PATTERSON V THE COMMISSIONER OF INLAND REVENUE COA CA870/2011

PATTERSON V THE COMMISSIONER OF INLAND REVENUE COA CA870/2011 [14 May 2013]IN THE COURT OF APPEAL OF NEW ZEALANDCA870/2011[2013] NZCA 153BETWEEN WAYNE THOMAS PATTERSONApplicantAND THE COMMISSIONER OF INLANDREVENUERespondentCounsel: Applicant in personP Courtney for RespondentJudgment: 14 May 2013 at 3.00 pm(On the papers)JUDGMENT OF STEVENS J(Review of Registrar's decision refusing to dispense with security for costs)A The application to review the Registrar's decision refusing to dispensewith security for costs is dismissed.B The applicant is to pay the sum of $5,880.00 by way of security for costs in relation to the appeal within 20 working days of the date of this judgment.____________________________________________________________________REASONSBackground[1] The applicant, Mr Patterson, has filed an appeal against a decision of Associate Judge Gendall in the High Court in which he was adjudicated bankrupt on the petition of the Commissioner of Inland Revenue (the Commissioner).1 The1 Commissioner of Inland Revenue v Patterson HC Wanganui CIV-2011-483-191, 1 December2011.undisputable tax debt (including penalties and interest) that resulted in the bankruptcy order amounts to just under $3.1 million.[2] By application dated 16 December 2012 the applicant applied under r 35(6) of the Court of Appeal (Civil) Rules 2005 to the Registrar for dispensation from the obligation to pay security for costs. The application was opposed by the respondent.By letter dated 12 March 2013 the Registrar declined Mr Patterson's application fordispensation.[3] In reaching her decision the Registrar stated:It must be in the interests of justice for security for costs to be waived and there must be exceptional circumstances to justify waiver and impecuniosity alone is not sufficient reason.While I can't comment on the merits of the appeal, the circumstances of this appeal can't be considered exceptional. There is also nothing in this appeal of public importance or significance that would justify the dispensation of security for costs. It is necessary to protect the respondent in this case in terms of any costs that could be awarded against you should this appeal be unsuccessful.[4] By letter dated 20 March 2013 Mr Patterson has now sought a review of theRegistrar's decision.Security for costs – general principles[5] In the normal course, appellants in civil proceedings in this Court are required to pay security for costs.2 The Registrar may vary or waive security "if satisfied that the circumstances warrant it".3 Security for costs will be waived where it is in the interests of justice to do so. There must be some exceptional circumstance to justify waiver.4 The applicant must honestly intend to pursue the appeal and it must be arguable, as respondents should not face the threat of hopeless appeals without provision for security. The importance of the issues raised in the appeal will be significant, as will the question whether there is any public interest in having2 Court of Appeal (Civil) Rules 2005, r 35(2).3 Court of Appeal (Civil) Rules, r 35(6).4 Fava v Zaghloul [2007] NZCA 498 at [9].them determined.5 Impecuniosity alone is not usually sufficient to justify a waiver, but may be reason to reduce the quantum of security.6[6] I am satisfied that the Registrar was right to refuse to dispense with the requirement to pay security for costs in this case.[7] In support of his application Mr Patterson relies on his impecuniosity arising from his bankruptcy, being in prison for six and a half years without income and having no personal assets. However, on the assumption that he is impecunious, that alone will not be a sufficient reason to dispense with security. Exceptional circumstances are required.[8] While I accept that Mr Patterson may genuinely intend to argue the appeal, it must also be arguable. This is where the applicant faces an insurmountable hurdle as now described.[9] The applicant did not file tax returns for the years ended 31 March 2004 to 2007. He was notified by letter dated 27 September 2010 that default assessments of his tax liability for those years were about to be made and Notices of Default Assessments were issued to the applicant on 6 October 2010. In order to engage in the statutory procedure for disputing assessments provided for in Part 4A of the Tax Administration Act 1994 the applicant was required both to file tax returns and a Notice of Proposed Adjustment (NOPA) by 7 February 2011, being four months from the date of Notices of Assessments. The applicant filed his NOPA out of time.[10] Accordingly the assessments are deemed to be correct and cannot be"disputed in a Court or in any proceedings on any ground whatsoever".7 It is clear therefore that the Court has no jurisdiction to deal with the issues that the applicant seeks to raise in the appeal related to the correctness of the undisputed default- assessed tax liability that formed the basis of the order for adjudication.5 Creser v Official Assignee CA196/05, 12 June 2006 at [29].6 Fava v Zaghloul at [9]; Easton v Broadcasting Commission [2009] NZCA 252 at [5] andRIG v Chief Executive of the Ministry of Social Development [2010] NZCA 370, (2010)20 PRNZ 703.7 Section 109 of the Tax Administration Act 1994 and Tannadyce InvestmentsLimited v Commissioner of Inland Revenue [2011] NZSC 158, [2012] NZLR 153.[11] In those circumstances it is plain that the applicant is unable to establish exceptional circumstances to justify a departure from the general position that an appeal is permitted only on terms providing for the payment for security for costs.[12] This Court is also required to consider the interests of justice. The relevant factors include whether appeal rights would be rendered nugatory, the merits of the appeal and whether the respondent should be put to the expense of arguing a meritless appeal without protection provided by security for costs.[13] It seems clear that the applicant is really seeking to have the Court consider the correctness of the default assessments. That is not possible because the failure to file a NOPA within the required timeframe meant that the applicant was unable to engage in the statutory dispute process.8[14] A further relevant factor is that the applicant did not file a statement ofdefence to the Commissioner's bankruptcy petition in the High Court.9 Thus he was not entitled to defend the bankruptcy application. As counsel for the respondent points out the applicant has no standing to appeal that judgment.[15] It follows from the above that this appeal does not raise any matter of public interest. Neither does it have any prospect of success.Decision[16] The application for review of the Registrar's decision as to security for costsis declined. Security for costs in the sum of $5,880.00 must be paid into Court within 20 working days of the date of this judgment. There is no order for costs on this application.Solicitors:Crown Law Office, Wellington for Respondent8 See s 109 of the Tax Administration Act and Allen v Commissioner of Inland Revenue [2006]NZSC 19, [2006] 3 NZLR 1.9 Commissioner of Inland Revenue v Patterson, above n 1, at [12].