Hope in 20 year tax stoush

David Hampton. Photo / Geoff Sloan

Businessman takes heart from Court of Appeal ruling over deal by IRD officials.

A businessman is confident he can win a 20-year, $4 million legal battle with Inland Revenue.

David Hampton was running a chain of pre-school centres in Christchurch - Chesterfields Preschools - when he ran into tax troubles.

He claims in court documents that the Inland Revenue Department owed him a series of refunds.

While he awaited his due cash, a tax bill was being racked up that IRD officials said would be put on hold until he got his refunds, avoiding late-payment penalties, he says.

But Mr Hampton, 53, says the government department reneged on the deal, leaving him with a tax bill that spiralled out of control from 1993 to 2006 to reach $4 million in unpaid tax and late filing penalties.

For the last two decades, Mr Hampton has been fighting his predicament that he says has cost him his business and more than $500,000 in legal fees.

Now, a Court of Appeal judgment has given him hope.

The ruling, released this week, says Mr Hampton may have a case to launch misfeasance proceedings against tax officials, claiming they were negligent in their duties and went back on promises he could pay his tax bill later.

He has won other court battles to avoid paying the $4 million tax bill, and two prior High Court rulings have also ruled in his favour.

Mr Hampton yesterday welcomed the Court of Appeal's conclusions that his claim against individual IRD employees has a chance of success.

"It's a good result for the taxpayer," he said, despite the Appeal Court ruling against two of his claims - one against the IRD, and the other against the Crown lawyer who represented the tax department through various court proceedings. The ruling says if Mr Hampton, a former law student, stops trying to represent himself in the "difficult and complex" case and forks out for "properly qualified" counsel, he could - with leave of a High Court judge - take 20 individual IRD workers to court for alleged misfeasance.

Mr Hampton is criticised in the Court of Appeal's 60-page ruling for a long-winded and "difficult, if not impossible, to understand" amended statement of claim.

But it was that confusing and rambling document which left appeal judges thinking that it may just contain the germ of a misfeasance claim.

Given that the IRD had "substantial success" at the appeal, Mr Hampton has been left to pick up costs. He's vowed, however, to dig deeper to hire a new counsel and try to head back to the High Court.

IRD write-offs

• In the year ended June 2011, $785.4 million of tax debt was written off because taxpayers were unable to pay.
• That was an increase of more than $118 million from the amount written off in June 2010.
• For year ending June 2009, $722.3 million written off.