COMMISSIONER OF INLAND REVENUE v CHATFIELD & CO LIMITED [2019] NZCA 73

COMMISSIONER OF INLAND REVENUE v CHATFIELD & CO LIMITED [2019] NZCA 73[28 March 2019]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA78/2018[2019] NZCA 73BETWEEN COMMISSIONER OF INLANDREVENUEAppellantAND CHATFIELD & CO LIMITEDFirst RespondentCHATFIELD & COSecond RespondentHearing: 16 August 2018Court: Asher, Brown and Gilbert JJCounsel: P H Courtney and L A Herbert for AppellantR A Rose and L M Zwi for RespondentJudgment: 28 March 2019 at 3.00 pmJUDGMENT OF THE COURTA The appeal is dismissed.B The appellant must pay the respondents one set of costs for a standard appealon a band A basis and usual disbursements.____________________________________________________________________Table of ContentsPara NoIntroduction [1]The double tax agreement [3]Relevant background [10]The 2014 notices [10]Previous rulings [15]The High Court judgment [22]Justiciability [23]Lawful action by competent authority [24]Intensity of review [29]Issues [30]Issue 1: Justiciability of decision to issue the 2014 notices [32]Issue 2: Intensity of review [46]Issue 3: Amicus vs court alone review [53]Issue estoppel [55]The Court's refusal to consider the documents alone [60]Issue 4: Did Mr Nash lawfully discharge his obligations ascompetent authority? [70]Issue 5: The evidential foundation for certain facts relied on bythe Judge [89]Exchange control investigation [91]Exhaustion of domestic options [94]Korean limitation periods [97]A suspension of the NTS investigation [100]Conclusion [102]Issue 6: The correct approach to the interpretation of the DTA [103]Result [108]REASONS OF THE COURT(Given by Brown J)Introduction[1] Following a request made by the Korean National Tax Service (NTS) underart 25 of the New Zealand–Korea Double Tax Agreement (the DTA),1 on 7 October2014 the Commissioner of Inland Revenue issued notices (the 2014 notices) toChatfield & Co (together with the first respondent, referred to as Chatfield) under s 171 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 Respectto Taxes on Income 1773 UNTS 69 (signed 6 October 1981, entered into force 22 April 1983);see Double Taxation Relief (Republic of Korea) Order 1983.of the Tax Administration Act 1994 (TAA) requiring the production of variousdocuments and records of New Zealand taxpayer companies associated with a Koreannational with New Zealand residency. In a review proceeding by Chatfieldchallenging the Commissioner's decision to issue the 2014 notices Wylie J granted adeclaration that the decision was invalid and made an order quashing the 2014notices.2[2] The Commissioner appeals from that judgment. In addition she renews hercontention rejected in the High Court that the decision to issue the 2014 notices wasnon-justiciable and in the alternative she challenges the finding that in the context a"correctness standard" of review should apply. The Judge's decision to decline toreceive documents alone and without reference to Chatfield is also attacked on appeal.The double tax agreement[3] A double tax agreement is an international treaty between the New Zealandgovernment and another state entered into for the purposes in s BH 1 of the IncomeTax Act 2007 which materially states:BH 1 Double tax agreementsPurposes(2) The following are the purposes for which a double tax agreement maybe negotiated:(a) to provide relief from double taxation:(f) to prevent fiscal evasion:(g) to facilitate the exchange of information:[4] The overriding effect of a double tax agreement is stated in s BH 1(4):2 Chatfield & Co Ltd v Commissioner of Inland Revenue [2017] NZHC 3289, [2018] 2 NZLR 835at [99] [High Court judgment].Overriding effect(4) Despite anything in this Act, a double tax agreement has effect inrelation to—(a) income tax:(b) any other tax imposed by this Act:(c) the exchange of information that relates to a tax, as defined inparagraphs (a)(i) to (v) of the definition of tax in section 3 ofthe Tax Administration Act 1994.[5] Such treaties facilitate the exchange of information between states whichcontributes to the integrity of their respective tax systems by enabling tax authoritiesto monitor taxpayers operating in multiple jurisdictions. Double tax agreements areunusual amongst New Zealand international treaties because, once given effect to byOrder-in-Council, they have direct application in New Zealand's domestic law.[6] The DTA was incorporated into New Zealand law by the Double TaxationRelief (Republic of Korea) Order 1983. It largely follows the Organisation forEconomic Cooperation and Development's model convention as it stood at the time.3[7] The taxes to which the DTA applies are specified in art 2:Article 2Taxes covered1. The taxes to which this Convention shall apply are:(a) In the case of Korea:(i) the income tax;(ii) the corporation tax; and(iii) the inhabitant tax (hereinafter referred to as "Koreantax");3 OECD Model Double Taxation Convention on Income and Capital 1977 (OECD Publishing, Paris,1977) at Annex I.[8] Of particular relevance to this case is the provision relating to exchange ofinformation which relevantly provides:Article 25Exchange of information1. The competent authorities of the Contracting States shall exchange suchinformation as is necessary for carrying out the provisions of thisConvention or of the domestic laws of the Contracting States concerningtaxes covered by the Convention insofar as the taxation thereunder is notcontrary to the Convention, as well as to prevent fiscal evasion. Theexchange of information is not restricted by Article 1. Any informationreceived by a Contracting State shall be treated as secret in the samemanner as information obtained under the domestic laws of that State andshall be disclosed only to persons or authorities (including courts andadministrative bodies) involved in the assessment or collection of, theenforcement or prosecution in respect of, or the determination of appealsin relation to, the taxes covered by the Convention. Such persons orauthorities shall use the information only for such purposes. They maydisclose the information in public court proceedings or in judicialdecisions.2. In no case shall the provisions of paragraph 1 be construed so as to imposeon a Contracting State the obligation:(a) (b) to supply information which is not obtainable under the laws orin the normal course of the administration of that or of the otherContracting State;(c) [9] Since 1 March 1994 the position as competent authority for New Zealand hasbeen held by Mr J Nash, the Manager (International Revenue Strategy) at the InlandRevenue Department (IRD) who is responsible for exchanges of information withNew Zealand's tax treaty partners.Relevant backgroundThe 2014 notices[10] The NTS commenced a tax investigation in Korea into the affairs ofMr J H Huh, a Korean national with New Zealand residency, who was the substantialowner of several New Zealand companies. In May 2014 the NTS made a request tothe Commissioner under art 25 of the DTA in relation to several New Zealand taxpayercompanies associated with Mr Huh. Although some of the information was able to beprovided from existing records, to fully respond it was necessary for theCommissioner to take further steps.[11] Consequently on 7 October 2014 the Commissioner exercised her power toissue to Chatfield 15 notices under s 17 of the TAA which relevantly states:17 Information to be furnished on request of Commissioner(1) Every person (including any officer employed in or in connection withany department of the government or by any public authority, and anyother public officer) shall, when required by the Commissioner,furnish any information in a manner acceptable to the Commissioner,and produce for inspection any documents which the Commissionerconsiders necessary or relevant for any purpose relating to theadministration or enforcement of any of the Inland Revenue Acts orfor any purpose relating to the administration or enforcement of anymatter arising from or connected with any other function lawfullyconferred on the Commissioner.[12] The notices issued by Ms Forrest, an IRD investigation team leader, requiredChatfield to produce various documents and records which it held on behalf of KNCConstruction Ltd and 14 affiliated companies. Each of the companies has its registeredoffice in New Zealand and at the time of the request Chatfield was registered unders 34B of the TAA as the tax agent for each of them.[13] The Commissioner's sole purpose in issuing the 2014 notices was to obtaininformation requested by the NTS for possible exchange under art 25.No New Zealand tax revenue was in issue. Although some of the 2014 notices wererelatively confined, others were more wide-ranging. Thus the notice to Blue PacificNZ Ltd simply sought copies of the financial statements for the 2010 to 2013 tax yearswhile the notice to Victoria Tower Developments Co Ltd sought, in addition to thefinancial statements for 2003 to 2013, copies of several agreements for the sale andpurchase of real estate and company shares.[14] In May 2015 Chatfield commenced review proceedings challenging on twobroad grounds the Commissioner's decision to issue the 2014 notices. First it wasalleged that the decision breached Chatfield's legitimate expectations arising from anoperational statement known as OS 13/02 dealing, inter alia with the issuance of s 17notices.4 Secondly, Chatfield contended that in issuing the notices the Commissionerfailed to take into account three relevant considerations:• OS 13/02;• the limited nature of the tax agent/client relationship; and• the terms of the DTA, in particular art 25.Previous rulings[15] This Court has previously had occasion to consider this litigation on twooccasions, first in the context of disclosure and secondly concerning the scope of thepleading.[16] Chatfield sought an order under s 10(2) of the Judicature Amendment Act 1972seeking that the Commissioner should disclose and produce relevant documents, inparticular the request made under the DTA by the NTS to the Commissioner and allexchanges relating to that request. The Commissioner refused to supply thedocuments and sought an order under s 70 of the Evidence Act 2006 precludingdisclosure on the ground that the documents related to matters of state.[17] On 1 September 2015 Ellis J held that, in principle, it is possible to obtaindisclosure of material exchanged between the Commissioner and the NTS but thatsuch disclosure was governed by s 81 of the TAA.5 There being an evidential vacuumin the materials before her the Judge considered that the appropriate course was forthe Commissioner to make inquiry of the NTS as to its views on disclosure of thedocuments sought.6 Having made that inquiry the Commissioner then filed twomemoranda, one open and the other confidential to the Court, and advised that theNTS claimed confidentiality in respect of each document requested.4 Graham Tubb Operational Statement 13/02: Section 17 notices (Inland Revenue, OS 13/02,14 August 2013).5 Chatfield & Co Ltd v Commissioner of Inland Revenue [2015] NZHC 2099, (2015)27 NZTC 22-024.6 At [79].[18] After receiving further submissions Ellis J issued a further judgment inJune 2016 holding that the Commissioner was not required to disclose the request ofdocuments pursuant to s 81.7[19] Chatfield's appeal from that decision was dismissed by this Court which heldthat the undisclosed documents were not relevant to Chatfield's amended statement ofclaim.8 Leave to appeal to the Supreme Court was declined.9[20] On the Commissioner's application to strike out Chatfield's amendedstatement of claim Lang J made an order striking out the legitimate expectation claimand striking out the second cause of action other than the allegation that theCommissioner had decided to issue the 2014 notices without taking into account theterms of art 25, in particular the exceptions contained in art 25(2).10 Chatfield's appealto this Court was dismissed.11 Leave to appeal to the Supreme Court was declined.12[21] On 8 June 2017 Chatfield filed a second amended statement of claim whichvery significantly expanded the allegations against the Commissioner to includecontentions that the relevant decision-maker was not the Competent Authority,mistakes of fact, a failure to exercise independent judgment before issuing the 2014notices, breaches of several provisions of the TAA and that the decision to issue the2014 notices was unreasonable.The High Court judgment[22] The Judge commenced by noting that although only one cause of actionremained, the pleading adopted what could best be described as a scattergun approach,for the perceived reason that Chatfield had not seen the documents relevant to the7 Chatfield & Co Ltd v Commissioner of Inland Revenue [2016] NZHC 1234, (2016) 27 NZTC22-053.8 Chatfield & Co Ltd v Commissioner of Inland Revenue [2016] NZCA 614, (2016) 27 NZTC22-084.9 Chatfield & Co Ltd v Commissioner of Inland Revenue [2017] NZSC 48, (2017) 28 NZTC 23-010.10 Chatfield & Co Ltd v Commissioner of Inland Revenue [2016] NZHC 2289, (2016)27 NZTC 22-072.11 Chatfield & Co Ltd v Commissioner of Inland Revenue [2017] NZCA 148, (2017)28 NZTC 23-015.12 Chatfield & Co Ltd v Commissioner of Inland Revenue [2017] NZSC 118, (2017) 28 NZTC23-025.challenged decision.13 The judgment recorded that in the course of the hearing theCommissioner sought to argue justiciability as an affirmative defence and leave wasgranted to file an amended statement of defence notwithstanding Chatfield'sopposition.14 The Judge further noted that in oral argument Mrs Courtney for theCommissioner contended that the appropriate intensity of review only required theCourt to determine that the decision to issue the 2014 notices was valid on its face.15Justiciability[23] The Judge rejected the Commissioner's justiciability argument for severalreasons:16(a) Chatfield's challenge does not call into question the executive'sdecision to enter into the DTA. It does not raise any comity issuebetween New Zealand and Korea, and it does not challenge any act ofKorea as a foreign state. Rather, it puts in issue the exercise by theCommissioner of the power available under domestic law to issuenotices under s 17 of the Tax Administration Act.(b) To the extent that Chatfield's application for review involves theinterpretation of arts 2 and 25 of the DTA, the DTA is now part ofNew Zealand law. Interpretation of the Tax Administration Act, andof the DTA as part of New Zealand law, is within this Court'sconstitutional competence. The Courts in this country are responsiblefor determining questions of domestic law. In exercising thisjurisdiction, the Courts do not unacceptably tread on or overstep anyforeign state boundary.(c) The matters at issue in this case are not matters of high policy. Nor arethey politically fraught. All that is required is an assessment as towhether or not statutory requirements contained in domesticlegislation have been met on the facts of this particular case.(d) The legality of the Commissioner's actions in issuing notices unders 17 of the Tax Administration Act and its related provision, s 16, canbe the subject of judicial review proceedings, for example, if theCommissioner exceeds or abuses her powers. Prior authority in theDTA context is to the same effect.13 High Court judgment, above n 2, at [22].14 At [21].15 At [23].16 At [40].(e) Other checks and balances which apply to DTAs, and in particular theOECD's peer review regime, do not involve curial oversight. They donot focus on individual cases and they do not give remedies toindividual taxpayers.(Footnotes omitted).Lawful action by competent authority[24] It was common ground that the Commissioner exercised the powers availableunder s 17 for the purposes of gathering information for exchange with a foreign statepursuant to a DTA but that Mr Nash, as the competent authority for New Zealand, onreceipt of a request for the exchange of information from the NTS needed to satisfyhimself that the information sought came within the terms of the DTA andNew Zealand's tax laws.[25] The Judge ruled that the word "necessary" in art 25 required Mr Nash to satisfyhimself by clear and specific evidence that all of the information requested by the NTSwas needed or required in relation to an investigation into or other action being takenby the NTS against a Korean taxpayer and that the information was in regard to incometax, corporation tax, inhabitant tax or fiscal evasion and that the NTS had been unableto obtain the information in Korea.17[26] Affidavits were filed by Mr Nash and by Ms Forrest. After a close review ofthose affidavits the Judge described them as being "long on generalities but short onspecifics".18 The Judge said that Mr Nash's evidence suggested there had been no"hard inquiry" into the necessity for any exchange of information with NTS andtherefore the need to request the documents in the first place.19 He observed that thedifficulty in dealing with the case had been exacerbated by the fact that the relevantbackground papers, in particular the request from the NTS, file notes that Mr Nashmay have made, and any correspondence that may have passed between Mr Nash andthe NTS regarding the request had not been disclosed to the Court.20 The Judgerecorded in detail his exchanges with Mrs Courtney with reference to his concern2117 At [78].18 At [62].19 At [80].20 At [63].21 At [65]–[73] to which we refer below at [60].emphasising that the Commissioner had ultimately elected to run her case withoutreference to the background documents.22[27] The Judge considered that he was left with nothing more than Mr Nash's say-sothat he satisfied himself that the request was in terms of the DTA and New Zealand'stax laws, that the nature of the information sought by the NTS was consistent with thegrounds for the request, and that the information is of a sort which would broadly beexpected to be necessary or relevant to any inquiry of the nature indicated in therequest.23 He commented that the days when a court will accept an official's simpleassertion that a power has been exercised lawfully are long over, referring toLiversidge v Anderson, in particular the dissenting judgment of Lord Atkin.24[28] The Judge concluded in this way:[87] An applicant for judicial review bears the burden of proof, on thebalance of probabilities, but the evidential burden is relatively low where thefacts are within the knowledge of the other party, and particularly where theCourt has to determine whether the relevant facts on which the exercise of thepower in issue turn, did or did not exist.[88] When the actions of public authorities are in issue, there is anexpectation that public authority defendants will explain themselves, anddisclose all relevant documents. The defendant authority can be expected tosatisfy the Court, and if it does not do so, the claimant can, in appropriatecases, get the benefit of any doubt. Similarly, where facts lie peculiarly withinthe knowledge of one party, very slight evidence can be sufficient to dischargethe burden of proof resting on the opposing party.[89] In my judgment, this is one such case. Chatfield has been able to raiserelatively little, but the little it has raised rings alarm bells, albeit quietly.Those bells ring a little louder given the vague affidavits of Ms Forrest andMr Nash. There is a high duty on public authority respondents to assist theCourt with full and accurate explanations and to give the Court all the factsrelevant to the matter in issue. Here, the relevant facts and the supportingdocuments are in the possession of the Commissioner. It should have been arelatively straightforward matter for the Commissioner to produce them butthey have not been produced. Rather, I am left with the non-specific evidenceof the officer responsible for undertaking the necessary inquiries. In my view,the Commissioner has not been as candid in her conduct of this case as mighthave been expected.[90] On the very limited materials available to me, I am not satisfied thatthe appropriate inquiries were undertaken by Mr Nash.22 At [73].23 At [84].24 At [85], citing Liversidge v Anderson [1942] AC 206 (HL) per Lord Atkin from 225–247.(Footnotes omitted).Intensity of review[29] The Judge agreed with Chatfield's submission there was no proper basis forconstrained review in this case noting that it involved a relatively straightforwardanalysis of the provisions of the DTA, which was part of New Zealand's domestic law,and s 17 of the TAA, stating:25The power to make the decision to invoke the s 17 power is conferred by thelegislation onto the Commissioner, and the Commissioner, when exercisingthat power, must exercise it properly, and in accordance with the law. Thereis no need for deference to the Commissioner as the decision-maker wheninquiring what either the Tax Administration Act, or the DTA, require. Reviewin this context can and should be hard-edged, and a "correctness standard"should apply. The question is simply whether or not the Court can be satisfiedthat Mr Nash — as the decision-maker — did what he was required to do bylaw. There is, in my judgment, nothing in the facts of the present case whichcompels the conclusion that a light touch, or a deferential review, is eitherrequired or appropriate. If the Court is not satisfied that Mr Nash correctlyinterpreted or applied either art 2 or art 25 of the DTA, or that he properlyscrutinised the NTS's request as required by law, then it is appropriate to grantjudicial review, and there is no warrant for a less intensive standard of reviewthan would otherwise be the case.Issues[30] An agreed list of issues was filed in the following terms:1 Is the decision of the Commissioner of Inland Revenue (theCommissioner) to issue 15 Notices to Furnish Information (the 2014notices) under s 17 of the Tax Administration Act 1994 (TAA) as aresult of an exchange of information (EOI) request under the DoubleTaxation Relief (Republic of Korea) Order 1983 (NZ-Korea DTA)justiciable?2 If the decision to issue the 2014 notices is justiciable:2.1 what is the appropriate intensity of review in the context of anEOI request under the NZ-Korea DTA;2.2 did the High Court correctly identify and apply the relevantreview standard; and2.3 whether the High Court correctly identified what theCompetent Authority is required to do in order to be satisfiedwith the EOI request.25 At [98].3 Whether the High Court erred, either as a matter of law or in failingto take account of relevant considerations (including issue estoppel)when exercising its discretion as to how evidence should come beforethe Court on review, and whether it was appropriate for the Courtalone to view documents to determine lawfulness without appointingan amicus.4 Did Mr John Nash (as the Commissioner's representative andNew Zealand's Competent Authority) act lawfully under theNZ-Korea DTA? In particular, did Mr Nash have sufficientinformation or take steps to satisfy himself:4.1 That the EOI request was made in respect of taxes covered byart 2 of the NZ-Korea DTA;4.2 That the information sought for exchange was "necessary"under art 25(1) of the NZ-Korea DTA; and4.3 Whether any of the factors in article 25(2)(b) of theNZ-Korea DTA applied.5 Whether there was a sound evidential foundation for the three factsthe High Court relied on to support the finding at [90] of the Judgmentthat the Competent Authority did not undertake appropriate inquiries.6 To the extent the OECD Commentaries are considered relevant in thepresent case, did the High Court adopt the correct approach tointerpretation of the NZ-Korea DTA.[31] The Commissioner's submissions proceeded on the footing that, as all of theremedies available under the Judicature Amendment Act 197226 are discretionary, itwas necessary for the Commissioner to show that the Judge had acted on a wrongprinciple, had failed to take into account some relevant matter, took into account someirrelevant matter or was plainly wrong.27 However we consider that, save for theexercise of discretion specifically with reference to the ultimate grant or refusal ofrelief, the appeal is governed by the principles in Austin, Nichols & Co Inc v StichtingLodestar.28Issue 1: Justiciability of decision to issue the 2014 notices[32] The starting point for the Commissioner's argument is the observation ofElias CJ and Arnold J in Ririnui v Landcorp Farming Ltd:2926 Section 23(2) of the Judicial Review Procedure Act 2016 provided that the review was to becontinued and completed under the Judicature Amendment Act 1972.27 May v May (1982) 1 NZFLR 165 (CA) at 170.28 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.29 Ririnui v Landcorp Farming Ltd [2016] NZSC 62, [2016] 1 NZLR 1056.[89] While the modern view is that courts have the power to review allexercises of public power whatever their source, the courts accept that someexercises of public power are not suitable for judicial review because of theirsubject matter. Decisions about the allocation of national resources orinvolving issues of national defence or national security or involving nationalpolitical or policy considerations have been held to be not reviewable by thecourts, although courts in recent times have been more willing to reviewdecisions in areas previously regarded as inappropriate for review, the mostobvious example being decisions in relation to national security. (Footnotes omitted).[33] It was Mrs Courtney's submission that it is possible to identify variousprinciples that by analogy influence a court as to where the line as to justiciabilityshould be drawn and whether the court should intervene, namely:(a) Where the subject-matter of the decision and the role of thedecision-maker is within the customary sphere of an area where courtsare not well-equipped to weigh the considerations involved.(b) Where there are constitutional constraints on judicial involvement suchthat the public policies involved are so significant and appropriate forweighing by those entrusted with making the decision, the courts areless equipped to reweigh the considerations involved.(c) Where there is no satisfactory legal yardstick by which the issue can beresolved.(d) For reasons of comity between the courts and Parliament (and byanalogy between the courts and another State).[34] She submitted that, contrary to the High Court's conclusion, thedecision-making by a competent authority relating to a request and exchange ofinformation falls within at least one of those four categories for the following reasons:(a) It is important to observe the international and constitutional lawboundaries associated with sovereign States.(b) The high content of judgement and discretion involved in suchdecisions make them inherently unsuitable for resolution by the courts.(c) It is undesirable to allow a collateral challenge of the nature that hasoccurred in respect of this proceeding as it compromises the efficacy ofthe exchange of information regimes.[35] Chatfield responded that in the context of seeking information solely for herown purposes or for both her own purposes and the benefit of the foreign state, it iswell established that the Commissioner's decisions under s 17 are justiciable andreviewable. It submitted that the fact that the Commissioner did not seek theinformation identified in the 2014 notices for any of her own purposes and has insteadsought it only further to a foreign state's request cannot alter the justiciability positionin the way the Commissioner suggests. Indeed it contended that the fact that theinformation identified in the 2014 notices was sought solely for the benefit of a foreignstate should give rise to heightened scrutiny of the Commissioner's exercise ofdiscretion.[36] As we explain below, in our view Chatfield's responses to the Commissioner'scriticism of the High Court's reasoning on the justiciability issue are sound and shouldbe accepted.[37] Drawing attention to the High Court's conclusion that the competent authoritywas required "to satisfy himself, by clear and specific evidence" that all of theinformation requested by the NTS was needed or required in relation to aninvestigation or other action being taken by the NTS against a Korean taxpayer, theCommissioner challenged the proposition that no comity issue was involved.She contended that the competent authority and the Court on review would beinvolved at an operational level in interrogating the legal systems and administrativeprocesses of New Zealand's DTA partners. That could only be achieved by carryingout a mini trial investigating matters of Korean law, potentially involving witnesses.It was said that would unacceptably overstep the appropriate boundaries between NewZealand and other sovereign states. It was also said to be contrary to what courts ofhigh authority in other jurisdictions have considered is required.30[38] In response Chatfield submitted, correctly in our view, that the case does notinvolve:• any challenge to the executive's decision to enter into the DTA;• the interpretation of any statutory rules other than s 17 of the TAA 1994and arts 2 and 25 of the DTA;• comity issues or challenges to the truthfulness of any act by a foreign state.[39] Chatfield acknowledged that the DTA represents a carefully negotiatedcompromise and that the implementation decision is entirely one for Parliament.However once implemented treaties do not attract any higher order status than anyother provision of New Zealand's domestic law. Interpretation of a domestic statutegiving effect to a treaty is wholly within a New Zealand court's constitutionalcompetence and creates no separation of powers issue.[40] The Commissioner countered that the constitutional competence of the courtsdoes not resolve the concern that the so-called mini trial has the potential to infringesovereignty. She submitted that the EOI regimes under New Zealand's DTAs wouldfail to work effectively in practice and sovereign jurisdictions would refuse tocooperate with New Zealand.[41] Chatfield acknowledged the determination of its challenge may involve anexamination of what information the Commissioner sought or received from Koreaand what she made of the relevant information before she issued the 2014 notices.However consideration of such information at face value to determine whether itsatisfies the requirements of New Zealand domestic law is a different exercise fromconsideration of an allegation that information supplied by the NTS is untrue.3130 Citing AXY v Comptroller of Income Tax [2018] SGCA 23, (2018) 20 ITLR 723 at 748 and 759.31 Contrasting the present situation to that described in AXY v Comptroller of Income Tax [2015]SGHC 291, [2016] 1 SLR 616 at [29].[42] We accept Chatfield's submission that this case does not involve a challengeto the substance or truthfulness of any act of or decision made by the NTS. Rather thereview requires determinations only about whether, before making her decision toissue the 2014 notices to Chatfield, the Commissioner satisfied herself about allrelevant requirements of s 17 of the TAA and arts 2 and 25 of the DTA.[43] We agree with the Judge's conclusion that the matters at issue in this case arenot matters of higher policy or politically fraught.32 While, as Chatfieldacknowledged, the DTA is a carefully calibrated and negotiated regime, it does notcontain any inbuilt level of political flexibility. That contrasts with the overseasinvestment regime where there is the scope for the government to direct theCommissioner about matters of the day of concern to government.33[44] As this case demonstrates, the availability of review may have a significantimpact on the timeliness for responses to double tax agreement requests. However thatcan afford no principled basis for treating the competent authority as immune fromreview. Furthermore the significance of delay as a factor may be capable of beingaddressed by a more pragmatic response as discussed below. Nor do we consider thatthe OECD peer review regime is a material factor.34 It is not the equivalent of a judicialbody. As the Commissioner acknowledges it does not provide relief to individualtaxpayers but monitors the regime as a whole compared to best practice and producesin-depth review reports of members assigning ratings on EOI effectiveness.[45] For these reasons we reject the Commissioner's challenge to the High Court'sconclusion that the Commissioner's decision to issue the 2014 notices was justiciable.Issue 2: Intensity of review[46] In R (Daly) v Home Secretary Lord Cooke of Thorndon observed that the depthof judicial review and the deference due to administrative discretion vary with the32 High Court judgment, above n 2, at [40(c)]; set out above at [23].33 See s 34 of the Overseas Investment Act 2005, dealing with Ministerial directives.34 Carried out by the Global Forum on Transparency and Exchange of Information for Tax Purposes.subject matter.35 Cases on the spectrum36 from correctness to tolerance are usefullycollected by Matthew Smith in The New Zealand Judicial Review Handbook.37The Commissioner here contended that the High Court erred in concluding that in thecontext of this case review should be hard-edged,38 submitting that a more deferentialapproach than the correctness standard was appropriate.[47] The contention that the intensity of review should be constrained was said tobe justified because of:• the importance of observing the constitutional boundaries between states;• the high content of judgement and discretion in the decisions exercised bythe competent authorities (both in New Zealand and Korea);• the undesirability of collateral challenge that may disrupt the process; and• the availability of other mechanisms for accountability of decisions.[48] Reflecting the staged structure of agreed issue 2, the Commissioner's writtensubmissions addressed intensity of review and the scope of the competent authority'sfunction together. We will address the latter point in greater detail in the context ofissue 4. For present purposes it suffices to note that the Commissioner accepted thatin evaluating a request the competent authority needs to satisfy himself or herself that:• sufficient details supporting the request had been provided by therequesting state;35 R (Daly) v Home Secretary [2001] UKHL 26, [2001] 2 AC 532 (HL) at [32]. The House of Lordswas there focused on the proposition that intensity of review was somewhat greater under theproportionality approach.36 In Mihos v Attorney-General [2008] NZAR 177 (HC) at [98] Baragwanath J adopted ProfessorTaggart's metaphor of a rainbow of variable intensity of review in Michael Taggart"Administrative Law" [2006] NZ L Rev 75 at 82.37 M Smith The New Zealand Judicial Review Handbook (2nd ed, Thomson Reuters, Wellington,2016) at chs 38–40.38 At [29] above.• the nature of the information sought is broadly what would be expected tobe necessary to an inquiry/investigation of the nature indicated;whereupon it is for the competent authority to determine what information meets theterms of the request and should be exchanged.[49] It appeared to be the Commissioner's view that the application of a correctnessstandard of review could require the competent authority, and the High Court onreview, to undertake a mini trial potentially involving witnesses and the determinationof questions of foreign law. Challenging that proposition Chatfield submitted that thedischarge of the decision-maker's compliance with the statutory obligations did notrequire any "going behind" the content of the letter of request or other material, notingthat there was no challenge by Chatfield to the content of the request letter as opposedto what its content (taken at face value) meant in terms of the Commissioner's lawfulexercise of her s 17 power.[50] Ms Rose submitted that the key questions which the Judge was required to anddid decide were:• Did the Commissioner/Mr Nash misinterpret and/or misapply arts 2 or 25of the DTA?• Did the Commissioner/Mr Nash scrutinise the NTS's request forcompliance with arts 2 and 25 or did she/he simply act more like anautomaton?• What would a reasonably competent and diligentCommissioner/competent authority do?[51] She further submitted that in a modern review environment courts have nodifficulty reviewing for correctness and/or reasonableness even "high policy"decisions citing as examples Tiroa E and Te Hape B Trusts v Chief Executive of LandInformation New Zealand,39 Thomson v Minister for Climate Change Issues40 andCabinet's ex gratia payment decision in Pora v Attorney-General.41[52] We agree with Ms Rose's analysis of the questions which the Judge wasrequired to decide. The Commissioner and the competent authority must interpret andapply New Zealand law correctly. If they do otherwise then their actions will beunlawful. We do not consider that there is any basis for criticism of the approachapplied by the Judge that the intensity of review in the context of the issues raised inthis case should be the correctness standard.Issue 3: Amicus vs court alone review[53] This ground of appeal involved two issues:• the alleged failure by the High Court to recognise that issue estoppelapplied in respect of certain documents which had not been provided toChatfield;• the Court's refusal to consider the documents alone without considerationof them by an amicus.[54] To better understand the Commissioner's argument on this matter, whichChatfield described as perplexing, it will be convenient to briefly recite the relevantsequence of events.21 September 2017 The Commissioner's submissions on the cause of actionwhich had survived the strike out did not seek to rely onthe undisclosed documents.42 However the Commissionerindicated that if the Court wished to review the undisclosed39 Tiroa E and Te Hape B Trusts v Chief Executive of Land Information New Zealand[2012] NZCA 355, [2012] 3 NZLR 808 (CA).40 Thomson v Minister for Climate Change Issues [2017] NZHC 733, [2018] 2 NZLR 160 at [134].41 Pora v Attorney-General [2017] NZHC 2081, [2017] 3 NZLR 683 at [89]–[92].42 The undisclosed documents comprise the NTS request, the documents provided in response to the2014 notices and the information contained in the closed memorandum provided to Ellis J referredto at [17] above.documents they would be made available to the Courtalone.25 September 2017 Chatfield sought a direction that the Commissioner berequired to disclose to Chatfield the undiscloseddocuments.26 September 2017 The Commissioner's memorandum reiterated her offer tomake the undisclosed documents available only to theJudge and advanced five reasons in opposition toChatfield's request that it be provided with the undiscloseddocuments.28 September 2017 The judicial review hearing commenced. It appears thatthe Judge expressed concern about the undiscloseddocuments being provided to him alone. He directed thata telephone conference be scheduled to determine theissue. The hearing was adjourned part heard.17 October 2017 A telephone conference was held. A subsequent minuterecorded that the undisclosed documents which hadpreviously been held to be not relevant to the thenpleadings were "now relevant".43 The Commissioner'sproposal to refer the documents to the Court in a closedhearing, where Chatfield and its counsel would not bepresent, was not considered by the Judge to be satisfactory.The Judge suggested the appointment of an amicus toconsider the undisclosed documents and directed theparties to file a joint memorandum.20 October 2017 The Commissioner's memorandum contended that adecision whether the undisclosed documents needed to be43 Chatfield & Co Ltd v The Commissioner of Inland Revenue HC Auckland CIV-2015-404-1013,17 October 2017.reviewed to allow the Court to determine the case could beleft until the parties had completed their legal arguments atthe resumed hearing, making the point thatthe Commissioner's primary submissions regardingjusticiability and intensity of review did not rely on thedocuments.Chatfield's memorandum requested the appointment of onefrom a number of counsel it identified. It requested that thefurther hearing for 26–27 October 2017 be vacated to allowthe amicus adequate time to consider the issues.24 October 2017 A telephone conference was held followed by the releaseof a minute in which the Judge recorded his view that anamicus should be appointed and that the further hearingshould be adjourned to give the amicus time to prepare.44Counsel for the Commissioner then took the position thatthe undisclosed documents were not relevant and wouldnot be relied upon. Consequently the hearing couldproceed without an amicus. The Judge cautionedthe Commissioner that that course could have adverseimplications. The minute recorded that the Commissionerwould abandon any reliance on the confidentialinformation and that she would not put it before the Court.26 October 2017 The appointment of an amicus was again discussed.The Judge indicated that he would consider and determinefor himself whether he needed to see the undiscloseddocuments and that he would appoint an amicus if hedecided to look at them. The hearing was adjourned to1 December 2017.44 Chatfield & Co Ltd v The Commissioner of Inland Revenue HC Auckland CIV-2015-404-1013,24 October 2017.30 October 2017 The Judge issued a minute directing the Commissioner toascertain the position of the NTS to the confidentialmaterials being made available to an amicus, stating howthe Judge proposed the process would work and notingthat, while the views of the NTS would be taken intoaccount, they would not necessarily be determinative.451 December 2017 At the recommencement of the hearing counsel forthe Commissioner advised the Court the NTS maintainedits position that the Court should decide the proceedingonly on the basis of the open information but that if theCourt considered that it needed to review the confidentialinformation the Court should do so alone. The NTS did notwish the documents to be provided to an amicus.Issue estoppel[55] The Commissioner contended that the High Court erred in failing to rule inresponse to Chatfield's 25 September 2017 memorandum that issue estoppel appliedso as to preclude disclosure of the undisclosed documents to Chatfield. That issueturns on a correct analysis of the disclosure decisions earlier referred to.46[56] Ms Rose submitted that no question of issue estoppel arose given the basis ofthe Court of Appeal's earlier decision on Chatfield's request for discovery. Her pointwas that the Court of Appeal did not rule that the undisclosed documents were relevantbut did not need to be disclosed. Rather the Court ruled that the documents were notdemonstrated to be relevant.[57] This Court's reasoning accords with Ms Rose's submission:47[31] The fundamental point to be made, however, is that the pleading as itstands makes an assertion that is apparently incorrect on its face since it is45 Chatfield & Co Ltd v The Commissioner of Inland Revenue HC Auckland CIV-2015-404-1013,30 October 2017.46 At [16]–[19] above.47 Chatfield & Co Ltd v Commissioner of Inland Revenue, above n 8.clear that the Commissioner did take art 25 into account. If there are particularrespects in which it could be said she did not do so (and these particulars makean order for discovery appropriate) they have not been pleaded. Either way,we can see no basis in the pleading as it currently stands to justify the makingof a discretionary order for discovery under s 10.[32] We accept, as Ms Rose submitted, that there are important issues atstake when the Court is asked to order discovery in a case involving a requestmade by a foreign state under a double taxation agreement. But those issuesare not addressed in a vacuum. The extent to which discovery may be obtainedmust be governed by the pleading and in New Zealand, where an applicationfor review may be filed as of right without any requirement for leave, we seeno reason why any application for discovery should not be assessed accordingto the issues made relevant by the pleading. Here it is plain that, whenexamined against the surviving pleaded cause of action, the documents forwhich discovery is sought have not been shown to be relied on by Chatfield,or to adversely affect its case or to adversely affect or support another party'scase.(Footnote omitted).[58] Subsequently the pleading was amended in the manner described at [21] above.As a consequence of that amended pleading Wylie J considered that the undiscloseddocuments had become relevant, as was made clear in his minute of 17 October 2017:Justice Ellis earlier determined, on the basis of the pleadings as they thenstood, that the Commissioner was not required to discover the confidentialdocuments. Her judgment was upheld by the Court of Appeal, essentially onthe basis that the documents were not relevant to the then pleadings.It appears that the confidential documents are now relevant. TheCommissioner is proposing to refer me to the same, in a closed hearing, wherethe applicants and their counsel will not be present. The Commissioner saysthat they vindicate the position she has taken in this matter.[59] Given that change in circumstances in our view no question of issue estoppelarose.The Court's refusal to consider the documents alone[60] The Judge observed that the difficulty in dealing with the case was exacerbatedby the fact that the relevant background papers, in particular the request from the NTS,file notes that Mr Nash may have made, and any correspondence that may have passedbetween Mr Nash and the NTS regarding the request, had not been disclosed to theCourt.48 He then recorded the way in which the present issue evolved:48 High Court judgment, above n 2, at [63].[65] When the hearing before me commenced, Mrs Courtney advised thatshe proposed that she would make available to me the relevant backgrounddocuments, but on a confidential basis, and that she would ask me to clear theCourt (including Chatfield's representatives and its counsel), so that she couldaddress me directly in relation to them.[66] I indicated to Mrs Courtney that this proposal was not satisfactory tome. Because Chatfield and its counsel would not be present, Chatfield wouldnot have the opportunity to respond, and there would be no-one to test sucharguments as the Commissioner might advance based on the backgrounddocuments. I indicted that in my view, the Commissioner's proposal wascontrary to the rules of natural justice, and that it would place the Court in adifficult position when giving a reasoned judgment.[67] I asked Mrs Courtney whether the Commissioner was prepared toagree to the background documents being made available to the applicants'counsel, on the basis of appropriate undertakings as to confidentiality.Mrs Courtney advised that she would seek instructions. Subsequently sheadvised that this proposal was not acceptable to the Commissioner.[68] I then explored with counsel whether an amicus could be appointed,who could acquaint himself or herself with the applicants' arguments, inspectthe relevant background documents, and then address me in relation to them.The Commissioner initially agreed to this proposal, and there were discussionsabout the appointment of an appropriate amicus. Subsequently, theCommissioner resiled from this position and Mrs Courtney advised me thatthe Commissioner was happy that the case should proceed without me seeingthe relevant background documents at all.[69] I expressly queried this stance with Mrs Courtney. It seemed to methat it potentially placed the Court in a difficult position, requiring it to makea decision when it did not have all relevant materials before it. I askedMrs Courtney to take further advice from the NTS as to whether it wasprepared to agree to the documents being released to an amicus, on the basisthat the amicus would be subject to appropriate undertakings.[70] When the hearing resumed before me on 1 December 2017,Mrs Courtney advised me that the NTS had advised that it was not preparedto have the documents released to an amicus, and that the Commissioner wasstill happy to proceed without me seeing, or being given access to, the relevantbackground documents. I expressly discussed with Mrs Courtney the risksthat course involved for the Commissioner. She nevertheless elected toproceed on this basis.[61] Mrs Courtney submitted that the High Court was wrong to consider that thecourt-alone review process, which would have enabled the Judge to view the requestso as to consider whether it was lawful to seek the information requested in the 2014notices, was contrary to the rules of natural justice. She drew attention to theobservation by McGrath J in Dotcom v United States of America that the content ofthe right to natural justice under s 27 of the New Zealand Bill of Rights Act 1990 isalways contextual, the question being what form of procedure is necessary to achievejustice without frustrating the apparent purpose of the legislation.49[62] Mrs Courtney referred to a number of cases where it was said a court-alonereview process has been viewed as acceptable by New Zealand courts.• Tauber v Commissioner of Inland Revenue where this Court considered anunredacted version of an affidavit without disclosure to the opposingparty.50• Avowal Administrative Attorneys Ltd v District Court at North Shore wherethe High Court reviewed certain secret documents and declined to orderdiscovery of them.51• Cases where judges have exercised the power conferred by r 8.25(2) of theHigh Court Rules 2016 to inspect documents for the purposes ofdetermining the validity of claims to privilege or confidentiality.52• A line of authority in the Human Rights Review Tribunal where a closedcourt process has been developed so that the Tribunal itself can receive andreview information for the purpose of determining whether a claim forprivilege or confidentiality applies.53[63] In response Ms Rose made seven points, the last of which we consider is themost significant, namely that the right to know and effectively challenge the opposingcase is a fundamental feature of the judicial process as long recognised by the commonlaw. As Woodhouse P observed in Minister of Foreign Affairs v Benipal:5449 Dotcom v United States of America [2014] NZSC 24, [2014] 1 NZLR 355 at [120].50 Tauber v Commissioner of Inland Revenue [2012] NZCA 411, [2012] 3 NZLR 549 at [51]–[76];see [23]–[25] for the Court's explanation of the context concerning the review.51 Avowal Administrative Attorneys Ltd v District Court at North Shore [2008] 1 NZLR 675 (HC).52 Seamar Holdings Ltd v Kupe Group Ltd [1995] 2 NZLR 274 (CA), where the Court was discussingr 311 of the then High Court Rules (the second schedule to the Judicature Act 1908); and Bain vMinistry of Justice [2013] NZHC 2123, [2014] NZAR 892.53 See Dijkstra v Police (2006) 8 HRNZ 339 (NZHRRT); Reid v New Zealand Fire ServiceCommission [2008] NZHRRT 8; NG v Commissioner of Police [2010] NZHRRT 16; and Rafiq vCivil Aviation Authority of New Zealand [2013] NZHRRT 10.54 Minister of Foreign Affairs v Benipal [1984] 1 NZLR 758 (CA) at 763–764.The whole purpose of a Court of justice is to provide a forum where theopposing points of view of those in contention can be brought forward by themand then be weighed judicially the one against the other. When that is donethe answer will be accepted as a judicial decision, not because it is the productof judicial wisdom or experience or knowledge but because it is a decisionwhich has been judicially arrived at. That process and that objective areinseparable. It is in no way procedural in any ordinary sense. It is the centralaspect of a system of justice which will not accept subjective conclusionsaffected by personal investigations of the Judge or the influence ofimpressions he has gained from only one side. Because of its significance inthe rapidly developing field of administrative law the audi alteram partemprinciple is constantly referred to and accepted in that context as fundamentalto the achievement of a fair result. It most certainly applies a fortiori to theCourts from which it is derived.[64] While no further authority is required, we note that well-known statements tolike effect by Lord Denning in Kanda v Government of the Federation of Malaya55and Upjohn LJ in Re K (Infants)56 have been referred to in New Zealand cases on thisissue.57[65] In our view the Judge was plainly correct to decline to receive documentswhich were not disclosed to Chatfield. To the extent that the request or otherdocuments contained information which was confidential, then we can see no reasonwhy recourse could not have been made to the process in r 8.25(2) to whichMrs Courtney referred.[66] On that matter the Judge pertinently observed:58It is clear from the closing sentence of art 25(1) of the DTA, that documentsexchanged may be disclosed by officials in the contracting states in publicCourt proceedings or in judicial decisions. Strictly that provision does notextend to the request made, or to documents generated as a result of a request.Nevertheless, it was Mr Nash's view, by reference to the OECD commentaryon the equivalent provisions [in] the current model DTA, that, if Courtproceedings under the domestic law of the requested state necessitate thedisclosure of the letter of request to the competent authority, the competentauthority of the requested state can disclose that letter, unless the requestingstate otherwise specifies. He states that it was for this reason that copies ofthe request letter and documents exchanged were provided confidentially to55 Kanda v Government of the Federation of Malaya [1962] AC 322 (HL) at 337–338.56 Re K (Infants) [1963] Ch 381 (CA) at 405–406.57 For example Secretary for Justice v Simes [2012] NZCA 459, [2012] NZAR 1044 at [92]; Khalonv Attorney-General [1996] 1 NZLR 458 (HC) at 463; Minister of Foreign Affairs v Benipal,above n 54, at 764–765; Amtec Engineering Group Ltd v Marsden Machinery Ltd CA182/95,24 October 1995 at 8; and Meads Brothers Ltd v Rotorua District Licensing Agency [2002]NZAR 308 (CA) at [44].58 At [71].Ellis J when the matter was before her, to allow her to satisfy herself about theconfidentiality orders sought by the Commissioner.[67] The implications of a refusal of consent by a requesting state were recognisedby the Royal Court in Haskell v Comptroller of Taxes:59I have no doubt that the commentary to Article 26 of the OECD Model TaxConvention was not intended to express any suggestion that the competentauthority of a requested state should be able to ignore an order of its competentcourt and accordingly the court must reserve to itself the power to orderdisclosure of the letter, whether the requesting state signifies its consent ornot. If it came to such a position, no doubt the requesting state would have adecision to make as to whether it maintained its request, or was prepared todisclose the letter of request; and if it decided against the latter, then thepractical consequence would probably be that the proceedings before the courtwould become otiose.[68] In any event plainly some aspects of the request ceased to be confidential(if they were originally) once the 2014 notices were issued, namely the documentationrequired to be produced.60 Similarly the general format of the request, comprisingwhat might be termed the boilerplate clauses, could readily have been disclosed.While that might appear at first glance to be of no moment, in fact it would likely haveremoved at least some of the areas of dispute in this case because it would have servedto confirm (or otherwise) that the request was compliant with the particular stricturesof the DTA which is confined to information which is "necessary" and relates only tothe taxes stipulated in art 2 of the DTA.[69] For the future we see no reason why a suitably redacted copy of the requestshould not be made available to the court and to the recipient of a notice who brings ajudicial review challenge.Issue 4: Did Mr Nash lawfully discharge his obligations as competent authority?[70] In the High Court Chatfield submitted that it was incumbent on Mr Nash to besatisfied "by clear and specific evidence" that all of the information requested by theNTS was necessary for an investigation, or other action, being undertaken by the NTSagainst a Korean taxpayer regarding one or more of the taxes covered by the DTA.6159 Haskell v Comptroller of Taxes [2017] JRC 88 (RC) at [15].60 See [13] above.61 High Court judgment, above n 2, at [49].That expression appears to have been derived from Comptroller of Income Tax v AZPwhere Choo Han Teck J was describing the connection which the request needed todemonstrate between the information sought and the enforcement of the requestingstate's tax laws.62 Wylie J not only accepted that submission but, after noting thatMr Nash did not state what he considered "necessary" in art 25 meant, he describedaspects of Mr Nash's evidence as relatively vague and suggestive of there having been"no hard inquiry" into the necessity for any exchange.63 The Judge proceeded toreflect both on Mr Nash's affidavit and the relevance of Liversidge v Anderson as notedat [27]–[28] above.[71] In its written submissions on appeal Chatfield supported without reservationthe approach of the Judge, submitting that:53.12 nothing in any of the Commissioner's affidavits confirms that, as partof the request or at any other time before issuing the 2014 Notices, theNTS confirmed that each piece of information sought in the Request:(a) relates to tax/es covered by Art 2 of the DTA;(b) will only be used by Korea regarding tax/es covered by Art 2;(c) is "necessary" for carrying out the DTA's provisions orKorea's domestic laws concerning taxes covered by the DTAinsofar as the taxation thereunder is not contrary to the DTA,as well as to prevent fiscal evasion and is not a fishingexpedition;(d) is not available in Korea or that attempts have been made toobtain it or that doing so would create disproportionatedifficulties; and(e) does not breach any of the Art 25(2) exceptions.53.13 likewise, none of the Commissioner's affidavits confirm that, at anypoint before issuing the 2014 Notices, she:(a) independently satisfied herself by "clear and specificevidence" or otherwise conducted any "hard inquiry" thateach piece of information sought in the Request was"necessary"; or(b) sought and/or obtained any further information from Korearegarding the Request's compliance with Art 25.62 Comptroller of Income Tax v AZP [2012] SGHC 112, 14 ITLR 1155 at [10].63 At [80].[72] As noted in the context of issue 2 above, the Commissioner accepted that thecompetent authority needed to satisfy himself that:• information of the nature sought came within the terms of the DTA andNew Zealand's tax laws;• the nature of the information sought appeared to be consistent with thegrounds for the request;• information of that sort was broadly what would be expected to benecessary to an inquiry of the nature indicated.[73] The Commissioner submitted that neither the competent authority, northe Court on review, could be expected to inquire into the factual assertions underlyingthe request, nor as to the law in the other jurisdiction. Furthermore, where a competentauthority did not consider there to be any lack of clarity or the presence of doubtraising a question about the validity of the request, it was sufficient for the validity ofthe request to be determined on its face.[74] We are in general agreement with the Commissioner's analysis which findssupport in authorities such as Haskell:64The duty of candour therefore is such that the first respondent must set outsufficient information as to why it considered the request which it had receivedfell within the terms of the TIEA, but there is a presumption of regularity onwhich it is entitled to rely, and, in the absence of some specific reason thatwould make such a course appropriate, it is not required to provide the letterof request or other documents within its possession. This is a matter ofdomestic administrative law, not because there is or may be any internationalstandard to that effect. It is also not required to conduct a full audit of theprocedures of the requesting state. The purpose of the legislation would betoo easily defeated if there were a possibility of litigating in our domesticcourts the propriety of the procedures of the requesting state under foreignlaw. Until there is evidence to the contrary, the Royal Court is entitled toproceed on a presumption of regularity by the competent authority of therequesting state.64 Haskell v Comptroller of Taxes, above n 59, at [30]. See also ABU v Comptroller of Income Tax[2015] SGCA 4, [2015] 2 SLR 420 at [40].[75] We consider that the nature of the task which Chatfield appears to contemplateby the expression "clear and specific evidence" and the Judge by his reference to "hardinquiry" overstates the obligation on the competent authority on receipt of a requestunder the DTA. When this issue was explored in the course of argument Ms Roseagreed that provided the competent authority was not put on inquiry as to someirregularity, then Mr Nash was entitled to take the statements in the request letter atface value.[76] Furthermore, while maintaining the argument that the Commissioner wasrequired to have confirmation that each piece of requested information was necessaryfor one of the purposes set out in art 25, Ms Rose acknowledged that the clear andspecific evidence could simply take the form of an email to that effect. Indeed, inresponse to the proposition that an unsubstantiated assertion in the request letter wouldbe sufficient, Ms Rose replied:I am not suggesting sir that we can or should be going behind so yes. If thereis a confirmation there that says Mr So-and-So with Korea confirm[s] that thisis all necessary for an investigation into a tax covered by the convention —tickety-boo.However Ms Rose submitted that Mr Nash's affidavit came nowhere near to so stating.We turn now to consider his evidence.[77] Mr Nash's second affidavit described among other things the actions which hetook, and the actions taken under his supervision, in responding to the NTS request.He noted that the request was made under the DTA and not under the MultilateralConvention on Mutual Administrative Assistance in Tax Matters.65[78] The difference between the two is significant, as Ms Rose observed, becausethe DTA requires that the information requested be "necessary" whereas under theMultilateral Convention the requirement is that the requested information be"foreseeably relevant".65 In the schedule to the Double Tax Agreements (Mutual Administrative Assistance) Order 2013.[79] Emphasising that international case law consistently requires compliance withthe relevant standard, Ms Rose drew attention to the following observation in theSingapore Court of Appeal's decision in ABU v Comptroller of Income Tax:66First, the touchstone for the exchange of information under the EOI Standardis whether the requested information is "foreseeably relevant" for carrying outthe provisions of the relevant tax treaty or the enforcement of the domestic taxlaws of the requesting state. This is unlike the earlier incarnation of the EOIStandard, which Singapore previously implemented in its tax treaties, whichrequired the information to be "necessary" for those purposes instead.Ms Rose submitted that if Korea had wanted the benefit of the "foreseeable relevance"standard then it could have used the Multilateral Convention for its request but electednot to do so.[80] Had Mr Nash's affidavit been unambiguous in his references to the thresholdwhich he had applied there may not have been a difficulty. However, as we explainbelow, Mr Nash variously referred both to the necessary threshold and to the relevancethreshold as having apparent application in this case.[81] Having recited art 25, Mr Nash noted that the OECD Committee on FiscalAffairs had stated that a qualified ambulatory approach is preferable in interpretingand applying double tax agreements as changes in wording from earlier versions of adouble tax agreement are intended to clarify rather than change the meaning of articlesor commentaries. We discuss this issue below in the context of issue 6. He explainedthat in exchanging information with treaty partners under double tax agreements hepays close attention to the exchange of information provision in the relevant agreementand to the OECD model commentary on art 26 which deals specifically with theexchange of information. With reference to that commentary he said:In terms of relevancy of requests, the following guidance from the OECDModel Commentary on Article 26 is especially pertinent:In the context of information exchange upon request, the standardrequires that at the time a request is made there is a reasonablepossibility that the requested information will be relevant; whether theinformation, once provided, actually proves to be relevant isimmaterial. A request may therefore not be declined in cases where adefinite assessment of the pertinence of the information to an ongoing66 ABU v Comptroller of Income Tax, above n 64, at [26(a)].investigation can only be made following receipt of the information.The competent authorities should consult in situations in which thecontent of the request, the circumstances that led to the request, or theforeseeable relevance of requested information are not clear to therequested State.(Emphasis added).[82] In discussing the exceptions which apply under art 25(2), Mr Nash made thepoint that the requested state retains a discretion about how to proceed, stating:As DTAs are enacted into New Zealand law, Parliament has enabled theCommissioner using any of her powers to requisition information, which arecontained in ss 16 to 21 of the Tax Administration Act 1994.The Commissioner has an operational discretion to decide what informationshe considers necessary or relevant, and how that is to be obtained. In theabsence of anything obvious to the contrary (either on the face of the requestor from the history of the relationship), the Competent Authority may rely onthe accuracy of the content of the request and is not obliged to second guessthe Competent Authority of another country.(Emphasis added).[83] Then in that part of the affidavit specifically addressing his involvement in thepresent case Mr Nash made this statement:In respect of each Request, in my role as the Competent Authority, I satisfymyself that there are good grounds for the request; and the nature of theinformation sought to be exchanged is broadly what would be expected to benecessary or relevant to an inquiry of the nature indicated. Beyond that, Iunderstand that the Competent Authority is entitled to accept at face value thefactual assertions underlying the Request, and that the requesting State isentitled under its own law to make the Request, based on a broadunderstanding that the information sought comes within the DTA and aboutthe equivalent law in each State.(Emphasis added).[84] The immediately following paragraph under the heading "MonitoringCompliance With Information Exchange Processes Between States" included thefollowing:The 2013 Peer Review Report on New Zealand states at 5:The Global Forum is charged with in-depth monitoring and peerreview of the implementation of the international standards oftransparency and exchange of information for tax purposes. The standards provide for international exchange on request offoreseeably relevant information for the administration orenforcement of the domestic tax laws of a requesting party. (Emphasis added).[85] The passages which we have quoted were consistent in our view with theapplication of either the necessary or the relevant thresholds.[86] With reference to this issue Ms Rose submitted:The OECD Commentaries are not binding and have no legislative effect.Whilst the traditional New Zealand approach has been to take into account theCommentary effective at the time of a double tax agreement's drafting, laterCommentaries are of limited relevance where textual changes have been madeto the Model Treaty and not implemented into domestic law (as in the case ofthe DTA). Thus, where an Art 25 decision has been made in reliance on thecurrent (2014) OECD Commentary rather than analysis of what is required bythe particulars of the DTA's text, it will likely be unlawful.[87] As Wylie J observed,67 in the absence of the relevant documents the onlyinformation available to the Court to assess the legality of the process followed wasMr Nash's affidavit. While we prefer not to associate ourselves with the Judge'sobservation on candour, the fact is that by reference to that affidavit Chatfield hassatisfied us that Mr Nash asked the wrong question in his application of the "necessaryor relevant" test.[88] Consequently, we conclude that the assessment of the request was not lawfulby reference to the requirements of art 25.Issue 5: The evidential foundation for certain facts relied on by the Judge[89] In the High Court Chatfield raised four concerns which we infer it claimedought to have put the Commissioner on inquiry and prompted further investigation:68(a) Was the information sought to advance an exchange controlinvestigation into two of the target companies?67 At [89].68 At [79].(b) Had the NTS exhausted its domestic options?(c) The effect of a suspension of the investigation by the NTS.(d) The effect of the limitation period in Korea.All four matters appear to have been raised for the first time in the second affidavit ofJoon Youl Seo dated 21 July 2017.[90] These are the matters which it would appear the Judge was referring to whenhe stated:69Chatfield has been able to raise relatively little, but the little it has raised ringsalarm bells, albeit quietly. Those bells ring a little louder given the vagueaffidavits of Ms Forest and Mr Nash.In view of our conclusion on issue 4 we will address these further matters only briefly.Exchange control investigation[91] Chatfield's concern on this front was outlined in the judgment in this way:[51] It was submitted that, if the 2014 notices seek material that is outsidethe parameters of the taxes stipulated in art 2 of the DTA, then the 2014 noticesare necessarily invalid and unlawful. In this regard, it points to an affidavitfiled by Mr Seo, who is a director of Chatfield & Co Ltd and a partner inChatfield & Co, which suggests that the NTS is investigating a Koreancompany called Dae Ju Constructions Co Ltd in relation to alleged exchangecontrol breaches involving KNC Construction and Engineering Co Ltd andChristie Property Holdings Ltd — both New Zealand companies, and bothtarget companies under two of the 2014 notices. Chatfield argues that possibleexchange control breaches are not covered by the DTA, and the Commissionerhas no jurisdiction to seek information under s 17 in respect of these allegedbreaches.[92] Given the specific terms of art 2(1)(a),70 on the face of it potential exchangecontrol breaches would not be taxes covered by the DTA. However the pertinentconsideration here is the state of the competent authority's knowledge. In his secondaffidavit Mr Nash deposed that at the time he dealt with the NTS request he was69 At [89].70 At [7] above.unaware of the exchange control breach allegation and that he only became aware ofit when Chatfield filed its second amended statement of claim.Chatfield's submissions did not appear to challenge the Commissioner's asserted stateof knowledge at the relevant time. Rather its submissions focused on dicta in AXY vComptroller of Income Tax.71[93] We agree that if, prior to a decision on a request, new facts emerge relevant toit, such facts should be taken into account by the competent authority. We also agreethat if such new facts emerge after a decision on a request, there may be circumstanceswhere the decision should be reconsidered. However, information that was not beforea decision-maker plainly cannot be taken into account in the decision-maker'sdecision. In our view the decision to issue the 2014 notices could not be invalid onthe basis of information which was not then known to the competent authority.Exhaustion of domestic options[94] This issue was described in the judgment as follows:72[52] Chatfield also argues — relying on art 25(2)(b) — that there is noobligation on New Zealand to exchange information obtained under a s 17notice if Korea could have obtained the information under its own laws in thenormal course of the administration of those laws. It notes that Mr Seo hasfiled an affidavit advising that Mr Huh's ex-partner, Mrs Sewon Hwang, hasreceived an information production request from the NTS in Korea.Mrs Hwang is a Korean citizen and tax resident, and Mr Seo deposes that theinformation request sent to her sought material the NTS has also sought fromChatfield via the 2014 notices. Chatfield asserts that there is no evidencesuggesting that Mr Nash sought or obtained confirmation from the NTS thatit had exhausted all local remedies before making the DTA request.(Footnote omitted).[95] Although Mr Seo deposed that Mrs Hwang sent him a copy of the NTS requestin October/November 2016, the request was not exhibited. On 8 November 2016Mrs Courtney sent an email to Ms Rose requesting the date of the NTS request and, ifpossible, a copy. However it appears that there was no response.71 AXY v Comptroller of Income Tax, above n 30 at [83].72 The Judge noted that strictly speaking Mr Seo's assertions were hearsay but that the Commissionerdid not take the point.[96] We do not consider that this point has significance, both because it arose afterthe date of the decision to issue the 2014 notices and because the allegation lacksspecificity.Korean limitation periods[97] The judgment relevantly stated:[54] There was also a concern raised about limitation periods. TheCommissioner has advised the Court that the limitation period for the recoveryof taxes in Korea is five years for income tax and corporate tax, but that thereis a 10-year limitation period where evasion or fraud is suspected. Concern isexpressed that some of the material sought in the 2014 notices appears to falloutside either the five or 10-year window, and that there is no informationsupplied to determine which limitation applies to each of the 2014 notices.[98] Mr Nash addressed the limitation period issue in his second affidavit,explaining that just because information relates to a year in respect of which anassessment could no longer be made or amended, does not mean that information ofthat nature cannot be exchanged. He made the point that information relating to earlieryears may assist an understanding of the position in later years which are still open forassessment or amendment.[99] We do not consider that the suggested limitation issue was of such significanceas to put the Commissioner on inquiry that further investigation was required.A suspension of the NTS investigation[100] The judgment noted:[53] Mr Seo has also deposed that Mr Huh received a notice from the NTSin Seoul. The notice has been exhibited. It is under the subject line"Notification of Suspension of Tax Investigation" and it inter alia records thatthe original planned period of investigation was 3 April 2014 to 2 January2017, that the investigation is suspended from 31 December 2016 to31 December 2017, and that the adjusted period of investigation is now from3 April 2014 to 2 January 2018. The reason for suspension is recorded asfollows: "to collect information from overseas sources". The notice recordsthat after the suspension period is over, the NTS will resume the taxinvestigation.[101] This point does not appear to have any significance. That may account for thefact that the formulation of issue 5 referred to three facts, not four.73Conclusion[102] We agree with the Judge's assessment that these matters raised "relativelylittle". At the material time when Mr Nash made his decision we do not consider thatthey amounted to alarm bells, quiet or otherwise.74Issue 6: The correct approach to the interpretation of the DTA[103] The genesis of this issue appears to be the Commissioner's concern about anobservation by the Judge with reference to the interpretation of double tax agreements.After referring to sources of interpretation including the OECD Model Commentarythe Judge stated:75More recent commentary may be used to interpret a DTA concluded earlier intime where the commentary can be "viewed not as recording an agreementabout a new meaning but as reflecting a common view as to what the meaningis and always has been". Otherwise relying upon more recent commentaryrisks retrospectively.(Footnote omitted).[104] It was the Commissioner's submission that there was "nothing in the point"that the ambulatory approach which it was said New Zealand uses to interpret taxtreaties risks retrospectivity. Mrs Courtney submitted that the Court interprets anenactment as it applies when the circumstances arise.76 She also sought to invoke thedictum of Tipping J in Lai v Chamberlains concerning the retrospectivity of thetraditional declaratory theory of law.77 She argued that the ambulatory approach canbe viewed in the same way as the principle that a statute is interpreted as alwaysspeaking as the law strives to keep itself relevant.7873 At [30] above.74 See High Court judgment above n 2, at [89].75 At [31].76 Citing the Interpretation Act 1999, s 6.77 Lai v Chamberlains [2006] NZSC 70, [2007] 2 NZLR 7 at [130]–[131].78 Avowal Administrative Attorneys Ltd v North Shore District Court (2007) 23 NZTC 21,610 (HC)at [24], citing Hieber v Commissioner of Inland Revenue (2002) 20 NZTC 17,774 (HC) at [20].[105] Noting that this Court has recently considered the approach to theinterpretation of double tax agreements, the Commissioner referred to the followingstatement in Commissioner of Inland Revenue v Lin:79The China DTA, like all double tax treaties, is to be interpreted according tothe same principles applying to private contractual instruments. The parties'intention is to be discerned by interpreting the ordinary meaning of the treaty'sterms in context and in the light of its object and purpose. The context alsotakes account of its contemporary background. Resort can also be made tosubsequent agreement about the treaty's interpretation including, in this case,OECD commentaries.(Footnotes omitted).[106] However more pertinent to the concern which we perceive underlies issue 6are this Court's observations in the immediately following paragraph:[20] It is perhaps trite to observe that each treaty is the result of a discreteround of bilateral negotiations. The final instrument reflects the parties'agreement on what terms and conditions are appropriate to their particularrelationship. We mention this point now, to answer briefly an argumentadvanced by Mr Clews for Ms Lin. He sought to pre-empt an interpretationdifficulty for Ms Lin arising from the plain meaning of art 23 of the ChinaDTA by referring to comparable provisions in double tax treaties negotiatedby New Zealand with two other countries shortly after the China DTA. InMr Clews's submission we should construe art 23 in the same way asdifferently worded companion provisions in the other treaties. We do notaccept that submission. Each treaty must be construed discretely, inaccordance with its own particular terms.(Footnotes omitted).[107] In our view the final observation of Wylie J,80 which prompted theCommissioner's submission, is conveying no more than the point made by this Courtin Lin that each treaty must be construed discretely and in accordance with its ownparticular terms.79 Commissioner of Inland Revenue v Lin [2018] NZCA 38, (2018) 28 NZTC 23-052 at [19].Leave to appeal was declined: Lin v Commissioner of Inland Revenue [2018] NZSC 54, (2018) 28NZTC 23-061.80 At [31] set out above at [103].Result[108] The appeal is dismissed.[109] The appellant must pay the respondents one set of costs for a standard appealon a band A basis and usual disbursements.Solicitors:Crown Law Office, Wellington for AppellantBell Gully, Auckland for Respondents