RUSSELL v COMMISSIONER OF INLAND REVENUE CA215/2015 [2015] NZCA 351

RUSSELL v COMMISSIONER OF INLAND REVENUE CA215/2015 [2015] NZCA 351 [4 August 2015]IN THE COURT OF APPEAL OF NEW ZEALANDCA215/2015[2015] NZCA 351BETWEEN JOHN GEORGE RUSSELLAppellantAND COMMISSIONER OF INLANDREVENUERespondentHearing: 24 June 2015Court: Wild, French and Winkelmann JJCounsel: SRG Judd for the AppellantP H Courtney and KIS Naik-Leong for RespondentJudgment: 4 August 2015 at 2.30 pmJUDGMENT OF THE COURTA The appeal is dismissed.B The appellant is to indemnify the respondent for her costs and any usual disbursements of this appeal.____________________________________________________________________REASONS OF THE COURT(Given by Wild J)Introduction[1] Mr Russell challenges decisions by the Commissioner of Inland Revenue not to accept any of three successive offers he made to pay the income tax he owes. The first two offers were to pay by weekly instalment, the third offered a lump sumpayment. Each of these offers was to pay only a fraction of the income tax Mr Russell owes.[2] Mr Russell applied for judicial review of the Commissioner's decisions not toaccept his offers. In a judgment delivered in the High Court at Auckland on 17 April2015, Asher J dismissed Mr Russell's application on its merits (or more correctly, thelack of any), and also because the application was an abuse of the process of the High Court.1[3] It is from that judgment Mr Russell appeals. He argues first that Asher Jerred in a number of respects in upholding the Commissioner's decision. Secondly,Mr Russell contends the Judge was wrong to hold his application for review was anabuse of the Court's process.[4] With that introduction, we next chronicle what has happened. It is a long story, the salient parts of which we will summarise in tabular form. Next we will set out the statutory provisions relevant to the Commissioner's decision. That willenable us to deal, in turn, with each of the grounds upon which Mr Russellchallenges Asher J's judgment. Rather than summarising the judgment, we will referto it in dealing with each of the grounds of appeal.What has happened[5] This appeal must be considered against the background of the key events set out below. We have italicised the critical ones.Date Event6 July 2001 At least by this date Mr Russell was notified by theCommissioner's statement of position that he may be assessed for tax on $15,458,855.42.27 November 2002 Adjudication Report in disputes process issued to Mr Russell. Assessment for tax on $15,458,855.42 confirmed.6 January 2003 Commissioner issues assessments to Mr Russell for $5,690,441.39 of income tax.26 May 2005 Mr Russell challenges the income tax assessments in the Taxation Review Authority (TRA) and also applies for1 Russell v Commissioner of Inland Revenue [2015] NZHC 754, (2015) 27 NZTC ¶22-003 [Decision under appeal].Judge Barber to recuse himself from hearing the challengebecause of his previous involvement with the "Russelltemplate" cases before the TRA.227 July 2005 Judge Barber declines to recuse himself.315 September 2005 Mr Russell applies for judicial review of Judge Barber'sdecision not to recuse himself.3 October 2005 Hearing of Mr Russell's tax challenge proceeding begins inthe TRA.27 September 2006 Mr Russell makes first offer to Commissioner: $1,000 perweek for the rest of his life. Commissioner declines.419 December 2008 Cooper J dismisses Mr Russell's application for judicialreview.55 February 2009 Mr Russell appeals to Court of Appeal from Cooper J'sdismissal of his application for judicial review.17 September 2009 TRA decision.6 Assessments confirmed (as adjusted byagreement between the parties).3 September 2010 High Court dismisses Mr Russell's appeal from TRAdecision confirming assessment.719 April 2011 Court of Appeal dismisses Mr Russell's appeal fromCooper J's dismissal of application for judicial review.826 August 2011 Supreme Court declines Mr Russell's application for leaveto appeal from the Court of Appeal's decision in judicialreview proceeding.93 April 2012 Court of Appeal dismisses Mr Russell's appeal from HighCourt judgment dismissing appeal from TRA.1013 August 2012 Supreme Court declines Mr Russell's application for leaveto appeal from Court of Appeal dismissal of High Court'sdismissal of appeal from TRA.119 December 2012 Mr Russell makes second offer: $1,000 per week untildeath, bankruptcy or mental incapacity.26 August 2013 Commissioner declines Mr Russell's second offer.2 September 2013 Mr Russell makes third offer: $150,000 "in one lump sumon the basis that the balance of the debt is written off".13 September 2013 Commissioner declines third offer.13 December 2013 Commissioner applies for summary judgment againstMr Russell for his tax debt, now $367,204,207.41.27 February 2014 Mr Russell files notice of opposition to application forsummary judgment on basis Commissioner's "failure" to2 The tax avoidance scheme designed by Mr Russell and used by a number of his clients when hewas working as a tax advisor is known as the "Russell template" — see [48] below.3 Russell v Commissioner of Inland Revenue TRA 003/03 Decision No 10/2005, 27 July 2005.4 This offer was made in the course of a judicial settlement conference and was privileged. We refer to it further in [11]–[12] below.5 Russell v Taxation Review Authority (2009) 24 NZTC 23,284 (HC).6 Case Z19 (2009) 24 NZTC 14,217 (TRA).7 Russell v Commissioner of Inland Revenue (No 2) (2010) 24 NZTC 24,463 (HC).8 Russell v Taxation Review Authority [2011] NZCA 158, (2011) 25 NZTC ¶20-044.9 Russell v Taxation Review Authority [2011] NZSC 96, (2011) 25 NZTC ¶20-077.10 Russell v Commissioner of Inland Revenue [2012] NZCA 128, (2012) 25 NZTC ¶20-120.11 Russell v Commission of Inland Revenue [2012] NZSC 73, (2012) 25 NZTC ¶20-140 [SC leave decision].accept his offers "was irrational, and/or unreasonable and/orin breach of the [Commissioner's] statutory duties under[ss 6A, 176, 177, 177B and 183D of] the TaxAdministration Act 1994" and "[Mr Russell] will apply forjudicial review of the [Commissioner's] failure to accept[his] proposals".3 March 2014 High Court advises Commissioner's summary judgmentapplication will be heard on 26 May 2014.1223 May 2014 Mr Russell applies for judicial review of theCommissioner's decisions declining his three successivesettlement offers on grounds: the decisions were inconsistent with theCommissioner's statutory duties; and the Commissioner did not provide "adequate orrational reasons" for not accepting the offers.26 May 2014 Commissioner's application for summary judgment heard.Also 26 May 2014 Mr Russell applies for interim relief under s 8 JudicatureAmendment Act. The relief sought is an order prohibitingthe Commissioner bringing or continuing any applicationfor summary judgment or any bankruptcy or otherenforcement proceeding9 June 2014 Commissioner files: notice of opposition to Mr Russell's interim reliefapplication; and application for orders striking out Mr Russell'sapplication for judicial review.10 June 2014 High Court gives summary judgment against Mr Russell for$367,204,207.41.1326 June 2014 Mr Russell files amended application for judicial review.16 July 2014 Commissioner files amended application for orders strikingout Mr Russell's amended application for judicial review.1 August 2014 Mr Russell files notice of opposition to Commissioner'sstrike-out application.26 August 2014 High Court (Andrews J) grants Mr Russell interim relief:prohibits the Commissioner commencing a bankruptcyproceeding against Mr Russell until determination of theCommissioner's strike-out application or further order ofthe Court.1417 April 2015 Judgment of Asher J striking out Mr Russell's applicationfor judicial review.24 April 2015 Mr Russell files appeal against judgment of Asher J.12 Commissioner of Inland Revenue v Russell HC Auckland CIV-2013-404-5188, 3 March 2014 (Minute of Venning J).13 Russell v Commissioner of Inland Revenue [2014] NZHC 1296, (2014) 26 NZTC ¶21-074 [Summary judgment].14 Russell v Commissioner of Inland Revenue [2014] NZHC 2034, (2014) 26 NZTC ¶21-095 [Decision of Andrews J]. We omit references to steps taken by the Commissioner consequent upon the grant of interim relief: an appeal to the Court of Appeal; an application to recall the judgment on the ground the interim relief was not available: Judicature Amendment Act 1972, s 8(2); Crown Proceedings Act 1950, s 17(2).24 April 2015 Commissioner serves bankruptcy notice on Mr Russell(upon expiry of the notice on 8 May 2015 theCommissioner would be able to commence a bankruptcyproceeding).28 April 2015 Mr Russell applies to Court of Appeal under r 12(3) forurgent interim relief (an order restraining the Commissionercommencing a bankruptcy proceeding).8 May 2015 Court of Appeal dismisses Mr Russell's application forurgent interim relief.158 May 2015 Mr Russell applies to High Court under s 29(1)(b)(iii)Insolvency Act for Court's approval of a compromise.18 June 2015 Associate Judge Bell fixes 1 September 2015 to hearMr Russell's application for approval of his compromiseproposal.Statutory provisions[6] It is common ground that the relevant provisions are ss 6, 6A, 176, 177, 177A, 177B and 177C of the Taxation Administration Act, as they stood when the Commissioner made her decision. Paramount amongst these is s 6A(3):6A Commissioner of Inland Revenue(3) In collecting the taxes committed to the Commissioner's charge, andnotwithstanding anything in the Inland Revenue Acts, it is the duty of the Commissioner to collect over time the highest net revenue that is practicable within the law having regard to—(a) the resources available to the Commissioner; and(b) the importance of promoting compliance, especially voluntary compliance, by all taxpayers with the Inland Revenue Acts; and(c) the compliance costs incurred by taxpayers.(Our emphasis.)[7] Perhaps next in importance is s 6:6 Responsibility on Ministers and officials to protect integrity of tax system(1) Every Minister and every officer of any government agency having responsibilities under this Act or any other Act in relation to the15 Russell v Commissioner of Inland Revenue [2015] NZCA 155, (2015) 27 NZTC ¶22-006.collection of taxes and other functions under the Inland Revenue Acts are at all times to use their best endeavours to protect the integrity of the tax system.(2) Without limiting its meaning, the integrity of the tax systemincludes—(a) taxpayer perceptions of that integrity; and(b) the rights of taxpayers to have their liability determined fairly, impartially, and according to law; and(c) the rights of taxpayers to have their individual affairs kept confidential and treated with no greater or lesser favour than the tax affairs of other taxpayers; and(d) the responsibilities of taxpayers to comply with the law; and(e) the responsibilities of those administering the law to maintain the confidentiality of the affairs of taxpayers; and(f) the responsibilities of those administering the law to do so fairly, impartially, and according to law.[8] Next is s 176:176 Recovery of tax by Commissioner(1) The Commissioner must maximise the recovery of outstanding tax from a taxpayer.(2) Despite subsection (1), the Commissioner may not recover outstanding tax to the extent that—(a) recovery is an inefficient use of the Commissioner'sresources; or(b) recovery would place a taxpayer, being a natural person, in serious hardship.[9] Section 177 allows a taxpayer to apply for financial relief, including by entering into an instalment arrangement with the Commissioner. Section 177B deals specifically with instalment arrangements. It includes:177B Instalment arrangements(2) The Commissioner may decline to enter into an instalment arrangement if—(a) to do so would not maximise the recovery of outstanding tax from the taxpayer;[10] Section 177C allows the Commissioner to write off outstanding tax that cannot be recovered, but s 177C(3) provides:(3) Despite subsection (1), the Commissioner must not write off outstanding tax (inclusive of any shortfall penalties), if a taxpayer is liable to pay, in relation to the outstanding tax, a shortfall penalty for an abusive tax position or evasion or a similar act.Commissioner's decisions[11] As set out in the chronology in [5] above, Mr Russell's first offer to theCommissioner was made in September 2006. It is common ground that this offer was made in the course of a judicial settlement conference in the TRA, convened by Judge Barber. In an affidavit he swore on 4 June 2014 in support of his application for interim relief, Mr Russell ignores the privileged nature of what took place in that judicial settlement conference. However, in an affidavit sworn on 9 June 2014 in opposition to the interim relief application, Mr Michael Cook of Inland Revenue deposes:24. I understand that Mr Russell made a settlement offer at that judicial settlement conference in 2006 which was declined by the Commissioner.25. It is also my understanding that the discussions undertaken in connection with the judicial settlement conference were on a"without prejudice" basis and as litigation was on foot would have been subject also to legal professional privilege and litigation privilege.26. The Commissioner has not waived privilege in relation to these settlement discussions.[12] All of that must be correct, and the 2006 offer ought not to have been referred to by Mr Russell, at least not without first obtaining a waiver of privilege from the Commissioner. In particular, the 2006 offer ought not to have been referred to by Mr Russell in his amended statement of claim for judicial review. Accordingly, we say nothing more about it.[13] The Commissioner's decision to decline Mr Russell's second (instalmentpayments) offer was endorsed on 7 August 2013, at the foot of an internal Inland Revenue memorandum dated 10 July 2013. A background section about Mr Russell in that memorandum includes a summary of information held by Inland Revenue about Mr Russell's financial circumstances. It sets out the relevant parts ofss 176–177C and also the Commissioner's policies on instalment arrangements andthe writing off of outstanding tax as set out in Inland Revenue's Standard PracticeStatements. It quotes quite lengthy passages from those statements, which include references to the judgments of the High Court in Clarke & Money v Commissioner of Inland Revenue, Raynel v Commissioner of Inland Revenue and Rogerson v Commissioner of Inland Revenue.16[14] The reasons for the decline recommendation can be summarised thus:(a) Section 177C(3) prohibits Commissioner accepting: Although Mr Russell was not requesting a write-off, acceptance of his offer would not achieve full recovery so would necessitate a write-off. Given that the tax debt included shortfall penalties for the abusive position Mr Russell had taken, s 177C(3) prevented the Commissioner accepting the offer.(b) Not a realistic offer: Given Mr Russell's tax debt of $334 million,even if the arrangement was accepted and incremental penalties stopped, the use-of-money interest accruing on the debt would exceed the repayments. This would not maximise recovery. "It would in factbe irresponsible for the Commissioner to accept an arrangement that would effectively see the debt continue to grow despite [the offeredinstalment] payments being made".(c) Would not achieve certainty: One of the aims when ss 177–177C were introduced in 1997 was to provide more certainty for bothtaxpayers and Inland Revenue. Mr Russell's offer of "$1,000 per16 Clarke v Commissioner of Inland Revenue, Money v Commissioner of Inland Revenue (2005) 22 NZTC 19,165 (HC); Raynel v Commissioner of Inland Revenue (2004) 21 NZTC 18,583 (HC);Rogerson v Commissioner of Inland Revenue (2005) 22 NZTC 19,260 (HC).week until death" is an open-ended one that provides neither certainty nor finality in a reasonable way for either Inland Revenue or Mr Russell. That uncertainty is exacerbated because the proposed instalment arrangement is not of the usual type, which is either for payment of the full amount or for payment of an agreed amount plus agreement that the balance be written off.(d) Will not lead to greater recovery: The proposal does not lead to a greater recovery than other enforcement actions, such as bankruptcy, given interest would continue to accrue at a faster rate than the instalment payments offered.Relevant to this reason, under headings "Access to other funds" and "Compliance history", the memorandum then noted these points: "[S]ignificant transactions and sums of money" movedbetween numerous bank accounts in the names of many entities controlled by Mr Russell. Mr Russell had declinedInland Revenue's requests to supply information about theseentities. Mr Russell had stated he would fund his instalment payment offer by entering into a contract of services with Commercial Administration Ltd for $100,000 per year. He had explained that $1,000 per week would be paid direct to Inland Revenueand the remaining $50,000 credited to Mr Russell's currentaccount with that Company. Two things were not clear: why he was not offering the whole of that $100,000 given he did not plan to live off the remaining $50,000; and how the balance could be credited to his current account with that Company when he was not a shareholder. The complexity of Mr Russell's business affairs, the circularityof the shareholdings, the movement of funds and his lack oftransparency in the provision of information about the companies and trusts means Inland Revenue does not have the required level of certainty that the proposal is the best option to maximise revenue. As stated in Raynel and Rogerson, continuing non-compliance is a relevant factor.17 Mr Russell continues to be non-compliant in relation to his wider group affairs. "If the debt cannot be written off and the proposal is notaccepted the next option is therefore bankruptcy. Given the complexity of the affairs of Mr Russell and the lack of information given it seems a logical conclusion to consider bankruptcy as an alternative as it would allow the OfficialAssignee to investigate fully Mr Russell's affairs".[15] Those reasons were then summarised in a conclusion section in the memorandum, which finished with the recommendation:84. That the proposal be declined and we proceed to commence bankruptcy action as to not do so would not maximise recovery and it would be an inefficient use of the Commissioner's resources.[16] The Commissioner's decision to decline Mr Russell's third (lump sum) offerwas endorsed at the end of an internal Inland Revenue memorandum dated 6 September 2013. On 2 September, Mr Russell had written to Inland Revenue stating:Taking into account the criteria you set out in your letter [of 26 August,declining Mr Russell's second offer] I have been able to restructure theproposal to provide the certainty that the Commissioner requires.I can arrange to borrow against future earnings an amount of $150,000 which will be paid to the Commissioner in one lump sum on the basis that the balance of the debt is written off.17 Raynel v Commissioner of Inland Revenue, above n 16; Rogerson v Commissioner of Inland Revenue, above n 16.That will meet the criteria set out in your letter and I trust that the revised proposal is now acceptable to the Commissioner.[17] Inland Revenue's 6 September 2013 memorandum made these points: The offer was stated to come from Mr Russell's "future earnings", but nodetails of those future earnings were provided. A term of the offer was that the balance of Mr Russell's tax debt be written off. Mr Russell had not presented any new facts to the Commissioner with this third offer. Accordingly, there remained a lack of certainty around Mr Russell's true financial position, such that the Commissioner "is unable to evaluate whetherthe proposal would maximise recovery ". The offer was no better than the previous one: it was equivalent to three years worth of payments at $1,000 per week and was still insufficient to satisfy the total debt. In fact, it represented a recovery rate of 0.04 cents in the dollar. Mr Russell had admitted at an interview with Inland Revenue that he or his associated entities had $6 million owing to them, but had advised he was not pursuing recovery of these loans. If he did, he would clearly be in a position to make a more realistic offer to Inland Revenue. Given Mr Russell's poor compliance history and the fact that the debt arosefrom tax avoidance schemes, accepting this proposal, which did not satisfy the legislative criteria and policy guidelines governing relief, "would be contrary to the Commissioner's obligation to protect the integrity of the tax system and uphold taxpayers' perceptions of that integrity".[18] For those reasons, it was recommended the proposal be declined and the Commissioner proceed with legal recovery action "without further delay", enablingthe Official Assignee to pursue the debts owed to Mr Russell from associated entitiesand business partners. The Commissioner's rejection of the proposal was conveyedto Mr Russell in a letter dated 13 September 2013.First issue on appeal: did Asher J err in striking out Mr Russell's amendedstatement of claim?[19] As suggested by Mr Judd, we find it convenient to break this issue down intothe series of questions in counsel's agreed list of issues. We have, however, re-ordered those questions into a more logical sequence.Did Asher J err in his interpretation of the relevant law?[20] Here we deal with the following three questions suggested by counsel:(a) Did Asher J err in his interpretation of the relevant statutory provisions?(b) Did Asher J err in applying his interpretation of those sections to the circumstances of this case in the way that he did, especially when it was a strike-out application?(c) Did Asher J err in relying, to the extent that he did, on Raynel v Commissioner of Inland Revenue and other cases that followed it tosupport striking out the appellant's claim?18Did Asher J err in his interpretation of the relevant statutory provisions?[21] Asher J made these main points about the statutory provisions we have set out in [6] to [10] above:(a) Section 6A(3) imposes an overarching duty on the Commissioner to collect over time the highest net revenue practicable. That duty18 Raynel v Commissioner of Inland Revenue, above n 16.relates to taxpayers generally and is not specific to a particular taxpayer. Section 6A(3) specifically requires the Commissioner to have regard to the importance of promoting compliance, especially voluntary compliance, by all taxpayers.19(b) The s 6A(3) duty overrides consideration of the circumstances particular to the taxpayer, although they are relevant in exercise of theCommissioner's powers under s 177B. "Acceding to a small offerfrom an insolvent taxpayer may send the wrong message to tax defaulters generally and not be in the interests of collecting thehighest return from taxpayers generally over time".20 It may also be contrary to promoting compliance by all taxpayers. The taxpayer-specific considerations in the legislation are secondary to s 6A(3).21(c) Section 177B(2) must be read with the broader public interest purposes set out in ss 6 and 6A(3)(b). Even when a compromise offer may promise a higher return than enforcement, there may be circumstances where, to preserve the integrity of the tax system and promote compliance with other taxpayers, the Commissioner in accordance with her s 6A(3) duty, may be justified in refusing an offer. This is particularly so when what is offered is only a very small portion of the tax owed and when there has been a flagrant and ongoing failure to comply. The paramount obligation to collect the highest net revenue in the long term can be defeated if taxpayers who owe vast amounts can insist that a very small offer, bearing little relation to the real indebtedness, be accepted.22[22] We consider these points accurately summarise the effect of the statutory provisions.19 Decision under appeal, above n 1, at [20].20 At [21].21 Ibid.22 At [23].[23] Mr Judd submitted Asher J had read down s 177B(2) and that Parliament could not have used clearer language to direct the Commissioner when an instalment arrangement is offered. The arrangement should be accepted unless one of s 177B(2)(a)–(d) apply, and here the Commissioner relied only on (a).[24] We reject this submission. It ignores s 6A(3) and s 6. To adopt Mr Judd's own words, Parliament "could not have used clearer language" than it did in s 6A(3): "notwithstanding anything in the Inland Revenue Acts". Mr Judd is advancing to this Court, as he did to Asher J, a patently wrong interpretation of the relevant provisions.[25] As a fallback position, Mr Judd submitted s 177B was not inconsistent with s 6 and s 6A. He submitted "the connection is subtle and fact-specific and dependson the circumstances of each particular case". If that is acceptance that theCommissioner cannot, under s 177B, enter into an instalment arrangement with a taxpayer if doing so would breach her ss 6A and 6 duties and functions (but thatwhether entry into an instalment would in fact breach the Commissioner's dutiesunder ss 6 and 6A will depend on the individual circumstances of each case), then we agree.[26] We answer this first appeal question 'No'.Did Asher J err in applying his interpretation of those sections to the circumstances of this case in the way he did, especially given it was a strike-out application?andDid Asher J err in relying, to the extent he did, on Raynel v Commissioner of Inland Revenue and other cases that followed it to support striking out Mr Russell'sclaim?23[27] Asher J found support for his interpretation of the relevant statutory provisions, in particular ss 6 and 6A(3)(b) in what he termed "the leading High Court23 Raynel v Commissioner of Inland Revenue, above n 16.decision" in Raynel v Commissioner of Inland Revenue.24 Although it is a lengthy citation, we set out the following passage from Raynel cited by Asher J, because it soexactly applies to Mr Russell's situation:[54] Sections 6 and 6A(3)(b) emphasise that there is a broader public interest in the integrity of the tax system and in ensuring that taxpayers meet their obligations. Taxpayers who comply with the requirements of the Inland Revenue Acts are entitled to expect that appropriate and (where necessary) firm action is taken against taxpayers who shirk their obligations. If not, complying taxpayers will justifiably perceive there is a lack of integrity in the system and an unfair burden is cast on those who conscientiously complywith their obligations. the voluntary compliance scheme which is centralto the proper functioning of the Inland Revenue Acts will be placed in jeopardy unless all taxpayers know that the Commissioner will act firmly and resolutely with those who do not meet their obligations and have no reasonable excuse for doing so.[55] Ordinarily, where a higher net recovery will be achieved through a proposed compromise than by winding up or bankrupting a taxpayer and there are no countervailing considerations, the Commissioner's duty will beto accept the compromise. But there may be circumstances where, in order to preserve the integrity of the tax system and promote compliance by other taxpayers, the Commissioner will be justified in refusing an offer and, instead, taking enforcement proceedings. Where, for example, there has been a flagrant and on-going failure to comply with the taxpayer'sobligations and where recovery is dubious or is likely to result only in a relatively minor proportion of the overall debt being recovered, the Commissioner may be justified in initiating or continuing enforcement proceedings to secure the wider interests identified by the legislation.[28] Asher J then pointed out that Raynel had been followed by the High Court inRogerson, McLean and Clarke, all unsuccessful attempts by taxpayers to challenge by way of judicial review decisions by the Commissioner rejecting proposals similar to those by Mr Russell that the Commissioner rejected.25 The Judge then stated:26The legislative provisions and the weight of case law have settled the approach to be adopted to challenges such as that of Mr Russell. This is of relevance in the context of a strike out. There is not uncertainty in the law, of the type which might make a Court cautious to assume that a cause ofaction would not succeed. I do not accept Mr Judd's submission that theRaynel line of cases can be distinguished on the facts because Mr Russell was not guilty of fraud or inadequate or no returns. The moral culpability of the taxpayer can be of only peripheral relevance, and the scale and24 Decision under appeal, above n 1, at [22] citing Raynel v Commissioner of Inland Revenue,above n 16.25 Rogerson v Commissioner of Inland Revenue, above n 16; McLean v Commissioner of Inland Revenue (2005) 22 NZTC 19,231 (HC); Clarke v Commissioner of Inland Revenue, above n 16.26 Decision under appeal, above n 1, at [24].complexity of Mr Russell's avoidance places his transgressions in a seriouscategory.[29] Mr Judd submitted the Judge was wrong to apply Raynel and the decisions following it for these two reasons:(a) Those cases involved substantive judicial review applications, not strike-outs.(b) The Judge should, instead, have followed the approach taken by the High Court in W v Commissioner of Inland Revenue and Chesterfields Preschools v Commissioner of Inland Revenue, which the Judge mentioned later in his judgment at [46], and determined this case on its own facts.27[30] As to the first of those two reasons, we endorse the Raynel principles and therefore consider Asher J correctly referred to them in support of his interpretation of the relevant provisions in the legislation. The interpretation of the legislation is not governed by, and does not differ depending on, whether the Judge is dealing with an application to strike out an application for judicial review or with the substantivejudicial review application. It follows that we reject Mr Judd's submission that theRaynel line of cases is inapplicable to Mr Russell's situation.[31] As to the second reason, we simply do not follow why Mr Judd contends Wand Chesterfields Preschools have any relevance. It seems he is attempting to fasten onto them because the outcome in each case favoured the taxpayer.28 But, as Asher Jpointed out, each of those cases was "fact specific and involved errors by theCommissioner that are not present in the current case, which concerns the exercise ofthe Commissioner's discretion as to whether to accept Mr Russell's proposals".2927 W v Commissioner of Inland Revenue (2005) 22 NZTC 19,062 (HC); Chesterfields Preschools v Commissioner of Inland Revenue (2007) 23 NZTC 21,125 (HC).28 Although Chesterfields Preschools v Commissioner of Inland Revenue, above n 27, has a rather complex procedural history that includes a number of proceedings in this Court and the Supreme Court, the Commissioner did not appeal against this particular decision (refer Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2010] NZCA 400, (2010) 24 NZTC 24,500 at [3]).29 Decision under appeal, above n 1, at [46].[32] For those reasons we answer each of these two appeal questions 'No'.Did Asher J err in his findings of fact?[33] In this section we address the following questions from counsels' list ofissues:(a) Did Asher J err in relying on the affidavit evidence rather than approaching the strike-out application on the basis that the facts pleaded in the Amended Statement of Claim were true?(b) Having decided to place reliance on the affidavit evidence, did Asher J err in making the factual findings that he made based on those affidavits?(c) Did Asher J err in finding that there was "factual certainty" and "uncontestable facts" in the light of the affidavit evidence?30(d) Did Asher J err in the way that he dealt with the earlier decision of Andrews J in the same proceedings?31Did Asher J err in relying on the affidavit evidence rather than approaching the strike-out application on the basis that the facts pleaded in the amended statement of claim were true?[34] Mr Judd submitted the Judge was wrong to rely on the affidavit evidence filed by the Commissioner and should have restricted himself to the pleadings. First, Mr Judd took issue with Asher J describing the Commissioner's reasons for her decision as "the undisputed facts of this case".32 Mr Judd was referring to thereasons for the Commissioner's decision of 26 August 2013 to decline his second(instalment payment) offer, and the Commissioner's reasons for her decision of 13September 2013 to decline his third (lump sum payment) offer. These are the reasons we have summarised in [11] to [18] above.30 At [62].31 Decision of Andrews J, above n 14.32 Decision under appeal, above n 1, at [27].[35] The Judge no doubt described those reasons and decisions as "undisputed facts" because he understood there was no dispute those were the Commissioner'sdecisions and her reasons for making them. Mr Judd submitted those decisions and the reasons given for them:(a) were not complete. Mr Russell did not accept that what was set out was all that the Commissioner took into account; and(b) contained logical inconsistencies.[36] When he began to elaborate, it immediately became obvious Mr Judd wascriticising the merits of the Commissioner's decisions, and not her decision-making process.[37] Next, Mr Judd complained Asher J had not so much as referred to the affidavit sworn by Mr Russell on 4 June 2014, mentioned in [11] above. That is so, but the Judge probably treated it as irrelevant because it is almost wholly a challengeto the merits of the Commissioner's decisions — to her rejection of Mr Russell'sinstalment and lump sum payment offers. The Court inquired of Mr Judd what, if anything, Mr Russell had deposed about the Commissioner not putting forward the whole of her decision-making process. In answer, Mr Judd indicated he had wanted to cross-examine to establish it was not the full record. He also suggested that whatwas missing from the Commissioner's decisions was any information as to InlandRevenue's investigations of Mr Russell over the years. As to cross-examination, itappears Mr Judd was anticipating a "fishing expedition" to see what he mightuncover. Such cross-examination would not have been permitted, and certainly not in the judicial review context. We give no weight to the suggestion that informationas to Inland Revenue's investigations was missing. Mr Russell has receivednumerous tax assessments from Inland Revenue over the years, and the memorandasetting out the Commissioner's decisions provide an overview of what informationInland Revenue has, and what it lacks, about Mr Russell (for example, see [14](d) above).[38] Although Mr Judd submitted Asher J ought to have restricted himself to the pleadings, he did not take us to them. The pleadings in themselves do not conveysufficient information to determine Mr Russells' claim, in any case. In relation, for example, to the Commissioner's 26 August 2013 decision to decline Mr Russell'ssecond (instalment payments) offer, the amended statement of claim asserted simply:20. Since 13 August 2012 [sic] the applicant has again proposed to pay the debt by instalments of $1,000 per week for the rest of his life or until bankruptcy or mental incapacity.21. By letter of 26 August 2013, the respondent declined the instalmentproposal and stated that she would "now proceed to initiate bankruptcy proceedings against you for your unpaid arrears".[39] A Judge dealing with an application to strike out that amended statement of claim, or dealing with the substantive application, would always need to look at the decision itself, including the reasons for it. Routinely it is made available to the Court in an affidavit or as an attachment to an affidavit. That occurred here: theCommissioner's decisions and the reasons for them were annexures to an affidavitsworn by Mr Cook on 9 June 2014. As we have said, there was no suggestion by Mr Russell that those attachments did not place before the Court the whole of theCommissioner's decision-making process.[40] We answer this misconceived appeal question 'No'.Did Asher J err in making the factual findings he did based on the affidavits?andDid Asher J err in finding there was "factual certainty" and "uncontestable facts"in light of the affidavit evidence?[41] Mr Judd's submissions on these grounds really came down to a challenge to the merits of the Commissioner's decisions. He argued they did not make sense, because declining Mr Russell's offers would not maximise recovery. He pointed outthat Mr Russell asserted he had no assets. In stating that accepting Mr Russell's offer would be an inefficient use of the Commissioner's resources, Mr Judd claimedthe Commissioner failed to understand what the words "inefficient use of resources" mean. As the Commissioner was focusing on Mr Russell's role as a tax agent,Mr Judd contended the Commissioner's reliance on Mr Russell's poor compliancehistory was a consideration irrelevant to the decision whether or not to accept Mr Russell's instalment and lump sum proposals, and was thus also irrational.[42] Asher J considered these were all proper reasons for the Commissioner toreject Mr Russell's offers, and that the letters to Mr Russell sufficiently summarisedthe key reasons for rejecting his offers.33[43] With one qualification, which we address at [50]–[51] below, we agree. MrJudd's criticisms are predicated on the incorrect interpretation of the relevantstatutory provisions that we rejected in [24] above. In other words, Mr Judd was arguing that the only consideration for the Commissioner was whether accepting MrRussell's offers represented maximum recovery of the tax he owed. We reiterate: that is absolutely not the position.[44] Mr Russell was assessed in January 2003 for $5,690,441.39 in core tax onincome he had received of $15,458,855.42. By "core tax" we mean, excluding anyinterest or penalties. Mr Judd confirmed to us that Mr Russell has not paid a single dollar of that tax. Mr Judd submitted Asher J had focused wrongly on the core tax and ignored the fact the very first notice of assessment Mr Russell received includednot just that core tax, but "nearly $70m of interest and penalties". We address thispoint further at [62] below, but note that Mr Russell, as a chartered accountant, would have been well aware of the consequences of avoiding paying income tax on the $15.45 million approximately. Given that situation and Mr Russell's concertedefforts, over the ensuing 12 years, to challenge, in every available way and at every level, his liability to tax, the Commissioner was entitled to place considerable weight on taxpayer perceptions of the integrity of the tax system. What would other, voluntarily complying, taxpayers think if it became widely known that the Commissioner had accepted, in August or September 2013, an offer from Mr Russell of $1,000 a week until he died (he was at the time aged 78), or an all in offer of$150,000? Mr Russell's third (lump sum) offer represented just 0.04 per cent of histax debt or 2.63 per cent of the $5,690,441.39 core tax referred to earlier in this paragraph.33 Decision under appeal, above n 1, at [49].[45] For these reasons, we do not consider Mr Russell's poor compliance historywas an irrelevant consideration — quite the opposite.[46] Mr Judd was particularly critical of the Commissioner's reliance onMr Russell's role as a tax agent. He referred to this passage in Inland Revenue's10 July 2013 memorandum:11. Mr Russell is a tax agent with a long history of litigation with Inland Revenue in relation to tax avoidance schemes that were designed by him for his clients. For more than 30 years Mr Russell has arguedagainst the Commissioner's reassessment action both for his clients and himself.[47] Later in the same memorandum there are these passages:Compliance history75. It is appropriate to consider also the compliance history of the taxpayer when making a decision in relation to debt proposals. Mr Russell's aggressive tax avoidance schemes are well documentedin numerous court judgments through the past 30 years not only for himself but his clients. The Commissioner has consumed significant resources both in time and money to ensure the correct tax positions were confirmed.76. As stated in Raynel and Rogerson continuing non-compliance is a relevant factor. Mr Russell continues to be non-compliant in relation to his wider group affairs. For example the failure of entities to file returns and also his own failure to pay himself for services rendered to the company. The Commissioner is still continuing to takereassessment action against a number of "clients" of Mr Russell. In a number of cases the "clients" are controlled by Mr Russell asreceiver or liquidator and tax avoidance arrangements continue to be investigated by Inland Revenue.[48] In the somewhat unusual circumstances here, we do not accept it was irrelevant for the Commissioner to factor in Mr Russell's status as an agent for othertaxpayers. As is clear from the passages quoted in [47], the Commissioner's concernwas that Mr Russell devised the tax avoidance schemes used by a number of his clients (the so-called "Russell template" schemes), as well as the related schemes he used for his own entities. Further, as the Commissioner also pointed out, a numberof the "clients" are in fact controlled by Mr Russell, so the division between agentand taxpayer is blurred. In those circumstances, the manner in which theCommissioner deals with Mr Russell has obvious relevance to taxpayer perceptions of the integrity of the tax system.[49] Mr Judd referred to what Mr Russell had deposed in his affidavit as to his compliance over the years with his tax obligations. He submitted the Commissioner was not entitled to rely on Mr Russell having a bad compliance history when thiswas "plainly disputed". He argued Mr Russell's compliance history and therelevance of his role as a tax agent in other tax disputes involving his clients were not matters that could be determined on a strike-out application. However, what the Commissioner refers to in the paragraphs we have quoted in [46]–[47] above are not matters open to dispute. The Commissioner's reliance was on what is "welldocumented in numerous court judgments through the last 30 years not only for [Mr Russell] but his clients".[50] The qualification we mentioned in [43] above relates to the Commissioner'sreasoning that accepting Mr Russell's offers would be an inefficient use of resources. There is some force in Mr Judd's submission that accepting Mr Russell's offerswould have put an immediate stop to the legal and other costs Inland Revenue was incurring in its enforcement action against Mr Russell. However, the phrase"inefficient use of resources" appears in this paragraph in Inland Revenue's internal10 July 2013 memorandum:10. This arrangement would be an inefficient use of resources given the debt would grow faster than payments made. Given the lack ofcertainty, the lack of information, the concerns about Mr Russell'strue financial circumstances, the inability to write a portion of the debt off and the compliance history it is recommended that theproposal be declined and the Commissioner's [sic] moves tobankruptcy proceedings.[51] Although we accept the meaning attributed to "inefficient use of resources"in that paragraph is not clear, it seems the view was that bankrupting Mr Russell would lead to greater recovery of the unpaid tax because of the Official Assignee's ability to unravel Mr Russell's complex finances. Thus, expenditure of the further "resources" necessary to bankrupt Mr Russell would be efficient, as againstacceptance of either of Mr Russell's offers. It was reasonable and rational for the Commissioner to reject Mr Russell's proposals both because they were so low, butalso because there remained the prospect that an unravelling by the Official Assigneeof Mr Russell's complex and opaque affairs would produce a greater recovery of Mr Russell's tax debt.[52] We answer each of these two appeal questions 'No'.Did Asher J err in the way he dealt with the earlier decision of Andrews J in the same proceeding?[53] In her judgment of 26 August 2014 Andrews J stated:34[41] In the light of the fact that the Commissioner has applied to strike out the judicial review application, which has not yet been heard, it is not appropriate that I comment in any detail on the strength or weakness of Mr Russell's case. However, it can be said that, on the face of the mattersput before me, I could not conclude that his case is so hopeless that his application for an interim order should be dismissed, before the application to strike out, where the strength of the case is focussed on, is heard.[54] Before Asher J Mr Judd submitted that finding constituted an issue estoppel. In other words, the issue of the tenability of the grounds on which Mr Russell sought judicial review could not be relitigated in the strike-out application and consequently the application for judicial review had to go to a full hearing.[55] Asher J roundly rejected that submission.35 We need not elaborate on theJudge's reasons, because before us Mr Judd accepted there was not an issue estoppel.Rather, he submitted Andrews J was correct to hold Mr Russell's grounds weretenable, and Asher J was wrong, on the same evidence, to hold they were not.[56] This is an appeal from Asher J's judgment and our concern is solely with thecorrectness of that judgment. We are not concerned with Andrews J's judgment,which was not binding on Asher J. This point has no force and ought not to have been pursued.[57] We answer this appeal question 'No'.34 Decision of Andrews J, above n 14.35 Decision under appeal, above n 1, at [60]–[61].[58] Consistent with our answers to the seven appeal questions, we hold thatAsher J did not err in striking out Mr Russell's amended statement of claim.Second issue on appeal: was Asher J correct to hold the application for judicial review was an abuse of process?[59] In his judgment Asher J observed "Mr Russell should have paid the tax whenit was due, and can therefore fairly be required to pay the tax now".36 We agree with Asher J that this proceeding is an abuse of process, and that Mr Russell is attempting to relitigate matters already finally determined.[60] In his submissions Mr Judd made these points:(a) The amended statement of claim pleaded: in assessing Mr Russell the Commissioner "reconstructed tothe applicant [Mr Russell] income which had been earned and received by companies under the control of the applicant rather than being earned and received by the applicanthimself"; at all material times [Mr Russell] had no assets and his offers were based on payments he could make out of income he could earn; and had the Commissioner accepted any one of [Mr Russell's]instalment proposals, then from that point the Commissioner would have started receiving revenue from [Mr Russell] and would have stopped incurring costs in actions against him.(b) For the purposes of the strike-out application, those pleadings should have been taken as correct. The Judge was not entitled to prefer the evidence of the Commissioner over that of the appellant.36 At [37].[61] Contrary to Mr Judd's submission, Asher J was not obliged to accept thepleaded factual matters we have set out in [60](a) above. That is because they are demonstrably wrong. The first point is that the $15.45 million approximately ofincome that led to the assessments issued to Mr Russell in 2003 was Mr Russell'sincome. He may well have attributed it to companies under his control, but it is now finally determined that he ought not to have done that, because the attribution was pursuant to unlawful tax avoidance arrangements.37 So Mr Russell must now accepthe earned that $15 million approximately of income and therefore he was liable to pay the tax on that income.[62] Secondly, the Judge's statement set out in [59] above is a correct and proper one. What the Judge was saying is that Mr Russell should have paid income tax on the $15.45 million approximately of income as he earned it over the tax years 1985–2000. It is facile for Mr Judd to submit, as he did:It was impossible for Mr Russell to pay the tax when it was "due" in1985–2000 because nobody had assessed the tax to him at that time the tax had been returned by other companies and those returns had beenaccepted by the Commissioner It is impossible for a person to pay taxwhen it was due when he is assessed with it for the first time somewhere between three and 18 years after the event Those submissions seek to lay the blame on the Commissioner for tax avoidance arrangements devised and implemented by Mr Russell over those years. They are also tantamount to an attempt by Mr Russell to take advantage of his own prolonged default — something the law will not allow.[63] Mr Russell's challenges to the assessments were exhausted when theSupreme Court on 13 August 2012 declined him leave for a further (it would have been a third) appeal.38[64] Mr Russell attempted to defend the Commissioner's application for summary judgment for the amount of tax then due on the same grounds he advanced in support of the application for judicial review that Asher J struck out. Those grounds provided no defence to the application for summary judgment, as Associate Judge37 See [63] below.38 SC leave decision, above n 11.Doogue correctly held. Accordingly, summary judgment was entered on 10 June 2014.39[65] Mr Russell's only remaining option was to apply under s 29(1)(b)(iii) of the Insolvency Act 2006 for the Court's approval of terms to compromise the amountowing. He did this on 8 May 2015 after this Court had refused him interim relief pending the hearing of this appeal (and, as noted in the table at [5] above, the matter has been set down for hearing on 1 September 2015).[66] The application for judicial review that Asher J struck out is patently a tacticto delay the Commissioner commencing a proceeding to have Mr Russell's adjudicated bankrupt. It was thus not a proper use of the Court's process, but anabuse of it.[67] For those reasons we answer this second appeal issue 'Yes'.Result[68] For the reasons we have given in answering the seven questions agreed bycounsel, we hold that Asher J correctly struck out Mr Russell's application forjudicial review.[69] We also hold that the judicial review application the subject of this appeal was an abuse of the process of the High Court, and was properly struck out for that reason as well.[70] In the result, the appeal is dismissed.Costs[71] The Commissioner contended this appeal was hopeless. She also submitted the appeal was brought to cause further unjustified delay in the Commissioner proceeding to bankrupt Mr Russell. The Commissioner seeks indemnity costs.39 Summary judgment, above n 13.[72] Mr Judd's response was to point again to the judgment of Andrews J, inparticular the passage we have set out in [53] above.[73] We agree with the Commissioner's submissions. In particular, we accept the Commissioner's submission that this appeal was brought for the improper purpose offurther delaying the Commissioner proceeding against Mr Russell in bankruptcy. That brings the appeal squarely within r 53E(3)(a) of the Court of Appeal (Civil) Rules 2005.[74] Accordingly, we order that Mr Russell is to indemnify the Commissioner for her costs and any usual disbursements of this appeal.Solicitors:Ladbrook Law Ltd, Auckland for AppellantCrown Law Office, Wellington for Respondent