KEY POINTS:
The big banks have lost a Supreme Court case to try and limit discovery of documents in a tax case where $1.7 billion is disputed.
The Supreme Court backed up the Appeal Court in dismissing an appeal from Westpac, BNZ and ANZ National and awarded costs of $25,000 to the Commissioner of Inland Revenue.
The case involves transactions known as "repos", or structured finance deals, that Inland Revenue argues were devoid of commercial purpose other than to avoid tax.
Finance Minister Michael Cullen four years ago closed the loophole that he said was eroding the tax base to the tune of $360 million a year.
The commissioner contends some of the arrangements had "elements of sham".
The seven major banks involved deny this and have said they are confident they will win the case. Inland Revenue initially gave written approval to the transactions but later changed its tune.
The banks have set aside contingent liabilities in their accounts in case they lose. Four years ago ANZ, Westpac and BNZ have said they face potential back-tax bills totalling $348 million, $647m and $269m respectively, and the interest payments would have since grown substantially.
The issue that was appealed was about how the litigation should proceed. The banks wanted transactions to be considered individually and that the privacy and secrecy of individual taxpayers (banks) be preserved.
They argued Inland Revenue was engaging in "over-discovery" by seeking documents from a range of transactions.
The Supreme Court ruled if the identity of the other banks involved in the transactions was not before the court, the documents would have no use as evidence.
"In those circumstances, it is reasonably necessary that the identity of the other banks concerned should be before the court," the Supreme Court said.
It said if disclosure of identities became an issue, it should be decided by the trial judge. The High Court could be asked to address questions of protecting commercial confidentiality by reference to particular documents.
Earlier, the Court of Appeal said it was unusual to complain about over-discovery and the only foundation for such a claim could be found in the principles of abuse of process.
Like the Supreme Court, it said it was for a trial judge to give rulings on admissibility.
The Crown Law Office said it did not know when the substantive case would be heard.
- NZPA
