Negligence – overdue tax liability – duty of care – whether losses reasonably foreseeable – notice of proposed adjustment – Tax Administration Act 1994 – s 11(1) Limitation Act 2010

 Mao v Golden Abacus & Associates Ltd [2024] NZHC 1048 [2024] per Van Bohemen J.

Jiawen Mao, a property investor, is suing accounting firm Golden Abacus & Associates (GAA) for $1.5 million in damages for losses she claims to have suffered on the mortgagee sale of four properties because GAA failed in its  duty of care to her.

GAA denies any liability.

The saga began in August 2014, when the Inland Revenue Department (IRD) issued Mao with two notices of assessment, relating to overdue tax relating to the sale of several properties. The notices related to the income years ending in 2008 and 2009. The assessment was for $142,320 and included penalties of $28,000.

In September 2014, an IRD told Mao she needed to file a Notice of Proposed Adjustment (NOPA) and her tax returns if she wanted to dispute the assessment. Mao forwarded the email to GAA with no further instructions.

In November 2014, IRD deemed the default assessments to be final. Her NOPA was rejected. Mao did not pay the debt, leading IRD to pursue legal action.

Judgment was entered against her and, as a result, her credit rating fell and the loans over four properties were cancelled. These went to mortgagee sale, with losses of $1.5m.

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Legal reasoning

To succeed in the claim, Mao had to prove, on the balance of probabilities, that GAA owed her a duty of care which it breached, leading to losses that were reasonably foreseeable.

The High Court said the losses Mao claimed may have been a consequence of other circumstances. She had faced financial difficulty in relation to other property developments, meaning a causal link between GAA’s duty and the losses were not clear.

Even if a duty were owed, Mao was found to have failed to assert that GAA owed a duty to her. She had not instructed, nor relied on, GAA to provide advice on all the tax issues she faced.

Ultimately, the court found Mao’s claim to be time-barred by the Limitation Act 2010.

Applicable principles: whether a duty of care is owed –  reasonable foreseeability of losses – causal link between duty owed and losses

Held: The High Court  dismissed Mao’s claim.

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