FEDERAL COURT OF AUSTRALIA

Deputy Commissioner of Taxation v Shi (No 2) [2019] FCA 503

ORDERS

THE COURT ORDERS THAT:

1.    The amended interlocutory applications dated 9 April 2019 filed in proceedings NSD 2193 of 2018 and NSD 2194 of 2018 are dismissed.

2.    Pursuant to rule 2.32(4) of the Federal Court Rules 2011 (Cth), Mr Dan Oakes of the Australian Broadcasting Corporation, have leave to inspect the following documents:

(a)    affidavit of Mr Aris Zafiriou sworn in proceeding NSD 2193 of 2018 on 26 November 2018 and the exhibits thereto; and

(b)    affidavit of Mr Aris Zafiriou sworn in proceeding NSD 2194 of 2018 on 26 November 2018 and the exhibits thereto.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

STEWARD J:

1    By two amended interlocutory applications dated 9 April 2019, the respondents seek orders, pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth) (the “Act”), that two affidavits sworn in these proceedings by Mr Aris Zafiriou and the accompanying exhibits, or portions thereof, not be published or otherwise disclosed, except to the parties to these proceedings. In response to a request for inspection of those affidavits and exhibits by the Australian Broadcasting Corporation (the “ABC”), the respondents also sought orders that this request be refused, in whole or in part.

Legislative Provisions

2    The applicable legislative regime is as follows.

3    Section 17(1) of the Act provides that:

Except where, as authorised by this Act or another law of the Commonwealth, the jurisdiction of the Court is exercised by a Judge sitting in Chambers, the jurisdiction of the Court shall be exercised in open court.

4    Part VAA of the Act, modifies this general rule, and is concerned with suppression and non-publication orders. Section 37AE of the Act, which is within Part VAA, provides:

In deciding whether to make a suppression order or non-publication order, the Court must take into account that a primary objective of the administration of justice is to safeguard the public interest in open justice.

5    The power to make suppression or non-publication orders is found in s 37AF of the Act. It is in these terms:

(1)    The Court may, by making a suppression order or non-publication order on grounds permitted by this Part, prohibit or restrict the publication or other disclosure of:

(a)    information tending to reveal the identity of or otherwise concerning any party to or witness in a proceeding before the Court or any person who is related to or otherwise associated with any party to or witness in a proceeding before the Court; or

   (b)    information that relates to a proceeding before the Court and is:

(i)    information that comprises evidence or information about evidence; or

    (ii)    information obtained by the process of discovery; or

    (iii)    information produced under a subpoena; or

    (iv)    information lodged with or filed in the Court.

(2)    The Court may make such orders as it thinks appropriate to give effect to an order under subsection (1).

6    The Court may make orders pursuant to s 37AF on the grounds prescribed by s 37AG. That section provides as follows:

(1)    The Court may make a suppression order or non-publication order on one or more of the following grounds:

(a)    the order is necessary to prevent prejudice to the proper administration of justice;

(b)    the order is necessary to prevent prejudice to the interests of the Commonwealth or a State or Territory in relation to national or international security;

   (c)    the order is necessary to protect the safety of any person;

(d)    the order is necessary to avoid causing undue distress or embarrassment to a party to or witness in a criminal proceeding involving an offence of a sexual nature (including an act of indecency).

(2)    A suppression order or non-publication order must specify the ground or grounds on which the order is made.

7    Subject to any applicable order of this Court, r 2.32(2) of the Federal Court Rules 2011 (Cth) gives a non-party an ability to inspect certain documents. That does not include affidavits. However, pursuant to r 2.32(4), a non-party may seek from the Court leave to inspect a document that the person is not otherwise entitled to inspect. The ABC seeks that leave in relation to the two affidavits and their exhibits.

Background

8    The applicant, the Deputy Commissioner of Taxation (the “Commissioner”), has issued assessments for income tax, GST and penalties against a group of individuals and companies. To collect the tax assessed, the Commissioner has instituted two sets of proceedings in this Court: one to seek judgment against the individuals in relation to their tax liabilities; and one seeking to wind up the companies. At an ex parte hearing held last year before Yates J on 27 November 2018, senior counsel for the Commissioner read and relied upon the two affidavits of Mr Zafiriou, who is employed by the Australian Taxation Office as the Director, Significant Debt Management, in support of an application for freezing orders and for the appointment of provisional liquidators. When he did so the Court was closed. Both affidavits were comprehensive. In aggregate, the exhibits to those affidavits comprised thousands of pages of documents. They include audit reports, transcripts of interview, briefing documents, other reports, tax returns, and the like.

9    The way the affidavits were used or deployed before Yates J is important to the case put by the respondents in support of their interlocutory applications. According to the transcript of the hearing, as supplemented by the recollection of senior counsel for the Commissioner who appeared before Yates J (the accuracy of whose memory was properly not disputed), this is what occurred:

(a)    An order was first made to close the Court.

(b)    Senior counsel stated that he relied on the two affidavits as well as their exhibits. His Honour asked for copies.

(c)    His Honour then decided to stand the matter down to enable him to read the affidavits and invited counsel, upon returning, to take the Court to the salient points.

(d)    Before temporarily adjourning, when asked by senior counsel if his Honour would like to see the exhibits, his Honour said “I should have access to the exhibits”.

(e)    The exhibits were then supplied electronically on a “USB”.

(f)    After about two hours, the Court resumed. His Honour said “I’ve read that material”. Senior counsel then took the Court through each affidavit. For that purpose, he did not need to refer the Court to any exhibits. The exhibits were also not referred to in the Commissioner’s written submissions.

10    Yates J made the freezing orders sought and appointed provisional liquidators. His Honour also made orders pursuant to s 37AF that the contents of each application, the originating process in each proceeding, the affidavits, the transcript and the orders of the Court not be published or disclosed for one day. Confidentiality for one day was needed to facilitate the execution of search warrants by the Australian Federal Police and the issue of assessments and departure prohibition notices by the Commissioner on 28 November 2018.

11    Yates J published reasons for decision on 30 November 2018: Deputy Commissioner of Taxation v Shi [2018] FCA 1915; Deputy Commissioner of Taxation v Ausmart Services Pty Ltd [2018] FCA 1912. In his Honour’s reasons for decision, it was not necessary for Yates J expressly to refer to any exhibit, or to the contents of any exhibit.

Interlocutory Applications

12    The respondents originally sought to suppress the two affidavits on the ground that disclosure would prejudice the proper administration of justice due to ongoing investigations into the respondents, or some of them, by, amongst others, the Australian Federal Police and by Australian Border Force. Before me that claim was abandoned. Instead, the respondents relied on a novel point, not previously considered by this Court. For that purpose, it was said that the focus would be on the application for leave under r 2.32, but that the principles relating to whether to suppress documents under s 37AF of the Act would be relevant in accordance with what Wheelahan J had said in Conway v Fernandez (No 2) [2018] FCA 1975. At [12], his Honour said:

No application for a suppression order, or a non-publication order was made by any of the parties at the hearings on 3 and 4 December 2018. However, I shall treat the parties’ objections to access to the affidavits as applications for a suppression or non-publication order pursuant to s 37AH(1) of the Federal Court of Australia Act, as Rangiah J did in similar circumstances in Baptist Union of Queensland v Roberts [[2015] FCA 1068;] (2015) 332 ALR 79 at 82 [9]. …

13    The respondents accepted that where an affidavit has been read in open court and used and deployed, ordinarily this Court would grant access to it by a third party. As Pagone J said in Deputy Commissioner of Taxation v Hawkins [2016] FCA 164; (2016) 341 ALR 255 at [9]:

Affidavits and exhibits which have been read in proceedings are treated as evidence that has been given orally in open court and should generally be available for inspection by anyone wishing to do so unless the interests of justice require otherwise. … The purpose and rationale for allowing inspection is at least in part to enable members of the public to see why and how the Court had disposed of matters before it. That will usually mean that materials which have been used or deployed by the court will be available for inspection by any member of the public unless there is a countervailing reason not to allow inspection: see Seven Network Ltd v News Ltd (No 9) (2008) 148 FCR 1, [25]-[27]. …

The foregoing is an example of the “open justice” principle, explained by Pagone J in Hawkins in these terms at [7]:

Members of the public do not have an unfettered right to inspect the documents in the proceeding but may be given leave to inspect documents pursuant to r 2.32(4) of the Federal Court Rules 2011 (Cth). The ability of members of the public, whether or not they have an interest, to have access to court documents is an important aspect of the general principle of open justice. Section 17(1) of the Federal Court of Australia Act 1976 (Cth) provides that the jurisdiction of the Court “shall be exercised in open court” except where authorised by law to be exercised by a judge sitting in chambers, and the objective of the administration of justice “to safeguard the public interest in open justice” is made an express requirement to be considered under s 37AE when deciding whether to make a suppression or non-publication order. The general principle of open justice is a fundamental aspect of the administration of justice, the rule of law and of public accountability. The ability to enjoy the incidents of open justice, including the right to ability to inspect documents, is not dependent upon a person having a specific legal right in relation to the proceeding or in relation to the parties to the proceeding. Similarly the enjoyment of those incidents is not limited to those with a [disinterested] curiosity in the proceeding or the administration of justice more generally.

14    In contrast, where an affidavit is not read or admitted into evidence, the “open justice” rule is not engaged. As Sackville J observed in Macquarie Radio Network Pty Ltd v Australian Broadcasting Authority [2002] FCA 1408 at [21]:

Of course, the position may well be different where leave is sought to inspect affidavits that have not been read in open court. For example, as Santow J recognised in eisa Ltd v Brady [[2000] NSWSC 929], there is a risk of serious injustice if untested allegations contained in affidavits or pleadings can be published to the world at large without the usual constraints of defamation law applying. …

See also Hawkins at [9] quoting Oldham v Capgemini Australia Pty Ltd [2015] FCA 1149 at [27] per Mortimer J.

15    The respondents submitted, however, that there was a conflict in the authorities as to when an affidavit should be taken to have been “used or deployed”. It was said that some authorities favoured the view that once an affidavit had been admitted into evidence, it should ordinarily be accessible to members of the public. Other authorities, it was said, suggested that more was needed: the affidavit and its exhibits needed to be used or deployed in some way. For the former proposition, the respondents cited Seven Network Limited v News Limited (No 9) (2005) 148 FCR 1, where Sackville J said at [27]:

… it seems to me that unless the interests of justice require otherwise, this Court would ordinarily take the view that a non-party should have access to all non-confidential documents and other material admitted into evidence. I say “ordinarily” because the circumstances of each case will vary and the exercise of the discretion under O 46, r 6 of the Rules will have to take into account the particular circumstances of the case. I agree with Ms Adamson’s submissions to the extent that a convenient touchstone for determining the question of access by non-parties is whether the documents or other material have been admitted into evidence. In general, the application of this principle will serve the interests of open justice. In particular, access to the documentary evidence can be expected to be helpful to a person seeking to understand or explain the proceedings, or to evaluate the Court’s determination of the issues arising in the proceedings (cf, Evidence Act 1995 (Cth), ss 55, 56 (stating the test of relevance)). The approach I favour accords, for example, with Practice Note SC Gen 2 of the Supreme Court of New South Wales, which provides that access will normally be granted to non-parties in respect of material that has been admitted into evidence. I do not read anything said by Spigelman CJ in John Fairfax v Ryde Local Court as inconsistent with this approach.

16    For the latter proposition, the respondents cited Hawkins. The respondents pressed for the acceptance of the proposition that admission into evidence was insufficient to trigger the “open justice” principle. More was needed. An affidavit and its exhibits had to be used somehow in open court. They had to be referred to in submissions, in argument or in a judgment. Where, it was said, a particular exhibit had not been so used, the “open justice” principle was not engaged. There was no need for third parties to inspect such a document in order to understand the judgment of the Court.

17    Here, the respondents accepted that access should be granted to each affidavit, but not to the accompanying exhibits. It was submitted that the exhibits were not “used or deployed”. They were not referred to in the Commissioner’s written submissions, they were not referred to in argument before Yates J (save once in passing), and they are not referred to in the judgments. It was therefore unnecessary for a third party to inspect the exhibits in order to comprehend those judgments.

18    I respectfully disagree with that contention for two reasons.

19    First, in my view the affidavits and their exhibits were not just admitted into evidence; they were also used and deployed. Yates J took the affidavits and exhibits away when the proceedings were stood down. His Honour then read them. Inferentially, he did not read every page. He could not do so in two hours. But they were deployed before him. I have no doubt that he looked at the exhibits. Inferentially, his Honour did so in order to be satisfied that what Mr Zafariou said in his affidavits was accurate. Upon returning to the bench his Honour said: “I’ve read the materials”.

20    In Australian Competition and Consumer Commission v ABB Transmission and Distribution Limited (No. 3) (includes orders dated 22 May 2002) [2002] FCA 609, Finkelstein J observed that the ancient common law rule is that civil actions must be heard in open court. However, changes in the way civil litigation is now conducted have undermined that principle. At [4]–[5], his Honour said:

… When the rule that court proceedings should be open to the public was first developed the manner in which most cases were conducted gave content to the rule. When the case was called on counsel for the plaintiff would begin by outlining the nature of the claim that bought the parties before the court. He would then summarise the evidence to be led, making references, in more or less detail, to relevant documents. Oral evidence would then be called from the witnesses. The defendant’s case followed a similar path. The case would conclude with oral arguments. Members of the public who exercised their free right of access could discover what the case was about, though they might not always follow the submissions on the law.

Now things are different. In the belief that the resolution of civil cases will be more efficient and no less fair than in the past (a view which is not universally held) parties are required to submit their evidence in chief in the form of affidavits or written statements (with exhibits) together with written outlines of their submissions both on the facts and the law, well before the hearing. The efficient judge will read the material in private and when the hearing begins will usually announce that fact to the parties, thus relieving them of the burden of reading out evidence and rehearsing their arguments. Oral evidence will usually be confined to the cross-examination of key witnesses. To the bystander who has not read the affidavits, this evidence will be largely meaningless. Counsel’s arguments will be limited to expanding points already made in the written submissions, and will make little sense to any person not familiar with the detail. One unintended result is that the rule of open justice will not fully expose what has taken place in court. Much of what now occurs is no different from a court sitting in private.

21    His Honour then observed that when evidence is read in private by a judge in her or his Chambers, the need for that evidence to be made available for inspection by the public was all the more compelling. At [7], his Honour said:

The question that I must resolve is what principle should be applied when deciding whether to allow inspection in cases where leave is required. In giving the answer I propose to confine myself to those cases where a non-party seeks access to material which has been relied upon by the judge. In such a case I have no doubt that the proper approach is that access should be allowed unless the interests of justice require a different course. It is only by adopting this approach that, in a practical sense, the principle of open justice will be preserved. Put differently, in my view there is a strong presumption in favour of allowing any member of the public who wishes to do so to inspect any document or thing that is put into evidence. Inspection should only be refused in exceptional circumstances. I think that the position is a fortiori when the material has been read by the judge in private and is not read out in court. If that material is not made available for inspection then the manner in which the case has been conducted will only be known to the parties. That is an unacceptable position.

(Emphasis added.)

See also Hawkins at [10].

22    I respectfully agree with, and adopt, the foregoing reasons. The exhibits were used here because, I infer, they were “relied” upon by Yates J. His Honour read them, or parts of them, in private. Accordingly, it is all the more important that access be granted to those affidavits and their exhibits to the public, and here the ABC. Access will afford the public a proper opportunity to enable his Honour’s reasons for issuing the freezing orders and appointing provisional liquidators to be understood.

23    Secondly, I doubt whether there is any conflict in the authorities as suggested by the respondents. When an affidavit is tendered into evidence, and read and relied upon, it has been deployed or used. Deployment does not import any greater requirement than that. It does not mean that for the “open justice” principle to apply every exhibit must be expressly referred to in some way. If that were so, the respondents’ argument would then march uncontrollably to the deployment or non-deployment of each line of every affidavit, and then to each word of each line.

24    The consequences of acceptance of the respondents’ contention supports the conclusion I have reached. It is not uncommon for affidavits to be filed in this Court of some length. It is not uncommon for the exhibits to be numerous. It is then not uncommon for parts, if not large parts, of an affidavit and its exhibits, to play no, or a limited, part only in the final presentation of argument and the disposition of proceedings. Issues are narrowed; concessions are made; arguments are abandoned. The zeal of the solicitor or barrister who prepared the affidavit with the witness wanes with time. If the respondents are correct, in many proceedings access to affidavits and exhibits admitted into evidence would become confined because of that practice. In my view, that would be very contrary to the “open justice” principle. An affidavit and its exhibits, once admitted, becomes part of the record of the court proceedings. It is the evidence in chief of the witness. Once admitted, the public should, in the ordinary case, have access to it in its entirety.

25    Two more matters should be mentioned. First, the fact that the affidavits were “read” in closed court, requires no different conclusion. The only reason why Yates J closed the Court, and made limited resulting orders under s 37AF, was because of the pending police raids and the imminent service of the departure prohibition notices. Upon the completion of those steps, there was no longer any need for secrecy.

26    Secondly, the fact that the affidavits were read in ex parte proceedings, makes no difference here to the application of the “open justice” principle. As Pagone J said in Hawkins at [10]:

The affidavits and exhibits which were referred to by the Commissioner in the application before her Honour for freezing orders may, therefore, be inspected by Matrix and Mr Oates. These formed part of the evidence given by the Commissioner in open court in the proceeding which have become part of the process of open justice. The documents may have been relied upon by the Commissioner without testing or may have been referred to in open court (as was submitted by counsel for Mr Hawkins and Pegela) only when “addressed in an abridged manner in response to questions from the Court”, but they have been used and deployed by the Court and were part of the material upon which orders of the Court were made in open court. The fact that some of the material may have been read by her Honour in chambers without detailed reference in open court may be a stronger circumstance for the need to permit public inspection. …

I respectfully agree with, and adopt, those reasons.

27    For the foregoing reasons, the interlocutory applications for suppression are dismissed. The ABC is granted leave to inspect the two affidavits and exhibits sworn by Mr Zafiriou in proceedings NSD 2193 and 2194 of 2018. I will hear the parties as to costs.

Associate:

Dated:    12 April 2019