FEDERAL COURT OF AUSTRALIA
Hua Wang Bank Berhad v Commissioner of Taxation [2013] FCAFC 28
Place: | Sydney |
Division: | GENERAL DIVISION |
Category: | Catchwords |
Number of paragraphs: | |
Solicitor for the Applicant: | Henry Davis York |
Counsel for the Respondent: | Mr MA Wigney SC with Dr J Jacques |
Solicitor for the Respondent: | Australian Government Solicitor |
Counsel for the proposed Intervener: | Mr M Gronow |
Solicitor for the proposed Intervener: | Stewart Peters Lawyer |
IN THE FEDERAL COURT OF AUSTRALIA | |
| Applicant | |
AND: | Respondent |
DATE OF ORDER: | |
WHERE MADE: |
THE COURT ORDERS THAT:
1. The applicant’s application for leave to appeal be dismissed.
2. The applicant pay the respondent’s costs as agreed or taxed.
3. The interlocutory application, dated 18 September 2012, by the Independent State of Samoa for leave to intervene or to be heard as amicus curiae be dismissed, with no order as to costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
NEW SOUTH WALES DISTRICT REGISTRY | |
GENERAL DIVISION | NSD 1383 of 2012 |
BETWEEN: | HUA WANG BANK BERHAD Applicant
|
AND: | COMMISSIONER OF TAXATION Respondent
|
JUDGES: | LOGAN, JAGOT AND ROBERTSON JJ |
DATE: | 13 MARCH 2013 |
PLACE: | SYDNEY |
REASONS FOR JUDGMENT
THE COURT
INTRODUCTION
1 These proceedings in the Full Court concern orders made by the primary judge on 17 and 20 September 2012. By those orders the primary judge dealt with interlocutory applications served by the applicant on 20 June 2012 in relation to a notice to produce. Those orders being interlocutory, leave to appeal is necessary. That application for leave to appeal by Hua Wang Bank Berhad (the Bank) has been referred to the Full Court. The hearing of the application for leave to appeal included full argument on the merits of the appeal if leave were granted.
2 The Bank, in its written submissions, states that it seeks to appeal from part of the decision below, concerning the primary judge’s refusal to set aside portions of a notice to produce in circumstances where compliance with the notice would require employees of the Bank to breach the criminal law of Samoa. The respondent Commissioner identifies as a principal issue the nature of the Court's discretion to set aside or vary a notice to produce served on a party to proceedings where compliance with that notice may involve the commission of a crime under the laws of a foreign country (in this case Samoa). The respondent Commissioner says that the primary judge accepted that compliance with the notice to produce would involve the Bank and its staff committing an offence under the International Banking Act 2005 (Samoa) (International Banking Act) but declined to set aside or amend the relevant paragraphs of the notice to produce.
3 Also referred to the Full Court is an interlocutory application filed by the Independent State of Samoa to intervene or to be heard as amicus curiae in the Bank’s application for leave to appeal and, if leave is granted, in the appeal. We refused that application. At the end of this judgment we give our reasons for that refusal.
PROPOSED GROUNDS OF APPEAL
4 The proposed grounds of appeal, as amended by leave granted during the hearing in the Full Court are as follows:
1. The Court misconceived the nature of the discretion, which is a discretion that should only be exercised in circumstances that are ‘exceptional’ (per Federal Treasury Enterprises v Sojuzplodoimport [sic] [2007] FCAFC 43 at [15], followed in Suzlon [sic] v Bangad [2011] FCA 1152 at [48]-57;
2. The Court erred in principle by holding that the state of Samoa has no ‘compelling sovereign interest’ in the enforcement of its laws regarding international banking;
3. The Court took into account an irrelevant consideration, being the absence of evidence that the relevant Samoan criminal law is enforced.
4. The Court failed to take into account the following mandatory considerations:
(i) That the Appellant had agreed to voluntary production of records relating to those customers whose transactions were at issue in NSD 653/2011;
(ii) Whether there was proportionality between an order for production of the entirety of the Appellant’s records and customer lists for the years 2003 – 2007, and the likely probative value of this evidence in the Part IVC appeal;
(iii) That the proceedings were effectively foist upon the Appellant when the Respondent obtained ex parte freezing orders in respect of the entirety of the Appellant’s Australian assets; and
(iv) The interests of the Appellant’s customers in the maintenance of their confidentiality.
5 A ground that the Court erred because there is a privilege that prevents a corporation from being compelled to commit an offence for which its officers and employees can suffer criminal liability was abandoned.
BACKGROUND
6 So far as relevant, we adopt the primary judge’s statement of the background:
[4] The present litigation … arises from the issue by the Commissioner of notices of assessment to the various taxpayers on 12 August 2010. Each of the taxpayers is a foreign corporation. For the relevant income years the Commissioner has assessed the taxpayers for income tax on profits made on the purchase and sale of shares listed on the Australian Stock Exchange. The taxpayers contest this, submitting, inter alia, that they were not residents for Australian tax purposes. Additionally two of the taxpayers – Hua Wang Bank and Bywater Investments – argue that they had no beneficial interest in the shares in question, which they held merely as trustees …
[5] At the same time as the Commissioner issued the notices of assessment he also sought from this Court, and obtained, freezing orders against the taxpayers restraining them from dealing with certain parcels of shares: Deputy Commissioner of Taxation v Hua Wang Bank Berhad (2010) 273 ALR 194; [2010] FCA 1014; leave to appeal refused in Hua Wang Bank Berhad v Deputy Commissioner of Taxation (2010) 81 ATR 66; [2010] FCAFC 140.
[6] These orders remain in place although they have been subject, over time, to some variations.
[7] The taxpayers then lodged with the Commissioner… objections to the assessments …
[8] Before the Commissioner had concluded his deliberations on the objections he applied for, and obtained, summary judgment against each of the taxpayers on the basis of the non-contestable nature of a notice of assessment: Deputy Commissioner of Taxation v Hua Wang Bank Berhad (No 2) (2010) 81 ATR 40; [2010] FCA 1296.
[9] Having obtained those judgments he then sought to enforce the judgments against certain assets held by the taxpayers in Australia. These proceedings took the form of charging summonses against shares held by the taxpayers in ASX-traded shares.
[10] In the meantime the Commissioner had rejected the taxpayers’ objections on 30 March 2011 and thereafter the taxpayers commenced appeal proceedings in this Court under Part IVC of the Taxation Administration Act …
…
7 The notice to produce was dated 11 May 2012 and served on the solicitors on the record for the Bank, which is the applicant in the proceedings under Pt IVC of the Taxation Administration Act 1953 (Cth).
8 The paragraphs of the notice to produce which remain in issue are as follows:
3. Bank statements for Hua Wang Bank Berhad for the period 1 July 2003 to 30 June 2007.
4. General ledgers for Hua Wang Bank Berhad for the period 1 July 2003 to 30 June 2007.
5. Cash book for Hua Wang Bank Berhad for the period 1 July 2003 to 30 June 2007.
7. All correspondence and written records of conversations, including telephone conversations, between:
7.1 Hua Wang Bank Berhad, its directors and employees;
7.2 Vanda Gould;
7.3 Peter Borgas;
7.4 Ian Gowrie-Smith; and/or
7.5 Asiaciti Trust, its director and employees:
in respect of Hua Wang Bank Berhad including, but not limited to, transactions undertaken by Hua Wang Bank Berhad on behalf of other entities.
10. All documents evidencing the related persons or entities listed on the undertaking for depositor acceptance accompanying the renewal of Hua Wang Bank Berhad’s banking licence for the period 1 July 2003 to 20 June 2007.
11. The full list of names of depositors provided by Hua Wang Bank Berhad annually to the Inspector of International Banks for the period 1 July 2003 to 30 June 2007.
13. All documents lodged with the Minister of Finance or Inspector of International Banks to obtain approval for Hua Wang Bank Berhad to operate a wholly owned finance subsidiary, Hua Wang Finance Limited.
9 The reasons of the primary judge said to disclose error are at [64] to [81].
10 Sections 38(1), (4), (5) and 39(1) of the International Banking Act provide:
38.(1) Except as required by or provided for under the laws of Samoa, every person commits an offence who –
(a) divulges information, in Samoa or elsewhere, which the person has become aware of in the person’s capacity as an officer, employee, or authorised agent of a licensee, or as an officer or employee of an approved auditor, in relation to –
(i) any international banking business transacted in or from within Samoa;
(ii) the transfer of money and property into or out of Samoa in the course of any international banking business; or
(iii) the account of any person with a licensee or any item of such an account or the fact of any person having, or having had such an account; or
(b) attempts to induce any other person to breach professional confidentiality in relation to any such matters.
…
(4) Nothing in this section shall prevent the Court from requiring any person to give evidence or produce documents in any proceedings in the Court of any facts relevant in those proceedings that the person could otherwise be required to give or produce.
(5) Every person who commits an offence under this section shall be liable upon conviction to imprisonment for a term not exceeding 5 years, or to a fine not exceeding 50,000 dollars or both.
39.(1) For the purpose of section 38, an offence by an officer or employee of a licensee or of an auditing company, as the case may be, or by a person after termination of the person’s employment as an officer or employee of a licensee or of an auditing company, as the case may be, whether such offence occurs in Samoa or elsewhere, shall be deemed also to be an offence by that licensee or by that auditing company, as the case may be.
11 Apart from the issue of the effect of Samoan law, no separate argument was addressed to us, and no proposed ground of appeal related to, the primary judge’s rejection, in relation to paragraphs 3, 4, 5 and 7 of the notice to produce, of the Bank’s claim to redact details of transactions conducted on behalf of customers, details of the Bank’s customers, customer names and references to customers.
CONSIDERATION
12 The first questions which require an answer are: is there an error of principle in the exercise of discretion by the primary judge and if so what is that error of principle?
13 We would discourage as likely to lead to error the substitution for the terms of a statutory discretion other words said to constitute the test. We note the consideration of the meanings of discretion in Norbis v Norbis (1986) 161 CLR 513 at 518-519. We also regard as apposite the following observation by Kirby J in Oshlack v Richmond River Council (1998) 193 CLR 72 at [134], albeit said in relation to the discretion to award costs:
Although appellate courts should avoid the imposition of rigid requirements which would gloss the statute and narrow the discretion afforded to the donees of the statutory power, they retain a function to guide those who are obliged to exercise cost discretions. Such guidance may be afforded by referring in general terms to the considerations which the decision-maker can take into account. Such considerations may be listed for the avoidance of arbitrariness and inconsistency in such decisions. They are not intended to confine the decision-maker to a rigidly mechanical approach. Arbitrariness and inconsistency would be potentially unjust and therefore undesirable. Mechanical rigidity would amount to an abdication of the discretion afforded to the decision-maker in large terms.
[Citations omitted]
14 In the present case the relevant discretion is in r 1.34 of the Federal Court Rules 2011 which provides that the “Court may dispense with compliance with any of these Rules, either before or after the occasion for compliance arises”. The relevant rule from which the Bank sought dispensation from compliance is r 30.28(3) which provides that a party served with a notice to produce as specified must produce the documents in accordance with the notice.
15 For the reasons set out below, we do not regard the invocation of “exceptional circumstances” as necessary or appropriate; the question can be no more than whether the primary judge paid due regard to the important principle of comity. Thus we reject the Bank’s submission that the primary judge’s decision is attended by sufficient doubt because the Court “did not articulate and then apply the ‘exceptional circumstances’ test”.
16 Assuming in favour of the Bank that it is necessary or appropriate to apply any gloss to the exercise of the discretion under the Federal Court Rules 2011 to set aside a notice to produce, the expression “exceptional circumstances” seems to be derived from obiter dicta in Société Eram Shipping Co Ltd v Compagnie Internationale de Navigation [2004] 1 AC 260 with reference to the judgment of Hoffmann J in Mackinnon v Donaldson, Lufkin and Jenrette Securities Corporation [1986] Ch 482 where a plaintiff in an English action had obtained an order against an American bank, served on its London office, requiring production of books and papers at its New York head office. Hoffmann J held at 493:
In principle and on authority it seems to me that the court should not, save in exceptional circumstances, impose such a requirement upon a foreigner, and, in particular, upon a foreign bank. The principle is that a state should refrain from demanding obedience to its sovereign authority by foreigners in respect of their conduct outside the jurisdiction.
And at 494 the judge said:
The need to exercise the court’s jurisdiction with due regard to the sovereignty of others is particularly important in the case of banks. Banks are in a special position because their documents are concerned not only with their own business but with that of their customers. They will owe their customers a duty of confidence regulated by the law of the country where the account is kept. That duty is in some countries reinforced by criminal sanctions and sometimes by ‘blocking statutes’ which specifically forbid the bank to provide information for the purpose of foreign legal proceedings: compare section 2 of our Protection of Trading Interests Act 1980. If every country where a bank happened to carry on business asserted a right to require that bank to produce documents relating to accounts kept in any other such country, banks would be in the unhappy position of being forced to submit to whichever sovereign was able to apply the greatest pressure.
17 These decisions were cited in Suzlon Energy Ltd v Bangad [2011] FCA 1152; (2011) 198 FCR 1 at [30]-[54], a judgment on which the Bank relied before the primary judge for the proposition that courts are unwilling to affirm a notice to produce that requires a foreign bank to disclose matters confidential to its clients in breach of foreign law. It is in our view noteworthy that the expression “exceptional circumstances” was not in terms used by the Court in disposing of the interlocutory applications in Suzlon Energy Ltd.
18 In Australian Securities Commission v Bank Leumi Le-Israel (1996) 69 FCR 531 at 552 it was held by the Full Court that “it is no light matter to enforce Australian laws in circumstances which infringe the legislative policies of other countries”. Nevertheless, the Full Court was satisfied that the exercise of discretion in that case was one reasonably open to the trial judge.
19 This approach is consistent with that taken by the Full Court in Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International NV (2007) 157 FCR 558. The primary judge in that case had made orders staying the proceeding until a foreign state, the Russian Federation, provided discovery. This was done on the basis that the Russian Federation, although not a party to the proceeding, was the “real” contradictor standing behind the respondents. The Full Court at [12] said that “a significant factor for consideration was the potential impact of the proposed order upon the Russian Federation which is not a party to the proceedings and is also, of course, a foreign state”. At [21] the Full Court said that the order complained of could be seen to affect a sovereign state; comity dictated that caution be exercised before making the order; and that the learned primary judge did not exercise the caution necessary before making an order effectively requiring the Russian Federation to undertake the process of discovery, with the consequence that the exercise of discretion by the trial judge was amenable to judicial review consistent with the principles in House v The King (1936) 55 CLR 499. The Full Court did not apply the expression “exceptional circumstances” in so concluding. The Full Court referred at [15] to Arhill Pty Ltd v General Terminal Company Pty Ltd (1990) 23 NSWLR 545 and Stemcor (Australasia) Pty Ltd v Oceanwave Line SA [2004] FCA 391.
20 Arhill (1990) 23 NSWLR 545 dealt with leave to serve subpoenas outside the jurisdiction. The issue was service on a Japanese company which was not a party to the proceeding. In that context, Rogers CJ Comm D said at 551 that a “foreigner, resident abroad, will not lightly be subjected to a local jurisdiction”, reference being made to Mackinnon [1986] Ch 482 in support of that statement.
21 Stemcor [2004] FCA 391 involved an equivalent fact situation in which a party sought leave to serve a subpoena on a non-party who was resident outside the jurisdiction. Justice Allsop, as he then was, applied the approach in Arhill (at [12]) and noted at [13] that the Court would not lend its aid to a process which was no more than an “empty threat” given that the Court could not enforce compliance on pain of punishment with any such subpoena.
22 Waller v Freehills (2009) 177 FCR 507 at 529, on which the Bank relied to support its proposition of a distinction between curial and administrative processes, cannot be read as establishing any rigid separation between the principled approach apposite to each discretionary exercise, whatever label be attributed thereto. No complaint was or could properly be made about the reasoning of Hely J in Bank of Valletta v National Crime Authority (1999) 164 ALR 45; [1999] FCA 791 at [48]-[57], which makes the point that decisions about subpoenas and notices to produce (in a curial context) provide a relevant analogy for cases involving the defence of a reasonable excuse for not complying with an examination summons (in an administrative context). The primary judge in the present case applied the same approach at [72] of his reasons for judgment and did not err in so doing. Thus we reject the Bank’s submission that there was an error of principle in [72] in conflating the question of reasonable excuse for non-compliance with a regulatory notice issued by an administrative agency with the principles that inform a decision by a court to compel a breach of law in a foreign country under the laws of that country.
23 In Suzlon Energy Ltd (2011) 198 FCR 1, on which the Bank placed substantial reliance, the jurisdiction of the Court over the foreign resident was in dispute. An attempt was made to use the process of serving a subpoena on the foreign resident to obtain documents which could be adduced in support of the existence of a prima facie case, being a foundational fact required to be proved in an application to serve an originating application (that is, to commence proceedings against) a foreign person outside the jurisdiction. In that context, reference was made to the approach in Mackinnon [1986] Ch 482.
24 The Bank stressed the statement at [47] that the principles identified in Mackinnon [1986] Ch 482 are not affected by the fact that it was a non-party sought to be served. According to the Bank, this meant that the principles applied to a party, such as itself. The problem for the Bank is that the principle articulated in Mackinnon [1986] Ch 482 involved, at a general level, a subpoena demanding obedience by “foreigners in respect of their conduct outside the jurisdiction” and, at a specific level, a subpoena to a local branch of an international bank purporting to require production of documents relating to conduct outside the jurisdiction held by a foreign branch of the bank.
25 The Bank also relied on Gao v Zhu [2002] VSC 64. In that case, an application was made by the Bank of China to set aside a subpoena that had been served on it by the plaintiff. The Bank of China was a non-party and the evidence was that the documents were held at the Shanghai Branch of the bank. Justice Habersberger referred to Arhill (1990) 23 NSWLR 545 and said at [13] “ … it is clear … that regardless of which Shanghai branch the documents may be at, what was being sought was an infringement of the sovereignty of the People’s Republic of China. The subpoena was an attempt to compel a foreigner, under threat of punishment for contempt, to produce documents in respect of conduct outside the jurisdiction”. After referring to the general rules stated by Hoffman J in MacKinnon [1986] Ch 482, Habersberger J said there was nothing to suggest that there were any exceptional circumstances in the present case. His Honour set aside the subpoena to the Bank of China.
26 It will be apparent from this analysis that none of the cases to which reference was made involve facts analogous to the present. In the present case the notice to produce was to the Bank, a party who is present in and, indeed, commenced proceedings in the jurisdiction. As the appeal statement discloses, the conduct which caused the Bank to commence the proceeding involves the disallowance of the Bank’s objection to the Commissioner’s notices of assessment of taxation payable on gains from dealing in shares listed on the Australian Stock Exchange. While the documents of the Bank may well be located outside this jurisdiction and in Samoa by reason of the requirements of the International Banking Act (ss 11(1) and 26(1) in particular), it cannot be said that the facts are comparable to those in Mackinnon [1986] Ch 482, Arhill (1990) 23 NSWLR 545, Stemcor [2004] FCA 391, Suzlon Energy Ltd (2011) 198 FCR 1 or Gao [2002] VSC 64. The facts do not involve a requirement for production by a foreigner or a person who disputes the jurisdiction of the court in respect of conduct outside the jurisdiction. The Bank is a person who has invoked the court’s jurisdiction and at least the foundational conduct to which the proceeding relates was within the jurisdiction. Because the essential issue is the control of the Bank in order to determine the issue of residency, conduct outside the jurisdiction is also relevant, as the primary judge found at [62].
27 For these reasons the principle of “exceptional circumstances” (assuming there is such a principle in terms) is not engaged on the facts of the present case. Thus we reject the Bank’s submission that the decision of the primary judge is attended by sufficient doubt because the decision is incongruous with the outcomes from two allegedly highly analogous cases, being Federal Treasury Enterprise (FKP) Sojuzplodoimport (2007) 157 FCR 558 and Suzlon Energy Ltd (2011) 198 FCR 1.
28 The principle which is engaged is the need for caution where there is an intrusion upon the sovereignty of a foreign state, it being no light matter to enforce Australian laws in circumstances which infringe the legislative policies of other countries, in this case, the International Banking Act which provides in s 38 for the commission of an offence by any person divulging banking information other than to the Supreme Court of Samoa, the offence being punishable by up to 5 years imprisonment and/or a fine (see the primary judgment at [65]). These circumstances dictated that the primary judge proceed with caution. Assuming, for this purpose, that it is open to the Bank to appeal on the basis that the primary judge failed to proceed with caution (such a ground not being apparent from the draft notice of appeal), it cannot be said the primary judge’s reasons lend any support to that view.
29 The primary judge was aware that the Bank’s application was not to set aside the whole of the notice to produce but, rather, to produce more limited documents with customer details masked. The primary judge was sensitive to the issue of customer confidentiality which most likely attends banking records (at [64]). His Honour also expressly recognised that caution was required, posing the issue for resolution in these terms at [71]:
The requirement that a party before this court should be required, on pain of being held in contempt, to do an act which would constitute a criminal offence under the laws of another country necessarily requires one to pause.
30 In the balancing exercise then carried out the primary judge also posed and answered a series of questions as follows at [75]:
What matters are relevant? First, there is the matter of comity: “It is no light matter to enforce Australian laws in circumstances which infringe the legislative policies of other countries” (Australian Securities Commission v Bank Leumi Le-Israel (Switzerland) (1996) 69 FCR 531 at 552 per Lehane J (Lockhart and Foster JJ agreeing)); secondly, there is the nature and significance of the proceedings which are before this court. Are the documents located in Australia or the country whose criminal laws prevent production? Do the proceedings have an element of public interest about them? How serious are they? (cf Bank of Valetta at [49] per Hely J). Thirdly, what is the nature of the foreign law in question? Does it have any application in the country in question or does it, in terms, only apply to foreigners? (See Australia and New Zealand Banking Group Ltd v Konza (2012) 289 ALR 286; [2012] FCA 196 at [80]–[100] per Lander J.) Fourthly, it is relevant to consider whether production of the material would carry with it a risk of undermining significant interests of the State involved.
31 In the face of these reasons it cannot be said that the primary judge failed to apply the principled approach of caution required when it is sought to enforce Australian laws in circumstances which infringe the legislative policies of other countries. We reject proposed ground of appeal 1 as providing a basis for leave to appeal.
32 The Bank’s other substantive arguments are equally unpersuasive. Contrary to the Bank’s submission, the primary judge did not hold that Samoa has no compelling sovereign interest in the enforcement of its laws regarding international banking. There was no evidence sought to be adduced before the primary judge about the role or importance of international banking to Samoa. The primary judge in fact held at [77] as follows:
I accept the importance of comity but it must be informed too, so it seems to me, by the fact that by definition none of the customers of the Bank can be resident in Samoa. That is not to say that respect to these laws is not to be afforded; merely that it makes it impossible either [sic] to identify much by way of a compelling sovereign interest for Samoa itself in the matter.
33 In other words, given that the Bank could not have customers resident in Samoa (and, we interpolate, the lack of any other evidence of particular interest to Samoa in the Bank’s conduct) the primary judge did not see “much by way of a compelling sovereign interest for Samoa itself in the matter”. This conclusion was reasonably open given the state of the evidence before the primary judge. We reject proposed ground of appeal 2 as providing a basis for leave to appeal.
34 The Bank next contended that at [78] the primary judge took into account an irrelevant consideration, being the absence of evidence that the relevant Samoan criminal law is enforced. The Bank accepted that there was no such evidence but submitted that “international comity and the principle of restraint do not depend on the adduction of such proof”. The Bank submitted that the nature of comity was one that depended “simply on the existence of the competence of judicial and legislative acts within the territory limits of a different country”. There was no authority that says that laws can simply be assumed not to operate in the absence of evidence or that such evidence was necessary. This argument was supported by reference to Mackinnon [1986] Ch 482 at 499.
35 Contrary to the Bank’s submission, in Suzlon Energy Ltd (2011) 198 FCR 1 there was expert evidence, which was taken into account by the Court, as to the enforcement of the foreign law: see the report at [34] and following. Further, we would not regard the likelihood or otherwise of Samoa enforcing its criminal sanctions as a prohibited consideration, particularly in light of s 39(4) of the International Banking Act whereby the Supreme Court of Samoa’s processes for requiring any person to give evidence or produce documents stand outside what would otherwise be the prohibitions in that section. In effect the primary judge was commenting on the paucity of the evidence as to the reality of the risk to the Bank. This was something which the Bank itself advanced before this Court in terms of its committing a criminal act exposing it to the possibility of losing its banking licence and exposing it and its officers and employees to criminal liability. We reject proposed ground of appeal 3 as providing a basis for leave to appeal.
36 Nor did the primary judge fail to consider the various matters as the Bank alleged. The passing reference during the hearing before the primary judge by the Bank to a willingness to produce far more limited banking records hardly constituted a matter which the primary judge was bound to consider. Having rejected the Bank’s attempts to argue that the notice was too wide (at [62]ff) there was no need for the primary judge to deal expressly with another approach mentioned by the Bank in the course of submissions, the effect of which would have been contrary to that which the primary judge had already found. Contrary to the terms of the proposed ground of appeal, we would not take the offer, referred to only in the transcript by counsel in the course of his submissions, to amount to an agreement by the Bank to voluntary production of records relating to certain customers.
37 The primary judge dealt with the issue of the width of the notice to produce in the context of the relevance of the material to the proceeding as a whole (again, at [62]ff). Hence, it cannot be said that the primary judge failed to consider the issue of proportionality.
38 We are unable to see why the assertion that the proceeding was “effectively foist upon” the Bank by reason of the Commissioner obtaining ex parte freezing orders in respect of the whole of the Bank’s Australian assets was a matter the primary judge was bound to consider. The Bank elected to commence the proceeding, as it was entitled to do, and in that context was served with the notice to produce.
39 Finally, and as already noted, the primary judge considered the issue of customer confidentiality at [64].
40 We therefore reject proposed ground of appeal 4 as providing a basis for leave to appeal.
41 In our opinion, none of the proposed grounds of appeal have substance. Nor, given the factual circumstances, can it be said that the primary judge failed to act in accordance with the requirement for a cautionary approach as a matter of principle.
42 For these reasons it cannot be said that the decision of the primary judge is attended with any real doubt. Nor is substantial injustice, should leave to appeal be refused, apparent. First, the decision involved the exercise of a discretion relating to an interlocutory matter of practice. Second, the attempts failed to elevate the decided cases to a level of principle other than that comity requires a cautionary approach in circumstances where there is enforcement in Australia of laws which infringe the legislative policies of other countries. Third, the attempts to identify inconsistencies between the decided cases also failed. Fourth, no substantive rights have been determined. All that is being sought is that the Bank, having invoked this Court’s jurisdiction, now conduct itself in accordance with the requirement that a party may require production of apparently relevant documents. As Hoffmann J said in Mackinnon [1986] Ch 482 at 494, “[i]f you join the game you must play according to the local rules” later noting, at 495, that of course a party may be excused from having to produce a document on the grounds that this would violate the law of the place where the document is kept but, in principle, there was no reason why a party should not have to produce all discoverable documents wherever they are. The primary judge appears to have been saying as much when he observed at [76] that:
These are proceedings brought in Australia by the Bank which directly raise as an issue the relationship between it and its customers. On the one hand it seeks to prove that the profits which were made in its name were not made by it but by its customers; on the other it contends that any testing of that proposition by the person who it has sued would involve an infringement of Samoan law. Perhaps in an ordinary bank this might involve no unfairness but in a bank which is not permitted to have resident Samoan depositors and whose only customers, at least so far as some of the evidence tends to suggest, are necessarily clients in some way of Mr Gould, this does not appear to be fair.
43 Whatever original misstatement there was in the primary judge’s reference to Mr Gould in [64] which read “It emerged during argument that the beneficial owner was Mr Vanda Gould” and which was then corrected to read “It emerged during argument that many members of this class are clients of Mr Gould”, the point his Honour was making was sound. Weighing up these circumstances with the other material led to the conclusion at [80] that:
On balance I regard the interests favouring production as outweighing those protecting the Bank from Samoan law.
44 This conclusion was reasonably open and not attended by any error of principle. Accordingly, it cannot be subject to appellate interference.
45 For these reasons, leave to appeal should be refused. No reason was advanced why the applicant Bank should not pay the costs of the respondent Commissioner. Our order is that leave to appeal is refused with costs.
THE APPLICATION BY THE INDEPENDENT STATE OF SAMOA
46 As to any appeal resultant from a grant of leave, the intervention application of the Independent State of Samoa was made pursuant to r 36.32 of the Federal Court Rules 2011 (Rules). That rule and its accompanying notes provide:
36.32 Applications to intervene
(1) A person who was not a party to the proceeding in the court appealed from may apply to the Court for leave to intervene in an appeal.
(2) The person must satisfy the Court:
(a) that the intervener’s contribution will be useful and different from the contribution of the parties to the appeal; and
(b) that the intervention would not unreasonably interfere with the ability of the parties to conduct the appeal as they wish; and
(c) of any other matter that the Court considers relevant.
Note 1 The role of the intervener is solely to assist the Court in resolving the issues raised by the parties.
Note 2 The Court may give leave to the intervener to intervene on conditions, and with the rights, privileges and liabilities (including liabilities for costs), determined by the Court.
Note 3 When giving leave, the Court may specify the form of assistance to be given by the intervener and the manner of participation of the intervener and, in particular:
(a) the matters that the intervener may raise; and
(b) whether the intervener’s submissions are to be oral, in writing, or both.
47 Part 35 of the Rules, which makes separate provision in respect of applications for leave to appeal, does not contain an equivalent of r 36.32 expressly directed to a grant of leave to intervene in such an application. That absence of specific provision may well have its origins in the rarity of such applications at that stage in litigation. Be that as it may, there is a generic rule, r 9.12, with respect to intervention which is apt to cover so much of the intervention application as relates to the leave to appeal application. Rule 9.12 is directed to applications for leave to intervene in a “proceeding”. For the purposes of the Rules (qv r 1.51 and Sch 1, Dictionary), “proceeding” bears the same meaning as it does in the Federal Court of Australia Act 1976 (Cth), where it is defined (s 4) in a way which includes any proceeding in this Court, including a proceeding which is incidental to or in connection with a proceeding as well as an appeal. Such is the width of this definition that it undoubtedly includes an application for leave to appeal. Indeed, given the explicit reference to “appeal” in the definition, r 36.32 is, in a sense, otiose, but can be seen to serve the useful purpose of highlighting the practice to follow in relation to a stage in litigation when intervention applications are more frequently encountered than at the leave to appeal stage.
48 The criteria set out in r 9.12(2) as relevant to a grant of leave to intervene in a proceeding are not materially different to those which r 36.32(2) makes relevant to whether to grant leave to intervene in an appeal. The context in which those criteria fall for application is, of course, different. Even so, in the circumstances of this case, where submissions in respect of whether leave to appeal should be granted are being treated as submissions in respect of any resultant appeal, there is no need separately to address whether, for example, leave to intervene in the application for leave to appeal might be refused without prejudice to the granting of leave to intervene in any resultant appeal. The upshot in relation to the intervention application in this case is that the Court has a discretion to exercise. The exercise of that discretion is informed by whether the would-be intervener answers the criteria set out in the rule. Those criteria are open-ended in the sense that they are limited only by considerations relevant in the circumstances of a given case.
49 The Rules do not make express provision in relation to an amicus curiae. Instead, it is an incident of this Court’s exercise of judicial power that, it may, as a matter of discretion, afford a hearing to a legal practitioner, usually counsel, who has offered to assist the Court as to the law, practice or procedure governing the particular proceeding before the Court. The end to which that practitioner’s appearance is directed is not partisan but rather the interests of justice in the deciding of a proceeding according to law, from whence is derived the term applicable to such a practitioner, an amicus curiae, a friend of the court. Even though that practitioner may, on occasion, have been retained on the instructions of a person who has an interest in some aspect of the litigation to extend that offer to the Court, that person neither thereby becomes a party to the litigation if the Court decides to hear that practitioner nor does the role which that practitioner may permissibly discharge as an amicus change to a partisan one.
50 It was convenient both to the Court, the parties and the Independent State of Samoa for the latter’s application to be dealt with at the outset of the hearing. Permitting the Independent State of Samoa either to intervene or for counsel retained on its instructions to be heard as amicus was opposed by the Commissioner but supported by the Bank. We had the benefit of considering written submissions in respect of the application, which were filed in advance of the hearing by the Independent State of Samoa and the parties. Neither the Independent State of Samoa nor the parties made in oral submissions any substantial addition to the issues raised for consideration in relation to the application by those written submissions.
51 Guidance as to matters of general principle in relation to an application of the kind made by the Independent State of Samoa was provided in Roadshow Films Pty Ltd v iiNet Ltd [2011] HCA 54, (2011) 284 ALR 222 (the iiNet Case) at [2] to [4] and [6], where the High Court stated:
2 In determining whether to allow a non-party intervention the following considerations, reflected in the observations of Brennan CJ in Levy v Victoria (1997) 189 CLR 579 at 600–605; [1997] HCA 31, are relevant. A non-party whose interests would be directly affected by a decision in the proceeding, that is one who would be bound by the decision, is entitled to intervene to protect the interest likely to be affected. A non-party whose legal interest, for example, in other pending litigation is likely to be affected substantially by the outcome of the proceedings in this court will satisfy a precondition for leave to intervene. Intervention will not ordinarily be supported by an indirect or contingent affection of legal interests following from the extra-curial operation of the principles enunciated in the decision of the court or their effect upon future litigation.
3 Where a person having the necessary legal interest can show that the parties to the particular proceedings may not present fully the submissions on a particular issue, being submissions which the court should have to assist it to reach a correct determination, the court may exercise its jurisdiction by granting leave to intervene, albeit subject to such limitations and conditions as to costs between all parties as it sees fit to impose.
4 The grant of leave for a person to be heard as an amicus curiae is not dependent upon the same conditions in relation to legal interest as the grant of leave to intervene. The court will need to be satisfied, however, that it will be significantly assisted by the submissions of the amicus and that any costs to the parties or any delay consequent on agreeing to hear the amicus is not disproportionate to the expected assistance.
…
6 In considering whether any applicant should have leave to intervene in order to make submissions or to make submissions as amicus curiae, it is necessary to consider not only whether some legal interests of the applicant may be indirectly affected but also, and in this case critically, whether the applicant will make submissions which the court should have to assist it to reach a correct determination. Ordinarily then, in cases like the present where the parties are large organisations represented by experienced lawyers, applications for leave to intervene or to make submissions as amicus curiae should seldom be necessary or appropriate and if such applications are made it would ordinarily be expected that the applicant will identify with some particularity what it is that the applicant seeks to add to the arguments that the parties will advance.
52 In Sharman Networks Ltd v Universal Music Australia Pty Ltd (2006) 155 FCR 291, at [7] to [9] (Sharman Networks), a case which arose when the Court’s practice was governed by the Federal Court Rules 1979 (former Rules), the Full Court made the following observations in relation to the terms amicus curiae and intervener and the distinction between them:
7 There can be a degree of confusion in the use of the terms “amicus curiae” and “intervener”. At the extremes, the distinction is clear enough. Where a court invites a legal practitioner to assist it by ensuring that its attention is drawn to all relevant law and arguments, the legal practitioner is an amicus curiae, not an intervener. On the other hand, where a person’s interests may be affected by the outcome, the person, if permitted by the court, becomes an “intervener”, not an amicus curiae.
8 There is, however, a large intermediate area. A non-lawyer entity may seek to become involved in litigation. It may be an official body, such as the Australian Competition and Consumer Commission or the Australian Securities and Investments Commission (we leave to one side any special statutory power to intervene or to apply for leave to intervene). It may be an organisation that puts itself forward as acting in the public interest. The Amici so characterised themselves. Yet a further class of case is illustrated by an industry, trade or professional association, whose members’ interests may be affected, directly or indirectly, by the outcome of the litigation.
9 While it is easy to see the first of these three intermediate categories as comprising entities acting in the public interest, entities in the second and third classes may be acting, to various degrees, both in the public interest and in private interests.
At the time when Sharman Networks was decided, the equivalent in the former Rules of r 6.32 was O 52, r 14AA. The latter was cast in like terms to r 36.32. That means that those observations remain pertinent, as does the following, further observation by the Full Court in that case:
12 It would be inconsistent with the obvious intention of the rules for a non-lawyer entity to be free to seek leave to be heard as amicus curiae outside the comprehensive framework now provided by O 6, r 17 and O 52, r 14AA.
53 The Independent State of Samoa submitted that it had a direct interest in the outcome of an appeal by the Bank for two reasons:
(a) as a Sovereign State, it had a direct interest in the operation and enforcement of its own banking secrecy laws; and
(b) it considered that the decision under challenge by the Bank, if permitted to stand, could have a negative impact on the Samoan banking industry and economy.
That direct interest, it was submitted, was evident from the reference by the primary judge to considerations of comity and to the prospect that an order for production would entail a breach by employees of the Bank of obligations found in s 38 and s 39 of the International Banking Act. In developing that submission, the Samoan State submitted that it was uniquely able, as a Sovereign State, to make submissions and to lead evidence about:
(a) the purpose and effect of the laws on Samoa and its banking industry;
(b) the importance of maintaining banking secrecy and confidentiality for banks registered in Samoa; and
(c) the importance of the banking industry for the Samoan economy, including providing employment, Government revenue and foreign exchange.
It will be noted that the application extended to seeking to introduce evidence which was not before the primary judge.
54 The Independent State of Samoa has no direct legal interest of the kind described in the authorities quoted above either in the substantive taxation appeal or in the related taxation recovery proceeding. The Bank is neither an emanation of the Independent State of Samoa nor even does any emanation of that country, e.g. a sovereign wealth fund, assert any investment interest in the Bank. Resolution of the Australian federal revenue law dispute, one way or the other, affects no interest of the Independent State of Samoa. No issue in the recovery proceeding in respect of a debt due to the Commonwealth and payable to the Commissioner created by any assessment will affect any interest of the Independent State of Samoa. There is no other pending litigation involving the Independent State of Samoa which might be affected by the outcome of either the taxation appeal or any tax recovery proceeding.
55 We did not dismiss its intervention application on the basis of an absence of this kind of direct interest in the substantive proceedings, for the Independent State of Samoa did not assert any such interest. The focus of its asserted interest was narrower, confined to the interlocutory controversy between the Bank and the Commissioner in relation to the notice to produce. We accept that it would be possible under the Rules to confine a grant of leave to intervene just to the leave to appeal application and any resultant appeal. Axiomatically, given the breadth of the discretion, it would be possible alternatively to confine hearing from an amicus just to the hearing of the Bank’s application.
56 Even so narrowed, the interest of the Independent State of Samoa can, in terms of the authorities, nonetheless be seen to be an indirect, rather than a direct, legal interest. As we have observed, the Bank is not an emanation of the Independent State of Samoa. It is not the Independent State of Samoa which is the subject of the production obligation. That country will not in any way be bound by the Court’s decision in respect of compliance by the Bank with the notice to produce. Neither the Independent State of Samoa nor any emanation thereof is a party to other pending litigation which would be “likely to be affected substantially” by the outcome of the decision in respect of the notice to produce. This Court’s decision in respect of the notice to produce could not in any way prohibit the Independent State of Samoa from taking such proceedings as it saw fit in Samoa either under the International Banking Act or otherwise in respect of documents produced to this Court and made available to the Commissioner pursuant to that notice. Further, the courts of Samoa will in no way be bound by any interpretation which this Court gives to the meaning and effect of the International Banking Act in the course of determining the production controversy.
57 Of course the Independent State of Samoa has an interest, in Samoa, in the adherence to and enforcement of its laws, including the International Banking Act. The Bank has already drawn attention to this interest before the primary judge. That is a relevant consideration in the balancing exercise, described above, which attends this Court’s practice and procedure in relation to a notice to produce in circumstances such as the present. That an interest of this nature is relevant does not thereby mean that the International Banking Act forms part of the law of Australia. Nor does it mean that, in this country and in the leave to appeal application, the interest of the Independent State of Samoa is, in terms of the categorisation of interests for the purposes of an intervention application, other than indirect. A way of highlighting why that interest is indirect is to contrast it with that of Australia in relation to the notice to produce. Australia’s interest is in the determination in Australia of a controversy arising under its revenue law by an exercise of Australian judicial power according to the practice and procedure of this Court, which includes provision for the production on notice of documents to the Court on the initiative of Australia’s chief revenue officer, the Commissioner, who is necessarily a party to the substantive proceeding. The Commonwealth of Australia will be bound by a judicial determination of the document production controversy. Australia’s interest is qualitatively different to that of the Independent State of Samoa and is direct.
58 Because the interest of the Independent State of Samoa arising from the International Banking Act is only indirect and has already been highlighted by the Bank before the primary judge, granting it leave to intervene would not, in terms of r 36.32(2)(a) be either “useful” or materially different from the Bank’s contribution.
59 That the Independent State of Samoa wishes to supplement the evidence led before the primary judge as to its interest does not convert its interest from an indirect to a direct one. That wish is though relevant to whether intervention would, in terms of the rule, constitute an unreasonable interference with the ability of the parties to conduct the leave to appeal application and any consequential appeal as they would wish.
60 That the Independent State of Samoa may not have been aware of the interlocutory proceeding concerning the notice to produce is one thing, that further evidence concerning the nature and extent of its interest could not, with reasonable diligence by the Bank have been led before the primary judge is another. Evidence as to the importance for the Independent State of Samoa of its banking laws and their purpose and effect could and should have been led before the primary judge by the Bank, if so advised. Self-evidently, the Independent State of Samoa would have been willing to furnish such evidence to it upon request, had the Bank seen fit to request the same. As it is, the proposal on the part of the Independent State of Samoa to lead such evidence on intervention carries with it the prospect of a need to resolve matters of factual controversy, given the disposition of the Commissioner to challenge some of that evidence. That prospect carries with it the undesirable feature of seeking to engage three judges in a task usually consigned for good reason to a court constituted by a primary judge sitting alone. Though that course is promoted by the Bank, pursuing it would deprive the Commissioner of contesting the leave to appeal application and any resultant appeal against the background of the evidence led before the primary judge. The Court must take account of the wishes of both parties and of the forensic context in which those wishes arise. Here, so far as the Bank is concerned, that necessarily includes a failure to introduce a particular body of evidence before the primary judge.
61 In support of its intervention application, the Independent State of Samoa made reference to the Australia Samoa Tax Information Exchange Agreement (Tax Information Treaty), which came into force in February 2012. That such a treaty exists is testimony to the good relations that exist between the Independent State of Samoa and Australia. Yet, as its submission acknowledged, the Tax Information Treaty has retrospective application only to information for the years from 2010 onwards. The tax appeal concerns income years prior to 2010. Even if there were a relevant treaty between Australia and Samoa affording the Commissioner access to documents and data of the kind the subject of the notice to produce it would not follow from this that the Commissioner could avail himself of this treaty to gather information for use in a pending proceeding in this Court. At least in the absence of an explicit or necessarily implicit indication to the contrary, Australian domestic legislation adopting and applying the Tax Information Treaty would not be construed so as to authorise conduct which would otherwise be a contempt of court: Commissioner of Taxation v De Vonk (1995) 61 FCR 564.
62 For these reasons, we were not persuaded that the application by the Independent State of Samoa for leave to intervene should be granted.
63 As to the amicus application, there is no want of legal representation by the parties to assist the Court with submissions as to the relevant legal principles or their application to the facts at hand. That tells against taking up the offer of assistance from counsel retained on the initiative of the Independent State of Samoa.
64 The Commissioner sought costs in respect of the dismissal of the application made by the Independent State of Samoa. The international relations ramifications of one sovereign state seeking costs against another, which are entailed in that application, are matters for the Executive Government, not the Court, to weigh up. The Independent State of Samoa is not a party to the proceeding but we accept that the power to award costs extends to the awarding of costs against a non-party. There is an “event” in the sense that expression is used in relation to the exercise of the costs discretion in that the application of the Independent State of Samoa has been dismissed on each of the bases upon which it has been made. In resisting costs, the Independent State of Samoa pointed to the interest which it has arising from the International Banking Act and the reasons for the enactment of that legislation.
65 Though we have classified its interest as indirect, that does not mean that the interest of the Independent State of Samoa was gratuitous. Further, as the iiNet Case nicely highlights, it does not invariably follow that costs follow the event in respect of intervention or amicus applications. That may well be a reflection of public interest considerations which can attend such applications. The public interest in the deciding of a case according to law can, at times, be facilitated by an amicus coming forward to offer assistance. That public interest would not be served if costs generally followed the event in cases where such an application was unsuccessful. Having regard to the criteria set out in r 36.32, public interest considerations also intrude in relation to whether to grant leave to intervene. We do not consider that these are served by an invariable application of a practice derived from inter partes litigation whereby costs usually follow the event. Rather, whether or not to award costs in such applications, if they are sought, calls for the making of a judgment in the circumstances of the particular case. In this case, as we have observed, the application of the Independent State of Samoa was not gratuitous. Its hearing occupied very little of the time allocated for the hearing of the leave to appeal application. In part, that was a reflection of the prior preparation and filing of written submissions and these did put the Commissioner to the expense of preparing written submissions in reply. The written submissions of the Independent State of Samoa were, however, succinct and the hearing of its application was efficiently conducted by its counsel, who did not engage in any repetition. In the circumstances of this case, we consider that the interests of justice are served by making no order as to costs.
ORDERS
66 We make the following orders:
1. The applicant’s application for leave to appeal be dismissed.
2. The applicant pay the respondent’s costs as agreed or taxed.
3. The interlocutory application, dated 18 September 2012, by the Independent State of Samoa for leave to intervene or to appear as amicus curiae be dismissed, with no order as to costs.
I certify that the preceding sixty-six (66) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Logan, Jagot and Robertson. |
Associate:
