COMMISSIONER OF INLAND REVENUE v CHATFIELD & CO LIMITED [2019] NZSC 84

COMMISSIONER OF INLAND REVENUE v CHATFIELD & CO LIMITED [2019] NZSC 84 [7 August 2019]IN THE SUPREME COURT OF NEW ZEALANDI TE KŌTI MANA NUISC 34/2019[2019] NZSC 84BETWEEN COMMISSIONER OF INLANDREVENUEApplicantAND CHATFIELD & CO LIMITEDFirst RespondentCHATFIELD & COSecond RespondentCourt: Glazebrook and O'Regan JJCounsel: P H Courtney for ApplicantR A Rose and J G Bassett for RespondentsJudgment: 7 August 2019JUDGMENT OF THE COURTA The application for leave to appeal is dismissed.B The applicant must pay costs of $2,500 to the respondents.____________________________________________________________________REASONS[1] The respondents (Chatfield) applied for judicial review of a decision of theCommissioner to issue notices under s 17 of the Tax Administration Act 1994(the TAA) requiring Chatfield to furnish information to the Commissioner that it heldin relation to specified clients of the firm. Chatfield succeeded in the High Court andthe notices were quashed.1 The Court of Appeal dismissed the Commissioner'sappeal.2 The Commissioner now seeks leave to appeal to this Court.[2] The background to the High Court decision was, in brief, as follows:(a) The Korean National Taxation Service (NTS) commenced aninvestigation into the affairs of a Korean national who was resident inNew Zealand, Mr Huh.(b) The NTS made a request under art 25 of the New Zealand-KoreaDouble Tax Agreement (the DTA) for information relating to certainNew Zealand companies with which Mr Huh was said to beassociated.3(c) In order to obtain the requested information the Commissioner issued15 notices under s 17 of the TAA requiring Chatfield to furnishdocuments held on behalf of the companies.(d) There has been protracted proceedings between the parties, assummarised in the Court of Appeal's judgment.4(e) In the High Court decision to which this application for leave relates,the Court dealt with Chatfield's application for judicial review of theCommissioner's decision to issue the s 17 notices.[3] The Commissioner wishes to pursue in this Court a number of issues that theCourts below decided against her. She argues they are matters of general or public1 Chatfield & Co Ltd v Commissioner of Inland Revenue [2017] NZHC 3289, [2018] 2 NZLR 835(Wylie J) [Chatfield (HC)].2 Commissioner of Inland Revenue v Chatfield & Co Ltd [2019] NZCA 73, (2019) 29 NZTC¶24-007 (Asher, Brown and Gilbert JJ) [Chatfield (CA)].3 Convention Between the Government of New Zealand and the Government of the Republic ofKorea for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect toTaxes on Income 1773 UNTS 70 (signed 6 October 1981, entered into force 22 April 1983). SeeDouble Taxation Relief (Republic of Korea) Order 1983.4 Chatfield (CA), above n 2, at [15]–[21].importance and that it is therefore necessary in the interests of justice for the Court tohear and determine the proposed appeal.5[4] The Commissioner wishes to argue that her decision is not justiciable. TheCourts below concluded it was. The Commissioner cited in support of her argument:(a) the dual nature of the DTA as both domestic legislation and a treatysubject to public international law; and(b) the difficulty that the availability of judicial review would pose for theCommissioner in responding in a timely way to requests forinformation under DTAs.[5] The Courts below rejected this, finding that the judicial review sought byChatfield did not involve interpretation of any statutory rules other than s 17 of theTAA and the relevant articles of the DTA and that the matters in issue were not mattersof higher policy or politically fraught.6[6] As an alternative to that submission, the Commissioner wishes to argue thatany review by the Courts should be "circumscribed", reflecting the points set outabove, at [4]. She wishes to argue the Courts below were wrong to review thecorrectness of the approach of the Competent Authority (the official responsible forexchanges of information with New Zealand's treaty partners) to the NTS's request.The Court of Appeal characterised the Court's task as reviewing whether theCommissioner and the Competent Authority had interpreted and applied New Zealandlaw correctly.7[7] We are not satisfied that either of these arguments meets the test for the grantof leave. We do not consider that the argument that the Court cannot review theCompetent Authority's exercise of his or her powers and determine whether theCompetent Authority correctly applied New Zealand law has sufficient prospect ofsuccess to justify a further appeal.5 Senior Courts Act 2016, s 74(1) and (2)(a).6 Chatfield (HC), above n 1, at [40]; and Chatfield (CA), above n 2, at [38]–[45].7 Chatfield (CA), above n 2, at [52].[8] The Commissioner wishes to raise a further issue relating to the principles oftreaty interpretation. She says the Courts below interpreted the reference in art 25 ofthe DTA to "necessary" in the phrase "the Contracting States shall exchange suchinformation as is necessary for carrying out the provisions of this Convention" toonarrowly. The affidavit sworn by the Competent Authority, Mr John Nash, used theterms "necessary or relevant" and "foreseeably relevant", the latter term being the testset out in the Convention on Mutual Administrative Assistance in Tax Matters.8 It isalso the formulation used in the current model bilateral tax convention published bythe Organisation for Economic Co-operation and Development (OECD).9 The"necessary" wording in art 25 of the DTA reflected the OECD model convention as itstood at the time the DTA was signed in 1981.10[9] The Commissioner wishes to argue that the Courts below erred in theirinterpretation of art 25. The Commissioner says that, properly interpreted, there islittle difference between a test of "necessary" and the tests applied by Mr Nash. Weaccept that the interpretation of the DTA may give rise to points of public importancegiven their international and domestic law status. But, for reasons we will come to,we do not see the interpretation issues as capable of altering the outcome in the presentcase, and for that reason we do not consider that leave for a further appeal on that issueis justified.[10] The Commissioner also argues the Court of Appeal erred in identifying whatthe Competent Authority is required to do in responding to a request for informationunder a DTA. In fact, the Court of Appeal largely accepted the Commissioner'sposition on this issue.11 Its finding against the Commissioner was based on the actualwording of Mr Nash's affidavit, which makes the point specific to the facts of thiscase. No matter of public importance or commercial significance arises.8 Convention on Mutual Administrative Assistance in Tax Matters, as amended by 2010 Protocol(opened for signature 1 June 2011, entered into force 1 March 2014). See Double Tax Agreements(Mutual Administrative Assistance) Order 2013.9 Organisation for Economic Development and Co-operation Model Double Taxation Conventionon Income and on Capital (OECD Publishing, 2017) at 45, art 26(1).10 Organisation for Economic Development and Co-operation Model Double Taxation Conventionon Income and on Capital (OECD Publishing, Paris, 1977) at Annex I, art 26.11 Chatfield (CA), above n 2, at [74]–[75].[11] An issue arose in the High Court about the disclosure of the request receivedfrom the NTS to the Court and possibly to Chatfield or its counsel or to an amicuscuriae. This issue had arisen in earlier litigation between Chatfield and theCommissioner and had been resolved in the Commissioner's favour.12 But thechanges made to Chatfield's judicial review challenge since the issue was consideredin those earlier proceedings meant that it was necessary to address it afresh.[12] The detailed chronology of the development of this issue appears in the Courtof Appeal judgment.13 Ultimately, the High Court decided disclosure to it withoutdisclosure to Chatfield or its counsel was unacceptable.14 As the NTS did not authorisethe Commissioner to disclose the letter of request to anyone other than the Court, nodisclosure was made. The High Court Judge observed that the Commissioner had notbeen as candid in her conduct of the case as might have been expected.15 The Courtof Appeal did not associate itself with that observation but agreed that, as the relevantdocuments had not been disclosed, the only information available to the Court toassess the legality of the process followed was Mr Nash's affidavit.16 That broughtinto focus the references in Mr Nash's affidavit to "necessary or relevant" and"foreseeably relevant" in contrast to the "necessary" standard in the DTA.[13] The Commissioner wishes to challenge on appeal the lower Courts' insistenceon disclosure in order to properly evaluate the existence or otherwise of propergrounds for the s 17 notices. We accept that a number of issues of public importancepotentially arise from a consideration of that issue. But we see the argument that theCommissioner wishes to pursue (in essence, that the Court should resolve the concernsraised by Chatfield against it without being able to refer to the key document, whichwas in the Commissioner's possession) as having insufficient prospect of success inthe present case to justify putting Chatfield to the expense and inconvenience of afurther appeal.12 See Chatfield & Co Ltd v Commissioner of Inland Revenue [2015] NZHC 2099, (2015) 27 NZTC¶22-024; Chatfield & Co Ltd v Commissioner of Inland Revenue [2016] NZHC 1234, (2016) 27NZTC ¶22-053; Chatfield & Co Ltd v Commissioner of Inland Revenue [2016] NZCA 614, (2016)27 NZTC ¶22-084; and Chatfield & Co Ltd v Commissioner of Inland Revenue [2017] NZSC 48,(2017) 28 NZTC ¶23-010.13 Chatfield (CA), above n 2, at [54].14 Chatfield (HC), above n 1, at [70]–[73].15 At [89].16 Chatfield (CA), above n 2, at [87].[14] We are satisfied that it is not in the interests of justice to grant leave to appealin this case. We therefore decline leave.[15] We award costs to Chatfield of $2,500.Solicitors:Crown Law Office, Wellington for ApplicantBell Gully, Auckland for Respondents