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15 Apr 2008
Appeal Status
Not appealed

ANZ has second cause of action struck out

2008 case note - interlocutory application by the CIR to strike out the second cause of action in ANZ's statement of claim was granted – tax avoidance.

Case ANZ National Bank Limited and Ors v The Commissioner of Inland Revenue CIV 2005-485-1037, 1038, 1039; 2006-485-1105, 1108, 1109, 1111 (Strike-out application)


An interlocutory application by the Commissioner to strike out the second cause of action in ANZ's statement of claim was granted.


The ANZ bank ("ANZ") sought a private binding ruling in relation to a structured finance transaction which it planned entering into. This transaction was known as the "Karapiro" transaction. The Commissioner issued a positive ruling to ANZ in relation to the transaction and stated the anti-avoidance provisions in section BG 1 of the Income Tax Act 1994 did not apply to the transaction.

The Commissioner subsequently investigated a number of other similar transactions which ANZ had entered into. Following this investigation, amended income tax assessments were issued on the basis these other transactions constituted tax avoidance arrangements. ANZ has challenged the amended assessments in the High Court.

These proceedings arose out of the second cause of action which ANZ pleaded in its statement of claim. ANZ says reliance was placed on the positive ruling given by the Commissioner in relation to the Karapiro transaction when deciding whether or not to enter into the other transactions. ANZ claimed the Karapiro ruling amounted to a representation made by the Commissioner regarding the legitimacy of the transaction. ANZ also claimed that it was unfair and inconsistent for the Commissioner to reassess the other transactions on the basis of tax avoidance when they shared the same essential features as the Karapiro transaction. ANZ sought to have the reassessments set aside.


The High Court relied on Harrison J's decision in Westpac Banking Corporation v CIR (2008) 23 NZTC 21, 694 where the court struck out a materially similar cause of action pleaded by Westpac. In that case the Commissioner had also issued a positive ruling to Westpac in relation to a structured finance transaction known as the First Data ruling. In these proceedings Wild J adopted much of the Harrison J's analysis from the Westpac proceedings.

With regard to the representation argument, Wild J noted the Karapiro ruling was confined to the facts and assumptions of that particular transaction and discussed how the nature of the private rulings regime (as it stood at the time) made it clear that a private binding ruling could only apply to a particular arrangement. He stated that to say a private ruling constituted a representation in the way which ANZ pleaded would create an amorphous and uncertain alternative to the private binding rulings regime.

In relation to the reliance and unfairness aspects of ANZ's second cause of action, Wild J adopted the reasoning of Harrison J in the Westpac decision. ANZ had the opportunity to seek private binding rulings in relation to the other structured finance transactions but failed to do and so could not avail itself of the protection offered by the rulings regime.

The second cause of action in ANZ's fourth amended statement of claim was found to be untenable and was struck out and costs were awarded to the Commissioner.

Tax Administration Act 1994, Judicature Act 1908