Section 16 - Commissioner's powers to obtain information

Summary

This was an appeal of a High Court decision which dismissed a judicial review application by the appellants, challenging the issuance and execution of section 16 warrants and seeking orders for the Commissioner to not inspect and return the documents seized. The Court of Appeal upheld the High Court decision and found the Commissioner's application for the access warrants for private dwellings and removal and retention of documents lawful and reasonable.

Impact of decision

The decision vindicates the procedures followed by the Commissioner's access and removal teams and shows they were methodical, justifiable and not unreasonable.

The decision also confirms the precedent set by the Avowal litigation:

• the statutory form of warrant is sufficient;
• the Commissioner need not exhaust alternative investigatory powers before relying on section 16 of the Tax Administration Act 1994 ("TAA");
• other persons may accompany the officer executing the warrants so long as their presence is necessary for the effective exercise of the search and inspection powers.

Facts

This is an appeal of the High Court decision of Venning J in favour of the Commissioner of Inland Revenue ("the Commissioner") dismissing the appellant's judicial review application.

As part of her investigation into Messrs Tauber and Webb as well as associated entities, the Commissioner applied to the District Court for warrants pursuant to sections 16(4) and 16C(2) of the TAA. Warrants were issued to enter four private dwellings alongside eight warrants issued to remove and retain documents accessed from the private dwellings and four businesses under section 16. This included the registered address (as well as the home address) of Ms Bockett, the accountant of the Honk Entities.

On 16 March 2011, the Commissioner executed the warrants. A total of eight sites were accessed: six in Auckland and two in Hamilton.

A total of 111 boxes of hard copy books and documents were removed, along with approximately 9.5 terabytes of electronic media from the Auckland sites. Late on 16 March 2011, a blanket privilege claim was made over all hard copy and electronic information removed.

On 8 April 2011, the applicants filed their judicial review application challenging the lawfulness and reasonableness of the access and removal operations for the six Auckland sites.

Following the hearing in the High Court, the appellants failed to make out any grounds for review. They have appealed aspects of that decision.

Decision

All challenges to the warrants failed. The appeal was dismissed and the Commissioner was awarded one set of costs from all the appellants.

Appropriateness of judicial review

The Court found that the facts fell into the recognised exception in the case of Gill v Attorney-General [2010] NZCA 468, [2011] 1 NZLR 433 and therefore judicial review was appropriate. Gill states that a judicial review of a search warrant is generally not appropriate because the most suitable remedy for any errors in the process is the exclusion of wrongly seized evidence. However, because the nature and the scope of these warrants impacted directly both on the powers of the Commissioner and whether these powers have been lawfully exercised, the review was appropriate.

Consideration of the unredacted affidavit

In the High Court, the case had proceeded on the basis that access to the unredacted affidavit was not required. Venning J reserved his position on this point and indicated that he would call for an unredacted copy if required. In the Court of Appeal, the Judges questioned whether it would be possible to review the decision of the District Court without seeing all material provided to them. A copy of the unredacted application was given to them.

The Judges reviewed the application to ensure that no material had been unduly redacted. While a few small portions were questionably masked, they did not consider that material relevant to the issues on appeal. They were satisfied that it was proper for them to have access to, and review, the full unredacted application.

Was the Commissioner's reliance on section 16 powers reasonable?

This issue focused on whether the warrants were required for the Commissioner to exercise her functions. The Court agreed with Baragwanath J in Avowal Administrative Attorneys Lt v District Court at North Shore [2010] 2 NZLR 794 and found the following:

1. A warrant issued under section 16(4) is not a warrant to search the premises for particular information or documents but rather gives access to enter a private dwelling. The Commissioner's power to inspect documents on these premises then comes from part of the broader statutory power, section 16(1).
2. Section 21 of the Bill of Rights Act 1990 (the freedom from unreasonable search and seizure) requires that section 16(4) is to be read subject to an overall test of reasonableness in all the circumstances.
3. Whether or not other options have been pursued is one of the factors to be taken into account when determining whether a warrant should be issued. However, there should be no absolute requirement that the Commissioner should exhaust all options before seeking a warrant.
4. The Commissioner's power under section 16C to seize and retain documents for inspection is more intrusive than taking copies under section 16B. Therefore, the judicial officer considering the warrant application must be satisfied in all the circumstances that there are reasonable grounds for believing that the Commissioner may require removing documents to exercise her functions.

Alleged errors and omissions in affidavit

The Court agreed with the High Court judge. The errors or failing contained in the affidavit were primarily in relation to emphasis and in the context of a lengthy affidavit, they were not material. Even if restricted to considering the redacted affidavit, none of the challenges would succeed.

The form of the warrants

The appellant contended that the warrants did not meet the requirements of section 16(5)(b). Section 16(5)(b) requires that the warrant issued specify a class of persons who may have physical access to a private dwelling under a warrant issued under s 16(4). The Court stated that a class of every officer authorised by the Commissioner met this requirement.

Counsel for the appellants argued that the warrants were drawn too widely and did not have as much specificity as the circumstances allowed. The Court upheld Avowal; because these warrants were issued under the statutory scheme of a civil tax-recovery scheme they were not analogous to search warrants under the criminal law or other legislation. The Commissioner's powers under section 16 are necessarily broad given the complexity that is often inherent in tax investigations. Therefore, the warrants were not expressed too broadly.

Were the warrants reasonably required?

The Court gave separate consideration to the applications for the access warrants to the private homes of Messrs Tauber and Webb, as opposed to that of Ms Bockett out of deference to her status as a professional.

The access warrants for the private dwellings of Messrs Tauber and Webb, as well as the related removal and retention warrants, were lawful and reasonable. The affidavit demonstrated that it was reasonable in all circumstances of the case for the Commissioner to seek the access warrants on the basis that the warrants were reasonably required. It was not necessary for the Commissioner to demonstrate that all other options available to her under the TAA had been exhausted.

The Court was satisfied by a narrow margin that the affidavit filed in support of the warrants for the private dwelling of Ms Bockett demonstrated that it was reasonable in all the circumstances of the case for the Commissioner to seek the warrants. Particular emphasis was placed on evidence pointing towards a pattern of action on behalf of Honk Entities and others that obstructed the Commissioner's investigation. This included a failure by Honk Entities, which Ms Bockett was agent of, to comply with section 17 requests.

Had the Court found that the warrants in respect of Ms Bockett's residence were unlawful it would have been necessary to consider the question of remedy. The Judges determined that even if they had determined that the warrants were unlawful, the breach could only have been classified as slight and therefore no relief would have been granted.