FEDERAL COURT OF AUSTRALIA

Binetter v BCI Finances Pty Limited (in liq) [2015] FCAFC 122

THE COURT ORDERS THAT:

1.    Leave to appeal be granted.

2.    The appeal be dismissed.

3.    The appellant pay the respondents’ costs of the application for leave and the appeal.

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

REASONS FOR JUDGMENT

THE COURT:

Introduction

1    On 13 August 2015, the Court made orders in the proceeding that leave to appeal be granted, that the appeal be dismissed, and that the appellant pay the respondents’ costs of the application for leave and the appeal. The Court said at that time that it would deliver reasons for the orders it made, and these are the Court’s reasons.

2    The applicant seeks leave to appeal from orders made by a judge of this Court on 7 July 2015. The orders which are challenged are as follows:

1.    The interlocutory application filed by Andrew Binetter and dated 24 April 2015 (the Binetter application) be dismissed.

2.    Andrew Binetter pay the costs of the Commissioner of Taxation and of John Sheahan and Ian Russell Lock as liquidators of BCI Finances Pty Ltd (in liq) in connection with the Binetter application, as agreed or taxed.

3.    The Commissioner of Taxation be released from the implied obligation not to make use of documents filed in these proceedings for purposes other than those of the proceedings, so far as is necessary to enable the Commissioner of Taxation (the Commissioner) to use the documents identified in Schedules A and B as attached to the interlocutory application filed by the Commissioner and dated 3 June 2015 for the following purposes:

(a)    The administration of the Income Tax Assessment Act 1936 (Cth), the Income Tax Assessment Act 1997 (Cth) and the Taxation Administration Act 1953 (Cth) as they apply to Andrew Binetter, Michael Binetter, Margaret Binetter, the estate of the late Erwin Binetter, the estate of the late Emil Binetter, Gary Binetter and their related persons and entities:

(i)    in respect of any of the years of income ended 30 June 1993 to 30 June 2015; and

(ii)    the determination of any objections to assessments of tax, penalties or interest issued to or referable to those persons or entities in respect of any of those income years and any appeals or review thereon.

(b)    For provision to a Law Enforcement Agency as defined in section 355-70(4) of Schedule 1 of the Taxation Administration Act 1953 (Cth) and for use by the Law Enforcement Agency for purposes that relate to any of the functions of the Law Enforcement Agency.

4.    The Commissioner of Taxation be released from the implied obligation not to make use of documents filed in these proceedings for purposes other than those of the proceedings, so far as is necessary to enable the Commissioner of Taxation to use the documents identified in the attached Schedule A in the proceedings of Commissioner of Taxation of the Commonwealth of Australia v Rawson Finances Pty Ltd NSD 1329 of 2014 in the Federal Court of Australia.

5.    John Sheahan and Ian Russell Lock, as the joint and several liquidators of the applicant (BCI Finances) be given leave to use each and all of the documents described in the schedule to the interlocutory application filed by the liquidators and dated 2 June 2015 for the purposes of the winding up of BCI Finances, including in the proceedings instituted by BCI Finances in this Court in proceedings SAD 5 of 2015.

6.    The Commissioner and the liquidators are, within seven days, to file and serve notice on the other parties of any costs order sought in respect of their interlocutory applications.

7.    Any party who objects to the making of a costs order as proposed by the Commissioner and the liquidators is to file and serve notice of their objection within a further seven days thereafter, in which event directions will be made for short written submissions on the costs issues.

(B.C.I Finances Pty Limited (in liq) v Commissioner of Taxation [2015] FCA 679).

3    The test for leave to appeal is well-known and there is no need for us to set it out (Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398-399). Leave to appeal should be granted in this case because, as will appear from our discussion of the grounds of appeal, there is sufficient doubt about the correctness of the decision under challenge to warrant it being reconsidered by the Full Court and the appellant will suffer substantial injustice should leave be refused supposing the decision to be wrong.

4    The appellant does not dispute the entitlement of the Commissioner of Taxation (“the Commissioner”) to use the documents identified in Schedule B of the Commissioner’s application. The dispute concerns the documents in Schedule A which, generally described, are two transcripts of examinations of Ms Emilia Mandel (a current Bank Hapoalim employee) and Mr Baruch Etzion (a former Bank Hapoalim employee) respectively, and various documents produced by Bank Hapoalim in response to a letter of request issued under s 7 of the Foreign Evidence Act 1994 (Cth) (“the Act”).

Background

5    The background to the matter is as follows.

6    The orders which the appellant challenges were made is NSD 626 of 2011. BCI Finances Pty Limited (in liq) (“BCI Finances”) commenced that proceeding in 2011 and at that time the company was not in liquidation and was under the control of its directors. By the proceeding, BCI Finances appealed against various decisions of the Commissioner rejecting objections to assessments of tax payable by BCI Finances and related penalties.

7    On 9 August 2012, the primary judge made the following orders in the proceeding, relevantly:

1.    A letter of request be sent to the judicial authorities of Israel to take or cause to be taken the evidence of Mr Ilan Mazur. A draft of the proposed letter of request is annexed to these orders and marked ‘Annexure A’.

2.    The applicant provide to the Court a document signed on or behalf of the applicant in the form of the document in Schedule A in aid of and for transmission with the letter of request.

8    The primary judge published reasons for her decision to issue a letter of request (BCI Finances Pty Limited v Commissioner of Taxation [2012] FCA 855) (“letter of request judgment”).

9    In her letter of request judgment, the primary judge noted that the Commissioner’s application for the issue of a letter of request was made under s 7(1)(c) of the Act. The primary judge made a number of observations in which she identified the context of, and the reasons for, the Commissioner’s application for an order under s 7(1)(c) (at [6], [20] and [21]):

The essential issue in dispute between the parties is the status of the arrangements between the applicant and Bank Hapoalim. It is the Commissioner’s position that the available evidence is insufficient to support the existence of these arrangements as loans and that the genuineness of the arrangements is in question. The Commissioner contends that there are numerous indicia which indicate that the arrangements should not be accepted as genuine arrangements. Accordingly, it was put by senior counsel for the Commissioner in support of the application that it must be recognised that the provenance, integrity and adequacy of the documents evidencing the loans and other arrangements between the applicant and Bank Hapoalim are themselves the critical issue in the proceeding. As such, it was pointed out for the Commissioner that the current application is somewhat unusual in that the Commissioner is seeking to obtain evidence from Bank Hapoalim which if in fact obtained would support the applicant’s case rather than the Commissioner’s case. Nevertheless, the applicant opposes the making of the order sought.

Section 7(2)(b) refers to the question of “whether the person will be able to give evidence material to any issue to be tried in the proceeding”. As I have emphasised, I accept that a central issue in this proceeding is the provenance, integrity and adequacy of documents evidencing the loans and other arrangements between Bank Hapoalim and the applicant. I have no doubt that an officer of the bank could give evidence relevant to the proceeding in terms of what has been described by the Commissioner as evidence of the bank's systems in relation to its administration of its credit arrangements, its processes for requiring and maintaining documents, and its processes and systems for ensuring the provenance and authenticity of documents. In this case, given that the provenance and authenticity of documents already produced by the applicants is in issue, that relevant evidence could also be given by Mr Mazur as to those issues. Accordingly, I also have no doubt that s 7(2)(b) of the Foreign Evidence Act is satisfied.

Section 7(2)(c) requires me to have regard to “whether, having regard to the interests of the parties to the proceeding, justice will be better served by granting or refusing the order”. On the evidence that has been adduced before me, and in the circumstances of the proceeding as referred to above, I have no doubt that it is in the interests of the parties to the proceeding that the order be made and that justice will be better served by the granting of the order. This is the applicant's appeal seeking to set aside the Commissioner's disallowance of objections on the basis that the taxation amount in the assessments is excessive. The basis upon which the applicant seeks to do so essentially is the existence of loans and other credit arrangements between it and Bank Hapoalim. Despite numerous attempts to obtain relevant documents so as to demonstrate the genuineness of those loans the documents which have been produced thus far by the applicant, not unreasonably from the Commissioner's point of view, raise more questions than they answer. In these circumstances, for Bank Hapoalim to be required to give evidence in accordance with the interlocutory application would be in the interests of both parties and would serve justice, because it would ensure that the parties and indeed the Court will be determining the appeal on the basis of a proper evidentiary foundation and not an incomplete or dubious evidentiary foundation, as the Commissioner currently asserts is the case.

10    The draft letter of request (and its attachments) is annexed to these reasons for judgment. It will be seen that the draft letter of request was prepared in accordance with the provisions of the Convention on the Taking of Evidence Abroad in Civil or Commercial Matters (“the Convention”).

11    On 5 March 2014, administrators were appointed to BCI Finances. On 10 March 2014, the primary judge made an order by consent dismissing the proceeding. On 23 April 2014, Messrs Sheahan and Lock were appointed as liquidators of BCI Finances.

12    On 22 May 2014, the primary judge granted leave to permit the Commissioner to prosecute a claim for indemnity costs against BCI Finances despite it being in liquidation. On the same day and by consent, Andrew Binetter, Gary Binetter and Margaret Binetter were joined as parties to the proceeding, and an order was made that each of them pay the Commissioner’s costs of the proceeding on a full indemnity basis.

13    On 12 May 2015, the primary judge ordered that BCI Finances pay the Commissioner’s costs on an indemnity basis up to and including 23 April 2014.

14    The orders which the appellant challenges refer to two proceedings (order 4 and order 5).

15    In Commissioner of Taxation of the Commonwealth of Australia v Rawson Finances Pty Ltd NSD 1329 of 2014, the Commissioner seeks the following orders:

1.    an order that the orders made by the Full Court of the Federal Court in matter No. NSD 1067 of 2012 be set aside;

2.    further or alternatively, an order that the orders made by the Full Court of the Federal Court in matter No. NSD 1067 of 2012 and the Federal Court in matter No. NSD 1711 of 2011 be set aside and the decision of the AAT be quashed;

3.    an order that the respondent pay the costs of these proceedings and of the proceedings in the Federal Court in matter No. NSD 1711 of 2011 and the Full Federal Court in matter No. NSD 1067 of 2012 on the indemnity basis.

16    Proceeding NSD 1711 of 2011 was an appeal from the Administrative Appeals Tribunal which had allowed objections by Rawson Finances Pty Ltd against objection decisions by the Commissioner (Commissioner of Taxation v Rawson Finances Pty Ltd [2012] FCA 753). An appeal to the Full Court was dismissed (Rawson Finances Pty Ltd v Commissioner of Taxation [2013] FCAFC 26).

17    Proceeding SAD 5 of 2015 was commenced in January 2015, and it involves claims by the liquidators against the directors and other persons and entities, amongst other things, for breaches of their duties as directors. The breaches related to a scheme involving the establishment of companies, including BCI Finances, the purpose of which was to conceal offshore funds and offshore income from the Commissioner, enable those companies to claim deductible expenses in connection with the use of offshore funds, and to evade or avoid taxation liabilities to the Commissioner.

The Relevant Provisions of the Act

18    The relevant part of the Act is Part 2 and the heading to that Part is “Examination of witnesses abroad”. Part 2 substantially re-enacts Part IIIB of the Evidence Act 1905 (Cth) which was introduced into that Act in 1985.

19    Section 7(1) of the Act gives a superior court in any proceeding before it, power on the application of a party to the proceeding to make an order relating to a person outside Australia for, inter alia, the issue of a letter of request to the judicial authorities of a foreign country to take the evidence of the person or cause it to be taken. An order may only be made if it appears to the Court that it is in the interests of justice to make the order, and s 7(2) sets out a non-exhaustive list of matters to be taken into account in determining whether it is in the interest of justice to make the order.

20    Section 9 is in the following terms:

9    Use of evidence taken in an examination

(1)    Subject to subsection (2), the court may, on such terms (if any) as it thinks fit, permit a party to the proceeding to tender as evidence in the proceeding:

(a)    a person’s evidence taken in an examination held as a result of an order under subsection 7(1); or

(b)    a record of that evidence.

(2)    Evidence of a person so tendered is not admissible if:

(a)    it appears to the court’s satisfaction at the hearing of the proceeding that the person is in Australia and is able to attend the hearing; or

(b)    the evidence would not have been admissible had it been adduced at the hearing.

21    The word “examination” is defined in s 3 of the Act as including:

any proceeding that is for the taking of evidence of a person conducted by the judicial authorities of a foreign country in relation to a letter of request issued as a result of an order made by a superior court under Part 2.

Section 5 of the Act provides that a reference in the Act to evidence taken in an examination includes (among other things) a document produced at the examination.

22    Sections 7 and 9 are in Division 1 of Part 2 of the Act and the heading to that Division is “Proceedings in superior courts”. Division 2 of Part 2 has the heading “Proceedings in the Federal Circuit Court of Australia and inferior courts” and, in essence, it gives nominated superior courts the power to make the kind of orders referred to in Division 1 in relation to a proceeding before the Federal Circuit Court or an inferior court. For example, the Family Court may make an order under s 7(1) in relation to a proceeding in the Federal Circuit Court in a child support or family law matter, and the Federal Court may make an order in relation to a proceeding in the Federal Circuit Court in a matter other than a child support or family law matter (see s 9A).

23    In the case of orders made under ss 9A, 10 or 11 of the Act, s 12 is the equivalent of s 9 in the case of orders made under s 7 of the Act.

24    Division 3 of Part 2 has the heading “Subsequent proceedings” and it contains the power to make orders which include directions that evidence in relation to a committal proceeding may be used in a criminal proceeding that results from the committal proceeding or in a related civil proceeding, and evidence in relation to a criminal proceeding (other than a committal proceeding) may be used in a related civil proceeding. The terms, “criminal proceeding” and “related civil proceeding”, are defined in s 3 of the Act.

25    Division 4 of Part 2 has the heading “Miscellaneous” and it includes sections giving the Court a discretion to exclude evidence and the power to vary or revoke orders made by the Court under ss 7, 9A, 10 or 11. Sections 15 and 16 are in the following terms:

15    Discretion to exclude evidence

(1)    This section applies to any civil proceeding or criminal proceeding in a superior court, the Federal Circuit Court of Australia or an inferior court.

(2)    If it is in the interests of justice to do so, a court may exclude from the proceeding evidence obtained under this Part, even if it is otherwise admissible.

(3)    This Part does not affect a court’s power under any other law to exclude, or limit the use of, evidence:

(a)    because it has been obtained unlawfully or improperly; or

(b)    because it would, if admitted, operate unfairly or be unfairly prejudicial to a party; or

(c)    for any other reason.

16    Variation or revocation of orders

(1)    A superior court may vary or revoke an order made by the court under section 7, 9A, 10 or 11.

(2)    The power to vary an order includes the power to:

(a)    include in the order a direction under section 13; or

(b)    vary or revoke a direction under section 13 that is included in the order.

(3)    If an order under section 7 or 10 that includes a direction under section 13 is revoked, the direction under section 13 is taken to have been revoked at the same time.

Issues on the Appeal

26    The four grounds of appeal are as follows. First, the appellant contends that the Act is an exhaustive code as to the uses which may be made of evidence taken in an examination conducted pursuant to letters of request issued under the Act. The uses of the evidence which were the subject of the primary judge’s orders were not within the terms of the Act and it was not open to her Honour to make the orders which she did. Secondly, even if the first contention is rejected, the appellant contends that the provisions of the Act are such that the use of the evidence outside the uses specified in the Act is restricted to use in other judicial proceedings and does not extend to use of the evidence for what the appellant described as administrative purposes. Thirdly, even if the first and second contentions are rejected, the appellant contends that the respondents are not entitled to use the evidence for the purposes specified in the orders under challenge without the permission of the judicial authorities of the foreign country to which the letters of request were directed. Finally, and irrespective of the fate of the preceding contentions, the appellant contends that in this case the letter of request procedure miscarried and the primary judge erred in finding that the Israeli Court “at all times, was executing the LOR”. The appellant contends that even if there is a discretion, it is only engaged if the letter of request is executed according to its terms.

27    Other arguments were put to the primary judge. It was argued by the appellant that the letter of request process should have been terminated when the proceeding was dismissed by consent on 10 March 2014. It was argued that maintaining the process after that date was an abuse of process. It was also argued by the appellant that the process was maintained for the purpose of the winding up of BCI Finances, that that was an improper purpose and that, therefore, the maintaining of the letter of request process was an abuse of process. These arguments were rejected by the primary judge and were not repeated on appeal.

28    The primary judge considered at some length the discretion to relieve a party of the implied obligation. Subject to two matters which are referred to below (at [42] and [68]), there is no challenge by the appellant to the way in which her Honour exercised the discretion. Of course, if any one of the appellant’s first, third or fourth grounds succeed, then her Honour’s substantive orders cannot stand, and if the second ground succeeds, then her Honour’s orders would have to be varied to exclude use for what was said to be administrative purposes.

Is the Foreign Evidence Act an exhaustive code?

29    The appellant advanced three submissions in support of his contention that the Act is an exhaustive code. First, he submitted that the power to issue a letter of request is statutory, and that this Court does not have inherent jurisdiction to order the issue of a letter of request (Allstate Life Insurance Co and Others v Australia & New Zealand Banking Group Ltd and Others (No 18) (1995) 133 ALR 667 at 674 per Lindgren J), and that as the terms of the relevant sections in the Act as to the use of evidence taken in an examination are clear there is no room for any uses not specified in the Act. Secondly, he submitted that Parliament addressed the issue of the use of evidence outside the proceeding in which the order was made, or to which it relates, in ss 13 and 14 of the Act and that there would have been no need for it to do so if the matter was governed by the implied undertaking which arises when documents are provided under compulsion. Thirdly, he submitted that s 15 which gives the Court a discretion to exclude evidence obtained under Part 2 of the Act and otherwise admissible, is limited to the proceeding in which the order was made, or to which it relates, and it is an error to construe it (as the primary judge did) as applying more generally.

30    It is a well-established principle of the common law that a party to litigation who receives documents provided under a compulsory process is under an obligation not to use the documents for any purpose other than that of the litigation. The Court may release a party from the obligation or may modify the undertaking. It is not necessary in this case to discuss the issues which might arise in connection with the obligation. It is sufficient to note the following statement of the principle in Hearne and Another v Street and Others (2008) 235 CLR 125 (“Hearne”) at 154-155 [96]:

Where one party to litigation is compelled, either by reason of a rule of court, or by reason of a specific order of the court, or otherwise, to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use it for any purpose other than that for which it was given unless it is received into evidence. The types of material disclosed to which this principle applies include documents inspected after discovery, answers to interrogatories, documents produced on subpoena , documents produced for the purposes of taxation of costs, documents produced pursuant to a direction from an arbitrator, documents seized pursuant to an Anton Piller order, witness statements served pursuant to a judicial direction and affidavits. The appellants did not dispute the existence of this principle, and in particular did not dispute its potential application to the affidavit of Mrs Hesse and the witness statement of Dr Tonin.

(Citations omitted).

31    The implied obligation is owed to the Court and there is nothing voluntary about it. It arises because of the circumstances under which the documents were provided, that is to say, they were provided by reason of a compulsory process. On the face of it, evidence provided pursuant to a letter of request would engage the implied obligation.

32    The first, third and fourth respondents referred to various principles in support of their submission that the common law as to the use of documents outside a proceeding applies in the case of evidence obtained in response to a letter of request issued under the Act. They referred to the maxim in the common law that a statute made in the affirmative, without any negative express or implied, does not take away the common law (see, for example, BIL (NZ Holdings) Ltd and Another v ERA House Ltd and Others (1991) 23 NSWLR 280 at 286 per Rogers CJ Comm D). They also referred to Minister for Lands and Forests and Another v McPherson and Another (1991) 22 NSWLR 687. In that case, the question arose as to whether there was anything in the Western Lands Act 1901 (NSW) which precluded the Supreme Court from exercising its equitable jurisdiction to provide relief against forfeiture of an interest in a Crown lease created under the Act to the extent that that was not inconsistent with the provisions of the Act. The New South Wales Court of Appeal held that there was nothing in the Act which had that consequence. Kirby P (as his Honour then was) (with whom Meagher JA agreed on this point) saw no reason why basic rules of equity did not continue to apply and that “[t]he justice of equity may equally supply the omission of the legislature, filling the silences of the statute” (at 700). The principle which his Honour applied is that the rules of the common law and equity continue to apply in a field where there are also statutory provisions unless those statutory provisions, by express language or by inference which is unambiguously clear, excludes them.

33    The appellant sought to meet this argument by contending that the whole procedure in this case is statutory and that as there would be no evidence but for the statutory provisions, it is those provisions and those provisions alone which govern the use of the evidence.

34    We have considered the appellant’s arguments carefully. Subject to a consideration of the appellant’s other arguments, we are unable to discern anything in the language of the statutory provisions which precludes the operation of the common law principle. The relevant sections, ss 9, 12 and 14, are quite specific as to the use which may be made of evidence taken in an examination. The person’s evidence taken in an examination or a record of that evidence may be tendered as evidence in the proceeding. There is nothing to suggest that the common law does not govern any other uses of the evidence, rather than an absolute prohibition on such other uses. A surprising consequence of the appellant’s submission is that there could be no other use of the evidence taken in an examination even where the evidence had been admitted and made public in the proceeding. We do not think that can be right and we do not think the legislature has covered other uses of the evidence taken in an examination and in the hands of one of the parties to a proceeding. The common law principle applies in that situation.

35    We think that the appellant’s second submission should be rejected because we do not consider the “use sections” in the Act, ss 9, 12 and 14 on the one hand, and the common law implied obligation and the power of the Court to relieve a party of the obligation on the other, as being in any way equivalent so that it might be said that the enactment of ss 9, 12 and 14 would have been unnecessary had the legislature assumed the operation of common law principle. Sections 9, 12 and 14 identify how the evidence may be used in the proceeding. That is quite different from a prohibition on other use, subject to the Court’s power to relieve a party from the obligation, having regard to the particular circumstances of the case. In other words, it seems to us that in ss 9, 12 and 14 the legislature wished to make it clear how the evidence might be used and not leave it to the discretion of the Court.

36    With respect to the appellant’s third submission, it is true that her Honour placed some weight on the breadth of s 15 of the Act and that her Honour said that s 15 weighed against construing the Act as an exhaustive code. As we understand her Honour’s reasons, she placed weight on the expression “any civil proceeding or criminal proceeding” and said that the section implicitly recognised that a court may relieve a party of the implied obligation and there was a need for a further power in the Court to exclude evidence in the interests of justice. We see s 15 as somewhat more equivocal (in terms of whether the Act is an exhaustive code) than her Honour. On the one hand, it might be said that s 15 has work to do even if it be assumed that the Act is an exhaustive code. In those cases specifically identified in the Act (i.e., ss 9, 12 and 14), it provides a further discretion to the Court and removes any suggestion that once over the hurdle in ss 9(2), 12(2) or 14(3), the evidence must be admitted. On the other hand, and we realise this is not a complete answer, it can be argued that s 15 should be given a broad operation, bearing in mind that in the specifically identified cases, the Court will have already considered the interests of justice in the context of the particular proceeding and whether to issue a letter of request and that, in all cases, it seems to us the Court will retain a discretion to exclude evidence on well-established grounds.

37    The fact that we would not put the same weight on s 15 as the primary judge does not affect our conclusion that the Act is not an exhaustive code and the first ground of appeal must be rejected.

38    Before leaving this issue, we should record the fact that we do not think that Dendron GmbH v Regents of the University of California (Ch D) [2004] EWHC 589; [2005] 1 WLR 200 (“Dendron”) advances either party’s argument. The question of jurisdiction or power was not in issue in that case.

A Use for Purposes other than Litigation?

39    The primary judge’s orders allow the Commissioner to use the evidence for the administration of nominated Acts and for provision to a Law Enforcement Agency as well as for existing litigation. The orders allow the liquidators to use the evidence for the purposes of the winding up of BCI Finances, including in existing litigation.

40    The appellant submitted that even if the Act is not an exhaustive code, it nevertheless extends no further than allowing the Court to permit use in other litigation. The appellant submits that the Act only permits a letter of request to be issued in a judicial proceeding, and the use of evidence obtained as a result of the letter of request should be similarly confined. There is no dispute that a letter of request can only be issued in relation to a judicial proceeding. That follows from the terms of the sections and is clear from the Convention (see Article 1 of the Convention; British American Tobacco Aust Services Ltd v Eubanks for the United States of America (2004) 60 NSWLR 483 at 495-500 per Spigelman CJ).

41    We reject this submission. It is clear that the common law power to relieve a party from the implied obligation extends to situations where the applicant wishes to use the documents for purposes other than litigation (Liberty Funding Pty Limited v Phoenix Capital Limited [2005] FCAFC 5; (2005) 218 ALR 283 at [31]). That means that the common law power extends to cases where documents could only have been obtained by compulsory processes (e.g., orders for discovery and inspection and subpoenas) in an existing proceeding. We see no reason to limit the common law principle in the case of evidence taken in an examination held as a result of a letter of request.

42    The appellant put his second ground of appeal in an alternative way. He submitted that the process whereby the evidence was obtained is relevant to the exercise of the discretion whether or not to relieve a party from the implied obligation. He submitted that the primary judge had not given this consideration any weight in deciding whether the evidence could be used for administrative purposes. We reject this submission. The primary judge said that the discretion was to be exercised “with due regard to the source of the material” (at [59]), and our examination of her reasons for exercising the discretion in favour of the respondents makes it clear that her Honour did take the matter into account (at [67]-[75]), especially at [70]).

43    The second ground of appeal must be rejected.

Which is the appropriate Court?

44    The primary judge was of the view that it was solely a matter for this Court, as the Court issuing the letter of request, to determine whether or not there should be relief from the implied obligation.

45    The primary judge considered (at [46]) that the attitude of the executing Court was irrelevant to the determination of the question of the implied obligation. Her Honour placed significant weight on the view that the Israeli Court was not acting for any purpose of its own and that it was this Court that “caused” compulsory processes to be brought to bear. At [46] her Honour said:

I also do not accept that the court which executed a letter of request is relevant to the exercise of determining whether or not a party should be released from the implied obligation. The court which executed the letter of request in the present case, the Israeli Court, did so solely in aid of the processes of this Court. But for the litigation in this Court, the Israeli Court would have had no reason to undertake any judicial process. It would be a time wasting and futile exercise to ask the Israeli Court to consider a leave application in respect of the use of documents which it enabled to be obtained solely for the purpose of the the (sic) resolution of litigation in this Court.

46    The appellant submits that her Honour erred in those conclusions for four reasons, which require consideration of Articles 10, 11 and 12 of the Convention. Those articles provide:

Article 10

In executing a Letter of Request the requested authority shall apply the appropriate measures of compulsion in the instances and to the same extent as are provided by its internal law for the execution of orders issued by the authorities of its own country or of requests made by parties in internal proceedings.

Article 11

In the execution of a Letter of Request the person concerned may refuse to give evidence in so far as he has a privilege or duty to refuse to give the evidence -

a)    under the law of the State of execution; or

b)    under the law of the State of origin, and the privilege or duty has been specified in the Letter, or, at the instance of the requested authority, has been otherwise confirmed to that authority by the requesting authority.

A Contracting State may declare that, in addition, it will respect privileges and duties existing under the law of States other than the State of origin and the State of execution, to the extent specified in that declaration.

Article 12

The execution of a Letter of Request may be refused only to the extent that -

a)    in the State of execution the execution of the Letter does not fall within the functions of the judiciary; or

b)    the State addressed considers that its sovereignty or security would be prejudiced thereby.

Execution may not be refused solely on the ground that under its internal law the State of execution claims exclusive jurisdiction over the subject-matter of the action or that its internal law would not admit a right of action on it.

47    The appellant argued, first, that the Israeli Court was exercising its own powers for its own purposes. As a signatory to the Convention and in purporting to execute the letter of request in accordance with the Convention, the Israeli Court was to apply its own internal procedures as appropriate in accordance with Article 10 of the Convention. It could, if the circumstances warranted, decline to execute the letter of request in accordance with Article 12 of the Convention. Therefore, the appellant argues, the Israeli Court had a significant role to play in the process for the purposes of the administration of the Convention in Israel, and was exercising its powers for its own purposes in meeting its obligations as a signatory of the Convention. The appellant made the point that, as with other Conventions, there are mutually advantageous objectives in entry into a Convention.

48    Secondly, it is argued that the Australian Court did not “cause”, in any sense, any compulsory power or processes to be brought to bear in Israel. All the Australian Court did, according to the appellant, was to make a request for assistance. This does not have any bearing on the fact that the Israeli Court was the Court which instigated the compulsory processes designed to meet that request. The appellant argues that it is those compulsory processes which give rise to the application of the implied obligation, not the request issued by the Australian Court. It is for that reason, it is contended, that the implied obligation is owed to the Israeli Court, not to the Australian Court. In particular, it is noted that the Supreme Court of Israel has recognised the implied obligation in Israeli law in Yosef Muskonav Gideon Moor No 632/77 and 662/77, dated 2 May 1978. Her Honour noted (at [47]) the recognition of the principles by the Israeli Court, which is in terms very similar to those recognised by the High Court of Australia in Hearne (at [96], [103]) or the House of Lords in Harman v Secretary of State for Home Department [1983] 1 AC 280.

49    The third basis for error, the appellant argues, is that the observation by the primary judge (at [46]) that “it would be a time wasting and futile exercise” to approach the Israeli Court in respect of the use of documents “which it enabled to be obtained solely for the purpose of resolution of litigation in this Court”, is irrelevant and speculative. The appellant argues that it cannot be “futile” to seek the leave of a court to which the implied obligation is owed, in circumstances where the proposed use of the material obtained pursuant to its compulsory processes “differs in significant respects” from the purpose for which it was obtained. It is argued that the attitude of the Israeli Court, as the Court whose compulsory processes were utilised to obtain the letter of request material, must be relevant to the determination of the question of whether leave should be granted to use that material for “collateral purposes”.

50    Finally, the appellant opposes the primary judge’s reasoning (at [47]), where her Honour said:

There is also an inconsistency in the submissions for Andrew Binetter about this issue. On the one hand, the Israeli Court is said to be the relevant court or at least relevant for any leave application, but on the other hand it is said that in accordance with Damberg v Damberg it is it should be assumed that the Israeli Court would apply Australian law to the question of leave (an assumption consistent with the recognition of the implied obligation by the Supreme Court of Israel in Yosef Muskona v Gideon Maor, No’s 632/77 and 662/77, dated 2 May 1978). If this is so, there is no reason for this Court not to determine the question of leave without reference to the Israeli Court; there is no reason to infer other than that the Israeli Court would reach the same conclusions as this Court.

51    The appellant suggests that her Honour misapprehended the argument advanced at first instance. It was not argued that the Israeli Court would “apply Australian law” to the question. Rather, it was submitted that, in the absence of evidence as to the position of Israeli law, the principle that it was the same as Australian law applies, such that Israeli law recognised the existence of the implied obligation. It does not follow from this, according to the appellant, that the attitude of the Israeli Court is irrelevant, or that it would arrive at the same result if leave were sought from it. Shortly put, the view that the Israeli Court would take is not known because it has not been asked.

52    These arguments cannot be accepted for the reasons that follow.

53    While it is clear that the Israeli Court was acting in accordance with Convention obligations, it is unrealistic to assert that it was acting for a purpose of its own. The primary judge was entirely correct in saying (at [43]) that:

… the Israeli Court executed the [letter of request] in furtherance only of and for the purposes of the proceeding in this Court. While it was the Israeli Court that brought to bear its powers of compulsion as contemplated by [Article] 10 [of the Convention], it did not do so for any purpose of its own. It did so solely for executing the [letter of request], an execution which was in aid of the processes of this Court alone …

54    These observations by her Honour accord with reality. While it may be readily accepted that the Israeli Court was exercising its powers for the purposes of meeting its obligations as a signatory to the Convention, (and for that matter would expect Australian reciprocity), it did so only as a result of Israel’s signature to the Convention and the order made by the primary judge exercising the statutory power pursuant to s 7 of the Act. It would be unrealistic to assume that foreign evidence will be voluntarily supplied, particularly by a bank, which has its own obligations of confidentiality, unless a power of compulsion is exercised by a court in the requesting state. The Israeli Court’s processes were brought to bear only because this Court issued the letter of request. Israel, in turn, pursuant to its Convention obligations which mirror those adopted by Australia, was obliged to execute the letter of request, absent a ground of refusal pursuant to Article 12 of the Convention. Without an order permitting the making of the request from this Court, no documents or evidence would have been produced.

55    While the appellant is neutral in relation to the question of whether or not leave in relation to the implied obligation is also to be sought from this Court, he contends that the failure to consider the attitude of the Israeli Court was fatal to the exercise of the discretion to grant the implied obligation. The primary judge was correct to rule against this submission. It, in turn, again rests on the assumption that it is only the Israeli Court’s compulsory processes being used to obtain the letter of request material. As the entire initiating process emanates from this Court, for the reasoning outlined above, this argument must fail. The sole purpose of the Israeli Court’s involvement was to produce the documents and evidence to be provided to the parties to the litigation in this Court. The evidence was not obtained for use in any Israeli proceedings or for any purpose in Israel other than compliance with the letter of request. There were no such proceedings in Israel.

56    As to the third point, the parties argue about who bore the onus to prove what the attitude of the Israeli Court would be to the question of the implied obligation, but in the end it matters little as the attitude of the Israeli Court to that question does not fall for consideration. Nonetheless, in the absence of any other indication, it might be reasonably inferred, as her Honour did, that “... there is no reason to infer other than that the Israeli Court would reach the same conclusions as this Court” (at [47]). This reasoning, with respect, is sound.

57    It may be observed that the statutory framework of the Act itself highlights that the Israeli Court has no role in the question of usage of evidence obtained pursuant to the letter of request. The Israeli Court does not have any role in relation to the exercise of powers pursuant to ss 9, 12, 14 or 15 of the Act, for example. All decisions about actual usage of the evidence are preserved by statute to the Court in which it is sought to tender the evidence.

58    As noted above, the parties each make reference to the decision of Dendron. The parties accept that in a number of respects this decision should be distinguished. The judgment does not refer to the source of power pursuant to which the relevant letter of request was issued to the Alabama Court. The issues arising for determination before her Honour and now before us were not argued in Dendron. It is not of assistance to either party.

59    The primary judge was correct on the issue as to which court should be requested to consider whether or not leave in relation to the implied obligation for the letter of request evidence should be granted.

60    The third ground of appeal must be rejected.

Did the letter of request “miscarry”

61    The appellant argues that the letter of request miscarried. The argument invites consideration of s 16 of the Act which we have set out above (at [25]).

62    The letter of request was issued for the examination of Mr Ilan Mazur. In the end, Mr Mazur was not examined. Rather, Mr Etzion was examined on 3 March 2015 and Ms Mandel was examined on 15 March 2015. No application was made pursuant to s 16 of the Act for a variation of the terms of the letter of request to seek that evidence be taken from some person other than Mr Mazur. The appellant argues that this was a “significant departure” from the terms of the letter of request and the primary judge was wrong to conclude (at [56]) that the Israeli Court was nevertheless at all times executing the letter of request.

63    There are said to be four errors involved in that conclusion. The first is said to be that a letter of request may only be issued if the requirements of s 7(2) of the Act are considered. Mr Etzion and Ms Mandel were clearly not the subject of the application for the issue of the letter of request or consideration by the primary judge. The appellant contends that no consideration was given at that time as to whether either of those persons was “willing or able to come to Australia to give evidence”. Mr Etzion had given evidence in Australia previously, and his evidence had been relied upon in relation to the application of the letter of request. The prior conduct of the proceedings suggested that Mr Etzion may well have been willing to come to Australia to give evidence, however, the matter was not the subject of consideration.

64    The second error, the appellant says, is that there is no power to issue a letter of request solely for the production of documents. Such production may only be “in aid of and ancillary to the examination”. Given that Mr Mazur was not examined, the production of documents cannot have been “in aid or ancillary to” the examination sought under the letter of request. The appellant argues that by failing to seek an amendment to the letter of request, the respondents deprived the Court of the opportunity to conduct a proper assessment of whether the process which was in fact adopted in the Israeli proceedings was supported by the Act, and which was properly the subject of the letter of request.

65    The third error advanced by the appellant is that the primary judge was wrong to conclude (at [53]) that Mr Mazur was required to give evidence pursuant to the letter of request “not in any personal capacity but in his capacity as the Chief Legal Officer of Bank Hapoalim”. However, the appellant argues that the primary judge’s reasoning fails to deal with the fact that the letter of request was issued in respect of Mr Mazur personally, and not by general reference to an officer of Bank Hapoalim. It was Mr Mazur who was the subject of the primary judge’s consideration in issuing the letter of request, notwithstanding the general comments referred to by the judge. The appellant contends that a question of whether the letter of request was executed could only be assessed having regard to the actual terms of the letter of request. The letter of request could have been amended pursuant to s 16 of the Act, but it was not. The appellant stresses that it is plain that the process in the Israeli Court “departed significantly” from the terms of the letter of request.

66    The approach taken by the primary judge in her Honour’s reasoning on this point was as follows (at [53]):

Second, while the [letter of request] related to the examination of Mr Mazur, he was required to give evidence not in any personal capacity but in his capacity as the Chief Legal Officer of Bank Hapoalim. The documents required to be produced to aid the examination of Mr Mazur were all documents of Bank Hapoalim. The questions proposed to be asked of him all related to the documents and activities of Bank Hapoalim. At [20] of the [letter of request] judgment I said this:

I have no doubt that an officer of the bank could give evidence relevant to the proceeding in terms of what has been described by the Commissioner as evidence of the bank's systems in relation to its administration of its credit arrangements, its processes for requiring and maintaining documents, and its processes and systems for ensuring the provenance and authenticity of documents.

67    The appellant’s final complaint in relation to this ground is that her Honour said that the discretionary factors in favour of granting the implied obligation outweighed any miscarriage of the letter of request process, such that the leave sought by the respondents should be granted in any event. Her Honour said (at [56]):

The submissions for Andrew Binetter relied on these provisions to support the proposition that the Israeli Court had exceeded its remit and had not executed the [letter of request] by not examining Mr Mazur, requiring documents to be produced by another officer of Bank Hapoalim, and by requiring the examination of Ms Mandel and Mr Etzion. I disagree. The Israeli Court, at all times, was executing the [letter of request]. Accordingly, this argument should not be accepted. Moreover, even if the argument were correct, the Commissioner and the liquidators still obtained the documents as a result of the [letter of request]. As explained below, the discretionary factors in favour of releasing them from the implied obligation are so strong that any miscarriage of the [letter of request] process (which I do not accept occurred) would be an insufficient reason to deny the leave which is sought.

68    The appellant says that the primary judge’s resort to discretion was erroneous. The appellant argues that the Act specifies a very clear process, which must be followed in issuing the letter of request and the use of material obtained pursuant to it. Resort to discretionary factors relevant to an application for leave in relation to the implied obligation could not overcome the fact of a miscarriage of the letter of request. There is no discretion available in any event, the appellant argues. Alternatively, if there is, it could only be properly enlivened if the letter of request was faithfully executed.

69    These arguments cannot be accepted for the reasons that follow.

70    There can be no doubt that the Israeli Court was at all times executing the letter of request. It is true that when Bank Hapoalim claimed that the nominated employee had no knowledge or involvement in the relevant matters, the Bank Hapoalim put forward other officers who could assist. At no time was any step taken by the appellant in protest to this. The appellant pointed to the fact that by the time the Israeli Court was purportedly executing the letter of request, the liquidators had been appointed and therefore the appellant no longer had power as a director. Nonetheless, it is common ground that the appellant was represented in Israel at the time of the execution of the letter of request. No objection was raised. No argument is advanced now as to why the objection could not at least have been raised in the same way that it is now being pursued and was raised by the primary judge. Leaving the objection to be raised at this point could only cause inconvenience and disruption to the commencement of the trial.

71    Moreover, this contention overlooks the process which occurred. As the liquidators point out, and as found by the primary judge (at [54]), after the letter of request was transmitted to Israel, Bank Hapoalim applied to the Israeli Court for that Court to cancel the summonsing of Mr Mazur on the basis that he did not oversee the preparation of the loan documents for Bank Hapoalim’s clients, and that he had no personal knowledge of the loans that were the subject matter of the proceedings. On 20 May 2013, in response, the Israeli Court ordered the “bank’s representative” to appear at the offices of the Commissioner’s Israeli lawyers “to be investigated” and to provide documents. The Israeli Court noted that it was not essential that Mr Mazur be the bank’s representative who appeared. Subsequently, the Israeli Court made orders for the examination of another officer of the bank, Ms Mandel (and also on the bank’s application) Mr Etzion. These steps were all executed by the Israeli Court in response to the letter of request and were carried out pursuant to its supervision in accordance with the processes and rules of that Court and documented as such. Translations are in evidence.

72    As her Honour concluded, Mr Mazur had been nominated in the letter of request as the Chief Legal Officer of Bank Hapoalim, which made it clear that the office he held, and apparent knowledge of the matters to which the letter of request was to be directed, was the purpose of naming him. It was to be the officer with the relevant knowledge who would be able to comply, not an officer without the relevant knowledge.

73    The Convention expressly provides, by Article 9, that a court executing a letter of request shall apply its own laws and, ultimately, that court has the final say on the methods and procedures to be followed. Article 9 and (as previously noted) Article 10 of the Convention provide:

Article 9

The judicial authority which executes a Letter of Request shall apply its own law as to the methods and procedures to be followed. However, it will follow a request of the requesting authority that a special method or procedure be followed, unless this is incompatible with the internal law of the State of execution or is impossible of performance by reason of its internal practice and procedure or by reason of practical difficulties. A Letter of Request shall be executed expeditiously.

Article 10

In executing a Letter of Request the requested authority shall apply the appropriate measures of compulsion in the instances and to the same extent as are provided by its internal law for the execution of orders issued by the authorities of its own country or of requests made by parties in internal proceedings.

74    It might reasonably be expected that, as provided in the Convention, signatory countries would wish to maintain the autonomy of their own sovereign court to adopt their own procedures. No authority has been provided by the appellant to support a view that because a person named in the letter of request was not ultimately examined, that the process somehow failed.

75    It is not as though the Israeli Court ignored the letter of request. Rather, it acted upon the letter of request, and in response to the bank’s request and dealt, with respect, sensibly in accordance with its own processes (there being no suggestion to the contrary) to ascertain the information on which reliance is now sought to be placed pursuant to the letter of request. The suggestion that the Israeli Court would have to revert to this Court to exercise its own processes does not accord with the autonomy of the receiving court. It ignores the fact that the effect of the Convention and the Act is that once a letter of request is issued, the provisions of the Act dealing with the actual issue of the letter of request are exhausted.

76    Further, it is clear that the legislative framework established by the Act contains other significant safeguards which are perfectly capable of addressing any concerns regarding the manner of execution of a letter of request. For example, the restrictions on admissibility and tender in ss 9, 12 and 14, the important general discretion to exclude evidence under s 15, and the need to obtain leave in relation to the implied obligation in order to use letter of request evidence for other purposes, are all safeguards reposed in the Court in which the evidence is sought to be adduced.

77    In oral argument, the appellant was invited to identify the principle of law which would preclude reliance on evidentiary material obtained from a person other than that expressly designated in the letter of request. The principle was put by the appellant on the basis that for the respondents to access the information thus obtained would be to gain the fruits of a flawed or incorrect process. It is not, however, as though the material was illegally obtained. If there is some objectionable technicality in the execution of the letter of request, there are safeguards within the Act to prevent injustice and which the Court can take into account. There is no unlawful activity in any sense on the part of either of the respondents in receiving information pursuant to the letter of request in these circumstances.

78    The fourth ground of appeal must be rejected.

Disposition

79    It was for these reasons that the Court informed the parties on completion of oral argument that, while leave to appeal would be allowed, the appeal would be dismissed. The following orders were made:

1.    Leave to appeal be granted to the applicant.

2.    The appeal be dismissed.

3.    The appellant pay the respondents’ costs of the application for leave and the appeal.

Associate:

Dated:     27 August 2015

ANNEXURE “A”

DRAFT LETTER OF REQUEST

Request for international judicial assistance pursuant to the Hague Convention of 18 March 1970 on the Taking of Evidence Abroad in Civil or Commercial Matters.

Signature and seal of the requesting authority

Attachment “A” to the letter of request

Nature and purpose of the proceedings and summary of the facts

(article 3, c)

1.    The proceedings are an appeal by the applicant, BCI Finances Pty Ltd, from a decision of the respondent, the Commissioner of Taxation, to disallow an objection to assessments of income tax for the tax years ending 30 June 1997 to 30 June 2008.

2.    In the relevant income years, the applicant claimed that it had loan agreements in place with Bank Hapoalim, BM in respect of which it had made interest payments. The applicant claimed deductions in respect of these interest payments. The loans that the applicant claimed and claims to exist comprise a loan of 12,000,000 Swiss Francs said to have been entered into on 25 April 1993 and a loan of A$3,848,552 said to have been made on 24 April 2006.

3.    In issuing the assessments the subject of the appeal proceedings, the respondent Commissioner of Taxation disallowed certain deductions claimed by the applicant as interest and withholding tax in respect of the loans, included as income a payment made pursuant to the claimed loan arrangements in the 2006 tax year and imposed administrative penalties.

4.    In the proceedings, the applicant has the burden of proving that the assessments are excessive. The applicant contends that the loans were made to it by Bank Hapoalim, BM, that it made the interest payments and that the interest payments and withholding tax were and are properly deductable. The respondent contends that the applicant has not discharged its burden of proving that the loans were made, or made on the terms contended by the applicant, that the payments made by the applicant were interest payments and that such payments as were made were properly deductable.

Attachment “B” to the letter of request

Evidence to be obtained or other judicial act to be performed

(article 3,d)

1.    The evidence to be obtained is the evidence of Mr Ilan Mazur

2.    The general nature and subject matter of the examination of Mr Ilan Mazur and the nature of the questions to be put during the examination are detailed in attachment “C” to the letter of request.

3.    It is also requested that, in aid of and ancillary to the examination, a subpoena decus tecum, summons or equivalent order which requires Mr Ilan Mazur, as the proper officer of Bank Hapoalim, BM to produce documents that fall within the categories of documents described in the schedule. Submitted with the letter of request is a letter executed by or on behalf of B.C.I Finances Pty Limited which consents to the production of documents by Bank Hapoalim, BM pursuant to a subpoena, summons or order and waives any rights of secrecy, privacy or confidentiality in respect of the documents that may arise or exist by reason of the relationship between Bank Hapoalim, BM and B.C.I Finances Pty Ltd.

Schedule

1.    All documents recording or evidencing the application for, approval of, granting or making of, and terms of (including terms relating to any security and guarantees), any loan, finance facility or advance of money by Bank Hapoalim, BM to B.C.I Finances Pty Ltd during the period 1 January 1993 to 30 June 2008, including but not limited to any agreement for general business terms; agreement for opening a current account and its management; agreement for credit; agreement for collateral deposit safekeeping; personal guarantee; pledge and set off agreement; notice of pledge or negative pledge undertaking; pledge agreement or deed of pledge; bank guarantee or standby letter of credit.

2.    For the period 1 January 1993 to 30 June 2008, all documents recording:

2.1    any payments or transfers of funds by Bank Hapoalim, BM to B.C.I Finances Pty Ltd or any person or entity at the direction of B.C.I Finances Pty Ltd;

2.2    any payments or transfers of funds received by Bank Hapoalim, BM from B.C.I Finances Pty Ltd or from any person or entity at the direction of B.C.I Finances Pty Ltd;

2.3    the balance standing to the credit or debit of any loan account, finance facility or deposit account held at Bank Hapoalim, BM on behalf of or in the name of B.C.I Finances or Erwin Binetter, Emil Binetter, Andrew Binetter, Michael Binetter, Margret Binetter, Gerda Binetter Ligon 158 Pty Ltd, Ligon 159 Pty Ltd, Milgerd Nominees Pty Ltd or Erma Nominees Pty Ltd.

3.    All documents recording or evidencing any agreement, arrangement or understanding between Bank Hapoalim, BM and B.C.I Finances or Erwin Binetter, Emil Binetter, Andrew Binetter, Michael Binetter, Margret Binetter, Gerda Binetter Ligon 158 Pty Ltd, Ligon 159 Pty Ltd, Milgerd Nominees Pty Ltd or Erma Nominees Pty Ltd which is or was collateral to, or connected in any way with, any loan, finance facility or advance of money by Bank Hapoalim, BM to B.C.I Finances Pty Ltd during the period 1 January 1993 to 30 June 2008.

4.    All documents recording or evidencing any communication between Bank Hapoalim, BM or any of its officers, employees, representatives or agents and B.C.I Finances or Erwin Binetter, Emil Binetter, Andrew Binetter Michael Binetter, Margret Binetter, Gerda Binetter relating to or in connection with any loan, finance facility or advance of money by Bank Hapoalim, BM to B.C.I Finances Pty Ltd during the period 1 January 1993 to 30 June 2008.

5.    For the period 1 January 1993 to 30 June 2008, all documents recording or evidencing the following in relation to Baruch Etzion:

5.1    the dates during which Mr. Etzion was employed or retained by Bank Hapoalim, BM or by any company associated with Bank Hapoalim, BM in respect of services to be provided to Bank Hapoalim;

5.2    the terms and conditions of any employment contract between Bank Hapoalim, BM and Mr. Etzion, or between Mr. Etzion and any company associated with Bank Hapoalim, BM in respect of services to be provided to Bank Hapoalim, BM;

5.3    the terms and conditions of any agency, consultancy or service contract between Bank Hapoalim, BM and Mr. Etzion, or between any company associated with Bank Hapoalim, BM in respect of services to be provided to Bank Hapoalim, BM;

5.4    the position, duties and responsibilities of Mr. Baruch Etzion as an officer, employee, agent or consultant to Bank Hapoalim, BM.

Attachment “C” to the letter of request

Questions to be put to the person to be examined or statement of the subject-matter about which they are to be examined

(article 3, f)

1.    The general subject-matter of the examination is the description, nature and provenance of the documents that have been produced by the applicant in the Federal Court proceedings as well as any documents located, identified and produced by or on behalf of Bank Hapoalim in response to a subpoena decus tecum, summons or equivalent order issued or made to Bank Hapoalim.

2.    The general nature of the questions to be put to the examinee are detailed in schedule 1 below, though allowance is to be made for the judicial rules, procedures and practices of the requested State. It may be necessary to ask additional or varied questions depending on what, if any, documents are produced by Bank Hapoalim in answer to the subpoena, summons or equivalent order.

Schedule 1

1.    What is your full name and occupation and where do you work?

2.    What are your duties and responsibilities in your work position?

3.    In your position, are you aware that a subpoena decus tecum, summons or equivalent order has been issued or made to Bank Hapoalim has been issued requiring it to produce documents that fall within specified categories of documents?

4.    Do you have with you and are you able to produce the subpoena decus tecum, summons or order or a copy thereof?

5.    Have searches been made by yourself, or to your knowledge other officers of Bank Hapoalim, to locate and identify documents that fall within the categories of documents detailed in the subpoena decus tecum, summons or order?

6.    If yes, what searches have been made?

7.    Have any documents been identified and located as a result of the searches?

8.    If yes, do you produce, or are you aware that there has been produced by Bank Hapoalim, documents in answer to the subpoena decus tecum, summons or order?

9.    If yes, the following questions should be put in relation to each document:

9.1    what is the document?

9.2    is it dated and if so, what is its date?

9.3    is the author or maker of the document, if any, known or ascertainable and if so, who was the author or maker?

9.4    does the document, or did the document at any time, form part of the records belonging to or kept by Bank Hapoalim, BM?

9.5    does the document contain representations or statements made or recorded in the course of or for the purpose of the business of Bank Hapoalim, BM?

9.6    if yes, were the statements or representations made by a person who might reasonably be supposed to have had personal knowledge of the facts in the statements or representations, or on the basis information directly or indirectly supplied by such a person?

10.    During or as a result of the searches, were any documents identified as having once existed and been in the custody or control of Bank Hapoalim, but which either do not now exist, or are no longer in the custody and control of Bank Hapoalim and as a result cannot be produced?

11.    If yes, in respect of each such document:

11.1    what is or was the document?

11.2    why is it not possible to produce the document?

11.3    what information, if any, is known about the contents of the document?

12.    The following questions should be put in relation to each of the documents listed in schedule 2 below, being copies of documents produced by the applicant in the Federal Court proceedings:

12.1    is this a copy of a document which was within the material that Bank Hapoalim has produced (and about which questions have just been asked);

12.2    if not, are you able to identify what the document is;

12.3    is it a document that you recognise to be in a form used in the ordinary course of the business of Bank Hapoalim;

12.4    if yes, what is the nature of the document and what is its purpose and role in terms of the ordinary business of Bank Hapoalim?

13.    How are the bank’s records maintained?

14.    If in hard copy are there multiple copies kept – for example a “head office” and “branch” copy; a “credit” copy; etc?

15.    Are the hard copy documents also maintained in electronic form? If so, who has access to those records?

16.    Is the data contained in the documents maintained in electronic form?

17.    If so:

17.1    who has access to that data?

17.2    What automatic communications and reports are generated using the data?

17.3    What language are those communications and reports generated in?

17.4    Can the data be accessed to create supplementary communications and reports?

17.5    If so, who has the authority to generate such supplementary communications and reports?

18.     [The following questions need only be asked if no documents, or no documents additional to the documents in schedule 2, are produced by Bank Hapoalim pursuant to the subpoena, summons or order] Assume for the purposes of the following questions that the documents in schedule 2 are the only documents that have been able to be produced in respect of purported dealings between a customer and Bank Hapoalim.

18.1    Would it be expected, in the ordinary course of Bank Hapoalim’s business, that the bank would have created, received, or maintained further documentation to record or evidence the entire dealings and agreements between the customer and the bank recorded in these documents;

18.2    If so, what additional documents;

18.3    Are you aware of a reason why the bank would no longer have copies or records of those additional documents;

18.4    What if there were related or collateral agreements or arrangements between the bank and the customer?

Schedule A

[ON LETTERHEAD OF B.C.I. FINANCES PTY LTD]

The purpose of this letter is to confirm and advise that B.C.I Finances Pty Limited consents to Bank Hapoalim, BM producing any and all documents that fall within the categories of documents listed in the schedule to this letter in accordance with any subpoena decus tecum, summons or equivalent order issued or made by any Israeli court, tribunal or judicial officer. For these purposes, B.C.I Finances Pty Ltd unconditionally waives any rights of secrecy, privacy or confidentiality in respect of the documents that may arise or exist by reason of its relationship with Bank Hapoalim, BM.

[To be signed by any officer or duly authorised representative of B.C.I Finances Pty Ltd]

Schedule

1.    All documents recording or evidencing the application for, approval of, granting or making of, and terms of (including terms relating to any security and guarantees), any loan, finance facility or advance of money by Bank Hapoalim, BM to B.C.I Finances Pty Ltd during the period 1 January 1993 to 30 June 2008, including but not limited to any agreement for general business terms; agreement for opening a current account and its management; agreement for credit; agreement for collateral deposit safekeeping; personal guarantee; pledge and set off agreement; notice of pledge or negative pledge undertaking; pledge agreement or deed of pledge; bank guarantee or standby letter of credit.

2.    For the period 1 January 1993 to 30 June 2008, all documents recording:

2.1    any payments or transfers of funds by Bank Hapoalim, BM to B.C.I Finances Pty Ltd or any person or entity at the direction of B.C.I Finances Pty Ltd;

2.2    any payments or transfers of funds received by Bank Hapoalim, BM from B.C.I Finances Pty Ltd or from any person or entity at the direction of B.C.I Finances Pty Ltd;

2.3    the balance standing to the credit or debit of any loan account, finance facility or deposit account held at Bank Hapoalim, BM on behalf of or in the name of B.C.I Finances or Erwin Binetter, Emil Binetter, Andrew Binetter, Michael Binetter, Margret Binetter, Gerda Binetter, Ligon 158 Pty Ltd, Ligon 159 Pty Ltd, Milgerd Nominees Pty Ltd or Erma Nominees Pty Ltd.

3.    All documents recording or evidencing any agreement, arrangement or understanding between Bank Hapoalim BM and B.C.I Finances or Erwin Binetter, Emil Binetter, Andrew Binetter, Michael Binetter, Margret Binetter, Gerda Binetter Ligon 158 Pty Ltd, Ligon 159 Pty Ltd, Milgerd Nominees Pty Ltd or Erma Nominees Pty Ltd which is or was collateral to, or connected in any way with, any loan, finance facility or advance of money by Bank Hapoalim, BM to B.C.I Finances Pty Ltd during the period 1 January 1993 to 30 June 2008.

4.    All documents recording or evidencing any communication between Bank Hapoalim, BM or any of its officers, employees, representatives or agents and B.C.I Finances or Erwin Binetter, Emil Binetter, Andrew Binetter Michael Binetter, Margret Binetter, Gerda Binetter relating to or in connection with any loan, finance facility or advance of money by Bank Hapoalim, BM to B.C.I Finances Pty Ltd during the period 1 January 1993 to 30 June 2008.

Schedule E

In this schedule:

"Applicant" means BCI Finances Pty Limited

"borrowings" includes loans and advances.

"document" or "documents" includes:

Any record of information, including:

(i)    anything on which there is writing including letters, emails, notes, diaries, memorandums, minutes of meetings, agendas, reports;

(ii)    anything on which there are marks, figures, symbols, seals or perforations having a meaning for the persons qualified to interpret them;

(iii)    anything from which sounds, images or writings can be reproduced with or without the aid of anything else, including computer hard discs or drives containing information stored electronically and electronic storage devices, computer hard drives or back-up tapes used for storage or backup of information;

(iv)    a map, plan, drawing or photograph.

"entity" includes person.

"financial record" includes:

(i)    invoices, receipts, orders for the payment of money, bills of exchange, cheques, promissory notes and vouchers;

(ii)    documents of prime entry;

(iii)    working papers and other documents to explain or which explain:

a.    the methods by which financial statements are made up;

b.    adjustments to be made in preparing financial statements

"lending" includes loans and advances.

"security" includes any security, guarantee or collateral or any other arrangement supporting any borrowings.

1.    All documents (including all banking records, bank statements, cheques and cheque stubs) and financial records for the period 1 July 1992 to 30 June 2008 which evidence, record or relate to:

(a)    any borrowings by the Applicant from Bank Hapoalim (including the calculation and payment of interest on, and repayment or forgiveness of, any such borrowings);

(b)    any lending by the Applicant to any entity (including the calculation and payment of interest on, and repayment or forgiveness of, any such lending)

(c)    the use to which any borrowings by the Applicant from Bank Hapoalim were put;

(d)    the use to which any lending by the Applicant to any entity was put; and

(e)    any security (including the value thereof) offered or provided by the Applicant or any other entity in relation to any borrowings by the Applicant from Bank Hapoalim or any lending by the Applicant to any entity and any discharge or potential discharge of any such security.

2.    Profit and Loss statements (including any drafts thereof) for the years ended 30 June 2007 to 30 June 2008;

3.    Balance Sheets (including any drafts thereof) for the years ended 30 June 2003 to 30 June 2008;

4.    Cash flow statements (including any drafts thereof) for the years ended 30 June 2002 to 30 June 2008.

5.    General ledgers and any trial balances (including any drafts thereof) for the years ended 30 June 2007 and 30 June 2008.

6.    Any journal books or other document or records listing journal entries for any of the years ended 30 June 2008 to date.

7.    Any cash books or other document, ledger or record recording cash entries for any of the years ended 30 June 1992 to 30 June 1994 and 30 June 2001 to 2008.

8.    Any document (including minutes), evidencing or recording:

(a)    the basis upon which the financial statements for the Applicant are prepared including whether they are prepared in accordance with accounting standards and, if so, which;

(a)    whether the Applicant did prepare, or considered preparing, financial statements and other information on a consolidated basis.

9.    Any document recording or relating to:

(a)    Mr Szanto's engagement as the Applicant's auditor and/or accountant;

(b)    any communication with Mr Szanto in relation to the financial state and performance of the Applicant at any time in the period 30 June 1992 to 30 June 2008;

(c)    any communication with Mr Szanto which records or relates to any borrowings by the Applicant from Bank Hapoalim or any lending by the Applicant to any entity.

10.    Without limiting paragraph 1 above, bank statements for the period 1 January 1997 to present relating to the following accounts held by, or on behalf of, the Applicant:

11.    Without limiting paragraph 1, any bank statement or other document which records or evidences the payment to Bank Hapoalim of any interest or repayment of principal by or on behalf of the Applicant, including (but not limited to) any such statements or documents relating to accounts held at or with the Colonial State Bank or Bank of America or accounts held in Swiss francs.

Any document which evidences or records any business or investment activity of the Applicant apart from the borrowing and on-lending of funds.