Court orders halt on Inland Revenue chasing agent for unpaid tax

Inland Revenue has mishandled a tax case involving an Auckland real estate agent. Image / 123rf

Inland Revenue has been told to stop chasing a real estate agent for unpaid tax after it was found to have mishandled the case.

The courts have now put an end to criminal and civil proceedings against Auckland real estate agent Richard (Ric) Parore, after they found the IRD had breached his rights to a fair trial.

One judge described Inland Revenue's conduct, which had essentially woven together criminal and civil proceedings, as "ill-handling".

Parore's lawyer David Weaver said the case centred on a "dispute over $54,000 in tax that has been in train, in one court or another, since 2018".

At its heart was whether Parore was liable for GST during his bankruptcy. The 78-year-old agent was discharged from five years of bankruptcy in October 2014, but stayed working in real estate during that time, and afterwards.

Parore's tax affairs had been under audit since March 2017. Evidence following an investigation showed Parore had remained working as a real estate agent from March 2012 through to the end of March 2017. During that time, investigators found Parore had not registered for GST, had failed to pay any GST and did not file income tax returns.

In June 2018 the Inland Revenue Commissioner told Parore he was to be prosecuted for tax offences and that the civil dispute it had raised with him would be "parked" pending the outcome of the criminal prosecution.

In August 2019, 13 charges were laid against Parore alleging tax offences. A trial began in July 2020 but a month later seven of the charges were dismissed because they related to the time Parore was bankrupt, and there was therefore no case to answer.

Inland Revenue successfully appealed that decision, which meant the case could continue. Parore's efforts to appeal that decision failed. While debate continued over whether the case should go ahead, lawyer David Weaver found a precedent in an unpublished decision involving a similar case where the "intertwining of civil and criminal proceedings had resulted in a breach of fair trial rights for the defendant".

Parore's application for a stay of proceedings was successful. The courts agreed his rights had been "compromised irreparably" when IRD launched a criminal case against him that relied on information having already been disclosed during civil proceedings.

The court said its decision was not disciplining Inland Revenue for the breach, but recognised the importance of fair trial rights and the administration of criminal justice generally.

Tax lawyer David Weaver. Photo / Supplied

Weaver told Open Justice that the move to halt proceedings, which effectively means that the Crown cannot do anything further – regardless of whether a party is guilty or innocent - is a rare remedy. He said "prosecutorial conduct" does not often reach the stage where the courts have to stop a case.

"The judge is really saying the integrity of the justice system is at issue, therefore the court won't allow the matter to go any further.

"It's protecting its own processes by stopping the case."

The High Court has now also declined an application by the IRD Commissioner for more time to issue a challenge.

Weaver said IRD had four years in which to complete a civil process against Parore, which it began and then put on hold halfway through. Close to the expiry, IRD then applied to extend the time on the grounds there was an exceptional circumstance.

The court found otherwise.

Judge Layne Harvey said in his High Court decision last week, which dismissed IRD's application for more time to continue proceedings, that he was not satisfied the commissioner had identified qualifying exceptional circumstances.

He said the remedy was disproportionate at this "late stage of a lengthy process" and that little would be gained by allowing the extension of time.

"In any event doing so would further penalise Mr Parore for the Commissioner's apparent ill-handling of this case. As has been said, it would be inappropriate for the Commissioner's own prosecutorial misconduct – regardless of fault – to now be accepted as an 'exceptional circumstance' justifying an extension of time."

Costs were awarded to Parore.