TANNADYCE INVESTMENTS LIMITED V COMMISSIONER OF INLAND REVENUE HC CHCH CIV 2008 409 759

TANNADYCE INVESTMENTS LIMITED V COMMISSIONER OF INLAND REVENUE HC CHCH CIV 2008 409 759 13 October 2008IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY CIV 2008 409 759BETWEEN TANNADYCE INVESTMENTS LIMITED Plaintiff AND COMMISSIONER OF INLAND REVENUE Defendant Hearing: 27 August 2008 Appearances: A J Forbes QC for Plaintiff K Clark QC and P Courtney for Defendant Judgment: 13 October 2008 at 2pmJUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN[1] The plaintiff (TIL) applies to set aside the defendant's (CIR) statutory demand claiming $356,686.79 (inclusive of penalties and interest) for income tax for the 2002-2004 income years. [2] Earlier, and by my minute dated 27 August 2008, I noted the statutory demand also claimed a sum for GST for the period ending 31 October 2002. As that minute noted, there is no issue with the CIR's demand for payment of that component of the statutory demand. [3] This case concerns TIL's claim that it has an arguable case to dispute liability to meet the claim of the CIR for income tax for the 2002-2004 income years. [4] When TIL filed its application to set aside the statutory demand, it did so upon the grounds:(i) there is a substantial dispute as to whether or not the debt is owing or is due; (ii) TIL intends to make an application for judicial review as to the CIR's procedure in issuing a tax assessment against it, including as to the lawfulness and fairness of that procedure, and whether the CIR has abused his statutory powers. [5] TIL's application was supported by an affidavit by Mr D I Henderson, TIL's director and sole shareholder. Mr Henderson's case is that any question of liability for the 2002-2004 income years has its foundation in TIL's dealings in the preceding income tax years of 1993-1998. Essentially Mr Henderson claims: (a) TIL was unable to provide tax returns for each of those years (1993-1998) because the CIR had taken possession of, but had lost, relevant company records to enable full returns to be completed. (b) In that outcome statements were made and/or agreements reached which the CIR resiled from. (c) A dispute has arisen as to the extent of trading losses that TIL claims were incurred over this period. TIL says they were significantly greater than allowed for by the CIR. Because of this, TIL does not accept the amount claimed in the CIR's recent statutory demand; indeed says there is nothing at all presently owed. [6] The factual background to these elements of the parties' dispute covers a period of about 15 years and is chronicled in a very large volume of correspondence which has been exhibited or referred to in various affidavits filed upon TIL's present application. The affidavits of each side can at times be characterised as a "tit-for-tat" exchange concerning Mr Henderson's claims. In those circumstances I have chosento annex to this judgment a chronology. Where appropriate the chronology identifies the affidavit deponent from which information is sourced. [7] I will provide an overview of that factual background so far as it focuses upon TIL's claims of an arguable case to set aside the statutory demand. I also need to deal with TIL's second mentioned ground of application, namely concerning its intention to file an application for judicial review. [8] On 1 August 2008 TIL filed a statement of claim upon its application for judicial review. It claims, inter alia: i) The CIR has not acted fairly in accordance with the agreement reached through the Chief Ombudsman in June 1999. ii) The CIR has acted unlawfully in the tax assessment process and procedure it has adopted since August 1999, but in particular because the CIR was required, pursuant to s89(C) of the Tax Administration Act (the Act), but failed: a. to issue a Notice of Proposed Adjustment (NOPA) if he did not accept the tax returns filed by TIL in August 1999 for the period 1993-1998; b. to issue a NOPA if he did not accept the tax returns filed by TIL in October 2005 for the period 2002- 2004; c. to act in good faith, and has abused his statutory powers of decision since August 1999, including in terms of: i. the Act s6(1) which requires the CIR at all times to use his best endeavours to protect the integrity of the tax system;ii. the Act s6(2)(a) which provides that the CIR's obligations under s6(1) includes the tax payer's perception of that integrity; iii. the Act s6(2)(b) which provides that the CIR's obligations under s6(1) includes the rights of tax payers to have their liability determined fairly, impartially, and according to law; iv. the Act s6(2)(f) which provides that the CIR's obligations under s6(1) includes the responsibilities to administer the law fairly, impartially and according to law.Factual overviewLost documents[9] TIL claims that in May 1995 records pertaining to its tax and financial affairs were delivered to the Inland Revenue Department's (IRD) Christchurch office. TIL claims that since at least 1998 the records have been unable to be located. It says they have been mislaid or lost by the IRD. As a result of this it says it could not complete full returns for the years 1993-1998. [10] The IRD claims it did not lose any records. It says further that even if records were lost, that did not relieve TIL from its obligation to provide tax returns, as it had various options offered to it:• TIL's income tax could have been, and was expected to have been, assessed on the best information available.• The asset accretion methodology could have been used. Indeed, TIL was asked to provide information to allow that to occur.• The CIR expressly advised that he would consider any other reasonable method suggested by TIL. [11] In Mr Lewer's (IRD) letter to Mr Henderson of 11 December 1998 he stated that the IRD had returned all original records and that all photocopies had been returned, except those provided in mid-May 1995 by a Ms Cook. In a reply dated 15 December 1998 Mr Henderson stated that the records provided by Ms Cook in mid- May 1995 were originals, not photocopies, and that the IRD had not acknowledged receipt of these records as it claimed. Mr Henderson stated that in February 1998 Mr Lee from the IRD wrongly said that there were no records delivered by TIL in May 1995; that Mr Lewer did not in his letter address the records delivered to IRD in March 1996; and that chequebooks and deposit books had not been returned as claimed by Mr Lewer.Dispute about the need to file returns for the 1993-1998 tax years[12] Mr Henderson claims that Mr Carr, of IRD, made an agreement with him in meetings in December 1997 and January 1998 that TIL did not have to file returns for the 1993-1998 years because TIL was no longer trading or employing staff, and that it did not have to file any further tax returns until it recommenced trading, or until a review of the affairs of the company had been completed. [13] The CIR's position on this claim is made clear by his letter to Mr Henderson which stated:You seem to be suggesting that there is in place an agreement whereby [TIL] is not obliged to file returns.And:The Crown Law Office wrote to you on behalf of Inland Revenue on 7 March 1998 and stated in unequivocal terms that the review was over. The obvious implication being that all outstanding returns would then have to be filed.[14] A letter from Mr Lewer to Mr Henderson dated 11 December 1998 also refutes that agreements were made between Mr Carr and Mr Henderson on the terms that Mr Henderson claims.Dispute about whether the parties acted in accordance with the agreement reached through the Ombudsman[15] In a letter from the Chief Ombudsman to Mr Henderson dated 29 June 1999, the Ombudsman sets out his understanding that the following was agreed between the IRD and Mr Henderson at their meeting on 23 June 1999:• Mr Henderson would file with the IRD within one month the annual income tax returns of TIL for the financial years 1993- 1998 inclusive.• Such returns would be supported by reasonably prepared sets of accounts on the basis of the information available to Mr Henderson.• The IRD would inform Mr Henderson within one month of the receipt of the income tax returns and supporting accounts of any areas of concern, or would issue assessments.• On the foregoing basis the IRD would not institute any prosecution proceedings against TIL for the late filing of returns.• The IRD undertook to advise Mr Henderson as to who would be legally entitled to sign income tax returns to ensure formalities are complied with.• Further investigation by the Ombudsman of Mr Henderson's complaints is unnecessary, but Mr Henderson was to approach the Ombudsman if he required any further assistance. [16] TIL claimed that the IRD did not adhere to the above agreement. On 18 August 1999 Mr Henderson filed tax returns for TIL on a global basis for the 1993- 1998 tax years, and provided a set of accounts. These, he said, were prepared on the basis of the information available to him.[17] TIL claims that the IRD did not advise of the rejection of the tax returns in a timely way pursuant to the agreement (ie within one month). Rather, on 13 September 1999 Mr Lewer acknowledged receipt of the returns and raised a number of queries. TIL claims there was no indication given thereby that the returns were not accepted, or were non-compliant. [18] On 15 May 2000 Mr Lewer advised Mr Henderson that the IRD would not act on the returns until the requested information was provided. Mr Henderson responded that he could not answer the queries because he did not hold the relevant company records, as the IRD had them. [19] In Mr Henderson's letter to Ms Stella (IRD) of 24 November 2003, he invites the IRD to issue default assessments. Mr Henderson's letter states his understanding that the IRD had to file an assessment based on the information in its possession (which he says it was refusing to provide him with), and if Mr Henderson was unhappy with that assessment, the parties could go to the taxation review authority or to the High Court. [20] On 25 May 2004 Ms Stella issued default assessments for income tax for the years 1993-1999 and a notice of loss determination based on an asset accretion method. [21] TIL claims that the IRD never said before then that the returns filed in August 1999 on a global basis were invalid or unacceptable because they did not meet the legislative requirements of annual returns for each year, and that accordingly, the letter of 25 May 2004 indicates a "change of stand" by the IRD, and that the IRD was resiling from the agreement reached through the Ombudsman. TIL also claims that the IRD did not advise Mr Henderson who would be legally entitled to sign TIL's tax returns and accounts as was required by the agreement reached through the Ombudsman. [22] The IRD rejects the claim that it did not act in accordance with the agreement reached through the Ombudsman, as areas of concern were notified to TIL within one month of the receipt of the "return" as required by the Ombudsman. Whenasked to provide the further information which IRD needed in order to assess its income tax liability, TIL neglected or refused to do so. The IRD claims that the global return filed by TIL did not comply with the Ombudsman's agreement as it required individual returns for each of the financial years.Tax and loss assessments[23] By Ms Stella's letter of 25 May 2004 there included a default assessment of TIL for income tax on assessed income of $6523 for the 1993-1999 tax years on an asset accretion basis, and assessed its trading losses as being $209,373. Mr Henderson believed that TIL's trading losses in fact exceeded $2 million, but he was unable to provide appropriate evidence due to the unavailability of company records.Principles[24] There is no dispute about these. Section 290(4) of the Companies Act 1993 provides that the Court may set aside a statutory demand if it is satisfied: (a) There is a substantial dispute whether or not the debt is owing or is due, or (b) (not applicable), or (c) The demand ought to be set aside on other grounds. [25] An applicant needs to show clear grounds for a claim of a dispute. More than a mere assertion is required. There must be some material, short of proof, to support the claim. Typically, Courts will require an applicant to show a clearly arguable case in support of a claim that the debt is not due.TIL's case[26] It is not for the Court to determine whether or not judicial review would be available, or even that it is likely to be, but only whether TIL has an arguable case because it cannot be said such a case has no prospect of success.[27] Mr Forbes submits that in accordance with the principles established by case law there are, in this instance, exceptional circumstances "beyond the ordinary run"; that there is a "tenable cause of action"; and there are "issues proper for determination". [28] The grounds for TIL's judicial review application include misrepresentation, acting unfairly in the process leading up to the May 2004 assessment, acting inconsistently with its legitimate expectation, not adhering to and resiling from agreements reached, significant delay, refusal to provide relevant information requested, or to inform it fully and accurately as to relevant matters, lack of good faith, and abuse of statutory powers. [29] Notwithstanding the existence of a statutory regime incorporated in the Act, by which a tax payer's challenge to an assessment are therein confined, in appropriate circumstances the Courts will permit recourse to judicial review to challenge the validity of an assessment – as opposed to the correctness of that assessment. [30] In support of this position Mr Forbes referred to the decision of Master Kennedy-Grant in Sunrise Auto Limited v CIR (1998) 18 NZTC 13.600. Mr Forbes commented that the learned Master identified, among others, the following grounds as making an assessment invalid: (a) Lack of good faith; (b) Procedural defects; (c) Failure by the CIR to quantify a taxpayer's liability on the information then in the CIR's possession; (d) Acting arbitrarily, or in disregard of the law or facts known to the CIR; (e) The making of an assessment out of time.[31] Mr Forbes refers also to CIR v Chester Trustee Services Limited [2003] 1 NZLR 395 (CA), where Tipping J noted that all cases involving s 290(4)(c) come down to the Court's judgment as to whether the creditor's prima facie entitlement to liquidate a company is outweighed by some factor making it plainly unjust for liquidation to ensue. [32] Mr Forbes' submission is that if a Court considers that the use of the liquidation procedure (including the statutory demand procedure) is an abuse of the process of the Court, then that procedure should be denied to a creditor. It is open to challenge the correctness of the CIR's assessments in the proceeding. It follows, submits Mr Forbes, that the Court's discretion under s 290(4)(c) can be exercised in the interests of the overall justice of the case, even though the company is, or may be, insolvent. [33] Mr Forbes submits there is an essential core of complaint that supports TIL's position, i.e., that Mr Henderson's assertions pass the threshold of credibility. [34] Mr Forbes does not support the position that the standard of proof required of an applicant who seeks to establish "other grounds" under s 290(4)(c) is higher than the standard of an arguable case required to establish the existence of a substantial dispute. [35] Concerning the ability of a Court to entertain a judicial review application challenging an assessment outside of the tax objection procedures, Mr Forbes concedes that recourse to such proceedings is generally available only in exceptional circumstances, typically where an abuse of process is alleged, eg: (a) Where there is a challenge to the legitimacy or validity of the process by which a purported assessment was arrived at, or a proposed assessment is to be made; (b) Where unfairness in the process leading up to an assessment may amount to an abuse of power rendering the CIR's decision subject to review.[36] Mr Forbes submits that to enable TIL to demonstrate an arguable case for obtaining judicial review, the CIR's statutory demand should either be set aside, or TIL's application should be adjourned pending the outcome of its judicial review proceeding. [37] Mr Forbes refers me to a number of authorities indicating support for the view that judicial review should not be excluded in appropriate circumstances, including: (a) From Eichelbaum J when he said he did not see it followed that in no circumstances can there be any judicial examination (as to) whether an official's proposed actions accord with the obligations imposed upon him by the statute (Lemmington Holdings v CIR[1984] 2 NZLR 215). (b) Although in the general run of cases affecting the making of assessments there will be no room for the operation of any concept of fairness, there may be recourse to the Court in the circumstances of an exceptional individual case ( Eichelbaum J –Lemmington Holdings (supra)). (c) Judicial review can be invoked "to address procedural error, defects arising in ultra vires, unlawfulness and such matters as bad faith, abuse of power and errors of law going to the legitimacy of the process rather than the correctness of the decision" (Gault J inCIR v Ti Toki Cabarets (1989) Limited [2001] 1 NZLR 147 (CA). (d) Review may be available to impugn the validity or legitimacy of the process adopted in making an assessment provided the review applicant's pleading discloses a tenable cause of action and raises issues proper for determination (Eichelbaum CJ in E R Squibb & Sons (NZ) Ltd v CIR (1991) 13 NZTC 8,096).(e) In appropriate cases a decision by the Commissioner to act inconsistently with a tax payer's legitimate expectation in the process leading up to an assessment could constitute unfairness amounting to an abuse of power, so as to justify intervention by way of judicial review . (Casey J in Brierley Investments Limited v CIR (1993) 15 NZTC 10,212 (CA)). (f) The legitimacy or validity of the process actually adopted by the Commissioner, and the true character of the resulting decision may be impugned in judicial review proceedings if supported by an evidential foundation (Richardson J in CIR v Canterbury Frozen Meat Company Limited [1994] 2 NZLR 681 (CA)). (g) The process followed and the character of the resulting decision as to an assessment may be challenged outside the objection procedure on traditional administrative law grounds, although it would only be an exceptional cases, typically an abuse of power, that the Court will entertain an application for judicial review of a decision which has not been challenged by way of objection of challenge process. (McKay J in Golden Bay Cement Co. Ltd v CIR [1996] 2 NZLR 665 (CA)). (h) It amounts to an abuse of process to commence judicial review proceedings unless the tax payer can point to exceptional circumstances justifying that course. (Glazebrook J in CIR v Abattis Properties Limited (2002) 20 NZTC 17,805 (CA)).Considerations[38] Parliament has enacted a detailed legislative scheme to deal with disputes to tax assessments. The law is clear and the principles are settled. If a tax payer wishes to dispute an assessment "the disputes procedure must be complied with and that involves the filing of a return and the issuing of a NOPA". (Allen v CIR [2006] 3 NZLR 11 (SC)). Only in rare or exceptional cases will process type decisions thatcan be addressed through the statutory challenge procedure be susceptible to judicial review. [39] Judicial review proceedings are an abuse of process if they deal with matters that can be dealt with under the statutory challenge procedure. The question is whether the statutory challenge procedure was competent to deal with the challenges TIL mounts by this application, and by its judicial review proceeding. [40] In reality, the two parts of TIL's application, are one. Claims of lost documents, or what documents were sent by Mr Henderson and what, if anything, was returned, of conversations about whether or not tax returns needed to be filed, of what was agreed with the Ombudsman, and the kind, have by the judicial review application been transposed into pleadings of misrepresentation, abuse of process, unfair treatment, unlawful acts, actions in bad faith, and abuse of statutory power. [41] The question is whether there is a credible basis for these claims to be made in the judicial review proceeding. It is easy enough to assert in pleadings the existence of claims by reference to the labels given in TIL's judicial review proceeding. [42] Where the facts are not plain, or where they might be in dispute, it may be appropriate to apply commonness and reasonable inference when assessing competing claims. An Associate Judge does not have jurisdiction to determine judicial review applications, or even to strike out such applications. That should not preclude me from making an assessment of the judicial review case to decide whether, on the application before me, TIL has an arguable case to resist the CIR statutory demand. [43] When on 25 May 2004 the IRD issued default assessments and notices of loss determination for the 1993-98 income years, its letter also set out the process that had to be followed if TIL wished to dispute and ultimately challenge the default assessments. The letter advised that a NOPA must be in the prescribed form, and a copy of the prescribed form was enclosed. The letter emphasised that the completion of a NOPA, and completion of income tax returns had to be filed before 26 July2004. It warned that failure to take both steps would mean that the assessments could not be disputed or challenged in the absence of exceptional circumstances. Those exceptional circumstances were referenced to the relevant provision of the Act. [44] TIL did not dispute the default assessments or notice of loss determination. Therefore, and by operation of s 109 of the Act the default assessments were deemed to be final assessments. Consequently, the default assessments, not having been disputed in accordance with the statutory dispute process, are incontestable. [45] Section 109 of the Act provides:109 Except in objection of proceedings under Part VIII or a challenge under Part VIIIA, - (a) No disputable decision may be disputed in a court or in any proceedings on any ground whatsoever; and (b) Every disputable decision and, where relevant, all of its particulars are deemed to be, and are to be taken as being, correct in all respects.[46] In Sweetline Distributors Limited v CIR (2004) 21 NZTC 18,608 (HC) the Court stated:Once an assessment has been made it can only be disputed in accordance with (the Act). The provisions of s 109 are clear in this regard and the applicants are statutorily precluded from the discretion and remedy they seek from the Court.[47] As adverted to by Mr Forbes, the extent to which the section precludes judicial review has been the subject of extensive consideration by the Courts over the years since the issue was first raised in a tax context by CIR v Lemmington Holdings Ltd (supra). [48] In the tax context the position is that issues as to process and validity of assessments should be dealt with in the statutory challenge proceedings, and separate judicial review proceedings will only be entertained in limited circumstances, including:• Before an assessment is made.• If there is no assessment.• In exceptional cases involving abuse of power. [49] In the latter respect, I accept the submission that the threshold is that as having been established by the High Court in Australia in Commissioner of Taxation v Futuris Corporation Limited [2008] HCA 32. In that case the High Court of Australia considered provisions materially similar to those applying in New Zealand. In Futuris examples of exceptional circumstances included: (a) Conscious maladministration of the assessment process so as not to produce an "assessment" (para.25). (b) Allegations that statutory powers have been exercised corruptly or with deliberate disregard to the scope of those powers (para. 60). [50] In Futuris the Court noted that it was not particularly surprising that applications directed at setting aside assessments on the basis of absence of good faith have generally been unsuccessful. [51] The approach of Futuris is consistent with a long line of New Zealand cases dealing with allegations of abuse of power. [52] In Golden Bay Cement Co. Ltd v CIR (supra) the Court noted that only in exceptional cases, typically abuse of power, would Courts entertain an application for judicial review of a decision that had not been appealed. [53] In Harley Development Inc. v CIR [1996] 1 WLR 727 (PC) the Privy Council noted that where a statute lays down a comprehensive system of appeals procedure against administrative decisions, it would only be in exceptional circumstances, typically an abuse of power, that the Court would entertain an application for judicial review.[54] In CIR v Ti Toki Cabarets (1989) Limited (supra) the Court of Appeal stated:Judicial review cannot frustrate the honest discharge by the Commissioner of his statutory duty to assess.[55] I accept Ms Clark's submission that the threshold, or test, for a establishing "exceptional circumstances" or "abuse of power" in the tax context is deliberate maladministration or absence of bona fides. Importantly, there can be little scope at all for judicial review proceedings filed after an assessment has taken place. [56] In Sunrise Auto Limited v CIR (supra) the Court concluded there was a substantial dispute about whether or not the debt was owing. The Court concluded that save for the debt the subject of the statutory demand, the company was arguably solvent. It considered it to be an abuse of process to seek to liquidate at company when its is arguable whether it was insolvent. In the end issues of solvency prevailed in the Court's consideration. [57] TIL submits the present case is an appropriate one for the exercise of discretion under s 290(4)(c) to set aside the statutory demand. [58] All cases involving s 290(4)(c) come down to a judgment by the Court as to whether the creditor's prima facie entitlement is outweighed by factors making it plainly unjust for liquidation to ensue. Any ground advanced must be sufficiently compelling to overcome the general policy of the Companies Act with regard to insolvent companies, which is that insolvency should bring an end to a company's existence. In this case the ground advanced challenges only the income tax assessment on the basis that the CIR's procedure in issuing the assessment was unlawful and unfair, and an abuse of statutory power. In CIR v Chester Trustee Services Limited [2003] 1 NZLR 395 the Court of Appeal stated s 290 was to perform a valuable purpose in allowing "a truly disputed debt" to be challenged by a convenient procedure. The Court noted that while subs(4)(c) provides the jurisdiction to the Court to set aside a statutory demand, as with any statutory discretion, it must be exercised in conformity with the objective of enactment:The use of the exceptional power must be confined to cases which clearly justify departure from the fundamental principle that insolvency should bring the end to other companies existence. (Para. 48).[59] Allegations of abuse of process, or abuse of power can easily be made. In this case analysis is needed in order to assess whether those pleadings can be sustained. The following paragraphs refer to TIL's statement of claim in support of its judicial review application. [60] Paragraph 32 pleads that the defendant and the IRD has, in relation to TIL, exercised, or refused to exercise statutory powers, or has purported to have done so. I accept Ms Clark's submission that such pleading is imprecise and ambiguous as to the actual power or decision under review. [61] Paragraph 34 (i) pleads that the CIR has not acted in accordance with the agreement reached with the Ombudsman. But, in filing a global return TIL did not comply with the Ombudsman's agreement. Further, when asked to provide further information which the Department needed in order to assess its income tax liability, TIL did not do so. Also, I accept the submission of Ms Clark that a complaint to the Commissioner that the CIR did not act in accordance with the agreement reached with the Ombudsman could, and should have, been raised by the statutory challenge procedure. The de novo nature of the challenge procedure will allow any alleged defects of the process to be cured prior to the impugned assessment. Nine years has now elapsed since the agreement with the Ombudsman, a fact to be weighed in assessing the bona fides of the present claim. [62] Paragraph 34(ii) pleads that Commissioner acted unlawfully by failing to issue a NOPA when he did not accept the returns filed by TIL. That, as Ms Clark submits, cannot, as a matter of law be correct. The failure to issue a NOPA before an assessment does not invalidate an otherwise valid assessment. Moreover, that complaint is one that could and should have been made in the statutory challenge proceedings. [63] Paragraph 34 (iii) alleges the CIR abused his statutory powers of decision in terms of s 6 of the Act. But, TIL does not say what decision, or lack of decision, or purported decision amounted to an abuse of power generally, or breached s 6 in the respects referred to. I accept Ms Clark's submission that the pleading fails to identify the conduct that is amenable to review. Further, as Ms Clark notes, s 6 isnot justiciable. As in Russell v TRA and CIR (2003) 21 NZPC 18,255 (CA) Gault P stated:With reference to s 6, we do not accept that the obligation upon the Commissioner to use his best endeavours to protect the integrity of the tax system renders any conduct (not involving a decision) which might be said to be inconsistent with that obligation amenable to judicial review.[64] In paragraph 35 TIL pleads that it had a legitimate expectation that the agreement reached in June 1999 with the Ombudsman would be adhered to, and that any rejection of the returns filed by TIL would be advised in a timely way in accordance with the agreement. But, to me it seems the Commissioner did adhere to the agreement. By that agreement the CIR accepted that areas of concern would be notified to TIL within one month of the receipt of the "return". TIL complains the IRD was tardy in objecting to the global nature of the return. Admittedly, the IRD initially decided to consider the information contained within the return, rather than insist TIL file separate returns for each year. The chronology demonstrates that remained the IRD's focus for a number of years until the default assessments finally issued. I accept Ms Clark's submission that in deciding that the global "return" and supporting documentation filed by TIL did not provide sufficient information to allow the CIR to make an assessment in respect of each income year, and in giving TIL an opportunity to provide further information, the CIR complied with the Ombudsman's agreement to act in accordance with his statutory duties. [65] Paragraph 36 pleads that the procedures and process adopted by the CIR fall to be assessed against the delay which has occurred since August 1999, and were not in accordance with the agreement reached in June 1999, or in accordance with TIL's legal obligations. I accept the submission that it is difficult to discern the point of the pleading, much less to identify the reviewable error. In any event, it seems to concern a matter which could, and should, have been raised in the statutory disputes process. [66] Paragraph 37 pleads that the procedures and process adopted by the CIR since August 1999 also fall to be assessed against the plaintiff's right to natural justice, including under s 27 New Zealand Bill of Rights Act, and in particular as to giving TIL timely advice and reasons if its returns were to be rejected. Again, Iaccept the submission of Ms Clark that the evidence amply demonstrates that not only did the IRD provide timely advice of the deficiencies in the returns, but the advice was detailed, helpful and especially accommodating. In any event, if TIL had invoked the statutory process then the deficiencies complained of would have been avoided. [67] Paragraph 38 pleads that the matters complained of cannot fairly, or properly, be determined under the statutory disputes or challenge procedures. But, confronted by a high threshold test of exceptional circumstances, it seems clear than TIL falls far short in its complaint that the CIR's decision to issue default assessments in respect of income tax debt might be an abuse of power, and thus justiciable. [68] TIL asserts undue and unreasonable delays by the CIR in making the default assessments. I accept the submission that that criticism is better directed at the actions of TIL. It is 9 years since the agreement reached with the Ombudsman. It is 4 years since the default assessments issued. As Ms Clark submits, the Court is unlikely to exercise its discretion to grant relief, given these delays, and in the face of liquidation. TIL has threatened the present proceedings for more than 5 years, but no action was taken. TIL has had the ability to bring these proceedings much earlier. A judicial review application was only filed on 1 August 2008, and then only in response to a direction of mine. [69] In the beginning the parties' dispute concerned Mr Henderson's claim that the IRD had lost records he provided to them. At the core of the judicial review application are allegations about the unreasonableness of the CIR in requiring tax returns to be filed, when TIL did not have access to those records it says were lost. In the judicial review application TIL has elevated these concerns by pleading abuse of process and abuse of statutory power. [70] By his second affidavit Mr Henderson raises the bar somewhat for, by inference, he claims the IRD may all along have retained financial information which hitherto it says it never had. Mr Henderson seized upon Mr Cassidy's reference to 200 eastlite folders as support for this proposition that the IRD has financial information about TIL which it has concealed from Mr Henderson. Whyelse does the IRD now agree to disclose that information unless it had previously deliberately withheld it from TIL. [71] In my view, this assessment of matters is without merit. It ignores the explanation given by Mr Cassidy and Ms Ryan regarding the existence of those eastlite folders, namely that much of the material contained upon them is duplicate material, and relates not only to TIL but to Mr Henderson personally, and to other companies with which he is associated. [72] The submission of deliberate withholding of financial information is nonsensical, given the 10 – 15 year relationship between the IRD, Mr Henderson, TIL, and the other companies with which Mr Henderson is associated. [73] No reasonable inference of sinister intent can be extrapolated from Mr Cassidy's letter to Mr Henderson. Any ambiguity given by the letter has been adequately explained. [74] I earlier noted that TIL's application for review reflected predictable formulations of challenge. In my view, an analysis of the allegations against the CIR reveals that, in substance, TIL's claims fail to meet the threshold demanded before a judicial review application would be entertained. [75] The judicial review proceeding, even if it provided the requisite compelling grounds, is only relevant to the income tax default assessments. I do not accept that individually, or collectively, TIL's case can constitute exceptional circumstances. It is the author of its own misfortune. Ms Clark's submission is apposite, i.e., that by TIL's own default, neglect and delay in pursuing remedies available to it in appropriate forums, and in a timely manner, it has sought to absolve itself from filing tax returns, challenging assessments, and paying tax assessed. [76] For more than 10 years TIL has been raising issues concerning its ongoing income tax liabilities. These issues remain unresolved despite the fact that a statutory process exists for promoting a prompt and efficient resolution of such.[77] TIL has consistently resisted following the statutory challenge procedure. Rather, it has elected to engage the CIR in a concerted campaign to challenge the legitimacy of its assessments and processes.Summary[78] TIL does not have an arguable case, much less a good arguable case, to set aside the CIR's statutory demand.Judgment[79] TIL's application to set aside the CIR's statutory demand is dismissed. The time for compliance with that statutory demand, so far as it concerns the CIR's claim for income tax arrears, is extended to 4pm 31 October 2008. [80] TIL shall pay the Commissioner's costs calculated on a Category 2B basis, together with disbursements approved by the Registrar. Those disbursements shall include reimbursement of senior counsel's travel costs.______________________________________________________________________________SolicitorsCousins & Associates, Christchurch for Plaintiff (Counsel – AJ Forbes QC., Christchurch) Crown Law, Wellington for DefendantCHRONOLOGY 13 August 1998The CIR wrote to Mr Henderson. A schedule of all returns that remained outstanding from TIL was attached and Mr Henderson was asked to attend to the filing of these immediately. The letter stated: "You seem to be suggesting that there is in place an agreement whereby Tannadyce is not obliged to file returns."And:"The Crown Law Office wrote to you on behalf of Inland Revenue on 7 March 1998 and stated in unequivocal terms that the review was over. The obvious implication being that all outstanding returns would then have to be filed." And:"You are aware that the Department's position in relation to the question of missing records is that all documents supplied by Tannadyce have been returned. In any event your allegations in this regard seem only to impact upon a minority of the outstanding returns." See NL1 Mr Lewer affidavit.17 August 1998TIL replied to IRD advising that an estimate of the income and expenditure for the outstanding years could be provided. See para 3, CS2 Stella affidavit.11 December 1998Mr Lewer wrote to Mr Henderson regarding TIL's outstanding returns. The letter:• addresses Mr Henderson's allegation that records had been lost by IRD. Mr Lewer said IRD had returned all original records to Mr Henderson, and that all photocopies had been returned except the photocopies provided in mid- May 1995 by Miss Cook and the copy of the Heads of Agreement.• refutes that an agreement had been made between Mr Carr and Mr Henderson on the terms claimed by Mr Henderson i.e. that TIL need not file tax returns.• at para 45 - 46 states that Mr Lewer does not wish to leave the issue of income tax returns merely on the basis of competing contentions as to what occurred with the records and accordingly will accept income tax returns for the years ended 31 March 1993 to 31 March 1998 prepared from what records Mr Henderson does have. The asset accretion method is suggested which measures changes in assets and liabilities over a period to estimate income or loss.• encloses a questionnaire for Mr Henderson to complete in order for IRD to determine whether certain returns were required to be filed. See NL2 Mr Lewer affidavit.15 December 1998Mr Henderson responded to Lewer's letter of 11 Dec 1998. The letter asserts that:• TIL did not have to file returns due to the agreement made with Mr Carr.• The records provided by Miss Cook in mid-may 1995 were originals not photocopies and IRD had not acknowledged receipt of these records as it claimed. In February 1998 a Mr Lee from IRD wrongly said that there were no records delivered by TIL in May 1995.• Mr Lewer did not address the records delivered to IRD in March 1996.• Cheque books and deposit books have not been returned as claimed by Mr Lewer.• Regarding para 46 of Mr Lewer's letter, Mr Henderson said that Peter Sivertsen (Regional Manager Taxpayer Audit, IRD) said on 26 January 1995 that on the basis of the GST returns filed by TIL up to 31 Jan 1994 it had cumulative trading losses of approximately $2m. On that basis Mr Henderson proposed that he and IRD should agree on a figure of $2.8m as the cumulative losses of TIL from incorporation to 31 March 1998.• The issue of costs associated with dealing with IRD audits needs to be revisited, in particular the ability of TIL to claim back GST on expenses incurred.• Several outstanding issues have not been responded to by IRD. The letter did not enclose any income tax returns nor indicate when returns were going to be filed, however, it did return the completed questionnaire. See A1 Mr Henderson affidavit.14 January 1999Mr Lewer wrote to Mr Henderson in response to Mr Henderson's letters of 15 Dec 1998 (above) and 22 Dec 1998.• Regarding GST returns, Mr Lewer accepts Mr Henderson's answers in the questionnaire that TIL ceased carrying on a taxable activity in early 1996 and accepts that Mr Henderson reached agreement with Mr Carr in relation to GST liabilities from March 1995 to September 1997. TIL is accordingly deregistered and Mr Lewer requests Mr Henderson to advise of the cost or value of assets retained in order to account for output tax.• Regarding PAYE/FBT returns Mr Lewer accepts TIL ceased employing in July 1995 except for a three week period in March 1996. Mr Lewer requests Mr Henderson to advise of the gross payments and PAYE deductions made.• Regarding income tax returns, Mr Lewer says that Mr Henderson did not provide a reasonable basis for claiming the $2.8m loss. Mr Lewer requests Mr Henderson to advise of TIL's assets and liabilities at 31 March 1998 in order for an asset accretion method to be used - "This should be a relatively simple exercise and will overcome any issue of missing records."See NL3 Mr Lewer affidavit.15 January 1999Letter from Mr Henderson to Mr Lewer. Verification of $2.8m loss not provided. See reference para [13] Mr Lewer affidavit.20 January 1999Letter from Mr Henderson to Mr Woodnorth. Verification of $2.8m loss not provided. See reference para 13 Mr Lewer affidavit.3 February 1999Letter from Mr Henderson to Mr Lewer. Verification of $2.8m loss not provided. See reference para 13 Mr Lewer affidavit.5 February 1999Letter from Mr Henderson to CIR. Verification of $2.8m loss not provided. See reference para 13 Mr Lewer affidavit.16 February 1999Letter from Mr Lewer to Mr Henderson in response to Mr Henderson's letters dated 15 & 20 Jan 1999 and 3 & 5 Feb 1999.• Regarding GST returns, notes Mr Henderson has not provided the cost or value of assets retained in order to account for output tax as requested on 14 Jan 1999. Accordingly a default assessment will be raised based on information IRD holds resulting in $8888 tax to pay. The matter can be reviewed if the requested information is supplied.• Regarding PAYE returns, notes Mr Henderson claimed in a letter of 15 Jan 1999 that any PAYE owed by TIL was part of an agreement entered into between IRD and TIL. However, Mr Lewer states there is no basis for that proposition. In the absence of the information requested on 14 Jan 1999 a default assessment will be raised based on information IRD holds resulting in $668 PAYE to pay.• Regarding income tax returns, in the absence of the information requested on 14 Jan 1999 a default assessment will be raised on NIL income. The matter can be reviewed if the requested information is supplied.• IRD will not abandon or breach the agreements reached between Mr Henderson and Carr. However, it will not allow Mr Henderson to include matters within the agreements which were not subject to the agreements. See NL4 Mr Lewer affidavit.5 March 1999Letter from Mr Lewer to Mr Henderson in response to undated letter received 17 February 1999, and letter dated 2 March 1999. Also in response to letters from Mr Henderson addressed to Mr Carr dated 17 February 1999, and addressed to the CIR dated 18 February 1999.• Mr Henderson purported to object to the default GST assessment of $8888 indicated in Mr Lewer's letter of 16 February 1999. The provisions providing for the correct way to object to assessments are set out. In order to dispute the assessment a return will need to be filed. The notice of assessment is enclosed.• Mr Henderson purported to object to the default PAYE assessment of $668. In order to dispute the assessment a return will need to be filed. The notice of assessment is enclosed• The assets accretion method has been proposed because of the claims that records are lost. This methodology has been used in other cases (Glausiuss v CIR). NIL default amounts have been issued because no returns have been filed. The notices of assessment are enclosed.• The above steps are not in conflict with the agreement reached between Mr Carr and Mr Henderson on 23 December 1997 but rather carry the agreement into effect according to its terms. See NL5 Mr Lewer's affidavit.1 April 1999Letter from Mr Lewer to Mr Henderson in response to Mr Henderson's letters dated 2 and 5 March 1999.• Puported NOPAs: In Mr Henderson's letter of 2 March 1999 he refers to a letter and notice of proposed adjustment he sent to IRD on 17 Feb 1999. MrLewer states IRD only received a letter and not a notice of proposed adjustment and reiterates that a taxpayer may only dispute an assessment by furnishing a return.• GST: In Mr Henderson's letter of 5 March 1999 he continued to assert that Mr Carr made an agreement with him on 23 Dec 1998 that TIL did not have to file GST returns until it commenced doing business again. Mr Lewer reiterates what he said in his letter of 11 Dec 1998 that there was no agreement between Mr Henderson and Mr Carr that the GST, FBT and PAYE returns could be left outstanding until TIL recommenced trading and employing staff nor was there an agreement that TIL would not have to file GST returns until it commenced doing business again. Mr Lewer reiterates that on the basis of Mr Henderson's answers to the questionnaire outstanding GST returns were not required for certain periods however a final GST return was required.• De-registration: Mr Lewer states it is unclear from Mr Henderson's letter of 5 March 1999 whether TIL wishes to dispute the decision to de-register it. If TIL does wish to dispute the de-registration it has to forward a NOPA and an explanation as to its lateness.• PAYE: Notes TIL appears to have conditionally accepted the PAYE owed.• Income Tax: In Mr Henderson's letter of 5 March 1999 he resists filing income tax returns even on an asset accretion basis because of the claim that unspecified records were lost or destroyed by IRD. Mr Lewer reiterates his conclusions made in his letter of 11 December 1998 that IRD has returned all original records and all photocopies except those provided in mid-May 1995 and copies of five agreements and one Heads of Agreement. Mr Lewer reiterates that that the asset accretion method could be used to prepare returns but that he will accept returns prepared on any other reasonable basis.• Official Information Act requests: In Mr Henderson's letter of 17 Feb 1999 he requests pursuant to the Official Information Act all the working papers IRD has in regard to earlier assessments. Mr Lewer states that the request does not provide sufficient particulars of the information sought and asks Mr Henderson to set out the dates of the assessments about which he wants information. See A3 Mr Henderson affidavit.5 April 1999Letter from Mr Henderson to Mr Lewer. The letter stated: "I have attached to this letter our own income tax return for the period relating to the missing records."However, no returns were attached. See para 5 CS2 Stella affidavit.28 April 1999Letter from Mr Lewer to Mr Henderson in response to letter from Mr Henderson dated 5 April 1999.• Mr Lewer reiterates that he asked TIL to file those returns that were needed but TIL has refused to do so, therefore default assessments were made.• Mr Lewer reiterates that in the absence of filing those returns TIL cannot dispute the default assessments, therefore the ball is in TIL's court. There is nothing further Mr Lewer can do to advance compliance aspects in the absence of TIL filing the relevant returns.• Mr Lewer reiterates that in earlier letters he has already dealt with the issue of Mr Henderson's assertion that he had an agreement with Mr Carr covering PAYE and GST.• Mr Lewer requests that Mr Henderson forward the income tax return and NOPE that were not attached to earlier correspondence.• Mr Lewer asserts that in Mr Henderson's letter of 5 April 1999 he took Mr Lewer's comments about Mr Sievertsen's January 1995 assessment out of context.• Mr Lewer points out the typo "asset accreditation basis" made in an earlier fax was corrected to "accretion" in the hard copy sent to Mr Henderson therefore a new process had not been introduced as asserted by Mr Henderson.• Mr Lewer reiterates that his letter of 1 April 1999 explains what is required for TIL to advance the de-registration issue.• In Mr Henderson's letter of 5 April 1999 he states that the company will be going back into business effective 1 April. Mr Lewer encloses a form to be filled out in this regard.• Mr Lewer again requests Mr Henderson to particularise the assessments of which Mr Henderson wants working papers. See NL6 Mr Lewer affidavit.28 April 1999Letter from Mr Henderson to IRD . Mr Henderson stated: "TIL is not in a position to readily file income tax returns", but then later in the letter: "I will send you copies of the notice of proposed adjustment and income tax return you claim you have never received, in the weekend." No such documents were received. See para 5 CS2 Stella affidavit.12 May 1999Letter from Mr Henderson to IRD. Mr Henderson claims his letter of 15 December 1998 constituted an income tax return from the company, a proposition rejected by IRD. See para 5 CS2 Stella affidavit.16 May 1999Mr Henderson wrote to Mr Lewer suggesting that the IRD and Mr Henderson meet with a third party such as the Ombudsman. See reference para 22 Mr Lewer affidavit.23 June 1999A meeting was held between Sir Brian Elwood (Chief Ombudsman at the time), Mr Henderson, Mr Woodnorth from IRD and Mr Coleman from the Crown Law Office. A summary of relevant factual matters as at 23 June 1999 appears at A4 of the Mr Henderson affidavit. Mr Henderson states the summary was prepared by IRD, however the summary states it is "as recorded by Sir Brian Elwood from his reading of the TIL files held by the office of the Ombudsmen." The summary states:• IRD says that TIL must file Income tax returns for the financial years 1993 – 1998.• TIL says IRD has lost some documents, sent to IRD by TIL, and necessary for it to prepare such returns.• IRD denies that it has lost any of TIL's documents and claims that it has forwarded to TIL all of TIL's documents which it held.• IRD has offered TIL the opportunity to prepare tax returns on an asset accretion basis as at 31/3/1998 (subject to checking and verification as may be necessary). TIL does not accept this opportunity as it considers to do so "would seriously prejudice Tannadyce ". IRD on 1 April 1999 has also offered to "accept returns prepared on any other reasonable basis."29 June 1999Letter from Sir Brian Elwood to Mr Henderson. Sir Brian Elwood refers to meeting on 23 June 1999 and sets out his understanding that the following was agreed between IRD and Mr Henderson:• Mr Henderson would file with IRD within one month the annual income tax returns of TIL for the financial years 1993 – 98 inclusive.• Such returns would be supported by reasonably prepared sets of accounts on the basis of the information available to Mr Henderson.• IRD would inform Mr Henderson within one month of the receipt of the income tax returns and supporting accounts of any areas of concern or issue assessments.• On the foregoing basis IRD would not institute any prosecution proceedings against TIL for the late filing of returns.• The IRD undertook to advise Mr Henderson as to who would be legally entitled to sign the income tax returns to ensure formalities are complied with.• Further investigation by the Ombudsman of Mr Henderson's complaints is unnecessary but Mr Henderson can approach the Ombudsman if he requires further assistance.18 August 1999Mr Henderson prepared and filed tax returns for TIL on a global basis for the 1993- 1998 tax years and provided a set of accounts. Mr Henderson states at para 9 of his affidavit that these were prepared on the basis of the information available to him. Mr Lewer states at para 27 of his affidavit that taxpayers cannot file 'global' returns, however, in the spirit of the agreement he decided not to insist that TIL file separate returns for each year and instead focused on what information was provided in the return. See NL7 Mr Lewer affidavit.13 September 1999Mr Lewer wrote to Mr Henderson. He acknowledged receipt of the tax returns for 1993-1998. Mr Lewer stated that the returns raised a number of queries regarding management fees, rents, other income, bad debts, depreciation, salaries and a suspense account and Mr Lewer requested full answers from Mr Henderson to these queries. See A6 Mr Henderson affidavit.15 May 2000Mr Lewer wrote to Mr Henderson referring to an earlier letter he wrote to Mr Henderson dated 9 February 2000.• Mr Lewer states that Mr Henderson has refused to answer the questions contained in Mr Lewer's letter of 13 September 1999.• Mr Lewer accordingly advises that IRD will not be acting on the returns provided for TIL covering the 1993-1998 periods until the information requested has been provided and TIL will not be able to receive the benefit of any loss claimed in the returns until that time.• Mr Lewer advises TIL to provide full answers to the questions in the letter of 13 September 1999. Any subsequent income return filed for TIL seeking to claim the benefit of losses claimed in the returns of 1993-1998 will have to be filed with all of the information sought. Once the required information is provided IRD will be able to act on the 1993-1998 returns and credit TIL with any losses established. See A7 Mr Henderson affidavit.21 December 2000Letter CIR to Mr Henderson: "The allegation that records have been lost has repeatedly been rejected in great detail, see for example the 10 December 1998 letter setting out the log of records receipts. In the past you have been asked to provide details in support of the allegation but have not done so." See para 6 CS9 Stella affidavit.4 September 2002Letter from CIR to Mr Henderson stating: "I am willing to arrange a meeting with senior officers to resolve those outstanding inquiries [ie as set out in the letter of 13 September 1999]. If there are other issues unresolved concerning TIL you will need to provide details of these prior to the meeting. This would allow the opportunity to discuss and possibly resolve all outstanding issues related to TIL." See para 10 CS2 Stella affidavit.13 December 2002A meeting was conducted in Christchurch between Mr Henderson and Mr Wayne Bailey (accountant) on behalf of TIL and IRD's acting National Manager Technical Standards (Mr Colin Hutchins) and Manager Technical Development Unit (Mr Neil Campbell). At para 11 CS2 Stella affidavit, Ms Stella states: "Unfortunately, despite the department having gone to considerable lengths to make it clear that a principal purpose of the meeting was to deal with the queries contained in the letter of 13 September 1999, no substantive answers to those questions were provided at the meeting. Nor was the position made any clearer as to why TIL had consistently insisted that a meeting between the parties was the only way the department's inquiries could effectively be progressed."13 March 2003Letter from Martin Scott (Group Manager, Field Delivery, IRD) to Mr Henderson. Refers to Mr Henderson's letter of 5 February 2003. Refers to Scott's letter of 26 February 2003. Refers to letter from Mr Henderson to the CIR dated 11 March 2003. Refers to the meeting of 13 December 2002.• Canvasses issues around TIL's de-registration/re-registration.• Canvasses issues around deductibility of expenses and related information request.• Canvasses the way to progress the GST expense claims matter.• Regarding the IRD's queries of 13 September 1999 and the claimed loss of records, Scott explains that IRD has never received substantive responses to the queries. Scott explains that Mr Henderson indicated he could not provide responses without having a meeting with IRD. IRD agreed to have a meeting with Mr Henderson on 13 December 2002. Mr Henderson said he was unable to answer the queries of 13 September 1999 because he did not hold the company records and claimed that IRD held those records. Scott reiterates the IRD's position in relation to the claimed lost records. Scott states "In any event, the returns to which the department's inquiries relate were prepared after the claimed loss of records is said to have occurred. Those returns were presumably prepared on the basis of some records held, or assumptions made regarding the course of TIL's business over the relevant periods. The department's interest is in those records or assumptions." "Due to your continued failure to provide any substantial response to the department's reasonable inquiries in this regard, we are now in precisely the same situation as was advised to you in 15 May 2000. Your failure to provide the information requested leaves the department in a position where it will consider the returns on the basis of the information contained in them and any other information available to Inland Revenue."• Canvasses issues regarding IRD's communications policy.• Canvasses issues regarding Mr Henderson's allegations against IRD staff in a letter of 11 March 2003.• Declines Mr Henderson's request for a further meeting due to the way he conducted himself at the last meeting.• Notes that Mr Henderson stated in his letter of 5 February 2003 that he has instructed his Barristers to take matters further in some proper judicial forum. The IRD awaits service of any such proceedings. See A8 Mr Henderson affidavit.26 May 2003Letter from Mr Scott to Mr Henderson. It states: "that all historical (2002 and earlier) matters relating to Tannadyce Investments Limited are to be put in writing. You have signalled your intention to enter into litigation with the Department in respect of those historical issues, and in any event their nature and complexity are such that I consider that communications in respect of them should be in writing."See para 23 CS2 Stella affidavit.20 August 2003Mr Henderson wrote to Mr Scott seeking copies of information from the Department that they held and said "Please let me know how you would like to proceed on this matter." (See para 11 A10 Mr Henderson affidavit).18 September 2003Letter from Ms Stella to Mr Henderson. See para 12 A10 Mr Henderson affidavit where Mr Henderson states "On 18 September 2003 you wrote to me and suggested that the position was unchanged from that which I have quoted above from Mr Scott's letter to me of 13 March 2003. Indeed you quote that very same paragraph from Mr Scott's letter of 13 March 2003. You also ask for more detail in regard to the missing records."19 September 2003Letter from Mr Henderson to Ms Stella. See para 12 A10 Henderson affidavit where Mr Henderson states "On 19 September 2003 I wrote to you and asked that you provide me with copies of all the records held by the Department in regard to TIL. It is my very firm belief that by receiving these documents I would at least have some basis on which to perhaps address the issues raised by Mr Lewer on 13 September 1999."15 October 2003Letter from Ms Stella to Mr Henderson. See para 13 A10 Mr Henderson affidavit where Mr Henderson states "On 15 October 2003 you wrote to me and, in quite an amazing twist of events, you refused to provide me with the information relating to TIL's records that you hold based on the Secrecy Provisions of the Tax Administration Act."12 November 2003See para 14 A10 Mr Henderson affidavit where Mr Henderson states: "On 12 November 2003, I had quite a long discussion with you wherein I specifically asked you once more what the process should be now, and asking you to take some further steps to conclude this matter."24 November 2003Letter from Ms Stella to Mr Henderson which has attached to it a copy of the settlement deed between TIL and BNZ. See para 15 A10 Mr Henderson affidavit.24 November 2003Letter from Mr Henderson to Ms Stella. Refers to Ms Stella's letter dated 24 November 2003 and a deed signed on 1 December 1994 between TIL, BNZ, Station Village Partnership and Mr Henderson.• Criticises the way IRD conducted itself at the December 2002 meeting, in particular, that officers did not bring any documentation.• Criticises the IRD for not providing information that it undertook at the December 2002 meeting to provide.• Regarding returns, Mr Henderson states: "Returns for Tannadyce were completed under an arrangement set up by the Ombudsman. The Ombudsman recognised that there were an immense amount of difficulties relating to Tannadyce filing its returns because of the fact that the department had lost records. Accordingly, the returns were filed. The department has responded with a number of questions which are clearly based on records that the department holds. In fact, you yourself would have to now acknowledge, having sent me a copy of the agreement you have sent, that the department do indeed hold a significant number of records for Tannadyce. The returns were filed as best we could file them based on the limited amount of information that we had in our possession and my best memory of the events that took place. The person who prepared the accounts is no longer available to me. Rightly or wrongly, it is my view that the department should have moved immediately, upon the filing of the accounts, to have a meeting with me to resolve all the outstanding issues. They could have been simply resolved at that point in time."• Mr Henderson states he has involved Rodney Hide in these matters in order to make progress.• Refers to an agreement Ms Stella and Mr Henderson made via telephone on 12 November [2003?] that the parties should proceed to the TRA or the High Court.• States that as Mr Henderson understands matters, the IRD has to file an assessment based on the information in its possession (which it is refusing to provide Mr Henderson with) and if Mr Henderson is unhappy with the assessment, the parties can go to the TRA or the HC. See CS1 Stella affidavit.25 May 2004Letter from Ms Stella to Mr Henderson. Refers to Mr Henderson's letter of 24 November 2003 to Ms Stella.• In response to Mr Henderson's statement in his letter of 24 November 2003 that IRD has to file an assessment, Ms Stella encloses default assessments and Notices of Loss Determinations for 1993-1999.• A background summary of the extensive history between the parties is set out.• The basis for the assessments is provided:o The purported income tax return of 18 August 1999 does not meet the legislative requirements of an annual income tax return for each year 1993-1998 and does not enable IRD to assess TIL's tax liability on an annual basis for that period. TIL has provided no substantive responses to IRDs queries arising from that information as set out in the 13 September 1999 letter.o A further defect is that TIL provided only one 'return' purporting to cover al six years, however, s 33 Tax Administration Act 1994 requires annual income tax returns to be filed.o For the above reasons the CIR does not consider TIL has met its statutory obligation to file annual income tax returns for 1993-1998. Accordingly, default assessments have been made for the income years of 1993-1999.o Given the limited information available the asset accretion method has been chosen as the basis for the calculation of the default assessments and the loss determination notices to be issued.o The 1999 year has been included because TIL was required to furnish a return for that year as well.o The calculation takes the net assets of TIL at 1/4/93 and compares the net assets at 31/3/99. Any increase is income to the company.o The overall result of the asset accretion method is a loss determination notice to be issued for the 1999 year of $209,373. The process for disputing assessments is set out. Should Mr Henderson wish to dispute the assessments, he must, within the following two months, file separate annual income tax returns for each year 1993-1999 and issue a NOPA in the prescribed form and containing sufficient detail. Should Mr Henderson fail to take both steps by 26 July 2004, in absence of exceptional circumstances, he will be unable to dispute the assessments. Upon receipt of a NOPA the CIR will consider its content and will have two months to issue a Notice of Response if itis disagreed with. Reminds Mr Henderson of the communication policy outlined in Scott's letter of 26 May 2003. Income tax forms, a NOPA form and an explanatory booklet on the disputes resolution process enclosed. See CS2 Stella affidavit.31 May 2004Letter from Mr Henderson to Ms Stella stating: "Please find enclosed the blank returns and other documents that you have forwarded to me along with your letter dated 25 May 2004. Given the agreements made and completed with the Ombudsman in June 1999, these documents are redundant."See CS3 Stella affidavit.31 May 2004Letter from Mr Henderson to Ms Stella. Refers to Ms Stella's letter to Mr Henderson dated 25 May 2004.• States the issue of lost records is very real. Notes as far back as 1996 TIL sought legal advice on the matter and has never received a reply or response of any nature from IRD in relation to correspondence and concerns.• The IRD issued default assessments notwithstanding the fact that it holds many records relating to TIL. The IRD did not use all the information in its possession and acknowledged it had plucked figures out of the air.• As a consequence of improper treatment and IRD's refusal to cooperate regarding the issue of missing records, Mr Henderson sought help from the Ombudsman.• Mr Henderson went to considerable effort to prepare a set of accounts and prepare and file all returns exactly on the basis as agreed with IRD and the Ombudsman in June 1999, i.e. on the basis of information available to him.• The queries in the letter from Mr Lewer of 13 September 1999 identify that the IRD holds relevant information in regard to TIL's tax affairs during the relevant period which is information Mr Henderson had been seeking and the IRD had claimed does not exist.• Allegations are made against Mr Lewer that he called Mr Henderson a liar, that he has broken the law, and taken months to answer letters.• Mr Henderson concluded the best way forward was to meet with Mr Lewer and for Mr Lewer to bring the records of TIL and with the help of professional assistants work through the issues, however, Mr Lewer refused.• Mr Butler eventually agreed to a meeting, however, because of Mr Scott, it took three months and 30 pieces of correspondence for a date to be set up.• At the meeting (13 December 2002), despite Mr Butler's clear assurances that the purpose of the meeting was "to resolve outstanding inquiries [from Mr Lewer's letter of 13 September 1999]" (see letter of 4 September 2002), Mr Hitchens and Mr Campbell advised Mr Henderson at the meeting that the sole purpose was "to receive the feedback that you have been asked to provide in respect of queries which the Department has made of you and we will then take that information away with us and consider that information and, in due course, come back to you" Mr Henderson claims that Mr Lewer had not briefed Mr Hitchens or Mr Campbell in advance of the meeting on the background of Mr Lewer's queries of 13 September 1999 as neither of them could answer simple questions. Neither of them had brought documentation that the IRD has in its possession regarding TIL's affairs,however, they asked Mr Henderson questions about such documents, which he of course could not answer.• Mr Henderson claims to this date no one from IRD has come back to him in respect of the answer he provided to the specific queries raised. He also made Official Information Act requests of Mr Hitchens and Mr Campbell at the meeting and it took several months for some of that information to be provided and not all of it has been provided yet.• Refers to the letter of Scott dated 13 March 2003 stating "Your failure to provide the information requested leaves the Department in a position where it will consider the returns on the basis of the information contained in them and any other information available to the Inland Revenue." Mr Henderson claims he heard nothing from Mr Scott, Ms Stella nor any one at IRD in respect of the returns which is a breach of the agreement with the Ombudsman.• Sets out further background of events/correspondence from 20 August 2003 – 24 November 2003 which has been inserted into this chronology. The background set out by Mr Henderson is for the purpose of demonstrating his concern that the IRD drags matters out beyond a reasonable time period.• Mr Henderson asserts Ms Stella's letter of 25 May 2004 sets out a one-sided account of events and shows that IRD proposes going back on the agreement brokered between Mr Henderson and IRD by the Ombudsman.• Mr Henderson asserts that in the course of the mishandled GST and other audits conducted by the IRD from 1994-1999 the IRD lost or destroyed many of TIL's records. As a consequence TIL was hampered in filing its returns.• Mr Henderson proposed the following as a way forward:o IRD should write to Mr Henderson confirming it intends to adhere to the agreement made in June 1999 brokered by the Ombudsman.o IRD should withdraw the default assessments that have been made.o IRD should provide Mr Henderson immediately with all the documents it has in its possession regarding TIL's financial affairs during the period 1993-1999 upon which the queries raised by Mr Lewer in his letter of 13 September 1999 were made.o Mr Lewer should visit TIL's offices in Christchurch with relevant IRD personnel to discuss and resolve the outstanding queries, and at the conclusion of that meeting the parties either agree to amend the returns or issue a NOPA respecting the fact that the returns have been filed pursuant to the agreement that they would be completed on the basis of the information available to Mr Henderson at the time they were prepared. TIL can then choose to accept that NOPA or continue with the process to challenge it. See A10 Henderson affidavit.8 June 2004Letter from Ms Stella to Mr Henderson. Refers to Mr Henderson's letter to Ms Stella of 31 May 2004.• Outlines IRD's position that following the meeting with the Ombudsman in June 1999 TIL was to file annual income tax returns for the years 1993- 1998. This was not done. Instead a 'global return' was produced. The queries raised by the IRD in relation to that 'return' endeavoured to progress matters but no progress has been made.• It is not agreed that the IRD's position as set out in Ms Stella's letter of 25 May 2004 constitutes a breach of the June 1999 agreement as brokered by the Ombudsman.• Reiterates a global return does not constitute annual returns as required by the Tax Acts therefore default assessments have been issued and the opportunity has been given to dispute these assessments.• Neither the agreement brokered by the Ombudsman nor subsequent correspondence releases TIL from its legal obligations to file annual income tax returns. TIL has had information available to it to prepare accounts for the 1993-1998 period and this information has been used to calculate default assessments. TIL is expected to be in a position to file annual returns even if it is only on a pro-rata basis.• The blank returns and other documents labelled by Mr Henderson as 'redundant' and returned to IRD on 31 May 2004 are returned to Mr Henderson as they are required for him to dispute the assessments issued by 26 July 2004.• Informs Mr Henderson he may raise a further complaint with the Ombudsman however it will not serve to suspend or delay the requirement to file annual returns and issue a NOPA if TIL wishes to dispute the default assessments.• Refers to Mr Henderson's request for information: "You appear to have made a request for "all documents you have in your possession regarding TIL's financial affairs affecting the period 1993-1999 upon which the queries raised by Mr Lewer in his letter dated 13 September 1999 have been made", I will respond further to this request within the time frames provided for under the Official Information Act. However, I note that the letter of 13 September 1999 informs you that you have been provided with some information, for example in relation to the question on Management Fees the letter states "Information available to the Department (details of which have been previously supplied to you) would indicate during the period, the following management fees were". And in some cases the letter dated 13 September 1999 clearly indicates the question relates to the financial information you have provided with the global return, for example in relation to depreciation the letter states "The main claim is the "loss on disposition" of the assets on hand at 31/3/92".See A11 Henderson affidavit.15 July 2004Letter from Mr Henderson to Ms Stella. Refers to Ms Stella's letter to Mr Henderson of 8 June 2004.• States Mr Lewer acknowledged receipt of the returns in the letter dated 13 September 1999.• Asserts the IRD is now saying five years later that the returns have not been filed.• The IRD should have raised its concerns with the returns within the one month period of their filing as provided for in the agreement brokered by the Ombudsman.• Asserts IRD is not sticking to the agreement as brokered by the Ombudsman.• TIL is satisfied its returns have been filed, received and accepted by the IRD.• States that the default assessment is disputed. In the absence of IRD's co- operation to provide copies of the records it holds, this letter and the previous returns filed are to stand as TIL's NOPA. See A12 Mr Henderson affidavit.22 July 2004Letter from Ms Stella to Mr Henderson. Refers to Mr Henderson's letter to Ms Stella of 15 July 2004.• Reiterates the steps required to be taken for TIL to dispute the default assessment by 26 July 2004.• Reiterates the 'global return' does not meet the legislative requirements of an annual income tax return.• States Mr Henderson's letter of 15 July 2004 does not meet the criteria for an NOPA.• Reiterates neither the agreement brokered by the Ombudsman nor subsequent correspondence has the effect of releasing TIL from its legal obligations to file annual income tax returns. See CS4 Stella affidavit.28 July 2004Letter from Mr Henderson to Ms Stella. Refers to Ms Stella's letter to Mr Henderson of 22 July 2004.• Reiterates Mr Henderson's position that returns have been filed, received and accepted by the IRD relying on the acknowledgement of receipt by Mr Lewer in a letter dated 13 September 1999.• Asks questions about observations Mr Lewer made in the letter of 13 September 1999; why it has taken IRD five years to raise this matter; and why none of these matters were raised at the meeting in December 2002. See CS5 Stella affidavit.6 August 2004Letter from Ms Stella to Mr Henderson. Refers to Mr Henderson's letter to Ms Stella of 28 July 2004.• Reiterates the unacceptability of the 'global return'.• States that as TIL did not dispute the default assessments by 26 July 2004 they are now final assessments. See CS6 Stella affidavit.17 September 2004Letter from Ms Stella to Mr Henderson. "It is not clear to me what issues you consider remain unresolved with TIL. You have stated that these have been raised on many occasions. I understand we are actively working through some current issues but if you have other matters that I or the department has not responded to previously please provide these to me in writing."See para 10 CS9 Stella affidavit.1 November 2004Letter from Ms Stella to Mr Henderson."I again take from this letter [Mr Henderson's letter of 26 October 2004 – not provided] that you are still of the view that the department is endeavouring to avoid or confuse issues. This is not the case. As sated in my previous correspondence, if you have further matters that you wish to raise please set these out in writing." See para 11 CS9 Stella affidavit.2 March 2005Letter from Ms Stella to Mr Henderson.• Final notice for outstanding GST returns for the period 31/10/02 – 31/12/04.• Final notice for outstanding income tax returns for the period 31/3/00 – 31/3/03. See CS7 Stella affidavit.10 March 2005Letter from Mr Henderson to Ms Stella. Refers to the final notice of 2 March 2005.• Mr Henderson states there are still a number of outstanding issues between TIL and IRD which he has had difficulty resolving with IRD.• Mr Henderson asks whether the IRD is interested in tidying up all outstanding matters and if so what the proposed process would be. See CS8 Stella affidavit.24 March 2005Letter from Ms Stella to Mr Henderson. Refers to Mr Henderson's letter to Ms Stella of 10 March 2005.• The only outstanding matter between the parties is the overdue returns as described in Ms Stella's letter of 2 March 2005.• Other matters raised by Mr Henderson that have been the subject of exhaustive and repeated correspondence are not considered to be outstanding as Mr Henderson has either been provided with IRD's response or has failed to provide evidence in support of the claims.• Mr Henderson has failed to provide any details to support the allegation that IRD lost TIL's records.• Mr Henderson has repeatedly made the general comment that there are "various issues" that need to be addressed, however, it is unclear what these are. See CS9 Stella affidavit.May 2005Prosecution action was instituted against TIL for failing to file income tax returns for the years ended 31 March 2000 to 31 March 2004. On 20 October 2005 TIL pleaded guilty and was convicted on all counts. See para [29] Stella affidavit.12 October 2005IRD received and processed income tax returns on behalf of TIL that purported to relate to the years ended 31 March 1999 to 31 March 2004. The return for the 1999 income year included a purported current tax loss of $1,539,744.See CS10 Stella affidavit and paras [30] and [31] Stella affidavit. The returns for the income years 2000 to 2004 inclusive were efiled. Copies of those returns are at CS11 – CS15 Stella affidavit. At para [33] of the Stella affidavit it states that when returns are filed they are automatically processed, with the result that the IRD computer system generates Notices of Loss Determination or Notices of Assessment. Copies of these are at CS16 Stella affidavit.19 October 2006Letter from Ms Stella to Mr Henderson. Refers to Ms Stella's letter to Mr Henderson dated 6 August 2004 and the returns filed in October 2005. Explains that the loss to be carried forward from 1999 to 2000 is $209,373. Noted TIL was advised that was the amount of the loss determined by the Default Assessments and Notice of Loss Determinations in Ms Stella's letter to Mr Henderson dated 25 May 2004. Noted that TIL did not dispute the Default Assessments and Notice of Loss Determinations therefore they are Final Assessments. Explains IRD has reassessed the years 31 March 2000 – 31 March 2004 to take into account the loss available to be carried forward from 1999. Schedules attached of amendments made. Notes reassessment shows a debit balance for 2002 – 2004 which may incur a shortfall penalty. A response about the penalty should be made by 8 November 2006 otherwise a notice of proposed adjustment relating to the penalty may be issued. See A13 Henderson affidavit. At para [35] Ms Stella affidavit she explains that Notices of assessment for 2002 to 2004 income years were issued on 20 and 24 October 2006 (Copies at CS17 Ms Stella affidavit). IRD did not receive a dispute from TIL in the form of an NOPA within the statutory response period so the assessments for the 2002 to 2004 income years are deemed to be correct. At para [36] Ms Stella affidavit, she explains that the loss of $209,373 being carried forward resulted in TIL having to pay tax from 2002 – 2004 of $13,568.94, $154,366.74 and $16,500 and it is those amounts (and penalties and interest) which are the income tax debt the subject of the statutory demand.11 December 2006Letter from Mr Henderson to Ms Stella. Refers to Ms Stella's letter to Mr Henderson dated 19 October 2006. States that TIL did dispute the Default Assessments and Notice of Loss Determinations within the statutory period in the final paragraph of its letter to Ms Stella dated 15 July 2004:"for the record, and avoidance of doubt, the assessment you have filed is disputed. In the absence of your co-operation to provide copies of the recordsyou hold, this document and the previous returns filed are to stand as our NOPA."Reiterates that Mr Henderson has been trying to resolve the issue of lost records and hold IRD to account for agreements that it made with the Ombudsman in relation to lost records and filing of returns. States Ms Stella's letter of 19 October 2006 is rejected as TIL is satisfied it has met its obligations to IRD. Suggests TIL and IRD agree to judicial review or mediation to have the matter sorted out and seeks a response from IRD about its willingness to participate in such processes. See A14 Mr Henderson affidavit.19 December 2006Letter from Ms Stella to Mr Henderson acknowledging receipt of Mr Henderson's letter dated 11 December 2006. See CS18 Stella affidavit.19 January 2007Letter from Ms Stella to Mr Henderson. Refers to Mr Henderson's letter to Ms Stella dated 11 December 2006. Reiterates that the issues of assessments for the income years 1993 – 1999, the notice of loss determinations and lost records have been the subject of extensive correspondence previously and IRD does not intend to correspond on these matters further. As these issues have previously been dealt with and no further information has been provided IRD does not agree to attend mediation. Judicial review is a legal matter Mr Henderson is to seek advice on himself. See CS19 Stella affidavit.14 April 2008Letter from Mr Henderson to Mr Cassidy (IRD) Pursuant to the Official Information Act, Mr Henderson requests copies of every document IRD has relating to TIL. See 'A' second Henderson affidavit.14 May 2008Letter from Cassidy to Mr Henderson. Refers to Mr Henderson's request of 14 April 2008. States that IRD holds a large volume of information relating to TIL and that it is estimated it will take 3 months to provide the requested information. See 'B' second Henderson affidavit.7 August 2008Letter from Mr Cassidy to Mr Henderson.It notes:• On 15 April 2008 the IRD received a request pursuant to the OIA to provide Mr Henderson with copies of "every document that you have of any nature whatsoever, including emails, diary notes, letters, worksheets, invoices, credit notes, and anything else that in any way relates to anything between TIL and the Department and/or has come into the possession of the Department in any whatsoever.• The Department informed Mr Henderson on 14 May 2008 it had decided to grant his request for information; that it estimated it would take three months to provide the information requested, and that the Department reserved the right to charge Mr Henderson for the time spent reading and reviewing the information, but would provide the first 100 hours of time free of charge.• The Department had now collated all possible information that may relate to TIL; it held a very large volume of information relating to TIL; and had gathered approximately 200 eastlite folders of documents relating to TIL.• Within the 200 folders there will be a significant number of duplicate documents, due to the large number of people who have had an involvement with TIL.• Due to the high volume of documents the Department would not be able to complete its review of the information by 15 August 2008 as previously indicated. Rather it estimates it will take until December 2008 to complete the review of information relating to TIL. 'C' second Henderson affidavit.18 August 2008Mr Henderson says this is the first time the IRD has acknowledged the extent of information held by it relating to TIL. He has always been of the view the IRD has a considerable amount of information about TIL and is considered it was likely to include financial information. Mr Henderson states it is quite clear that nothing like all the documents held by the IRD have ever been returned to TIL. He states: "I assume that they have been lost or mislaid by the IRD. It now appears the IRD may well have had the documents and information I have repeatedly requested all along. I consider the letter from the IRD dated 7 August 2008 reinforces the absolute necessity for TIL to have full discovery of documents from the IRDin the judicial review proceeding filed by TIL against the CIR.Paras. 11 and 12 second Henderson affidavit.22 August 2008Mr Cassidy states the approximately 200 folders contain information relating not only to TIL, the subject of Mr Henderson's OIA request, but also to Mr Henderson personally, or to other companies associated with him. There are a substantial number of duplicates within the 200 folders. See Cassidy affidavitMs Ryan, like Mr Cassidy a solicitor in the employ of the IRD, states it is not correct that the Department has gathered approximately 200 folders "relating to TIL" but identified around 200 folders that could potentially contain information relevant to the OIA request. Not all information within these folders is relevant to TIL, or the OIA request. Much of the information reviewed relates to either Mr Henderson personally, or other companies associated with him, and does not relate to TIL at all. It is not the case that the entire contents of the 200 folders are relevant to the OIA request.