BNZ INVESTMENTS LIMITED (AND OTHERS) V THE COMMISSIONER OF INLAND REVENUE HC WN CIV 2004-485-1059

BNZ INVESTMENTS LIMITED (AND OTHERS) V THE COMMISSIONER OF INLAND REVENUE HC WN CIV 2004-485-1059 4 February 2008IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY CIV 2004-485-1059 CIV 2005-485-1045 CIV 2006-485-1028 CIV 2006-485-2084IN THE MATTER OF the Tax Administration Act 1994 and the Income Tax Act 1994 BETWEEN BNZ INVESTMENTS LIMITED (AND OTHERS) Plaintiffs AND THE COMMISSIONER OF INLAND REVENUE Defendant Hearing: 24 January 2008 Counsel: A R Galbraith QC and A S Butler for Plaintiffs D J White QC and R Ellis for Defendant Judgment: 4 February 2008JUDGMENT OF MILLER J[1] This judgment addresses the Commissioner's application to strike out part of the plaintiffs' amended statement of claim of 4 December 2007, and the plaintiffs' applications for particulars of the Commissioner's defence and further discovery. [2] At issue in the litigation is the content, purpose, and effect of several structured finance transactions involving the plaintiffs, whom it is convenient to call "the Bank", and various overseas counterparties and intermediaries. I will assume familiarity with the judgments in BNZ Investments Limited and Others v Commissioner of Inland Revenue WN HC CIV 2004-485-1059 and CIV 2005-485- 1045 Wild J 22 November 2006, BNZ Investments Limited and Others vCommissioner of Inland Revenue CA93/07 21 August 2007 and Westpac Banking Corporation v Commissioner of Inland Revenue HC AK CIV 2004-404-006444 Harrison J 26 October 2007. Those judgments recount, in greater detail than is presently necessary, the nature of the transactions and the Commissioner's attempt to show that the transactions had the purpose or effect of tax avoidance by relying on similar transactions involving other Banks and the same counterparties or intermediaries. [3] The fixture was originally set to deal with the Bank's applications of 1 November and 4 December 2007 for particulars and discovery. The particulars sought affected the Commissioner's statement of defence dated 24 September 2007. However, on 4 December the Bank filed an amended statement of claim, to which the Commissioner has yet to plead. The amendments provoked the strikeout application. The Commissioner also served a notice for particulars on 23 January, the day before the fixture. Counsel were content to argue all three applications although Mr White's position was that the Commissioner would voluntarily provide some further particulars and discovery should the strikeout application fail. The applications were the subject of extensive written submissions. It is not useful to rehearse them in detail.The strikeout application[4] The Commissioner's complaint, in short, is that in its amended statement of claim the Bank has added paragraphs attacking the Commissioner's reasons for issuing the amended assessments that are the subject of these challenge proceedings. The Commissioner says that what is in issue is the correctness of the assessments, not the Commissioner's reasons for doing so.Challenge proceedings against an assessment[5] An assessment is a decision of the Commissioner as to the amount of tax to be paid by a taxpayer. To qualify as an assessment it must be an honest attempt to assess the amount of tax payable on the information available to the Commissioner:CIR v New Zealand Wool Board (1999) 19 NZTC 15, 476, 15, 479. I accept Mr Galbraith's submission that the exercise of judgement is central to an assessment, which is to be distinguished from the "notice of the assessment" sent to the taxpayer under s111 of the Tax Administration Act 1994. But the Commissioner is not required to give reasons. Correspondence, inquiries, and consideration may characterise the process leading to the assessment, but they are not part of the assessment itself: Smith v CIR (1997) 1 NZLR 727, 733. Nor is the Commissioner bound in challenge proceedings by his reasons for issuing the assessment; he may defend it on any available ground. [6] An assessment once made must be taken as correct until set aside or modified in objection or challenge proceedings under the Tax Administration Act: s109 of that Act. Part 8A of the Act deals with challenge proceedings. Section 138B(1) provides that a challenge is made to an assessment, and states so far as relevant:138B When disputant entitled to challenge assessment(1) A disputant is entitled to challenge an assessment by commencing proceedings in a hearing authority if— (a) the assessment includes an adjustment proposed by the Commissioner which the disputant has rejected within the applicable response period; and (b) where the assessment is an amended assessment, an adjustment proposed by the Commissioner that is included in the assessment— (i) imposes a fresh liability (being a liability that was not included in an earlier assessment) in respect of a particular; or (ii) increases an existing liability (being a liability that was included in an earlier assessment but to a lesser extent) in respect of a particular; and (c) the disputant files the proceedings, in accordance with the Taxation Review Authority Regulations 1994 (or any regulations made in substitution for those regulations) or the High Court Rules, within the response period following the issue of the relevant notice of assessment.[7] Section 138P deals with the powers of the hearing authority, and provides so far as relevant:138P Powers of hearing authority(1) On hearing a challenge, a hearing authority may— (a) Confirm or cancel or vary an assessment, or reduce the amount of an assessment, or increase the amount of an assessment to the extent to which the Commissioner was able to make an assessment of an increased amount at the time the Commissioner made the assessment to which the challenge relates; or (b) Make an assessment which the Commissioner was able to make at the time the Commissioner made the assessment to which the challenge relates, or direct the Commissioner to make such an assessment. (1B) If a taxpayer brings a challenge and proves, on the balance of probabilities, that the amount of an assessment is excessive by a specific amount, a hearing authority must reduce the taxpayer's assessment by the specific amount.[8] The hearing authority, in this case the High Court, does not perform an appellate function. It must make its own decision about the taxpayer's liability to tax. It does so on the pleadings and evidence before it, not on the record that was before the Commissioner when he made the assessment: CIR v Zentrum Holdings[2007] 1 NZLR 145. For these reasons, the hearing authority ordinarily need not examine in detail the process which led to the Commissioner's assessment:Dandelion Investments Limited v CIR (1996) 17 NZTC 12, 689. That decision was concerned with process issues, but the point applies equally, in my view, to the substance of the assessment. This conclusion is not affected by the fact that the scope of the arguments before the hearing authority may have been limited by statements of position exchanged under the dispute resolution process: s138G. I record in passing that statements of position have not been exchanged in this case. [9] The onus in challenge proceedings is on the taxpayer, presumably because the existence and character of any given receipt or expenditure is within its knowledge. Section 149A provides so far as relevant:149A Standard of proof and onus of proof(1) The standard of proof in civil proceedings relating to the imposition of penalties is the balance of probabilities. (2) The onus of proof in civil proceedings—(a) Relating to evasion or similar act to which section 141E applies or to obstruction rests with the Commissioner: (b) Relating to any other matter or thing rests with the taxpayer.[10] Reasons do not ordinarily accompany an assessment, as noted earlier. If the taxpayer wishes to challenge it, a statement of claim must be filed. The High Court Rules apply. Faced with a notice of assessment that simply quantifies its tax liability, the taxpayer could plead that the relevant expense, using deductions for ease of illustration, was deductible under the applicable provisions of the Income Tax Act. If the Commissioner wished to rely on the anti-avoidance provisions, he would respond by invoking sBB9, in effect as an affirmative defence. Because the onus is on the taxpayer, it likely would be ordered under Rule 169 to file and serve a reply setting out the details of the arrangement, and its purpose and effect. [11] In this case, it is common ground that the Commissioner has issued the offending assessments because he believes that arrangements under which certain deductions were claimed had the purpose or effect of tax avoidance. The Bank knows that to be so because the Commissioner issued notices of proposed adjustment in relation to some of the transactions. A NOPA must provide a concise statement of the key facts and law, sufficient to inform the taxpayer of the Commissioner's grounds for the proposed adjustment. The Bank responded with notices of response, and the Commissioner then issued the assessments. I observe that the notices of response may have led the Commissioner to modify the reasons given in the NOPA. [12] In circumstances where notices of proposed adjustment have been issued, it is understandable that pleadings might be abbreviated by the taxpayer filing a statement of claim that immediately confronts the Commissioner's justification for the proposed adjustment that preceded the notices of response and the assessments. That is what has happened in this case. It remains the position, however, that the question for the Court is not whether the Commissioner's reasons for the proposed adjustment were sound but whether the subsequent assessment correctly quantifies the taxpayer's tax liability. The Court answers that question by reference to the pleadings and evidence before it, not the record that was before the Commissioner when he issued the NOPA or made the assessment.The Bank's claim[13] Mr Galbraith accepted that, in this case, the taxpayer must show that the arrangements under which certain deductions were claimed did not have the purpose or effect of tax avoidance, and so complied with sBB9 of the Income Tax Act 1994 or its successor, sBG1. [14] It goes without saying that any such arrangement pre-dated the Commissioner's assessment, and that the Commissioner was not a party to it. His knowledge of the arrangement will depend on information supplied by the taxpayer or obtained through his investigations, and his opinion about it cannot alter its existence or character. [15] A feature of the amended claim is that it does not expressly plead what comprises each arrangement, nor what its purpose and effect was. Accepting this, Mr Galbraith supplied a "possible form of repleading" in which the Bank will define each transaction by reference to the transaction documents and the steps by which it was carried out, and will plead that the transactions had the purpose and effect of implementing the commercial objective of profitably providing competitively priced funding. I proceed on the assumption that these amendments will be made. [16] The amended statement of claim introduced paragraphs 12.1 and 11.2, which respectively plead:12.1 The Amended Assessments are incorrect in fact and law, because: (a) the Commissioner's reasoning in support of the Amended Assessments failed to take proper account of the consistency of the nature and structure of the assessed transactions with the scheme and purpose of the tax regimes applicable to the derivation of dividends and other distributions, and the deductibility of related expenditure; (b) the Commissioner's reasoning was made on the incorrect premises, as pleaded in paragraph 11.2. 11.2 When the Commissioner made the Amended Assessments he, among other things: (a) had no, or insufficient, regard to the fact that the nature and structure of the Gen Re 1, CSFB, Gen Re 2, Rabo 1, Rabo 2 and Lehmans transactions was influenced by:(i) the nature and structure of the Ruled Transactions; (ii) the approval given to the nature and structure of the Ruled Transactions by the Commissioner by way of Ruling A and Ruling B; and (iii) the Commissioner's acceptance, in those rulings, that transactions of this nature and structure were within a range of acceptable practice as contemplated by the scheme and purpose of the tax regimes applicable to the derivation of dividends and other distributions, and the deductibility of related expenditure; (b) in determining the tax consequences of each of the transactions, had regard to factors extraneous to the "arrangement" in each case, and in particular had regard to: (i) what he alleges to be a pattern of conduct by the plaintiffs; (ii) his determination that each of the Gen Re 1, CSFB, Gen Re 2, Rabo 1, Rabo 2 and Lehmans transactions is part of a series of so-called template transactions; and (iii) the existence, terms and tax consequences of, transactions entered into by parties unrelated to the plaintiffs, which he characterises as being, along with the transactions entered into by the plaintiffs, based on a "template"; (c) has been inconsistent in the transactions to which he has had regard, in that he has had regard to the transactions referred to in paragraph (b)(iii) above but has not had regard to transactions substantially similar to those transactions, the tax consequences of which he has either not disputed, or has approved by way of binding ruling; (d) has determined the tax consequences of each of the Gen Re 1, CSFB, Gen Re 2, Rabo 1, Rabo 2 and Lehmans transactions, having given excessive weight to the overall fiscal consequences of those six transactions together with transactions entered into by other parties, and has correspondingly given insufficient weight to the purpose or effect of each particular arrangement.[17] I interpolate at this point that the Commissioner has issued amended assessments in respect of each of the six transactions named in paragraph 11.2(a). The "ruled transactions" referred to in paragraph 11.2(a) are transactions in respect of which the Commissioner had issued favourable private binding rulings. The Bank says that those transactions were substantially similar to each of the pleaded transactions.[18] The strikeout application extends to other paragraphs of the amended statement of claim in which the Bank pleads, in relation to each transaction, that it had entered into previous transactions that were the subject of favourable binding rulings, and goes on to plead that those transactions were substantially similar to those that are the subject of the offending assessments and that the Bank had regard to the "ruled transactions" when structuring the subsequent transactions. [19] I also note that paragraph 12.1 is the first, and general, ground on which the Bank says the assessments were wrong. As pleaded, the Bank says that the assessments may be set aside on the grounds in 12.1 alone; in other words, that they could be set aside even if they happen to be correct in law. The balance of paragraph 12 goes on to plead, transaction by transaction, that the amended assessments are wrong for various reasons that need not be detailed here. In essence, the Bank says that the transactions were genuine arms-length transactions and the relevant expenditure was genuinely incurred. The relevant point for present purposes is that in the remainder of paragraph 12 the Bank's case is advanced, as one would expect, by reference to the features of the transactions.The parties' positions[20] The Commissioner's primary argument is that his reasoning in support of the amended assessments is irrelevant. He also sees in paragraphs 12.1(v) and 11.2 a challenge in the nature of judicial review. He contends that paragraph 11.2 raises concepts of legitimate expectation and allegations of inconsistency or of giving excess weight to relevant considerations. He pointed to the judgment of Harrison J in Westpac Banking Corporation v CIR, in which the taxpayer sought to pre-empt challenge proceedings by having the assessments quashed in a judicial review proceeding founded, in large part, on a legitimate expectation arising out of prior rulings. Mr White also complained that the reference in paragraph 12.1(a) to scheme and purpose of the tax regime is bad because it raises no question of fact. [21] Mr Galbraith responded that there is no separate judicial review cause of action in this case, and disclaimed any reliance on legitimate expectation or estoppel. Nor does the Bank contend that the Commissioner is bound to act consistently.Rather, the Bank wants to prove its case by showing, in part, that the Commissioner's reasoning was wrong. And the Commissioner is expert in the administration of the Income Tax Act, so his opinion about the character of any given arrangement is a relevant consideration for the Court. The reference to scheme and purpose is legitimate because interpretation of the legislation takes place in a factual context.Strikeout principles[22] I need not rehearse the principles affecting strikeout applications, but it is necessary to address a submission by the Bank that a pleading may be struck out under R186 on the ground that no cause of action is disclosed only where the application affects the entire pleading. I reject that submission. R186 contemplates that part of a pleading may be struck out on that ground. I refer to the commentary in McGechan on Procedure at 186.09. There may be cases in which allegations in the pleading cannot comprise a material part of an otherwise viable cause of action; that is, they are irrelevant.Discussion[23] One of the Commissioner's allegations is that the transactions were executed on a template that had been "mass-marketed" to banks; he asserts that use of an 'off the peg tax scheme' indicates that the purpose was that of managing tax capacity. InBNZ Investments v CIR, the Court of Appeal accepted that for this reason, among others, the Commissioner might properly discover similar transactions by the same Bank and by other Banks. (In concluding that the documents were discoverable, the Court made it clear that it was not determining their admissibility.) For present purposes, the material point is that the Bank says that later transactions followed a similar form because earlier ones had been the subject of favourable rulings. [24] I accept that the Bank is entitled to respond to the Commissioner's reliance on the "mass-market" nature of the transactions by pleading that they took a similar form because earlier rulings had been issued; that is, that the Bank itself (or its advisors) had regard to the ruled transactions. Indeed, I did not understand Mr Whiteto dispute this as the argument developed, although he did contend that it is only the rulings themselves, and not the documents underlying them, that are thereby made relevant. [25] It follows that the Commissioner's application must fail insofar as it affects paragraphs 2.7, 2.8, 3.9, 3.10, 4.7, 4.8, 5.9, 5.10, 6.11, 6.12, 7.11 and 7.12 of the amended statement of claim. [26] The position is otherwise with respect to references to the ruled transactions in paragraphs 11.2 and 12.1(b). Those paragraphs focus on the Commissioner's reasons for issuing the amended assessments, and further on his failure to take the ruled transactions into account. I accept Mr White's submission that as a matter of interpretation, paragraphs 11.2 and 12.1(b) together seek to set aside the assessments on grounds of consistency with the ruled transactions, legitimate expectation arising out of them, or the Commissioner's reliance on extraneous considerations. I further accept his submission that the Commissioner's reasons for issuing the amended assessments are not a material part of the cause of action. The Bank could not succeed on the grounds pleaded in paragraph 12(1) if, no matter how flawed the Commissioner's reasoning, the Court concludes that the assessments correctly quantify the taxpayer's liability to tax. [27] I observe that it is difficult to avoid the impression that the Bank is trying to focus its challenge on the quality of the Commissioner's reasons for making the assessments rather than the question whether the transactions themselves have the purpose or effect of tax avoidance. To permit that approach is to distract attention from the real issue, with likely consequences in terms of delay, length of hearing, and cost. [28] To recognise this is not to deny that, as a matter of advocacy, the Bank may seek to prove its case by first knocking down the Commissioner's, as Mr Galbraith argued. Where the Bank errs is in seeking to confront the Commissioner's reasons for making the assessments rather than his pleadings and evidence in the challenge proceeding. As the Bank's written submissions made plain, the Bank assumes that achallenge proceeding is analogous to an appeal from a lower Court. For reasons given at paragraphs [5] - [12] above, I do not agree. [29] Paragraphs 11.2 and 12.1 will be struck out.Discovery[30] The Bank seeks discovery of three classes of documents. The first relate to the Commissioner's consideration or reasoning in respect of an application for a binding ruling made by BNZ Investments Limited and others in respect of a transaction called AIG 2. The second comprises binding rulings made by the Commissioner in favour of other taxpayers in respect of substantially similar transactions. The third comprises documents relating to the Commissioner's consideration and analysis or reasoning in respect of applications for rulings made by other taxpayers in respect of substantially similar transactions, whether or not the Commissioner gave a ruling. [31] The Commissioner resists on grounds of irrelevance and contends that the application is premature since some of the documents are relevant only if the amended statement of claim survives in its present form. (Mr White also pointed out that the orders sought are provisional in the sense that the question whether the Commissioner may rely, in this proceeding, on tax arrangements of other taxpayers is presently before the Supreme Court. In the meantime, I proceed on the assumption that he may do so.) Mr Galbraith responds that the documents are discoverable in any event. He says that discovery of these documents may help the Bank to impeach the Commissioner's reasoning behind the assessments. [32] Each of the categories of documents sought relate to private rulings, which are provided for in s91E of the Act. With certain exceptions, the Commissioner is required to make a private ruling on how a taxation law applies, or would apply, to a person and the arrangement for which the ruling is sought. However, the Commissioner may not make a ruling if the application for it would require the Commissioner to determine questions of fact, or if the application would require the Commissioner to form an opinion as to a commercially acceptable practice. And theapplication for a ruling must disclose all relevant facts and documents relating to the arrangement for which the ruling is sought. The Commissioner does not audit the transaction or conduct a factual investigation, but may specify any factual assumptions on which the ruling is based. A ruling does not apply if the arrangement is materially different from that identified in the ruling, or there is a material omission or misrepresentation in connection with the application, or the Commissioner makes an assumption about a future event or another matter material to the ruling and the assumption subsequently proves to be wrong. [33] Turning to the three categories of documents sought, it is convenient to begin with the second; that is, rulings made by the Commissioner in favour of other taxpayers in respect of substantially similar transactions. These rulings are discoverable for reasons given in relation to the strikeout application: they are relevant to the Bank's defence to the Commissioner's claim that the transactions involve tax avoidance partly because they were mass-produced by the intermediaries who marketed them to the various Banks. [34] I also note that in his judgment of 22 November 2006 Wild J held at [119]:Fourth, Mr Dobson referred to the BNZ's claim that in entering into the three transactions it had relied on private rulings it had obtained on two previous similar transactions. Those rulings were that the transactions were not tax avoidance. The BNZ should certainly be able to rely on those rulings, and to refer the Court to the transactions to which they relate. But I accept Mr Dobson's point that if some other allegedly materially similar transactions are to be looked at, then logic and consistency suggests that all allegedly substantially similar transactions should be looked at in deciding whether the three transactions are caught by sBG1.[35] Wild J may have had in mind that the rulings were relevant as an admission by the Commissioner about the purpose or effect of the transactions concerned. With some hesitation, I accept that they are discoverable for that reason. It is not a sufficient answer to argue, as Mr White did, that the Commissioner's rulings are of little moment since they were based on information supplied by the taxpayer and eschewed factual findings; they nonetheless involve a (partly factual) conclusion that the transactions as described did not have the purpose or effect of tax avoidance. Nor is it an answer to point out that the Commissioner was not party to the transactions; an admission by him is relevant because he is party to this litigation.The weight to be attached to such admissions may be slight, but I am not prepared to accept that they are wholly irrelevant. [36] Rulings may also be admissible in cases of ambiguity and to facilitate understanding of the scheme and purpose of the tax laws: L R McLean and Co v CIR(1994) 16 NZTC 11,211, 11,214. The Commissioner's expertise may assist the Court in such cases. Having said that, I accept that this case turns on the content, purpose and effect of the transactions, which are substantially factual questions for the Court. [37] Turning to the third category, Mr Galbraith argued that this application is simply the mirror image of the Commissioner's successful attempts to secure discovery of documents relating to the purpose of the so-called template transactions. He argued that the underlying documents may assist the Bank in an argument that there is nothing different between the transactions that received rulings and those that are the subject of the amended assessments. [38] I reject the submission that discovery of the Commissioner's documents underlying rulings follows symmetrically from discovery of documents relating to template transactions. It is the purpose or effect of the Bank's transactions, and not the Commissioner's reasoning, that is the subject of the litigation. However, I accept that discovery should extend to documents which the Commissioner took into account when making rulings on what he now characterises as template transactions. Such documents are relevant because they may affect the weight that the Court may attach to the rulings as an admission by, or opinion of, the Commissioner about the purpose and effect of such transactions. [39] I draw the line, however, at the Commissioner's reasons for refusing rulings in other cases. Such decisions cannot amount to an admission, still less a formal or published opinion. The Bank's purpose in seeking such material is that of demonstrating inconsistency, but that is not the issue. It is not the reason for allowing the Bank discovery of earlier rulings, as already noted.[40] These conclusions also dispose of the first category of documents sought, which concern the AIG 2 transaction. A ruling was given in respect of part of this transaction. The ruling and the documents relied upon to make it are discoverable. I note that the same or related documents were the subject of a judgment of Wild J dated 7 December 2006 in a separate judicial review application, BNZ Investments Ltd and Others v CIR HC WN CIV 2006-485-697. In that context, the question arose whether the Commissioner took into account extraneous considerations, correctly applied the law, and made his own decision, when declining to give a ruling. Wild J held that documents that the Commissioner took into account when making his decision to decline a ruling were discoverable. He refused discovery of material that might be relevant to the Bank's transactions, or that might evidence disagreement within the IRD about them; such discovery would be oppressive as well as irrelevant. Mr White pointed out that Wild J also refused discovery of documents underlying other rulings that were made, reasoning that the rulings speak for themselves. In a challenge proceeding, however, the issue is not the quality of the Commissioner's decision but whether the assessments are correct. I have held that documents that the Commissioner took into account are discoverable in relation to rulings that were granted because they may affect the weight to be given to an alleged admission about the purpose or effect of the ruled transactions. Documents underlying a refusal to issue a ruling are not relevant in this context.Particulars[41] The position with respect to particulars has become confused. As mentioned above, the Bank's application for particulars affected the Commissioner's defence to the previous statement of claim, and the Commissioner responded to the amended statement of claim by issuing a notice on 23 January 2008 seeking further particulars of that claim. The Bank is agreeable to giving some of the particulars sought, but not all. There is presently no application for particulars of the amended claim by the Commissioner. In the result, the argument proceeded in a somewhat unsatisfactory way, with counsel indicating where the Bank will provide any further particulars sought by the Commissioner and Mr Galbraith arguing that the Commissioner then ought to provide, in his yet to be filed defence to the amended claim, the particulars sought in the Bank's application for particulars of 1 November 2007. Nonetheless, itis possible to resolve some points of difference between the parties at the level of principle. I will deal with the issues to the extent that I am able to do so. [42] The particulars sought in the Bank's application may be summarised as follows: (a) The steps and transactions that the Commissioner alleges form part of each of the six arrangements said to constitute a tax avoidance arrangement; (b) The Commissioner's allegation that the rate of distribution received by the Bank in five of the six transactions was not a market rate; (c) The allegation that each of the six transactions is a tax avoidance arrangement, including any features of the transactions on which he relies and particulars of steps, understandings or transactions extraneous to the transactions themselves; (d) The denial that funding costs incurred by the Bank were paid on arms-length terms; and (e) Whether and if so what extent the Commissioner denies the Bank's allegations as to similarities between two earlier ruled transactions and the six disputed transactions. [43] The Commissioner's notice for particulars seeks particulars of facts on the matters and circumstances on the basis of which the Bank alleges that the six transactions were not tax avoidance arrangements; in particular, whether the Bank says that there was an arrangement, if so its nature, terms and steps, and the facts that support any contention that the purpose or effect of the transaction was other than tax avoidance. The Commissioner also seeks particulars of whether the Bank says that the transactions fall within a "range of acceptable practice" and if so, the facts by reference to which that range of acceptable practice is to be determined. He further seeks particulars of the facts on the basis of which it is alleged that funding costsincurred in the transactions were incurred on arms-length terms and on terms unrelated to any arrangement. It will be seen that there is an element of tit for tat, and perhaps haste, in the exchange of demands for particulars. [44] Under R108 a statement of claim is to show the general nature of the plaintiff's claim to the relief sought and to give such particulars of time, place, amounts, names of persons, nature and dates of instruments and other circumstances "as may suffice to inform the Court and the party or parties against to whom relief is sought" of the cause of action. It is not necessary to state the evidence supporting the facts alleged. Under R130 a statement of defence must give a fair and substantial answer to any allegation of fact in the statement of claim, and must plead any affirmative defence. It must give such particulars as may suffice to inform the Court, the plaintiff and any other parties of the defence. [45] The temptation to insist upon excessively refined pleadings is to be resisted as unnecessary and wasteful of costs and Court time. That is particularly so in complex cases, where over-pleading can obscure rather than clarify the issues. Case management should ensure that each side is fairly informed of the case that must be met. It can extend to requiring leading counsel to agree a list of issues. Evidence can be exchanged in good time before the trial. Notices of proposed adjustment have already been issued, although I accept that they do not preclude the Commissioner from identifying other grounds and are said to be internally inconsistent. [46] It is logical to deal first with the particulars sought by the Commissioner. I accept that the Bank must plead the particulars necessary to fairly inform the Commissioner of the scope and terms of any arrangement, and its purpose or effect. I did not understand Mr Galbraith to suggest otherwise. [47] I do not accept that it is necessary or useful to require the Bank to plead a "range of acceptable practice" within which the transactions fall. That is a matter of evidence.[48] So far as funding costs are concerned, it is enough for Bank to plead the transactions were on arms-length terms. That sufficiently puts the Commissioner on notice that the Bank relies on this point. The rest is evidence. [49] I now turn to the Bank's application for particulars. I accept that the Commissioner is entitled to put the Bank to proof of the transactions. But to the extent that he alleges that they differed from those pleaded by the Bank, particulars must be supplied of names, dates, nature and dates of instruments and the like. The pleading should extend to identifying documents of other counterparties or intermediaries that are said to establish terms of the Bank's arrangements. Mr Galbraith accepted that this need not extend to every email or letter evidencing the terms of the arrangements. [50] The Bank wants the Commissioner to identify the market and the market rate for distributions, together with the extent to which the actual rate is said to diverge from the market rate. In my view the assertion that the rate was not a market rate sufficiently puts the Bank on notice of the issue raised by the Commissioner in defence. It is for the Bank to prove that the transactions were on orthodox commercial terms. I do not accept the Bank's analogy with Commerce Act proceedings, in which market definition is often central to inquiries into existence and use of market power. However, I note that the Commissioner accepts the defence could usefully be clarified. That is to be encouraged, bearing in mind that the Commissioner must supply particulars necessary to give a fair and substantial answer; if he advances a positive case, particulars may be necessary. It is not possible to be more specific having regard to the state of the pleadings. [51] The third set of particulars sought is difficult to understand. To the extent that the Commissioner alleges that the transactions or arrangements differed from those pleaded by the Bank, I have already indicated that he must provide particulars. He is otherwise entitled to put the Bank to proof of its allegation that the purpose or effect of the transactions was that of profitably providing competitively priced funding. To the extent that he alleges some other purpose or effect that can be characterised as tax avoidance, however, he should plead it. He now accepts, in fact,that such particulars should be provided. He need not specify the evidence that he intends to adduce, as the Court of Appeal noted in its judgment at [40]. [52] I understood Mr Galbraith to accept that the Commissioner may put the Bank to proof of its allegation that funding costs were paid on arms-length terms. I agree. That sufficiently puts the Bank on notice of this issue. The Commissioner's criticism that the application is an attempt to reverse the onus is well-founded in this respect. As in other areas, it goes without saying that the Commissioner must give a fair and substantial answer; if he advances a positive case in relation to funding costs, particulars may be necessary. [53] Similarly, the Commissioner may put the Bank to proof of its allegation that the ruled transactions were indistinguishable from those that are the subject of the assessments, as he has done in the existing statement of defence. [54] If further clarification of the pleadings is to be sought, applications should follow the filing of a further amended statement of claim and a defence to that claim. I direct that an amended claim be filed by 12 February and a defence by 19 February.Costs[55] Costs are reserved. Miller JIn accordance with r540(4) I direct the Registrar to endorse this judgment with the delivery time of 2.15pm on the 4th day of February 2008.Solicitors:Russell McVeagh, Wellington for the Plaintiffs Crown Law Office, Wellington for the Defendant