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14 Apr 2008
Appeal Status

Supreme Court decides on taxpayer secrecy

2008 case note – Discovery of CIR held documents permitted for a taxpayer defending an assessment against another taxpayer – taxpayer secrecy.

Westpac Banking Corporation Limited, BNZ Investments Limited, ANZ National Bank Limited and Ors v The Commissioner of Inland Revenue SC 66 and 67/2007

Tax Administration Act


The exceptions in the taxpayer secrecy legislation permit the discovery of documents held by the Commissioner in relation to a taxpayer in defence of his assessment against another taxpayer.


The Commissioner has investigated a number of structured financing arrangements entered into by the Westpac, BNZ and ANZ National banks. Following this investigation, amended income tax assessments were issued to each of the banks involved in these proceedings. The basis for the reassessments were that the structured finance transactions entered into by the various banks were a tax avoidance arrangement and the Commissioner was able to counteract the tax advantage gained by the banks. In each case the reassessments have been challenged by the respective banks. The substantive question relating to whether the transactions amounted to tax avoidance has not yet been dealt with by the Courts.

These proceedings arose out of the discovery process in the substantive challenge proceedings where the Commissioner listed and intended to produce for inspection documents relating not only to transactions specific to the particular bank, but also documents relating to similar transactions entered into by the other banks. The basis for this was that the Commissioner considered various classes of these documents were relevant to the determination of tax avoidance across the various banks.

Each of the banks objected to the Commissioner seeking to rely on other bank documents in the defence of his assessments. Proceedings were brought by the banks arguing that the documents of other banks should not be discovered in litigation on the grounds that they were not relevant. The banks also argued that section 81 of the Tax Administration Act 1994 (TAA) prevented the Commissioner from using documents of a bank which was not party to the particular challenge proceedings in the defence of his assessments against another bank.

The High Court rejected all avenues of attack by the banks and held that it was for the Commissioner to decide which documents were relevant and that his actions did not contravene the secrecy provisions of the TAA. With regard to ANZ National Bank's application for declaratory relief and judicial review Wild J found no basis for review and rejected their application for a declaratory judgment.

On appeal the Court of Appeal agreed with the High Court on the question of taxpayer secrecy and said that it was not satisfied that the other bank documents were irrelevant. The Court of Appeal also rejected the contention that the Commissioner's discovery was an abuse of process or was precluded on the common law principle of public interest immunity.


The Court analysed section 81 of the TAA, the meaning of the provision, the exceptions allowing disclosure of taxpayer secret information and the legislative history behind the provision. The Supreme Court then analysed the Commissioner's secrecy obligations in terms of sections 6 and 6A of the TAA, in particular the Commissioner's obligations to ensure a taxpayer's affairs are kept confidential against the Commissioner's overriding obligation to maintain the integrity of the tax system. The ultimate issue for the Court was to decide how these competing values could be reconciled.

The Court held that disclosure of taxpayer secret information was not permitted unless, and to the extent that it was reasonably necessary for the performance of the Commissioner's statutory functions. The Court recognised the value of taxpayer secrecy but said this value needed to be balanced against the need to maintain the integrity of the tax system.

With regard to whether the common law principle of public interest immunity prevented discovery of the "other banks'" documents, the Court disposed of the argument with reference to an established legal maxim, namely the various banks cannot resort to a common law principle when the statute law adequately deals with the question of law. The answer could be found by reference to the wording of section 81 coupled with the care and management provisions set out in sections 6 and 6A of the TAA.

The Supreme Court unanimously found that the documents the Commissioner wished to discover were part of the wider commercial context of the transactions and that, if in the substantive proceedings issues of commercial sensitivity arose, they could be addressed by the High Court.

The various banks' appeals were dismissed and costs were awarded to the Commissioner.