PETER WILLIAM MAWHINNEY AS TRUSTEE OF THE DOUG VESEY TRUST v THE COMMISSIONER OF INLAND REVENUE [2020] NZCA 112

PETER WILLIAM MAWHINNEY AS TRUSTEE OF THE DOUG VESEY TRUST v THE COMMISSIONEROF INLAND REVENUE [2020] NZCA 112 [23 April 2020]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA162/2019[2020] NZCA 112BETWEEN PETER WILLIAM MAWHINNEY ASTRUSTEE OF THE DOUG VESEY TRUSTAppellantAND THE COMMISSIONER OF INLANDREVENUERespondentHearing: 25 February 2020Court: Miller, Dobson and Moore JJCounsel: Appellant in personR L Roff and HCJ Salisbury for RespondentJudgment: 23 April 2020 at 2.00 pmJUDGMENT OF THE COURTA The appeal is dismissed.B The appellant must pay the Commissioner costs for a standard appeal ona band A basis, with provision for one counsel, and usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Miller J)[1] This appeal raises a small point of tax administration law. It is whetherthe Commissioner, in the unusual circumstances of this case, is deemed by law to haveaccepted a Notice of Proposed Adjustment (NOPA) issued by the appellant.In the High Court, Peters J answered this question in the negative.1 We agree with her,and generally for the same reasons which we will state briefly.The narrative[2] It is first necessary to record the chronology. It begins with a GST return filedon 5 November 2008, in which the appellant claimed a refund of $625,000 for thepurchase of a property.[3] On 16 April 2013 the Commissioner issued a Notice of Assessment disallowingthe refund in full. It seems the Commissioner's position was that the claim to a refundwas fraudulent. For that reason the assessment was issued without first triggeringdispute procedures under the Tax Administration Act 1994 (the TAA).2[4] An assessment is a disputable decision,3 but the taxpayer who wishes to contestit must initiate a dispute within four months.4 On 30 March 2015, long outside thatresponse period, the appellant issued a NOPA challenging the assessment.[5] Had the NOPA been issued within time, the Commissioner would have beenrequired to issue a Notice of Response (NOR) within two months,5 failing which theCommissioner would be deemed under s 89H(2) to have accepted the adjustmentcontained in the NOPA. But the NOPA was out of time, and so of no effect.Section 89D(5) states that:89D Taxpayers and others with standing may issue notices of proposedadjustment(5) For a notice of proposed adjustment issued under this section to haveeffect, the notice must be issued within the applicable response period.[6] The TAA allows the Commissioner to excuse the late issue of a NOPA inexceptional circumstances. The Commissioner does so under s 89K(1) by issuing a1 Mawhinney v Commissioner of Inland Revenue [2019] NZHC 553, (2019) 29 NZTC 24-006.2 Tax Administration Act 1994, s 89C(eb).3 Section 3.4 Section 89AB(4)(b).5 Sections 89G and 89AB(2).notice "stating" that the NOPA "is to be treated for all purposes under this Part [4A]as if it had been given within the applicable response period".6 If the Commissionerdecides not to issue such notice, she must issue a "refusal notice" within one month ofthe taxpayer's NOPA.7[7] The appellant's NOPA invoked s 89K. By letter of 29 April 2015the Commissioner issued a refusal notice.[8] Section 89K(6) also allows the taxpayer to challenge a refusal notice bybringing proceedings in the Taxation Review Authority within two months ofthe notice. The appellant did so on 9 July 2015. The Authority has jurisdiction toreverse the Commissioner's decision.8[9] On 24 February 2016 relevant provisions of the Taxation (Annual Rates for2015–2016, Research and Development, and Remedial Matters) Act 2016 came intoeffect. They included a provision designed, according to the commentary to the Billto the Act, to clarify uncertainty in the law, which might otherwise mean thatthe Commissioner be "required to issue a substantive response to a dispute that maynot have a procedural basis".9 The legislation inserted a new s 89AC, which provides:89AC Response period when initiating notice filed lateWhen the initiating notice is a notice of proposed adjustment referred to insection 89AB(2) or a statement of position referred to in section 89AB(5), andthe disputant issues the initiating notice outside the applicable response periodbut the notice is treated as being issued within that period, the response periodfor the response to the initiating notice is a 2–month period beginning on theearlier of—(a) the day on which the Commissioner issues a notice in favour of thedisputant in accordance with section 89K(1):(b) the day on which a challenge to the Commissioner's refusal undersection 89K(4) is finally judged successful by the Taxation ReviewAuthority or by a court, or the day on which the Commissionerconcedes.6 Section 89K also applies to certain other documents.7 Section 89K(4).8 Section 138P(2).9 Todd McClay Taxation (Annual Rates for 2015–2016, Research and Development, and RemedialMatters) Bill; Commentary on the Bill (Inland Revenue, February 2015) at 96.It will be seen that the legislation expressly postpones the response date to a NOPAwhere the taxpayer challenges a decision of the Commissioner to refuse to deem a lateNOPA valid. The concern evidently was that the Commissioner might otherwise berequired to respond to a NOPA which was out of time, and so ineffective, inanticipation that it might later be deemed timely under s 89K.[10] On 5 May 2016 the Authority issued a decision holding thata) the Commissioner's assessment was valid and b) the NOPA was out of time andc) the Commissioner ought not to have refused to accept the NOPA out of time.10The Authority "set aside" the Commissioner's decision. In consequence the NOPAwas deemed for all purposes to have been issued within time.[11] The Commissioner issued a NOR on 28 June 2016, within two months ofthe Authority's decision.11 Statements of position were issued, and a challengeproceeding was commenced. The appellant might have contested the merits ofthe original assessment in that proceeding but curiously elected not to do so.Rather, the sole issue for determination was whether the Commissioner was deemedto have accepted the NOPA because the NOR was out of time, not having been issuedwithin two months of the NOPA.12[12] The Authority held against the appellant in a decision issued on 29 January2018, reasoning that s 89AC applied; further, even if it did not apply, the NOR wasissued within time under the legislation as it stood before s 89AC was enacted.13Peters J upheld that decision in the judgment under appeal.14The appeal[13] The same issues are raised on appeal. The appellant, represented byMr Mawhinney as trustee, says that s 89AC may not be given retrospective10 Trustees of the Doug Vesey Trust v Commissioner of Inland Revenue [2015] NZTRA 04.11 Tax Administration Act, s 89AC.12 Section 89H(2).13 Trustees of the Doug Vesey Trust v Commissioner of Inland Revenue [2018] NZTRA 01 at [28]and [48].14 Mawhinney v Commissioner of Inland Revenue, above n 1.application, for to do so would be to deprive it of a right to which it was entitled underthe pre-amendment legislation.Discussion[14] On its face s 89AC took effect on 24 February 2016, before the Authorityrevived the appellant's NOPA. The question is whether the amendment ought to beinterpreted to exclude this case, and others like it, where a taxpayer's NOPA hadalready been issued but was late, and hence ineffective.[15] Mr Mawhinney invoked ss 7 and 18 of the Interpretation Act 1999. Section 7provides than an enactment does not have retrospective effect, but s 4 gives it the statusof a presumption by providing:4 Application(1) This Act applies to an enactment that is part of the law of New Zealandand that is passed either before or after the commencement of this Actunless—(a) the enactment provides otherwise; or(b) the context of the enactment requires a differentinterpretation.(2) The provisions of this Act also apply to the interpretation of this Act.[16] Section 18(1) provides that "[t]he repeal of an enactment does not affectthe completion of a matter or thing or the bringing or completion of proceedings thatrelate to an existing right, interest, title, immunity, or duty".[17] This Court explained in Foodstuffs (Auckland) Ltd v Commerce Commissionthat the general approach to retrospectivity strikes a balance between giving effect toreforms and protecting vested rights, if any, that are put in jeopardy by the newlegislation:15[20] We turn now to the wider context and to principle. As in this case,counsel and the Courts will resort to those matters and relevant authority whenfaced with difficulties in applying interpretation legislation. The common lawconcerning non-retrospectivity and related interpretation legislation have both15 Foodstuffs (Auckland) Ltd v Commerce Commission [2002] 1 NZLR 353 (CA).long recognised the need to strike a balance between giving effect toParliament's will, aimed at changing the law and introducing new policies, onthe one hand, and, on the other, to protecting, for reasons of justice andfairness, positions already established under the old law. In terms ofthe second matter, Courts and legislatures alike have stated the principle ofnon-retrospectivity and have protected legally recognised interests — such asrights, titles, immunities, duties, liabilities — which ''exist'' or have ''vested''or ''accrued''. If the general law lacks means or procedures to recognise,enforce or sanction those legally recognised interests, Courts and especiallylegislatures may also recognise and save the continued effect of the proceduresthat supported those interests But if, broadly speaking, no existing, vestedor accrued legal interests are put in jeopardy the new manifestation ofParliament's will is to be given full effect.[18] This Court further held in Crown Health Financing Agency v P that the lawadopts a general principle that the presumption against retrospectivity applies tosubstantive rights but not those that are procedural in nature, unless a contraryintention is expressed in the legislation itself.16[19] The Court recognised that the distinction between substantive and proceduralrights is not always easy to draw. Sometimes reforms of a procedural character mayoperate to destroy substantive rights.17 To similar effect is the decision ofthe Privy Council in Yew Bon Tew v Kenderaan Bas Mara to which Mr Mawhinneydrew our attention:18 these expressions "retrospective" and "procedural," though useful in aparticular context, are equivocal and therefore can be misleading. A statutewhich is retrospective in relation to one aspect of a case (e.g., because itapplies to a pre-statute cause of action) may at the same time be prospectivein relation to another aspect of the same case (e.g., because it applies only tothe post-statute commencement of proceedings to enforce that cause ofaction); and an Act which is procedural in one sense may in particularcircumstances do far more than regulate the course of proceedings, because itmay, on one interpretation, revive or destroy the cause of action itself.[20] It cannot be doubted that the legislation in this case preserved the appellant'ssubstantive right to have its claim to a GST refund determined on the merits.Mr Mawhinney did not suggest otherwise. He argued rather that what the appellantlost was the right to invoke s 89H(2), under which the Commissioner is deemed toaccept an adjustment contained in a NOPA when she fails to reject it within time.16 Crown Health Financing Agency v P [2008] NZCA 362, [2009] 2 NZLR 149 at [189]. The casewas appealed to the Supreme Court but leave was not granted on the question of retrospectivity.17 Maxwell v Murphy (1957) 96 CLR 261 at 267.18 Yew Bon Tew v Kenderaan Bas Mara [1983] 1 AC 553 (PC) at 558–559.[21] This argument is wholly without merit, for two reasons. First, s 89AC isplainly procedural in nature. There is no good reason to limit its application to disputescommenced after it came into force, because it does not deprive taxpayers ofthe substantive right to have their tax liabilities determined on the merits.[22] Second, s 89AC achieves no more than what is plainly implicit in the schemeof the TAA. The Commissioner was not required to file a NOR by 30 April 2015.At that date her obligation to do so or face the consequences had not been triggered,for the appellant's NOPA was late and of no effect.19 The much later decision of theTRA excused the taxpayer's failure to file its NOPA in time. It would be remarkableif the legislature intended that a decision relieving the taxpayer of the consequencesof its own failure to act within time should deny the Commissioner the right to contestthe taxpayer's claim. It is no answer to this to suggest, as Mr Mawhinney did, thatthe Commissioner might apply to the High Court to extend time under s 89L, sinceshe was never in default.[23] For these reasons the appeal must fail.[24] We will not discuss the question whether the same result would be achievedunder the legislation as it stood prior to amendment. Peters J held that it did,20 and itwill be apparent that we agree that a purposive interpretation must be given tothe words in s 89K "for all purposes".Disposition[25] The appeal is dismissed[26] There is no reason to allow costs to lie where they fall, as Mr Mawhinneysuggested. The appellant must pay the Commissioner costs for a standard appeal on aband A basis, with provision for one counsel, and usual disbursements.Solicitors:Crown Law Office, Wellington for Respondent19 Tax Administration Act, s 89D(5).20 Mawhinney v Commissioner of Inland Revenue, above n 1, at [40].