Provident Insurance Corporation Ltd v The Commissioner of Inland Revenue

JurisdictionNew Zealand
CourtHigh Court
JudgeChurchman J
Judgment Date08 May 2019
Neutral Citation[2019] NZHC 995
Docket NumberCIV-2018-404-1199
Date08 May 2019

[2019] NZHC 995




Under the Tax Administration Act 1994

In the Matter of the Goods and Services Tax Act 1985

Provident Insurance Corporation Limited
The Commissioner of Inland Revenue

L McKay and S Armstrong for Plaintiff

A Goosen and E Venter for Defendant

Statutory Interpretation, Taxation — premiums paid on insurance policies — meaning of “financial services” — Goods and Services Tax Act 1986

The Court held that there was no discernible coherent link connecting all of the financial services listed in s3(1) GST Act. The fact that Provident may be subject to obligations under the Credit Contracts and Consumer Finance Act 2003 in relation to the two insurance products, did not transform the insurance policies into a credit contract. If Parliament had intended the use of the words “security” and “indemnity” in a very general sense then the words surrounding it (guarantee, indemnity and bond) would be unnecessary. “Security” meant security over real or personal property.

The financial service in question was the provision of a contract of insurance. The parties were the insurer and the insured. A contract of insurance was not a credit contract. The credit contract was solely between the financier and the insured. There was no contract of indemnity between the insurer and the financier, and the fact that the financier might benefit as a result of the provision of insurance services to the insured did not result in the insurer supplying exempt services to the financier.

The service being provided by Provident was that of an insurer. If an insured event happened, then payments were made under the CCI and GAP policies to a financier. The payments that Provident made were not different in character to the payments that it would make under its mechanical breakdown insurance or comprehensive motor vehicle insurance policies.

It was paying out under a contract of insurance because the risk it undertook to provide cover for had eventuated. The fact that as between the insured and the financier, the proceeds of the CCI and GAP polices extinguished an obligation in respect of principal and interest did not transform the nature of the proceeds of the policy. They still remained, from Provident's viewpoint, payments made under an insurance policy because the risk event covered by that policy had occurred.

The premium was payable by the insured at the commencement of the insurance contract. It was that premium that was subject to GST. The service being provided was insuring the identified risk. That was not a financial service. In that respect, the service provided by Provident under the CCI and GAP policies was identical to the service it provides under its other policies.

The purpose of the GST Act was to levy a consumption tax on the widest possible range of goods and services with as few exemptions as possible. Payments of interest and principal were not payments for the supply of goods and services and were intended to be exempt. There was no identifiable policy underlying s3(1) GST Act that differed from the overall policy of the Act.

Provident had not shown that, on the balance of probabilities, the Commissioner's assessments were wrong, the proceedings were dismissed

Table of Contents

What this case is about




The defendant's challenge


The plaintiff's response




Life insurance component


The issues


The arguments




The policies


The GAP policy




Statutory interpretation —relevant legal principles




Prior legal interpretations


Sections 3(1)(ka) and 3(1)(l)




Other matters




What this case is about

This is a case of statutory interpretation. The Goods and Services Tax Act 1985 (the Act) imposes a tax on the supply in New Zealand of goods and services by a registered person in the course or furtherance of a taxable activity. Along with extensively defining financial services, s 3 of the Act contains a number of exemptions in respect of them.


Provident Insurance Corporation Limited (Provident) offers insurance products. Some of those products are designed to mitigate risk in relation to the repayment obligations for credit contracts for the purchase of motor vehicles.


Two of those products are in issue in this case:

  • (a) the Credit Contract Indemnity (CCI) policy which covers a borrower's loan repayments upon the occurrence of specified insured events; and

  • (b) the Guaranteed Asset Protection (GAP) policy which, in the event a vehicle is written off in an accident, will cover the difference between the total loss pay-out received from a comprehensive motor vehicle insurer and any outstanding loan balance.


The question for the Court to decide is whether the premia paid for these two policies are subject to GST output tax, or exempt from tax under the financial services exemption.


Before addressing this issue, I will deal with a preliminary issue that arose in relation to evidence.


The defendant has challenged the admissibility of a brief of evidence filed by the plaintiff from Robin Moncrieff Oliver.


Mr Oliver is an acknowledged expert in tax policy. His evidence consists largely of expressions of opinion.


Section 25 of the Evidence Act 2006 determines whether or not his evidence is admissible in whole or in part. Section 25 relevantly provides:

25 Admissibility of expert opinion evidence

(1) An opinion by an expert that is part of expert evidence offered in a proceeding is admissible if the fact-finder is 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.


As there is no dispute of relevant fact in these proceedings, the Court, in terms of s 25, does not need to “ascertain any fact”.


The issue is, therefore, whether or not the Court is likely to obtain substantial help from the opinions of Mr Oliver in relation to other evidence in the proceeding.


The only other witness who gave evidence on behalf of the plaintiff was Mr Owens. His evidence was largely non-contentious. He described the nature of the operations of the plaintiff and gave what he described as “the business context” for the two insurance policies which are the subject of these proceedings: the CCI and GAP policies. He also explained the process for selling these insurance products and settling claims under them, and further gave an outline of the tax dispute as he saw it.


The only other witness called was Marie Pallot who was called by the defendant. She, like Mr Oliver, was an acknowledged expert in tax policy and was called to give evidence solely in case the Court held Mr Oliver's evidence to be admissible. Her evidence was not directed at assisting the Court to understand Mr Owen's evidence but, like Mr Oliver's evidence, was opinion evidence about the policies which were said to underlie the “financial services” exception in s 3 of the Act.


The parties had initially intended to have the question of admissibility dealt with by way of preliminary hearing. However, the submissions and books of authorities relied on were filed very late: the defendant's on the last working day before the hearing, and the plaintiff's on the morning of the hearing. It was, therefore, not possible to address this matter sensibly at the start of the hearing.


At the request of the parties, the evidence was, therefore, admitted de bene esse. It was subject to the proviso that the Court saw some force in the submission that, on the face of things, the evidence appeared to be in the nature of legal submissions and, accordingly, inadmissible.

The defendant's challenge

Mr Goosen, for the defendant, submitted that the Courts have consistently expressed their disapproval of legal submissions being included in witness statements in proceedings of this nature. He referred to the observations of O'Regan J in Commissioner of Inland Revenue v BNZ Investments Ltd: 1

We agree that both witness statements contain much in the nature of submissions on legal issues. The difficulty which this poses is that it invites a response from the Commissioner from another tax expert essentially providing counter submissions. We do not see it as helpful to the Court to have the roles of counsel and expert witnesses intermingled in this way.


Mr Goosen objected to the fact that Mr Oliver's brief introduced into evidence a number of documents such as a GST commentary/guide prepared for the insurance industry 2 and three Government discussion documents on GST. 3 He submitted that

the Courts only take into account a limited number of sources of extrinsic materials such as Hansard, Bills, explanatory notes to Bills or reports from Parliament's Select Committee. Mr Goosen also referred to the disapproval expressed by the Supreme Court in the case of Penny v Commissioner of Inland Revenue of the practice of including what are legal submissions in the brief of expert taxation witnesses. 4 He submitted that the relevant intention was that of Parliament not that of experts or officials, and that it was for counsel to make submissions on such extrinsic aids that they consider inform the policy of and meaning of statutory provisions
The plaintiff's response

Mr McKay, for the plaintiff, submitted that the Court was likely to obtain substantial help from the...

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