COMMISSIONER OF INLAND REVENUE v CULLEN GROUP LTD [2018] NZCA 166

COMMISSIONER OF INLAND REVENUE v CULLEN GROUP LTD [2018] NZCA 166 [25 May 2018]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA65/2018[2018] NZCA 166BETWEEN COMMISSIONER OF INLANDREVENUEAppellantAND CULLEN GROUP LIMITEDRespondentCourt: French, Winkelmann and Clifford JJCounsel: G M Coumbe QC and M K Nicholson for AppellantJ W A Johnson and G J C Carter for RespondentJudgment:(On the papers)25 May 2018 at 10.00 amJUDGMENT OF THE COURTA The appeal is allowed.B The orders for discovery and inspection made in the High Court on20 December 2017 are quashed.C The order for costs in the High Court is quashed.D There is no order for costs in this Court.____________________________________________________________________REASONS OF THE COURT(Given by French J)[1] The parties have agreed on a resolution of this appeal filed by theCommissioner of Inland Revenue. It concerns the scope of a discovery ruling madein the High Court by Woolford J.1 The parties now agree the decision was wrong.They have asked this Court to make orders by consent allowing the appeal andquashing Woolford J's decision.[2] The relevant background is as follows.[3] Cullen Group Ltd (Cullen) has filed proceedings in the High Court challengingtax assessments totalling $59.5 million. The assessments relate to non-residentwithholding tax and transactions which the Commissioner alleges amounted to a taxavoidance arrangement. The key issue at trial will be whether Cullen made use ofwhat is called the "associated persons" rule under the "approved issuer levy" regimein a manner contrary to Parliament's intention at the time it created the regime. Theapproved issuer levy regime was created by two pieces of legislation, namely theIncome Tax Amendment Act (No 4) 1991 and the Stamp and Cheque DutiesAmendment Act (No 2) 1991.[4] Cullen applied for discovery of documents that it considered were potentiallyrelevant as extrinsic aids for the purposes of construing those two statutes. Theapplication included documents relating to 20 other statutes. Justice Woolford heldthat a limited order for discovery was justified.2[5] The order made by the Judge required the Commissioner to make discovery ofthree categories of documents relating to the Income Tax Amendment Act (No 4), theStamp and Cheque Duties Amendment Act (No 2) and the Land and Income TaxAmendment Act (No 2) 1968 and the selection of the definition of "associatedpersons" to be employed in the legislation.3 The three categories of documents were:4(a) all documents created by IRD officials including published material;material provided to select committees, ministers, and any specialpurpose committee or working group considering tax policy; and final1 Cullen Group Ltd v Commissioner of Inland Revenue [2017] NZHC 3260.2 At [33].3 At [26] and [34(a)(i)]. The 1968 Amendment Act enacted the "associated persons" definition usedin the "approved issuer levy" regime.4 At [12].reports or internal recommendations or other consideration given tolegislation;(b) all documents created by any special purpose committee or workinggroup established to consider tax policy; and(c) any other documents provided to or obtained by IRD officials.[6] Justice Woolford also ordered the Commissioner who had opposed theapplication to pay costs.5[7] As mentioned, Cullen now accepts Woolford J's decision was wrong.In particular, it agrees with the Commissioner that the Judge erred in the followingrespects:6(a) First, the discovery order made goes far beyond the orthodoxcategories of extrinsic aids that the courts are willing to consider.It would require the Commissioner to discover as relevant documentsthat have never been made public, that are far removed fromParliamentary processes, and that record the subjective views ofofficials working in the Inland Revenue Department. Those are notpermissible extrinsic aids, as they cannot assist the court to determineParliament's intention.(b) Burrows and Carter have identified criteria for admission of extrinsicmaterials. One criterion is that the documents should be publiclyaccessible, which means there is no need for discovery of suchdocuments.(c) Secondly, the order is disproportionate. It is likely that the orderwould involve an oppressive and fruitless search. It would require asearch and review exercise of material dating back to at least 1968,including any documents created at any time by any Inland RevenueDepartment official.(d) Even if a document relating to the selection of the"associated persons" test were to be found within the discoverycategories, it is most unlikely to be admitted by the trial Judge. Thisview is confirmed by the fact that the Commissioner recently(voluntarily) completed a fruitless search, extending over 300 hours,for documents within the conventional categories for extrinsicmaterial the Courts have regard to. That exercise confirms that the5 At [34(d)].6 We omit the footnotes provided in the joint memorandum of counsel. However, see generallyRI Carter Burrows and Carter Statute Law in New Zealand (5th ed, LexisNexis, Wellington, 2015)at 297–299.even wider searches contemplated by the discovery order would beoppressive and fruitless.[8] We agree and find that there are good reasons in law for this Court to overturnthe High Court judgment and make orders in the terms sought by the parties.[9] The appeal is accordingly allowed and the orders for discovery and inspectionmade in the High Court on 20 December 2017 are quashed. The order for costs madein the High Court is also quashed. There will be no order for costs on the appeal.Solicitors:Crown Law Office, Wellington for AppellantWynn Williams, Christchurch for Respondent