THE COMMISSIONER OF INLAND REVENUE v SABATINI [2017] NZHC 149

THE COMMISSIONER OF INLAND REVENUE v SABATINI [2017] NZHC 149 [14 February 2017]IN THE HIGH COURT OF NEW ZEALANDNELSON REGISTRYCIV-2016-442-000052[2017] NZHC 149UNDER the High Court Rules and the TaxAdministration Act 1994IN THE MATTER of an interlocutory application forsummary judgmentBETWEEN THE COMMISSIONER OF INLANDREVENUEPlaintiffAND DIOR JAY SABATINI (FORMERLYKNOWN AS DENISE ANNE CLARK)DefendantHearing: 13 February 2017Appearances: K E Saint for PlaintiffD J C Russ, Counsel assisting the CourtJudgment: 14 February 2017JUDGMENT OF ASSOCIATE JUDGE MATTHEWS[1] The Commissioner sues to recover from the defendant, Ms Sabatini, $18,384,406.24 by way of taxation. The debt is based on two assessments made in September 2010, the first for $6,326,352.23 as a promoter penalty under s 141EB of the Tax Administration Act 1994 (TAA), and the second being an assessment of income tax in relation to the 2007-2010 income tax years in a sum of $110,000, pursuant to s 106 of the TAA.[2] Ms Sabatini challenged the promoter penalty assessment and the income tax assessment in the High Court. At a point when the case was awaiting a hearing Ms Sabatini discontinued the challenge.[3] Late payment penalties and interest amounting to $11,692,732.41 have accrued since the assessments, by operation of late payment penalty provisions in the TAA and interest in the sum of $255,321.60 has also accrued.[4] The Commissioner applies for summary judgment under r 12.2(1) of the High Court Rules which provides that summary judgment may be entered where a plaintiff shows that a defendant does not have a defence to a claim.[5] If this position is established, the Court retains a discretion not to entersummary judgment, which is described as a "discretion of the most residual kind".1[6] The case for the Commissioner is straightforward. She relies on s 109 of the TAA, which provides:Disputable decisions deemed correct except in proceedingsExcept in objection proceedings under Part 8 or a challenge under Part 8A, -(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.[7] A "disputable decision", includes an assessment so each of the assessments now in issue is subject to the provisions of s 109. By virtue of ss 120I(1) and 138L(2) of the TAA the imposition of late payment penalties and interest cannot be disputed or challenged.[8] Thus the Commissioner argues that summary judgment should be entered against Ms Sabatini.[9] Ms Sabatini filed a notice of opposition in which she opposed the entry of summary judgment. Her first two grounds are criticisms of the conduct of the Commissioner, which she describes as disgraceful and as an unacceptable and repugnant intrusion into the judicial function. As well, she says the assessment was issued in bad faith and for an improper purpose and is not a genuine assessment in1 Pemberton v Chappell [1987] 1 NZLR 1 (CA) per Casey J.law. Ms Sabatini goes on to say that the assessment is not made on an intelligiblebasis, that the figures are merely "plucked out of the air", and the amount is arbitraryand unreasonable.[10] Finally, the defendant says she did have proceedings in the High Court challenging the assessments, but was not given a fair trial and as a result judgment should not be entered against her.[11] Ms Sabatini did not file an affidavit in support of this notice. Because of the very high claimed debt, the reference to other proceedings in this court, the fact that an affidavit had not been sworn to support the claims made in the notice of opposition, and the fact that Ms Sabatini was representing herself, I directed the appointment of Amicus Curiae. Mr Russ accepted appointment accordingly and filed submissions.[12] Ms Sabatini appeared at the hearing and mainly answered enquiries from the Bench. She explained to me that she had brought proceedings in the High Court at Wellington to challenge the Commissioner's assessments, that she had undertakenextensive preparation for the hearing of the matter, that Amicus Curiae had been appointed by that court to assist with the hearing, and that she had paid expenses for witnesses to be flown from overseas and accommodated in Wellington for the case. However, the date of the case changed, meaning that the money she had spent would be wasted and she could not afford to go on. She withdrew the proceedings as a consequence.[13] Mr Russ, in his written submissions, analysed the basis of theCommissioner's claim and informed the Court that he agreed with the position takenby the Commissioner. He confirmed that the Commissioner's assessments areconclusive under s 109 of the TAA, given that Ms Sabatini had abandoned her challenge, and that there are no grounds in this case for the exercise of judicial review, which in any event has limited availability in cases of this nature. He also informed the Court that he considers that there are no reasons for the Court to exercise its residual discretion against the granting of summary judgment.[14] Because Ms Sabatini does not have any legal right to challenge the assessments of the Commissioner in relation to core tax, penalties and interest, because of s 109 of the TAA, the Commissioner has established that Ms Sabatini does not have an arguable defence to the claim against her.[15] Although Ms Sabatini asks that the Court exercises its discretion against the entering of summary judgment against her, because of what she sees as the injustice of her being brought to account for taxes when, as she maintained when addressing the Court, she only had a junior administrative role with the organisation which ran and promoted the scheme in respect of which the Commissioner imposed promoter penalties, this is not in my opinion a course which the Court should follow. It overlooks, with respect, that if summary judgment is not issued, the underlying case would continue through to trial, and Ms Sabatini does not have a defence to the substantive case which could give her any prospect of a successful outcome at trial. At that point the Court would not have a residual discretion not to enter judgment, and nothing would be gained, therefore, for Ms Sabatini by exercise of the discretion against entering summary judgment now.[16] The discretion is not directed at situations where judgment is inevitable, sooner or later. It may be exercised in circumstances where oppression or injustice arising from entry of judgment on a summary basis, as distinct from after a substantive trial, may be caused. Instances cited by the Court in Environmental Protection Authority v Chatham Rock Phosphate Ltd,2 include circumstances where the proceeding involves the actions or possible liability of a third party which is not before the Court, where there should be an opportunity given to allow discovery or other interlocutory applications to be concluded, where the circumstances of the case disclose very unusual features the presence of which might lead the Court to conclude that the entry of summary judgment would be oppressive or unjust, or where a combination of complex issues of fact and law justify the dismissal of the application.[17] This is not, of course, an exhaustive list of circumstances in which the Court might exercise its discretion. In the present case none of these circumstances2 Environmental Protection Authority v Chatham Rock Phosphate Ltd [2016] NZHC 2079.applies, nor in my view are there any other reasons to do so. The overriding factors which dictate that the Commissioner is entitled to summary judgment are not only that Ms Sabatini has not given any evidence in response to the application supporting the contentions in her Notice of Opposition, but also because the TAA prevents her mounting such a defence now that her challenge to the assessments has been withdrawn, and judgment at trial would therefore be inevitable.Outcome[18] Summary judgment is entered against Ms Sabatini in the sum of $18,384.406.24.[19] Ms Sabatini will pay to the Commissioner costs on a 2B basis plus disbursements fixed if necessary by the Registrar._______________________J G MatthewsAssociate JudgeSolicitors:Inland Revenue Department, Legal & Technical Services, WellingtonFletcher Vautier Moore, Richmond