Chatfield & Co Ltd v Commissioner of Inland Revenue
[2016] NZHC 2289
•27 September 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-1013 [2016] NZHC 2289
BETWEEN CHATFIELD & CO LIMITED
First Applicant
CHATFIELD & CO Second Applicant
AND
COMMISSIONER OF INLAND REVENUE
Respondent
Hearing: 21 September 2016 Appearances:
R Rose for applicants
P Courtney and Bryant for RespondentJudgment:
27 September 2016
JUDGMENT OF LANG J
[on application by respondent for order striking out proceeding]
This judgment was delivered by me on 27 September 2016 at 3.30 pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
CHATFIELD & CO LTD v COMMISSIONER OF INLAND REVENUE [2016] NZHC 2289 [27 September
2016]
[1] In this proceeding the applicants, Chatfield & Co Limited and Chatfield and Co (Chatfield), seek judicial review of a decision by the Commissioner of Inland Revenue (the Commissioner) to issue notices under s 17 of the Tax Administration Act 1994 (TAA) requiring them to furnish information to the Commissioner that they held on behalf of clients. The Commissioner applies for an order under r 15.1(b) of the High Court Rules striking the proceeding out on the basis that Chatfield’s claims are not reasonably arguable.
Background
[2] Chatfield is registered under ss 3 and 34B of the TAA as the tax agent authorised to act in respect of the taxation affairs of 15 companies that have their registered offices in New Zealand.1 In 2014 the Commissioner received a request from the National Taxation Service (NTS) of Korea for information relating to those companies. The NTS made that request pursuant to the double taxation agreement (DTA) currently in force between New Zealand and Korea. The Commissioner
sought to obtain the information by issuing notices under s 17 of the TAA requiring
Chatfield to produce documents and records that it held on behalf of the companies.
[3] Chatfield has resisted the Commissioner’s notices. In this proceeding it seeks judicial review of the decision to issue the notices, and asks the Court to set them aside on two alternative bases. The first cause of action alleges that the Commissioner breached a legitimate expectation held by Chatfield that the Commissioner would adhere to statements of intent made in an operation statement known as OS 13/02. Chatfield contends that statements made in OS 13/02 caused it to hold a legitimate expectation that the Commissioner would not issue a notice under s 17 of the TAA seeking to obtain information from a taxpayer’s tax agent unless the Commissioner had first sought the information in question either from the taxpayer or another third party such as a bank. Chatfield contends that the Commissioner issued the notices in breach of that expectation.
[4] In the second cause of action Chatfield contends that, in issuing the notices, the Commissioner failed to take into account three relevant considerations. The first
1 The second applicant is an accountancy partnership that was originally registered as the tax agent of the companies but that status has now been assumed by the first applicant.
of these is the statements of intent made in OS 13/02. The second is “the limited nature of the information held by tax agents in New Zealand”, and the third is the terms of the DTA currently in force between Korea and New Zealand.
Relevant principles
[5] Rule 15.1(b) of the High Court Rules provides the Court with the power to strike out all or part of a proceeding where it discloses no reasonably arguable cause of action. The Commissioner contends that neither of the causes of action pleaded in this proceeding is reasonably arguable.
[6] The Commissioner originally relied upon a wider ground for strike out. This was that the proceeding is an abuse of process because it is causing prejudice and delay to the Commissioner.2 During the hearing, Ms Courtney for the Commissioner abandoned this aspect of the application. She invited me to consider the Commissioner’s application solely on the basis that neither cause of action is reasonably arguable.
[7] There is no dispute regarding the principles to be applied in this context. In Carter Holt Harvey Ltd v Minister of Education3 the Supreme Court confirmed that they were conveniently summarised by the Court of Appeal in Attorney-General v Prince and Gardner.4 In Southern Ocean Trawlers v Director-General of Agriculture and Fisheries, the Court of Appeal confirmed that the same principles apply in respect of applications for judicial review.5 In summary, the Court will exercise its jurisdiction to strike out a proceeding sparingly and only in the clearest of cases. The claim or cause of action must be so clearly untenable that it cannot succeed. In determining a strike out application, the Court is required to proceed on the basis that the facts pleaded in the statement of claim are true.
[8] Affidavit evidence may be relied upon in some circumstances but not where it contradicts the pleaded facts unless the pleaded fact in question is “demonstrably
2 High Court Rules, r 15.1(b).
3 Carter Holt Harvey Ltd v Minister of Education [2016] NZSC 95 at [10].
4 Attorney-General v Prince and Gardner [1998] 1 NZLR 262 (CA) at 267-268.
5 Southern Ocean Trawlers Ltd v Director-General of Agriculture and Fisheries [1993] 2 NZLR
53 (CA) at 63.
contrary to indisputable fact”.6 Furthermore, if a pleading can be amended in a manner that discloses a tenable cause of action the Court will generally give the plaintiff the opportunity to amend its claim.7 The courts will also be slow to strike out a cause of action where it is based on a novel or developing area of the law.8
OS 13/02
[9] Section 17(1) of the TAA relevantly provides as follows:
17 Information to be furnished on request of Commissioner
(1) Every person (including any officer employed in or in connection with any department of the government or by any public authority, and any other public officer) shall, when required by the Commissioner, furnish any information in a manner acceptable to the Commissioner, and produce for inspection any documents which the Commissioner considers necessary or relevant for any purpose relating to the administration or enforcement of any of the Inland Revenue Acts or for any purpose relating to the administration or enforcement of any matter arising from or connected with any other function lawfully conferred on the Commissioner.
…
[10] The Commissioner issued OS 13/02 in order to provide persons who might be affected by the exercise of the powers under s 17 with a degree of certainty regarding the manner in which the Commissioner would exercise those powers. The current version of the statement is currently to be found in both the Tax Information
Bulletin9 issued by the Inland Revenue Department and on the Department’s
website.10
[11] The following passages from OS 13/02 are relevant for present purposes:
1.This Operation Statement (“OS”) outlines the procedures Inland Revenue will follow when issuing notices, including third party requests, under section 17. The section, which relates to requisitions for information, is one of Inland Revenue’s information-gathering powers. Other information-gathering powers (such as section 16) can be and are used by the Commissioner in conjunction with section 17 but they are not discussed in this OS.
6 Attorney-General v McVeagh [1995] 1 NZLR 558 (CA) at 566.
7 Marshall Futures Ltd v Marshall [1992] 1 NZLR 316 (HC) at 323.
8 Couch v Attorney-General [2008] NZSC 45, [2008] 2 NZLR 725 at [33].
9 Tax Information Bulletin Vol 25, No 8 (September 2013).
10 OS applies from 14 August 2013 and replaces Standard Practice Statement 05/08 Section 17 Notices, published in Tax Information Bulletin Volume 17, No 6 (August 2005).
Background
4.Before the Commissioner can verify or make an assessment of a person’s tax liability, information (including non-documentary information which is within a person’s knowledge) is needed. The legislation provides the Commissioner with the necessary powers, including section 17, to collect information. Section 17 empowers the Commissioner to require any person to furnish in writing any information and to produce for inspection any documents that are considered “necessary or relevant” to exercise the Commissioner’s statutory functions.
5.Inland Revenue staff will usually request information and documents without expressly relying on section 17. This practice fosters a spirit of reasonableness and mutual cooperation.
6.If, however, information is not provided voluntarily or in a timely manner the Commissioner is able to use section 17 to demand the information by issuing a notice under the section. In some cases the information gathering process may be commenced by issuing a section 17 notice. For example, this may occur where there have been prior instances of non-cooperation from the taxpayer and/or their advisers. Non-compliance with the section 17 notice will result in the Commissioner invoking the statutory remedies.
…
Operational practice
Section 17 Notices
27.Section 17 gives the Commissioner the power to require persons to produce for inspection documents which the Commissioner considers necessary or relevant for any purpose relating to the administration or enforcement of the Inland Revenue Acts. It is most often used in the context of the investigation of a taxpayer’s correct tax position, but can also be used, for example, in the liquidation/insolvency situations to obtain information/documents, provided it is not used for improper purposes. However a section 17 power cannot be invoked for questionable or improper purpose, such as to gain advantage over other creditors or for debt recovery.
…
The reason for requiring the information
33.The Commissioner will only require disclosure of information considered necessary or relevant and that is reasonably required in the circumstances of the case.
…
Inland Revenue’s intention to ensure compliance with the notice
41.Generally, Inland Revenue will use a section 17 notice only where it is prepared to invoke statutory remedies in the event of non- compliance.
…
Multiple sources
43.Nothing in section 17 precludes Inland Revenue from seeking information from multiple sources and from sources other than the affected taxpayer, whether before or after seeking the information directly from the relevant taxpayer.
…
Requests to persons other than the taxpayer
64.Some holders of information, such as banks, are willing to provide information but require Inland Revenue to state its legal authority before they will release the information. Generally, where information is required from persons other than the taxpayer and cooperation is likely, Inland Revenue will initially seek the information by a letter, although the letter may follow a discussion and may contain reference to section 17.
65.That letter is not a formal section 17 demand. However, generally where the letter is not complied with, a section 17 notice will be issue so that the third party recipient is informed of the consequences of their non-compliance before such action is taken.
66.Any section 17 notice issued to a third party such as a bank should refer to the non-disclosure right. The recipient of the notice may then choose to contact the taxpayer to confirm whether the taxpayer or their authorised tax advisor wish to claim the non-disclosure right or legal professional privilege over documents required to be disclosed under the section 17 notice issued to the third party.
67.Where a formal section 17 notice is issued to a third party such as a bank it will be subject to an independent review by Legal and Technical Services before its issue.
…
Requests for certain information from tax agents
71.Inland Revenue may seek certain information from tax agents under section 17 where it becomes aware of particular transactions or
arrangements entered into by taxpayers in order to identify other taxpayers who may have entered into similar transactions or arrangements.
72.In the first instance, Inland Revenue will attempt to identify those taxpayers without recourse to requesting information from tax agents. However Inland Revenue may ask tax agents likely to have involvement with the arrangements in question to provide a list of clients who may have entered into a particular (or similar) arrangement.
73.These requests will only be made in limited circumstances and only where it is considered the transactions or arrangements are likely to involve tax avoidance or evasion, or other offences leading to prosecution for offences. Before making such requests to tax agents, investigates must first take all reasonable steps to obtain the necessary or relevant information from the taxpayer(s) or other third parties.
74.Before making a request for information, staff will take into account a range of factors including:
o The impact of the request on taxpayers’ perception of the
integrity of the tax system;
o The size of client bases involved, and the practicalities and the relative cost of compliance with the section 17 request;
o The level of perceived risk of taxpayers seeking to remove assets or leave the jurisdiction;
o The complexity of the arrangement, and the reasonableness of the expectation that the advisor will be able to identify the taxpayers in question;
o The level of revenue considered to be at risk;
o Inland Revenue’s ability to obtain the information from other sources.
75.An Inland Revenue officer will then arrange to meet with the particular tax agent to advise that a formal section 17 notice is to be made, to provide a draft copy of the notice, explain the scope and matters to be covered in the notice and whether a formal notice is in fact the best way of achieving Inland Revenue’s objectives. Subject to any changes made to the draft notice the final notice will be sent to the tax agent. Any changes to the draft notice will be approved by an appropriate delegated officer.
76.The tax agent will have the option to provide the information without a formal demand.
77.Before any request for information is made, an independent view of the proposed request will be carried out by appropriately delegated
officers to ensure the necessary criteria have been applied. This will include determining that the arrangement in question is clearly described and the parameters of the request are clear (for example, the scope of the request, the time period covered, the form of the response and the level of the detail required). Reference to this approval will be stipulated in the notice to the particular firm.
78.The notice will offer where practicable Inland Revenue assistance to extract the information and will also allow a reasonable time (to be specified) to provide the information.
79.The tax agent can either contact the Manager, Investigations and Advice or the Group Manager, Investigations and Advice if he/she wishes to query the scope or authority of the investigator to request the information in the notice.
…
The availability of judicial review
[12] The availability of judicial review in a taxation context now appears to be extremely limited. In Tannadyce v Commissioner of Inland Revenue the Supreme Court was unanimous in holding that a taxpayer who seeks judicial review of decision by the Commissioner will need to persuade the Court there is a valid basis for invoking judicial review rather than the challenge procedures under the TAA.11
The majority12 also held that an applicant for judicial review will need to establish a
sufficient factual foundation for the contention that it was not practically possible for them to follow the statutory procedures.
[13] Mrs Courtney for the Commissioner submitted that Chatfield’s clients could challenge the Commissioner’s use of the s 17 procedure by challenging any tax assessments that the NTS in Korea might ultimately make as a result of the information provided by means of the s 17 notices. This assumes that the Korean tax regime is similar to that in New Zealand, and that the Korean courts have adopted a similar approach to that taken in Tannadyce. There is no evidence that this is the case. The submission also overlooks the fact that Chatfield itself will never be the subject of any assessments by the NTS. Other than by way of judicial review, therefore, Chatfield has no means of challenging the lawfulness of s 17 notices
directed to it rather than its clients.
11 Tannadyce Investments Ltd v Commissioner of Inland Revenue [2011] NZSC 158, [2012] 2
NZLR 153.
12 Blanchard, Tipping and Gault JJ.
[14] In Lupton v Commissioner of Inland Revenue this Court granted in part an application by a taxpayer for review of notices issued by the Commissioner under s 17 of the TAA.13 I see no policy reason why judicial review should not be available in the circumstances of the present case. I therefore proceed on the basis that the Court has jurisdiction to hear Chatfield’s challenge to the Commissioner’s use of the s 17 procedure.
The first cause of action: denial of legitimate expectation
[15] The concept of legitimate expectation in the context of administrative law has arisen as part of a wider requirement that bodies responsible for exercising administrative powers and functions must do so fairly and reasonably. In Comptroller of Customs v Terminals (New Zealand) Ltd the Court of Appeal explained the concept in the following way:14
… when a public authority has promised to follow a certain procedure, it is in the interests of good administration that it should act fairly and should implement its promise, so long as it does not interfere with its statutory duty.
[16] The Court of Appeal also described the inquiry to be undertaken when a person seeks to advance a claim based on legitimate expectation:
[125] Where legitimate expectation is raised, the inquiry generally has three steps. The first is to establish the nature of the commitment made by the public authority whether by a promise or settled practice or policy. This is a question of fact to be determined by reference to all the surrounding circumstances. A promise or practice that is ambiguous in nature is unlikely to be treated as giving rise to a legitimate expectation in administration law terms.
[126] The second is to determine whether the plaintiff’s reliance on the promise or practice in question is legitimate. This involves an inquiry as to whether any such reliance was reasonable in the context in which it was given.
[127] The third, and often most difficult part of the inquiry, is to decide what remedy, if any, should be provided if a legitimate expectation is established.
13 Lupton v Commissioner of Inland Revenue (2007) 23 NZTC 21,204 (HC).
14 Comptroller of Customs v Terminals (New Zealand) Ltd [2012] NZCA 598, [2014] 2 NZLR 137 at [121].
[17] As Ms Rose for Chatfield readily conceded, no claim based on legitimate expectation has yet succeeded in the field of taxation law in New Zealand. In 2009 the Court of Appeal observed in Commissioner of Inland Revenue v New Zealand Wool Board that “any scope for invoking legitimate expectation is necessarily limited by the scheme and purpose of the income tax legislation”.15 This reflected the approach taken in earlier cases such as Brierley Investments Ltd v Bouzaid, in which Richardson J emphasised that the Commissioner cannot contract out of the responsibilities imposed by the tax legislation.16 For that reason the Commissioner could not “create no-go areas for himself” because to do so would be to “derogate from the generality and breadth of the commissioner’s powers conferred in aid of the statutory functions”.17
[18] In Commissioner of Inland Revenue v Ti Toki Cabarets (1989) Ltd the Court of Appeal observed that the introduction of the binding rulings regime in 1996 created “a strong inference” that Parliament intended that regime to be the only way in which the Commissioner may be lawfully bound by previous conduct.18 The Court also observed:
[41] This case does not call for determination in any absolute way of whether judicial review on the ground of denial of legitimate expectation can ever be brought in tax matters. What must be determined is whether judicial review on that ground is tenable in the circumstances under consideration in this case. We are satisfied it is not and that the Judge erred in finding the contrary.
The Court held that the decision in question in that case formed an essential part of the reasoning process underpinning the assessment, and the contested issue should therefore form part of the challenge to the assessment.
[19] In Dandelion Investments Ltd v Commissioner of Inland Revenue the Court of
Appeal similarly held there was no basis for judicial review based on alleged denial of legitimate expectation.19 The taxpayer in that case claimed the Commissioner had
15 Commissioner of Inland Revenue v New Zealand Wool Board (1999) 19 NZTC 15,476 (CA) at
[62].
16 Brierley Investments Ltd v Bouzaid [1993] 3 NZLR 655 (CA) at 662.
17 At 662.
18 Commissioner of Inland Revenue v Ti Toki Cabarets (1989) Ltd [2001] 1 NZLR 147 (CA) at
[31].
19 Dandelion Investments Ltd v Commissioner of Inland Revenue [2003] 1 NZLR 600 (CA).
breached a legitimate expectation that he would follow the terms of a policy statement issued in relation to s 99, the anti-avoidance provision in the Income Tax Act 1996. In Miller v Commissioner of Inland Revenue the Privy Council had earlier determined that the policy statement in question was no more than an attempt to reassure the public that the Commissioner and his officers “would think very
carefully about whether s 99 applies to any particular case”.20 The Privy Council did
not consider the policy statement prescribed the conditions or circumstances in which the Commissioner would apply the section.
[20] In Dandelion the Court of Appeal described the taxpayer’s attempt to bring a claim under the guise of legitimate expectation as being plainly futile given the Privy Council’s decision.21 The Court also noted that the Privy Council’s conclusion reflected earlier observations of the Court of Appeal in Brierley and Commissioner of Inland Revenue v New Zealand Wool Board “as to the limited scope for application of the principle of legitimate expectation to confine the Commissioner in the exercise of statutory duties in relation to assessment functions.”22
[21] I consider there are considerable obstacles in the way of any application for review based on denial of legitimate expectation where the expectation is said to have arisen from the Commissioner issuing a document such as OS 13/02. The Commissioner enjoys very wide powers under s 17 to seek documents and
information that may give rise to lines of inquiry.23 The only legitimate expectation
that parties affected by the exercise of those powers may arguably have is that the Commissioner will exercise the powers solely for the purpose of carrying out her statutory functions. It is highly unlikely the courts would hold the Commissioner to the terms of any policy or operational statement that had the effect of restricting the use of the powers under s 17 to carry out those functions. Dandelion provides a
good example of the approach the courts are likely to take in that context.
20 Miller v Commissioner of Inland Revenue [2001] 3 NZLR 316 (PC) at [21].
21 Dandelion Investments Ltd v Commissioner of Inland Revenue above n 19, at [75].
22 Brierley Investments Ltd v Bouzaid (CA), above n 16, at 662-664; Commissioner of Inland
Revenue v New Zealand Wool Board (1999) 19 NZTC 15,476 (CA) at [55]-[62].
23 Commissioner of Inland Revenue v New Zealand Stock Exchange [1990] 3 NZLR 333 (CA) at
336-337.
[22] Furthermore, New Zealand is party to numerous DTA’s with other countries. These are treaties in which the contracting parties agree to co-operate with each other to achieve the objective of avoiding double taxation of income and preventing tax evasion. Most DTA’s follow the wording used in the current OECD Model Treaty, and the DTA with Korea is no exception. New Zealand’s tax legislation also enacts DTA’s into New Zealand law. Section BH 1 of the Income Tax Act 2007 is the provision that currently performs this function.
[23] The Convention that the New Zealand Government has entered into with Korea has been given legislative effect under the Double Relief (Republic of Korea) Order 1983. Article 25 of this Order requires the revenue authorities of New Zealand and Korea to “exchange such information as is necessary” to carry out the
provisions of the Convention or the domestic laws of New Zealand and Korea.24 For
that reason the Court would be likely to hold that the Commissioner is performing her statutory duty when complying with requests by entities such as the NTS for information that may be held in New Zealand.
[24] In the United Kingdom, however, the courts have been more receptive to applications for judicial review against revenue authorities on that basis.25 Ms Rose submits that this area of the law is still developing in New Zealand, and that the claim should not be struck out for that reason. I agree that the Court of Appeal has not yet definitively held that applications for judicial review based on denial of legitimate expectation cannot succeed in a taxation context. For that reason it would not have been appropriate to strike the proceeding out solely on the basis that such claims are not recognised in New Zealand taxation law.
Does OS 13/02 constitute an unambiguous commitment that the Commissioner would seek information from the taxpayer or another third party before issuing a s 17 notice to the taxpayer’s tax agent?
[25] Chatfield must first establish that the statements made in OS 13/02 constitute an unambiguous commitment or promise by the Commissioner that information
24 Article 25 is set out in full at [33].
25 See eg R v Inland Revenue Commissioners ex parte M.F.K. Underwriting Agents Ltd [1990] 1
WLR 1545 (QBD) at 1574-1575; Re Preston [1985] AC 835.
would be sought from the taxpayer or other third parties before a notice under s 17
would be issued against the taxpayer’s tax agent.
[26] I take the view that nothing in OS 13/02 comes close to such a promise or commitment. The only statements relating specifically to tax agents in this context are those contained in paras 71 to 79. It is clear, however, from para 73 that these paragraphs deal with situations where the Commissioner considers that transactions or arrangements constitute tax avoidance, tax evasion or other offences likely to lead to prosecution. The paragraphs therefore have no relevance to the present case, which concerns the Commissioner exercising his power in order to give effect to his statutory duty under the DTA to provide information to the NTS.
[27] Paragraphs 64 to 67 of OS 13/02 deal with requests to persons other than the taxpayer, but there is nothing in these paragraphs to suggest that the Commissioner will only seek information from such persons after having first sought the information from the taxpayer. Furthermore, paragraph 43 expressly reminds the reader that nothing in s 17 precludes the Commissioner from obtaining information from multiple sources and from sources other than the affected taxpayer “whether before or after seeking the information from the relevant taxpayer”. Ms Rose submitted that this was a statement about how the Commissioner would exercise her powers under s 17 and not about the manner in which the Commissioner would act when applying OS 13/02. This submission ignores the fact that OS 13/02 relates solely to the manner in which the Commissioner will exercise her powers under s 17.
[28] The complete absence of any reference in OS 13/02 to the promise or commitment upon which Chatfield relies means that the ground for review based on denial of legitimate expectation cannot succeed. It is not reasonably arguable given the wording used in OS 13/02.
[29] The first cause of action must therefore be struck out. To the extent that the second cause of action also relies upon denial of legitimate expectation it must be struck out as well.
Second cause of action: failure to take into account relevant considerations
[30] As I have already observed, the second cause of action alleges that the Commissioner failed to take into account the terms of OS 13/02, the limited nature of the tax agent/client relationship and the exceptions contained in Article 25 of the DTA with Korea.
[31] I do not consider the first two particulars of the application for review under this head to be reasonably arguable. The Commissioner was not required to take OS
13/02 into account in the present case because OS 13/02 contains no reference to the manner in which the Commissioner will use s 17 to give effect to New Zealand’s obligations under DTA’s with other countries. For that reason it was irrelevant to the Commissioner’s decision to issue notices under s 17 to obtain information to satisfy the request from the NTS.
[32] The Commissioner was similarly not required to have regard to the nature of the relationship between Chatfield and its taxpayer clients, whether limited or otherwise, because the Commissioner would have no way of knowing the nature and scope of those relationships. The fact that an entity such as Chatfield is registered as a taxpayer’s tax agent is sufficient to entitle the Commissioner to consider it may hold information relevant for the Commissioner’s purposes.
[33] The third particular alleges that the Commissioner decided to issue the s 17 notices without taking into account the terms of Article 25, and in particular the exceptions contained in Article 25.2. These are as follows:
Article 25
Exchange of information
1.The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of this Convention or of the domestic laws of the Contracting States concerning taxes covered by the Convention insofar as the taxation thereunder is not contrary to the Convention, as well as to prevent fiscal evasion. The exchange of information is not restricted by Article 1. Any information received by a Contracting State shall be treated as secret in the same manner obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) involved in
the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes covered by the Convention. Such persons or authorities shall use the information only for such purpose. They may disclose the information in public court proceedings or in judicial decisions.
2.In no case shall the provisions of paragraph 1 be construed so as to impose on a Contracting State the obligation:
(a) to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State.
(b) to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State;
(c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy (ordre public).
[34] I consider this aspect of Chatfield’s claim to be reasonably arguable because there can be no doubt that the Commissioner was required to take the terms of the DTA between New Zealand and Korea into account in deciding whether to comply with the request by the NTS. These include the exceptions contained in Article 25.
[35] The Court is required to proceed on the basis that Chatfield can prove the Commissioner did not take the terms of Article 25 into account in making his decision to issue the s 17 notices. The Commissioner has filed evidence in support of the application to strike out the proceeding, but this does not expressly contradict that allegation. The principles that apply in respect of strike out application would prevent the Commissioner from filing evidence that contradicts the pleading in any event. Furthermore, Chatfield’s allegation cannot be said to be so demonstrably contrary to established fact that the Court should depart from the principle that the pleaded facts must be taken to be true.
[36] There is likely to be an issue at trial regarding the extent to which the Court may scrutinise the Commissioner’s decision, but that issue cannot be determined in the context of the present application. This aspect of Chatfield’s claim will therefore be permitted to proceed to trial.
Result
[37] The first cause of action is struck out, as is the second cause of action other then the allegation that the Commissioner failed to take into account the terms of the DTA between New Zealand and Korea.
Costs
[38] My tentative view is that the Commissioner has been the successful party and should be entitled to an award of costs on a Category 2B basis together with disbursements as fixed by the Registrar. If the parties cannot reach agreement they should file concise memoranda setting out their respective positions and I will
determine costs on the papers.
Lang J
Solicitors:
Bell Gully, Auckland
Crown Law, Wellington
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