was an abuse of process, he held, because her only remedy lay on appeal to the Taxation Review Authority. It was untenable, he held, because she had not paid tax twice over. The credit she claimed would have excused her from any liability to tax on the benefit amount.[8] On this appeal Mrs Goh contends that her application for judicial review was made in good faith and was not an abuse. She adheres to the grounds for her application that the Judge found to be without merit.Inter-agency adjustment[9] Once ACC determined that Mrs Goh was entitled to compensation for the period during which she had received the domestic purposes and invalid's benefits, the Ministry of Social Development reviewed her entitlement to a benefit during that period and concluded that the entire benefit that she had received, $48,404, was in excess of her entitlement.[10] On 18 November 2005 the Ministry wrote to Mrs Goh telling her this. It notified her also that it intended to request ACC to reimburse it that full amount. Itsaid "ACC law says that ACC has to pay us the overpaid Benefits from your weeklycompensation. Once they have done this ACC can pay any money left over to you."It notified her also that she had a right to have its decision reviewed.[11] On 18 November 2005 also the Ministry wrote to ACC stating that Mrs Goh's gross benefit for that period was $58,453 and that the net benefit that had been paid to her was $48,404. In terms of the inter-agency agreement it requested ACC to reimburse it the net amount.2 Goh v Commissioner of Inland Revenue HC Auckland CIV-2009-041-3258, 11 November 2009.[12] ACC did so. Also, in terms of the agreement, it paid to the Commissioner of Inland Revenue the tax the Ministry had paid on the benefit that Mrs Goh received, $10,049. Under the agreement the Commissioner had then to credit that repayment to the Ministry. It later did so.[13] Once those two deductions were made from the gross amount of Mrs Goh's retrospective compensation entitlement, $95,091, Mrs Goh became entitled to $37,438 less $14,365 tax. ACC deducted and paid the tax. It paid to Mrs Goh the net sum to which she then became entitled, $23,072.Two challenges[14] Mrs Goh has since challenged this inter-agency adjustment in two ways, in each instance with an equal lack of success.[15] She first challenged the Ministry's right to require ACC to reimburse it $48,404. The Social Security Appeal Authority upheld the Ministry's right to be reimbursed but held also that it was entitled only to $35,591. (That reduced sum does not figure, or have any significance, on this appeal.) On 30 June 2009, on appeal to the High Court, Asher J confirmed that the Authority's ruling was correct in law.3[16] Quite independently, Mrs Goh sought in her return of income for the year ended 31 March 2006, the year in which she received the net compensation payment, a credit for the $10,049 payment ACC made to the Commissioner to reimburse the Ministry for the tax on her benefit it had paid on her behalf. In effect, she contended that the Commissioner had received the tax twice over.[17] In assessing Mrs Goh's liability to tax in the year ended 31 March 2006 the Commissioner disallowed the credit she claimed and, when she invoked the dispute resolution process in the Tax Administration Act 1994 and sought a considered ruling from the Commissioner, that ruling was adverse to her.3 Goh v Chief Executive of the Ministry of Social Development HC Auckland CIV-2008-485-2391,30 June 2009.[18] The ACC was obliged in law, the adjudicator held, to compensate the Ministry for the PAYE payments made and to do so by paying an equivalent amount to the Commissioner. Mrs Goh, the adjudicator said, had no right to anything more than the net amount of the benefit. She was not entitled therefore, the adjudicator held, to put the Commissioner to proof as to whether the Ministry had been credited the ACC reimbursing payment.4[19] It was this ruling that led Mrs Goh to elect to bring her application for judicial review in the High Court, which was the application that Woodhouse J struck out as an abuse of process and inherently untenable, the decision she seeks to have set aside on this appeal.Abuse of process[20] First, Mrs Goh contends, her application for judicial review to the High Court involved no abuse of process, certainly none that was deliberate. She understood that under the Tax Administration Act 1994 she had a choice. She could appeal to the Taxation Review Authority or to the High Court.[21] Instead of appealing to the one or the other, Mrs Goh elected, she says, to apply to the High Court for a judicial review because she was not challenging the Commissioner's assessment, or not principally. She was challenging the validity of the ACC payment to the Commissioner. She questions indeed whether theCommissioner's assessment constituted a "disputable decision" open to appeal.[22] In response, the Commissioner contends, as in the High Court, that Mrs Goh's challenge is to the assessment made, that is, the Commissioner's decision to disallow Mrs Goh the tax credit she claimed. That this turned on the underlying inter-agency adjustment is beside the point. Having first correctly invoked the statutory disputes procedure, the Commissioner says, Mrs Goh's only further remedy lay in an appeal to the Authority.4 Buckley & Young Ltd v Commissioner of Inland Revenue (1978) 3 NZTC 61,271 at 283.Principles[23] Section 109 of the Tax Administration Act 1994 states that a disputable decision made by the Commissioner cannot be challenged except by objection under Part 8 or by challenge under Part 8A.5[24] Two complementary presumptions furthermore limit a challenge to anassessment on the ground of invalidity. Section 109(b) says that "every disputabledecision and, where relevant, all of its particulars are deemed to be, and are to betaken as being, correct in all respects." Section 114 deems assessments made to bevalid, even where incorrect.[25] The statutory objection procedure is not just the prescribed means to challenge a disputed assessment. It is also a curative means. The Taxation Review Authority, or the High Court, should it hear the challenge instead, has the same powers as the Commissioner and if on an objection the Commissioner is found to have acted in error, or invalidly, that can be cured by the exercise of the power of re- assessment.6[26] Only exceptionally, therefore, when an assessment is disputed, does judicial review have a place. Unfairness on the part of the Commissioner, or an abuse of process, has long been seen to be the only justifiable basis for judicial review in such cases,7 and also now, as it has been held more recently, where the error of law claimed is fatal to the exercise of the statutory power and it would be wasteful to require recourse to the objection procedure.8 The most recent, and the presently definitive, decision is that of this Court, Westpac Banking Corporation v Commissioner of Inland Revenue.9[27] There this Court held that judicial review of a tax assessment will only be justified where (i) what purports to be an assessment is truly not an assessment; or5 Tax Administration Act 1994 s 109(a).6 Tax Administration Act 1994, ss 135(1), 136(17).7 New Zealand Wool Board v Commissioner of Inland Revenue [1997] 2 NZLR 6 (CA) at 14.8 Miller v Commissioner of Inland Revenue [2001] 3 NZLR 316 (PC).9 Westpac Banking Corporation v Commissioner of Inland Revenue [2009] NZCA 24, [2009]2 NZLR 99 at [59].(ii) in exceptional cases, such as where there has been conscious maladministration.These very narrow grounds, as this Court said, supply "a particularly inauspicious statutory context for judicial review".10Incorrect remedy[28] The Judge was right, we consider, to conclude that even though Mrs Goh's underlying challenge is to the validity of the inter-agency payment, her decision to redress that by seeking a tax credit, a credit that the Commissioner disallowed, results in a tax dispute only able to be resolved by exercise of the statutory right of appeal.[29] The fact that the Commissioner's assessment may turn, certainly in part, on the underlying inter-agency adjustment does not so alter its character as to mean that it ceased to be an assessment. Mrs Goh does not say that. Nor does she, nor can she, say that the assessment was made in bad faith. The contrary is plainly the case. The Commissioner's assessment was considered, it rested on intelligible principle, and it was clearly made in good faith. The most that Mrs Goh can say, and does say, is that the Commissioner's assessment was incorrect. That being so, her only remedy was by way of appeal.[30] While, therefore, we accept that Mrs Goh made her application for judicial review believing that genuinely to be her proper remedy, that does not assist her. In applying for a remedy not open to her, and in not invoking the remedy prescribed for her, her application for judicial review has to constitute an abuse of process. As the Judge held, it must be struck out on that ground alone.Untenable claim[31] Mrs Goh's primary ground of appeal rests on the premise that the only payment ACC was obliged to make to the Ministry, to reimburse it the benefit paid in the period during which she was actually entitled to compensation, was the net10 At [47].amount, $48,404.56, requested in the 18 November 2005 letter. That request, Mrs Goh contends, was definitive. ACC was neither obliged, nor permitted, to deduct anything more.[32] The Commissioner, in response, contends that ACC was obliged to reimburse the Ministry Mrs Goh's gross excess benefit. That the Ministry requested only the net amount could not override its statutory duty. The Ministry only limited its claim to the net amount because that was a debt due to the Crown. The Ministry has a different statutory means of recovering overpaid tax from the Commissioner of Inland Revenue.[33] The Commissioner's submission rests on a number of consistent decisions of the High Court, the first of which is Buis v Accident Compensation Corporation.11Those decisions, we accept, state accurately the purpose and effect of the statutory regime.Statutory regime[34] Where, as here, a beneficiary receives a retrospective grant of accident compensation, s 252 of the Accident Compensation Act 2001 prevents any double payment. Section 252 requires ACC to refund to the Ministry what it describes asany "excess benefit payment".12 That is "the part of the benefit payment (up to theamount of the entitlement) that is in excess of the amount of benefit properlypayable, having regard to the entitlement under this Act."13[35] Section 252 is complemented by s 71A of the Social Security Act 1964. Section 71A requires that any income tested benefit payable be reduced by any"weekly compensation" entitlement. Subsection (2) says "Where this sectionapplies, the rate of the benefit payable to the person must be reduced by the amountof weekly compensation payable to the person."11 Buis v Accident Compensation Corporation HC Auckland CIV-2007-404-4703, 6 March 2009;Reddell v Accident Compensation Corporation HC Auckland CIV 2008-485-2736, 24 June2009; Hollis v Commissioner of Inland Revenue (2010) 24 NZTC 23,967.12 Tax Administration Act 1994, s 252(2).13 Section 252(3).[36] Neither s 252 nor s 71A state whether the "excess benefit payable" that is tobe paid by ACC to the Ministry is the net benefit that the Ministry paid to the beneficiary, or the gross benefit, taking into account the tax paid on the benefit by the Ministry. That it is the latter is made plain, as the High Court decisions say, by s 83A of the Social Security Act 1964.[37] Section 83A of the Social Security Act 1964 deems tax payable on a benefit to be both an element of the benefit,14 and an element also of the beneficiary's assessable or gross income.15 Section 83A(3) defines the income tax payable in these terms:The amount for income tax payable on a source deduction payment is the amount of the tax deduction that would be made, at the rate determined under the appropriate specified provision, if the payment were increased by an amount that, after the tax deduction were made, would result in an amount equal to the source deduction payment.[38] The effect of s 83A(3) is, we consider, accurately captured by Rodney Hansen J's hypothetical calculation in Buis.16 Assuming a benefit rate of $100, and a gross sum to yield that rate after tax to be $130, s 83A(3) assumes the full benefit tobe $130. That gross amount, as Rodney Hansen J says, is the "benefit payable" ofwhich s 252 speaks.[39] The net benefit that the Ministry seeks to recover is, according to s 85A of theSocial Security Act 1964, a debt due to the Crown. It is, as s 85A(b) says, "anybenefit paid conditionally or provisionally under this Act that a person has becomeliable to repay". It may also be, as s 85A(e) says, "any amount described by this Act as a debt due to the Crown from the person".[40] The Ministry has no need, however, to look to the beneficiary for payment. It is repaid under the inter-agency agreement. Under that agreement, as s 252(4) requires, ACC repays the Ministry, effectively on behalf of the beneficiary, the net benefit paid to the beneficiary, thus discharging the debt.14 Social Security Act 1964 s 83A(4)(a).15 Section 83A(4)(b).16 Buis v Accident Compensation Corporation HC Auckland CIV-2007-404-004703, 6 March 2009at [14].[41] ACC does not refund the Ministry the tax component. It is for the Commissioner to do that. Under s 83A(5) the Ministry may look to the Commissioner to refund any overpaid tax, not as a debt to the Crown, but in exercise of the right given the Ministry in two ways by the section. That is why ACC reimburses the Commissioner.Deductions authorised[42] Once ACC, in terms of the inter-agency agreement, reimbursed the Ministry the net benefit paid to Mrs Goh, and the Commissioner the tax component to the credit of the Ministry, and paid the surplus to Mrs Goh, it accomplished what the two governing statutes called for. It was as if Mrs Goh had never been a beneficiary and had been entitled to accident compensation from the outset. She lost nothing and she was not taxed twice. She has no right to the tax credit disallowed.Conclusion[43] Mrs Goh's application for judicial review challenging the validity of the Commissioner's assessment disallowing her a tax credit in the year ended 31 March 2006, in which she received the retrospective compensation payment, was, we consider, rightly struck out in the High Court as both untenable and an abuse of process.[44] Mrs Goh's application constituted an abuse of process because her only right was to appeal to the Taxation Review Authority. Her application was untenable because the tax credit she claimed for tax paid twice over on the benefit amount was not paid twice over. In reality she was seeking, whether she appreciates it or not, to be released from any liability to pay income tax on the benefit amount.[45] Mrs Goh's appeal is dismissed. She must pay the Commissioner costs as for a standard appeal on a Band A basis with usual disbursements.Solicitors:Crown Law Office, Wellington for Respondent