The Honourable Winston Raymond Peters v The Right Honourable Sir Ronald Keith Davison
High Court Auckland
1998 NZAR LEXIS 6;  NZAR 309
9, 10, 11, 23 March 1998
23 March 1998
[*1] Practice and procedure Judicial review Striking out proceeding Commission of Inquiry Plaintiff sought declarations that the Winebox Report of the Commission of Inquiry was a nullity and that the Commissioner had made errors of fact and law Application to strike out plaintiff's application Whether the circumstances of the plaintiff's rights not being affected allowed the declarations under the Declaratory Judgments Act 1908 or at common law Limits of judicial review in respect of Commissions of Inquiry - Declaratory Judgments Act 1908, ss 2, 3.
The Right Honourable Sir Ronald Davison ("the defendant"), as Commissioner, presented the Report of the Commission of Inquiry on the Winebox papers to the Governor-General on 14 April 1994. In respect of one of the transactions considered in the Report, the Magnum transaction, the defendant concluded that there was no fraud or failure to disclose and that the "form over substance" doctrine permitted parties to document whatever falsities suit their tax avoidance purposes. The Honourable Winston Peters ("the plaintiff") applied for declarations that the defendant failed to carry out his terms of reference, had made errors of [*2] fact and law, had acted in excess of jurisdiction and therefore that the Report was a nullity. The defendant applied to have the application struck out.
(1) Leave to appear was given to, and orders were made joining as parties, the "corporates" whose transactions the plaintiff had alleged amounted to fraudulent tax evasion, and the Commissioner of Inland Revenue and the Director of the Serious Fraud Office whose investigations of the Winebox documents were specifically directed to be inquired into by the defendant. However, as the plaintiff had neither sued them nor sought to have them joined as parties, they were ordered to bear their own costs.
(2) The plaintiff's standing to bring his application was not challenged by any of the parties.
(striking out the plaintiff's application)
Three essential issues emerged:
(1) Would the circumstances allow of declarations pursuant to the Declaratory Judgments Act 1908?
(2) Would the circumstances allow of declarations at common law?
(3) In what circumstances on an application for judicial review could a Court grant relief in respect of statements made, (opinions expressed), in the report of a [*3] Commission of Inquiry?
(1) In respect of the first question, the Report did not affect any rights attaching to the plaintiff. In the absence of a genuine dispute between the plaintiff and the respondent affecting their respective rights, s 2 could not apply and there was nothing in s 3 which specifically related to the plaintiff.
Furthermore, the Court would not entertain an application under the Act where facts were in dispute, nor where the matter could be the subject of a criminal charge. An action seeking declarations under the Act when the parties affected were not even before the Court was an entirely unsatisfactory vehicle for a fair resolution of such issues.
R v Sloan  1 NZLR 494, and New Zealand Insurance Co Ltd v Prudential Assurance Co Ltd  1 NZLR 84 (CA) applied.
(2) There had to be a genuine dispute between the plaintiff and the defendant concerning their respective legal rights and liabilities, only then was there jurisdiction under the common law.
Gouriet v Union of Post Office Workers (1978) AC 435;  3 All ER 70 (HL) and Gazely v Attorney-General (1995) 8 PRNZ 313 (CA) applied.
(3) The current limitations of review of Commissions of [*4] Inquiry were both orthodox and well understood: opportunities to challenge were confined to breaches of natural justice and cases where the Commission exceeded its powers by going outside the scope of its inquiries or failed to comply with the terms of reference. The simple formulation of an opinion was not a decision to review under the Judicature Amendment Act.
Re Erebus Royal Commission; Air New Zealand Ltd v Mahon (No 2)  1 NZLR 618 (CA) and Re Royal Commission on Thomas Case  1 NZLR 252 (CA) applied.
Cases referred to in judgment
A Taxpayer v Commissioner of Inland Revenue (1997) 18 NZTC 13, 350 (CA)
Ainsworth v Criminal Justice Commission [(1992) 175 C.L.R. 564,] (1992) 106 ALR 11 (HC of A-Full Court)
Attorney-General v Equicorp Industries Group Ltd (In Statutory Management)  1 NZLR 529 (CA)
Brannigan v Sir Ronald Davison  l NZLR 140 (PC)
Challenge Corporation Ltd v Commissioner of Inland Revenue  2 NZLR 513 (HC, CA & PC)[,  A.C. 155 (P.C.)]
Chase, Re  1 NZLR 325 (CA)
Erebus Royal Commission (Re); Air New Zealand Ltd v Mahon (No 2)  1 NZLR 618 (CA);  NZLR 662,  AC 808 (PC)
European Pacific Banking Corporation v TVNZ Ltd  [*5] 3 NZLR 43 (CA)
Gazely v Attorney-General (1995) 8 PRNZ 313 (CA)
Gouriet v Union of Post Office Workers (1978) AC 435;  3 All ER 70 (HL)
Greiner v Independent Commission Against Corruption  28 NSWLR 125
Mills v Dowdall  NZLR 154 (CA)
New Zealand Insurance Co Ltd v Prudential Assurance Co Ltd  1 NZLR 84 (CA)
R v Inland Revenue Commissioners, ex parte National Federation of Self-Employed and Small Businesses Ltd  AC 617;  2 All ER 93 (HL)
R v Sloan  1 NZLR 494
Royal Commission on Thomas Case, Re  1 NZLR 602
Royal Commission on Thomas Case, Re  1 NZLR 252 (CA)
Royal Commission to Inquire into and Report upon State Services in New Zealand, In re The  NZLR 96 (CA)
Southern Ocean Trawlers Ltd v Director-General of Agriculture and Fisheries  2 NZLR 53 (CA)
South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Investigations Ltd  2 NZLR 282 (CA)
Application for review
This was an application to strike out the plaintiff's application for declarations that the defendant made certain errors of fact and law in his Winebox report to the Governor-General.
B P Henry and R Darwns-Honey for the plaintiff
J Miles QC and A Duffy for the defendant
PANEL: Smellie J
JUDGMENTBY-1: Smellie J.
This is an application by the defendant to strike out the plaintiff's action pursuant to RR 186 and 477 of the High Court Rules. The plaintiff seeks declarations that the defendant made certain errors of fact and law in his Winebox Report to the Governor-General pursuant to terms of reference set out in an Order in Council dated 12th September 1994. And further, that as a consequence the Report should be declared a nullity, set aside, or otherwise qualified.
Early in this litigation I made orders joining as parties all those who had had standing before the defendant during the conduct of the Inquiry. They fall into two distinct groups. First, the "corporates" whose transactions the plaintiff alleges amount to fraudulent tax evasion and/or avoidance and secondly, the two parties whose investigations of the Winebox documents were specifically directed to be inquired into, namely, the Commissioner of Inland Revenue and the Director of the Serious Fraud Office.
The defendant's application was therefore supported by the four corporates (Fay Richwhite, [*7] Bank of New Zealand, Brierley Investments and European Pacific) and the heads of the two organs of State, Commission of Inland Revenue and Serious Fraud Office.
It was common ground among all counsel that the test to be applied when considering a strike out application is that enunciated in such cases as South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Investigations Ltd  2 NZLR 282 (CA); Southern Ocean Trawlers Ltd v Director-General of Agriculture and Fisheries  2 NZLR 53 (CA) , and I would add more recently Attorney-General v Equiticorp Industries Group Ltd ( In Statutory Management)  1 NZLR 529 (CA). The essence of all those cases is summed up in the judgment of McKay J in the last mentioned case at p 533, lines 30-35 where he said:
The discretion is one to be sparingly exercised. Striking out is justified only if, on the material before the Court and in the present state of evolution of the common law, the case as pleaded is so clearly untenable that the plaintiff cannot possibly succeed. If disputed questions of fact arise, the case must go to trial. If the claim depends on a question of law capable of decision on the material [*8] before the Court, the Court should determine the question even through extensive argument may be necessary to resolve it.
Initially in earlier hearings at which I presided in this litigation the possibility of a challenge to the plaintiff's standing to bring this action was, if not heralded, at least in the wind.
As a consequence although it was not raised specifically in the submissions filed by the defendant and those who support him, Mr Henry felt obliged to address the topic in paras 7-10, of his prepared synopsis. In those paragraphs there is also an overlap with other aspects of the case. By the end of the hearing, however, it was clear that neither the defendant nor any of the other parties were challenging Mr Peter's standing to bring this action. The decision to adopt that stance was, in my view, entirely appropriate and in line with the decision of the House of Lords in R v Inland Revenue Commissioners, ex parte National Federation of Self-Employed and Small Businesses Ltd  AC 617;  2 All ER 93. Had a contrary view been taken I would have had little difficulty in applying the Small Businesses' approach since the plaintiff's involvement in [*9] promoting the Inquiry and appearing throughout it by counsel takes him well outside the stated exceptions of "busybodies, cranks and mischief-makers" identified by the House of Lords in the above case. In short, if there is a valid ground of attack which can be appropriately remedied the plaintiff clearly has the standing to mount the attack and seek the relief.
The plaintiff's action
In the run-up to the hearing of this application, the plaintiff filed an amended statement of claim on 9 February 1998, along with his submission in response to those of the defendant, corporates and Commission of Inland Revenue and Serious Fraud Office, all of which had been filed and served pursuant to timetable orders made towards the end of last year.
There was a recurring theme in arguments addressed during the hearing by the defendant and those in support to the effect that the plaintiff, having seen the submissions filed last year, had amended in an effort to shore-up a hopeless case. I do not find it necessary to comment on those submissions. The fact is that without formal opposition this strike out application was argued on the basis of the amended statement of claim to which I now turn. [*10]
Paragraphs 1-7 plead the setting up of the Commission over which the defendant presided and the circumstances which gave rise to its establishment. As earlier mentioned the Order in Council was dated 12 September 1994 and the defendant reported to the Governor-General on 14 April 1997. At two and a half years the inquiry was one of the longest and most expensive to be conducted in this Dominion.
In paras 8-16 there is a detailed pleading of the Magnum transaction. It was one of half a dozen transactions found among the Winebox papers which received detailed consideration in the Report. Overall, however, in the course of the Inquiry some 60 transactions (a handful of them not New Zealand based) were considered.
In essence the Magnum transaction involved a New Zealand subsidiary of European Pacific paying withholding tax of approximately New Zealand $2m in the Cook Islands and then utilising tax certificates issued in the Cooks' to offset against tax otherwise payable in New Zealand. At the same time, however, another subsidiary in the European Pacific group received a payment from the Cook Islands Government of the same amount, (a refund in effect), less a fee of $50,000.
The tax returns [*11] filed by European Pacific's New Zealand subsidiary are pleaded in para 17 and the IRD's assessment of those returns in para 18. In para 19 a taxpayer's disclosure obligations pursuant to s 301 of the Income Tax Act 1976 in respect of a credit for foreign tax, are set out together with the plaintiff's understanding of what those provisions require.
The defendant's Report is then addressed in paras 21-23, specifically in relation to the Magnum transaction. Paragraphs 22-23 read as follows:
22. At 2:1:50 the defendant found the features of the Magnum transaction to be:
The Winebox documents themselves indicated the basic features of that part of the transaction involving the payment and repayment of the so-called tax. Those features were:
1. EPFML (a New Zealand registered company) received income on a debenture. It was required to pay withholding tax on that income to the Cook Islands Government.
2. EPFML paid to the Cook Islands Government in two payments the amount of the tax payable.
3. In return for those payments, it received from the Cook Islands Government what purported to be receipts for that tax.
4. By means of companies in the EPI group entering into transactions, [*12] which were quite unreal, for the sale and purchase of promissory notes, with the Cook Islands Property Corporation (a body controlled by the Cook Islands Government) the Cook Islands Government made a loss of sums equal to the two payments of so-called tax (less a sum of $50,000 which was retained on behalf of the Cook Islands Government). Those sums were paid not to the taxpayer, EPFML, but to Harcourts, another company within the EPI group.
5. The receipts obtained by EPFML (the New Zealand taxpayer) were used by that company in New Zealand when it made returns of income to the Inland Revenue Department.
6. Against the tax payable on that income EPFML offset what it claimed were credits for withholding tax already paid in the Cook Islands and produced as evidence of such payments the two receipts for so-called tax paid in the Cook Islands.
7. EPFML in claiming those tax credits did not disclose to the Inland Revenue Department the sums which had accrued to Harcourts by means of those promissory note transactions, and which effectively amounted to payment of the amount of tax less a fee of $50,000.
23. Notwithstanding, the provisions of the Income Tax Act 1976 and the [*13] factual findings by the defendant set out in para 22 the defendant held:
(i) The tax credit certificates must he regarded as valid receipts for tax paid;
(ii) EPFML was not obliged to disclose to the Inland Revenue Department the repayments of tax to Harcourt.
In paras 24-31 (under the general heading "form over substance doctrine") the pleading alleges the defendant concluded that the Magnum transaction was a series of independent agreements whereas it is pleaded that it, "was properly one composite agreement as each of the intergroup company arrangements was wholly interdependent as distinct from being independent".
Out of sequence but because it relates to relief sought in the action I also quote para 26:
That the defendant in his report of 14 August 1997 at 3:1:55 stated:
The fundamental defect in the "form over substance doctrine" is that the Inland Revenue Department is not a party to the transaction. The parties, may, therefore, document whatever falsities suit their tax avoidance purposes. Morally or in principle, there can be no good reason why the fact that they have carried out the transaction according to the (potentially dishonest) form of it should benefit [*14] them.
It is important to appreciate in respect of the passage from the Report set out in para 26 above that it appears in s 3 of the same which is devoted entirely to a consideration of the need for law changes pursuant to reference (b) of the terms of reference which required the Commission to inquire into and report upon:
(b) Whether, having regard to the kinds of transactions referred to in the papers so presented (that is tabled in the House) any changes to the criminal or tax law should, in your opinion, be made for the purposes of protecting New Zealand's income tax base from the effects of fraud, evasion and avoidance, and, if so, what.
The thrust of the pleading in the paragraphs currently under discussion is that the Commissioner either misapplied or misunderstood the doctrine of form over substance. That comes out clearly in paras 30-31 which read as follows:
30. That the "form over substance doctrine" does not apply in cases of tax avoidance, tax evasion or fraud.
31. The defendant incorrectly applied the "form over substance doctrine" to the transaction in that either:
(i) The transaction involved tax avoidance or tax evasion or fraud; or
(ii) the Income [*15] Tax Act 1976 should have been applied to the transaction on the legal form of it being one composite agreement.
Paragraphs 32-36 then allege that the defendant erred in fact and law in that he concluded:
(i) That under the "form over substance doctrine" taxpayers "may . . . document whatever falsities suit their tax avoidance purposes".
(ii) That he should have regard to EPFML and Harcourts as separate legal entities.
(iii) That the tax credit certificates must be regarded as valid receipts for tax paid.
(iv) That the transaction between Harcourts and EPFML was genuine and that as such earned income upon tax could be payable.
(v) That EPFML was not required to disclose to the Inland Revenue Department the payment to Harcourts.
(vi) That EPFML was not required to disclose that it was a party to a tax avoidance scheme under s 301 of the Income Tax Act 1976.
(vii) That there was no fraud disclosed in the transactions.
(viii) That the disclosure obligations as set out by the Privy Council in the case of Challenge Corporation Ltd v Commissioner of Inland Revenue  2 NZLR 513 was not correct.
(ix) That the legal test for ascertainment of evasion in [*16] Challenge did not apply on the facts as found by the defendant in the Magnum transaction.
(x) That there was no tax evasion disclosed in the transactions.
(xi) That the transaction was not fraudulent under s 227 of the Crimes Act or s 229A of the Crimes Act.
As a consequence it is further alleged that the defendant failed to carry out his terms of reference (para 34) and curtailed his Inquiry, and as a result, acted in excess of jurisdiction (paras 35-36).
The following declarations are then sought:
1. That the determination by the defendant in the Report dated 14 August 1997 to His Excellency The Right Honourable Sir Michael Hardie Boys, Governor-General of New Zealand and titled "Report of the WineBox Inquiry, Commission of Inquiry into Certain Matters Relating to Taxation" that the WineBox transaction called the Magnum transaction therein does not involve fraud and/or tax evasion was made without or in excess of jurisdiction and is a nullity.
2. Declaration that errors of law induced the defendant to fail to carry out the mandate entrusted to him by the Order in Council dated 12 September 1994, to duly investigate issues of competency arising in respect [*17] of the Inland Revenue Department and Serious Fraud Office.
3. Declaration that on the facts as found in the said Report in respect of the Magnum transaction the determination was wrong in law in that the defendant erroneously concluded:
(a) That he could reject the view of the Privy Council in the Challenge v Commissioner of Revenue as to the extent of the disclosure obligation of New Zealand taxpayers.
(b) That the "form over substance doctrine" permits taxpayers to document "whatever falsities suit their tax avoidance purposes" under the Income Tax Act 1976.
(c) That by virtue of the "form over substance doctrine" applied to the Magnum transaction EPFML had no obligation under s 301 of the Income Tax Act 1976 to disclose:
(i) The repayment of the withholding tax to Harcourts;
(ii) The full terms of the Magnum transaction;
(iii) The fact that the directors of EPFML accepted the agreement that incurred withholding tax payable to the Cook IslandsGovernment because as part of the composite agreement the Cook Islands Government had agreed that simultaneously with the payment of the withholding tax it would purchase and sell a promissory note for a loss [*18] equivalent to the tax paid less a $50,000 fee with parties agreed to by the directors of EPFML.
(d) That the Magnum transaction did not disclose "fraud or tax evasion".
4. A declaration that on the evidence before the Commission of Inquiry into Taxation and Related Matters the "form over substance doctrine" was not applicable when determining the legal consequences of the Magnum transaction.
The defendant's challenge
Subsequent to the presentation of very full and comprehensive submissions counsel for the defendant (Miles QC and Ms Ailsa Duffy) obliged the Court by providing a summary of the defendant's case. The Court expresses its appreciation for the ready cooperation of counsel in that regard. The summary served a three-fold purpose. First, it crystallised the essential points. Secondly, it enabled those supporting the defendant to precisely indicate where, if anywhere, they disagreed and what new points or angle of argument in addition to the defendant's presentation, were being advanced. Thirdly, that summary along with summaries presented by other counsel at the Court's request, ensured that when Mr Henry came to address at the end of the second day and throughout [*19] the majority of the third day, he had clearly before him the foundation for the attack on the plaintiff's action.
I have used the defendant's counsel's summary as the foundation for the outline of the plaintiff's case which I now set out.
The contention is, of course, that no reasonable cause of action is disclosed, and in addition, that the proceedings are in essence an abuse of process. So far as the absence of a reasonable cause of action is concerned the defendant argued first, that the Court has no jurisdiction either under the Declaratory Judgments Act 1908, the common law, or the Judicature Amendment Act to grant the plaintiff the declarations he seeks. This, it was submitted, flows from the nature of Commissions of Inquiry findings which are no more than expressions of opinion and do not bind anyone. Thus in the plaintiff's case there has been no determination of his legal rights, such as would create a justiciable issue or dispute between him and the defendant.
Furthermore, it was submitted that the declarations sought are hypothetical because there is no connection with any litigation between the plaintiff and the defendant. Thus the Court was being asked to provide an answer [*20] in a vacuum.
Next it was contended that as the plaintiff alleges that the defendant erred in fact as well as law there was no room for a declaratory judgment which will only be given when the facts are not in dispute.
The defendant's counsel went on to argue that the lack of affect on the plaintiff's rights preclude him from obtaining a declaration either under the common law or s 2 of the Declaratory Judgments Act. Furthermore, it was pointed out that the plaintiff cannot bring himself within the scope of s 3 of the Act which will only be utilised if there is a genuine matter to be resolved. In short, that the Court will not provide advisory opinions.
Turning to the question of the availability of relief by way of declaration pursuant to the Judicature Amendment Act 1972, the defendant's counsels' submissions were to the effect that the law confines the available grounds for judicial review in respect of Commissions of Inquiry to excess of jurisdiction and breach of natural justice. Here the plaintiff acknowledges that breaches of natural justice are not pleaded. So far as excess of jurisdiction is concerned, the defendant says that is confined to going beyond the terms of reference [*21] either in fact or as a result of misconstruing them. Also that the plaintiff's contention that expressing an opinion in the body of the Report based upon an erroneous understanding of the law (which is denied by the defendant) cannot lead to the finding of excess of jurisdiction.
Indeed, the defendant's counsel contend that under the guise of alleging excess of jurisdiction the plaintiff is merely attempting to appeal or otherwise challenge the findings and conclusions of the Commissioner. And for no other reason than they are adverse to the view of the matter that he contended for when urging that the Commission should be set up and subsequently repeated in evidence before the Commission.
Finally, on the no reasonable cause of action leg of the argument, the defendant's counsel contend that there were no errors of law, and even if jurisdiction existed, the Court should refuse to exercise its discretion because any such declarations would be of no practical importance or consequence.
The second leg of the argument alleging abuse of process is based, of course, upon the proposition that the attack is simply an attempt to appeal the Commissioner's conclusions, thus carrying on the argument [*22] for acceptance of the plaintiff's views that did not find favour.
All of the counsel for the corporates and the Inland Revenue Department and Serious Fraud Office adopted Mr Miles submissions but each of them, in a sense, added a further emphasis. Mr Harrison QC, for Fay Richwhite, developed an argument which was critical of the plaintiff not only on this application but throughout the whole affair and emphasised particularly that the pleadings are not apt, in his submission, to raise an allegation of acting in excess of jurisdiction. Counsel emphasised that simply expressing an opinion on the law (irrespective of whether it was right or wrong) did not amount to operating outside the terms of reference or in a way that misconstrued them. On the contrary it was argued that in reality the plaintiff was seeking to promote an appeal and that the decided cases are completely against him in that regard.
Mr Harrison also emphasised that quite apart from the absence of a legal basis for saying that the Commissioner curtailed his Inquiry, the Report itself demonstrates that he examined carefully the steps taken by the Inland Revenue Department and the Serious Fraud Office before reaching the [*23] conclusion that the care and attention they had given to the matter was reasonable and that there was no room for an allegation of incompetence. So far as those investigations being "lawful" and "proper" any suggestion of unlawfulness or impropriety was substantially abandoned by the plaintiff's counsel during final submissions at the Inquiry.
Mr Galbraith QC, for the Bank of New Zealand, emphasised that the limited availability for judicial review in respect of Commissions of Inquiry was necessary in a very practical sense. Otherwise anyone who did not like an opinion expressed in a Commissioner's report or the conclusions reached by him, irrespective of the absence of a lis could get before the Court and advance endless arguments seeking declarations. Counsel emphasised the different situation applying to decision-making Administrative Tribunals where errors of law, other than misinterpretation of terms of reference or the like, can provide grounds for review.
For Brierley Investments, Mr Gault emphasised the limited supervisory jurisdiction that the Courts have over Commissions of Inquiry, emphasising again as the defendant's and other counsel who followed had done, that the [*24] law in New Zealand is settled by theThomas (Full Court and Court of Appeal) and Erebus (Court of Appeal and Privy Council) cases. Thus, argued Mr Gault, there are only three circumstances where a party can succeed and they are limited to:
* Determine whether a Commission is acting or has acted within or outside its terms of reference.
* Ensuring that the requirements of natural justice are met.
* Intervening in the case of bias or predetermination.
On that basis counsel argued that conclusions reached by the Commissioner on "transaction issues" such as Magnum simply are not open to review, and that the basis upon which Mr Henry argues that there has been a failure to carry out the mandate in the terms of reference is not sustainable.
Mr Allan, for European Pacific, concentrated on two discrete issues. First, the reliance that the plaintiff places upon the decision of the Court of Appeal in European Pacific Banking Corporation v TVNZ Ltd  3 NZLR 43, and secondly, the plaintiff's submissions as to the reliability of the evidence of Mr Lindsay McKay, Tax Expert, called before the Commission by European Pacific.
As to the first point, counsel explained the [*25] nature of that case which was one where the Court had to decide whether a party should be precluded from using information which had been dishonestly obtained, or whether the normal rule should not apply because the materials demonstrated what is technically called "an iniquity" in the form of fraudulent evasion of tax, or at least avoidance. Counsel emphasised that the Court had been very careful to emphasise that it was making a ruling at a preliminary stage on an interlocutory appeal heard shortly before trial and that it was not making any finding that the Magnum transaction was fraudulent. Nor did it decide that it was prima facie fraudulent. At its highest the Court simply recognised that there was a serious argument to be advanced.
Concerning Mr McKay, Mr Allan pointed out that he was called as an expert, not only as to tax law but also tax practice. As a consequence he was able to give evidence as to whether or not tax practitioners (lawyers or accountants) would have regarded the Magnum transaction as fraudulent. And further, how it would have been regarded by the Department of Inland Revenue at the time. The thrust of his evidence, it was submitted, was that responsible [*26] opinion would not have regarded the transaction as fraudulent or tax avoidance. That evidence was significant because it had a bearing on whether or not the inference could be drawn that those who set up the transaction and saw it through should be regarded as conducting themselves in a way which they knew was against the law. Like other counsel, Mr Allan emphasised that Mr Henry had chosen not to cross-examine Mr McKay.
Counsel for the Inland Revenue Department adopted Mr Mile's submissions. Whereas, however, counsel for parties who preceded Mr Pearson placed emphasis on the nature of a Commission of Inquiry and the limitations on the relief available in this case, he concentrated more on the alleged errors of law.
In the submissions first filed, before the filing of the amended statement of claim, one of the first topics addressed was "form over substance". Counsel submitted that the passage from the report quoted in para 26 of the current amended statement of claim has been taken out of context. At para 12 of the original submissions it was said:
12. What the statement of claim overlooks is that the comments come in a section on law reform, and they appear as comments sandwiched [*27] between pertinent extracts from an OECD overview of the impact of form/substance analysis; and the formulation of the form/substance doctrine as it applies in New Zealand in the form of a quote from a leading decision of the Court of Appeal. The observations complained of are not a statement of the law, but a perceptive and appropriate expression of concern at the difficulty Inland Revenue Department often faces in gaining a full information relating to a transaction. The comments deal with the consequential need for disclosure obligations which arise from legal form predominating over economic substance. Mr Peters seeks to read the paragraph as a description of the form/substance principle itself, it simply does not purport to be that.
Furthermore, it was argued that the Commission's conclusion that Magnum was not a fraud and s 301 had been complied with, rested in large measure, on evidence given by experts such as Mr Lindsay McKay. At pp 12574-12575 of the record it appears that Mr McKay, while acknowledging there was a divergence of view, expressed a very firm opinion that the correct approach to Magnum was to consider its form. At p 12575 between lines 10-24, he said:
There is, [*28] in my view, no doubt as to which of these approaches is, as a legal matter, correct. The primacy of the prevailing New Zealand approach to the determination of tax consequences of contractual arrangements requires any substance based or personal subjective judgments to be put to one side and ignored in any exercise calling for the interpretation or application of income tax legislation in the absence of arguments over the operation of s 99. I sense a lack of appreciation of that demand on those who, contrary to judicial orthodoxy, would have the issue before this inquiry resolved on a substance basis only and who see as apologists those who feel constrained by the force of that demand.
And at pp 12602-12603 of the record, an equally firm opinion was expressed that in the context of the Magnum transaction the New Zealand subsidiary of European Pacific had complied with its disclosure obligations under s 301. At the end of those original submissions filed on behalf of the Inland Revenue Department it was argued:
Whether the Commissioner's own assessment was correct or not is of little moment in determining whether his view that the Inland Revenue Department acted properly and competently [*29] was correct - if Mr Peters is to challenge the report he must go further, and show that the Commission was not entitled to accept the evidence before it.
At that point it is again emphasised that the plaintiff's counsel did not see fit to cross-examine Mr McKay when he gave his evidence.
In supplementary or additional submissions made at the hearing on behalf of the Inland Revenue Department it was again submitted that:
The fundamental fallacy in the plaintiff's contention is that the Commissioner found something which excludes fraud - an absence of dishonesty. Without dishonesty there was no fraud, whatever misapprehension the Commissioner and others could have been under regarding, legal technicalities.
Counsel took me in the Report to 2:1:33 dealing with the European Pacific Board meetings and the evidence of European Pacific Directors and Executives (Messrs Richwhite, Collins, Turner and Tompkins) at 2:1:35 and to others involved (Mr Marra and Mr Diack) at 2:1:36. Indeed the whole of s 2.1 deals with the Magnum transaction. The particular passages referred to confirm that the Commissioner had examined most of the people whose dishonest intentions would have to be established before [*30] fraud could be shown. There was, as I understood it, a qualified admission by counsel for the Commission of Inland Revenue that perhaps technically the Commissioner went further than he needed to. Thus it would have been sufficient for him simply to express the opinion that there were no grounds for suspicion requiring further investigation of fraud, whereas in effect he had taken the next step and expressed a conclusion that, in fact, the transactions were not fraudulent.
Be that as it may, however, counsel submitted it did not detract from the one key point that even if the Commissioner got the law wrong, the plaintiff in these proceedings cannot overcome the Commissioner's conclusions on the facts that the people concerned did not act dishonestly.
Finally, Mr Andree-Wiltens for the Serious Fraud Office, while adopting Mr Miles' submissions, emphasised that the Commission had carefully scrutinised the steps that had been taken by the Serious Fraud Office (and the Inland Revenue Department) to probe the Magnum transaction and as a result, he submitted, cleared the Serious Fraud Office of any incompetence, unlawfulness or impropriety. It was submitted that those conclusions had been [*31] reached after extended cross-examination of the relevant witnesses and could not be disturbed in this case if it proceeds to a substantive hearing.
The plaintiff's response
Although Mr Henry's submissions filed according to the timetable run to fifty pages, and in part, seek to incorporate some submissions that he had made earlier when seeking to move the case into the Court of Appeal, he elected in the full day that I allocated for him to reply, to speak to the submissions and basically make a viva voce reply.
The first matter counsel addressed was what he described as the constant theme running through the submissions of the defendant and those who support him that despite a two and a half year Inquiry, there was no implicit obligation on the Commissioner to comply with the law of New Zealand. Mr Henry contended that it must have been intended that there should be such compliance otherwise what was the point of asking the Commissioner to recommend changes to the law? Counsel submitted that, given the circumstances of this case just as decision-making Administrative Tribunals can be reviewed for errors of law, so should this Commissioner.
From there Mr Henry moved to his second [*32] point which was that the plaintiff's action should not be struck out so long as there was a tenable argument that it might succeed. Counsel submitted that because it was intended that the Commissioner apply the law correctly and had not, it could not be said that either within the present law or any development of it, this action (which, he said, amounts to a challenge to the way the Commissioner applied the law to the facts he found), could not succeed.
Mr Henry submitted that in respect of three matters the Commissioner got the law wrong. First, it is said that he did not recognise and apply the approach to fraud spelt out by the Privy Council in Challenge Corporation Ltd v Commissioner Inland Revenue  2 NZLR 513 at p 561. This is the decision of the Privy Council which overturned the decision of Barker J at first instance, and the Court of Appeal upholding him on an application of s 99 of the Income Tax Act 1976. In the course of his judgment delivered on behalf of the judicial committee, Lord Templeman said, "Evasion occurs where the Commissioner is not informed of all the facts relevant to an assessment of tax".
The point here, of course, is that the plaintiff contends [*33] that the Commissioner should have found that when the New Zealand subsidiary of European Pacific presented the Cook Islands tax certificates, all the facts relevant to an assessment of tax should have been disclosed, including the fact that save for $50,000, the balance of the $2m covered by the certificates was going to find its way back to another subsidiary of the European Pacific Group.
Secondly, the contention is that the Commissioner wrongly interpreted s 301 of the Income Tax Act 1976 which reads as follows:
301. Information for credit to be furnished within 4 years A credit for foreign tax shall not be allowed unless, within 4 years after the end of the income year in which the taxpayer derived the income against the New Zealand tax on which the credit is claimed, or within such further period, not exceeding 2 years, as the Commissioner in his discretion allows in any case or class of cases, the taxpayer claiming the credit
(a) Makes application in writing to the Commissioner for the credit; and
(b) Furnishes to the Commissioner all information (including information in relation to any amount to which the taxpayer is entitled in respect of any relief or repayment [*34] of the foreign tax) necessary for determining the amount of the credit.
When setting out that section at p 2:1:51 of the Report, the Commissioner added:
There are two requirements of this section which deserve particular notice. They are: First, that the payment of tax for which a credit is claimed must be "substantially of the same nature" as New Zealand income tax or non-resident withholding tax.
Second, the person claiming the tax credit must furnish information in respect of "any amount to which the taxpayer is entitled in respect of any relief or payment of the foreign tax".
Here, Mr Henry's submission was that because the tax credits given by the Cook Islands' Government were not genuine and amounted to a mechanism whereby most of the tax paid was returned to an allied company, it could not be said that the credit being claimed was for tax "substantially of the same nature" as New Zealand income tax on non-resident withholding tax. Furthermore, that the second requirement identified by the Commissioner in the above quote was taken entirely from the words in brackets in paragraph (b) of s 301 and ignored the overriding obligation to furnish "all information . . . necessary [*35] for determining the amount of the credit".
Thirdly, that the Commissioner had wrongly applied the form over substance doctrine to clear the Magnum transaction whereas the substance should have been examined, and had it been, the nature of the evasion or avoidance of tax, would have been apparent.
It was Mr Henry's contention that the portion of the Report set out in para 26 of the amended statement of claim with its reference to allowing parties to "document falsities" demonstrated that the Commissioner did not understand the doctrine of form over substance. It was clear from Mr Henry's submissions also that his approach to the doctrine as expounded by Richardson J in Mills v Dowdall NZLR 154 is heavily dependent upon that portion of the statement which reads at p 159:
That requires consideration of the whole of the contractual arrangement and if the transaction is embodied in a series of interrelated agreements they must be considered together and one may be read to explain the others.
Counsel submitted that had the Commissioner looked at the Magnum transaction as "a series of interrelated agreements" he would have seen immediately that it was either fraudulent tax [*36] evasion or tax avoidance which should have been unravelled pursuant to s 99 of the Income Tax Act 1976. Counsel sought support for that view by referring not only to the Television New Zealand case but also to the decision of the Privy Council in Brannigan v Sir Ronald Davison  1 NZLR 140. In the judgment of Their Lordships in the latter case and, in particular, in the "simplified version" of the Magnum transaction which appears at p 143 of the report commencing at line 15 it was said:
Something, of the flavour can be captured by a simplified version of the Magnum transaction. This involved the payment of withholding tax (in very round figures, $2m) by European Pacific to the Cook Islands Government in respect of interest paid by one European Pacific company to another, the purchase by the Cook Islands Government of a promissory note from a European Pacific company, and the sale of the same note by the government to another company in the group at a substantial loss ( .95m). All these dealings were part of a single, prearranged scheme. Their economic effect was to pay back almost all the tax paid.
So, argued Mr Henry, if the Commissioner had looked at it that way and [*37] applied the law properly, he would have concluded that the obligation to disclose had not been discharged. Mr Henry also relied upon the statement of Tipping J in the case of A Taxpayer v Commissioner of Inland Revenue (1997) 18 NZTC 13,350 at 13, pp 365-366:
In my judgment, we should decide the novel problem presented in the present case by affirming our consistent approach in New Zealand to taxation issues. Except in cases involving sham or avoidance, taxation issues should be decided on the basis of the legal and equitable rights and obligations deriving from the transaction to which the taxpayer is a party, or the circumstances in which the taxpayer is involved.
But, with respect, it seems to me that it adds very little to similar statements made by Richardson J in Dowdall's case.
Elaborating on the fraud alleged, Mr Henry submitted that the Commissioner had recognised early in his Report that Magnum, and transactions like it, had been "aggressively tax-driven" and that considerable lengths had been gone to, to conceal ("shroud in secrecy") the full ramifications. That, he submitted, amounted to a conspiracy to commit an offence under s 251 of the Crimes Act (falsifying [*38] accounts relating to public funds) which, he argued, was wide enough to capture an intention to default on an obligation to disclose under s 301. Furthermore, he contended that s 229A of the Crimes Act (taking or dealing with certain documents with intent to defraud) could capture the presentation of the tax certificate with knowledge that the reality of the situation was that subject to a small reduction, the majority of the tax being claimed as having been paid in the Cooks' was going to be repaid to a subsidiary of the same group.
During the course of his argument I put it to Mr Henry that, in reality, he wanted the Court to do something that the Commissioner was not able to do, (because it was not his responsibility to declare rights between parties), namely to declare authoritatively what the law was in respect of the Magnum transaction which would, (according to the plaintiff), involve declaring it fraudulent. Mr Henry did not agree with that proposition but made it clear that he looked to the Court on the substantive hearing to say that by virtue of having misapplied the law to the Magnum transaction the Commissioner had exceeded his jurisdiction by getting the law wrong and [*39] as a consequence, curtailing further investigation. And for that proposition he relies primarily upon Re Royal Commission on Thomas Case  1 NZLR 602, a decision of the Full Court where it was said at p 616 discussing the Court's jurisdiction commencing at line 30:
The jurisdiction which the Court has in these present proceedings is three-fold; first, to ensure that the Commission acts fairly to persons likely to be aggrieved, secondly, if in its discretion it thinks it proper so to do, to prohibit the Commission from acting in excess of its jurisdiction by committing errors of law which prevent it from correctly carrying out its appointed task , or by rejecting evidence which it should take into account, or by taking, into account evidence which it should not consider; and, thirdly, to exercise the powers given to the High Court on an application for review under the Judicature Amendment Act 1972. (Emphasis added.)
Counsel also contended that when that matter went on to the Court of Appeal, reported as Re Royal Commission on Thomas Case 1 NZLR 252 it was again recognised that the Court had jurisdiction to determine whether or not the Commission was acting [*40] within its terms of reference.
Thus an important aspect of the plaintiff's response, as I understand it, is that by getting the law wrong and failing to recognise Magnum as a fraudulent transaction the Commissioner prevented himself "from carrying out (his) appointed task".
But at the end of the day Mr Henry submitted that the most important aspect of the whole case concerned the obligation of the taxpayers to disclose. He said that was the one fundamental point because European Pacific could not fully disclose without exposing fraudulent evasion or avoidance.
The findings of fact in the Report as they relate to the Magnum transaction as set out in para 22 of the statement of claim are accepted by the plaintiff. In other areas, however, particularly whether or not those responsible for putting together the Magnum transaction should have been held to have done so with the dishonest intention of non-disclosure, the Commissioner's findings of fact are not accepted.
Initially, as I understood him, Mr Henry suggested that the inferences to be drawn from established facts were issues of law. But ultimately I think counsel accepted that having heard from senior officers of European Pacific [*41] and one or two others involved in the transaction the Commissioner, taking into account all the circumstances, had to decide as a matter of fact he could draw the inference that whether the necessary intention to defraud was present in all or any of the players. Clearly Mr Henry continued to contend that the Commissioner had got it wrong and should have found an intention to defraud, but how that finding of fact was to be challenged in the substantive action counsel failed to explain.
Finally, I should mention that Mr Henry relied upon two recent Australian cases of high authority. First, is Ainsworth v Criminal Justice Commission (1992) 106 ALR 11 (HC of A-Full Court), and the other and perhaps more important, Greiner v Independent Commission Against Corruption (1992) 28 NSWLR 125. In this latter case the Independent Commission against Corruption was found to have misinterpreted the Act which established his office and declared his powers and duties. Particularly at pp 147-149 of the report, Mr Henry submitted that, as with the Commissioner in this case, the defendant in the Greiner case was held bound by the law set out in the statute which founded his authority. Thus [*42] it was said at p 147 between lines C- D:
The observance and application by the Commission of objective standards, established and recognised by law, in the performance of its task of applying s 9 to cases before it is essential. It is what was intended by Parliament, it is required by the statute, and it is necessary, for the maintenance of the rule of law.
On p 148 under the heading "Relief" Mr Henry relied upon all that was said there to the completion of the judgment on the following page. The third ground advanced for relief in Greiner was simply that the Court considered the Commissioner's reasons involved an error of law. Thus, in that case, the first declaration found that the Commission had made its report "without or in excess of jurisdiction" so that the report was a nullity while the second declaration read "declare that, on the facts as found in the said report, the said determination was wrong in law". Mr Henry's submission was that he was seeking a similar declaration here and that in fact in the amended statement of claim the declarations sought were framed with the Greiner decision in mind.
The essential issues in the case
Although the acrimony which [*43] the Winebox Inquiry generated surfaced briefly during the hearing counsel, nonetheless, recognised that the matter would be decided, not on the basis of strongly held beliefs or convictions one way or the other, but on the application of the appropriate law to the circumstances of the case.
The submissions made were, of course, advanced with the objective of persuading the Court to the particular view contended for. Although the presentation varied in emphasis and length according to the interests of the party involved, nonetheless, three essential issues emerged which can be encapsulated in the three questions set out below:
1. Will the circumstances allow of declarations pursuant to the Declaratory Judgments Act 1908?
2. Will the circumstances allow of declarations at common law?
3. In what circumstances on an application for judicial review will a Court grant relief in respect of statements made, (opinions expressed), in the report of a Commission of Inquiry?
There is perhaps a fourth issue that applies to all three questions and that is whether in respect of any one or all of them it can be said that the law is still evolving, so that an otherwise untenable case should [*44] be allowed to go to a hearing against the possibility that after full consideration of both the facts and the law a further development might occur which would give legitimacy to the claim. On the other hand, as is clear from the passage from the judgment of McKay J in the Equiticorp case cited earlier in this judgment, where the issue, as here, is substantially a legal one the Court should determine the question even when that involves extensive argument.
I now address each of those three questions in association with the evolution of the law point to see whether the defendant's contention that the plaintiff's action is clearly untenable, has been made out.
Will the circumstances allow of declarations pursuant to the Declaratory Judgments Act 1908?
Here I have reached the conclusion that the law is clear and beyond argument.
Section 2 of the Act empowers the Court to make binding declarations of right in proceedings otherwise properly brought. As is pointed out in the judgment of Cooke P in Re Chase  1 NZLR 325 at p 330 , that is a wide jurisdiction which is not to be whittled down by ungenerous interpretation. Nonetheless, as is clearly demonstrated by the Court [*45] of Appeal's decision inGazely v Attorney-General (1995) 8 PRNZ 313, there has to be a justiciable issue before the jurisdiction can be invoked.
In the absence of a genuine dispute between the plaintiff and the defendant affecting their respective rights, s 2 of the Act cannot apply. Here, the plaintiff immediately runs into one of his primary difficulties in this action. However one looks at it the expressions of opinion in the Winebox Inquiry Report, albeit disagreed with (indeed vehemently disagreed with) by the plaintiff, they do not in fact affect any rights attaching to him.
When we turn to s 3 of the Act the plaintiff's position is even more untenable. That section reads as follows:
3. Declaratory orders on originating summons
Where any person has done or desires to do any act the validity, legality, or effect of which depends on the construction or validity of any statute, or any regulation made by the Governor-General in Council under statutory authority, or any bylaw made by a local authority, or any deed, will, or document of title, or any agreement made or evidenced by writing, or any memorandum or articles of association of any company or body corporate, or [*46] any instrument prescribing the powers of any company or body corporate; or
Where any person claims to have acquired any right under any such statute, regulation, bylaw, deed, will, document of title, agreement, memorandum, articles, or instrument, or to be in any other manner interested in the construction or validity thereof,
such persons may apply to the Supreme Court by originating summons . . . for a declaratory order determining any question as to the construction or validity of such statute, regulation, bylaw, deed, will, document of title, agreement, memorandum, articles, or instrument, or of any part thereof. (Emphasis added.)
As Mr Miles QC put it in his submissions filed pursuant to the timetable order on 19th December 1997 in para 3.7:
Section 3 requires the person making the application for the declaration to be the same person who has done or desires to do an act or who claims to have acquired a right which is to be confirmed as lawful by the declaration. In the present case the plaintiff has done no acts nor does he claim any rights in respect of the declarations sought.
In short, submitted Mr Miles, there is nothing in this action which specifically relates to the [*47] plaintiff. That submission is demonstrably correct and indeed I did not understand Mr Henry to seriously challenge it.
Furthermore, it is clearly settled that the Court will not entertain an application under the Act where the facts are in dispute. R v Sloan 1 NZLR 494; New Zealand Insurance Co Ltd v Prudential Assurance Co Ltd  1 NZLR 84. Here the plaintiff has specifically pleaded that the defendant erred in both fact and law. As explained earlier, however, Mr Henry argued that the plaintiff did not disagree with the primary findings of fact, but with the inferences that the defendant drew from them. It may be that is a rather more sophisticated issue than the cases just cited address. But what is inescapable is that having heard and seen many of the people involved in putting the Magnum transaction documents in place, the Commissioner has specifically excluded an intention to defraud the revenue.
It has also been held that the Court will not make a declaration on matters that could be the subject of a criminal charge. Here the question of whether or not disclosure should have been made pursuant to s 301 could be the subject of a criminal charge, not against [*48] the New Zealand subsidiary because it has long since been wound up, but against some or all of the individuals referred to above whose intentions when creating the Magnum transaction were examined by the Commissioner. Hardie Boys J in R v Sloan at p 482, lines 25-35 emphasised this rule when he said:
Thus, authority is strongly against Mr Sloan. There is also a line of cases, a prime example being Institute of Patent Agents v Lockwood  AC 347, to the effect that an order will not be made declaring an activity unlawful where appropriate enforcement or penal proceedings are available.
Quite obviously an action such as this seeking declarations under the Act when the parties affected are not even before the Court, is an entirely unsatisfactory vehicle for a fair resolution of such issues.
Will the circumstances allow of a declaration at common law?
Here, in my view, the plaintiff's position is equally untenable. It was common ground that the Court has jurisdiction to make common law declarations of right. The defendant and those supporting him submitted that the Court does not have jurisdiction under the common law to go beyond that and make general declarations on [*49] hypothetical questions of law. The authority relied on here isGouriet v Union of Post Office Workers (1978) AC 435,  3 All ER 70. Lord Diplock at pp 501 and 100 respectively said:
The only kinds of rights with which Courts of justice are concerned are legal rights; and a Court of civil jurisdiction is concerned with legal rights only when the aid of the court is invoked by one party claiming a right against another party to protect or enforce the right or to provide a remedy against that other party for infringement of it, or is invoked by either party to settle a dispute between them as to the existence or nature of the right claimed. So for the Court to have jurisdiction to declare any legal right it must be one which is claimed by one of the parties as enforceable against an adverse party to the litigation, either as a subsisting right or as one which may come into existence in the future conditionally on the happening of an event.
The early controversies as to whether a party applying for declaratory relief must have a subsisting cause of action or a right to some other relief as well can now be forgotten. It is clearly established that he need not. Relief in the [*50] form of a declaration of right is generally superfluous for a plaintiff who has a subsisting cause of action. It is when an infringement of the plaintiff's rights in the future is threatened or when unaccompanied by threats, there is dispute between parties as to what their respective rights will be if something happens in the future that the jurisdiction to make declarations of right can be most usefully invoked. But the jurisdiction of the Court is not to declare the law generally or to give advisory opinions: it is confined to declaring contested legal rights, subsisting or future, of the parties represented in the litigation before it and not those of anyone else. (Emphasis added.)
To the same effect was a passage in the judgment of Lord Wilberforce at pp 483 and 85 respectively when he said:
[I]n my opinion, there is no support in authority for the proposition that declaratory relief can be granted unless the plaintiff, in proper proceedings, in which there is a dispute between the plaintiff and the defendant concerning their legal respective rights or liabilities, either asserts a legal right which is denied or threatened, or claims immunity from some claim of the defendant [*51] against him, or claims that the defendant is infringing or threatens to infringe some public right.
With respect the way in which His Lordship has expressed the proposition can be a little confusing on a first reading. But clearly there has to be a genuine dispute between the plaintiff and the defendant concerning their respective legal rights or liabilities, only then is there jurisdiction under the common law for the Court to declare the position.
Those same two passages from that leading authority were relied upon by the Court of Appeal in Gazely v Attorney-General when denying the plaintiff in that case relief because there, as in a sense here, the substance of the action was to reargue something already disposed of. At p 318, the last full paragraph, the Court said:
The present application is presented on a denial of the plaintiff's right that is unspecified but plainly is said to be that which occurred in the case of Black v Taylor which was ruled upon and now is historical only. So far as it may be taken as directed to the future it specifies no factual setting in which his rights are threatened. There is no matter in dispute between any parties. The issues are raised, [*52] in effect, as hypothetical questions. On these grounds taken together the application falls short of raising a justiciable issue. (Emphasis added.)
On this aspect of the matter, as I understood him, Mr Henry contended that Gouriet had been overtaken by the Small Businesses case and as a consequence the plaintiff has standing to bring the action. With respect, however, the issue here is not the plaintiff's standing to bring the action, (that in fact was not disputed by the defendant and those who support him). Rather it is, as the passages from the judgment of the House of Lords and the recent application of them by the Court of Appeal in Gazely show, the more fundamental issue as to whether a remedy will be granted in the absence of a dispute affecting the legal rights or liabilities of the parties to the action. Whichever way one looks at it that essential ingredient is missing here.
In what circumstances will the Court grant relief in respect of statements made (opinions expressed) in a report of a Commission of Inquiry?
Here the debate was rather more wide-ranging. The appointment of Commissions of Inquiry has been a feature of the New Zealand scene for many years. [*53] And as one of the jurisdictions in the van of the evolution of administrative law we faced the task of defining the limits of review in respect of such Commissions earlier than most.
The defendant and those who supported him argued that those limits are dictated inevitably by the nature of a Commission of Inquiry itself. Reference was made to In re the Royal Commission to Inquire into and Report upon State Services in New Zealand  NZLR 96. At p 109 North J said:
A Commission of Inquiry is certainly not a Court of law. Nor is a Commission of Inquiry to be likened to an administrative tribunal entrusted with the duty of deciding questions between parties. There is nothing approaching a lis , a Commission has no general power of adjudication, it determines nobody's rights, its report is binding on no one.
And Cleary J at p 115 said:
This argument overlooks the basic difference between a lis inter partes and an inquiry by Commissioners. In a controversy between parties the function of the Court is "to decide the issue between those parties, with whom alone it rests to initiate or defend or compromise the proceedings": Labour Relations Board of Saskatchewan v John [*54] East Iron Works Ltd  AC 127, 149. The function of a Commission of Inquiry, on the other hand, is inquisitorial in nature. It does not wait for issues to be submitted, but itself originates inquiry into the matters which it is charged to investigate. There are, indeed, no issues as in a suit between parties; no "party" has the conduct of proceedings, and no "parties" between them can confine the subject-matter of the inquiry or place any limit on the extent of the evidence or information which the Commission may wish to obtain.
Almost two decades later in Re Erebus Royal Commission; Air New Zealand Ltd v Mabon (No 2)  1 NZLR 618; Cooke J (as he then was), speaking for the majority, at p 653, took up the same theme and explained why the availability of judicial review of a Commission of Inquiry is confined to circumstances where it has either exceeded its powers (gone beyond its terms of reference) or breached the rules of natural justice. He said:
This is not an appeal. Parties to hearings by Commissions of Inquiry have no rights of appeal against the reports. The reason is partly that the reports are, in a sense, inevitably inconclusive. Findings made by the [*55] Commissioners are in the end only expressions of opinion. They would not even be admissible in evidence in legal proceedings as to the cause of a disaster. In themselves they do not alter the legal rights of the persons to whom they refer. Nevertheless they may greatly influence public and Government opinion and have a devastating effect on personal reputations; and in our judgment these are the major reasons why in appropriate proceedings the Courts must be ready if necessary, in relation to Commissions of Inquiry just as to other public bodies and officials, to ensure that they keep within the limits of their lawful powers and comply with any applicable rules of natural justice.
When the case reached the Privy Council ( NZLR 662,  AC 808) the passage from the majority judgment set out above were not dissented from. Also when the Thomas Commission case reached the Court of Appeal the same points were made, particularly at p 258 in the judgment of the Court rejecting the contention that there was an absence of any substantial supervisory jurisdiction. It was said between lines 10-25:
The Court has jurisdiction to determine whether the terms of reference of a Commission [*56] are lawful. That is illustrated by Cock v Attorney-General (1909) 28 NZLR 405, which was concerned both with the power to constitute a Commission contained in the Commissions of Inquiry Act 1908 and with the powers of a like nature conferred on the Governor-General by the Letters Patent constituting his office. Plainly the jurisdiction of the Court will reach the terms of reference of Commissions established under other statutes.
So too the Court has jurisdiction to determine whether a Commission is acting within or without its terms of reference. See Re Royal Commission on Licensing  NZLR 665, 680. Re Erebus (No 2) is another such case.
Next the Court will intervene to secure that the requirements of natural justice are met or to condemn the result if they are not - that is to say that persons interested (apart from any interest in common with the public) are afforded a fair opportunity of presenting their representations and meeting prejudicial matters: see Re Royal Commission on State Services  NZLR 96, 117; Re Erebus (No 2). In that area the Court is concerned with the reality of fair play. (Emphasis added.)
Very much later in the judgment at p [*57] 664 under the heading "Conclusions" between lines 35-45 it was said:
It is established in New Zealand that in appropriate proceedings the Courts may prevent a Commission of Inquiry - whether a Royal Commission, a Statutory Commission or perhaps a combination of the two - from exceeding its powers by going outside the proper scope of its inquiry. That basic principle was clearly accepted by this Court in Re Royal Commission on Licensing  NZLR 665. See especially the judgment of Myres CJ at pp 678-680. As he indicated, the principle is implicit in the judgment of the Privy Council in Attorney-General for the Commonwealth of Australia v Colonial Sugar Refining Co Ltd  AC 237; (1913) 17 CLR 644. It is also clear that in a broad sence the principles of natural justice apply to Commissions of Inquiry, although what those principles require varies with the subject-matter of the inquiry. The leading authority is the decision of this Court in Re Royal Commission on State Services  NZLR 96.
In this case, of course, the plaintiff does not allege breaches of natural justice in his pleadings and during the hearing Mr Henry made it abundantly clear that he does not [*58] rely upon any such breach as a basis for relief. We are, therefore, concerned here exclusively with the question of whether the Commission exceeded its powers by going outside the proper scope of its inquiries and whether, as contended by the plaintiff, errors of law which impact on the decision-making process can be said to lead to an excess of jurisdiction and thus, a failure to comply with the terms of reference.
On the question of a Commissioner's report containing "mere expressions of opinion" Mr Henry at p 20 of the synopsis of his argument cited both Erebus and Sloan acknowledging that the simple formulation of an opinion is not a decision amendable to review under the Judicature Amendment Act. He then went on to say at the bottom of p 20 and on to p 21:
However, it is the very fact that such opinions are not findings which makes declaratory relief available.
Thus in Sloan it was held that because what was involved was an expression of opinion only, "The appropriate procedure is clearly by way of application under the Declaratory Judgments Act 1908".
The High Court of Australia pointed out why declaratory relief is apposite to challenge Reports of Royal Commissions [*59] in a case not cited by Mr Miles QC, namely Ainsworth v Criminal Justice Commission [(1992) 175 C.L.R. 564,]   ALR 11. There the High Court held that "Mandamus was not available since the respondent Commission was under no duty to investigate the appellants. Neither was certiorari because the report had, of itself, no legal effect and carried no legal consequences, whether direct or indirect.
However, counsel submitted, a declaration was held to lie. Finally, counsel submitted:
When all is said and done, when every possible emphasis has been put forward on matters such as those stressed by Mr Miles QC, the fact is that findings of a Commission of Inquiry are fully amendable to declaratory relief even though such are "mere expressions of opinion". In other words, the fact that what is complained of in the present case is "mere expressions of opinion" does not in any way vitiate the plaintiff's case.
It was at that also that Mr Henry called in aid the decision of the Court of Appeal of New South Wales in Greiner.
The defendant and several of the counsel for other parties supporting the defendant, challenged Mr Henry to explain what he meant by his submissions and in particular, his two line [*60] statement quoted above namely "however, it is the very fact that such opinions are not findings which makes declaratory relief available".
My understanding of the answer given is that this is just part of the wider aspect of the plaintiff's case which relies heavily on the statement in the judgment of the full Court in Thomas quoted above (p 616, lines 33-35), " if in its (the Court's) discretion it thinks it proper to do so, to prohibit the Commission from acting in excess of its jurisdiction by committing errors of law which prevent it from correctly carrying out its appointed task", and there are echoes of the same point to be found at p 148 of Greiner in the judgment of Gleeson CJ between lines C- D when he said of the third proposition that had been advanced to the Court in that case:
If the third ground had stood alone, the question whether it would be appropriate for this Court to grant declaratory relief simply on the basis that it regarded the Commissioner's reasons as involving an error of law would have involved somewhat different considerations.
Mr Henry's point, as I understood him, was that the Thomas case illustrates a situation in which the Court moved [*61] because an error of law had prevented the Commission "from correctly carrying out its appointed task". Applying that approach to this case Mr Henry's contention is that because the Commissioner misapplied the doctrine of form over substance and failed to appreciate that the Magnum transaction was fraudulent and further, because he made an error of law in concluding that the New Zealand subsidiary of European Pacific was not obliged to make discovery of the full transaction when submitting the Cook Islands withholding tax certificates he had, in effect, committed errors of law which prevented him from correctly carrying out his task. This because, as a result of those errors, instead of continuing to investigate the performance of the Inland Revenue Department and the Serious Fraud Office he exonerated them. That, submits Mr Henry, is clear from the circumstance that in the Report not only did the defendant express the opinion that there was no fraud or failure to disclose, he specifically so held. This ingenious argument was described by Mr Miles QC as misleading and I have reached the conclusion that it is not supported by the authorities relied upon.
In Thomas the error complained [*62] of was the Commission's interpretation of the effect of the pardon which Thomas had been granted. By misunderstanding its true effect the Commission had purported to prevent other parties before it and, in particular, the New Zealand Police from adducing evidence which might tend to implicate Thomas in the killings of the Crewes. And when the issue was addressed in the Court of Appeal it was clearly regarded as one in which the Court had to determine whether the Commission was acting "within or without its terms of reference".
In the Greiner case it was again recognised that the publication of the findings of a Commission do not affect or create legal rights or obligations. In that case, of course, there were no terms of reference, rather there were statutory provisions which provided the Commissioner's mandate. At p 147, commencing at line E, the judgment of the Chief Justice reads:
The plaintiffs have made good three challenges to the reasoning in the report in relation to the question of the application of s 9 (l)(c) of the ICAC Act to the facts as found by the Commissioner. They are as follows:
1. The Commissioner, in reaching his conclusion that the conduct found by [*63] him could constitute reasonable grounds for dismissal, did not enunciate and apply objective standards to the facts of the case. Although the Commissioner recognised that the concept of dismissal of a Premier or a Minister is attended by sensitive constitutional implications and difficulties, he never identified any objective criteria for dismissal by reference to which his conclusion could be tested. He approached the question as though the matter was to be determined by his personal and subjective opinion. In this respect he exceeded his jurisdiction and failed to apply the correct test laid down by s 9.
2. The alternative ways in which the Commissioner (at p 74) formulated the test to be applied under s 9(1)(c) in the circumstances of the present case incorrectly stated the issue that arose for decision, and avoided the problem that was central to that issue.
3. Although the grounds upon which a Premier or Minister may, with legal and constitutional propriety, be dismissed by a Governor, acting with or without the advice of the Executive Council, are in many respects uncertain, history, precedent and analogy are of assistance in gaining an understanding of what they might [*64] include. Nothing is shown, either in the report or in the argument in this Court, which would justify the conclusion that such grounds would cover a case, such as the Commissioner found the present to be, where there was no criminal offence, where what was done was believed to be in all respects lawful and as to which it could not be concluded that it would be seen by a notional jury as contrary to known and recognised standards of honesty and integrity.
Those were the three successful challenges in that case and they led to the granting of declaratory relief. Earlier in this judgment I set out passages from p 148 of the judgment where quite obviously Gleeson CJ regarded the third point as being very dependent on the existence of the first and second points. Those two earlier points were misinterpretations of the Commissioner's mandate statute as set out in the statute and therefore by analogy, closely allied to the orthodox understanding of excess of jurisdiction by going outside the terms of reference.
In my judgment Mr Henry's approach attempts to stretch the established law far beyond the point it has presently reached. I see no basis for the view that Greiner and far less [*65] Ainsworth have opened the door to further developments which would see the current limitations which are both orthodox and well understood, removed.
Indeed it may be said the Winebox Inquiry demonstrates why, both as a matter of principle and policy, litigation about the Commissioner's conclusions should not be possible on an open-ended and unstructured basis. Some counsel opposing the plaintiff submitted, quite forcefully, that he was merely attempting in these proceedings to carry on his "crusade". That in reality he seeks to appeal the Commissioner's conclusions for no other reason than that they are contrary to the views he holds and as a consequence, adverse to his position in the wider public and political arena.
I do not regard it as any part of my function as the Judge charged with deciding whether or not this application to strike out should succeed, to reach a conclusion on those contentions. I consider it would be inappropriate for me to express any view in respect of them. But if the law were to become as open-ended as Mr Henry suggests then the opportunity for abuse of process by disaffected parties would be very real.
My conclusion in all the circumstances is that [*66] the defendant's application to strike out succeeds.
Judgment and costs
There will be judgment for the defendant and the plaintiff's action will be struck out.
The defendant is entitled to costs on this application and there may be issues of costs which I have reserved in respect of earlier applications in this litigation which should now be attended to. The defendant has leave to file a memorandum as to costs within 14 days and the plaintiff to reply within 14 days.
So far as the other parties who appeared are concerned I gave them leave to appear but the plaintiff did not sue them or seek to have them joined and therefore I do not consider that it would be just to award costs against the plaintiff for the benefit of those additional parties. They will therefore bear their own costs in this matter and in any earlier matters in which they were involved so far as this litigation is concerned.
The Winebox Inquiry was, of course, televised and very much in the public mind over the two and a half years that the Commission sat. There has also been a measure of interest in this application and the earlier application to move the case into the Court of Appeal.
It is important [*67] to appreciate that a Commission of Inquiry is not a Court. That the Commissioner makes no findings. He or she merely expresses opinions and makes recommendations to the Government which the Executive may pursue or ignore as it sees fit.
It is because of the limited nature of a Commission of Inquiry and the non-binding status of its conclusions that the opportunities to challenge the contents of any Report are so limited. They are confined, as the cases cited in this judgment show, to first striking down anything which is beyond what the Commissioner was authorised to investigate. Secondly, setting aside the Report if persons criticised were not given notice and an opportunity to defend themselves (the Erebus case). And thirdly, if it is established that the mind of the Commissioner was biased so that there was predetermination rather than a fair and impartial consideration of all points of view before any expression of opinion.
In this case the Honourable Winston Peters has not been able to show that the Commissioner went beyond an investigation of the matters he was asked to inquire into and specifically he has not claimed that he personally has been adversely affected as a result [*68] of any breaches of natural justice. That being the case his action inevitably would fail if it went to a full hearing. Rather than allow that to happen with all the attendant costs, inconvenience and pointless waste of Court and Judicial resources involved, I have said it must end now.
Counsel for the defendant and for other parties who supported the defendant submitted before me that in fact the defendant's conclusions on the law were right whereas Mr Henry, on behalf of the plaintiff, argued strenuously that the law had been misapplied and misunderstood. With great respect, the statement by the defendant in the third section of his Report dealing with recommendations as to amendment of the law, to the effect that the doctrine of form over substance allows parties to "document whatever falsities suit their tax avoidance purposes" was unfortunately worded and may well send the wrong message especially if taken out of context. But, of course, it is an expression of opinion which binds nobody. That it should have been a matter of concern to the plaintiff, as Deputy Prime Minister and Treasurer, is understandable. Nonetheless, taken in isolation or in combination with any of the other [*69] matters of which the plaintiff complains, no foundation has been established for making any of the declarations sought.
SOLICITORS: Solicitors for the plaintiff B P Henry (Auckland)
Solicitors for the defendant Meredith Connell (Auckland)
Reported by: Robbie Laven, Barrister