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14 Jul 2016
Appeal Status
Not appealed

Decision reinforces strength of section 81 provisions

2016 case note - High Court reinforces the strength of s 81 (Tax Administration Act) provisions regarding secrecy as applied to discovery obligations.

FAF Holdings Limited (in liq) and Ors v R J Bethune CIV 2015-412-0080 [2016] NZHC 1595


The High Court found that due to s81(3) of the Tax Administration Act 1994 ("TAA"), the Commissioner of Inland Revenue ("the Commissioner") is not required to comply with discovery obligations under r 8.25 of the High Court Rules. Associate Judge Christiansen stated that due to the secrecy provisions invoked in s81(3), disclosing was not necessary for carrying into effect the Revenue Acts. His Honour further noted that the proceeding was between liquidators (governed by the Companies Act 1993) and Mr Bethune, the director of FAF Holdings Ltd ("the Company"), thus the tax liability of the company was not in dispute.


This judgment upholds the long-standing principle that the Commissioner does not have to comply with information requests or discovery orders from parties who are not entitled to that information under any of the exceptions to secrecy in s 81.


FAF Holdings Limited was put into liquidation on an application from the Commissioner on 11 December 2014.

The liquidators, who are the second respondents in these proceedings, are suing Mr Bethune, sole director and shareholder of the company, for a number of alleged breaches of director's duties under the Companies Act 1993.

Mr Bethune denies that he breached these duties and says in his defence that he was unaware that the company had difficulties until December 2013 and that it was an in-house accountant who had control and responsibility of the company's finances.

The liquidators requested from the Commissioner the company's files. These were provided by the Commissioner and duly discovered to Mr Bethune. The liquidators filed an affidavit stating that they had fully discovered to Mr Bethune all relevant documents obtained from the Commissioner. Mr Bethune, however, contended that there were exchanges between himself and Inland Revenue that were not part of the discovered documents.

To further his defence, Mr Bethune applied for non-party discovery against the Commissioner, seeking (inter alia) correspondence, internal reports and file notes on the company’s solvency and potential claims by the Commissioner against Mr Bethune.

The Commissioner opposed the application under section 81(3) TAA. Pursuant to that section, no officer of the Department shall be required to produce in any Court or Tribunal any document or to devolve or communicate to any Court or Tribunal any matter or thing coming under the officer’s notice in the performance of the officer’s duties as an officer of the Department, except when it is necessary for carrying into effect the Revenue Acts, the listed accident compensation legislation, any other act imposing taxes or duties payable to the Crown or Commissioner’s powers, duties or functions under the New Zealand Superannuation Act 1974.

The Commissioner also submitted that Mr Bethune was not entitled to the company's information under s 81(4)(l) (information held or obtained in relation to that person or their representative) because directors cease to have powers, duties or functions (other than those permitted under the liquidation provisions of the Companies Act) once a company is placed into liquidation.


Associate Judge Christiansen dismissed the application. His Honour held that s 81(3) applied as disclosing was not necessary for carrying into effect the Revenue Acts.

His Honour also held that due to the privilege in s 81(3), the Commissioner is not required to comply with discovery obligations under the High Court Rules.

The fact that the Commissioner had lodged the claim resulting in the company’s liquidation was irrelevant; the tax liability of the company is not in dispute. The proceeding is between the liquidators, who have duties under the Companies Act which is not a Revenue Act, and Mr Bethune. Accordingly, the Commissioner is not required to produce the documents for the purpose of carrying into effect the Revenue Acts.

Mr Bethune did not have standing to request the company's documents under the exception in s 81(4)(l), therefore the section does not authorise the Commissioner to provide the company's information to Mr Bethune.

Costs were awarded on a 2B basis plus disbursements as approved by the Registrar.

S 81 Tax Administration Act 1994