Peters v Davison
Court of Appeal Wellington
1998 NZLR LEXIS 70;  2 NZLR 164
23, 24 September, 17 November 1998
DECIDED-DATE: 17 November 1998
[*1] Judicial review Commissions of inquiry Error of law in body of report Error material to commission's findings Reputation of individuals at stake Whether reviewable.
The plaintiff had made a number of allegations against the Commissioner of Inland Revenue and the Director of the Serious Fraud Office which resulted in the establishment of a commission of inquiry. When the commission reported, the report was severely critical of the plaintiff for making allegations which he could not substantiate. Some of those allegations surrounded the treatment by the Inland Revenue Department and the Serious Fraud Office of transactions which the plaintiff alleged constituted illegal tax evasion. The commission of inquiry examined the transactions and came to the conclusion that they were within the law. This caused the commission to find that the IRD and SFO were not corrupt or incompetent in their consideration of the transactions. The plaintiff sought judicial review of the commission report for error of law. The respondent successfully applied for the application to be struck out and the plaintiff appealed to the Court of Appeal against the striking out.
1 Where a commission [*2] of inquiry made an error of law which materially affected a matter of substance relating to a finding on one of the terms of reference, it was in general reviewable. The reason for exercising the power of review was the stronger if that error damaged the reputation of any person directly concerned in the inquiry (see page 193 line 25, page 199 line 29, page 210 line 11).
Re Royal Commission on Thomas Case  1 NZLR 252 (CA), Re Erebus Royal Commission  NZLR 662;  AC 808 (PC) and Campbell v Mason Committee  2 NZLR 577 discussed.
Greiner v Independent Commission Against Corruption (1992) 28 NSWLR 125 (CA) and Ainsworth v Criminal Justice Commission(1992) 175 CLR 564; 106 ALR 11 at pp 577/18 - 19 referred to.
Gouriet v Union of Post Office Workers  AC 435;  3 All ER 70 distinguished.
2 The commission had arguably erred in law in two central respects. The correct assessment of the law was crucial to the consideration of the terms of reference. It could not be said that the pleading disclosed no cause of action (see , page 195 line 18, page 203 line 15).
Error of law is a ground of review in and of itself; it is not necessary to show that the error caused the tribunal or Court to go outside its jurisdiction. The distinction between jurisdictional and non-jurisdictional error of law is in general redundant (see page 183 line 42).
Anisminic Ltd v Foreign Compensation Commission  2 AC 147;  1 All ER 208, O'Reilly v Mackman  2 AC 237;  3 All ER 1124 at pp 278/1129 and R v Lord President of the Privy Council, ex parte Page  AC 682;  1 All ER 97 at pp 701/107 referred to.
This was an appeal from the order of the High Court reported at  NZAR 309 striking out an application for judicial review of the findings of a commission of inquiry.
Brian Henry and Rachael Downs-Honey for the appellant.
Julian Miles [*6] QC and Ailsa Duffy QC for the respondent.
Alan Galbraith QC , Annabelle Dixon and Mark Dowland for the Bank of New Zealand Ltd.
Rhys Harrison QC and Mark Gavin for Fay Richwhite & Co Ltd.
Christopher Allan and Oliver Meech for the European Pacific Corporation Ltd.
Ian Gault for Brierley Investments Ltd.
Gus Andree Wiltens for the Serious Fraud Office.
Grant Pearson and Angela Satterthwaite for the Inland Revenue Department.
JUDGMENT-READ: Cur adv vult
JUDGES: Richardson P, Henry, Thomas, Keith and Tipping JJ
JUDGMENT BY: JUDGMENT OF RICHARDSON P, HENRY AND KEITH JJ.THOMAS J.TIPPING J.
JUDGMENTS: Table of contents
[For table see original]
This appeal is against the striking out by Smellie J of proceedings brought in the High Court at Auckland by the Rt Hon Winston Peters (Mr Peters) seeking to challenge parts of the "Report of the Commission of Inquiry into Certain Matters Relating to Taxation" presided over by the Rt Hon Sir Ronald Davison, formerly Chief Justice of New Zealand ((1997) AJHR H3).
The appeal is allowed. The consequence is that the proceedings are now restored and may proceed to trial in the High Court.
An alleged error of law made [*7] by a commission of inquiry in its report which materially affects a matter of substance relating to a finding on one of the terms of reference is in general reviewable by Court proceedings. The reason for exercising that power of review is the stronger if that error damages the reputation of any person directly concerned in the inquiry.
The basis for allowing the appeal is that certain alleged errors of law in the part of the report in which the commission stated its conclusions are arguable, and, if established, sufficiently material, going to the substance of a significant part of the report, to warrant a declaration. That conclusion is reinforced by the fact that the resulting answers to the competency issues in respect of both the Inland Revenue Department and the Serious Fraud Office were in turn directly related to, and helped form the basis of, the stringent criticisms levelled against Mr Peters with the consequential effect on his reputation.
The arguable errors of law relate to the construction of the Magnum transaction and the obligation of disclosure under s 301 of the Income Tax Act 1976.
Some of the criticisms of Mr Peters were directed to other serious allegations made [*8] by him and appear to be unaffected by the alleged errors of law discussed in the judgment.
The commission of inquiry was constituted pursuant to the Commissions of Inquiry Act 1908. The recitals to the Order in Council of 12 September 1994 state the background:
(a) It has been alleged that the Commissioner of Inland Revenue and his staff and the Director of the Serious Fraud Office and his staff have not, in the course of their official duties, acted in a lawful, proper and competent manner, in relation to certain transactions; and
(b) Questions have arisen about the adequacy of the laws of New Zealand in relation to certain transactions:
And whereas the question whether the allegations or any of them is true and the question whether those laws are adequate are both matters of public importance:
. . .."
The Order in Council then requires the commission "to inquire into and report upon":
(a) "Whether the Commissioner of Inland Revenue and his staff and the Director of the Serious Fraud Office and his staff acted, in the course of their official duties, in a lawful, proper and competent manner in dealing with the transactions referred [*9] to in thepapers presented, by leave, to the House of Representatives by the Member for Tauranga, The Honourable Winston Peters, on 16 March 1994 (A6, Volumes 1 to 3): " (Emphasis added.)
(b) "Whether, having regard to the kinds of transactions referred to in the papers so presented, any changes to the criminal law or the tax law should, in your opinion, be made for the purpose of protecting New Zealand's income tax base from the effects of fraud, evasion, and avoidance, and, if so, what: . . .."
The Order in Council also directs that, if the commission obtains evidence or information that in its opinion should be placed before the appropriate authorities for consideration of prosecution or enforcement action, that evidence or information shall be referred to the appropriate authorities and not included in the report.
The inquiry has become known as the Winebox Inquiry because the papers referred to in para (a) were presented to the House of Representatives in a winebox.
The original warrant of appointment required the commission to report its "findings and opinions on the matters" and any recommendations to the Governor-General by 31 March 1995. That proved [*10] too short a time for what became a complex and difficult investigation. No fewer than five successive extensions were granted before the report was presented to the Governor-General on 14 August 1997.
On 26 September 1997, Mr Peters brought the present proceedings. He applied to have the proceedings removed into this Court. Sir Ronald Davison applied to have them struck out. On 21 November 1997, Smellie J refused the removal application pending hearing of the striking-out application, which he ruled was an argument of substance ((1997) 12 PRNZ 11). The striking-out application was heard over three days in March 1998 and was granted in the judgment delivered on 23 March 1998 ( NZAR 309).
The amended statement of claim is largely directed to the Magnum transaction, one of the 60 transactions described in the Winebox papers and one which received particular attention in the report. In Brannigan v Sir Ronald Davison  1 NZLR 140, one of the challenges to the conduct of this inquiry, it was described by Lord Nicholls of Birkenhead in this way at p 143:
''This involved the payment of withholding tax (in very round figures, $2m) by European Pacific to the Cook Islands Government [*11] 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 ($1.95m). All these dealings were part of a single, prearranged scheme. Their economic effect was to pay back almost all the tax paid.
The withholding tax certificate was then presented to the New Zealand tax authorities by a company in the European Pacific group, and used to reduce the amount of New Zealand tax otherwise payable. The amount of the reduction corresponded to the amount of tax shown as paid on the certificate. Thus European Pacific was better off by $1.95m, the Cook Islands Government was better off by $50,000, and the New Zealand Government was worse off by $2m."
In terms of relevant Cook Islands legislation the New Zealand European Pacific company as debenture holder was deemed to have received from the associated European Pacific company the amount of the agreed interest plus the Cook Islands tax on that interest and the income tax was paid by the associated company "as income tax on behalf of [*12] the debenture holder".
The additional feature is that when claiming those tax credits the European Pacific company did not disclose the promissory note arrangements to the Inland Revenue Department and by the time they became known to the department the particular European Pacific company had been struck off the company register in New Zealand and there was no successor company which the Inland Revenue Department could look to.
The amended statement of claim
The amended statement of claim traverses the report at some length. It does not identify the source of the jurisdiction invoked to challenge aspects of the report, and does not in so many words identify particular paragraphs allegedly containing errors of law. In essence, however, it avers that the commission committed material errors of law in relation to two crucial aspects central to the discharge of the reporting function under the terms of reference and to the commission's findings and opinions in that regard. The first was material error in construing and determining the legal effect of the Magnum transaction by the incorrect approach the commission took to the "form over substance" doctrine. The second was material [*13] error in determining the scope and effect of the disclosure obligations on the European Pacific company under the Income Tax Act 1976, s 301 and the "obtaining by fraud" provisions of the Crimes Act 1961 when seeking a tax credit from the Commissioner of Inland Revenue for the amounts shown in the Cook Islandstax receipts. Less explicitly identified was a contention that the commission misconstrued s 293 of the Income Tax Act when concluding that the tax credit certificates must be regarded as valid receipts for tax paid entitled to credit under that section.
Paragraphs 28, 29, 31, 32(i), (ii), (iii), (v), (vi), (vii), (x) and (xi), 33, 34, 35 and 36 read:
"28. That on a proper application of the 'form over substance doctrine' the Defendant would be required to determine the true legal nature of the transaction including if the transaction constituted one composite agreement or a series of independent agreements.
29. That the transaction was properly one composite agreement as each of the inter-group company arrangements was wholly interdependent as distinct from being independent.
. . .
31. The Defendant incorrectly applied the 'form over substance doctrine' to [*14] the transaction in that either:
(i) The transaction involved tax avoidance or tax evasion or fraud or
(ii) The Income Tax Act 1976 should have been applied to the transaction on the legal form of it being one composite agreement.
32. That the Defendant erred in fact and law when 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 Harcourt as separate legal entities.
(iii) That the tax credit certificates must be regarded as valid receipts for tax paid.
. . .
(v) That EPFML was not required to disclose to the IRD the payment to Harcourt.
(vi) That EPFML was not required to disclose that it was a party to a tax avoidance scheme under section 301 of the Income Tax Act 1976.
(vii) That there was no fraud disclosed in the transactions.
. . .
(x) That there was no tax evasion disclosed in the transactions.
(xi) That the transaction was not fraudulent under section 227 of the Crimes Act or section 229A of the Crimes Act.
33. That the Defendant in preparation of his Report put special reliance on the Magnum [*15] transaction to discredit the Plaintiff and as a complete answer to allegations of [incompetence] on the part of the IRD and SFO.
34. That in terms of the foregoing he failed to carry out his Terms of Reference as set out in paragraph 3 hereof.
35. That by virtue of the Defendant's erroneous conclusion that the Magnum transaction did not constitute fraud, or tax evasion, the Defendant criticised the Plaintiff and curtailed any future enquiry into his Terms of Reference. . . .
36. That by virtue of the Defendant's erroneous conclusion as to the legal consequences of the Magnum transaction the Defendant acted in excess of his jurisdiction and failed to carry out his Terms of Reference.''
Immediately following para 36 the amended statement of claim seeks relief as follows:
"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 Wine-Box Inquiry, Commission of Inquiry into Certain Matters Relating to Taxation' that the Wine-Box transaction called the Magnum transaction therein does not involve fraud and/or tax evasion was made without [*16] 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 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 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 section 301 of the Income Tax Act 1976 to disclose:
(i) The repayment of the withholding tax to Harcourt;
(ii) The full terms of the Magnum transaction;
(iii) The fact that the directors of EPFML accepted the agreement that incurred [*17] 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 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.
5. Such further or other orders as this Honourable Court deems just."
Mr Peters' standing to bring the proceedings was not in issue in the High Court. As well as the immediate parties, Smellie J joined as parties four corporates whose Magnum transaction had been in issue (European Pacific, Bank of New Zealand Ltd, Brierley Investments Ltd and Fay Richwhite & Co Ltd) together with the officials named in para (a) of the terms of reference, namely the Commissioner of Inland Revenue and the Director of the Serious Fraud Office. They all [*18] supported the striking-out application and presented separate arguments.
The judgment of Smellie J
The question for decision was whether the case as pleaded was so clearly untenable that Mr Peters could not possibly succeed. The Judge considered and rejected in turn the availability of any declaratory relief, either under the Declaratory Judgments Act 1908 or at common law or by way of judicial review under the Judicature Amendment Act 1972. Mr Henry, for Mr Peters, advised us that for the purposes of the striking-out application he no longer relies on the Declaratory Judgments Act.
It was common ground that the High Court had jurisdiction to make common law declarations of right. The argument against jurisdiction was that the pleadings did not raise justiciable issues between the parties. Referring to Gouriet v Union of Post Office Workers  AC 435 and Gazley v Attorney-General (1995) 8 PRNZ 313, the Judge held that the remedy will not be granted in the absence of a dispute affecting the legal rights or liabilities of the parties to the action and that that essential ingredient was missing here.
The argument for Sir Ronald Davison before Smellie J, supported by counsel [*19] for the joined parties, was that the available grounds for judicial review in respect of commissions of inquiry are confined to excess of jurisdiction and breach of natural justice - and breach of natural justice was not pleaded. Excess of jurisdiction, it was submitted, is confined to going beyond the terms of reference either in fact or as a result of misconstruing them, and any other erroneous understanding of the law contained in the body of the report could not lead to a finding of excess of jurisdiction.
Mr Henry, for Mr Peters, relying particularly on Greiner v Independent Commission Against Corruption (1992) 28 NSWLR 125 and a passage in the judgment of the Full Court in Re Royal Commission on Thomas Case  1 NZLR 602, submitted that a commission is amenable to review where errors of law have prevented it from correctly carrying out its appointed task.
The issue for his decision, as Smellie J saw it, was whether amenability to review for excess of jurisdiction is limited to situations where the commission exceeded its powers by going outside the proper scope of its inquiry, or whether errors of law impacting on the decision-making process could be said to lead [*20] to an excess of jurisdiction and thus to a failure to comply with the terms of reference. He reviewed the New Zealand authorities on the application of administrative law principles to commissions of inquiry. It is sufficient in that regard to repeat the passages he cited from two judgments of this Court.
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 pp 115 - 116 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 East Iron Works Ltd [*21]  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."
In Re Erebus Royal Commission (No 2)  1 NZLR 618 in their joint judgment Cooke, Richardson and Somers JJ said at p 653:
''This is not an appeal. Parties to hearings by Commissions of Inquiry have no right of appeal against the reports. The reason is partly that the reports are, in a sense, inevitably inconclusive. Findings made by the 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 [*22] 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 to comply with any applicable rules of natural justice."
Smellie J rejected the argument for the plaintiff, Mr Peters. He concluded it was not supported by the authorities Mr Henry had relied on. In Thomas, he said, at p 334:
''. . . the error complained 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'."
The Judge went on to distinguish Greiner by characterising the two primary errors in the reasoning [*23] in the report of the commission in that case relating to the application of s 9(1)(c) of the Independent Commission Against Corruption Act 1988 as "misinterpretations of the Commissioner's mandate 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 this case, the Judge said, Mr Peters had not been able to show that the commission went beyond an investigation of the matters he was asked to inquire into and he had not claimed that he personally had been adversely affected as a result of any breaches of natural justice. That being the case Mr Peters' action inevitably would fail if it went to a full hearing and so must end now.
In order to understand and do justice to Mr Henry's argument that judicial review is available in the present case, it is necessary to consider in more detail the commission's approach to the terms of reference in relation to the Magnum transaction.
The report is in three sections. Part One of Section One contains general information relating to the commission. Part Two describes events leading up to the establishment of the commission [*24] of inquiry. Part Three discusses the commission's terms of reference. Part Four discusses the scope of the inquiry. Part Five narrates the course of the inquiry and the commission's proceedings. Part Six covers the history of the Winebox documents. Part Seven is directed to the nature of the Winebox documents and Part Eight the classification of the documents. Part Nine then discusses the origins, structures and operations of the European Pacific group of companies. Part Ten discusses the nature of tax havens and the Cook Islands as a tax haven. Part Eleven is concerned with the political background and economic changes of the early 1980s. And Part Twelve deals at length with the Inland Revenue Department and the Serious Fraud Office dealings with the Winebox documents.
Section Two is in seven parts. Part One is headed ''The Identification and Explanation of the Classes of Transactions upon which the Commission Focused". Four transactions are discussed in some detail. By far the most space, 26 pages, is occupied with a discussion of the nature of the Magnum transaction. Part Two is a discussion of evasion, avoidance and minimisation. Part Three (66 pages), headed "The Relevance [*25] of WP's Allegations to this Inquiry" ends with "the Commission's conclusions'' on those allegations. The next three parts are concerned with the Serious Fraud Office and the Inland Revenue Department. Part Four with the relationship between the two offices. Part Five with the manner in which transactions were dealt with by the Inland Revenue Department, and Part Six with the manner in which transactions were dealt with by the Serious Fraud Office. Part Seven, the final part, states in ten pages ''The Commission's Decisions''. It draws on the conclusions stated in Part Three.
Section Three, which is headed ''Consideration of the Need for Law Changes'' deals with para (b) of the terms of reference.
It will be apparent that because of the layout of the report the commission discussed aspects of the Magnum transaction and matters bearing on its findings at many stages in the report.
At the preliminary meeting, the commission set out its interpretation of the terms of reference:
''The primary focus of the Inquiry as spelt out in paragraph (a) of the Terms of Reference is upon the manner in which the Commissioner of Inland Revenue and his staff and the Director of the Serious Fraud Office [*26] and his staff carried out their official duties in dealing with the transactions referred to in the so-called 'wine-box papers'.
I am required to investigate whether they acted 'in a lawful, proper and competent manner'.
I propose first to have the Commissioner and such other witnesses as he may call detail to me inter alia:
What transactions he investigated?
The manner in which and by whom such were investigated?
What facts relating to each transaction were learned?
What conclusions as to tax liability were arrived at?
I then intend to have the Director of the Serious Fraud Office and such other witnesses he may call to detail to me:
What transactions he investigated?
The manner in which and by whom they were investigated?
What facts relating to each transaction were learned?
Why no action was taken in respect of any transactions investigated?
In relation to the Commissioner of Inland Revenue, the evidence given on the matters I have referred to will of itself be unlikely to be sufficient to enable me to determine whether the duties were carried out in 'a proper or competent manner'. In order to reach conclusions I will need to know whether the Commissioner received all the information [*27] relating to each transaction which he was entitled to receive and whether the true nature of each transaction was revealed to him. It is only then that I can decide whether the Commissioner's investigations were adequate or whether, if more searching investigations had been carried out, a different version of the facts from those found by the Commissioner might have resulted and different conclusions arrived at. The same will apply in the case of the Serious Fraud Office.
The probabilities are that should I decide in relation to the Commissioner of Inland Revenue and the Director of the Serious Fraud Office that further inquiries are needed then nothing less than detailed investigations by the Commission into the transactions referred to in the wine-box documents will enable me to deal adequately with Item (a) of the Terms of Reference in relation to both the Commissioner of Inland Revenue or the Director of the Serious Fraud Office" (1.3.7).
Towards the end of the inquiry the commission issued a guide to assist counsel with the preparation of addresses. It included at 1.4.3:
"It is not necessary for the Commission to reach conclusions on 'transaction issues' for example, whether [*28] a transaction amounts to legitimate tax planning, avoidance or evasion or whether a transaction amounts to fraud or not or whether the CIR (Commissioner of Inland Revenue) should have applied s 99 or whether the SFO should have laid charges of fraud.
The decisions upon such matters lie with the persons designated by statute to make them. The Commission has no power under its Terms of Reference to make such decisions.
The Commission's considerations are restricted to deciding:
(a) whether or not the IRD/SFO acted lawfully and properly in their dealings with the transactions;
(b) whether there were aspects of the transactions which the IRD/SFO as competent bodies should have considered and dealt with and if so, whether their consideration and handling of them was in fact competent.''
In the report itself the commission added at 1.4.3 that the scope of the commission's inquiry had been confined within these principles and that it would not be reporting on whether offences had been committed and whether any tax avoidance had taken place (1.4.5). However, it must be said that, contrary to those indications, the commission made findings of no avoidance, no evasion and no fraud in [*29] relation to the Magnum transaction (for example, at 2.1.66, 2.3.62 and 2.7.8).
Part Twelve of Section One recounted the Inland Revenue Department investigation. Earlier in Part Two, dealing with events leading up to the establishment of the commission, the report recorded that, reporting to the Minister of Revenue on 30 March 1994, the Commissioner of Inland Revenue stated:
''Looking now at the papers as a whole, it is clear that they relate to schemes designed in the late 1980s which are aimed at avoiding taxation imposed by New Zealand and other countries by using the Cook Islands as a tax haven. They do not constitute evidence of tax evasion but they do show blatant tax avoidance and cast little credit on the business ethics of the designers'' (1.2.23).
Referring to Magnum, the commission recorded at 1.12.26 and 1.12.27 that the Inland Revenue Department described the deal as comprising a complex mix of redeemable preference share finance, credits for tax paid in the Cook Islands and offsetting benefits being made available to a Cook Islands party associated to a New Zealand incorporated company. The European Pacific New Zealand Ltd group closed its operations in New Zealand and [*30] European Pacific Fund Management Ltd was struck off in 1990 by the Registrar of Companies after the Inland Revenue Department, carrying out standard checks, had advised that there were no outstanding returns or arrears of tax. When the matter was reviewed after the full details of Magnum became known to the department, it was decided no further steps could be taken. Section 99 would have been used to disallow the tax credits claimed by European Pacific Fund Management Ltd to the extent that offsetting benefits had been received within another part of the wider European Pacific International group, but an amended assessment of a non-existent entity has no force at law and there was no successor company to which s 276 could be applied (1.12.26). The Inland Revenue Department project team also concluded that there was no evidence of tax evasion.
In the "Update" at 1.12.126 Mr Nash, the senior department officer concerned who had referred earlier to differing expert views on the Magnum transaction, recorded that no new evidence had emerged to change the view that he formed in March 1994 that theCook Islands tax credits claims made by European Pacific Fund Management Ltd amounted to [*31] tax avoidance and not tax evasion.
The commission discussed the nature of the Magnum transaction in Part One of Section Two. At 2.1.40 to 2.1.41 he described the basic transaction. Then, after citing at length from another report prepared by an Australian Queen's Counsel for the Cook Islands Government detailing the arrangements, the commission's report continued at 2.1.49 and 2.1.50:
''It is not necessary to discuss here all of the steps involved in the transaction. It did, however, contain within it a device involving payment of so-called tax to the Cook Islands Government and repayment of sums equivalent to that tax to a company within the EPI group.
The wine-box 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 [*32] for that tax.
4. By means of companies in the EPI group entering into transactions, 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 IRD.
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 IRD the sums which had accrued to Harcourts by means of those promissory note transactions, and which effectively amounted to payment of the amount of the tax less a fee of $50,000.''
The commission then cited [*33] ss 293 and 301, and as they are important to Mr Henry's argument, they should be set out at this point.
293. Credits in respect of tax paid in a country or territory outside New Zealand
(1) For the purposes of this section -
"Income tax" means,
(a) In respect of any country or territory outside New Zealand, any tax (whether imposed by a central, state, or local government) which, in the opinion of the Commissioner, is substantially of the same nature as income tax imposed under Part IV of this Act or as a non-resident withholding tax imposed under Part IX of this Act; . . .
(2) Subject to this section, where a person who is resident in New Zealand derives income from a country or territory outside New Zealand, income tax paid in that country or territory in respect of that income shall be allowed as a credit against income tax payable in New Zealand in respect of that income: . . .
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 [*34] 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 of the foreign tax) necessary for determining the amount of the credit.
The report continues at 2.1.51:
"There are two requirements of those sections 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 repayment of the foreign tax'."
Mr Henry submits that the commission's interpretation of those provisions is inadequate and ultimately in the result erroneous, a point to which we shall return.
The commission was aware that opinions had been expressed that the Magnum transaction evidenced fraud [*35] and at 2.1.52 noted that:
''If the Commission was to be able to be fully informed of the nature of the Magnum transaction, as it had to be before it went on to decide whether the IRD and SFO dealt with in it a 'lawful, proper and competent manner', it was essential that it should inquire into the transaction itself.''
The commission accordingly inquired of European Pacific and its officers, its three major shareholders (Brierley Investments Ltd, Bank of New Zealand and Fay Richwhite Ltd) and the Cook Islands Government. Four opinions submitted supported what the commission termed its own view that the withholding payments in the Cook Islands were a tax, that European Pacific Fund Management Ltd had used a valid tax certificate and that it was not under any obligation to disclose under s 301 that the tax had been repaid to another European Pacific company, Harcourt. Referring to s 301, the commission said at 2.1.65:
"The 'relief or repayment' required to be disclosed was limited to such as 'the taxpayer' was entitled to. There was no obligation to disclose a repayment which had not been made to EPFML. The company, Harcourt, to which the repayment was made was a separate legal entity [*36] from EPFML. There are those who argue that EPFML should have disclosed the repayment, even if it was to another company. Such a construction of the section, however, is not possible. A prosecution against EPFML for not making disclosure would be met with a reply that it had strictly complied with the law, and as such would appear to be unanswerable.
There was clearly a loophole in the section which the designers of the Magnum transaction had exploited to their advantage."
Under the heading "Conclusion" the commission continued at 2.1.65 - 2.1.66:
"1. For the reasons which have been earlier discussed the tax credit certificates must be regarded as valid receipts for tax.
2. EPFML under the section as then enacted was not obliged to disclose the repayment of tax to Harcourt.
The Magnum transaction was a 'smart' transaction designed to take advantage of loopholes in income tax law. It did not exhibit any elements of illegality or fraud nor could it be claimed that it resulted in any evasion of tax. The proper returns of income were made and the IRD assessed tax upon that income.
There are some who have suggested that EPFML was guilty of tax avoidance. However, such could not [*37] be the case when it had disclosed and returned all of the income received. The payment of the tax on that income was made by a tax credit. It has not avoided any tax at all."
Mr Henry submits that those findings contain or incorporate material errors of law.
Part Two of Section Two is an extensive discussion of evasion, avoidance and minimisation, which refers to cases, articles in legal periodicals and opinions of witnesses before the commission. Two matters only require mention. The first is the commission's explanation of the dictum of Lord Templeman in Challenge Corporation Ltd v Commissioner of Inland Revenue  2 NZLR 513 at p 561 that:
"Evasion occurs when the Commissioner is not informed of all the facts relevant to an assessment of tax."
The commission noted that there are no common law offences in New Zealand, that evasion is a statutory offence under s 416 of the 1976 Act and at 2.2.16 that:
"What offences in the Tax Act may amount to evasion? In relation to non-disclosure of information to the Commissioner there must be a statutory provision requiring disclosure to have been breached. Such statutory provisions are to be found in various sections of our Act [*38] relating to the filing of returns of income and in sections requiring a taxpayer to give true information on request to an IRD officer. But unless there is a breach of such a statutory provision, there can be no 'evasion' because to amount to evasion there must be a breach of a statutory duty imposed on the taxpayer. He cannot be accused of a criminal matter of failure to disclose information where there is no statutory obligation to do so. There is in our Act no general duty of disclosure such as is suggested by Lord Templeman as a test for evasion. His words must, I believe, be interpreted in the New Zealand context by adding to the passage the words 'Where there is a statutory duty to do so.' The passage would then read 'Evasion occurs where the Commissioner is not informed of all the facts relevant to an assessment of tax' where there is a statutory duty to do so. Such would be, I believe, consistent with the proper test for evasion in this country."
The second is that at 2.2.23 in discussing shams the commission cited from the judgment of Richardson J in Mills v Dowdall  NZLR 154 at p 159 (as it did later in discussing form and substance 3.1.56 to 3.1.57):
''The [*39] parties are free to choose whatever lawful arrangements will suit their purposes. The true nature of their transaction can only be ascertained by careful consideration of the legal arrangements actually entered into and carried out. Not on an assessment of the broad substance of the transaction measured by the results intended and achieved; or of the overall economic consequences to the parties; or of the legal consequences which would follow from an alternative course which they could have adopted had they chosen to do so. The forms adopted cannot be dismissed as mere machinery for effecting the purposes of the parties. It is the legal character of the transaction that is actually entered into and the legal steps which are followed which are decisive. That requires consideration of the whole of the contractual arrangements and if the transaction is embodied in a series of inter-related agreements they must be considered together and one may be read to explain the others. In characterising the transaction regard is had to surrounding circumstances; not to deny or contradict the written agreement but in order to understand the setting in which it was made and to construe it against [*40] that factual background having regard to the genesis and objectively the aim of the transaction. . . . A document may be brushed aside if and to the extent that it is a sham in two situations.
(a) where the document does not reflect the true agreement between the parties in which case the cloak is removed and recognition given to their common intentions (as happened in Marac Finance Ltd v Virtue ); and
(b) where the document was bona fide in inception but the parties have departed from their initial agreement while leaving the original documentation to stand unaltered."
Mr Henry's submission is that the commission erred in its application of "evasion" to the Income Tax Act disclosure obligation, and that in determining the nature of the Magnum transaction it failed to apply Mills v Dowdall and also Lord Nicholls of Birkenhead's analysis of Magnum noted at the beginning of the judgment.
Part Three of Section Two discusses Mr Peters' allegations to the inquiry and his counsel's submissions. As to the Magnum transaction, the commission concludes at 2.3.62:
"The Magnum transaction has been discussed in detail in Part Two of this section. There the Commission concluded: [*41]
* That the tax credit certificates must be regarded as valid receipts for tax paid.
* That EPFML was not obliged to disclose to the IRD the repayments of tax to Harcourt.
In view of those conclusions, the outcome must be that there was no fraud in the way that the tax credits were presented to IRD and credits of tax obtained.
The Magnum transaction was therefore not fraudulent either under s 257 of the Crimes Act or s 229A of the Crimes Act.''
Part Five of Section Two is directed to the manner in which transactions were dealt with by the Inland Revenue Department. As to Magnum, it repeats at 2.5.4 the earlier finding that the transaction:
". . . did not exhibit any elements of illegality or fraud nor could it be claimed that it resulted in any evasion of tax.''
It goes on to refer to counsel for the Inland Revenue Department's survey referring to various examinations of the Magnum transaction concluding at 2.5.5:
"The steps described above have been examined exhaustively by this Inquiry, and the evidence that IRD's processes and conclusion were competent is overwhelming. The evidence before this Commission simply does not support the view that the Magnum transaction [*42] was illegal, and that became patently clear when Mr McKay gave his evidence to that effect.
After an exhaustive attempt to show that the Magnum transaction was fraudulent, this Commission has in fact substantiated the mainstream view, that the transaction was neither fraudulent, nor implemented fraudulently.''
The seventh and final part of Section Two is the most important part of the report. As its heading indicates, it sets out "The Commission's Decisions". It begins and ends with the allegations made by Mr Peters. Throughout its ten pages it is highly critical of Mr Peters and Mr Henry. The criticism largely occurs in a context which suggests that the inquiry was into Mr Peters' allegations and that it was for him to make them out.
It begins by describing Mr Peters' ''campaign'' in Parliament designed to expose criminal conduct in financial transactions on the part of certain major corporates and associated misconduct and incompetence on the part of the Commissioner of Inland Revenue and the Director of the Serious Fraud Office in not detecting those activities (2.7.1).
The report then records the reference of the allegations to a parliamentary select committee and the subsequent [*43] setting up of the commission. It might have been expected, the commission said, that Mr Peters would have then been eager to present his evidence in support of the allegations. But that was not his intention, nor was it within his ability; rather it was for the commission to make its own inquiries.
At 2.7.2 and 2.7.3 the commission then lists six frustrations which had stood in its way in understanding and examining the 60 transactions evidenced by the documents. Some were caused by legal challenges and lack of cooperation by the corporates whose transactions were being investigated. "Perhaps the greatest frustration of all" was the commission's inability to tie down Mr Peters and his counsel to identifying clearly the evidence of the frauds alleged, notwithstanding Mr Henry being put on notice about that on a number of occasions.
The report next records opportunities given to Mr Peters and his counsel to provide the basis for his allegations and to be heard on various important matters. The commission then summarises the final public stage of the inquiry when, having read all the relevant submissions and having still not been able to determine if there was any basis in fact or [*44] in law for Mr Peters' many allegations, "the Commission decided before hearing any counsel that it would put [Mr Peters'] case to the test by questioning Mr Henry on his submissions" (2.7.5). Much of that questioning is set out in an earlier part of the report. The commission at 2.3.38 said this in addressing Mr Henry:
". . . it is necessary for the Commission to have much more before it than mere allegations, innuendos, and generalisations. The time in my view for shadow boxing is past. It is time we now dealt with the realities and the specifics of the various transactions. Now, Mr Peters himself hasn't given them, apparently relying on you to do so.
And perhaps who better than you to do so, because you were one of Mr Peters' advisers at the time when he made his speeches in the House.
You have been put on notice several times during the Inquiry that you would be required to point to evidence, justifying Mr Peters' allegations.
Well, now is the time for action in that regard."
On the day following that questioning other counsel were given the opportunity to respond to Mr Henry's submissions. They did that in the strongest condemnatory terms. And, the commission continued:
''The [*45] Commission then considered all the submissions, but focused primarily on those of Mr Brian Henry, and reached its decision upon them on the basis of whether in fact or in law they produced any evidence of tax evasion or fraud which should have been identified and acted on by the IRD/SFO.''
At this point (2.7.6), a little over halfway through this critical part of the report, this passage appears with its significant heading, ''The Decisions'':
"Throughout its Inquiry the Commission was most conscious of the impact its decision might have on W.P. if it decided either that any of his allegations were untrue or that there was no evidence to support them.
It was also conscious of the fact that WP's allegations against the IRD, the SFO and the corporates and individuals named having been made under circumstances of absolute privilege, they would have no redress against him or opportunity to prove these allegations false except through the decision of this Commission.
In those circumstances it went to great lengths to probe the issues, particularly the allegations of fraud which WP had scattered so widely in the course of his speeches.
It also went to great lengths to enable WP, if he [*46] could, to substantiate his allegations to the extent of providing some basis in fact or in law for having made them."
The commission added that the questioning of Mr Brian Henry was "like chasing a will-o'-the-wisp, in that no proper foundation for or evidence in support of any of WP's allegations could be identified"; and concluded:
"The Commission in the result therefore was left in no doubt whatsoever that there was no evidence given before it which could justify the allegations which WP had made and no evidence of fraud or tax evasion which should have required the IRD/SFO to have acted upon it.''
Next, under the heading "WP's Allegations", the commission recalls the passage headed "Commission's Conclusions on WP 's Allegations" and briefly restates them, concluding at 2.7.8:
"In making his allegations of fraud WP grossly overplayed his hand and elevated the four types of transactions which he specifically identified to a level of fraudulent conduct which in fact none has been proved to have possessed. There is simply no evidence at all of the existence of such fraud as he alleged in any of the wine-box transactions."
Over the following two pages the report sets out the [*47] commission's findings in relation to the Inland Revenue Department and the Serious Fraud Office under the headings of lawfulness, impropriety and (in)competence. No evidence of unlawfulness, impropriety or incompetence was detected. Under the Inland Revenue Department competence heading the commission referred specifically to the four transactions Mr Peters focused on.
Having reached those critical conclusions on the first, major term of reference the commission added a passage headed "The Position of the Corporates and Individuals". The final paragraph of 2.7.10 immediately before the signature of the commission reads:
''The Commission has clearly established that the Magnum and the JIF transactions have not been proved to amount to fraud. The consequences are that the allegations made against the corporates and individuals claiming that they were guilty of conspiracy to commit such frauds were false and completely unjustified. Whilst it is not possible for such corporates and individuals to take action to challenge WP's allegations, as they were made under circumstances of absolute privilege, the findings of this Commission may go some way to remedying the injustices done to them." [*48]
Finally, and relatively briefly, Section Three of the report considers the need for law changes in terms of para (b) of the terms of reference. The only passage that needs mention is at 3.1.55 where the commission states:
"The fundamental defect in the 'form over substance' doctrine is that the IRD 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 them."
Mr Henry's submission is that this misstates the correct approach in New Zealand law to the analysis of the legal effect of transactions and must be taken to reflect and explain the commission's earlier erroneous analysis of the Magnum transaction.
Striking out proceedings principles
The general principles governing striking out are well settled. First, as to the legal test, the causes of action pleaded must be so clearly untenable that they cannot possibly succeed. The jurisdiction to strike out is exercisable only in plain and obvious cases. In all other cases the plaintiff [*49] is not to be deprived of having the causes pleaded and dealt with in the ordinary way at trial. Second, as to the factual position, such applications are approached on the assumption that the allegations in the statement of claim are factually correct and could be proved at trial. Any relevant factual differences in the material before the Court should only be resolved at trial.
The amended statement of claim is a discursive document of 37 pages. It does not identify the jurisdictional bases for challenging aspects of the report. And it does not specify with clarity particulars of the factual circumstances giving rise to each cause of action so as to inform the Court and the parties of that cause of action. Mr Henry acknowledges deficiencies in the pleadings and proposes filing a further amended statement of claim.
At this point what can fairly be gleaned from the present pleadings are allegations that the commission made material errors of law leading to material findings affecting the specific questions the commission was required to answer under the terms of reference. As is apparent from the judgment of Smellie J, the High Court and the parties certainly understood that the central [*50] question was whether the commission of inquiry was amenable in law to review for errors of law of the kinds and significance alleged. That question concerns the nature and scope of review by the Courts of commissions of inquiry.
In the inquiry in this case the report must speak for itself. The appellant is entitled to point to statements in the report to explain where and how the commission erred and to analyse the report with a view to establishing an arguable case that in particular respects the commission's report is amenable to judicial review and should be reviewed.
Judicial review for error of law
The grounds upon which judicial review is available are well established. Judicial review is in general available where a decision-making authority exceeds its powers, commits an error of law, commits a breach of natural justice, reaches a decision which no reasonable tribunal could have reached or abuses its powers, to quote Lord Templeman in Re Preston  AC 835 at p 862, a passage adopted by this Court in Miller v Commissioner of Inland Revenue  3 NZLR 664 at p 668.
Error of law is a ground of review in and of itself; it is not necessary to show that the error [*51] was one that caused the tribunal or Court to go beyond its jurisdiction. The effect of the House of Lords' decision in Anisminic Ltd v Foreign Compensation Commission 2 AC 147 as interpreted in O'Reilly v Mackman  2 AC 237 at p 278, and in R v Lord President of the Privy Council, ex parte Page  AC 682 at p 701, is in general to render redundant any distinction between jurisdictional and non-jurisdictional error of law.
The availability of error of law as a ground for review of the exercise of public power is also now well established in New Zealand as appears from the decisions of this Court in Bulk Gas Users Group v Attorney-General  NZLR 129 and Hawkins v Minister of Justice  2 NZLR 530. This may be compared with the different approach taken in Australia: Craig v State of South Australia(1995) 184 CLR 163.
Relevant characteristics of commissions of inquiry
The question now before the Court is about the application of the general law of judicial review to commissions of inquiry.
The broad question is whether a commission of inquiry set up under the Commissions of Inquiry Act 1908 is subject to review by the Courts in respect [*52] of rulings which it makes on questions of law. This case presents the following characteristics:
1. The Commission has already reported; as will appear, the great majority of judicial challenges to commissions of inquiry concern commissions which are still carrying out their tasks or may indeed not even have begun to operate.
2. The passages of the report which are impugned do not involve and are not linked to the exercise of any particular statutory power of decision, such as a costs order; the passages do no more than set out the Commission's opinion and conclusions (although under the heading of the "decisions") bearing materially on its terms of reference.
3. The alleged errors of law are materially related, it is claimed, to statements made in the report which are very damaging to Mr Peters' reputation.
4. The alleged errors may be capable of being characterised as errors involving the commission moving outside its terms of reference, power, jurisdiction or authority.
The availability and extent of review must be affected if not governed by the basic characteristics of commissions of inquiry set up under the Commissions of Inquiry Act 1908 and also of royal commissions [*53] which, although set up by the Governor-General under the letters patent, are subject to the 1908 Act. Those characteristics both support and oppose the close supervision of commissions by judicial review.
In opposition are basic characteristics of a commission of inquiry. Its report is merely an expression of its opinion. A commission of inquiry is not to be likened to a Court of law nor to an administrative tribunal entrusted with the duty of deciding questions between parties; there is nothing approaching a lis and the commission has no general power of adjudication (North J in Re the Royal Commission to Inquire into and Report upon State Services in New Zealand at p 109). It follows that the reports of commissions of inquiry have no immediate legal effect. Because the reports of commissions of inquiry are, in the end, only expressions of opinion, "[i]n themselves they do not alter the legal rights of the persons to whom they refer" (Cooke, Richardson and Somers JJ in Re Erebus Royal Commission (No 2) at p 653). To similar effect is the recent comment by the Supreme Court of Canada in Canada (Attorney General) v Canada (Commission of Inquiry on the Blood System) (1997) [*54] 151 DLR (4th) 1 at p 15. That lack of general power of adjudication and of legal effect of the report must however be put into context.
In support of close judicial supervision of commissions of inquiry is the major significance of most if not all of them in practical, public and other senses. The Governor-General, or the Cabinet in reality, has decided in exercise of either the prerogative or the powers conferred by the 1908 Act to establish the inquiry. The matter will be one of "public importance", to quote s 2 of the Act of 1908.
Next the government makes the decision to establish commissions to address major matters only relatively rarely. The matters can usefully be divided into questions of policy and administration (which tend to look to the future) or of conduct (which look to past events). The terms of reference in this case demonstrate that one commission may be concerned with questions of both types and the line may be difficult to draw at times.
In the past two decades policy commissions have considered the Courts, nuclear power generation, social policy, the electoral system and broadcasting. Conduct inquiries have included the Thomas case, the Erebus disaster, [*55] the release of a psychiatric patient, the administration of the Wellington District Court, the Abbotsford land slip, marginal lands and Cave Creek. Other inquiries into conduct have been carried out under particular departmental statutes.
The inquiries, especially into alleged wrongdoing, generally excite public and media attention. Their reports similarly receive major publicity. Whatever the technical legal characterisation might be, the public interest in this unusual, serious, official process plainly calls for carefully prepared and applied rules of law designed both to produce a report of real value and to protect the rights and interests of those involved. That can be seen in the legislation under which commissions operate and the reforms which have been introduced over recent decades. Some of those reforms have been based on the reports of law reform bodies including "Commissions of Inquiry: Thirteenth Report of the Public and Administrative Law Reform Committee" (Wellington: The Committee, 1980); "Advisory and Investigatory Commissions: Report of the Law Reform Commission of Canada" (Ottawa: 1979); "Report on Public Inquiries" (Toronto: Ontario Law Reform Commission, [*56] 1992); and "Public Inquiries: Issues Paper No 3" (Edmonton: Alberta Law Reform Institute, 1991).
The importance of the work of commissions of inquiry and their impact on significant interests of individuals also appears from the fact that rulings of law made by or relating to commissions are not infrequently reviewed in Court proceedings and not only by way of judicial review. For instance a commission may state a case on a question of law (if it has statutory power to do that, as New Zealand commissions do under s 10 of the 1908 Act) as in the State Services case, or an individual may be prosecuted or face contempt proceedings for not complying with an order of the commission, such as a witness summons, eg McGuinness v Attorney-General of Victoria (1940) 63 CLR 73 and Attorney-General v Clough  1 QB 773.
The reviewability of commissions of inquiry
The real as opposed to the technical force of the reports of commissions appears in the growing acceptance over recent years and in this case that commission reports or parts of them can be reviewed on certain grounds. There was no dispute about that before us. That is so although the report [*57] does no more than state opinions, conclusions, and recommendations and although there had been suggestions in the cases and indeed decisions in Australia (eg R v Collins, ex parte ACTU - Solo Enterprises Pty Ltd (1976) 50 ALJR 471) to the effect that a simple report as a result was not reviewable. The question accordingly becomes one about the extent of the right of review. Answers to that question are to be found in relevant principle and related rules of law, including those governing the roles of Courts and of commissions of inquiry, in history and in considerations of practical utility.
History provides a convenient starting point. The history of the attempts to review commissions of inquiry and royal commissions is essentially confined to this century. As already indicated, the great majority of challenges have involved commissions which have not yet reported; the challenges have related to:
* the validity of their terms of reference eg Cock v Attorney-General (1909) 28 NZLR 405;
* the scope of the terms of reference eg Re the Royal Commission on Licensing  NZLR 665;
* the procedures the commissions are following or are proposing to follow [*58] as in earlier phases of the present case;
* allegations of bias as in Thomas ; and
* the law they are applying or intending to apply, as in Thomas (effect of pardon).
Judicial review during the course of the inquiry
Decisions made by the commission during the course of the inquiry have been subjected to judicial review. There has been no suggestion that the commission is empowered to make erroneous decisions on questions of law during the course of its inquiry. The Winebox Inquiry itself gave rise during its course to significant sets of judicial review proceedings including Fay, Richwhite & Co Ltd v Davison  1 NZLR 517 (CA); and Controller and Auditor-General v Sir Ronald Davison  2 NZLR 278 (CA),Brannigan v Sir Ronald Davison [ A.C. 238, 1 NZLR 140 (PC). In the first an early decision by the commission that, subject only to such restrictions as it might find necessary, all hearings would be open to the press and the public was challenged as unlawful and invalid. The contention was that at least initially the commission of inquiry should sit in private when hearing evidence dealing specifically with taxpayers' affairs. In considering [*59] the Court's jurisdiction Cooke P said at p 524:
''There is no doubt that if in his ruling the Commission had fallen into a material error of law, or had laid down a procedure transgressing the principles of natural justice, or had reached a decision not open to a reasonable tribunal, a judicial review remedy would be available.''
Underlying these judicial interventions during the course of commissions of inquiry is the obvious public interest that commissions of inquiry be conducted in accordance with the law.
Judicial review following submission of the commission report
While an inquiry is in progress, there is still a body, process and task to be affected by the Court's ruling. This is not true of an inquiry that has completed its task and reported to the Governor-General. It has been argued that although judicial review during the course of an inquiry serves some useful purpose, namely to ensure that the commission proceeds in accordance with the law, once the final report is published its nature means that anything the Court may subsequently say about it is legally meaningless. The force of that argument has been substantially reduced by the acknowledgment that completed reports [*60] can be reviewed in some circumstances.
There appears to have been only one occasion before 1980 in which Courts in Australia, Canada or New Zealand reviewed the report of a commission which had completed its work and which had made no binding order for instance in respect of costs. (There appear to be no directly relevant United Kingdom cases: inquiries under the Tribunals of Inquiry (Evidence) Act 1921 (UK) are extremely rare.) That case, Landreville v The Queen (1973) 41 DLR (3d) 574 and Landreville v The Queen (No 2) (1977) 75 DLR (3d) 380, concerned the establishment and report of a commission which led to the resignation of a Judge. The proceedings for a declaration were allowed to continue and in fact produced a declaration favouring the plaintiff since: (1) they would help resolve a matter of general public interest (the ability of the government to establish an inquiry under the legislation in question into the conduct of a Superior Court Judge); and (2) they led to a statement, as a matter of public record, that the plaintiff did not at the commission hearing have a full opportunity to refute a very serious allegation. The declaration might also serve a useful purpose [*61] in the plaintiff's prosecution of proceedings relating to his pension ((1977) 75 DLR (3d) 380 at p 406). The Court had jurisdiction ''to make a declaration which, though devoid of any legal effect, would, from a practical point of view, serve some useful purpose" ((1973) 41 DLR (3d) 574 at p 581).
Since 1980 the situation has changed, with a number of the reports of commissions being reviewed after the completion of the commission process, with the Court in some cases issuing relevant relief. In New Zealand there have been three major cases: Re Royal Commission on Thomas Case  1 NZLR 252 (CA); Re Erebus Royal Commission  NZLR 662 (PC); andCampbell v Mason Committee  2 NZLR 577 (HC). The first proceeding failed; in the second it was the costs order that was quashed, the impugned passage being closely associated with it (and also being invalid as being in breach of the governing Order in Council on costs); and in the third the parties agreed that the Court had power in effect to edit the report. In another case of editing, passages of a judgment of the Maori Land Court were quashed because the person whose reputation was damaged by them had not been given [*62] a hearing as required by the principles of natural justice, O'Regan v Lousich  2 NZLR 620. Although the decision itself was not quashed the damaging statement was made in an inferior Court's binding judgment a standard subject of judicial review. Finally, in Coopers & Lybrand v Minister of Justice  2 NZLR 437, where a report was produced by inspectors appointed under s 9A of the Companies Act 1955, counsel accepted that in so far as past events were concerned the Court could properly make declarations following the approach taken in Landreville; even though they might have no legal effect, they could have some practical effect as a guide to the Registrar. Casey J concluded on the facts that no useful purpose could be served by a declaration. On appeal, however, this Court concluded that the auditors, whose only interest was to protect their reputation, were entitled to a declaration that the volumes in question were not records or information within s 9A.
On the basis of the New Zealand commissions of inquiry cases mentioned and related Australian cases (Greiner v Independent Commission Against Corruption ; and Ainsworth v Criminal Justice Commission [*63] (1992) 175 CLR 564), the respondent and the added parties accepted that a report of a commission of inquiry could be reviewed on two grounds:
1. that it had exceeded its terms of reference; and
2. that it had breached the principles of natural justice.
They did not accept that the grounds for review went beyond the two just stated to include all errors of law, although, as we have noted, the exercise of statutory power by public bodies is now in general reviewable simply on that ground.
The question whether the grounds do include all errors of law is to be answered in the context of the fact that the Privy Council inErebus left open for development by the New Zealand Courts the availability of a declaration of invalidity unconnected with a costs order. Lord Diplock said at p 687:
"For the like reasons their Lordships will refrain from going into the question whether upon an application for judicial review of a report of a tribunal of inquiry there is jurisdiction in the reviewing Court to set aside a finding of fact that is gravely defamatory of the applicant for review, or to make a declaration that such finding is invalid. This too is a matter which, in their Lordships' [*64] view, is best left to be developed by the New Zealand Courts, particularly as these remedies, if they do exist, are discretionary. In the instant case all five members of the Court of Appeal were of opinion that the reputations of those who were the subjects of the finding in para 377 would be sufficiently vindicated by a judgment setting aside the costs order, and that no further remedy, even if one were available, was necessary."
The question whether commission reports can in principle and in terms of the public interest be reviewed for error of law is to be considered in the context of four factors among others.
The first is the rapid movement of the general law of judicial review over the period when challenges to commissions have become somewhat more common. As Lord Diplock said in the Erebus judgment, "The extension of judicial control of the administrative process has provided over the last 30 years the most striking feature of the development of the common law . . ." (p 667). That judgment is itself a striking example, based as it is on a natural justice ground of lack of probative evidence, a ground which until then had had very limited judicial recognition under that [*65] head.
The second factor is the limited need to further refine the concepts of jurisdictional error and errors of law and especially the differences between them because Parliaments have moved to grant statutory rights of appeal and to repeal or not enact privative clauses. Indeed, that in issue in the Anisminic case was the sole remaining orthodox privative clause protecting a statutory tribunal left on the United Kingdom statute book, after Parliament there had in the Tribunals and Inquiries Act 1958 (UK) repealed all the others in response to the report of the Committee on Tribunals and Inquiries (the Franks Committee).
The third factor is the importance of ensuring the integrity of the essential findings of a report in its answers to the terms of reference. There is a legitimate public interest in those findings being properly based in law if the purposes of the report are to be achieved.
The fourth factor is the central relevance in the major cases of claimed serious damage to reputation along with the absence of any of the usual remedies for that damage by way of appeal or defamation proceedings. One partial practical remedy which review proceedings have facilitated is the [*66] acknowledgment in their course by commissions of errors which have been recorded in the judgments in fairness to the reputations of the individuals affected: the Erebus (No 2) , Thomas and Australian Drug commissions -  1 NZLR 618 at pp 666 - 667;  1 NZLR 252 at pp 269 and 273; and  NZLR 42 [Royal Commission of Inquiry into Drug Trafficking (The Stewart Commission) (1983)]. A more substantial practical remedy is of course for the Courts to declare that the report or some part of it is procedurally or legally flawed and that that flaw has led to damage to reputation.
That reputational element has had a significant role in the leading cases. In Erebus (No 2) at p 653, Cooke, Richardson and Somers JJ contrasted the strict legal position with the broader reality:
''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 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 [*67] 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.''
Woodhouse P and McMullin J made their comments about reputation in rebutting the argument that the report was not the exercise of a statutory power of decision, in terms of not "affecting" the rights of a person under the Judicature Amendment Act 1972 and was accordingly not reviewable under that Act:
''We think it would be very difficult to justify an argument that findings likely to affect individuals in their personal civil rights or to expose them to prosecution under the criminal law are not decisions 'affecting' their rights within the meaning of the Act. In the present case, for example, it was virtually certain that the findings of the Erebus Commission would be published [*68] by the Government. The effect on the reputation of persons found guilty of the misconduct described in the Report was likely to be devastating. At common law every citizen has a right not to be defamed without justification. Severe criticism by a public officer made after a public inquiry and inevitably accompanied by the widest publicity affects that right especially when the officer has judicial status and none the less because he has judicial immunity" (p 627).
The reasoning of the three Judges has been adopted in several cases since: the Thomas case  1 NZLR 252 at p 257, Thompson v Commission of Inquiry into Administration of District Court at Wellington  NZLR 98 at p 102, Campbell v Mason Committee at p 581; see also eg KPMG Peat Marwick v Sir Ronald Davison  2 NZLR 278 at p 330, Badger v Whangarei Refinery Expansion Commission of Inquiry  2 NZLR 688 at p 698, and O'Regan v Lousich.
Other jurisdictions have also recognised the connection between the reports of commissions of inquiry and individuals' reputations. In Australia see Gleeson CJ in Greiner v Independent Commission Against Corruption at p 147: ''reputation is now [*69] regarded as an interest capable of attracting judicial intervention to see that the requirements of the law are observed''; and Mason CJ and Dawson, Toohey and Gaudron JJ in Ainsworth v Criminal Justice Commission at p 577: "the law proceeds on the basis that reputation itself is to be protected". In Canada see Beno v Canada (Commission of Inquiry into the Deployment of Canadian Forces to Somalia) (1997) 146 DLR (4th) 708 at p 717; and in Ireland see Re Haughey  IR 217 at p 246.
In some situations condemnation of a person in a commission report will be scarcely distinguishable in the public mind from condemnation by a Court of law (Re Erebus (No 2) at p 666). Where a report calls a person's reputation into question in a direct way, both that person and the public generally have an interest in ensuring that any criticism is made upon a proper legal basis. It would be contrary to the public interest if the Courts were not prepared to protect the right to reputation in such a context (Re Erebus (No 2) at p 627). And once it is acknowledged that the Court should protect reputation or other proper interests by way of declaration after [*70] the report of a commission of inquiry has issued, there is no justification in principle in finding that review may be based on certain of the general grounds for review, but not on another: error of law.
The integrity and reputational elements relate directly to the practical utility of the remedy sought. In the normal course the plaintiff in judicial review proceedings wants one of two results: either the decision will be quashed or process stopped and no further official action will be taken, when the plaintiff aims to prevent an unwelcome exercise of power; or a direction will be given to require the power to be exercised on a different footing, particularly when the plaintiff is seeking a beneficial exercise of the official power. In the case of a commission of inquiry which has reported those consequences in general are not available. There is no continuing body which can take up the issues again and avoid the error of law or procedural fault which gave rise to the relief or which can respond to a ruling that part of the decision fell outside its powers. It may be different if the argument is that the whole inquiry is outside power (as would have been the case for instance had [*71] the proceedings in the Cock case been brought after the commission had reported and not at the outset or in respect of the "lack of power" ground pleaded in the Landreville case had it succeeded).
There are, however, situations in which a declaration that an error of law has been made in the commission's final report does have real value. First, the Ministers and others involved in setting up the inquiry and in considering how to respond to the resulting report are informed by the Court judgment of that defect - as are the public at large. Such a Court ruling is of real practical value. To repeat, there will in general be a strong public interest in ensuring the correctness of determinations of law in the report of a commission of inquiry. Second, where a Court rules that a commission has made a material error of law which damages reputation the plaintiffs gain the significant comfort of a ruling that the findings damning them are based on an error of law. In such cases the Court is not embarking upon a hypothetical exercise; rather judicial review is appropriate because its declaration will serve some useful purpose in protecting a private or public interest.
Against [*72] the reasoning just presented, one of the submissions on behalf of the respondent, accepted by Smellie J, was that while the Court has jurisdiction to make common law declarations of right, it does not have jurisdiction to go behind this and make general declarations on hypothetical questions of law. Lord Diplock in Gouriet v Union of Post Office Workers at p 501 was prayed in aid:
''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 [*73] 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. [In New Zealand see similarly s 2 of the Declaratory Judgments Act 1908.] Relief in the 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 a 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 .'' (Counsel's emphasis.)
The submissions on behalf of Sir Ronald Davison emphasised that the proceeding did not involve a dispute to which Mr Peters is party. His rights, it was said, are neither threatened nor affected by the report. He is [*74] doing no more than seeking a ruling from the Court on hypothetical questions in which he has no recognisable interest with the result that the Court has no common law jurisdiction to grant the declarations he seeks.
For several reasons we do not accept the proposition that the Court can make a declaration only if there are rights and duties of, and owed between, relevant parties. First, the precision of the statement made by Lord Diplock does not allow for the well-established rule, mentioned by the other four members of the House of Lords, that a private individual who will sustain injury as a result of a public wrong may bring proceedings; or in an alternative formulation that a private person may sue in respect of interference with a public right if either there is also interference with a private right of that person or the interference with the public right will inflict special damage on that person - Lord Wilberforce at p 483, Viscount Dilhorne at p 494, Lord Edmund-Davies at p 513 and Lord Fraser of Tullybelton at p 518, the latter two referring to the well-known authority, Boyce v Paddington Borough Council  1 Ch 109 at p 114. Lord Diplock [*75] in fact included that element of special damage when he summarised the effect of Gouriet and distinguished it in Inland Revenue Commissioners v National Federation of Self-Employed and Small Businesses Ltd  AC 617 at pp 638 - 639.
Secondly, in Gouriet the member of the public seeking relief was challenging the actions of a private body a trade union which was not claiming to exercise public power. The present case must be clearly distinguished, involving as it does the exercise of an important public power with major potential consequences.
Thirdly, as noted by the Public and Administrative Law Reform Committee in its report "Standing in Administrative Law" (1978) prepared shortly after Gouriet was decided, that case had eight special characteristics noted by the Judges. None were present in this case.
Fourthly, the alleged errors of law in this case, if established, do not have a simple hypothetical character. They may have real practical consequences. In the end the issue can be seen as one about the function of the Courts. Is it fundamental to the judicial role that in deciding disputes between parties it is concerned only with the enforcement [*76] of the rights of one and the duties of the other, or do the Courts as a matter of constitutional principle have the power to see that public authorities do not make material errors of law? Earlier in this judgment we noted the established ability of the Court to review for error of law: Miller v Commissioner of Inland Revenue . Those judicial review powers of the High Court are based on the central constitutional role of the Court to rule on questions of law: as Cooke J said in Bulk Gas Users Group at p 136 "the Courts of general jurisdiction have ultimately the function of interpreting Acts of Parliament". The essential purpose is to ensure that public bodies comply with the law.
Finally, it is difficult to see how Mr Peters can have standing to challenge the report but nevertheless be disqualified from seeking relief because his rights are said not to be affected.
The Court's constitutional role may be constrained of course, by the relevant legislation (for instance establishing a procedure for challenge as in tax matters), by the nature of the legal questions, or by the context in which it is invoked.
We consider those three matters in turn. There is no relevant legislation [*77] in this case. Nothing in the Commissions of Inquiry Act 1908 purports to limit any general power of the Court (for the commission's power to state a case is to be seen as an additionalpower, and is not in any sense in substitution for or restriction of the powers of review). Second, the particular questions of law in this case (essentially of interpretation of tax and related legislation) are ones which routinely come before the Courts. They are to be related especially to two of the matters which commissions can be appointed to inquire into and report on under s 2 of the 1908 Act: (a) the administration of the government and especially (d) the conduct of any officer in the service of the Crown. The issues might be seen to be of a very different character from those involved in the Greiner case. Third, the context in which the question of law is raised might be significant, even decisive. That appears from the consideration of two hypothetical situations.
The first is to assume that the report of the commission in the present case had set out at length the views of the Inland Revenue Department and the commission on a large number of difficult legal issues on which opinions [*78] could reasonably differ. Assume that the commission had done that in the course of a detailed consideration of the department's work in which the commission largely, but not in every detail, agreed with their characterisation of the transactions and the law to be applied. That process had led the commission to the conclusion, to return to the terms of reference, that the IRD acted in a competent manner in relation to those transactions. And assume that the commission had reached that view without any particular reference to Mr Peters' position. Can it be the case that a Court on review can or at least should review each and every legal point, in proceedings brought say by Mr Peters, or by an experienced tax lawyer who (as the commission recorded) had expressed a different view on the points of law or by an interested taxpayer? The answer might be different if the alleged error of law had a material effect on a matter of substance at the heart of the terms of reference.
The second hypothetical situation is to assume the reverse of what has in fact happened and that the Commissioner of Inland Revenue and his staff had been held by the commission of inquiry to be incompetent on a basis [*79] which was clearly wrong in law. With the Commissioner of Inland Revenue's reputation and career seriously damaged as a result of an error of law, it seems almost unthinkable that the Court would be powerless to intervene.
To hold that the public interest may require judicial review of the report of commissions of inquiry (their special nature notwithstanding) upon certain of the grounds of judicial review, but then to hold that the Court is never able outside those grounds to intervene for material error of law, an established ground of judicial review, is not in our view sound in principle or justifiable in the public interest. It does not recognise the importance of commissions of inquiry in our constitutional and governmental system. It does not recognise the practical utility that a declaration of error of law may have. It would deny the development of the law in Anisminicand later cases.
If the alleged error of law materially affects a matter of substance relating to a finding on one of the terms of reference it is in general reviewable. The reason for exercising the power of review is the stronger if that error damages the reputation of any person directly concerned in [*80] the inquiry.
[Their Honours examined the arguments in relation to the relevant sections of the Income Tax Act 1976 and continued:]
Alleged errors of law: summary
Because of the particular focus of the submissions for Sir Ronald Davison and added parties there was little analysis of the alleged errors of law in their argument of the appeal. Certainly this Court is not in a position to reach any final conclusions in this regard. All we can do is point to what we see as arguable errors of law.
For the reasons given, we are satisfied that the commission arguably erred in law in two central respects. The first was in construction of the Magnum transaction by not recognising that the whole of the interrelated contractual arrangements had to be considered together and that the promissory note arrangements were part of and steps in carrying out the Magnum transaction. The second was in its assessment of the disclosure obligations on EPFML in seeking and obtaining tax credits. The correct assessment in law of those obligations was crucial to any consideration under para (a) of the terms of reference of whether the Commissioner of Inland Revenue and the Serious Fraud Office acted in a competent [*81] manner.
Is the claim for review tenable?
It must be stressed at the outset that this Court is not called upon to reach any view, concluded or tentative, as to the answers to the contentions raised in the pleading. The question is whether those contentions are sufficiently identifiable as founding, if established at trial, entitlement to relief in accordance with legal principles.
Term of reference (a) required the commission to report on the competency of the Inland Revenue Department and the Serious Fraud Office in dealing with the Winebox transactions, of which Magnum was one. In its finding that there was no incompetence on the part of the Inland Revenue Department, the commission reasoned that this was because there was no tax evasion or even tax avoidance. Similarly with respect to the Serious Fraud Office, the commission reasoned that because there was no fraud there could be no incompetency. It is also clear from the report that in part these particular findings were in turn relevant to the commission's rejection, because they were without foundation, of some of what were termed Mr Peters' allegations.
As we have earlier discussed, it is arguable that the commission erred [*82] in law in basing its findings of an absence of fraud and the absence of tax evasion in respect of the Magnum transaction on the construction afforded s 301, and on the identification of what comprised that transaction. The crucial question which then arises for present purposes is whether those errors, if established, could then reasonably be held at trial to be of sufficient cogency or materiality to warrant some form of declaratory relief.
At this point it is important to put the matters under discussion, in particular the alleged errors of law, into the context of the report. The current statement of claim centres on the Magnum transaction. It was one of some 60 transactions disclosed in the winebox. The commission concentrated on four of those Magnum, and what were described as the JIF transactions, the RPS/MCN transactions, and the BNZ captive insurance scheme. The commission noted at 2.1.1 that Magnum and JIF, which were the tax credit transactions, had the greater potential for discovery of fraud than any others. Magnum was therefore but one, albeit significant, of the transactions inquired into by the commission in answering its terms of reference. Term of reference (a) [*83] was directed to whether the Inland Revenue Department and the Serious Fraud Office acted in a lawful and proper, as well as competent manner. In carrying out its functions, the commission investigated a number of allegations made by Mr Peters, some of which had formed the background which led to the establishment of the commission. Some of those matters went well beyond the issue of competency of the Inland Revenue Department and Serious Fraud Office, and impinged on the integrity and honesty of the officers concerned. Some also related to the conduct of corporates and individuals concerned in the Winebox transactions. The commission rejected all allegations, and this rejection led to the comments critical of Mr Peters.
It can be seen therefore that the present challenge is confined to what in overall terms could be classed as only part of the report. Nevertheless, it was an important and significant part - namely whether Magnum involved fraud or tax evasion. If, as the commission decided, Magnum was clear then the resulting impact on other aspects of the inquiry had to be significant.
Whether Magnum involved tax evasion or fraud in the criminal sense, were two of the matters at the [*84] heart of the inquiry. If there was evidence to support a finding of tax evasion, then the failure of the Inland Revenue Department to identify that and possibly take some consequential action had to impact on a consideration of its competency. If there was evidence to support a claim of criminal fraud on the part of those concerned in the implementation of Magnum, then the failure of the Serious Fraud Office to recognise that and further its investigations had to impact on its competency. The two issues (tax evasion and fraud) were therefore of direct relevance to term of reference (a). The questions of law, namely construction of the Magnum transaction and the obligation of disclosure placed on a taxpayer by s 301, were closely related and material to those same issues. Although there was expert opinion placed before and accepted by the commission to the effect that Magnum did not involve tax evasion, or even tax avoidance coming within the ambit of s 99, in the whole context of the inquiry we take the view that it would be open to the High Court to hold that if there were the errors of law earlier discussed, then they were of sufficient materiality, going to the substance of a significant [*85] part of the report, to warrant a declaration. That conclusion is reinforced by the fact that the resulting answers to the competency issues in respect of both the Inland Revenue Department and the Serious Fraud Office were in turn directly related to, and helped to form the basis of, the stringent criticisms levelled against Mr Peters with the consequential effect on his reputation. We recognise those criticisms were also directed to other serious allegations made by Mr Peters which appear to be unaffected by the alleged errors of law we have discussed.
Whether or not the above combination would be sufficiently material overall to justify declaratory relief remains for decision, on which we are not to be taken as indicating any view. What cannot be said is that the pleading discloses no cause of action. There are arguable errors of law alleged, which are capable of founding a proper basis for correction on review by declaratory relief in the exercise of the Court's jurisdiction. As we have held, in the case of a commission of inquiry jurisdiction to intervene is not limited to the narrow confines contained only in the concept of natural justice or that of acting outside the terms [*86] of reference.
We should record that we agree with the comment made by Thomas J at the end of his judgment about the likely extent of the hearing of the application for judicial review.
The Court being unanimous as to the result the appeal is allowed, the orders made by Smellie J are quashed and the application to strike out the proceedings is dismissed. Mr Peters is entitled to costs and, if necessary, counsel may submit memoranda.
I wish to be associated with the comprehensive judgment of Richardson P, Henry J and Keith J. Clearly, the appeal should be allowed and, in writing a separate judgment, I do not want to detract from the force of the main judgment of the Court. Rather, I wish to emphasise a number of points which I regard as being of particular significance. I will make these points under the following headings:
[For table see original]
The terms of reference
The commission's terms of reference are recited at the outset of the main judgment. Essentially, the commission was entrusted with the task of inquiring into and reporting upon two matters:
* Whether the Commissioner of Inland Revenue and the Director of the Serious Fraud Office (and their staff) [*87] acted in a lawful, proper, and competent manner in dealing with the transactions in the winebox; and
* Whether, having regard to those transactions, any changes should be made to the tax law or criminal law for the purpose of protecting New Zealand's income tax base.
Two points emerge.
First, it was the commission's duty and responsibility to inquire into the matters raised in the terms of reference and to carry out an investigation for that purpose. The commissioner initially indicated a proper understanding of the function of a commission of inquiry. In the early part of his report he emphasised that the essential purpose of a commission is to obtain information and to report its findings upon the questions set out in the terms of reference given to it (1.1.8). He acknowledged that its procedures are essentially inquisitorial in nature as distinct from the adversverdana and formalised procedures adopted in Courts of law. He stated that a commission is entitled to obtain its information where and how it thinks most appropriate to its function (1.1.9). Indeed, the commissioner recited at length the description of the nature and purpose of a commission of inquiry spelt out by [*88] the Full Court of the High Court inRe Royal Commission on Thomas Case  1 NZLR 602 at p 626, and a similar discussion by the Privy Council in Re Erebus Royal Commission [ A.C. 808,]  NZLR 662 at p 666 (1.3.8 - 1.3.9).
Thus, no one, including Mr Peters and his counsel, were cast or to be cast in a role akin to that of a prosecutor, and certainly not that of a prosecutor required to shoulder a burden of proof. The duty and responsibility for determining the questions asked in the terms of reference was that of the commissioner and no one else.
Secondly, the resolution of questions of law was intrinsic to the terms of reference. In the first place, in order to properly discharge his function, the commissioner was required to understand and determine the legal effect of the transactions in the winebox in order to determine whether the Inland Revenue Department and the Serious Fraud Office had dealt with them in a lawful, proper and competent manner. This requirement was also recognised by the commissioner. He expressly stated that, if he was to be fully informed of the nature of the Magnum transaction - before he went on to decide whether the Inland Revenue Department and Serious [*89] Fraud Office dealt with it in a lawful, proper and competent manner it was essential that he should inquire into the transaction itself (2.1.52). Hence, to obtain a true appreciation of the legal effect of the transaction, the commissioner had to undertake a careful analysis of the transaction on the basis of the relevant law. In the second place, the terms of reference required the commissioner to interpret certain critical statutory provisions, particularly s 301 of the Income Tax Act 1976 and ss 257 and 229A of the Crimes Act 1961. As the commissioner initially stated, he needed to know whether the Commissioner of Inland Revenue received all the information relating to each transaction which he was entitled to receive and whether the true nature of each transaction was revealed to him. It was only then that he could decide whether the Inland Revenue Department's investigations were adequate or whether, if more searching investigations had been carried out, a different version of the facts from those found by the department might have resulted and different conclusions arrived at (1.3.7). The same would apply in the case of the Serious Fraud Office (1.3.7). Again, it is evident [*90] that the commissioner could not discharge this responsibility without adopting the correct legal interpretation of the key statutory provisions.
It is to be noted that it is relatively unusual for the terms of reference of a commission of inquiry to be as heavily impregnated with legal issues as in this case. As the main judgment makes clear, commissions of inquiry, whether directed to policy and administration or to an official's conduct or both, tend to turn on questions of fact. Generally, a commission's key function is to obtain and collate information.
The immediate point I wish to stress, then, is that questions of law were intrinsic to the terms of reference. They were inextricably germane to the conduct of the inquiry and the completion of the report. Clearly, an incorrect understanding or analysis of the legal effect of the transactions or a misconstruction of the relevant statutes would be likely to affect the outcome of an inquiry into the conduct of the public servants involved.
In appointing a commission under the Commissions of Inquiry Act 1908 and settling the terms of reference, therefore, the Governor-General in Council (essentially the government) must have contemplated [*91] that the commission would proceed in accordance with the law. No other assumption is possible. Otherwise, why have an inquiry? What would be the value of the resulting report? To my mind it is inescapable that the terms of reference in this particular case necessitated a full understanding and analysis of the legal effect of the transactions and a correct interpretation of the relevant statutory provisions.
The commission's report
An extensive outline of the commission's report is contained in the main judgment and, again, I need not repeat what has been said. Reference to the report is necessary, however, to explain how it came about that Mr Peters' reputation was put in issue and, as was submitted, his reputation damaged in a way which would not have occurred if the commission had found, even emphatically, that the Commissioner of Inland Revenue and the Director of the Serious Fraud Office (and their staff) had not acted unlawfully, improperly or incompetently.
Contrary to what had been accepted by the commissioner about the nature of a commission of inquiry and his stated intention as to the form the inquiry would take, a substantial part of the report is devoted to the question [*92] whether Mr Peters had produced evidence to substantiate the allegations which he had made in Parliament. Various of his speeches are set out at some length (1.2.38 - 1.2.41; and 2.3.3 - 2.3.23). These speeches are analysed and the allegations of incompetence, impropriety or unlawfulness against the Commissioner of Inland Revenue and the Director of the Serious Fraud Office identified. The allegations in the various speeches are then summarised (2.3.20 - 2.3.21). Mr Peters' ''allegations'' in evidence are also dealt with (2.3.22 - 2.3.30). The commissioner states that the terms of reference do not specifically require him to inquire into allegations made against the corporate parties and individuals (2.3.22). But, he continues, while the "primary focus" of the inquiry was on the competence of the Inland Revenue Department and Serious Fraud Office, that competence had to be judged against the background of whether or not there was evidence of the frauds Mr Peters alleged (2.3.22). He later stated that, "[w]hilst the Commission's terms of reference limited its inquiries into the actions of the IRD and SFO", he could not ignore the various allegations that Mr Peters had made (2.3.24). [*93]
The commissioner then outlines the procedure which he had pursued in seeking evidence from Mr Peters that would support his allegations (2.3.25). His counsel, Mr Henry, protested that Mr Peters was only a witness; that he was not on trial; and that the "allegations" which the commission was "mandated" to answer were not the issues raised by Mr Peters (2.3.27). There is force in Mr Henry's submission in that an inquiry into Mr Peters' allegations as such formed no part of the terms of reference. Nevertheless, statements made by Mr Peters and Mr Henry are then repeated at length, often being viewed in the nature of charges (2.3.31 - 2.3.37). The commissioner addressed Mr Henry reminding him that he had been put on notice several times during the inquiry; that he would be required to point to evidence justifying Mr Peters' allegations; and that he should now be able to relate the evidence which had been given at the inquiry to the various allegations which Mr Peters had made. There is then a long passage in the report in which the commissioner sets out verbatim the transcript of his exchange with Mr Henry (2.3.39 - 2.3.60).
Although the commissioner had ruled in a memorandum that [*94] it was not necessary for him to reach conclusions as to whether a transaction amounted to legitimate tax planning, or tax avoidance or evasion or fraud (1.4.3), and that he would not be reporting on whether offences had been committed or whether any tax avoidance had taken place (1.4.5), he proceeded to hold that the transaction was not fraudulent (2.3.62; 2.5.5; and 2.7.7 - 2.7.8) and was not tax avoidance (2.1.66).
Referring specifically to the Magnum transaction the commissioner, seemingly adopting the language of adjudication, decided that the Magnum transaction was ''not proved'' to have been fraudulent (2.7.8). Having, in his view, clearly established that the Magnum, and another transaction, had not been proved to amount to fraud the consequence was that the allegations made against the corporate parties and individuals claiming they were guilty of conspiracy to commit such frauds were false and completely unjustified (2.7.10).
Two comments may be made. First, if the terms of reference had directed the commission to inquire into and report on the validity of Mr Peters' allegations made in Parliament, much of this part of the report would be understandable. But such an exercise [*95] formed no part of the terms of reference. Mr Peters' allegations may have formed part of the background to the inquiry (and the fact allegations had been made is mentioned in the recital to the terms of reference), but from that point they ceased to be relevant to the task the commission was directed to undertake. The focus had to remain on the conduct of the named public servants in terms of the terms of reference.
Secondly, in entering upon the exercise of determining whether or not Mr Peters had proved that the Commissioner of Inland Revenue and the Director of the Serious Fraud Office (and their staff) had acted fraudulently, Mr Peters (and his counsel) were effectively cast in a role akin to that of a prosecutor and, in effect, required to shoulder a burden of proof. This adversverdana approach went well beyond giving Mr Peters the opportunity to meet any criticism of him which would be express or implicit in findings exonerating the Commissioner of Inland Revenue and the Director of the Serious Fraud Office of unlawfulness, impropriety or incompetence. The adversverdana or confrontational nature of this part of the proceeding is patent. Such a framework or approach would seem to [*96] be more appropriate to a situation where there was a lis inter partes rather than a proceeding in the nature of an inquisitorial inquiry.
Mr Henry did not seek to rely on these aspects as grounds for review. As I apprehend his submission, it was that the pursuit of this adversverdana line of inquiry led to Mr Peters' reputation being put squarely in issue. He accepted that Mr Peters could be subject to implicit, and even express, criticism if the acts or conduct of the Commissioner of Inland Revenue and Director of the Serious Fraud Office were exonerated by the commissioner in the course of discharging the commission's function. But the confrontational approach which the commissioner adopted meant that Mr Peters' reputation was inevitably at risk. It was then severely damaged, Mr Henry argued, not because of the merits, but because of the errors of law which transfused the commissioner's thinking and resulted in his condemnation of Mr Peters and his exoneration of the corporate parties.
Before turning to the alleged errors of law, however, it is necessary to examine the Magnum transaction.
[His Honour examined the arguments in relation to the relevant sections of the Income Tax Act [*97] 1976 and continued:]
The reviewability of commissions of inquiry
I accept that the Court has jurisdiction to review the report of a commission of inquiry where the commission has made a material error of law in the course of performing its function. To deny the Court that jurisdiction would be to ignore seasoned developments in public and administrative law.
Counsel for the respondent articulated the Court's jurisdiction far too narrowly. They accepted that a report of a commission of inquiry could be reviewed on two grounds; one, where the commission has acted outside its terms of reference and, two, where the principles of natural justice have not been complied with. In support of these propositions counsel referred to various dicta in Re Erebus Royal Commission (No 2)  1 NZLR 618 and Re Royal Commission on Thomas Case . There has been, it was argued, no subsequent expansion of these limited grounds of review.
To my mind, this argument reflects an undesirable approach to the application of the doctrine of precedent. Each of these cases related to situations where it was alleged that the commission of inquiry had either exceeded its jurisdiction or breached the [*98] principles of natural justice. Not unexpectedly, the dicta of the Courts in those cases relate to those circumstances. Reference to the underlying principle, however, puts paid to any argument based on the literal wording of such dicta. Both acting outside jurisdiction and acting in breach of the principles of natural justice predicate a failure by the commission of inquiry to properly exercise its jurisdiction. Both are examples of the doctrine of ultra vires. It is equally a question of jurisdiction for the commission to fail to exercise its jurisdiction.
One can properly start with Anisminic . Prior to Anisminic Ltd v Foreign Compensation Commission  2 AC 147, there was considerable dissatisfaction with the distinction between errors of law on the face of the record and other errors of law. Anisminicrendered this distinction obsolete. As Lord Browne-Wilkinson said in R v Lord President of the Privy Council, ex parte Page  AC 682 at p 701: "Thenceforward it was to be taken that Parliament had only conferred the decision-making power on the basis that it was to be exercised on the correct legal basis: a misdirection in law in making the decision therefore [*99] rendered the decision ultra vires". He cited the dictum of Lord Diplock in O'Reilly v Mackman  2 AC 237. The learned Law Lord extolled the virtues of Anisminic in these terms at p 278:
"[The Anisminic case] . . . has liberated English public law from the fetters that the courts had theretofore imposed upon themselves so far as determinations of inferior courts and statutory tribunals were concerned, by drawing esoteric distinctions between errors of law committed by such tribunals that went to their jurisdiction, and errors of law committed by them within their jurisdiction. The break-through that the Anisminic case made was the recognition by the majority of this House that if a tribunal whose jurisdiction was limited by statute or subordinate legislation mistook the law applicable to the facts as it had found them, it must have asked itself the wrong question, ie, one into which it was not empowered to inquire and so have no jurisdiction to determine.''
Lord Browne-Wilkinson also observed that Lord Diplock had pointed out in Re Racal Communications Ltd  AC 374 at pp 382 - 383 that the decision in Anisminic applied to decisions of administrative [*100] tribunals or other administrative bodies made under statutory powers. In those cases, he had added, there was a presumption that the statute conferring the power did not intend the administrative body to be the final arbiter of questions of law. Indeed, Lord Diplock described Anisminic as a legal landmark. It had made possible the rapid development in the law in England of a ''rational and comprehensive system of administrative law'' on the foundation of the concept of ultra vires (p 382).
It is to be noted, however, that Lord Browne-Wilkinson concluded that not any error of law made by an administrative tribunal or inferior Court in reaching its decision can be quashed for error of law. What must be shown, he said, is a relevant error of law, that is, one which is an error in the actual making of the decision which affected the decision itself.
At one stage of his oral argument Mr Galbraith QC acknowledged that the issue came down to the question whether Anisminicapplied to commissions of inquiry. In my humble view, it must apply simply because a commission of inquiry, no less than any other statutory body, is subject to the doctrine of ultra vires. A statutory body cannot [*101] act in excess of its jurisdiction, it must exercise its jurisdiction in the sense of performing the function entrusted to it, it cannot disregard the principles of natural justice and, as is now clear, it cannot proceed on the basis of a material error of law. There can be no sound reason for exempting commissions of inquiry from this general principle. Indeed, it would be doing a disservice to "a rational and comprehensive system of administrative law" to fracture the principle. As indicated above, it must be accepted that the government, when establishing a commission of inquiry to inquire into and report upon a matter, must be presumed to expect that the commission will carry out that task in accordance with the law.
Such an approach recognises the reality that the report of a commission of inquiry may have a far-reaching impact, at times greater even than the impact of a binding decision. The report may seriously affect a person's reputation and, with that damage, affect his or her way of living and their very livelihood. The concern of the Courts to protect a person's reputation has been fully dealt with in the main judgment. It is also noted that judicial intervention correcting [*102] a material error of law may assist to resolve a matter of general public interest. Reference is made, among other decisions, to the Canadian case of Landreville v The Queen (1973) 41 DLR (3d) 574 and Landreville v The Queen (No 2) (1977) 75 DLR (3d) 380, which accepted that a commission of inquiry could be reviewed if, from a practical point of view, it would serve some useful purpose. A useful purpose would include a declaration of matters relevant to a person's reputation and the resolution of matters of general public interest.
I fully agree that declaratory relief in this case could be of value in two respects.
First, the terms of the report are damning of Mr Peters' reputation. His actions both before and during the course of the inquiry are forthrightly condemned. Some condemnation may or may not be warranted if relevant to the terms of reference but, if his reputation is to be put in issue, Mr Peters, as with any other citizen, has a right to have that condemnation based upon a correct appreciation of the law. In this case, the commissioner's apparent errors of law caused him to take a legally benign view of the Magnum transaction which in turn led to him being severely [*103] critical of Mr Peters. The link between the alleged errors of law and the condemnation of Mr Peters is, therefore, well established.
A compelling way in which to illustrate the potential impact of the commission's report is to reverse his findings and suppose that he had found, on the basis of equivalent errors of law, that the Commissioner of Inland Revenue was corrupt or incompetent. The finding would not be binding in the sense that a decision of a Court of law is binding, but the impact on the Commissioner of Inland Revenue would be devastating. His reputation would be lost. His job would be almost certainly forfeited and his career as a public servant would be ruined. His prospect of finding another job would be seriously impaired and his family life could be destroyed. It is difficult to believe that a formal decision of a Court to the same effect would have more serious consequences. It cannot be sensibly suggested that in such circumstances the Court would not have jurisdiction to review the report of the commission and issue such declaratory relief as it considered appropriate.
Secondly, there is in this case a substantial public interest in having any error of law material [*104] to the commission's report publicly declared. The government, and other members of the legislature and the Executive, are entitled to know whether, or to what extent, they can rely upon and act on the report. The Commissioner of Inland Revenue, and his department, in particular, should be able to carry out their statutory function without unnecessary errors of law being introduced into the administration of the Income Tax Act. Similarly, taxpayers are entitled to know where they stand. Complete certainty in the law is seldom possible, but in the area of tax law as much certainty as possible is clearly desirable. The opinion of a commissioner, who as a past Chief Justice enjoys considerable stature, following a hearing of up to two and a half years will almost certainly be given considerable weight, irrespective that it is not binding in the sense that the decision of a Court is binding. Indeed, the commission's report is likely to have a greater impact on the public's perception of the tax law of this country and what taxpayers can or cannot do than many, or any, decisions of this Court in that area of the law. For the commercial community, in particular, it must be of considerable [*105] importance that any error of law be corrected so that businesses are not under any misapprehension as to the taxpayer's obligation of disclosure and the scope and limits of the doctrine of form over substance.
For myself, I would not be inclined to give as much attention as is given in the main judgment to the question whether a commission of inquiry's report is reviewable following the submission of the report to the Governor-General. It is true that a commission has then completed its task and there is no longer a body or process in train to be affected by the Court's ruling. But I consider that fact to be a matter which goes to the nature of the remedy rather than the jurisdiction of the Court to undertake review or the principle on which the jurisdiction is founded. Necessarily, the only remedy likely to be appropriate is declaratory relief. The principles of judicial review must, however, remain extant whether the irregularity is discovered or challenged before or after the report has been presented. The irregularity is the same. Thus, if it is appropriate to review a commission of inquiry for breach of the principles of natural justice prior to the report it is equally appropriate [*106] to review the commission for the same breach only discovered after the report. In the same way, a material error of law will have the same import after the report as it would have before its completion. Moreover, it would be unacceptable if a commission of inquiry could avoid judicial review by refraining from making rulings, or disclosing its "rulings", during the course of an inquiry and then cement whatever errors it chose to make in its report without being susceptible to review.
Jurisdiction for the Court to review a report of a commission of inquiry for errors of law does not mean that reports of commissions of inquiry will be subject to regular and frequent judicial review. Counsel for the respondents uniformly relied upon the much overused ''floodgates'' argument. I have already pointed out that this inquiry is relatively unusual in the extent to which legal issues are intrinsic to the terms of reference. Generally speaking, the conduct of a commission of inquiry is a factual and not a legal exercise. Of course, questions of law can and do arise in the course of inquiries, but they are not generally as deep-seated as in this case. The absence of such intrinsic questions [*107] of law in a commission's terms of reference will itself limit the occasions on which review will be able to be sought for errors of law.
Further, of course, the Court has a discretion to refuse declaratory relief. I do not doubt that the Courts will be willing in the case of commissions of inquiry to exercise that discretion realistically and refuse relief where it is appropriate to do so. The realistic response of the Courts, together with the deterrent effect of the expense of proceedings and possibility of an adverse award of costs, will further deter unnecessary and ill-advised challenges to a commission's findings.
Most importantly, however, it is not all errors of law which will found jurisdiction to grant relief. The errors of law must be material. Professor Craig, having discussed R v Lord President of the Privy Council, ex parte Page (supra) in his text, P P Craig,Administrative Law (3rd ed, 1994) at p 361, emphasises that the error has to be one which affected the actual making of the decision and affected the decision itself. I would adopt that test. It ensures that the error of law must be material.
The materiality of the errors of law in question follows almost [*108] automatically from the fact, which I have already stressed that, in this particular case, legal questions were intrinsic to the terms of reference. The commissioner himself accepted that an appreciation of the Magnum transaction was critical to his inquiry. But the legal effect of that transaction could only be determined by a proper application of the law. At once the doctrine of form over substance became relevant. The true legal effect of the transaction could not be discerned unless it was looked at in the context of the whole of the contractual arrangements as stipulated in Mills v Dowdall NZLR 154. Once the legal effect of the Magnum transaction was determined, the lawfulness and competence of the Commissioner of Inland Revenue and the Director of the Serious Fraud Office (and their staff) could not then be resolved without applying the correct interpretation of s 301 of the Income Tax Act and ss 229A and 257 of the Crimes Act.
In all, but for the purported errors of law it is not possible to say that the commissioner would not have agreed with the Commissioner of Inland Revenue's assessment in 1994 that the transaction disclosed ''blatant tax avoidance''. A different [*109] interpretation of s 301 and European Pacific's obligation of disclosure could possibly have led to findings of possible evasion or fraud. Once findings to this effect had been made, or at least recognised as a serious possibility, it would not have been possible for the commissioner to make the trenchant criticism which he made of Mr Peters. Moreover, he would have necessarily approached the question of the competence of the Commissioner of Inland Revenue and the Director of the Serious Fraud Office on a different and possibly more critical basis. For these reasons I am satisfied that the errors of law, if established, must be considered material.
The Judge in the Court below was clearly concerned to ensure that an inquiry which had extended over two and a half years and which had received continuous publicity should be brought to an end. He felt that Mr Peters' proceeding would inevitably 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, he said, ''it must end now''.
The desire to see an end to this long-running and costly saga may be [*110] laudable but it cannot be allowed to infect the application of the law. Jurisdiction for the Court to grant declaratory relief exists, and Mr Peters is entitled as a matter of law to invoke that jurisdiction. It should perhaps be mentioned that the grant of declaratory relief would not mean that the inquiry would have to be repeated. Rather, it would mean no more than that the law would be confirmed and that, if the alleged errors of law are substantiated at the substantive hearing, the commission's report is to be read subject to the declarations which are made.
I would also observe that I do not accept the dire predictions of counsel for the corporate parties to the effect that the substantive hearing will be a prolonged hearing requiring considerable evidence to be heard. The hearing is not a rehearing of the inquiry, and it is difficult to see what evidence would or could be relevant. The substantive hearing will necessarily be directed to questions of law and there is no reason why such a hearing should be any less manageable than any other proceeding seeking judicial review.
I wish to associate myself with the judgments of the other members of the Court with which I fully agree. [*111]
There are two underlying issues in this appeal. The first is whether, and if so in what circumstances, the High Court may make a declaration that in its report a commission of inquiry has made an error of law. The second is whether, if the High Court has such a power, it is arguable that such a declaration should be made in this case.
As the circumstances in which these issues arise have been fully traversed in the other judgments, I can come straight to what I see as the key issue. That issue is far from hypothetical, because the Winebox Commission arguably made several material errors of law, as set out in the other judgments. There is nothing I wish to add in that respect.
I am also satisfied that such errors of law were arguably material to the challenge which Mr Peters wishes to make to the commissioner's report. Their arguable materiality lies in the fact that they appear to have been central to the conclusions of the commission upon the basis of which it roundly criticised Mr Peters. Thus the commission arguably made errors of law material to Mr Peters' reputation. That is a legitimate interest for the purposes of his seeking judicial review. If the High Court has the power [*112] to review the report of a commission of inquiry for error of law, Mr Peters' claim should be allowed to go to trial for it is arguable that he is entitled to such a review in this case.
There is no doubt that commissions of inquiry are amenable to judicial review during their currency: see Fay, Richwhite & Co Ltd v Davison  1 NZLR 517 (CA) and Controller and Auditor-General v Sir Ronald Davison  2 NZLR 278 (CA), Brannigan v Sir Ronald Davison  1 NZLR 140 (PC). Equally, there is no doubt that the grounds of such review are not confined, as is suggested to be the position following the publication of the commission's report.
The real issue in this case is not whether the report of a commission of inquiry is amenable to judicial review. It is conceded to be reviewable on two grounds. Those grounds are breach of the principles of natural justice and excess of the terms of reference. To exceed one's terms of reference is, or can be, a species of error of law. The real question concerns the extent of the grounds on which a commission's report may be reviewed. Specifically the question is whether the report of a commission of inquiry is amenable to judicial [*113] review on the basis of error of law generally. Henceforth, I will assume that the error of law in question can be shown to be material in the sense of being relevant to a legitimate interest.
I agree with the other members of the Court, for the reasons they have given, that a report of a commission of inquiry is amenable to judicial review for material error of law. The principal reason I am writing separately is to discuss further the basis for that amenability.
Ultra vires is the essential underpinning of all grounds for judicial review. This is a subject on which I wrote in O'Regan v Lousich 2 NZLR 620 at pp 626 - 630. The reason for the discussion in that case was a privative provision said to preclude judicial review. At p 626 I said:
''The concept of jurisdiction in administrative law terms has developed in recent years through a series of decisions of the House of Lords. The first was Anisminic Ltd v Foreign Compensation Commission  2 AC 147. There then followed Re Racal Communications Ltd  AC 374; South East Asia Fire Bricks Sdn Bhd v Non-Metallic Mineral Products Manufacturing Employees Union  AC 363 (this being a decision of the Privy [*114] Council); O'Reilly v Mackman  2 AC 237; and more recently Page v Hull University Visitor  1 All ER 97.
Anisminic rendered immaterial the former distinction between errors going to jurisdiction and errors within jurisdiction. It also made immaterial the previous distinction between errors of law on the face of the record and errors of law generally. This development, and those that followed, have been achieved by a widening of the concept of ultra vires: see the speech of Lord Diplock in O'Reilly at p 278 and the speech of Lord Browne-Wilkinson in Page at p 107. The widening of the concept of ultra vires has proceeded on the following basis.
Parliament grants the decision maker the power to decide on the footing that the power is to be exercised lawfully (ie correctly in law), fairly (ie according to the rules of natural justice, if applicable) and reasonably (ie within the bounds of reason the Wednesburyprinciple). If the decision maker goes wrong in law, acts unfairly or makes an unreasonable decision, the decision is regarded as having been made ultra vires and thereby the decision maker exceeds his or her jurisdiction." [*115]
After discussing an intermediate position based largely upon Lord Diplock's approach in O'Reilly v Mackman  2 AC 237, namely that mistake of law involves asking the wrong question, I said at p 627:
"The process of reasoning whereby a person misdirecting himself in law was said to have asked himself the wrong question can now be simplified into saying that a power to decide is given on the basis that it must be exercised on the correct legal basis. Thus if the decision maker errs in law the decision is ultra vires: see Lord Browne-Wilkinson's speech in Page at p 107. Thus we are back to the proposition with which I started, namely that if a decision maker goes wrong in law, acts unfairly or makes an unreasonable decision he will have acted ultra vires and in excess of jurisdiction."
That remains my view. A decision maker who errs in law acts ultra vires. The question is whether a commission of inquiry, which may not strictly be a decision maker, should be treated in the same way in respect of its report. It is clear that such a commission acts ultra vires if breaching natural justice, or if exceeding its terms of reference.
There is no logical reason to exclude error [*116] of law as a ground on which the report of a commission of inquiry can be judicially reviewed. The basis for review is ultra vires and all manifestations of such excess of power should be available as grounds of review. That brings in errors of law as well as breach of natural justice and excess of the terms of reference.
In O'Regan, after a discussion of the ambit of certiorari and what the Privy Council had said in the Erebus case (Re Erebus Royal Commission [ A.C. 808,]  NZLR 662 at p 687), I came to the conclusion at p 630, that:
". . . if a person or body wielding public powers does something unlawful and thereby affects the plaintiff's rights, the plaintiff may challenge the action of that person or body by appropriate public law proceedings. The normal procedure will be to apply for judicial review. If, for some reason, that procedure is not open, the remedies of certiorari and declaration can be sought. Conduct will be unlawful in this context if it is erroneous in law, unfair or unreasonable.''
Because of the general importance of this subject, I will now trace, in a little more detail than was necessary in O'Regan, what I there called the widening of the concept [*117] of ultra vires. I acknowledge immediately my indebtedness to the speech of Lord Browne-Wilkinson in R v Lord President of the Privy Council, ex parte Page  AC 682, with which I respectfully agree.
Three English cases are central to this development. They are: Anisminic Ltd v Foreign Compensation Commission  2 AC 147, O'Reilly, and Page. It is desirable also to mention Re Preston  AC 835 and Bulk Gas Users Group v Attorney-General NZLR 129. I shall also make reference to the latest edition of Professor Sir William Wade's book on Administrative Law.
Anisminic concerned a privative provision "no certiorari''. Lord Reid's opinion was based significantly upon the "wrong question'' approach to error of law, later developed by Lord Diplock in O'Reilly. There is no power to consider the wrong question. Therefore, error of law is a manifestation of ultra vires. Lord Wilberforce distinguished between decisions which were invalid and those that were merely erroneous, suggesting that material error of law involved invalidity rather than mere error. In these strands lay the foundation for the view that Anisminic had rendered [*118] obsolete the distinction between errors of law within jurisdiction and errors of law taking the tribunal outside jurisdiction. The step of laying to rest that distinction was taken by Lord Diplock in O'Reilly . All the other members of the House who sat agreed with him. His Lordship said at p 278 that Anisminic had:
". . . liberated English public law from the fetters that the courts had theretofore imposed upon themselves so far as determinations of inferior courts and statutory tribunals were concerned, by drawing esoteric distinctions between errors of law committed by such tribunals that went to their jurisdiction, and errors of law committed by them within their jurisdiction. The breakthrough that Anisminicmade was the recognition by the majority of this House that if a tribunal whose jurisdiction was limited by statute or subordinate legislation mistook the law applicable to the facts as it had found them, it must have asked itself the wrong question, ie, one into which it was not empowered to inquire and so had no jurisdiction to determine. Its purported 'determination', not being 'a determination' within the meaning of the empowering legislation, was accordingly [*119] a nullity."
In Preston, Lord Templeman said at p 862 that judicial review was available where a decision-making authority:
". . . exceeds its powers, commits an error of law, commits a breach of natural justice, reaches a decision which no reasonable tribunal could have reached, or abuses its powers."
That formulation, which was adopted by this Court in Miller v Commissioner of Inland Revenue  3 NZLR 664 at p 668 appears to treat excess of power and error of law as conceptually separate. But for myself, I would prefer to say that a decision maker who makes an error of law thereby exceeds his powers. Lord Templeman was clearly not endeavouring to describe clear and mutually exclusive categories, because abuse of power must, ordinarily at least, involve excess of power, yet His Lordship mentioned them separately.
The most recent step in the United Kingdom came in Page. Lord Browne-Wilkinson's speech was concurred in by Lord Keith of Kinkel and Lord Griffiths, albeit Lord Mustill and Lord Slynn of Hadley dissented, though not necessarily on the present issue. Lord Browne-Wilkinson described the fundamental principle of judicial review as being that the Courts will [*120] intervene to ensure that powers of public decision-making bodies are exercised lawfully. The power of the Courts to intervene is based on the premise that the powers of the body reviewed have been conferred on the "underlying assumption" that such powers will be exercised "only within the jurisdiction conferred". Hence, if the decision maker exercises his powers "outside the jurisdiction conferred", he is acting "ultra vires his powers and therefore unlawfully". With that introduction, His Lordship then said at p 701:
"In my judgment the decision in Anisminic Ltd v Foreign Compensation Commission  2 AC 147 rendered obsolete the distinction between errors of law on the face of the record and other errors of law by extending the doctrine of ultra vires. Thenceforward it was to be taken that Parliament had only conferred the decision-making power on the basis that it was to be exercised on the correct legal basis: a misdirection in law in making the decision therefore rendered the decision ultra vires. Professor Wade considers that the true effect of the Anisminic case is still in doubt: Administrative Law, 6th ed, pp 299 et seq. But in my judgment the decision [*121] of this House in O'Reilly v Mackman  2 AC 237 establishes the law in the sense that I have stated."
By this means, Lord Browne-Wilkinson synthesised the concepts of excess of jurisdiction and excess of powers (ultra vires).
The decision of this Court in Bulk Gas came after Anisminic and O'Reilly but before Preston and Page. In Bulk Gas, Cooke J cited extensively from Lord Diplock's speech in O'Reilly , including the passage set out above concerning the effect of Anisminic. His Honour, with whom Somers J agreed, then said at pp 135 - 136:
"In making the foregoing references to Lord Diplock's approach I have not overlooked the belief quite widely held among lawyers that even in the case of an administrative tribunal (rather than an inferior Court) there may be a rather elusive thing called 'jurisdiction' or 'area' within which there is power to determine questions of law conclusively. Those who hold to this concept often think as well that even within the umbrella the tribunal's decision on law will not be conclusive if its reasoning is apparent on the face of the record, unless protected by a privative clause.
While impressive support [*122] can be cited for that way of looking at the matter, including Anisminic itself, I doubt whether it can long survive the analysis made by Lord Diplock (whose own former adherence to a radically different approach was overruled by the House of Lords in Anisminic )."
The reasoning of the House of Lords in O'Reilly was developed and simplified by the majority of the House in Page. I think it appropriate to adopt that simplified approach in New Zealand. As I endeavoured to explain in O'Regan, it provides a symmetrical rationale for judicial review on each of the three classic heads - illegality, unfairness and irrationality. In each case, the person concerned has acted ultra vires. The power to decide, or to do what is impugned, is given on the premise that such power will be exercised lawfully, fairly and rationally. Objection has been levelled at this approach on the basis that to hold that someone has acted ultra vires may suggest that their conduct is such that they should be liable for damages, or some other civil remedy; this because, having acted outside their jurisdiction, they are not entitled to immunity from such claims. However, that view does not take [*123] account of the fact that the concept of ultra vires, as now developed, is a much more refined one than hitherto. It no longer necessarily has the pejorative connotation of the earlier usage of the expression.
This point is made in Wade & Forsyth's Administrative Law (7th ed, 1994), to which I shall refer further below. Furthermore, most, if not all, relevant immunities are drafted or interpreted so as to apply unless there is bad faith (ie knowledge that you are acting ultra vires or at least recklessness in that respect). In addition, reviewability does not of itself imply liability for damages or other civil relief. Indeed the law has to date set its face against financial remedies for administrative law error made in good faith. Nothing I have written is intended to suggest a departure from that stance.
The analysis which I have adopted finds support in Wade & Forsyth. The authors discuss the doctrine of ultra vires at pp 41 - 49. The whole discussion is relevant. I will endeavour to summarise it and keep citations to a minimum. The authors commence by saying that the simple proposition that a public authority may not act outside its powers (ultra vires) might [*124] fitly be called the central principle of administrative law. They then observe that the ultra vires principle, as developed, has many ramifications and in some respects has attained "a high degree of artificiality". An act which for any reason is ultra vires is often described as being outside jurisdiction, albeit jurisdiction in this context usually means simply power, sometimes the power to decide. But generally the words "jurisdiction" and "power" are interchangeable. An ultra vires act has no legal effect.
The next step the authors take is to observe that the technique by which the Courts have extended judicial control of powers is by expanding (they say "stretching") the doctrine of ultra vires. In protecting the citizen against abuse of power, the Court's sole weapon is the doctrine of ultra vires. The Courts have no constitutional right to interfere with action taken within the powers granted. If an action is intra vires, it is authorised by its enabling instrument and the Court has no power to treat it as unlawful. This essentially is the difference between judicial review and appeal.
The authors say that it is for this constitutional reason that the doctrine of ultra [*125] vires has "become so artificial in some of its applications". The Judge is on safe ground in intervening only if the impugned conduct can be regarded as ultra vires. Thus, all grounds for review, including errors of law, must ultimately be regarded as manifestations of the doctrine of ultra vires. Unless this is so, the Court itself will be powerless to act. Then follows this important passage at pp 44 - 45:
"It is at this point that artificiality becomes a problem. From time to time the judicial mind rebels against the misuse of language which is seemingly involved in saying that, for example, a minister who acts on wrong considerations or without giving someone a fair hearing is acting outside his jurisdiction. It is tempting to call this, in words which will be quoted later, 'a wrong exercise of a jurisdiction which he has, and not a usurpation of a jurisdiction which he has not'. Sometimes, therefore, judges will say that errors such as improper motives or breach of natural justice do not involve excess of jurisdiction. But then they forget that, if this were correct, they would have no title to condemn them. Every administrative act is either intra vires or ultra vires; and [*126] the court can condemn it only if it is ultra vires.
Judicial unfamiliarity with the 'basic English' of administrative law has been the cause of some confusion. Relatively seldom do the courts feel it necessary to expound the analysis of ultra vires in its more subtle applications. But the House of Lords has done so in several important modern decisions, which put the matter beyond doubt. In Ridge v Baldwin [ AC 40], a leading case on natural justice, the House held that the dismissal of a chief constable, being vitiated by failure to give him a fair hearing, was void, and from that it follows inexorably that it was outside jurisdiction, ie ultra vires. In the Anisminic case, one of the high-water marks of judicial control, the House similarly held that a tribunal's decision was a nullity if it misunderstood the law and so took account of wrong factors.''
The authors express the view at p 45 that in Page the House of Lords ''strongly confirmed this analysis, holding that any error of law rendered a tribunal's decision ultra vires". They then sum up their analysis in the following way at p 46:
"There is therefore no escape from the principle of ultra vires. But the [*127] notion that so many kinds of errors all involve excess of jurisdiction is highly sophisticated and puts a strain upon the language conventionally used. It is the word 'jurisdiction' which is the stumbling-block here; if 'power' were substituted, there would be less difficulty. Judges sometimes think of 'jurisdiction' as meaning merely the authority to inquire into and determine a case, as opposed to what is done in the course of the proceedings. This narrower sense of the term has caused trouble in another context, as will appear later. In general, however, the courts adhere firmly to the wide meaning of 'jurisdiction' since this is the sheet-anchor of their power to correct abuses."
Against the background of ultra vires being the central pillar of judicial review, I return to the present case. The report of a commission of inquiry is conceded to be subject to judicial review for breach of natural justice and excess of the terms of reference (excess of jurisdiction in the old sense). If a commission breaches natural justice or exceeds its terms of reference, it acts ultra vires. Decision makers in the conventional sense similarly act ultra vires when making errors of law. I can see [*128] no sufficient reason why the report of a commission of inquiry should not be reviewed for material error of law (as a species of ultra vires) in the same way as it can be reviewed for breach of natural justice and excess of jurisdiction (themselves other species of ultra vires). Indeed, it would be illogical to allow review for some manifestations of ultra vires and not another. That is why I am unable to accept the submission of the respondent and other parties that the accepted grounds for judicial review of a commission's report should not be expanded to include error of law.
In real and practical terms, while a commission of inquiry may not have made a decision binding in law, its report can, as is argued here, have a major effect on a participant's reputation; that being an interest which the law will protect. If a reputation has been impugned on an erroneous legal basis the law should permit review and relief to the extent appropriate.
The extent to which, if at all, error of fact can constitute ultra vires conduct, and thus provide a basis for review, does not arise and can be left for decision to another day. It is, however, worthy of note that in the Erebus case at p [*129] 671 Lord Diplock, speaking for the Privy Council, considered a finding of fact made without any probative evidence to support it, amounted to a breach of natural justice, rather than the more conventional classification of such a situation as error of law. Either classification, however, represents a species of ultra vires, and it would seem consistent to require error of fact to be at the level of ultra vires (whether as an error of law or as a breach of natural justice or indeed as irrationality) before intervention on review is justified.
On the basis of the foregoing discussion, I am of the view that the High Court may declare that a commission of inquiry has made an error of law in its report if the plaintiff shows that the error is sufficiently material, either to a private interest of the plaintiff or to the public interest, to warrant intervention by the Court. Here the appellant, Mr Peters, as intending plaintiff has shown it to be arguable that the commission made errors of law and that they are sufficiently material to the private interest which he has in his reputation to warrant intervention by the High Court. It follows that his statement of claim was wrongly struck out. [*130] I agree that the appeal should be allowed on the terms stated in the judgment of Richardson P, Henry and Keith JJ.
Solicitor for the appellant: D J Gates (Whangaparaoa).
Solicitors for the respondent: Meredith Connell & Co (Auckland).
Solicitor for the Bank of New Zealand Ltd: Solicitor, Bank of New Zealand Ltd (Wellington).
Solicitors for Fay Richwhite & Co Ltd: Russell McVeagh McKenzie Bartleet & Co (Auckland).
Solicitors for the European Pacific Corporation Ltd: Rudd Watts & Stone (Auckland).
Solicitors for Brierley Investments Ltd: Bell Gully (Auckland).
Solicitor for the Serious Fraud Office: Solicitor, Serious Fraud Office (Auckland).
Solicitor for the Inland Revenue Department: Chief Counsel, Inland Revenue Department (Wellington).
Solicitor for the appellant: D J Gates (Whangaparaoa).
Solicitors for the respondent: Meredith Connell & Co (Auckland).
Solicitor for the Bank of New Zealand Ltd: Solicitor, Bank of New Zealand Ltd (Wellington).
Solicitors for Fay Richwhite & Co Ltd: Russell McVeagh McKenzie Bartleet & Co (Auckland).
Solicitors for the European Pacific Corporation Ltd: Rudd [*131] Watts & Stone (Auckland).
Solicitors for Brierley Investments Ltd: Bell Gully (Auckland).
Solicitor for the Serious Fraud Office: Solicitor, Serious Fraud Office (Auckland).
Solicitor for the Inland Revenue Department: Chief Counsel, Inland Revenue Department (Wellington).
Solicitor for the appellant: D J Gates (Whangaparaoa).
Solicitors for the respondent: Meredith Connell & Co (Auckland).
Solicitor for the Bank of New Zealand Ltd: Solicitor, Bank of New Zealand Ltd (Wellington).
Solicitors for Fay Richwhite & Co Ltd: Russell McVeagh McKenzie Bartleet & Co (Auckland).
Solicitors for the European Pacific Corporation Ltd: Rudd Watts & Stone (Auckland).
Solicitors for Brierley Investments Ltd: Bell Gully (Auckland).
Solicitor for the Serious Fraud Office: Solicitor, Serious Fraud Office (Auckland).
Solicitor for the Inland Revenue Department: Chief Counsel, Inland Revenue Department (Wellington).