Chatfield & Co Limited v Commissioner of Inland Revenue: Discovery in the Context of Judicial Review
2017 case note – Supreme Court refused leave to appeal – discovery of documents, double taxation agreement.
The Commissioner of Inland Revenue (“the Commissioner”) issued a number of Notices under s 17 of the Tax Administration Act 1994 (“the TAA”) to the appellant. The appellant sought to judicially review this, and as part of that sought discovery of certain material (“the Documents”). The High Court refused this request, and that was upheld on appeal by the Court of Appeal. The appellant then sought leave to appeal to the Supreme Court. The Supreme Court refused leave on the basis that the issue here was straightforward, and was a matter of the application of settled principles to a particular fact situation. It was not necessary for the Supreme Court to engage with this issue.
The appellant has now exhausted its appeal rights in regards to its request for discovery of the Documents. The High Court’s decision to refuse discovery is upheld and the Commissioner will not be required to provide the Documents. The decision has limited wider impact, as it is largely limited to its particular facts, although may provide some guidance on the Supreme Court’s approach to determining applications for leave to appeal in the discovery context.
The Appellant appealed against a decision of the High Court declining an application for discovery of the Documents exchanged pursuant to the Double Taxation Agreement between New Zealand and the Republic of Korea (“the DTA”).
The decision of the High Court was reflected by judgments of Ellis J dated 1 September 2015 (Chatfield & Co Ltd v Commissioner of Inland Revenue  NZHC 2099, (2015) 27 NZTC 22-024) and 9 June 2016 (Chatfield & Co Ltd v Commissioner of Inland Revenue  NZHC 1234, (2016) 27 NZTC 22-053).
The Appellant’s substantive litigation originally involved two causes of action. The first was that the Appellant had a legitimate expectation under an operational statement known as OS 13/02 (Operational Statement: Section 17 notices (Inland Revenue, OS 13/02, 14 August 2013)). The second was that the Commissioner failed to consider the terms of OS 13/02, the limited nature of the tax agent/client relationship and the terms of the DTA between New Zealand and the Republic of Korea. The first cause of action and the first two limbs of the second cause of action were struck out by judgment of Lang J dated 27 September 2016 (Chatfield & Co Ltd v Commissioner of Inland Revenue (No 2)  NZHC 2289, (2016) 27 NZTC 22-072).
This left the allegation that in making the decision to issue the s 17 notices the Commissioner failed to consider the terms of the DTA as the last remaining cause of action.
In the High Court Ellis J concluded that the only aspect of the pleading to which the documents would relate (namely the allegation that the Commissioner failed to take into account the DTA) was unlikely to be justiciable and the Documents were confidential and not required to be disclosed (Chatfield & Co Ltd v Commissioner of Inland Revenue  NZHC 1234, (2016) 27 NZTC 22-053 at ).
The Court of Appeal agreed with the High Court that the documents were not required to be disclosed, noting that discovery in judicial review proceedings is not available as of right. The power of the Court to grant discovery in judicial review proceedings is discretionary and contrasts with the position in an ordinary proceeding.
The Court of Appeal considered the Commissioner had considered the relevant terms of the DTA and characterised the application for discovery as effectively a “fishing” expedition. As a result the Court of Appeal dismissed the appeal.
The appellant then sought leave to appeal to the Supreme Court.
The Supreme Court declined the application for leave and awarded costs of $2,500 to the Commissioner.
In reaching its decision the Supreme Court noted that while the applicant raised issues of a type that would warrant the Court’s attention, the issue was straightforward on the particular circumstances of this case because:
- The Court had discretion as to whether or not to order discovery.
- The Court had to consider whether the materials sought were relevant given the only remaining live issue.
- The Court concluded on the pleadings that they were not.
The Supreme Court noted this was simply a matter of applying settled principles to a particular fact situation and not a matter which it was necessary for the Supreme Court to engage in.