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10 Sep 2014
Appeal Status
Not appealed

Application for discovery dismissed by the High Court

2014 case note – application for discovery from CIR dismissed on basis that documents sought not relevant - shortfall penalties, unacceptable tax position.

ASB Bank Limited v Commissioner of Inland Revenue


The High Court dismissed ASB Bank Limited's ("ASB") application for discovery from the Commissioner of Inland Revenue ("the Commissioner"), on the basis that the documents sought were not relevant.

Impact of decision

The High Court has restated that relevance (as determined by the pleadings) is the starting point in discovery. If a document is not relevant, it is not discoverable.

This judgment is High Court authority that informal, unfinalised views expressed by internal Inland Revenue staff will not be relevant to the determination of whether a tax position taken is "about as likely as not to be correct" (for the purposes of determining whether an assessment of shortfall penalties for taking an unacceptable tax position is correct).


ASB's application for discovery sought all documents held by the Commissioner (including emails, meeting notes and minutes) that express a view on the Yen transaction, relevant to whether or not the tax position taken by ASB was "about as likely as not to be correct". In particular, ASB sought documents held by the Commissioner's Policy and Strategy Unit in relation to the second Yen transaction (which was contemplated by ASB but not commenced), documents held by Rulings and any/all other disputes documents held.

The Commissioner opposed the application for discovery on the basis that those documents are not relevant.


Asher J dismissed ASB's application for discovery. His Honour restated the principle that the starting point for a discovery application is that the documents sought must be relevant to an issue in the proceedings. Relevance in this case is to be considered against the requirements of s 141B(1) of the TAA (unacceptable tax position). Asher J considered the test under s 141B(1) as stated by the Supreme Court in Ben Nevis Forestry Ventures Limited v CIR [2006] NZSC 115 (at 184-185) that the "merits of the arguments supporting the taxpayer's interpretation must be substantial". Thereby reiterating that the test is an objective one, so that the taxpayer's belief as to whether the tax position taken was correct is irrelevant. All tax laws, including the general anti-avoidance provision and decisions of the Courts and Taxation Review Authority on the interpretation of the relevant tax laws are to be considered (s 141B(7) of the TAA ).

His Honour noted (at [17]) that the question of discoverability of documents in relation to the issue of whether a taxpayer's tax position had substantial merit has not been directly addressed in New Zealand. Asher J referred to Australian cases (Prebble v CoT [2002] FCA 1434, Walstern v CoT (2003) 138 FCR) that considered a similar test in the Australian penalties regime and stated that those cases did not suggest that informal views, which were not intended to be communicated to third parties, could be considered. His Honour stated (at [18]) that the observations of Venning J in Accent Management Ltd v CIR (2005) 22 NZTC 19,027 (HC) at [360] and [364], is an indication that there were limits as to whether the private opinions held by the Commissioner's officers could be considered.

His Honour further stated (at [19], [21], [23] and [24]) that a judge may get some assistance from commentary on the law and other material of probative value (such as articles by reputable experts and Rulings of the Commissioner) in deciding whether a taxpayer's tax position had substantial merit but that a line must be drawn. Asher J held that "the documents fail the relevance test because their informal nature means they have no significant probative value" (at [22]).

High Court Rules, Tax Administration Act 1994