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Real estate agent uses BORA arguments to win High Court battle with IRD

7 Jul 2023

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Fair trial rights – New Zealand Bill of Rights Act 1990 – compensatory – minimum standards of criminal procedure – taxation disputes – returns and payments – stay of criminal proceedings granted – breach of fair trial rights established – successful application for damages

Parore v Attorney-General [2023] NZHC 1010 per Gwyn J.

The plaintiff, Richard Parore, sought compensation (Baigent damages) for breach of rights in a tax proceeding under the New Zealand Bill of Rights Act 1990 (NZ BORA).

Parore was a self-employed real estate agent. He was adjudicated bankrupt on 2 April 2009 and discharged from bankruptcy on 10 October 2014. Parore continued to work as a self-employed real estate agent during and after his bankruptcy. He initially complied with filing GST returns during his bankruptcy but from 2012 to 2017 he failed to pay GST and had not filed income returns.

The presumptive term of Parore’s bankruptcy was three years from the date he filed a statement of his affairs. He did not do this until September 2011. Parore was required to obtain the Official Assignee’s (OA) consent to trade while bankrupt. The OA consented, but placed specific conditions requiring his accountant monitor all finances and pay him a wage.

Parore did not sign this form so the Commissioner of Inland Revenue (IR) believed he had continued trading without the OA’s consent. The commissioner started auditing Parore’s tax affairs.

Civil tax dispute and prosecution

On 22 January 2018, IR wrote to Parore saying he was required to be registered for GST and to file GST returns. He was further advised that IR would issue default assessments for the various GST periods ending 31 March 2011 through to 31 March 2017. The IR officer in charge also told Parore that the commissioner was considering prosecuting him for failing to register for GST. The officer invited Parore to explain why he had not registering for GST or filed returns, and why he should not be prosecuted.

The officer’s letter also stated that Parore did not have to comment or respond to these questions. But if he chose to do so, the commissioner might use the information as evidence if a decision to prosecute was made.

On 2 March 2018, Parore filed a Notice of Proposed Adjustment (NOPA), and 13 GST returns for the period from 10 October 2014 through to 30 September 2017. The NOPA also set out part of Parore’s defence for the various GST periods during his bankruptcy.

On 24 April 2018, the commissioner issued a Notice of Response (NOR)  to Parore. Two days later, the commissioner’s NOR was formally rejected.

The civil dispute then moved to the “conference phase” of the statutory tax dispute resolution process under the Tax Administration Act 1994 (TAA). This conference, intended to clarify and resolve issues between IR and a taxpayer, took place on 19 June 2018. On 28 June 2018, IR advised Parore the commissioner had decided to prosecute and the civil process would be “parked” at the conference stage, pending the outcome of the prosecution.

The trial

On 26 August 2019, the commissioner laid criminal charges of tax evasion in the Auckland District Court under the TAA.  Parore’s trial started on 14  July 2020 before Judge Clarkson. Parore applied to dismiss seven charges relating to the period of his bankruptcy, arguing that under s 58 of the Goods and Services Tax Act 1985 there was no case to answer.

The application was granted but successfully appealed, with Jagose J ordering a new trial of the dismissed charges together with the remaining six charges.

Before the trial could resume at the District Court, R v Safi  was decided by Judge Collins, involving  a similar set of facts. The District Court held the defendant’s fair trial rights had been impugned because of the way the civil tax disputes process had interacted with criminal proceedings. The defendant had given up some of his defence during the NOPA/NOR process. Judge Collins stayed the charges laid.

Parore applied for a stay of all charges. Judge Clarkson noted Parore was presumed innocent, enjoyed the right to silence, and should not be compelled to disclose his defence. However, because Parore was compelled to give a NOPA to protect his tax position, he was thus compelled to disclose some of his defence. The application was granted.

IR appealed the decision but the High Court upheld the stay of proceedings .

Parore’s application for compensation was heard in April 2023.

Held: Application granted.

An order was made for a declaration that the Commissioner of Inland Revenue breached Parore’s right to silence as guaranteed by s 25(d) of the NZBORA by filing charges against him after compelling him to provide information and then by continuing that prosecution until it was stayed.

Gwyn J held the commissioner’s decision to lay charges when she did was “highly reckless at best”, and the damage suffered by Parore arose from the breach of his fair trial rights.

While the stay of proceedings underscored the importance of adhering to fair trial rights, the court accepted it wasn’t enough of a remedy for Parore. Damages for legal costs in the sum of $70,989.86.

Damages for emotional harm in the sum of $5,000 based on evidence from his clinical psychologist.

Parore v Attorney-General [2023] NZHC 1010

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