[1] This is a claim for compensation (Baigent damages)¹for breach of rights under the New Zealand Bill of Rights Act 1990 (Bill of Rights) in a tax proceeding.

Background

[2] Richard Parore was at all relevant times a self-employed real estate agent. Mr Parore was adjudicated bankrupt on 2 April 2009 and discharged from bankruptcy on 10 October 2014. Mr Parore continued working as a real estate agent both during and after his bankruptcy. Mr Parore filed Goods and Services Tax (GST) returns and paid GST during the first two or so years of his bankruptcy. For the years 2012 to 2017, the Commissioner of Inland Revenue (Commissioner) contended that Mr Parore failed to pay GST and had not filed income tax returns.

[3] The presumptive term of Mr Parore’s bankruptcy was three years from the date he filed a statement of his affairs.²Mr Parore did not file his statement of affairs until September 2011.

[4] Within a few days of receiving the statement of affairs, the Official Assignee (OA) notified Mr Parore that he was required to obtain the OA’s consent to trade while a bankrupt.

[5] Mr Parore applied for OA consent in late October 2011. He advised that he would retain a named accountant to act as his financial supervisor.

[6] On 24 January 2012 an OA insolvency officer met with Mr Parore and explained that the accountant would need to monitor Mr Parore’s finances and pay him a wage. On that day, Mr Parore was sent a form to sign to confirm that he was aware of the conditions upon which the consent to trade would be granted. Those conditions included a requirement that the accountant would be a joint signatory on the bank account into which all monies were to be banked, that the accountant would prepare financial statements, PAYE and GST returns and that no tax obligations were to be in arrears at any time.

¹Simpson v Attorney-General [1994] 3 NZLR 667 (CA) [Baigent’s Case].

²Insolvency Act 2006, s 290.

[7] Mr Parore did not sign and return the form. The Commissioner therefore took the view that Mr Parore continued trading without the OA’s consent. The Commissioner also considered that Mr Parore was obliged to, but did not, file GST returns throughout the remaining period of his bankruptcy, nor for the three-and-a-half years following his discharge from bankruptcy on 10 October 2014. In March 2017, the Commissioner commenced an audit of Mr Parore’s tax affairs.

The civil tax dispute

[8] Clint Tully was the Commissioner’s officer in charge of the investigation into Mr Parore’s tax affairs.

[9] On 22 January 2018, Mr Tully wrote to Mr Parore notifying him that he was required to be registered for GST and to file GST returns. Mr Tully advised that he would be issuing default GST assessments for the various GST periods ending 31 March 2011, through to 31 March 2017. Mr Tully also advised Mr Parore that the Commissioner was considering bringing a prosecution against him for failing to register for GST. Mr Tully invited Mr Parore to explain why he did not register for GST, why he did not file GST returns and why a prosecution should not occur. Mr Tully’s letter also stated that Mr Parore did not have to comment or answer but if he chose to do so, the information might be used by the Commissioner as evidence if a decision to prosecute was made.

[10] Also on 22 January 2018, Mr Tully, and his Team Leader George Fraser, signed a prosecution memorandum. The subject of the memorandum was: “Approval to prosecute for charges allegedly committed against the Tax Administration Act 1994 (“TAA”) as outlined below.”

[11] The prosecution memorandum detailed the allegations, the number and type of charges to be laid and final recommendation by Mr Tully, including the following statement:

3.2 In the Investigator’s opinion the offending of this taxpayer is at the highest level on the compliance wheel and it is therefore recommended that the offending in question warrants the strongest action by the CIR.

[12] The purpose of the memorandum is stated to be to “seek your approval to commence prosecution action against [Mr Parore].”

[13] In signing the document, the Team Leader, Mr Fraser, said “I agree with the case leader’s recommendation to prosecute. ... Should you approve this prosecution then the assigned prosecutor will determine whether charges are laid under 143B(1)(b) & (f) or S143B(2) of the TAA.”

[14] The memorandum is also signed by the Team Lead Customer Compliance Specialist Approval, Harish Singh, on 7 March 2018 and approved by Maryanne Hansen, Group Lead – Customer Compliance, on 8 March 2018. The top of the memorandum is dated 8 March 2018.

[15] On 23 January 2018, the day after Mr Tully and Mr Fraser signed the prosecution memorandum, the Commissioner issued default GST assessments against Mr Parore, under s 106 of the Tax Administration Act 1994 (TAA). They covered the various GST periods ending 31 May 2011 through to 31 March 2017. Mr Tully’s letter advised Mr Parore that if he did not pay the amounts assessed by the due date, the Commissioner may start action to collect the debt. The letter including the following paragraph:

If you wish to dispute the assessments you must file a notice of proposed adjustment along with your tax returns within four months of the assessment issue date shown on the notice(s) of assessment. ...

[16] On 2 March 2018, Mr Parore filed a Notice of Proposed Adjustment (NOPA) and 13 GST returns for the period from 10 October 2014 (when he was discharged from bankruptcy) through to 30 September 2017. The NOPA also set out what was described as part of Mr Parore’s defence for the various GST tax periods during his bankruptcy. Mr Parore asserted that he was not liable for GST during these periods because, as a bankrupt, he was an incapacitated person as defined in s 58(1) of the Goods and Services Tax Act 1985 (GST Act). Mr Parore said that the OA was deemed to be carrying on the taxable activity as his personal representative and that the OA was liable for any GST payable as his specified agent. Mr Parore asserted that he was not a registered person during the period of his bankruptcy, and he was therefore not required to file GST returns until 10 October 2014.

[17] Mr Tully acknowledged receipt of Mr Parore’s NOPA on 21 March 2018. The GST adjustments proposed by Mr Parore and the returns he had filed for the GST period ending 31 March 2015 through to 30 September 2017 were accepted as being correct, but the adjustments proposed for the GST periods ending 31 May 2011 to 30 September 2014 were rejected.

[18] On 21 March 2018, Mr Tully wrote to Mr Parore’s chartered accountant, Graeme Carruthers of nsaTax Limited requesting comment and explanation in relation to the arguments raised on Mr Parore’s behalf in the NOPA. Mr Tully required a response within seven days, by 28 March 2018. Mr Tully stated that if Mr Parore disagreed with the Commissioner’s position, the civil disputes resolution process would continue.³The letter did not mention the prosecution decision which had been made by Mr Tully and Mr Fraser on 22 January 2018.

[19] On 22 March 2018, Mr Carruthers, on behalf of Mr Parore, provided a detailed response to Mr Tully’s request.

[20] On 24 April 2018, Mr Tully issued the Commissioner’s Notice of Response (NOR) to Mr Parore, through Mr Carruthers, in accordance with s 89G of the TAA. The Commissioner’s NOR stated, under the heading “What you must do now”, advice that Mr Parore must reject the NOR within two months if he did not intend to accept it. Under this heading, the NOR also stated:

...

Please note that the Commissioner of Inland Revenue has limited legal discretion to accept a written rejection regarding a Commissioner’s notice of response if the notification is not received within the two month response period outlined above.

[21] On 26 April 2018 the Commissioner’s NOR was formally rejected by Mr Parore’s accountants pursuant to s 89H(3) of the TAA.

[22] The civil dispute then moved to the “conference phase” of the statutory tax dispute resolution process under the TAA.

The “disputes resolution processes” is the name used to describe the process under pt 4A of the Tax Administration Act 1994 to challenge tax assessments.

[23] A conference took place on 19 June 2018. It was facilitated by a Mr Baxter. Mr Tully and Gary Swain (in-house counsel for the Commissioner) attended. Mr Parore and two accountants retained by him also attended. There is no record of what took place at the conference. However, as Wylie J noted in the High Court stay judgment:⁴

... it is noteworthy that Mr Tully, in an affidavit filed in opposition to the stay application, referred to a meeting held as part of the conference phase and said that during “the meeting” Mr Parore’s advisors voluntarily provided him with a more detailed version of the submission made by Mr Parore in his NOPA which included references to case authorities as well as excerpts from the Commissioner’s policy statements. Further, in a letter to Mr Parore’s accountants thanking them for their attendance, Mr Tully noted as follows:

Questions were also raised at the conference in respect of

potential criminal charges that may be laid by the Commissioner in respect of alleged offending by Mr Parore.

[24] On 19 June 2018 Mr Tully wrote to Mr Carruthers to thank him, Mr Parore and Mr McKenzie for attending the conference. The letter responded to matters discussed at the conference and went on to say:

The Commissioner is currently considering potential prosecution and/or applicable shortfall penalties in respect of Mr Parore and her decision will be communicated to you in writing.

On 26 June 2018 Mr Tully made the following entry in Inland Revenue’s computer system under Mr Parore’s case notes: “After discussions with my TL [team leader] it has been decided to park the disputes at the conference stage and proceed with the prosecution.”

[25] On 27 June 2018 Mr Parore’s accountants wrote to Mr Tully in relation to various matters which had been raised by Mr Tully at the conference. They appear to have been under the impression that the disputes proceedings would continue.

[26] On the same day, Mr Tully made a file note in the Inland Revenue computer system:

Gary Swain (LTS) [Legal and Technical Services] and I met with Chris Viljoen Deputy Assignee and Charles Jones (Legal team )from the Official Assignee’ office. We briefed them on the section 58 GST Act argument being put forth by [Mr Parore’s accountants]. We advised them that a potential prosecution

⁴Commissioner of Inland Revenue v Parore [2021] NZHC 3405 [Wylie J decision] at [20].

is being considered and that we may require them as a witness. Chris to check Parore’s file to see of the case officer is still employed by the Trustees and Insolvency Service.

[27] On 28 June 2018 Mr Tully wrote to Mr Parore advising him that the Commissioner had decided to commence prosecution proceedings. He advised that the civil process would be “parked” at the conference stage, pending the outcome of the prosecution.

The criminal proceedings

[28] On 26 August 2019 the Commissioner filed charging documents in the District Court at Auckland. The charges asserted that Mr Parore had evaded or attempted to evade the assessment or payment of GST contrary to sections 143B(2), 149B, 150 and 150C of the TAA. Particulars were given identifying various six-month GST periods, seven during and six after the bankruptcy. The charges under s 143B(2) of the TAA were for the same GST periods subject to the default assessments and civil tax dispute, before that was “parked” by the Commissioner.

[29] The Commissioner alleged that Mr Parore had collected $84,226.05 of GST which he failed to report or pay to Inland Revenue.⁵

[30] Mr Parore’s trial commenced on 14 July 2020 before Judge Clarkson. Two witnesses from the Insolvency and Trustee Service of the OA, Anthony Pullan and Karla Freda, were called by the Commissioner.

[31] Mr Pullan gave brief evidence relevant to the application of s 58 of the GST Act. Mr Tully also gave evidence.

[32] At the end of the Crown case, but before closings, Mr Parore applied under s 147 of the Criminal Procedure Act 2011 to dismiss the seven charges that related to the period of his bankruptcy. He argued, in reliance on s 58 of the GST Act, that there was no case to answer in respect of these charges.

⁵At [26].

[33] On 24 August 2021, Judge Clarkson granted Mr Parore’s application, dismissing the seven charges relating to the period when Mr Parore was a bankrupt. However, Judge Clarkson directed that the trial on the remaining six charges was to continue.

[34] The Commissioner appealed the decision to the High Court and the appeal was allowed by Jagose J.⁶Justice Jagose ordered a new trial of the dismissed charges in conjunction with conclusion of the trial on the remaining charges.

[35] Mr Parore sought leave to appeal Jagose J’s decision to the Court of Appeal but leave was declined.⁷

[36] The trial in the District Court then resumed. In the interim, counsel for Mr Parore had become aware of the decision in R v Safi.⁸That case involved a similar situation and there Judge Collins had held that the defendants’ fair trial rights had been impugned as a result of the way the civil tax disputes process had interacted with the criminal proceedings. Judge Collins had stayed the charges laid against the defendants.

[37] Before the Judge in the resumed trial could consider counsel’s closing submissions and deliver her verdicts, Mr Parore applied to stay the further prosecution of all charges against him.

District Court stay judgment

[38] District Court Judge Clarkson noted that, in the criminal proceedings against him, Mr Parore was entitled to the presumption of innocence, that he enjoyed the right to silence and he could not be compelled to disclose his defence.⁹The Judge recorded that Mr Parore was however compelled to provide a NOPA to protect his position in relation to the default tax assessments issued by the Commissioner. The Judge cited comments by Judge Collins in Safi to the effect that compelling the provision of a

⁶Commissioner of Inland Revenue v Parore [2021] NZHC 420.

⁷Parore v Commissioner of Inland Revenue [2021] NZCA 312.

⁸R v Safi [2018] NZDC 19698.

⁹Commissioner of Inland Revenue v Parore [2021] NZDC 17946 [Judge Clarkson decision] at [31].

NOPA before the conclusion of a criminal trial effectively compels a defendant to disclose his or her defence in the criminal trial.

[39] The District Court Judge also referred to Skinner v R,¹⁰where the Supreme Court noted in the tax context that hearing civil proceedings before a criminal trial carries the risk of interfering with the fair trial right.

[40] Judge Clarkson considered that the position was thus “well understood” in 2016, well before the civil dispute process was commenced in Mr Parore’s case.¹¹The Judge concluded that there had been a breach of Mr Parore’s fair trial rights, specifically the loss of the right to silence, that it was an important and fundamental breach and that the risk of breach was known to the Commissioner.¹²

[41] The Judge rejected the submission Mr Parore had not disclosed a “defence” in the criminal proceedings, as the s 58 defence was a legal one only.¹³The Judge held that a stay was not a disproportionate response because of the impropriety of the Commissioner’s conduct and because that conduct had caused a serious breach of fair trial rights.¹⁴The Judge considered that the impropriety related to all thirteen charges. Consequently, the Judge found that the prosecution of all the charges should be stayed.

High Court stay judgment

[42] The Commissioner appealed the District Court stay judgment.

[43] In the High Court, Wylie J noted:¹⁵

A defendant’s right to a fair trial is absolute and the right to a fair trial is one to be enjoyed by the guilty as well as the innocent because a defendant is presumed to be innocent until proved to be otherwise in a fairly conducted trial.

¹⁰Skinner v R [2016] NZSC 101, [2017] 1 NZLR 289.

¹¹Judge Clarkson decision, above n 9, at [38].

¹²At [38], [54] and [57].

¹³At [47].

¹⁴At [39].

¹⁵At [48] (footnotes and citations omitted).

[44] The Judge also noted the fair trial right is enshrined in s 25 of the Bill of Rights.¹⁶Section 25 sets out minimum rights and there are other associated rights which defendants enjoy as part of the right to a fair trial — the right to remain silent, the right not to be compelled to disclose a defence, the right to put the prosecution to proof and the right to require the prosecution to prove its case beyond reasonable doubt.¹⁷

[45] As Wylie J noted,¹⁸in the taxation context, the “risk of the Commissioner triggering the civil disputes process under the TAA ahead of a prosecution in a criminal trial has been recognised for some years, both in the legislation and in the case law.”

The Judge cited Skinner v R.¹⁹

[46] The Court also noted that those risks have been acknowledged and accepted by the Commissioner,²⁰and a statement issued by the Commissioner on 22 July 2020.²¹

[47] As Wylie J observed,²²the risks came to pass in Safi. In that case, after discussing both Skinner and Wilson, Judge Collins found that, whether deliberately or carelessly, the Commissioner’s officers had brought about a situation where the defendants, in order to preserve their position in the civil proceedings, were required to disclose their defence to the criminal proceedings. The Judge considered that the trial was presumptively unfair and the only appropriate remedy was to stay the proceedings.

[48] Justice Wylie found that the Commissioner was contemplating a criminal prosecution against Mr Parore from the outset.²³As the Court found, Mr Tully made this clear in his letter of 22 January 2018. Nevertheless, the Commissioner went ahead and issued default assessments on 23 January 2018. The Commissioner did not advise

¹⁶At [49].

¹⁷At [50].

¹⁸At [55].

¹⁹Skinner v R, above n 10.

²⁰Judge Clarkson decision, above n 9, at [56].

Inland Revenue The disputes resolution process and fair trial rights (Commissioner’s statement CS20/04, 22 July 2020).

²²Judge Clarkson decision, above n 9, at [57].

²³At [61].

Mr Parore that he could postpone any response under the exceptional circumstances provision in s 89K of the TAA. Rather, the Commissioner informed Mr Parore that if he wished to dispute the assessments, he must file a NOPA, along with his GST returns, within four months of the issue date of the default assessments.

[49] Once the default assessments were issued, the onus in the civil proceedings fell on Mr Parore. Unless he issued a NOPA, the GST assessed by the Commissioner would crystalise and Mr Parore would have lost the right to dispute the Commissioner’s assessments. As Wylie J found:²⁴

[63] ... Had the charges been laid at this point, the effect of the Commissioner’s letter of 23 January 2018 and the default assessments would have been to deprive Mr Parore of his right to remain silent, of his right not to be required to disclose his defence, and to reverse the burden of proof.

[64] The NOPA had to comply with s 89F of the TAA. Mr Parore had to identify the adjustment or adjustments he proposed to the Commissioner’s assessments and provide a statement of the facts and law in sufficient detail to inform the Commissioner of the grounds on which he was disputing the Commissioner’s proposed adjustments. He also had to state how the law applied to the facts.

[50] Mr Parore did provide a NOPA, together with the GST returns for various GST periods 1 October 2014 to 30 September 2017. He set out his defence for the period up to 10 October 2014.

[51] Justice Wylie rejected the Commissioner’s argument that the s 58 defence was an assertion of law and, in those circumstances, there could be no prejudice. The Judge concluded:²⁵

... it seems reasonably clear from the documents provided and from Mr Tully’s affidavit that the Commissioner was put on a train of enquiry as a result of disclosure of the s 58 defence. Secondly, whether or not the s 58 defence is good or bad falls to be assessed by reference to all of the evidence because, when the Commissioner later charged Mr Parore, she alleged evasion. She had to prove beyond reasonable doubt that Mr Parore intended to evade GST. Mr Parore’s s 58 defence was relevant to his intention and what he intended and why it cannot be judged in a vacuum. Intention is a question of fact, to be proved just like any other fact, beyond reasonable doubt. Thirdly, were I to rule on the application of the s 58 defence now, hold that it was legally flawed and send the charges back for retrial, the effect could be to

²⁴At [63].

²⁵At [69].

deprive Mr Parore of a defence which may be open to him. That would undermine his rights under s 25(c) of the New Zealand Bill of Rights Act. Finally, in this regard I agree with the Judge that it cannot be said with any certainty that no information was provided, or that none was provided that the Commissioner relied on. ...

[52] As Wylie J noted,²⁶the minimum standards of civil procedure recognised in s 25 of the Bill of Rights are available only to a person who has been charged with an offence. At the point when the Commissioner was dealing with the civil dispute, she had not charged Mr Parore. However, when she subsequently charged him on 26 August 2019, the Judge assessed that the Commissioner had put Mr Parore “in an impossible position”:²⁷

... She had used her statutory powers under the TAA to effectively require Mr Parore to disclose his prospective defence, to deprive him of the right to remain silent, to get him to acknowledge the actus reus of certain of the offences and to disclose his hand in relation to other of the offences. When the charges were laid, a fair trial for Mr Parore was already an impossibility. I agree with observations made by Judge Collins in Safi that, whether innocently or deliberately, the Commissioner cannot bring about a situation where she is forewarned ahead of trial what defences will be run, what evidence the defence will call and then, being so forewarned, assert that the trial is fair.

[53] The Judge went on to conclude that in his view there was prejudice to Mr Parore when the charges were laid because his fair trial rights were then engaged but they had already been compromised.²⁸

Recommencement of civil process

[54] Following the High Court’s confirmation of the stay of the criminal proceeding, the Commissioner attempted to recommence the civil process. The next statutory step in that process required the Commissioner to issue a disclosure notice to Mr Parore.²⁹That step triggers the requirement for Mr Parore to issue a Statement of Position within two months from receipt of the Commissioner’s disclosure notice.³⁰ The Commissioner did not issue a disclosure notice until 3 February 2022, despite the

²⁶At [71].

²⁷At [72].

²⁸At [73].

²⁹Tax Administration Act 1994, s 89M(1).

³⁰Section 89M(5).

disputes procedure having to be completed, within the statutory framework, by 2 March 2022.

[55] On receipt of the Statement of Position from Mr Parore the Commissioner must then provide his Statement of Position which enables a challenge notice to be issued.³¹ The Commissioner’s delay in issuing a disclosure notice to Mr Parore meant the exchange of Statements of Position could not occur, thus preventing the challenge notice from being issued within four years.³²

[56] The Commissioner applied to the High Court to extend the four-year period on the grounds of “exceptional circumstances”. Justice Harvey declined the application in March 2022.³³As a consequence, Mr Parore’s tax position as set out in his NOPA was deemed to be correct.

Evidence

[57] Evidence was given by Mr Tully for the Commissioner and Johan Laven, for Mr Parore. There were challenges to the admissibility of the evidence of both witnesses. I consider those challenges in the course of discussing the issues below.

Issues for resolution

[58] The Commissioner has admitted much of Mr Parore’s claim. In my assessment the issues that remain to be resolved are:

(a) What rights have been breached?

(b) How should the breach be characterised?

(c) Was the breach causative of the loss claimed by Mr Parore?

(d) Was a stay of the criminal proceedings a sufficient remedy?

³¹Section 89M(6BA).

³²Section 89P(3).

³³Commissioner of Inland Revenue v Parore [2022] NZHC 488.

(e) Whether Mr Parore has received a benefit from the breach of his rights.

(f) Whether a declaration is necessary.

(g) Whether damages are an appropriate remedy:

(i) can legal costs be awarded as damages?

(ii) whether Mr Parore suffered emotional distress as a result of the breach of his rights.

What rights have been breached?

[59] The District Court held that the Commissioner’s actions amounted to a risk to fair trial rights and a risk to the integrity of the judicial process if the burden of proof were allowed to be shifted.³⁴Judge Clarkson characterised it as a “serious breach of fair trial rights”.³⁵

[60] In the High Court, Wylie J noted,³⁶the associated rights which defendants enjoy as part of the right to a fair trial — the right to remain silent, the right not to be compelled to disclose a defence, the right to put the prosecution to proof and the right to require the prosecution to prove its case beyond reasonable doubt. Later in the judgment, the Judge noted that there was prejudice to Mr Parore when the charges were laid because his fair trial rights were then engaged but they had already been compromised.³⁷

[61] Justice Wylie found that, had the charges been laid after Mr Parore filed a NOPA and GST returns, it would have infringed the presumption of innocence, the right to require the Commissioner to prove her case and Mr Parore’s right to remain silent.³⁸

³⁴At [54]–[55].

³⁵Judge Clarkson decision, above n 9, at [55].

³⁶Wylie J decision, above n 4, at [50].

³⁷At [73].

³⁸At [67].

[62] In this Court, the plaintiff says that the relevant right is the right to silence.³⁹ The defendant has an election to call or give evidence and does not have to make that election until the Crown closes its case. Mr Conder submitted that, under s 25(d),⁴⁰ the right must extend back to the point of investigation. This right was breached by requiring Mr Parore to complete steps in the civil dispute which required him to make active statements, then filing criminal charges. The entire process amounted to a violation of Mr Parore’s rights. The effect was that Mr Parore was denied his right to silence.

[63] Mr Conder concedes that at the time of the NOPA Mr Parore’s rights were not breached and the NOPA process in itself is legal. But the election by the Commissioner, at that point, to pursue the civil process rather than the criminal proceeding was a wrong step at the point at which the violation began.

[64] Mr Conder distinguished Allen⁴¹where there was no legal compulsion. In Allen the defendant was charged with murder. After the incident the defendant made a number of 111 calls.. The defendant sought to have parts of those calls excluded from evidence. The High Court excluded the evidence because it was improperly obtained. In any event, in Allen⁴²Duffy J noted that there is a common law right to silence (before arrest or detention or charge) which coexists with the right in the Bill of Rights.⁴³Thus, even if it is a common law right, Mr Parore still has a remedy for breach of his right to silence.

[65] Mr Goosen for the Commissioner relied on R v Barlow⁴⁴which confirmed that ss 24 and 25 of the Bill of Rights apply only from charge. Counsel acknowledged that, once charged, it ends up being a breach of s 25(d), but says that s 25(a) is the more appropriate right in this case.

³⁹New Zealand Bill of Rights Act 1990, s 24(d).

⁴⁰New Zealand Bill of Rights Act.

⁴¹R v Allen HC Rotorua CRI-2007-087-1729, 10 February 2009 (Oral Judgment of Duffy J).

⁴²At [24].

⁴³New Zealand Bill of Rights Act, s 28.

⁴⁴R v Barlow (1995) 14 CRNZ 9, (1995) 2 HRNZ 635 (CA).

[66] The Commissioner accepts that, once the NOPA had been lodged, there was no proper way to lay charges because the information in the NOPA inevitably had to form part of the criminal process.

[67] The Commissioner argued before Wylie J that during the civil process Mr Parore did not disclose a factual defence in his NOPA, nor any evidence he intended to rely on. It was argued that, on that basis, the provision of the NOPA did not cause prejudice to the fairness of his trial because his assertion under s 58 of the GST Act was incorrect at law and the assertion as to the relevance of s 58 could not have been used by him to obtain any tactical advantage at trial, and, the Commissioner’s evidence at trial only incidentally referred to s 58.

[68] Justice Wylie rejected the s 58 argument.⁴⁵The Commissioner was put on a train of enquiry as a result of disclosure in the s 58 defence. In addition, whether or not that defence is good or bad:⁴⁶

falls to be assessed by reference to all of the evidence because, when the Commissioner later charged Mr Parore, she alleged evasion. She had to prove beyond reasonable doubt that Mr Parore intended to evade GST. Mr Parore’s s 58 defence was relevant to his intention and what he intended and why it cannot be judged in a vacuum.

[69] I adopt Wylie J’s finding on that issue.

[70] The default assessments were equivalent to a decision to continue with the civil process. Mr Parore was then required to file a NOPA if he wished to dispute the default assessments. Mr Parore was compelled by the NOPA process to give evidence against himself. It was wrong for the Commissioner to go back on the decision regarding the civil process and lay criminal charges. By subsequently laying charges, the Commissioner made Mr Parore a witness against himself, in breach of his rights.

[71] I accept Wylie J’s characterisation of the breach. It was a breach of the right to silence under s 25(d) of the Bill of Rights. As the Judge observed, when the Commissioner charged Mr Parore on 26 August 2019, she put him in an impossible

⁴⁵At [69].

⁴⁶At [69].

position.⁴⁷She had used her statutory powers under the TAA to effectively require Mr Parore to disclose his prospective defence (by filing his NOPA and GST returns), to deprive him of his right to remain silent, to get him to acknowledge the actus reus of certain of the offences and to disclose his hand in relation to other of the offences. “When the charges were laid, a fair trial for Mr Parore was already an impossibility.”⁴⁸

How should the breach be characterised?

[72] Mr Parore says the Commissioner’s breach of the Bill of Rights was “highly reckless”. Counsel for Mr Parore pointed by analogy to s 30 of the Evidence Act 2006. Among the factors the Court may consider under s 30 in deciding whether evidence was improperly obtained, is the nature of the impropriety, in particular whether it was deliberate, reckless or done in bad faith.⁴⁹

[73] The risk that the civil tax process could lead to a violation of the Bill of Rights has been known for some considerable time. In 2016, the Supreme Court specifically raised the issue in Skinner v R.⁵⁰The risk was therefore known to the Commissioner from 2016 at the latest.

[74] The risk was reinforced when the District Court in R v Safi stayed charges on the same basis.⁵¹Counsel for Mr Parore says that the Safi decision reinforced the fact that the risk was clearly present in this case when the civil process preceded the criminal one.

[75] Counsel also emphasises that it was not a question of the Commissioner overlooking the relevance of Safi to the present case. In email correspondence almost a year before charges were filed, the Commissioner’s staff were discussing the relevance of Safi to Mr Parore’s case.⁵²That is inconsistent with any submission that the breach was simply inadvertent.

⁴⁷At [72].

⁴⁸At [72].

⁴⁹Evidence Act 2006, s 30(3)(b).

⁵⁰Skinner v R, above n 10, at [65].

⁵¹R v Safi, above n 8, at [34]–[35].

Mr Goosen advised that the Commissioner sought legal advice on the application of Safi to Mr Parore’s case but privilege in that advice has not been waived.

[76] As the District Court decision noted:⁵³

[51] The impropriety of the prosecution ignoring the warnings given by higher courts as to the order of criminal and civil proceedings in cases such as these is very significant. I make no comment, there being no direct evidence, as to whether this was an intentional disregard. But the prosecution actions or omissions would now seem to be disregarded in a plethora of rebuttals to defence arguments.

[77] Counsel for Mr Parore says that the “plethora of rebuttals” has been exacerbated in this proceeding:

(a) The 8 March 2018 prosecution memorandum dated 8 March 2018, which contained Mr Tully and Mr Fraser’s respective recommendation and approval of prosecution proceedings, both signed on 22 January 2018, was not discovered by the Commissioner until this proceeding.

(b) Mr Tully’s concession that information was taken directly from the NOPA and GST returns for the framing of the criminal charges against Mr Parore was first made in this proceeding. In the previous proceedings Mr Tully had said that the Commissioner did not use information obtained from the civil process.

(c) Mr Tully’s evidence in this Court was that it was “practice” to proceed as the Commissioner did in this case, but no evidence was brought as to any such practice.

(d) Mr Tully also referred, in this proceeding, to the Commissioner “awaiting a settlement proposal” from Mr Parore, but counsel for Mr Parore notes that suggestion was raised in this Court for the first time.

[78] Counsel for the Commissioner submitted that I may have regard to Mr Tully’s evidence about Mr Parore’s conduct when considering whether the Commissioner’s conduct was reckless or intentional. Mr Goosen says that it shows that there was a proper substantive basis for the Commissioner to bring the criminal charges against

⁵³Judge Clarkson decision, above n 9, at [51].

Mr Parore. I do not accept that. The right to silence is not a variable right, depending on the extent of perceived guilt or innocence. For that reason, I have not had regard to those parts of Mr Tully’s evidence about Mr Parore’s compliance history.

[79] In my view the Commissioner’s breach of Mr Parore’s trial rights was plainly not inadvertent. As Mr Goosen conceded, the Commissioner ought to have acted on the knowledge of the relevant court authorities at an earlier point.

[80] As Judge Clarkson noted, there is no direct evidence before me to show that it was intentional, and the Court is not privy to the legal advice received by the Commissioner as to the impact of the Safi decision on Mr Parore’s case. However, the combination of factors referred to above lead me to conclude that the Commissioner’s decision to lay the charges when she did was highly reckless at best.

Was the breach causative of the damage to Mr Parore?

[81] Mr Goosen submitted that damages must flow from the breach: Attorney-General v Van Essen.⁵⁴Any personal and financial consequences suffered by Mr Parore were caused by, and were an inherent aspect of, the overall criminal prosecution, rather than being caused directly by the breach of his right to silence. If the prosecution had taken place without the breach, Mr Parore would have suffered the same emotional consequences, and very likely more if a conviction had resulted.

[82] Mr Goosen sought to distinguish Mr Parore from an “innocent” defendant. The bringing of the charges against him was not inappropriate, in that there was a substantive basis for the charges. Therefore, Mr Goosen says, the cause of any damage to Mr Parore is the charge itself rather than the breach of his rights.

[83] In response, Mr Conder submitted that this case was not one where a difficulty had arisen during the trial process; the entire process, from the outset, was in breach of Mr Parore’s rights. Even if the trials had proceeded to completion and Mr Parore had been acquitted, his rights would still have been violated. It was the process itself that was unacceptable. Mr Conder says the case is analogous to Y v R,⁵⁵under the

⁵⁴At [107].

⁵⁵Y v R HC Auckland T281/96, 21 July 1997 at 8.

Costs in Criminal Cases Act 1967, where the court concluded that the defendant should never have been subject to the criminal process.

[84] As I have found at [78] above, the Commissioner’s view of Mr Parore’s guilt or innocence is not relevant to how the nature of the breach should be characterised or whether the breach caused damage to Mr Parore. I accept Mr Conder’s submission that in this case a distinction between damage arising from breach of the fair trial right and the impact of the trial process itself is entirely artificial. As Wylie J found,⁵⁶by the time the charges were laid a fair trial for Mr Parore was already an impossibility. The damage suffered by Mr Parore arose from the breach of his rights.

Was the stay adequate relief?

[85] Mr Goosen for the Commissioner submitted that the stay of the prosecution had the effect that no prejudice to Mr Parore in the criminal proceeding materialised from the breach of his right to silence. Mr Parore was not convicted. In that sense he did not suffer harm from the breach and the stay was sufficient to vindicate the breach of his right.

[86] Counsel for the Commissioner relies on Taunoa v Attorney-General where Blanchard J said:⁵⁷

It may be entirely unnecessary or inappropriate to award damages if the breach is relatively quite minor or the right is of a kind which is appropriately vindicated by non-monetary means, such as through the exclusion of improperly obtained evidence at a criminal trial.

[87] For Mr Parore, Mr Conder submitted that a stay was not adequate. While it brought to an end a continuing violation of Mr Parore’s rights, the stay did not remedy the harm that he had already suffered.

[88] Two factors are relevant to this issue.

⁵⁶R v Safi, above n 8, at [72].

⁵⁷Taunoa v Attorney-General [2007] NZSC 70, [2008] 1 NZLR 429 at [256].

[89] First, the High Court’s stated purpose in granting the stay was not to vindicate Mr Parore’s rights. As Wylie J said, in upholding the stay:⁵⁸

A stay is warranted because the Commissioner breached Mr Parore’s fair trial rights from the outset. To grant a stay is not to discipline the Commissioner for that breach; rather it serves to recognise the importance of fair trial rights and the administration of criminal justice in this country generally.

[90] I adopt Wylie J’s reasoning on that point. The stay underscored the importance of adhering to fair trial rights but did not directly address the damage to Mr Parore.

[91] Second, while the stay vindicated Mr Parore’s right not to be tried any further, the point at which the stay was granted is relevant. On 26 August 2019 thirteen charges were laid against Mr Parore. The trial commenced on 14 July 2020 before Judge Clarkson. At the end of the Crown case, but before closings, Mr Parore applied under s 147 of the Criminal Procedure Act to dismiss the seven charges that related to the period of his bankruptcy. The trial was then adjourned. On 24 August 2021, Judge Clarkson granted Mr Parore’s application.⁵⁹The Judge dismissed the seven charges relating to the period when Mr Parore was a bankrupt but directed that the trial on the remaining six charges was to continue.

[92] Mr Parore had thus been through the substance of not one, but two, trials before the stay was ultimately granted (and subsequently upheld by the High Court).

[93] I accept that the stay does not provide a sufficient remedy for Mr Parore.

Has Mr Parore benefited by the Commissioner’s breach?

[94] The defendant pleads as an affirmative defence that Mr Parore has retained

$55,673.51 of GST that he collected in the course of his taxable activity, which he should have voluntarily returned and paid to the Commissioner.

[95] The Commissioner points to evidence from payslips which show amounts of GST paid to Mr Parore during seven GST periods, being the six-monthly GST periods

⁵⁸Wylie J decision, above n 4, at [79].

⁵⁹Commissioner of Inland Revenue v Parore [2021] NZDC 16363.

ended 30 September 2011 to 30 September 2014 inclusive (the GST periods during the last three years of his bankruptcy).

[96] The Commissioner submits that Mr Parore thereby received a “windfall” since the Commissioner is precluded from recovering that $55,673.51.

[97] In response counsel for Mr Parore submit that, as a matter of law, when the Commissioner’s application to extend time was declined, the information in Mr Parore’s NOPA (which showed no tax payable) was deemed to be correct. To suggest otherwise would be to look behind the deeming provision and the earlier decision of the High Court and to place an effective tax burden on Mr Parore different from what the law provides.

[98] I accept that, as a matter of law, the information in Mr Parore’s NOPA was deemed to be correct and this Court is not entitled to look beyond it. Mr Parore is therefore tax compliant. For that reason, I have not had regard to that portion of Mr Tully’s evidence under the heading “Total GST collected by Mr Parore that he has not returned”.

Is a declaration necessary?

[99] Mr Parore seeks a declaration in the following terms:

That the Commissioner of Inland Revenue has breached Mr Parore’s rights to silence as guaranteed by s 25(d) of the New Zealand Bill of Rights Act 1990 by filing charges against him after compelling him to provide information and then by continuing that prosecution until it was stayed.

[100] Counsel for Mr Parore argued that a declaration is necessary to communicate the breadth and nature of the breach suffered by Mr Parore.

[101] Mr Goosen submits that there have already been findings of a breach by the Commissioner (in both the District Court and the High Court) and there is no need for a declaration in this case.

[102] In any event, in the defendant’s view, the Commissioner’s breach is a breach of s 25(a) of the Bill of Rights. Counsel does not agree that the declaration sought is appropriate.

[103] I conclude that a declaration is necessary. While both the District Court and the High Court have found that Mr Parore’s fair trial rights were breached, neither made a declaration under the Bill of Rights to that effect.

Damages

[104] I have already concluded that a stay of the criminal proceedings was not adequate to vindicate the breach of Mr Goosen’s rights. I therefore go on to consider whether an award of damages is appropriate. That question raises two sub-issues:

(a) Can Bill of Rights damages include reimbursement of costs? and

(b) Are damages for emotional harm justified in this case?

Reimbursement of legal costs as damages

[105] The Commissioner accepts that Mr Parore has incurred legal costs of

$70,989.86 in relation to the charges against him in the criminal proceedings.

[106] The question is whether those costs are recoverable as damages under the Bill of Rights.

[107] Counsel for Mr Parore points to the judgment of Tipping J in Taunoa, where the Judge said:⁶⁰

[322] The other principal ingredient of an effective remedy is compensation. Everything relevant to compensation for what the plaintiff has suffered as a result of the breach is potentially available here. Economic loss clearly qualifies, as does compensation for non-economic or intangible damage or detriment. Nothing should be allowed under any head which is covered by the accident compensation legislation but otherwise compensation for all loss or damage, direct or indirect, is potentially capable of playing a part in the remedial package.

⁶⁰Taunoa v Attorney-General, above n 57, at [322] (footnotes and citations omitted).

...

[108] Mr Parore also relies on a more recent decision in Kwok v Rainey.⁶¹In that case Thomas J considered the question of litigation costs as damages, in a case involving a claim by the defendant against the law firm (GW) which had advised him on relationship property risks. The claim was brought in negligence and breach of contract.

[109] As Thomas J noted, the question of litigation costs as damages has been considered in New Zealand before: “[t]he general policy rule that costs may not be claimed as damages, with a few set exceptions, is well established.”⁶²

[110] The parties in Kwok v Rainey accepted that the two exceptions outlined in

Chick v Blackwell,⁶³applied in that case.

[111] Justice Thomas went on to note that even under those exceptions, the normal rules of causation, foreseeability and mitigation apply:⁶⁴

... Whether GW’s negligence caused a loss in a factual sense is a common- sense question of whether the breach was a sufficiently substantial cause of the plaintiff’s loss.

[112] The plaintiff says those tests are satisfied here. Mr Parore was a defendant in criminal proceedings that lasted from the filing of proceedings in August 2019 through to the eventual stay being upheld by the High Court in December 2021. During that period he was represented by counsel and was not in receipt of legal aid. This was a cost that Mr Parore would never have incurred but for the decision to lay charges. That decision was wrong from the outset.

[113] The Commissioner relies on Attorney-General v Van Essen,⁶⁵where the Court of Appeal observed that in most cases where public law damages have been awarded, the conduct concerned involved physical restraint, direct infliction of physical harm, or a prolonged or significant deprivation of liberty. The

⁶¹Kwok v Rainey [2020] NZHC 923 at [255].

⁶²At [255].

⁶³Chick v Blackwell [2013] NZHC 1525 at [152]–[153].

⁶⁴Kwok v Rainey, above n 61, at [256].

⁶⁵Attorney-General v Essen [2015] NZCA 22.

Court of Appeal went on to note that in a few cases where public law damages have been awarded where no physical damage or interference with liberty has occurred, this has typically been to reflect equivalence with tortious claims, “on the basis of clear pecuniary loss arising directly from the breach of the right itself.”⁶⁶

[114] Again, counsel for the Commissioner says that the financial cost for which Mr Parore seeks recovery results from the Commissioner’s decision to charge him, not from the breach of his right to silence.

[115] The Commissioner also relies on case law stating that it is exceptional to award compensation where the alleged breaches take place during the trial process itself.⁶⁷

[116] The Commissioner says that there were clear grounds for laying the charges and there was no evidence supporting the conclusion that Mr Parore was innocent and should never have been charged.

[117] The Commissioner particularly relies on the judgment of William Young J in

Brown v Attorney-General where the Judge said:⁶⁸

[141] I would be very sorry to see the courts assert a jurisdiction to award compensation in “exceptional” or “egregious” cases involving breach of fair trial rights. ...

[142] In my view, the New Zealand courts ought not to award compensation as a remedy for unfair trial process but rather should require such complaints to be raised with either the trial judge or on appeal. ...

[118] I have already rejected the arguments for the Commissioner that the damage suffered by Mr Parore arose from the decision to charge him rather than the breach of his right to silence; that this case is analogous to one where there is a breach of fair trial process, arising during the course of the trial; and that the Commissioner’s perception of Mr Parore’s guilt or innocence is relevant.⁶⁹None of those factors therefore imposes a barrier to awarding damages.

⁶⁶At [107].

Brown v Attorney-General [2003] 3 NZLR 335, (2003) 7 HRNZ 100 (HC) at [118]; and Currie v Clayton [2014] NZCA 511, [2015] 2 NZLR 195 at [82].
Brown v Attorney-General [2005] 2 NZLR 405 (CA) at [141]–[142] per William Young J. Cited with approval by the Court of Appeal in Currie v Clayton, above n 67, at [84].

⁶⁹See at [70]–[71], [78] and [84] above.

[119] I note that Brown v Attorney-General preceded the Supreme Court’s judgment in Taunoa. Taunoa remains the leading judgment on this point. The more recent judgment of Ellis J in Fitzgerald v Attorney-General is also relevant.⁷⁰There, Ellis J framed the relevant question as whether damages were necessary to provide effective redress. As the Court noted,⁷¹there is little by way of guidance in the exercise of the discretion in relation to Bill of Rights damages. While acknowledging that the leading authority remains the Supreme Court’s decision in Taunoa, Ellis J noted that it is difficult to discern in the various judgments in that case either a majority approach or one it is of much practical assistance to a first instance judge.

[120] In Fitzgerald, Ellis J acknowledged that Mr Fitzgerald’s pursuit of his criminal proceedings had the effect of bringing the infringement of his Bill of Rights rights to an end.⁷²The Judge also acknowledged that in many cases the cessation of any continuing breach may be remedially sufficient.

[121] Justice Ellis noted:⁷³

... In many cases where some part of the criminal process has misfired, I accept that error correction within the process itself will be regarded as sufficient vindication of the wrong. ...The correction ultimately afforded by the criminal justice process inadequately vindicates the rights breached and does not recognise the actual harm inherent in what happened to Mr Fitzgerald. The same can, I think, be said of a declaratory remedy.

[122] Those factors led Ellis J “inevitably” to the view that an award of damages was necessary to provide effective redress.⁷⁴

[123] I am satisfied that an award of damages is necessary to provide effective redress for the breach of Mr Parore’s right.

[124] I am also satisfied that it is appropriate that damages be awarded in respect of Mr Parore’s legal costs. The breach by the Commissioner was a “sufficiently substantial cause” of his loss.⁷⁵It is important to note that these are not awarded as

⁷⁰Fitzgerald v Attorney-General [2022] NZHC 2465.

⁷¹At [124].

⁷²At [128].

⁷³At [148].

⁷⁴At [149].

⁷⁵Kwok v Rainey, above n 61, at [256].

costs in the usual sense, in terms of the High Court Rules 2016. Rather, the actual costs incurred provide the appropriate basis for assessing the quantum of damages.

Emotional damage

[125] Mr Parore seeks an additional sum of damages for the emotional harm he has suffered.

[126] Mr Parore himself did not give evidence. However, evidence was proffered for the plaintiff from a clinical psychologist, Johan Laven, to the effect that Mr Parore’s exhibits symptoms that are common effects of mild to moderate stress. Mr Laven noted that most defendants he has worked with as a clinical psychologist during criminal proceedings report feelings including social withdrawal, shame, anxiety, pessimism, loss of trust in society and justice processes, anger, irritability, disturbed sleep, difficulty concentrating, and reduced energy, stamina and motivation. For approximately 10 per cent of Mr Laven’s clients these emotional responses result in feeling unable to maintain employment during Court processes. Further, Mr Laven referred to studies which found that being a defendant can lead to deteriorated mental health irrespective of the outcome of the trial.

[127] The Commissioner objected to the admissibility of Mr Laven’s evidence on the basis that:

(a) Insofar as Mr Laven sought to give evidence about the emotional harm suffered by Mr Parore, that was based on Mr Parore’s own self-reported statements and, as Mr Parore himself did not give evidence, these are hearsay statements.

(b) Insofar as Mr Laven’s evidence is of a more general nature, it is inadmissible under s 25(1) of the Evidence Act, because the Court as fact-finder is not likely to obtain substantial help from the opinion in understanding other evidence in the proceeding or in ascertaining any fact that is of consequence to the determination of the proceeding.

[128] Counsel for Mr Parore acknowledged that, as Mr Parore is not a witness, his statements to Mr Laven are hearsay, but says there is good reason not to exclude Mr Laven’s evidence:

(a) While based in part on Mr Parore’s statements, the evidence also draws on Mr Laven’s expertise in dealing with participants in the criminal process.

(b) Mr Laven’s report makes clear that Mr Parore does not have a well- developed level of understanding of the emotional impact the proceedings have had on him. Therefore, there can be no concerns that Mr Parore is malingering a severe impact, which he wishes to avoid being challenged on and giving evidence.

(c) It would be perverse to require Mr Parore to give evidence to support the claim when the very foundation of the claim is that his right to silence has been breached.

[129] To the extent that Mr Laven purported to give evidence directly of the emotional harm suffered by Mr Parore, I have excluded it. However, I accept that his evidence in more general terms about the experience of criminal defendants is relevant and admissible under s 25(1) of the Evidence Act.

[130] In addition, as counsel for the Commissioner conceded, the fact that a defendant will suffer emotional harm as a consequence of a criminal proceeding is so self-evident that it can be the subject of judicial notice. I am prepared to take judicial notice of that fact and accept that the criminal process to which Mr Parore was subject would, almost inevitably, have resulted in some emotional harm.

[131] I conclude that that emotional harm should be the subject of a separate, modest award of damages. I award $5,000 damages in that respect.

Orders

[132] I make the following orders:

(a) A declaration that the Commissioner of Inland Revenue has breached Mr Parore’s right to silence as guaranteed by s 25(d) of the New Zealand Bill of Rights Act 1990 by filing charges against him after compelling him to provide information and then by continuing that prosecution until it was stayed.

(b) Damages for legal costs incurred in the sum of $70,989.86.

(c) Damages for emotional harm in the sum of $5,000.

Costs

[133] My preliminary view is that the plaintiff is entitled to costs on a 2B basis. If the parties are unable to agree costs, they should file memoranda of no more than five pages within 14 working days of the date of this judgment.

Gwyn J

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