SUPREME COURT OF NEW ZEALAND COURT OF APPEAL OF NEW ZEALAND JUDICIAL COMMITTEE OF THE PRIVY COUNCIL
HOLDEN v INLAND REVENUE COMMISSIONER (NZ)
MENNEER v INLAND REVENUE COMMISSIONER (NZ)
Haslam J - Wild CJ, Turner P and Richmond J - Lord Wilberforce, Lord Diplock, Lord Cross of Chelsea, Lord Salmon and Sir Eric Sachs
7 March 1972, Wellington - 29 September 1972, Wellington - 6 May 1974 - London
Haslam J By consent, these two cases stated were heard together. It was agreed that they came before this Court as test cases raising identical questions covering the correctness of the assessments of each objector under the Land and Income Tax Act 1954 (NZ).
Counsel agreed that the oral evidence which was called by way of supplementation to the cases stated was relevant to each, and that the only essential difference between the two disputes were the figures and numbers of transactions. The objectors called the evidence of Mr S G Longuet of Wellington, sharebroker, Professor J W Rowe who occupies the Chair of Economics at Massey University, Dr G A Lau, and each objector. The Commissioner called Mr S W Johns, an Officer of the Reserve Bank in Wellington, and Mr F H Lobb, Senior Investigating Officer of the Inland Revenue Department, with a special responsibility for the administration of estate and gift duties. I find (as was accepted by both counsel) that no questions of credibility arise in any instance, and that there have therefore been minimal advantages in having seen and heard the witnesses. In several cases, the evidence-in-chief was typed in advance and, after the oath had been administered, read by the witness as part of his testimony. Dr Lau supplemented his typescript of evidence-in-chief by certain further evidence in which, by consent, he incorporated and adopted afresh his testimony in an earlier case involving similar issues. Every witness was cross-examined. Legal argument submitted to me on the first day of hearing was confined to directing my attention to Commissioner of Inland Revenue v Hunter [1970] NZLR 116 , which it was agreed was binding upon this Court in the instant case.
The objectors moved on the first day for an order removing the cases stated to the Court of Appeal in terms of s 64(d) of the Judicature Act 1908 (NZ). The Commissioner conceded that I had jurisdiction to make this order, which he nevertheless opposed, but counsel indicated that he was anxious for some direction from me about the attitude he should adopt thereon in the public interest. Both sides appeared to agree that an authoritative ruling is desired as early as possible, as many taxpayers will be affected by the ultimate decision, but that it is likely that this result will be reached only after the appellate processes have been exhausted.
After careful consideration I decided to refuse to make the order, and so pronounced on the second day of hearing. It appeared to me that the somewhat lengthy evidence lent itself to a careful selection at this level of relevant material which could be of assistance in legal argument at a later stage. I accordingly invited counsel to co-operate in submitting to me an agreed statement of facts which was accepted by both sides in supplementation of the narrative in the cases stated. I have now received that document which is set out below.
By understandable mistake on the part of one witness, he removed a document (Reserve Bank Bulletin 1966) when he retired after testifying and it was therefore not available for production later. I accordingly reserved leave to tender this document at the resumed hearing. While not disparaging the value of this publication, I decided that its production, without its being limited to a specific topic to which a witness could depose and adopt as opinion evidence, would merely serve to widen and confuse an already lengthy narrative. The objectors wished to apply for the recall of the Commissioner ' s witness, Mr Johns, to enable him to be cross-examined upon this document, but this course was objected to by the Commissioner, and as he would not have been available at the initial hearing for that purpose, (as he was the first witness to be called as a matter of convenience), I was not prepared to allow a lengthy inquiry at this stage if the objectors were unwilling to inform me of the specific issue that it was desired to clarify. I accordingly rejected the document and refused the application to recall Mr Johns.
The first case stated on the objection of Mr Duncan Holden reads as follows:
1 At all material times the objector resided at Havelock North where he carried on the business of farmer.
2 The balance date of the objector is 30 June and the Commissioner accepts a return of income for any year ending on 30 June as being in respect of the year ended on the previous 31 March.
3 In furnishing returns of income to the Commissioner it was declared on behalf of the objector that the incomes derived by him during the years ended on 30 June 1965 and 1966 were as follows:
| Year Ended 30 June 1965 | |
| Assessable Income | £ 1812. 1. 7 |
| Year Ended 30 June 1966 | £ 6246.14.10 |
4 Subsequently the Commissioner ascertained that during the years ended on 30 June 1965 and 1966 the objector purchased overseas securities with overseas currency and shortly thereafter sold the said securities in New Zealand for New Zealand currency. Details of such transactions are as follows:
| Year Ended 30 June 1965 | |||
|---|---|---|---|
| Date | Purchase Price (Sterling) | Selling Price (NZ) | Difference between Purchase Price and Selling Price at Official |
| 18.5.65 Bought | Rate | ||
| £ 596.15.0 6% | |||
| Conversion Loan | |||
| Stock 1972 | £ 596.15. 0 | ||
| 18.5.65 Sold | |||
| £ 596.15.0 6% | |||
| Conversion Loan | |||
| Stock 1972 | £ 668. 7. 6 | £ 71.12. 6 | |
| 18.5.65 Bought | |||
| £ 4000 6% | |||
| Conversion Loan | |||
| Stock 1972 | £ 4020. 0. 0 | ||
| 18.5.65 Sold | |||
| £ 4000 6% | |||
| Conversion Loan | |||
| Stock 1972 | £ 4500. 0. 0 | £ 480. 0. 0 | |
| £ 4616.15. 0 | £ 5168. 7. 6 | £ 551.12. 6 | |
| Year Ended 30 June 1966 | |||
| 19.7.65 Bought | |||
| £ 5810.19.0 5% | |||
| Exchequer Stock | |||
| 1967 | £ 5840. 0. 0 | ||
| 19.7.65 Sold | |||
| £ 5810.19.0 5% | |||
| Exchequer Stock | |||
| 1967 | £ 6595. 8. 6 | £ 755. 8. 6 | |
| 20.7.65 Bought | |||
| £ 995.0.6 5% | |||
| Exchequer Stock | |||
| 1967 | £ 1000. 0. 0 | ||
| 20.7.65 Sold | |||
| £ 995.0.6 5% | |||
| Exchequer Stock | |||
| 1967 | £ 1129. 7. 0 | £ 129. 7. 0 | |
| 20.7.65 Bought | |||
| £ 4000 5% | |||
| Exchequer Stock | |||
| 1967 | £ 4020. 0. 0 | ||
| 20.7.65 Sold | |||
| £ 4000 5% | |||
| Exchequer Stock | |||
| 1967 | £ 4540. 0. 0 | £ 520. 0. 0 | |
| 23.7.65 Bought | |||
| £ 602 5% | |||
| Exchequer Stock | |||
| 1967 | £ 602. 0. 0 | ||
| Date | Purchase Price (Sterling) | Selling Price (NZ) | Difference between Purchase Price and Selling Price at Official |
| Year ended 30 June 1966 - continued | Rate | ||
| 23.7.65 Sold | |||
| £ 602 5% | |||
| Exchequer Stock | |||
| 1967 | £ 681. 0. 0 | £ 79. 0. 0 | |
| 5.8.65 Bought | |||
| £ 10945.5.6 5% | |||
| Exchequer Stock | |||
| 1967 | £ 11000. 0. 0 | ||
| 5.8.65 Sold | |||
| £ 10945.5.6 5% | |||
| Exchequer Stock | |||
| 1967 | £ 12447.12. 3 | £ 1477.12. 3 | |
| 9.8.65 Bought | |||
| £ 206.2.6 5% | |||
| Exchequer Stock | |||
| 1967 | £ 206. 2. 6 | ||
| 9.8.65 Sold | |||
| £ 206.2.6 5% | |||
| Exchequer Stock | |||
| 1967 | £ 233.19. 0 | £ 27.16. 6 | |
| 22.4.66 Bought | |||
| £ 500 6 ½ % | |||
| Exchequer Stock | |||
| 1969 | £ 500. 0. 0 | ||
| 22.4.66 Sold | |||
| £ 500 6 ½ % | |||
| Exchequer Stock | |||
| 1969 | £ 537. 3. 2 | £ 37. 3. 2 | |
| 15.6.66 Bought | |||
| £ 1500 6 ½ % | |||
| Exchequer Stock | |||
| 1969 | £ 1500. 0. 0 | ||
| 15.6.66 Sold | |||
| £ 1500 6 ½ % | |||
| Exchequer Stock | |||
| 1969 | £ 1643. 3. 0 | £ 143. 3. 0 | |
| £ 24668. 2. 6 | £ 27837.12.11 | £ 3169.10. 5 |
5 The Commissioner considered that the said profits of £ 551.12.6 and £ 3169.10.5 referred to in the previous paragraph hereof were assessable income of the objector. Accordingly the Commissioner made amended assessments of the amounts on which in his judgment income tax ought to be levied on the objector in respect of the years ended on 30 June 1965 and 1966 respectively and the amounts of such tax for those years as follows:
| Year Ended 30 June 1965 | |
|---|---|
| Assessable income returned | £ 1812. 1. 7 |
| Add profit on sale of overseas securities | 551.12. 6 |
| £ 2363.14. 1 | |
| £ 583. 7. 0 | |
| Income Tax | |
| Year Ended 30 June 1966 | |
| Assessable income returned | £ 6246.14.10 |
| Add profit on sale of overseas securities | £ 3169.10. 5 |
| £ 9416. 5. 3 | |
| Income Tax | £ 4938. 4. 0 |
6 The objector objected to the assessments referred to in the previous paragraph hereof on the grounds set forth in his solicitors ' letter dated 2 December 1969. A copy of such letter is annexed hereto and marked " B " .
7 Upon such objection being disallowed the Commissioner was required to state this case.
8 Subsequently the Commissioner recalculated the said profits from the sale of overseas securities referred to in paragraphs 4 and 5 hereof and in doing so used the then prevailing official buying rate of £ STG 100.0.0 = £ NZ 100.7.6. Details of such calculations are as follows:
Year Ended 30 June 1965
| Purchase Price (Sterling) | Telegraphic Transfer Buying Rate (NZ) | Selling Price (NZ) | Difference between Purchase Price and Selling Price at Official Rate |
| £ 4616.15. 0 | £ 4634. 1. 3 | £ 5168. 7. 6 | £ 534. 6. 3 |
Year Ended 30 June 1966
| Purchase Price | Telegraphic Transfer Buying Rate (NZ) | Selling Price (NZ) | Difference between Purchase Price and Selling Price at Official Rate |
| £ 24668. 2. 6 | £ 24760.12. 7 | £ 27837.12.11 | £ 3077. 0. 4 |
9 Accordingly on 28 July 1970 the Commissioner made amended assessments of the amounts on which in his judgment income tax ought to be levied on the objector in respect of the years ended on 30 June 1965 and 1966 respectively and the amounts of such tax for those years as follows:
Year Ended 30 June 1965
| Assessable income returned | £ 1812. 1. 7 |
|---|---|
| Add profit on sale of overseas securities | 534. 6. 3 |
| £ 2346. 7.10 | |
| Income Tax | £ 576.10. 1 |
Year Ended 30 June 1966
| Assessable income returned | £ 6246.14.10 |
|---|---|
| Add profit on sale of overseas securities | 3077. 0. 4 |
| £ 9323.15. 2 | |
| Income Tax | £ 4875. 9. 3 |
10 The objector restated his objection to the amended assessments referred to in the previous paragraph hereof by letter from his solicitors dated 11 August 1970. A copy of such letter is annexed hereto and marked " C " . Such objection was disallowed and the Commissioner was required to state this case.
11 The objector contends (a) That neither the sum of £ 534.6.3d nor any part thereof included in the amended assessment for the year ended 30 June 1965 is income; (b) That neither the sum of £ 3077.0.4d nor any part thereof included in the amended assessment for the year ended 30 June 1966 is income; (c) The business of the objector does not, nor did it at any material time include dealing in any personal property, and, in particular, does not nor did it at any material time comprise dealing in stocks or securities; (d) That none of the stock or securities referred to in such amended assessments, and no property of any kind, was acquired by the objector for the purpose of selling or otherwise disposing of it; (e) No profits or gains were derived by the objector from the carrying on, or the carrying out of any undertaking or scheme entered into or devised for the purpose of making a profit, with respect to stock or securities or otherwise; and (f) The transfer by the objector of assets in the United Kingdom to New Zealand did not yield any profit or gain to the objector within the meaning of s 88 of the Land and Income Tax Act 1954 or otherwise.
12 The Commissioner contends (1) That the sums referred to in para 9 hereof as " profit on sale of overseas securities " constituted assessable income of the objector for the respective years in question under s 88(1)(c) of the Land and Income Tax Act 1954 and, in particular, constituted (i) profits or gains derived from the sale of personal property which was acquired for the purpose of selling it, and (ii) profits or gains derived from the carrying on or carrying out of an undertaking or scheme entered into or devised for the purpose of making a profit; (2) That such sums constituted assessable income of the objector under s 88(1)(g) of the said Act; (3) That such sums constituted assessable income of the objector according to ordinary concepts.
13 The question for the determination of this Honourable Court is whether the Commissioner acted incorrectly in making the assessments referred to in par 9 hereof and, if so, then in what respects should such assessments be amended.
In the case stated on the objection of Mr M C Menneer the concluding paragraph 11 (Commissioner ' s contentions) and 12 are for practical purposes identical in wording with paragraph 12 and 13 respectively in the Holden appeal as set out above. The factual narrative in the Menneer Case is recorded as follows in the case stated:
1 During the 1964 calendar year the objector immigrated to New Zealand from the United Kingdom. At material times the objector resided at Hastings where he was employed as an orchard worker. Subsequently he has resided at Tuki Tuki, No 2 RD Hastings, where he carried on the business of market gardener.
2 In furnishing a return of income to the Commissioner it was declared on behalf of the objector that the income derived by him from employment as an orchard worker during the year ended on 31 March 1966 was £ 638.12.0.
3 Subsequently the Commissioner ascertained that during the year ended on 31 March 1966 the objector purchased overseas securities with overseas currency and shortly thereafter sold the said securities in New Zealand for New Zealand currency. Details of such transactions are as follows:
| Date | Purchase Price (Sterling) | Selling Price Less Stamp Duty and Brokerage Charges (NZ Currency) | Difference between Purchase Price and Selling Price |
|---|---|---|---|
| 21.5.65 Bought £ 700 | |||
| Sterling | |||
| Bonds | £ 700. 0. 0 | ||
| 21.5.65 Sold £ 700 | |||
| Sterling | |||
| Bonds | £ 782. 2. 6 | £ 82. 2. 6 | |
| 24.6.65 Bought | |||
| £ 4975.2.6 5% | |||
| Exchequer Stock | |||
| 1967 | £ 4975. 2. 6 | ||
| 24.6.65 Sold | |||
| £ 4975.2.6 5% | |||
| Exchequer Stock | |||
| 1967 | £ 5606.19. 0 | £ 631.16. 6 | |
| 8.7.65 Bought | |||
| £ 1000 5% | |||
| Exchequer Stock | |||
| 1967 | £ 1000. 0. 0 | ||
| 8.7.65 Sold | |||
| £ 1000 5% | |||
| Exchequer Stock | |||
| 1967 | £ 1123.11. 6 | £ 123.11. 6 | |
| 8.2.66 Bought | |||
| £ 2000 5% | |||
| Exchequer Stock | |||
| 1967 | £ 2000. 0. 0 | ||
| 8.2.66 Sold | |||
| £ 2000 5% | |||
| Exchequer Stock | |||
| 1967 | £ 2185. 0. 0 | £ 185. 0. 0 | |
| £ 8675. 2. 6 | £ 9697.13. 0 | £ 1022.10. 6 |
Certified copies of the objector ' s sharebrokers ' contract notes in respect of the aforementioned transactions are annexed hereto and marked " A " . According to the objector ' s sharebrokers these contract notes are the only written record of the transactions, however, when such information was first obtained by the Commissioner the sharebrokers ' records showed that British securities were purchased on behalf of the objector on the dates indicated above. The overseas securities referred to would be in the nature of bearer stock, ownership of which would pass by delivery and the parcels of securities bought and sold would not be identifiable by descriptive numbers.
4 The Commissioner considered that the said profit of £ 1022.10.6 referred to in the previous paragraph hereof was assessable income of the objector. Accordingly the Commissioner made an amended assessment of the amount on which in his judgment income tax ought to be levied on the objector in respect of the year ended on 31 March 1966 and the amount of such tax for that year as follows:
| Assessable income returned | £ 638.12. 0 |
|---|---|
| Add profit on sale of overseas securities | £ 1022.10. 6 |
| £ 1661. 2. 6 | |
| Income Tax | £ 274.14. 6 |
5 The objector objected to the assessment referred to in the previous paragraph hereof on the grounds set forth in his accountants ' letter dated 1 December 1969. A copy of such letter is annexed hereto and marked " B " .
6 Subsequently the Commissioner recalculated the said profits from the sale of overseas securities referred to in paragraphs 3 and 4 hereof and in doing so used the then prevailing official buying rate of £ STG 100.0.0 = £ NZ 100.7.6. Details of such calculations are as follows:
| Purchase Price (Sterling) | Telegraphic Transfer Buying Rate (NZ) | Selling Price Less Charges (NZ) | Difference between Purchase Price and Selling Price at Official Rate |
| £ 8675. 2. 6 | £ 8707.15. 0 | £ 9697.13. 0 | £ 989.18. 0 |
7 Accordingly on 3 September 1971 the Commissioner made an amended assessment of the amount on which in his judgment income tax ought to be levied on the objector in respect of the year ended on 31 March 1966 and the amount of such tax for that year as follows:
| Assessable income returned | £ 638.12. 0 |
|---|---|
| Add profit on sale of overseas securities | £ 989.18. 0 |
| £ 1628.10. 0 | |
| Income Tax | £ 264. 9. 7 |
8 The objector restated his objection to the amended assessment referred to in the previous paragraph hereof by letter from his solicitors dated 3 September 1971. A copy of such letter is annexed hereto and marked " C " .
9 Upon such objection being disallowed the Commissioner was required to state this case.
10 The objector contends (a) That neither the sum of £ 989.18.0 nor any part thereof included in the amended assessment for the year ended 30 June 1966 is income; (b) The business of the objector does not, nor did it at any material time include dealing in any personal property, and, in particular, does not nor did it at any material time comprise dealing in stocks or securities; (c) That none of the stock or securities referred to in such amended assessments, and no property of any kind, was acquired by the objector for the purpose of selling or other disposing of it; (d) No profits or gains were derived by the objector from the carrying on, or the carrying out of any undertaking or scheme entered into or devised for the purpose of making a profit, with respect to stock or securities or otherwise; (e) The transfer by the objector of assets in the United Kingdom to New Zealand did not yield any profit or gain to the objector within the meaning of s 88 of the Land and Income Tax Act 1954 or otherwise; and (f) The official exchange rate, as referred to in paragraph 6 hereof, is not relevant in determining whether or not a profit or gain was derived by the objector. 11. The Commissioner contends (1) That the sums referred to in par 7 hereof as " profit on sale of overseas securities " constituted assessable income of the objector for the respective years in question under s 88(1)(c) of the Land and Income Tax Act 1954 and, in particular, constituted (i) profits or gains derived from the sale of personal property which was acquired for the purpose of selling it, and (ii) profits or gains derived from the carrying on or carrying out of an undertaking or scheme entered into or devised for the purpose of making a profit; (2) That such sums constituted assessable income of the objector under s 88(1)(g) of the said Act; and (3) That such sums constituted assessable income of the objector according to ordinary concepts.
12 The question for determination of this Honourable Court is whether the Commissioner acted incorrectly in making the assessment referred to in par 7 hereof and, if so, then in what respects should such assessments be amended.
By way of supplementation of the above narratives, counsel for the objectors and for the Commissioner are agreed that:
" 1. The facts as set out in the two cases stated accurately record the incomes as returned, the assessments made by the Commissioner in each case, and the basis of those assessments. The details relating to the transactions involving the purchase and sale of United Kingdom securities are correctly recorded in the cases stated and in the exhibits accompanying them.
" 2. The position relating to exchange control during the period in question is accurately and comprehensively described in the evidence of Mr S W Johns.
" 3. The courses of action open to New Zealand residents during the period in question who wished to obtain New Zealand currency and had funds in the sterling area are set out in par 7 of Mr S W Johns evidence-in-chief:
" 7. During the period 1 January 1964 to 16 June 1966 New Zealand residents lawfully possessing funds in the sterling area and wishing to obtain New Zealand currency had three courses of action open to them: (a) The foreign currency could be remitted to New Zealand through the New Zealand banking system at the official rate of exchange, (b) The foreign currency could be sold to another New Zealand resident provided it was effected at the current official rate of exchange.
(3) The foreign currency could be used to purchase foreign assets which were then sold in New Zealand. The most common type of asset was foreign sterling area securities but subject to customs and other requirements the holders of foreign currency could bring other assets such as motor vehicles under the non remittance scheme to New Zealand; and subsequently sell them for New Zealand currency. '
" 4. There is no evidence before the Court as to the existence of a ' black-market ' for the direct transfer of overseas currency to New Zealand currency, and accordingly there is no suggestion in this case of a commercial rate of exchange based on black market transactions.
" 5. The evidence establishes that during the relevant period there was a very considerable volume of transactions by way of purchase of sterling area securities for sterling and their sale to New Zealand residents for New Zealand currency. In all of the present transactions the purchase and sale were virtually simultaneous and in each case were concluded on the same day.
" 6. The objectors contend that the purchase and sale transactions were simply and essentially a vehicle for the remission of sterling funds to New Zealand funds, while the Commissioner contends that the transactions were commercial transactions producing their own gain.
" 7. The evidence of Mr Longuet establishes that in the transactions with which he was concerned the price agreed upon between the seller and buyer of sterling securities for New Zealand currency was based on the demand by New Zealand residents for sterling funds. Stockbrokers were able to arrive at a price on any given day in accordance with the usual law of supply and demand.
" 8. The difference between the amount realized in New Zealand currency following the purchase and sale of sterling securities and the amount obtainable by remitting the sterling to New Zealand through the banking system is, for convenience, referred to as the ' premium ' on the sterling. The premium obtainable varied over a period of time in accordance with the supply and demand, and also varied according to the particular securities bought and sold. The position is described in the evidence of Professor J W Rowe and of Dr G A Lau, but counsel for the Commissioner cannot without abandoning his main argument accept the terminology of ' exchange rate ' employed by them.
" 9. The mechanics of the transactions with which Mr S G Longuet was concerned during the period in question involved: (a) reaching the normal market rate for the United Kingdom securities on any given day; (b) at the end of the day cabling instructions to his London agents for the purchase and sale of United Kingdom securities; (c) the debiting of the buyers sterling account with the cost of purchasing the United Kingdom securities; and (d) the crediting of his New Zealand account with the proceeds of sale of those securities. The first transaction set out in the Holden Case stated may be treated as representative of all the transactions in both of the cases stated.
" 10. Each counsel reserves the right to make limited submissions on the facts. "
Both sides agreed that the only factual problems lay in the correct inferences to be drawn from the primary facts as deposed to by the witnesses, and that neither side would be assisted if I were to exceed the narrow limits prescribed by the arguments of counsel. Each reserved the right to raise later such contentions as might be open on the evidence.
The objectors submitted on the strength of the evidence of Professor Rowe in pars 4, 5, 7, 8 and 9 of his examination-in-chief, and of Dr Lau par 2 evidence-in-chief and elsewhere, that during the material period there was a legitimate commercial exchange rate (or rates) in New Zealand which differed from the official exchange rate (or rates); that the testimony on this point was relevant to an omission in the material before the Court in the Hunter Case, wherein McCarthy J (pp 128 and 129) made specific reference to the topic; and that on appeal, there was ample material for the Court to draw this inference accordingly. It was conceded that this Court must accept the decision in Hunter ' s Case as binding and as affording a complete answer to the issues raised in the cases stated, and that, although the relevant finding of fact in Hunter ' s Case did not fall within the ambit of binding precedent in the present instance, each taxpayer now before me followed a course so closely approximating the business procedure under review in Hunter ' s Case that it could not be argued that the shares in question were not acquired by the taxpayer " for the purposes of selling " the same property in terms of s 88(1)(c) of the Land and Income Tax Act 1954.
The Commissioner joined issue on the correct interpretation to be placed upon the reasons expressed by McCarthy J in Hunter ' s Case, and on that aspect I purposely refrain from commenting. He further contended that the majority judgments in Hunter ' s Case rejected the submission that the constituent elements of transactions in securities could be examined in order to measure the value of sterling used by the objector in each instance. By way of foreshadowing the main argument to be presented at a later stage, the Commissioner ' s counsel contended that " the evidence did not establish that, on the day of purchase of any particular parcel of stock the sterling used for that purpose was worth in New Zealand currency a quantifiable sum above its conversion at official exchange rates " . I again quote counsel in noting the Commissioner ' s submission that the quantum of any premium depended to some extent on the particular asset purchased.
The Commissioner also relied upon the evidence given about the conversion of overseas income into New Zealand currency for income tax purposes and the valuation of overseas assets in deceased estates with particular reference to sterling funds. I was referred to the testimony of Mr Lobb and of Mr Holden about the method employed by his Accountants in calculating for tax purposes the amount of his income earned abroad. In every instance the official exchange rate had been used and that fact may be regarded as unchallenged. I do not think that I can usefully comment at length upon these contending submissions, the result of which in part depends upon the interpretation to be placed on the relevant passage of the testimony.
In this setting it is inappropriate to embark upon a minute examination of the reasons upon which the majority decision was based in Hunter ' s Case. As the Commissioner contended from the outset that the latter decision precluded my reaching any other result, and the objectors (with a reservation of all rights about proceeding further and arguing the matter afresh) agree with this approach by me to the cases stated, I answer " No " to the question as expressed, viz " whether the Commissioner acted incorrectly " .
By consent, and at the invitation of both counsel, I invoke r 34(1) of the Court of Appeal Rules 1955 and direct that no security for costs need be given on either appeal from this judgment in terms of that rule. In addition, whatever the ultimate result of this litigation, I fix costs on each case stated at $100, viz $200 in all, and the incidence of such costs must abide the ultimate event.
Appeal
The taxpayers appealed to the Court of Appeal of New Zealand (Wild CJ, Turner P and Richmond J), which dismissed the appeal with costs .
For the objectors: Sainsbury, Logan & Williams , Napier.
For the Commissioner: Crown Law Office , Wellington.
Dr Barton , for the appellants.
Dr Richardson , for the respondent Commissioner.
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