PETER WILLIAM MAWHINNEY AS TRUSTEE OF THE DOUG VESEY TRUST v COMMISSIONER OF INLAND REVENUE [2020] NZSC 81

PETER WILLIAM MAWHINNEY AS TRUSTEE OF THE DOUG VESEY TRUST v COMMISSIONER OFINLAND REVENUE [2020] NZSC 81 [11 August 2020]IN THE SUPREME COURT OF NEW ZEALANDI TE KŌTI MANA NUISC 32/2020[2020] NZSC 81BETWEEN PETER WILLIAM MAWHINNEY ASTRUSTEE OF THE DOUG VESEY TRUSTApplicantAND COMMISSIONER OF INLANDREVENUERespondentCourt: Glazebrook, O'Regan and Williams JJCounsel: Applicant in personR L Roff and J B Y Cheng for RespondentJudgment: 11 August 2020JUDGMENT OF THE COURTA The application for leave to appeal is dismissed.B The applicant must pay the respondent costs of $2,500.____________________________________________________________________REASONSIntroduction[1] This application for leave to appeal concerns the Tax Administration Act 1994(TAA). The applicant seeks leave to appeal the Court of Appeal's decision holdingthat the Commissioner of Inland Revenue is not deemed to have accepted theapplicant's notice of proposed adjustment (NOPA),1 as well as aspects of a separatedecision of the Taxation Review Authority (TRA).21 Mawhinney v Commissioner of Inland Revenue [2020] NZCA 112 (Miller, Dobson and Moore JJ)[CA judgment].2 Trustees of the Doug Vesey Trust v Commissioner of Inland Revenue [2015] NZTRA 04.Background[2] In November 2008, the applicant filed a goods and services tax (GST) returnclaiming a $625,000 refund for the purchase of a property. In April 2013, theCommissioner issued a notice of assessment disallowing the refund on the ground thatit was fraudulent.[3] In March 2015, the applicant issued a NOPA challenging the assessment. Hadthe NOPA been issued in time, the Commissioner would have been required to issue anotice of response (NOR) within two months of the NOPA.3 Failure to do so wouldmean the Commissioner would be deemed under s 89H(2) of the TAA to have acceptedthe NOPA. But the NOPA was two years out of time,4 and so the applicant appliedunder s 89K of the TAA to invoke the Commissioner's discretion to treat the NOPA asif it had been lodged in time.[4] In response, the Commissioner issued a refusal notice in April 2015.5 Theapplicant then challenged the Commissioner's refusal notice by bringing proceedingsin the Taxation Review Authority.6[5] In the meantime, in February 2016, certain amendments to the TAA came intoforce.7 They inserted a new s 89AC to explicitly govern timeframes for theCommissioner to file a NOR where the taxpayer's NOPA is accepted out of time.Section 89AC provides that where a taxpayer's late NOPA is accepted under s 89K,the two months within which the Commissioner must issue a NOR begins on the daythe final decision is made to treat the NOPA as if it were in time, not the day the NOPAwas issued.[6] On 5 May 2016, the TRA ruled (among other things) that the applicant's NOPAwas out of time, but that the Commissioner should have treated it as if it were in time3 Tax Administration Act 1994, s 89AB(2).4 Notices of proposed adjustment are to be issued within four months of the initiating notice:s 89AB(4)(b).5 Section 89K(4).6 Section 89K(6).7 Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act2016, ss 257 and 258.under s 89K (first TRA decision).8 Within two months of that decision, on 28 June2016, the Commissioner issued the applicant a NOR responding to the applicant'sNOPA.[7] A challenge proceeding was then commenced. The sole argument advancedwas that the Commissioner should be deemed to have accepted the applicant's NOPAof March 2015 because she failed to issue the NOR within two months of the date ofthe NOPA.[8] The TRA held that the new s 89AC applied to this case even though it had notbeen enacted when the applicant lodged the NOPA (second TRA decision).9 TheCommissioner's NOR was in time. She was therefore not deemed to have acceptedthe applicant's NOPA.10 If it were wrong on that point, the TRA also held that theCommissioner's NOR was in time under the law as it stood prior to the amendments.11[9] The applicant's appeals to the High Court and Court of Appeal were bothdismissed.12 Both Courts agreed that the new s 89AC applied to the applicant'sNOPA, and that even under the old law, time for the two-month deadline ran from thedate of the TRA's decision, not the date of the late NOPA.13 In particular, the Courtof Appeal held that:(a) section 89AC is plainly procedural and does not deprive taxpayers ofthe substantive right to challenge the merits of their tax liabilities;14(b) section 89AC achieves no more than what is plainly implicit in thescheme of the TAA;15 and8 Trustees of the Doug Vesey Trust v Commissioner of Inland Revenue, above n 2, at [50] and [76].9 Trustees of the Doug Vesey Trust v Commissioner of Inland Revenue [2018] NZTRA 01(Judge Sinclair).10 At [28].11 At [48].12 Mawhinney v Commissioner of Inland Revenue [2019] NZHC 553, (2019) 29 NZTC 24-006(Peters J) [HC judgment]; and CA judgment, above n 1.13 HC judgment, above n 12, at [26]–[40] and [49]–[50]; and CA judgment, above n 1, at [17]–[24].14 CA judgment, above n 1, at [21].15 At [22].(c) the Commissioner was not required to file a NOR within two monthsof the date of the applicant's NOPA because at that time the NOPA waslate and of no effect.16First TRA decision[10] The applicant wishes to challenge certain findings made in the first TRAdecision. That decision was not appealed to either appellate court below. Accordingly,this aspect of the application is in substance an application for leave to appeal directlyfrom the TRA to this Court.[11] This Court does not have jurisdiction to entertain an appeal directly from theTRA.17 Even if it did, we do not consider that the proposed appeal meets the leavecriteria under ss 74 and 75 of the Senior Courts Act 2016.Second TRA decision and subsequent appeals[12] We treat the rest of the application as one for leave to appeal the Court ofAppeal's decision.18Submissions[13] First, the applicant submits that the effect of s 89K(1) is that where a NOPA istreated as if it were in time under that section, it is deemed to have been in time fromthe date it was issued. This is because the section provides that the Commissioner isto issue a notice stating that the NOPA is to be treated "for all purposes under this Part"as if it were in time. The applicant submits the Court of Appeal erred because itsinterpretation only treated the NOPA as if it were in time for "some purposes", andthis has resulted in a substantial miscarriage of justice.16 At [22].17 See Senior Courts Act 2016, ss 70, 75 and 65 definition of "New Zealand court". See alsoTaxation Review Authorities Act 1994, s 5.18 CA judgment, above n 1.[14] Second, the applicant submits that as trustee, he has been denied natural justiceunder the New Zealand Bill of Rights Act 1990 due to delays on the part of theCommissioner.[15] Third, the applicant submits that a substantial miscarriage of justice may occurunless the appeal is heard because it was "legally impossible" to challenge theCommissioner's assessment disallowing the GST refund due to her reliance on thetruncated procedure in s 89C(eb).[16] Finally, the applicant submits that the new s 89AC does not have retrospectiveeffect, and that this is a question of general commercial significance.Our assessment[17] The arguments referring to legal impossibility and the Bill of Rights Act werenot raised in the TRA or the Courts below. We note that in the TRA, the applicantconfirmed the challenge was limited to the sole issue of deemed acceptance unders 89H of the TAA.19[18] In any case, nothing raised by the applicant suggests that the analysis of theTRA and the Courts below was wrong. The Court of Appeal applied settled law to thecase and the applicant has not identified any grounds for challenging the Court'sdecision.Result[19] The application for leave to appeal is dismissed.[20] The applicant must pay the respondent costs of $2,500.Solicitors:Crown Law Office, Wellington for Respondent19 Trustees of the Doug Vesey Trust v Commissioner of Inland Revenue TRA 005/17, 30 August 2017at [1].