Skip to main content
22 Dec 2008
Appeal Status
Not appealed

Commissioner's right to remove and copy electronic information

2008 case note – scope of the CIR's section 16 powers - CIR's right to access and remove documents, electronic information, privilege and encryption.

Avowal Administrative Attorneys Limited and Ors v the District Court at North Shore and the Commissioner of Inland Revenue

Tax Administration Act 1994 ("the TAA")


The High Court held that the definition of "book and document" in the TAA included computer hard drives. The Commissioner therefore had the right to remove hard drives for copying under section 16 of the TAA. This decision should be read together with the interim judgment released on 28 February 2008.

Impact of decision

This decision explains the scope of the Commissioner's section 16 powers. It clarifies when and to what extent the Commissioner is required to do a relevance check prior to removing electronic documents for copying, particularly in circumstances involving privilege claims or encryption of hard drives.


On 8 November 2006, the Commissioner and the Australian Tax Office ("the ATO") conducted simultaneous access operations on both sides of the Tasman. The operations followed a request by the ATO to the Commissioner in 2004 under Article 26 of the Australia-New Zealand Double Tax Agreement ("the DTA"). The ATO provided background information which indicated that a number of entities based in or operating in New Zealand were promoting, marketing and implementing a wide range of tax avoidance schemes.

Using his powers under section 16 of the TAA, the Commissioner entered seven premises, both private and commercial, and removed hardcopy documents and hard drives for copying. Seven applicants commenced judicial review proceedings against the Commissioner, and another applicant later joined the proceedings.


Are hard drives a "book or document"?
The Court stated that the definition of "book and document" in the TAA was a wide one and not limited to the information contained within the book or document. Information can be stored electronically; tapes, discs and computer reels are examples within the TAA definition of information stored electronically.

A hard drive is an integral part of a computer. When reference is made to information stored on a computer, it must include information stored on a hard drive. The function of storing information on a computer that was formerly carried out by computer reels is now carried out by the hard drive. The definition of "books and documents" is out of date to the extent that it refers to computer reels. "Computer reels" in the definition must now be read as "hard drive", so the hard drive of a computer is a "book or document" for the purposes of the Act. Therefore, section 16 of the TAA authorises IRD officers to inspect and copy hard drives which they consider necessary and relevant, and section 16B authorises the removal of the hard drive to make copies, or the removal of the computer if the hard drive cannot be readily removed.

At the Avowal sites, a blanket claim to privilege was made over all electronic information. The IRD officers considered that it would not be appropriate to conduct a relevance search because of the privilege claim. The Court stated that this was a cautious approach to take, but not one for which the IRD officers could be criticised.

Where there is a blanket claim to privilege, an officer exercising a search power may look at a document, including a document over which privilege is claimed, for the purpose of determining whether it may be relevant or privileged. However, the IRD officers cannot be criticised for deciding not to challenge the claim to privilege in these circumstances, particularly given that provision is made in section 20(5) of the TAA for a process to determine privilege claims. The copying of privileged material is not a breach of privilege where such a process is provided.

The purpose of the keyword search (relevance check) is to protect the occupier's rights against unreasonable search, to ensure that the search is directed at relevant material and to ensure that it is conducted reasonably. However privilege is also an important right. It was not unreasonable for the IRD officers to accept the claim to privilege and to deal with it in a manner consistent with section 20(5) of the TAA, rather than insisting on conducting a keyword search. In the circumstances of the particular search, the general claim to privilege meant that the IRD officers were not required to carry out a relevance check before copying and/or removing the hard drives.

At the Tauranga site, privilege was claimed over all hardcopy and electronic documents that were to be removed. The officer in charge instructed his team to scan the material solely to determine whether or not it was relevant and nothing else. As noted above, the Court considered that this did not breach privilege.

Ability to copy the entire hard drive
The applicants submitted that once a relevance search was done, only the documents identified as relevant could be copied off the hard drive. The Court rejected this submission, holding that while it may have been technically possible for the IRD computer technicians to have done this, as a matter of principle, this approach is not required by the authorities. The fact that the hard drive may also contain irrelevant or privileged information does not mean that it cannot be copied or removed.

What is required is an assessment by the IRD officers in relation to each hard drive copied, first to determine whether there is relevant material on it and second whether it is necessary to copy that material so that it can be removed for later analysis.

At the Motueka sites, four of the hard drives copied were encrypted. The IRD computer technician did not conduct a keyword search of these computers. The applicants submitted that the IRD could not copy or remove an encrypted file because no relevance check could be done on that file. The Court rejected the submission. It stated that the purpose of the relevance check was to provide a balance between the ability of the Commissioner to exercise his section 16 powers and the rights of the individual to be free from unreasonable search and seizure.

The Court stated that the encryption of a hard drive made a relevance check pointless. The Court held that the ultimate test was whether the inspection was conducted in a reasonable fashion and whether the search and decision to copy was a reasonable one, having regard to all the circumstances of the case. The decision must be made on the basis that copying is necessary or relevant or considered likely to provide relevant information. The conclusion that the encrypted hard drives were likely to provide information for the purposes of the investigation was reasonable. Therefore, it was open to the IRD officers to copy or remove the encrypted hard drives.

Prior to the final hearing, the applicants indicated that they were withdrawing their challenge to the removal of hard copy documents and to the removal of electronic information at three of the seven sites.

Of the four sites at which the removal of electronic information was challenged, the High Court upheld the Commissioner's actions at the Avowal and Tauranga sites. At the Browns Bay site, the Court ordered the return of a back-up hard drive over which no relevance check was carried out, but upheld the copying of a laptop. At the Motueka site, the Court ordered the return of the laptop clone and the second hard drive, but upheld the copying of the encrypted hard drive.