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09 Jun 2016
Appeal Status

Commissioner not required to disclose documents exchanged under double tax agreement

2016 case note – High Court finds CIR not required to disclose documents exchanged under double tax agreement.

Chatfield & Co Limited v Commissioner of Inland Revenue [2016] NZHC 1234

Sections 17 and 81 of the Tax Administration Act 1994, ss 69 and 70 of the Evidence Act 2006, s 10(2)(i) of the Judicature Amendment Act 1972


The High Court found that the disclosure of documents exchanged between tax authorities pursuant to a Double Tax Agreement is governed by s 81 of the Tax Administration Act 1994 ("TAA"). The High Court confirmed the Commissioner of Inland Revenue ("the Commissioner") was not required to disclose such documents to the applicant in relation to judicial review proceedings.


The High Court has found that the provisions of s 81 of the TAA govern the determination of whether copies of documents exchanged between Republic of Korea's National Tax Service ("NTS") and the Commissioner, including the original request received by the Commissioner from the NTS ("the Documents") are to be disclosed to the applicant. While the Commissioner had relied on the relevant sections of the Evidence Act 2006 in support of her opposition to the disclosure of the Documents, this decision reinforces the confidential nature of documents exchanged between tax authorities.


Chatfield & Co Ltd ("Chatfield") applied to judicially review a decision of the Commissioner to issue it with Notices to Furnish Information under s 17 of the TAA ("the Notices").

Chatfield acts as the tax agent for various companies ("the Companies") which are currently under investigation by the tax authorities of the Republic of Korea ("Korea"). The NTS asked the Commissioner to obtain and provide information relating to the Companies, pursuant to the Double Taxation Relief (Republic of Korea) Order 1983 ("the DTA"). 

In the context of this application for review, Chatfield has sought copies of the Documents. The Commissioner had refused to provide copies of the Documents on the grounds that they are irrelevant, and that they relate to "matters of state" and as such are protected by privilege/confidentiality.


The High Court's decision is set out in a judgment ([2016] NZHC 1234) dated 9 June 2016 which is to be read in conjunction with an earlier reserved judgment ([2015] NZHC 2099) dated 1 September 2015.

Reserved Judgment dated 1 September 2015

In its reserved judgment dated 1 September 2015, the High Court stated that it was prepared to proceed on the basis that, as the Documents caused the Notices to be issued, they will by definition be relevant to a claim seeking judicial review of the decision to issue the Notices. 

The High Court identified two cases in which the New Zealand Courts have been required to grapple with applications for discovery in a Double Tax Agreement context; being Commissioner of Inland Revenue v E R Squibb & Sons (New Zealand) Ltd ((1992) 6 PRNZ 601 (CA)) ("Squibb") and Avowal Administrative Attorneys Ltd v North Shore District Court ([2008] 1 NZLR 675 (HC)) ("Avowal").

The High Court considered that the terms of the DTA coupled with s 81 of the TAA and the rules of court govern the position regarding disclosure. If consent to disclose the Documents was specifically refused by the NTS, then ss 69 and 70 of the Evidence Act 2006 may come into play. 

Furthermore, the High Court considered that the conclusions set out in its reserved judgment were not directly at odds with Squibb and Avowal, and that any such conflict is explicable on the basis of the different wording of the DTA; the clarification in more recent OECD commentaries; and the more nuanced approach that is now taken to secrecy under s 81 of the TAA.

The High Court considered that the following factors are relevant in interpreting Double Tax Agreements:

  1. Each Double Tax Agreement is the product of a separate bilateral negotiation process and there are likely to be differences between the various agreements;
  2. The most recent version of the relevant Commentaries to the Model Convention (OECD (2014), Model Tax Convention on Income and on Capital: Condensed Version 2014, OECD Publishing) is intended to reflect a common view as to what the meaning of a particular section is, and has always been; and,
  3. The legal landscape in relation to taxpayer secrecy, and its recent evolutions.

The High Court also considered that Westpac Banking Corporation Ltd v Commissioner of Inland Revenue ([2008] NZSC 24, [2008] NZLR 709) ("Westpac") carried greater authority than Squibb in this context. 

The High Court concluded that the matter could not be resolved at this point. It directed that the Commissioner make inquiries of the NTS as to its views on disclosure of specific documents and file a memorandum advising of the outcome of any inquiries made. 

Judgment dated 9 June 2016

Subsequent to the release of the Reserved Judgment, the Commissioner filed a memorandum with the High Court detailing why, as a matter of Korean law, the NTS sought to maintain the confidentiality of the Documents. 

In its judgment the High Court found that the requested disclosure was not a ss 69 or 70 (of the Evidence Act 2006) matter but that, following Westpac, s 81 of the TAA and the rules governing discovery apply. 

The High Court found that the Commissioner faces competing s 81 interests in carrying into effect the Inland Revenue Acts, being:

  1. Complying with her discovery obligations in the course of defending court proceedings against her; and
  2. Maintaining a properly founded duty of confidence (whether owed to a taxpayer or to a foreign state).

The weighing of these two interests was considered to be different to the exercise required under ss 69 or 70 of the Evidence Act 2006. 

Against disclosure, the High Court found that discovery principles require that documents sought must at least be relevant to some justiciable issue. Here the applicant wished to test whether the request from the NTS was:

  1. necessary for carrying out the provisions of the Convention or of the domestic laws of Korea (as required by art 25(1)); and
  2. for information which is obtainable under the laws or in the normal course of the administration of Korea (as required by art 25(2)).

As set out in its reserved decision of 1 September 2015, the High Court found that the prospect of the Court on review being willing to engage with those kinds of issues is far from high.

The High Court then considered the recent decision of the Singaporean Court of Appeal in Abu v Comptroller of Income Tax ([2015] SGCA 4, [2015] 2 SLR 420 (CA)) ("Abu"). It found that there were similarities between the contentions raised in Abu and those Chatfield advanced in the judicial review proceedings. In this regard the High Court agreed with the concerns articulated by the Singaporean Court of Appeal, that:

  1. Domestic law requires that a request from a foreign tax authority must be clear, specific, relevant, legitimate and consistent with the Exchange of Information Standards. 
  2. Where considering challenges to the veracity of a request from a foreign tax authority, the protection of a taxpayer's rights needs to be balanced against the need to ensure the efficacy of the exchange of information machinery. 
  3. International comity would be compromised if the court were required to make pronouncements that could question the underlying bona fides of requests made by foreign tax authorities.
  4. The Court, in applying the relevant provisions of the tax acts, must not step into the shoes of the executive, which is the branch of government charged with the responsibility for entering into and enforcing international agreements.

As a result, the High Court considered the balance fell firmly on the side of confidentiality, directing that the Documents are not required to be disclosed.