SHEARING SERVICES KAMUPENE LTD v THE COMMISSIONER OF INLAND REVENUE [2014] NZHC 3223

SHEARING SERVICES KAMUPENE LTD v THE COMMISSIONER OF INLAND REVENUE [2014] NZHC 3223 [15 December 2014]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYCIV 2014-404-523[2014] NZHC 3223BETWEEN SHEARING SERVICES KAMUPENELTDApplicantAND THE COMMISSIONER OF INLANDREVENUERespondentHearing: 30 June 2014 (further submissions on 4 July 2014)Counsel: J H Coleman for the ApplicantL A Herbert and M T Stapleton for the RespondentE G Sharrock for Interested Party (Maunga HikurangiKoporitana/Mt Hikurangi Incorporated)Judgment: 15 December 2014JUDGMENT OF MALLON JTable of ContentsIntroduction ....................................................................................................................................... [1]Background ........................................................................................................................................ [5]Case 9 ............................................................................................................................................... [14]The pleadings ............................................................................................................................... [14]The decision in Case 9 .................................................................................................................. [15]Case 7 ............................................................................................................................................... [18]Procedural steps ........................................................................................................................... [18]The decision in Case 7 .................................................................................................................. [21]Leave to appeal ................................................................................................................................ [25]The appeal provisions ................................................................................................................... [25]Steps taken by Shearing Services.................................................................................................. [27]Principles relevant to leave .......................................................................................................... [32]The merits ........................................................................................................................................ [33]The argument now advanced ........................................................................................................ [33]Not part of statement of position .................................................................................................. [37]The substantive merits .................................................................................................................. [42]The conduct of the parties .............................................................................................................. [53]The length of and reason for the delay .......................................................................................... [55]Prejudice .......................................................................................................................................... [58]Overall assessment .......................................................................................................................... [61]Result ................................................................................................................................................ [62]Introduction[1] The applicant, Shearing Services Kamupene Limited (Shearing Services), seeks special leave to appeal from two decisions of the Taxation Review Authority (the Authority). Leave is required because the appeal was filed out of time. Leave is opposed by the respondent, the Commissioner of Inland Revenue (the Commissioner).[2] The Authority's decisions relate to Shearing Services' liability to pay PAYE for shearers and shed hands in the 2005 to 2007 tax years, as well as associated shortfall penalties. The Commissioner has assessed that liability as amounting to in excess of $1.5 million. Shearing Services challenged that assessment before the Authority and the Commissioner applied to strike out Shearing Services' claim. Inthe first decision for which leave to appeal is sought, the Authority granted theCommissioner's strike out application subject to leave granted to Shearing Servicesto apply to be heard on two issues (Case 9).1 Shearing Services belatedly did so apply. In the second decision, for which leave to appeal is also sought, the Authority struck out Shearing Services' claim (Case 7).2[3] Shearing Services seeks to appeal the Authority's decisions because it says that it is not the entity responsible for PAYE. It says that the entity which contracted with the shearers and shed hands was Maunga Hikurangi Koporeihana (Maori Inc). It says that this is the entity which has the tax liability. Maori Inc agrees with that position. This submission was not made before the Authority. Shearing Services says that this was because it was not represented by a lawyer before the Authority. It says that it would be manifestly unjust if it is left burdened with a significant but fundamentally erroneous assessment when its case has never been properly advanced and adjudicated on by the courts.[4] The Commissioner says that leave should not be granted. She says that the appeal is without merit because there is insufficient evidence to support the claim which is now being advanced. She also says that it is now too late to contend that Maori Inc was the correct entity to assess, as this was never part of Shearing1 Case 9 [2012] NZTRA 9, (2012) 25 NZTC 1-021.2 Case 7 [2013] NZTRA 7, (2013) 26 NZTC 2-006.Services' statement of position before the Authority. She contends that the Judgewas correct to strike out Shearing Services' claim and to grant summary judgment in her favour. She also says that Shearing Services' conduct counts against leave beinggranted.Background[5] Shearing Services provides shearing services to farmers, mainly in Southland. The issue if an appeal were to be brought relates to whether it employs, contracts or hires shearers and shed hands as part of the services it provides, or whether another entity (Maori Inc) does so. It is accepted that up until January 2005 Shearing Services employed the shearers and shed hands and made PAYE tax deductions for these workers. From January 2005 it ceased doing so.[6] Inland Revenue commenced an investigation in 2007. At this time, a director of Shearing Services explained to an Inland Revenue investigator that Shearing Services was not required to pay tax because of the Te Ture Whenua Maori Act 1993 (the TTWM Act). Shearing Services also purported to require the Commissioner to attend the Te Kooti Marae to determine whether documents requested by Inland Revenue had to be provided. The Commissioner declined that request. A decision from the Te Kooti Marae purported to affirm Shearing Services' view that the information did not have to be provided. In the course of the investigation Inland Revenue was advised that Shearing Services had transferred its staff to New Zealand Contracting Solutions (NZCS) and from January 2005 Shearing Services obtained NZCS workers, whom it then contracted to provide shearing services to its customers.[7] Following the Inland Revenue enquiries, in accordance with the relevant procedure, on 12 March 2009 the Commissioner issued a notice of proposed adjustment (NOPA). That notice proposed to amend Shearing Services' monthly employer schedules from January 2005 – June 2007 to include payments to shearers and shed hands, and PAYE was to be calculated for this period. It also proposed a shortfall penalty for evasion, but with a 50 per cent reduction for prior compliance. It calculated the PAYE and proposed shortfall penalties as totalling $1,598,201.57.[8] Inland Revenue proposed to make these adjustments because its view was that NZCS was simply a trading name of Shearing Services rather than a legal entity. In reaching this view it took into account that the deposits into the NZCS account came from Shearing Services, NZCS did not account for tax of its own accord, the shearers and shed hands could not control their own activities and were therefore not independent contractors, and there was no evidence to establish that there had been a change in the relationship between Shearing Services and the shearers and shed hands.[9] On 11 May 2009 Shearing Services issued a notice of response (NOR). In that document it said the shearers had contracts in place with NZCS, and NZCS supplied contractors to Shearing Services. It said that NZCS was not registered withthe companies office but was registered under the "Maori Incorporation MaungaHikurangi Koporeihana Maori Constitution Regulations 2008". It said that itbelieved that such a Maori Incorporation had the authority to register a company or trust for the purposes of trade or other activity. It also said that it considered that"the Maori Incorporation or any of its trusts or companies" are exempt from PAYE,GST, withholding taxes or any other taxes in accordance with "[c]ommon law,general law and tikanga Maori". It said that, in accordance with the TTWM Act, all property and income are declared for charitable purposes as set out in their trust constitutions.[10] On 5 March 2010 the Commissioner filed its statement of position. It calculated the PAYE owing by Shearing Services for the 2005 to 2007 years to be $856,115.19, with shortfall penalties of $642,086.38, together totalling $1,498,201.57. The Commissioner considered that the shearers and shed hands were employees of Shearing Services because NZCS was not registered with the companies office, was not a legal entity, was not registered with Inland Revenue, and the only document as to its existence was a "Certificate of Trade" issued by "Kaitiaki Ahuwhenua Trust Inc", which was another entity with no legal basis. TheCommissioner considered that in these circumstances NZCS was simply a trading name of Shearing Services. The Commissioner noted Shearing Services' contention that the shearers and shed hands were independent contractors contracted to NZCS which supplies contractors to Shearing Services. It said that no evidence had beenprovided to support this position. It noted that Shearing Services had also raised Maori sovereignty issues but the Commissioner's view was that the income tax legislation was law passed by Parliament and must be followed.[11] On 4 May 2010 Shearing Services filed its statement of position. In that document it claimed that it had authority under tikanga Maori to issue, practice and claim rights that included issuing a certificate of trade, claiming an exemption from taxation, contracting with any party and carrying on any business or activity. It said that it had the authority to apply to Te Kooti Marae to have its case heard by its peers and that Inland Revenue did not have jurisdiction over any matter of tikanga Maori. The statement of position annexed a number of documents that included a "Notice of Understanding, Intent and Claim of Right" (which elaborated on the Maorisovereignty claim) and a "certificate of exemption".[12] The dispute was referred to the Commissioner's Adjudication Unit. It released a report on 4 October 2010. It considered that Shearing Services was subject to Inland Revenue legislation. It considered that NZCS was not a separate legal entity and that Shearing Services had not shown that NZCS was Shearing Services' trading name. It concluded that the status of the shearers and shed hands had not changed since 2005 Accordingly it concluded that Shearing Services was liable to comply with PAYE rules in respect of payments made to shearers and shed hands and it was also liable for shortfall penalties.[13] Subsequently a representative of Shearing Services purported to issue a notice of default to the Commissioner. It purported to hold the Commissioner liable for dishonouring "the Maori Incorporation/Maori Authority called MaungaHikurangi Koporeihana Maori." The Commissioner responded that the notice of default was of no legal effect.Case 9The pleadings[14] On 7 December 2010 Shearing Services filed a notice of claim with the Authority to challenge the findings of the Adjudication Unit. This alleged that it hadbeen operating under 2008 Regulations of "the Maori Incorporation" and that therewas no jurisdiction to rule on matters of tikanga Maori. On 7 March 2011 the Commissioner made an application to strike out Shearing Services' notice of claim. Shearing Services filed a first amended statement of claim with the Authority on 30 September 2011, and a second amended statement of claim on 14 December 2011. Shearing Services claimed breaches of the TTWM Act, made allegations seemingly in support of claim to uphold a Te Kooti Marae ruling on 7 February 2008, and made various other claims. The pleadings are not in the material before me (or if they are I was not referred to them) but are described by the Judge who heard the strike outapplication as being "rather extensive and confusing".3The decision in Case 9[15] The Authority issued its decision on the strike-out application on 19 September 2012. The Judge found that the claim of Maori sovereignty was misplaced. He noted that it was well established that Maori have liability to pay tax, that arguments asserting that Parliament is not authorised to make laws applicable to Maori will not succeed, and that there are no statutory provisions overriding the revenue legislation in respect of Maori. Shearing Services therefore did not fall outside the jurisdiction of the revenue legislation.[16] The Judge went on to say:[106] The disputant seems to also dispute the correctness of theCommissioner's assessments on the basis that the shearers working for thedisputant are independent contractors and not employees. Such a question is within my jurisdiction. However, such a challenge should identify why andhow the Commissioner's calculation of the tax owed by the disputant shouldbe corrected. Instead, the relief sought by the disputant is not a correction tothe Commissioner's assessments but, rather, a strike out of the assessments.It seems that the disputant no longer seeks a strike out of the adjudication report.[17] The Judge considered that as pleaded there was insufficient evidence to conclude that the shearers and shed hands were independent contractors of Shearing Services. He considered that Shearing Services' pleadings disclosed no reasonable3 Case 9, above n 1, at [13].cause of action. However, rather than striking out the claim in its entirety, the Judge said:[110] If the disputant wishes to challenge the assessments on the grounds that the Commissioner was incorrect to conclude that an employment relationship existed between the disputant and its shearers and shed-hands, then the disputant should have sought leave to file a further amended claim on this basis and adduced appropriate evidence. Such a claim would need to accept the jurisdiction of this Authority.[114] The disputant's notices of claim do not challenge, or purport tochallenge, any extant disputable decision of the Commissioner, but continue to argue that the disputant is outside the jurisdiction of the legislature, nor dothe pleadings challenge or otherwise address the disputant's liability inregard to the substantive claim.[115] Having said all that, two matters concern me. First, because the pleadings of the disputant are so confusing and misguided as to its likely PAYE tax liabilities, I am not clear whether it seeks to properly argue that the shearers and shed-hands are independent contractors rather than its employees. Also, it seems to me to be open to the disputant, on what evidence has been adduced to me, to argue that a lower level of shortfall penalty than that for evasion might be more appropriate, because it is possible that the disputant is sincere in its views about Maori sovereignty affecting its PAYE responsibilities.[116] Accordingly, leave is reserved for one month for the disputant to apply for me to hear those two issues (or either of them) in substance, but not in relation to so-called Maori sovereignty concepts.[117] Accordingly, the disputant's notice of claims herein is struck outsubject to the said leave reserved issues should the disputant wish to pursue either or both of them i.e. all claims of the disputant are struck out except for the status issue of the shearers and shed-hands (whether they were employees or independent contractors at material times), and except for the issue of short-fall penalty; and I shall address those two issues further after the expiry of one calendar month.Case 7Procedural steps[18] The applicant failed to apply to have the matter determined within the one month timeframe allowed by the Judge. After the one month period had expired, on 5 November 2012, Shearing Services filed a memorandum applying to be heard, and to reconfirm its objection to the assessments. On 21 November 2012 the Commissioner filed a memorandum seeking a strike out of the proceeding on theground that Shearing Services had failed to file an amended notice of claim within the time period specified by the Authority. On 20 December 2012 the Authority ordered Shearing Services to file witness briefs by 15 February 2013 in the place of filing an amended notice of claim.[19] On 26 February 2013 Shearing Services filed "briefs of evidence". The Judge considered that these briefs "did not purport to evidence any matter in respect of which leave was given".4 He gave Shearing Services a further opportunity to provide briefs of evidence on whether the shearers were its employees or independent contractors and on the level of the shortfall penalties imposed. The Judge also ordered Shearing Services to provide discovery on these two topics. Some documents were filed on 18 March 2013 but these were not regarded as complying with the discovery order.[20] On 29 May 2013 the Commissioner applied to strike out the two remaining live elements of the claim, and for summary judgment. On 26 July 2013 Shearing Services filed a notice of opposition and several affidavits. The Judge describe these affidavits as purporting to "evidence a wide ranging and radical case, well outside the scope of the leave granted".5The decision in Case 7[21] The Authority's determination was given on 25 October 2013. By this timethe Authority understood from the evidence filed that Shearing Services' positionwas as follows:(a) Its shearers and shed hands were neither employees nor independent contractors. Those descriptions were pakeha concepts. There was a third type of working arrangement, called "Whanau Kiatono", which was lawful pursuant to tikanga Maori principles, and was not subject to pakeha laws and tax legislation.4 Case 7, above n 2, at [18].5 At [21].(b) NZCS was a valid legal entity under tikanga Maori and was not simply a trading name of Shearing Services. "Nga Tikanga Maori Law Society"established X Inc (also called MHKM Inc) as a Maori Incorporation under the TTWM Act. X Inc incorporated NZCS as a Maori Incorporation under tikanga Maori. NZCS merged with AWS Limited when AWS Limited was incorporated under the Companies Act 1993 in March 2007.(c) Whanau trusts contracted to work for NZCS, on behalf of the shearers and shed hands and their whanau. These contracts were later assigned by NZCS to AWS Limited. In January 2005 Shearing Services entered into a contract with NZCS to hire shearers and shed hands. As a consequence there were no contracts between the shearers and shed hands and Shearing Services.[22] The Judge held as follows:(a) It was not open to Shearing Services to contend that the shearers and shed hands were neither employees nor independent contractors of Shearing Services. The Judge had already determined in Case 9 that they worked for Shearing Services and the only remaining question was whether they did so as employees or independent contractors.(b) It was also not open to Shearing Services to rely on Maori sovereignty arguments to displace revenue laws. The Judge had already found against Shearing Services on that argument in Case 9. The argument could not succeed on a direct or indirect basis. Shearing Services could thereforenot allege that a "self-styled Maori authority" (Nga Tikanga Maori LawSociety) was able to incorporate a legal entity, X Incorporated, valid as against the Commissioner without complying with generally applicable New Zealand company law or other law providing for the creation of legal entities.66 At [39] to [41](c) It was also not open to Shearing Services to contend that NZCS was a valid legal entity. That issue had already been determined against Shearing Services in Case 9.(d) In any event, the documents relied on by Shearing Services were "founded on a fundamental misunderstanding" of the TTWM Act. They appeared tohave been intended to "create an alternative legal reality borne out of an assertion of continued 'Maori sovereignty'".7 The issuing entity, X Incorporated, had no legal status and nor did the entities it purported to have created. Under the TTWM Act only the Maori Land Court and the Maori Appellate Court are authorised to establish ahu whenua trusts. The whanau trusts were not the result of any order of the Maori Land Court.(e) Further, the evidence provided by Shearing Services was questionable. For example, a document purporting to be a contract between Shearing Services and NZCS/AWS Limited was dated 20 December 2004. This was two and a half years before AWS Limited was incorporated. If it was genuine, then it was legally void because NZCS was not a legal entity able to contract. Similarly, a document purporting to be a contract between a whanau trust and NZCS/AWS Limited was dated 1 January 2005, that being two and a half years before AWS Limited was incorporated. If that document was genuine it was legally void because NZCS was not a legal entity able to contract. Another document purported to authorise andcertify that Shearing Services was incorporated into the "MHKM Registry" on 1 January 2005. Yet from other dates referred to in that document it was "plainly created after 10 August 2010 some 5 years after the alleged events in question."8(f) There was no evidence which bore on the question whether those who worked as shearers or shed hands did so as employees or independent contractors of Shearing Services. As it happened, the Employment Relations Authority (the ERA) had determined that question on 157 At [81].8 At [82].February 2006 finding that the relationship was one of employment.9Although the Judge considered that he could take this into account he decided that he would not.[23] The Judge noted that it was the Commissioner who had the onus of satisfying the Court that Shearing Services had no answer to the defence.10 The Judge concluded:[92] From the evidence it seems that until July 2004 the shearers and shed-hands were treated as employees of the disputant. The, in early 2005, as a result of professional advice, CS was interposed between those employees and the disputant and consideration was given to converting the shearers and shed-hands from the status of employees to independent contractors but they still seem to be employees of the disputant. CS Inc. does not seem to be a valid legal entity.[93] I cannot tell from the evidence whether that change in status has been achieved but it would still require payment of withholding tax.[94] CS Inc negotiates contracts with farmers and provides them with the shearers and shed-hands needed.[95] Frankly, the precise challenge from the disputant is not clear from its pleadings, evidence, and submissions which focus on the relevance and effect of so-called Maori Statute law, and on adverse consequences to Maori from European colonization.[96] The evidence does not show that the disputant sincerely believed that Maori sovereignty relieved it of its PAYE responsibilities, but that the disputant is aggrieved. I regard the shortfall penalties at 150% (for evasion), reduced by 50% for previous good behaviour, to be appropriate.[97] I conclude that the disputant cannot discharge its onus of provingthat the Commissioner's assessment of the disputant for PAYE (and shortfallpenalties thereon) in relation to dozens of shearers and shed-hands was wrong and by how much; nor has the disputant disclosed any reasonably arguable cause of action.[24] The Judge accordingly struck out Shearing Services' claim and awarded summary judgment to the Commissioner.9 Rongonui v Te Whata ERA Christchurch CA17/07, 15 February 2007. Shearing Servicescontended this decision had been "struck out" but did not provide evidence to the Authority tosubstantiate this. In the affidavit evidence filed in support of the present application Shearing Services provided a consent order made in the Employment Court dated 6 August 2007. Thatorder records that the challenge to the ERA's decision was resolved following settlement discussions and that, as part of that settlement, the ERA's determination was set aside.10 At [52].Leave to appealThe appeal provisions[25] A decision of the Authority may be appealed to the High Court pursuant to the Taxation Review Authorities Act 1994 (TRAA).11 Because the appeal provision in the TRAA does not specify a time limit for filing an appeal, the appeal must be brought within 20 working days after the decision appealed against is given.12 That time period may be extended by special leave of the Court.13[26] Case 9 was delivered on 19 September 2012. Case 7 was delivered on 25 October 2013. The 20 working day periods for filing an appeal expired on 17 October 2012 and 25 November 2013 respectively.14Steps taken by Shearing Services[27] Shearing Services endeavoured to lodge an appeal within the 25 November 2013 time period. On 11 November 2013 Shearing Services emailed Mr Coleman, counsel on this application, seeking advice in respect of the appeal and noting that the appeal needed to be filed by 22 November 2013. Mr Coleman replied that other commitments prevented him from considering the matter for the next week and a half but that a lawyer should draft up a notice of appeal for this review.[28] Subsequent to this, Mr Te Whata, a director of Shearing Services, was confused about the date by which the appeal needed to be filed. He was in Australia when the decision in Case 7 was released. Thinking that the date for filing the appeal expired on 20 November 2013, he instructed Mr Brown, a Maori elder whohad conducted Shearing Services' argument in Case 7, to prepare appeal documentation including an extension of time. Mr Brown accordingly wrote to theAuthority by letter dated 20 November 2013 advising of Shearing Services' intentionto appeal to the High Court and seeking leave of the Authority for an extension of time to file the appeal.11 Tax Review Authorities Act 1994, s 26A.12 High Court rules, r 20.4(2)(b).13 Rule 20.4(3).14 Taking into account that 28 October 2013 was a public holiday.[29] It seems that Mr Brown then learned that the appeal needed to be filed in the High Court and that it was for the High Court to consider an extension in time. On 29 November 2013 Mr Brown sought to file in the High Court at Whangarei and at Auckland an application for an extension of time to file an appeal, an affidavit in support and a copy of the decision in Case 7. The application to file an appeal out of time, however, stated that Shearing Services wished to appeal both Case 9 andCase 7. The application and affidavit did not set out the grounds on which the appeal was to be brought, but did explain the difficulty for Shearing Services in instructing counsel in time to bring the appeal.[30] The Deputy Registrar of the High Court at Auckland returned the documents to Mr Brown under cover of a letter dated 2 December 2013. In that letter the Deputy Registrar advised that an individual cannot commence a proceeding for a party. The headings of the documents also did not comply with the High Court Rules.[31] On 17 February 2013 Mr Coleman was instructed as counsel. On 28 February 2014 an application for leave to appeal out of time was filed. The application was made in respect of the decision in Case 7. A draft notice of appeal was prepared at that time. It was subsequently amended. The amended draft contended that Case 7 was wrong in fact and in law on three grounds:(a) The Judge erred in concluding that the argument that the shearers and shed hands were neither employees or independent contractors of Shearing Services was issue estopped by the decision in Case 9 and was an abuse of process and that leave for this argument to be advanced could not be granted.(b) The Judge erred in concluding that the endeavours to alter the arrangements from 2005 were legally ineffective, that the documents provided were not probative of anything, that the legal relationship with the shearers and shed hands remained with Shearing Services, and that Shearing Services could not discharge the onus of showing that the assessments were wrong and by how much.(c) The Judge erred in finding that the evidence did not show that Shearing Services sincerely believed that Maori sovereignty relieved it of PAYE liability (relevant in relation to the shortfall penalties).Principles relevant to leave[32] The overriding consideration in determining whether to permit an appeal to proceed out of time is the interests of justice. Relevant to where the interests of justice lie are the prospective merits of the appeal, the conduct of the parties, the reason for the delay and the length of the delay, and the extent of any prejudice flowing from permitting the appeal to proceed out of time.15The meritsThe argument now advanced[33] A number of affidavits have been filed in relation to the application for leave. In these affidavits Shearing Services explains the following:(a) The argument it wishes to advance is that Maunga Hikurangi Koporeihana Maori (Maori Inc) is a separate legal entity by reason of customary law, or alternatively that in law it is an unincorporated association.(b) Shearing Services contracts with Maori Inc, trading as NZCS (which is now accepted not to be a separate legal entity). Under those contractual relationships Shearing Services pays Maori Inc virtually all the receipts from farmers. NZCS's bank account is ultimately the property of Maori Inc and therefore the Ngati Hine Hapu Ki Moerewa (the hapu).[34] The affidavits for Shearing Services also explain that Mr Brown was in charge of running the litigation before the Authority and that he had insisted on running the Maori sovereignty or tikanga Maori arguments. These arguments involved contending that Shearing Services did not need to submit to the Authority, that no tax was payable, that Maori Inc had its own jurisdiction and could require15 My Noodle Ltd v Queenstown Lakes District Council [2009] NZCA 224, (2009) 19 PRNZ 518.public officials to appear before it, and that Maori Inc could create other legal entities. Mr Brown now accepts that these contentions may have been misguided.[35] Lastly the affidavits for Shearing Services explain how Maori Inc came about and provide documents relating to that. In essence, Maori Inc was intended to be incorporated under the TTWM Act to enable a block of land to be transferred to the whanau/hapu. Maori Inc was said to act for and on behalf of the whanau/hapu. A number of documents are exhibited to the affidavits. These include minutes of meetings of Maori Inc on dates between 2003 and 2013. The documents alsoinclude a "certificate of trade issued by Maori Inc in 2005." This document purportsto authorise and certify under tikanga Maori that on 1 January 2005 NZCS was incorporated and "shall have Customary right of trade within and outside the Dominion of Aotearoa (NZ) where the native title has not been extinguished." Thedocument itself is not dated. The document is said to demonstrate that NZCS is a trading name of Maori Inc.[36] An affidavit has been filed on behalf of the Commissioner from Britson Mikaere, a professional historian. He gives expert evidence that tikanga Maori does not recognise the concept of a legal entity separate from whanau/hapu because there was no need for it, and nor is there evidence that such entities existed in Maori life.Not part of statement of position[37] The procedure by which an assessment may be challenged requires the disputant to file a statement of position. The statement of position must, with sufficient detail to fairly inform the Commissioner, give an outline of the facts, evidence, and propositions on which the disputant intends to rely, and an outline of the issues it considers will arise.16 Section 138G of the Tax Administration Act 1994 provides:138G Effect of disclosure notice: exclusion of evidence(1) Unless subsection (2) applies, if the Commissioner issues a disclosure notice to a disputant, and the disputant challenges the disputable decision, the Commissioner and the disputant may raise in the challenge only–16 Tax Administration Act 1994, s 89M(6).(a) the facts and evidence, and the issues arising from them; and(b) the propositions of law,–that are disclosed in the Commissioner's statement of position and in the disputant's statement of position.(2) A hearing authority may, on application by a party to a challenge to a disputable decision, allow the applicant to raise in the challenge new facts and evidence, and new propositions of law, and new issues, if satisfied that–(a) the applicant could not, at the time of delivery of theapplicant's statement of position, have, with due diligence,discovered those facts or evidence; or discerned those propositions of law or issues; and(b) having regard to the provisions of section 89A and the conduct of the parties, the hearing authority considers that the admission of those facts or evidence or the raising of those propositions of law or issues is necessary to avoid manifest injustice to the Commissioner or the disputant.(3) For the purposes of subsection (1), a statement of position includes any additional information that the Commissioner and the disputant agree (under section 89M(13)) to add to the statement of position.[38] The issue that arises is whether Shearing Services' statement of position disclosed the issue that NZCS was the trading entity of Maori Inc and that Maori Inc was the employer or contractor of the shearers and shed hands. Counsel for Shearing Services acknowledges that it does not do so directly. The statement of position advances the Maori sovereignty claim. It purports to come from Maori Inc (as noted on the cover letter) and does state that Maori Inc fully accepts the Commissioner'sclaims in the NOPA if Inland Revenue can rebut the Maori sovereignty claims. That is insufficient to inform the Commissioner of what is now advanced. It reads more as a challenge to the Commissioner to disprove the Maori sovereignty claim (which is at the forefront of the statement of position). It does not assert that Maori Inc, rather than Shearing Services, is the employer of the shearers and shed hands. Astatement of position must identify any given issues "with sufficient clarity to causea reasonable party to recognise it as such".17 In my view the argument now being advanced was not advanced in the statement of position such that a reasonable party was able to recognise it.17 Vinelight Nominees Ltd v Commissioner of Inland Revenue [2013] NZCA 655, (2013) 26 NZTC 21-055 at [31].[39] The requirement is that the statement of position, as distinct from the NOPA and the NOR, sets out the facts, evidence, and law on which the disputant relies, and gives an outline of the issues that the disputant considers will arise.18 Nevertheless counsel for Shearing Services submits that, from the supporting documents, the Commissioner was aware of the argument that NZCS was the employer/contractor rather than Shearing Services. I agree that the Commissioner (and the Authority) identified that as an issue that was potentially being raised. Whether it was being advanced was somewhat unclear because the Maori sovereignty claim predominated. In any event, the argument that NZCS was the employer/contractor, rather than Shearing Services, is not the same as the argument now being advanced: that NZCS is a trading entity of Maori Inc and that Maori Inc is a valid legal entity under our law and is the correct entity with the tax liability. That contention was not articulated in the supporting documentation in such a way as to fully and fairly inform the Commissioner of that issue and the facts, law and evidence relied on in support of it, even if that documentation can be relied on to determine the scope of the challenge.[40] Counsel for Shearing Services contends that the Authority in Case 7 should have granted leave to allow this issue to be raised. There are two problems with that submission. The first is that this was not quite the issue that was being advanced at that time. Rather, it was contended that X Inc was able to validly create NZCS and it was NZCS that had the contracts with the shearers and shed hands. Secondly, even if the argument now being advanced had been raised in Case 7, the Authority was entitled to decline leave to hear it. That is because the issue could have been advanced at the outset.[41] That the argument now being advanced is a new issue, is sufficient to dispose of the application for special leave. The statement of position defined the scope of the challenge, the argument now being advanced could have been advanced earlier, and it is now too late to raise new issues by way of an appeal from the Authority'sdecision on that challenge. For completeness I will, however, consider other matters relevant to whether leave should be granted.18 Beckham v Commissioner of Inland Revenue (2007) 23 NZTC 21,499 at 69 (HC); Beckham v Commissioner of Inland Revenue [2008] NZCA 301, (2008) 23 NZTC 22,066.The substantive merits[42] Under the TTWM Act the Maori Land Court can make an order incorporating, as a Maori Incorporation, the owners of any areas of Maori freehold land.19 On making such an order, the owners become a body corporate with "powerto do and suffer all that bodies corporate may lawfully do and suffer".20[43] As I understand it Maori Inc has not in fact been incorporated by an order of the Maori Land Court, although that has been the intention. I say that because I do not understand the affidavit evidence to assert that there has been such an order.21Further, I understand from counsel for Shearing Services that, although it was intended to obtain an order of incorporation, matters did not progress to that stage.[44] Shearing Services submits that Maori Inc is either a quasi-corporation or an unincorporated body. It submits that a quasi-corporation is recognised where corporate status or procedural rights are given by statute (expressly or impliedly) or by the common law. It submits that whanau and hapu are terms repeatedly used by Parliament to describe collective groups of Maori in contexts that envisage collective ownership of property, the common law frequently references whanau and hapu as meaning collective groups of Maori and envisages collective ownership of property and the ability to sue, the common law includes tikanga Maori, and that by implication the whanau and/or hapu will be contractually liable for debts to the extent of their commonly owned property but not personally liable beyond that. It submits that for these reasons Maori Inc is a quasi-corporation recognised in law as existing separately from its members. It submits that the same argument holds if Maori Inc is an unincorporated body.[45] In my view the prospects of success on this point are low. As the Commissioner points out, there are examples in tax legislation where unincorporated bodies are given status but they are quite limited and do not apply here. The TTWM Act has provided a mechanism by which land can be retained for the benefit of19 Te Ture Whenua Maori Act 1993, s 247.20 Section 250(1).21 The closest the evidence gets to on this is reference to a meeting of Maori Inc, in which it resolved to adopt the constitution of an another entity that was correctly incorporated under the TTWM Act.whanau and hapu in recognition of the special significance of that land to Maori. That mechanism is through the creation of Maori incorporations by order of the Maori Land Court. It is quite a stretch to say that an intended Maori incorporation, which has not yet been recognised by an order of the Maori Land Court, has a legal status that should be recognised for tax purposes because in other contexts whanau and hapu have been recognised as having status for some purposes, when the tax legislation does not provide for this.[46] In reality, as matters stand, the intended Maori incorporation consists of those individuals who are purporting to act on behalf of people who make up the whanau/hapu from time to time. A contract with Maori Inc, trading as NZCS, is a contract with those individuals, and any other individuals on whose authority the contract was entered into.22 In other words, any contract between Shearing Services and NZCS is a contract by the legal entity of Shearing Services with each individual on whose authority the NZCS representatives acted, even if NZCS was acting on behalf of Maori Inc.[47] Moreover, as the Commissioner points out, Shearing Services still has not established that the contracting relationships it relies on exist despite the time and opportunity it has had to do so. The documents show that Maori Inc purported to act as though it was a valid Maori Incorporation through holding meetings and purporting to create entities, such as NZCS. But there is no adequate evidence that the shearers and shed hands who have worked for farmers through arrangements put in place by Shearing Services have done so as a collective entity, that being the whanau/hapu that the intended Maori Incorporation represents.[48] The real issue is and always has been whether the shearers and shed hands worked as employees or independent contractors of Shearing Services. Shearing Services was given the opportunity to provide information and make submissions on that issue but did not do so before the Authority. Nor does it seek to advance this issue in the materials it has filed for this application for special leave. In these circumstances Shearing Services cannot discharge its onus to show that the22 HG Beale Chitty on Contracts (31st ed, Thomson Reuters, London, 2012) at [9-064]; Hostick v The New Zealand Railway & Locomotive Society Waikato Branch Inc [2006] 3 NZLR 842 (HC) at [25]; Campbell v Scott [1995] 2 NZLR 345 (HC) at 348.Commissioner's assessments of PAYE for the 2005, 2006 and 2007 years waswrong.23[49] The other issue on which leave was reserved by the Authority was whether Shearing Services genuinely believed it was not obliged to pay PAYE. In Case 7 the Judge considered that, despite the opportunity to do so, Shearing Services did not provide evidence to show that it sincerely believed that Maori sovereignty relieved it of its PAYE responsibilities. Rather Shearing Services showed only that it was aggrieved. In other words there is a difference in genuinely believing in Maori sovereignty and a genuine belief that this will allow a party to be relieved of legislatively prescribed tax obligations.[50] On this appeal the question is whether the Authority was wrong on the evidence before it. Nothing has been advanced to show that it was. Any new evidence filed in support of an appeal would require special leave.24 However, putting that issue to one side, the affidavit evidence filed in support of this application for leave does not advance matters either. In these circumstances Shearing Services has not provided a foundation for a conclusion that there was any error in this respect.[51] The Judge concluded by saying that Shearing Services "cannot discharge its onus of proving that the Commissioner's assessment was wrong".25 However it is clear that in saying this, the Judge was not reversing the onus on a strike out application. The Judge went on to say that Shearing Services had not disclosed anyreasonable argument. Earlier the Judge had correctly set out that it is "the defendantwho has the onus of satisfying the Court that the plaintiff has no answer to thedefence".26[52] Overall the merits of the proposed appeal are low. They do not point in favour of granting special leave.23 Tax Administration Act 1994, ss 109 and 149A.24 High Court Rules, r 20.16, formerly r 716.25 Case 7, above n 2 at [97].26 At [52].The conduct of the parties[53] The conduct of Shearing Services does not support granting leave either. During the investigation it asserted Maori sovereignty and purported to exercise jurisdiction over the Commissioner. Its pleadings continued to rely on Maorisovereignty claims in the face of the Commissioner's application to strike out. TheAuthority provided many opportunities for Shearing Services to advance its claim on a proper basis. Those opportunities included the Authority identifying two possible legitimate grounds of challenge which Shearing Services could pursue if it wished to do so. Shearing Services then did not comply with the timetable and did not put forward evidence relevant to those issues. Instead it continued to assert its Maori sovereignty claims.[54] This was not a case of "two cultures talking past each other" as wassuggested on behalf of Maori Inc at the hearing before me. Rather, because of strongly held views about Maori sovereignty, objection was taken to paying tax on grounds that were not legally valid. If there was a proper legal objection to paying the tax, Shearing Services had more than sufficient opportunity to advance it.The length of and reason for the delay[55] The application for leave to appeal was made in respect of Case 7. Subsequently counsel advised that leave was also sought in respect of Case 9 if that was considered necessary. The earlier documents prepared by Shearing Services in respect of the proposed appeal did, however, refer to both Case 7 and Case 9.[56] To the extent that the appeal concerns Case 7 the delay in filing the application was not particularly long and it has been explained. To the extent that the appeal concerns Case 9 the delay is longer. Having said that, it was not altogether clear that an appeal from Case 9 was necessary. That decision rejected the Maori sovereignty claim. It also held that NZCS was not a separate legal entity. Leave was reserved on two issues. Shearing Services considered that leave could have been granted in Case 7 to advance the submission that NZCS was a separate legal entity trading on behalf of Maori Inc.[57] As it was not necessarily clear that an appeal in respect of Case 9 was necessary to advance the argument it now wishes to pursue, I consider that it is appropriate to focus on the delay in respect of Case 7 only. As that delay was not long and is explained, if other factors had favoured the granting of special leave, this delay would not have counted against Shearing Services.Prejudice[58] The Commissioner does not claim any specific prejudice if the appeal were permitted. Shearing Services submits that there would be a miscarriage of justice if the appeal did not proceed because the wrong entity has been assessed and the real issue about this has never been ruled upon. Maori Inc supports this and emphasises that the nature of indigenous institutions and their rights and obligations is a matter of public importance.[59] Shearing Services draws an analogy with counsel incompetence in the criminal context. That is to say that because of inept representation before the Authority, a substantial assessment has been made against the wrong entity, this is manifestly unjust, and the matter should be reconsidered. However the analogy with counsel incompetence is not entirely apt. A defendant in a criminal proceeding will often have less control over the arguments to be advanced by counsel in a criminal proceeding on their behalf. In the present case there is no suggestion that Shearing Services was anything other than content for the Maori sovereignty argument to be advanced on its behalf (however misguided that might be).[60] More generally I accept that if the wrong entity has been assessed as having a substantial tax liability, this factor would point in favour of granting special leave. However there would need to be some real prospect that the appeal could succeed. In my view that is not the case here.Overall assessment[61] I consider that it is not in the interests of justice to grant special leave for Shearing Services to bring its appeal. The argument it now advances has evolved over time. It was not included in its statement of position. It was not clearlyarticulated until this application for special leave was made. Shearing Services says that this was because it was incompetently represented and that as a result the Maori sovereignty argument was erroneously pursued. However that was the choice that Shearing Services made. It had more than adequate opportunity to alter its course and to seek to advance its objections to the assessment on a legally valid basis. In any event the argument it now wishes to advance has low prospects for success. It is not supported by any direct legal authority and the evidence does not support it either (despite the extensive opportunity Shearing Services has had to produce that evidence).Result[62] The application for leave to appeal Case 9 and Case 7 is dismissed. My preliminary view is that the Commissioner is entitled to costs on a 2B basis. The parties should be able to agree on costs in light of this indication. If that proves not to be the case they have leave to file brief submissions (no more than five pages) confined to the issues in dispute by 30 January 2015.Mallon J