Commissioner's Access and Removal Powers Revisited
The High Court has again considered the extent to which it will be prepared to intervene in the exercise by the CIR of his access and seizure powers under the Tax Administration Act. These powers were considered extensively in both the High Court and Court of Appeal in the Avowal cases of 2009 and 2010. In 2011 the same Judge who dealt with Avowal in the High Court has recently scotched a taxpayer application for review of access powers in Tauber et al v CIR CIV 2011-404-002036, High Court Auckland 12 August 2011.
Venning J was asked to find against the CIR on the way he had conducted a coordinated “raid” on premises (both business and domestic) associated with taxpayers, whom the CIR considered were likely to have suppressed income, claimed false deductions, and/or to have been involved in other tax evasion or avoidance. The Judge found for the CIR on every argument that was advanced and it is worth summarizing those to show what latitude the Courts will allow the CIR in the conduct of such actions.
1. Warrants expressed too broadly – This was an argument over whether the warrants to access private dwellings and to removed documents were specific enough in identifying the IRD officers who were authorised to execute them. It was lost because the warrants followed the statutory form which provided for specific or general authority to delegates of the CIR. Either would suffice.
2. Warrants not subject to adequate conditions – The statutory form of access or removal warrant did not contemplate or provide for conditions as other forms do.
3. Less obtrusive methods should have been used first - This argument was advanced on the basis of the NZ Bill of Rights Act protection against unreasonable search and seizure. The Judge held (as had the Court in Avowal on much the same argument) that the reasonableness of access and removal of documents did not depend on or assume that the CIR had to work his way through a hierarchy of powers before exercising the access and removal power. He was free to make the decision to access premises and remove documents as long as that was then carried out reasonably. The Court’s role on review was not to second guess the decision to exercise the access and removal power which was available to the CIR. His conduct in the search could be considered but not the decision to search.
Moreover, the judicial officer issuing the relevant warrants could not inquire into whether the CIR should exercise his access powers. He was only concerned with deciding whether the CIR’s functions required access to a dwelling. This did not involve an inquiry into possible alternatives but only to be sure that the CIR had a proper basis for saying that he needed access to the dwelling to carry out his functions.
In other words the judicial protection of householders that is provided for by the need for the CIR to obtain access and removal warrants requires only that the CIR make out a case for his having to have access to a dwelling and to remove documents in order for his powers to be effective. Put this way the warrant protection goes only to whether the CIR needs access to a dwelling and not to whether he should be trying to exercise the access power in the first place. On one view it is protection against arbitrary or capricious access and not much more.
4. The searches were carried out unreasonably - Given the points already made, this was where the taxpayers had to make out their case that the NZ Bill of Rights Act had not been followed. There were a number of grounds on which it was said the IRD search was unreasonable but all were lost. Chiefly this is because there were reasonable explanations for the approach taken by the IRD in the action and the Court was not prepared to accept what seemed to it like the taxpayers “over-egging the pudding”.
The point is that such actions by the IRD will involve tension and potential conflict. It would impractical to expect everything to be plain sailing and the Court will intervene only when the CIR clearly behaves excessively. In this case it was not excessive for him to have had the number of staff involved that he did, or to have taken a long time about the search, or to have searched roof spaces or personal records, or to have allowed officers to take their lunch on the taxpayer’s property!
5. The application for the warrants was defective – The taxpayers argued that what went to the Judge who issued the warrants was misleading to a material degree and tainted the warrants themselves. These arguments were all dismissed, even though it is clear that the IRD affidavits submitted in support of the warrant application put things to the Judge in a way that may well have conveyed an uncomplimentary impression of the taxpayers concerned.
The Court seems to have regarded the statements with which the taxpayers took issue as matters of impression and degree. Where something incorrect was stated it was seen as an error in good faith. None of the statements was considered to be material and, given Venning J’s comments about the limited role of the judicial officer being asked to issue the warrants, that is not surprising.
The core issue for that officer would have been whether it was likely or not that information or documents necessary for the CIR to carry out his functions would be found at the taxpayers’ dwellings (or that of their accountant) and whether it would be necessary for documents to be removed for fuller inspection. Misstatements about the taxpayers themselves were really beside the point.
Tauber cements the Avowal approach to access, search and seizure by the IRD. The scope to review such actions will be very limited though it will always be important for taxpayers to test these matters in the right cases. The case is noteworthy for the warning the Court gives that there will be some cases in which it is simply impossible to resolve issues on review and those cases should not be advanced. The lessons to take from the case include:
(a) The CIR probably does not have to spend as much effort as he often does to meet the threshold for an access or removal warrant to be issued. The key focus will be on telling the officer from whom the warrant is sought, why it is necessary to access the taxpayer’s dwelling, ie the basis on which the CIR considers that documents and information are likely to be there, and why it should be removed for inspection.
(b) Likewise this should be the focus of any challenge to the propriety of the application for the warrant. It is likely that any other argument will be regarded as seeking to unseat the CIR’s decision to search.
(c) Arguments about whether a search has been reasonable in terms of the NZ Bill of Rights Act will be limited by the Court to the way the search has been conducted rather than the fact that the CIR has decided to undertake the search in the first place. That is because the law confers on the CIR the right to access premises and to remove documents. He is not required to exhaust other avenues of inquiry before access and removal will be reasonable. That focuses attention on the conduct of the search, not the decision to make it.