Key Points:

The spy scandal that engulfed senior civil servant Bill Sutch had its final chapter today with the release of his Security Intelligence Service (SIS) file which vindicates him and provides relief for his family.

"On the basis of the SIS documents released, there was no evidence to convict him in 1974 and there is none now," his daughter Helen Sutch said.

She said her father had a distinguished career and made an immense contribution to economic, intellectual and cultural life in New Zealand.

"Our family hopes that justice can now be done to that historic legacy, which has been overshadowed for so long by events in the last year of his life," she said.

The Sutch case came at the time of the so-called Cold War globally. In 1974, after some meetings with a Russian diplomat, Dr Sutch was charged under the Official Secrets Act with obtaining information that would be helpful to an enemy.

The left-wing historian and former head of the Department of Industries and Commerce was acquitted at a trial in February 1975, and died of liver cancer in September the same year.

The family of Dr Sutch said that research since 1975 has established that there was nothing of relevant interest in the United Nations Relief and Rehabilitation Administration (UNRRA) files, the FBI and the Australian Security Intelligence Organisation (ASIO) files, and no mention of Dr Sutch in the two published volumes of Mitrokhin files from Russia.

The released SIS file contained little new information about the events of 1974, but did reveal some disturbing aspects of the way the SIS was working at the time, Ms Sutch said.

"In reading the file, one can see how easily SIS assumptions, often based on uninformed, unattributed, and untested opinions, with little or no understanding of context, have been turned in the dark into `facts'.

"At the same time, the openly expressed opinions and actions of others have been held against them and misinterpreted."

The file includes a long assessment written at that time which concludes that Dr Sutch was effectively a spy, despite the fact that during his 66 years "we have accumulated six files on Sutch, and yet can prove nothing of which he is suspected."

The family said they found this statement to be a remarkable assertion.

The family also finds misinterpretation and bias in an unattributed report dated January 16, 1943 that looks back on the period in which Dr Sutch was working for Gordon Coates, a conservative minister of finance.

It states that "it was generally accepted as a fact that Sutch was in no small measure responsible for some of the more important legislation, much of it of a socialistic nature, passed between 1933 and 1935, in particular the Reserve Bank of New Zealand Act 1933 and the Mortgage Corporation of New Zealand Act 1934."

Ms Sutch questions the idea that the Reserve Bank Act was "socialistic".

The SIS also released a declassified Top Secret Annex to the report by the then chief ombudsman Sir Guy Powles, covering his investigation into the SIS in 1976. This report made no judgment as to Dr Sutch's guilt or innocence but was strongly critical of SIS actions as unlawful.

Sir Guy Powles said that there were some aspects of the case which were "disturbing". Information had been obtained by breaking in to Dr Sutch's office and the tapping of his telephone which were clear breaches of the law. The agency had a duty to comply with the law.

In breaking the law the SIS was subverting the very values it existed to protect, Sir Guy said.

He also noted that the SIS knowingly permitted the then prime minister, Norman Kirk, to issue a press statement saying telephone tapping was not used in gathering evidence in the case, knowing this to be misleading.

The family said it hoped that the release of the file signals a new period of openness and transparency in government.

The Official Secrets Act was replaced by the Official Information Act in 1982, which presumes that information should be open unless a strong case can be made for its protection, for instance on grounds of privacy or commercial confidentiality.

The family said that the SIS has continued to operate in secrecy, influencing the lives and careers of New Zealanders who still have no way of knowing what has been said about them or checking the accuracy of the statements on SIS files.

Ms Sutch called for greater access for all New Zealanders to their files, at least those files dating from the Cold War period.

The family's lawyer, John Edwards, said the family was relieved that the files had been released.

Dr Sutch went to Russia and spoke admiringly of some of the practices the Soviets had undertaken but there was never any evidence that he was disloyal to New Zealand.

He called for an opening of other SIS files during the Cold war period and also during the 1981 Springbok tour.

The family did not plan to take any further action on the matter.