Commissioner of Inland Revenue v Cullen Group Limited
[2018] NZCA 166
•25 May 2018 at 10.00 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA65/2018 [2018] NZCA 166 |
| BETWEEN | COMMISSIONER OF INLAND REVENUE |
| AND | CULLEN GROUP LIMITED |
| Court: | French, Winkelmann and Clifford JJ |
Counsel: | G M Coumbe QC and M K Nicholson for Appellant |
Judgment: | 25 May 2018 at 10.00 am |
JUDGMENT OF THE COURT
A The appeal is allowed.
BThe orders for discovery and inspection made in the High Court on 20 December 2017 are quashed.
C The order for costs in the High Court is quashed.
D There is no order for costs in this Court.
____________________________________________________________________
REASONS OF THE COURT
(Given by French J)
The parties have agreed on a resolution of this appeal filed by the Commissioner of Inland Revenue. It concerns the scope of a discovery ruling made in the High Court by Woolford J.[1] The parties now agree the decision was wrong. They have asked this Court to make orders by consent allowing the appeal and quashing Woolford J’s decision.
[1]Cullen Group Ltd v Commissioner of Inland Revenue [2017] NZHC 3260.
The relevant background is as follows.
Cullen Group Ltd (Cullen) has filed proceedings in the High Court challenging tax assessments totalling $59.5 million. The assessments relate to non-resident withholding tax and transactions which the Commissioner alleges amounted to a tax avoidance arrangement. The key issue at trial will be whether Cullen made use of what is called the “associated persons” rule under the “approved issuer levy” regime in a manner contrary to Parliament’s intention at the time it created the regime. The approved issuer levy regime was created by two pieces of legislation, namely the Income Tax Amendment Act (No 4) 1991 and the Stamp and Cheque Duties Amendment Act (No 2) 1991.
Cullen applied for discovery of documents that it considered were potentially relevant as extrinsic aids for the purposes of construing those two statutes. The application included documents relating to 20 other statutes. Justice Woolford held that a limited order for discovery was justified.[2]
[2]At [33].
The order made by the Judge required the Commissioner to make discovery of three categories of documents relating to the Income Tax Amendment Act (No 4), the Stamp and Cheque Duties Amendment Act (No 2) and the Land and Income Tax Amendment Act (No 2) 1968 and the selection of the definition of “associated persons” to be employed in the legislation.[3] The three categories of documents were:[4]
(a)all documents created by IRD officials including published material; material provided to select committees, ministers, and any special purpose committee or working group considering tax policy; and final reports or internal recommendations or other consideration given to legislation;
(b)all documents created by any special purpose committee or working group established to consider tax policy; and
(c)any other documents provided to or obtained by IRD officials.
[3]At [26] and [34(a)(i)]. The 1968 Amendment Act enacted the “associated persons” definition used in the “approved issuer levy” regime.
[4]At [12].
Justice Woolford also ordered the Commissioner who had opposed the application to pay costs.[5]
[5]At [34(d)].
As mentioned, Cullen now accepts Woolford J’s decision was wrong. In particular, it agrees with the Commissioner that the Judge erred in the following respects:[6]
(a)First, the discovery order made goes far beyond the orthodox categories of extrinsic aids that the courts are willing to consider. It would require the Commissioner to discover as relevant documents that have never been made public, that are far removed from Parliamentary processes, and that record the subjective views of officials working in the Inland Revenue Department. Those are not permissible extrinsic aids, as they cannot assist the court to determine Parliament’s intention.
(b)Burrows and Carter have identified criteria for admission of extrinsic materials. One criterion is that the documents should be publicly accessible, which means there is no need for discovery of such documents.
(c)Secondly, the order is disproportionate. It is likely that the order would involve an oppressive and fruitless search. It would require a search and review exercise of material dating back to at least 1968, including any documents created at any time by any Inland Revenue Department official.
(d)Even if a document relating to the selection of the “associated persons” test were to be found within the discovery categories, it is most unlikely to be admitted by the trial Judge. This view is confirmed by the fact that the Commissioner recently (voluntarily) completed a fruitless search, extending over 300 hours, for documents within the conventional categories for extrinsic material the Courts have regard to. That exercise confirms that the even wider searches contemplated by the discovery order would be oppressive and fruitless.
[6]We omit the footnotes provided in the joint memorandum of counsel. However, see generally RI Carter Burrows and Carter Statute Law in New Zealand (5th ed, LexisNexis, Wellington, 2015) at 297–299.
We agree and find that there are good reasons in law for this Court to overturn the High Court judgment and make orders in the terms sought by the parties.
The appeal is accordingly allowed and the orders for discovery and inspection made in the High Court on 20 December 2017 are quashed. The order for costs made in the High Court is also quashed. There will be no order for costs on the appeal.
Solicitors:
Crown Law Office, Wellington for Appellant
Wynn Williams, Christchurch for Respondent
0
1
0