FEDERAL COURT OF AUSTRALIA

Deputy Commissioner of Taxation v Shi [2020] FCAFC 100

ORDERS

THE COURT NOTES THAT:

1.    The Court has retained a copy, and not the original, of the original affidavit of the First Respondent dated 16 March 2019 and delivered to the New South Wales District Registry in a sealed envelope (Privilege Affidavit).

THE COURT ORDERS THAT:

1.    Leave to appeal on the first ground of the draft notice of appeal be granted.

2.    Leave to appeal on the second, third and fourth grounds of the draft notice of appeal be refused.

3.    The appeal be dismissed.

4.    The Applicant pay the Respondent’s costs of the proceeding.

5.    Subject to order 6, the copy of the Privilege Affidavit retained by the Court (and the original if it is located) be returned to the First Respondent pursuant to section 128A(5) of the Evidence Act 1995.

6.    Order 5 be stayed until the later of:

(a)    28 days from the date of these orders; or

(b)    the determination of any application for special leave to appeal to the High Court from these orders filed before the expiry of 28 days from the date of these orders; or

(c)    in the event that special leave to appeal from these orders is granted, the determination of that appeal; or

(d)    the determination of any application commencing proceedings in the original jurisdiction of the High Court filed before the expiry of 28 days from the date of these orders.

7.    The copy of the Privileged Affidavit retained by the Court (and the original if it is located) remain in a sealed envelope marked “confidential” until further order of the Court.

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

REASONS FOR JUDGMENT

DAVIES J:

INTRODUCTION

1    On 27 November 2018, freezing orders were made against the respondent (Mr Shi) pursuant to r 7.32 of the Federal Court Rules 2011 (Cth) (the Rules) on an application by the applicant (DCT): Deputy Commissioner of Taxation v Shi [2018] FCA 1915 (Yates J). The freezing orders were obtained by the DCT in proceedings to recover Mr Shi’s unpaid tax liabilities. The orders relevantly required Mr Shi to inform the DCT in writing of:

…all of [his] assets worldwide, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of [his] interest in the assets.

(disclosure order)

2    Mr Shi prepared two affidavits. In his first affidavit, which he affirmed on 13 December 2018 and filed and served on the DCT, Mr Shi disclosed assets in Australia with an estimated value of $360,000 as well as two bank accounts with “unknown” balances. In his second affidavit (privilege affidavit), which he affirmed on 16 March 2019, Mr Shi set out various other assets. He did not file or serve the privilege affidavit on the DCT, raising an objection to complying with the disclosure order in relation to the content of that affidavit on the ground that some or all of the information required to be disclosed may tend to prove either that he had committed an offence against, or arising under, an Australian law or a law of a foreign country or that he was liable to a civil penalty. Mr Shi affirmed a further affidavit on 16 March 2019 setting out the basis for his objection to disclosing the information in the privilege affidavit.

3    On 24 April 2019, judgment was entered by consent for the DCT against Mr Shi in the amount of $42,297,437.65 in respect of the tax liabilities upon which he was sued. In the week prior to judgment being entered against him, Mr Shi brought an interlocutory application for an order under s 128A(5) of the Evidence Act 1995 (Cth) (Evidence Act) for the return of the privilege affidavit to him or his legal representatives, alternatively an order under s 128A(7) of the Evidence Act that a certificate be given in respect of the information as referred to in s 128A(6)(a). A certificate given by the Court under s 128A(7) would mean that evidence of the information disclosed by Mr Shi in his privilege affidavit and evidence of any information, document or thing obtained as a direct result or indirect consequence of that information having been disclosed could not be used against Mr Shi in any proceeding in an Australian Court. Mr Shi’s interlocutory application was argued and determined subsequent to judgment being obtained.

4    Section 128A of the Evidence Act provides:

(1)    In this section:

disclosure order means an order made by a federal court in a civil proceeding requiring a person to disclose information, as part of, or in connection with a freezing or search order, but does not include an order made by a court under the Proceeds of Crime Act 2002.

relevant person means a person to whom a disclosure order is directed.

(2)      If a relevant person objects to complying with a disclosure order on the grounds that some or all of the information required to be disclosed may tend to prove that the person:

(a)      has committed an offence against or arising under an Australian law or a law of a foreign country; or

(b)      is liable to a civil penalty;

the person must:

(c)      disclose so much of the information required to be disclosed to which no objection is taken; and

(d)      prepare an affidavit containing so much of the information required to be disclosed to which objection is taken (the privilege affidavit) and deliver it to the court in a sealed envelope; and

(e)      file and serve on each other party a separate affidavit setting out the basis of the objection.

(3)      The sealed envelope containing the privilege affidavit must not be opened except as directed by the court.

(4)      The court must determine whether or not there are reasonable grounds for the objection.

(5)      Subject to subsection (6), if the court finds that there are reasonable grounds for the objection, the court must not require the information contained in the privilege affidavit to be disclosed and must return it to the relevant person.

 (6)      If the court is satisfied that:

(a)      any information disclosed in the privilege affidavit may tend to prove that the relevant person has committed an offence against or arising under, or is liable to a civil penalty under, an Australian law; and

(b)      the information does not tend to prove that the relevant person has committed an offence against or arising under, or is liable to a civil penalty under, a law of a foreign country; and

(c)      the interests of justice require the information to be disclosed;

the court may make an order requiring the whole or any part of the privilege affidavit containing information of the kind referred to in paragraph (a) to be filed and served on the parties.

(7)      If the whole or any part of the privilege affidavit is disclosed (including by order under subsection (6)), the court must cause the relevant person to be given a certificate in respect of the information as referred to in paragraph (6)(a).

 (8)      In any proceeding in an Australian court:

(a)      evidence of information disclosed by a relevant person in respect of which a certificate has been given under this section; and

(b)      evidence of any information, document or thing obtained as a direct result or indirect consequence of the relevant person having disclosed that information;

cannot be used against the person. However, this does not apply to a criminal proceeding in respect of the falsity of the evidence concerned.

(9)      Subsection (8) does not prevent the use against the relevant person of any information disclosed by a document:

(a)      that is an annexure or exhibit to a privilege affidavit prepared by the person in response to a disclosure order; and

(b)      that was in existence before the order was made.

(10)      Subsection (8) has effect despite any challenge, review, quashing or calling into question on any ground of the decision to give, or the validity of, the certificate concerned.

(11)      If a person has been given a certificate under a prescribed State or Territory provision in respect of information of a kind referred to in paragraph (6)(a), the certificate has the same effect, in a proceeding to which this subsection applies, as if it had been given under this section.

(12)      For the purposes of subsection (11), a prescribed State or Territory provision is a provision of a law of a State or Territory declared by the regulations to be a prescribed State or Territory provision for the purposes of that subsection.

 (13)      Subsection (11) applies to:

(a)      a proceeding in relation to which this Act applies because of section 4; and

(b)      a proceeding for an offence against a law of the Commonwealth or for the recovery of a civil penalty under a law of the Commonwealth, other than a proceeding referred to in paragraph (a) of this subsection.

5    The primary judge read Mr Shi’s privilege affidavit for the purposes of determining the application and was satisfied that:

(a)    the affidavit disclosed reasonable grounds for the making of the claims for the privilege against self-incrimination in relation to its contents for the purposes of s 128A(4): at [18];

(b)    the information disclosed in the privilege affidavit may tend to prove that Mr Shi committed an offence against or arising under an Australian law for the purposes of s 128A(6)(a): at [22]; and

(c)    the information did not tend to prove that Mr Shi had committed an offence in China for the purposes of s 128A(6)(b): at [25].

6    However, the primary judge was not satisfied of the criterion in s 128A(6)(c) for an order to be made requiring the affidavit to be filed and served, namely the primary judge was not satisfied that the interests of justice required the privileged information to be disclosed to the DCT. Accordingly, because the primary judge found that there were reasonable grounds for the objection but was not satisfied that the interests of justice required the information to be disclosed, his Honour ordered the return of the privilege affidavit to Mr Shi as required by s 128A(5).

7    The DCT has applied for leave to appeal from the decision of the primary judge. Leave is required because the decision below was interlocutory in nature (see s 24(1A) of the Federal Court of Australia Act 1976 (Cth) (FCA Act)). The application was heard on the basis that the hearing of the application should be treated as the hearing of the substantive appeal in the event that the Court determined that leave should be granted.

8    The proposed notice of appeal contains four grounds as follows:

1.    Steward J erred in determining that it was not in the interests of justice to grant a certificate pursuant to section 128A of the Evidence Act 1995 (Cth) (Act) in respect of the affidavit of Xu Neng Shi affirmed 16 March 2019 (Privileged Affidavit).

Particulars

a.    His Honour erred in determining whether the issuing of a certificate was in the interests of justice by taking into account the powers available to the appellant under section 353-10 of Schedule 1 to the Taxation Administration Act 1953 (Cth).

b.    His Honour erred in declining to grant a certificate pursuant to section 128A(7) of the Act in circumstances where his Honour found that there was a clear public interest in the recovery of outstanding tax: see [30] and [44] of the Judgment.

2.    Steward J erred in failing to find that the Privileged Affidavit was not in compliance with the requirements of the disclosure orders made by Yates J on 27 November 2018.

Particulars

a.    On 27 November 2018, Yates J made orders that required the respondents to provide information concerning their assets world-wide. In particular, his Honour made the following orders:

i.    Order 8 required the respondents to make an affidavit that would “to the best of your ability inform the applicant in writing of all your assets worldwide, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of your interest in the assets”; and

ii.    Order 9(c) required the respondents to “disclose so much of the information required to be disclosed to which no objection is taken…and…preparing an affidavit containing so much of the information required to be disclosed to which objection is taken, and deliver it to the Court in a sealed envelope…”.

    (the Disclosure Orders)

b.    The appellant was never provided with a copy of the Privileged Affidavit.

c.    The appellant was provided with an “Open Annotation to Privileged Affidavit of Xu Neng Shi” on 15 May 2019 which described the nature of the Privileged Affidavit at a high level of generality.

d.    His Honour read the Privileged Affidavit.

e.    Based on his Honour’s consideration of the Privileged Affidavit, his Honour made the findings set out in [30] of the Judgment.

f.    After his Honour read the Privileged Affidavit, his Honour:

i.    ought to have found that it did not strictly comply with the requirements of the Disclosure Orders and included information the disclosure of which was not required by the Disclosure Orders.

ii.    ought to have ordered the First Respondent to file a disclosure affidavit that strictly complied with the aforementioned requirements;

iii.    determined the respondent’s application by reference to the latter evidence.

g.    Had the respondent been required to file a disclosure affidavit strictly in accordance with the Disclosure Orders, there would have been no basis for the findings set out in [30] of the Judgment.

3.    Steward J erred in failing to order that the respondent provide an affidavit that complied strictly with the Disclosure Orders.

Particulars

a.    Based on the respondent’s submissions, the Privileged Affidavit went well beyond the requirements of the Disclosure Orders, pursuant to which it had been prepared and filed.

b.    The appellant repeats the particulars of prayer 2 above.

4.    In the alternative, Steward J erred in finding at [20] of the Judgment that providing a copy of the Privileged Affidavit to the appellant with redactions would be pointless.

Particulars

a.    The appellant repeats the particulars of prayers 2 and 3 above.

9    In the event that leave to appeal is granted, a notice of contention was filed on behalf of Mr Shi alleging that the judgment and order of the primary judge should be affirmed on the following grounds not relied on by the primary judge:

Onus – s 128A(6)(b)

1.     The Primary Judge should have found that under s 128A(6)(b):

a.     the party seeking that the affidavit containing the information of the kind referred to in sub-s (6) (Privileged Affidavit) be filed and served bears the onus of establishing the matter set out in s 128A(6)(b), namely that the Court be satisfied that "the information does not tend to prove that the [Respondent] has committed an offence against or arising under, or is liable to a civil penalty under, a law of a foreign country" (cf J[11], [13], [16], [23]); and

b.     the Applicant (Commissioner) did not meet his onus of satisfying the court of that matter (cf J[25]).

Not satisfied of matter in s 128A(6)(b) irrespective of onus

2.     Further or in the alternative to Ground 1, for purposes of s 128A(6)(b), on the material before the Court, the Primary Judge should have concluded that the Court was not satisfied that the information disclosed in the Privileged Affidavit "does not tend to prove that the [Respondent] has committed an offence against or arising under, or is liable to a civil penalty under, a law of a foreign country" (cf J[25]).

Interests of justice – s 128A(6)(c)

3.     The Primary Judge should have concluded (cf J[30]) that the interests of justice do not require the information in the Privileged Affidavit to be disclosed for the reasons that:

a.     the Commissioner has obtained judgment against the respondent (J[28]);

b.     the risk that information in the Privileged Affidavit could be used or held against Mr Shi in or in relation to criminal proceedings (cf J[29]); and

c.     the nature of the information in the Privileged Affidavit is such that:

i.     disclosure of the information would not further the purpose of the orders pursuant to which the Privileged Affidavit was prepared; and

ii.     the interests of justice do not otherwise require disclosure.

10    Ground 2 of the notice of contention was not pressed on the application.

PROPOSED APPEAL – GROUND 1

11    This ground concerns the “interests of justice” criterion in s 128A(6)(c). The primary judge concluded that he “would have been of the clear view that the interest of justice favoured disclosure” but for one consideration. His Honour reasoned at [26]–[30]:

It would appear to be accepted in the context of s 128 that the phrase “interests of justice” should be construed “broadly”: Cureton v Blackshaw Services Pty Ltd [2002] NSWCA 187 at [37] per Sheller JA. It would also appear to be accepted that it is not enough that the evidence in question be relevant – a “relatively high standard of satisfaction” is required given that the legislation to a significant extent abrogates a basic common law right: Gedeon at [286]. In my view, these observations apply equally to s 128A(6)(c).

In general terms, the Commissioner submitted that it was in the interests of justice that there be disclosure of the privileged affidavit having regard to the findings made by Yates J about the risk of dissipation of assets, the allegations concerning significant historical transfers of funds to China, and the negligible value of the assets disclosed in Mr Shi’s non-privileged affidavit. The Commissioner suspects there are more assets over which Mr Shi has effective control. He wants to know about these. As things stand, the assets so far disclosed fall far short of the $42,297,437.65 that Mr Shi owes the Commissioner. The Commissioner, it was said, may wish to issue writs of execution of property, charging orders, a court ordered garnishee and may wish to perform court examinations. These remedies will be facilitated by full disclosure. In that respect, in my view, there is a clear public interest in having Mr Shi’s debt to the Commonwealth discharged as fulsomely as is possible.

Mr Shi submits that the interests of justice require me to consider the totality of the facts and circumstances, the potential impact on future proceedings and the stage reached in the current proceedings. He points out that s 128A(8) would not prevent the Commissioner from giving the material to prosecutors and that this might lead to a miscarriage of justice. If that were to take place there was also a risk that prosecutors might use the evidence to find or encounter “derivative information” despite the protection afforded by s 128A(8). Whilst Mr Shi has yet to be charged, he notes that the accusatorial process of criminal justice can commence pre-charge: X7 v Australian Crime Commission (2013) 248 CLR 92; Strickland (a pseudonym) v Commonwealth Director of Public Prosecutions [2018] HCA 53; (2018) 93 ALR 1. Mr Shi also points to the fact that disclosure is not needed for the Commissioner to obtain the only remedy he sought in his original applications, namely, judgment debts against each respondent. He now has that. Mr Shi also observes that the issue of any certificate pursuant to s 128A(7) would have no effect in a Chinese court where Mr Shi might face charges.

I should point out that the Commissioner submits that he would not be permitted to give the privileged affidavit to the police or other prosecutorial authorities because such disclosure would be in breach of the “Harman” undertaking: Harman v Secretary of State for Home Department [1983] 1 AC 280. I agree with that submission. Unless given leave, the Commissioner would not be at liberty to disclose the privileged affidavit to a third party. No such leave has been sought. Moreover, even if the prosecutorial authorities were to obtain the privileged affidavit, any certificate issued pursuant to s 128A(7) would prevent it being used against Mr Shi in any subsequent criminal proceedings.

But for one consideration, I would have been of the clear view that the interests of justice favoured disclosure. The public interest in recovery of the outstanding tax is a compelling consideration…

12    The “one consideration” was the consequence of the issue of a certificate by the Court pursuant to s 128A(7). His Honour continued at [30]:

… In general terms, the consequence of disclosure with the issue of a certificate would be that much of the information contained in the privileged affidavit would not be able to be used against Mr Shi in any Australian Court (s 128A(8)). That would also include evidence of any information, document or thing obtained as a “direct result or indirect consequence” of the disclosure. In my view, that might have consequences in any future criminal proceeding as well as any future tax appeal pursued by Mr Shi pursuant to Part IVC of the [Tax Administration Act 1953]. In that respect, there is also a clear public interest that taxpayers pay the correct amount of tax based upon all of the relevant facts. The privileged affidavit contains information that may bear upon that issue.

13    In concluding that the interests of justice did not require disclosure, the primary judge considered it relevant that the DCT could use his powers to obtain information compulsorily pursuant to s 353-10 of Sch 1 of the Taxation Administration Act 1953 (Cth) (the TAA) in order to obtain the information in the privilege affidavit from Mr Shi by means other than an order for disclosure under s 128A(6). Section 353-10 relevantly provides:

(1)    The Commissioner may by notice in writing require you to do all or any of the following:

(a)      to give the Commissioner any information that the Commissioner requires for the purpose of the administration or operation of a *taxation law;

(b)      to attend and give evidence before the Commissioner, or an individual authorised by the Commissioner, for the purpose of the administration or operation of a taxation law;

(c)      to produce to the Commissioner any documents in your custody or under your control for the purpose of the administration or operation of a taxation law.

Note:    Failing to comply with a requirement can be an offence under section 8C or 8D.

(2)      The Commissioner may require the information or evidence:

(a)      to be given on oath or affirmation; and

(b)      to be given orally or in writing.

For that purpose, the Commissioner or the officer may administer an oath or affirmation.

…

14    The primary judge noted (at [32]–[34]) that the privilege against self-incrimination cannot be invoked as a reason not to comply with a notice issued pursuant to s 353-10 (Deputy Commissioner of Taxation v De Vonk [1995] FCA 994; 61 FCR 564 (De Vonk) at 583–4 per Hill and Lindgren JJ) and (at [35]) that the Harman undertaking, if it be relevant, would not prevent taxation officers from using information obtained pursuant to a s 353-10 notice, referring to Deputy Commissioner of Taxation v Rennie Produce (Aust) Pty Ltd (in liq) [2018] FCAFC 38; 260 FCR 272. The primary judge at [36]–[45] also rejected the DCT’s argument that an exercise of the s 353-10 power in the present case might “embroil the Commissioner in an argument about contempt of court” because of the possibility of future criminal proceedings, reasoning on the authorities that there would be no “usurpation” of the function of the Court because there was no current criminal proceeding against Mr Shi, only a criminal investigation which may, or may not, result in charges being laid and as things stood, there were no criminal proceedings of which to be in contempt.

15    At [44] the primary judge, after observing that it is in the public interest that the DCT, in raising assessments and collecting tax, has the most accurate information available, concluded it was in the public interest that the DCT have access to the most complete information concerning the worldwide assets of Mr Shi. The primary judge stated:

He should have that access, and be able to use any resulting information for the purposes of a recovery. If necessary, he should be free to use that information “against” Mr Shi in any subsequent proceedings relating to recovery or in any future tax appeal instigated by the respondents. That type of use is in the public interest.

16    The primary judge reasoned that the broad limitations on use of information disclosed subject to a certificate granted under s 128A militated against the interests of justice requiring disclosure when another avenue was open to the DCT to obtain the information which would allow him to use it more freely and which would better fulfil the compelling public interest in recovery of unpaid tax.

17    The DCT argued that the primary judge fell into error in the House v The King [1936] HCA 40; 55 CLR 499 sense in taking the DCT’s powers under s 353-10 into account in determining whether the interests of justice required disclosure of the information in the privilege affidavit. First, it was argued that the primary judge acted on a wrong principle in holding that the DCT could not be prevented from using his s 353-10 power to obtain the information contained in the privilege affidavit in the absence of current criminal charges against Mr Shi. On the DCT’s submissions, in circumstances where the Court had determined, in the interests of justice, that the DCT should not have access to the privileged information, the use of s 353-10 to require Mr Shi to provide that information may be a contempt of court. At the very least the DCT would be obliged to consider whether the issue of a notice under s 353-10 would interfere with the administration of justice. Secondly, it was argued that it was irrelevant to the question of where the interests of justice lie that the DCT could obtain the privileged information by exercising his power under s 353-10. It was argued that:

(a)    the disclosure of assets pursuant to an asset disclosure order is important to the efficacy of a freezing order because of the urgency of the relief attaching to the making of a freezing order, which is to prevent the risk that assets are moved to frustrate the court’s processes;

(b)    the power given to the DCT by s 353-10 to obtain information is a different statutory mechanism with a substantially different enforcement method in the event of non-compliance. The DCT’s use of his power under s 353-10 to obtain the information that Mr Shi disclosed in the privilege affidavit would not provide the same timely and effective mechanism for enforcement of the freezing order against Mr Shi as if the information was required to be disclosed pursuant to the asset disclosure order;

(c)    without the timely disclosure of assets, the purpose and utility of the freezing order, urgently obtained, may be defeated by delay in information being furnished pursuant to a s 353-10 notice, with the risk that assets are moved in the meantime;

(d)    the DCT should be in no different position to any other litigant where an asset disclosure order had been made and the DCT seeks to avail himself of the Court’s processes;

(e)    given the inherent urgency of disclosure orders, determining the scope of the assets under risk should not be deferred in circumstances where the Court has a proper and readily available process;

(f)    the DCT should have available to him effective means of enforcing compliance with the disclosure order and the same process that would be available to other litigants before the Court; and

(g)    as the freezing orders remained in place at the time of the hearing of the application under s 128A, the risk of dissipation remained an ongoing concern.

18    For Mr Shi it was argued that the primary judge was correct to hold that the DCT could use his power pursuant to s 353-10 of Sch 1 to the TAA in order to obtain the information in the privilege affidavit from Mr Shi by means other than an order for disclosure under s 128A(6) and it must be a relevant consideration for the purposes of s 128A(6)(c) that the DCT could exercise that power to obtain information to aid the DCT in recovery of the unpaid tax. It was also submitted that there is nothing in the express language of s 128A which would operate to confine the Court’s discretion on the question of where the interests of justice lie, and if the information could potentially be obtained by a means other than an order under s 128A(6), that would be a relevant consideration against the importance of the privilege affidavit itself to the proceedings (as opposed to the information in it). It was submitted it would also be a relevant consideration if disclosure with a certificate may not materially further the public interest because such disclosure would preclude the DCT from using the information in the privilege affidavit in any proceeding, including a proceeding under Pt IVC of the TAA concerning an appeal from an objection decision in respect of Mr Shi’s assessed tax liability. Finally, in relation to the DCT’s submissions concerning “considerations of urgency” as a basis upon which the Court should conclude that the DCT’s power under s 353-10 was an irrelevant consideration, it was submitted that whilst urgency is a consideration relevant to a decision to make a freezing order and ancillary asset disclosure orders, it did not follow that the potential for the DCT to exercise his compulsory powers was an irrelevant consideration in assessing the interest of justice under s 128A(6)(c). It was submitted that the DCT’s submission amounted to a contention that the primary judge should have given more weight to the urgency inherent in freezing orders, which was not a ground of appeal. In any event, it was submitted, the primary judge did consider the nature of freezing orders, asset disclosure orders and the urgency inherent in those orders and absent specific error being identified, the weight to be given to that consideration was a matter for the primary judge as the holder of the discretion.

19    It is useful as a starting point for addressing the competing arguments of the parties to consider the background to the enactment of s 128A of the Evidence Act and the balance of interests which s 128A strikes between the right of a person to object to compliance with an asset disclosure order on the ground that disclosure may lead to their incrimination, and the requirement for the person to make disclosure of their assets pursuant to the disclosure order. The background is helpfully set out by Campbell J in Pathways Employment Services Pty Ltd v West [2004] NSWSC 903; 186 FLR 330 (Pathways). In summary, until the enactment of s 128A in 2008, the privilege against self-incrimination could be invoked by a person for refusing to comply with an asset disclosure order: Reid v Howard [1995] HCA 40; 184 CLR 1. The limited abrogation of the privilege effected by the enactment of s 128 of the Evidence Act in 1995 (and cognate provisions in state Evidence Acts) applies where a “witness” objects to giving “evidence” on the ground that the evidence may tend to incriminate them. If a court requires the witness nonetheless to give that evidence, the court must issue a certificate under the section. The effect of the certificate is that the evidence and any information obtained as a direct or indirect consequence of the witness giving the evidence cannot be used against the witness in any Australian court. Importantly, s 128 only applies if a “witness” objects to giving particular “evidence”. Due to this limitation, the procedure adopted in some cases where a person objected to giving evidence about their assets pursuant to an asset disclosure order on the basis of the privilege against self-incrimination was for the affidavit disclosing the person’s assets to be brought into court after it was sworn but before it was filed for the court to consider whether there were reasonable grounds for the objection and, if the court was so satisfied, evidence subject to a certificate would be adduced from the person by reading the affidavit: see Bax Global (Australia) Pty Ltd v Evans [1999] NSWSC 815; 47 NSWLR 538 at 547–8 [33]–[35] and 549–551 [40]–[45]. This procedure became known as the “Bax Global (Australia) Pty Ltd v Evans procedure”. In Ross v Internet Wines Pty Ltd [2004] NSWCA 195; 60 NSWLR 436 (Ross), it was held that the Bax Global (Australia) Pty Ltd v Evans procedure infringed the privilege against self-incrimination. At 452 [104], Giles JA (with whom Spigelman CJ and McColl JA agreed) stated:

I recognise the objective of the Bax Global (Australia) Pty Ltd v Evans procedure in the administration of justice. In my opinion, however, it is impermissible for the court to substitute for a person’s fundamental common law right the statutory balance of rights, supplemented by court-devised additional protection by way of artificially making the disclosing party a witness, closure of the Court, limitations on who can see the disclosure affidavit, or if privilege is upheld and no certificate is granted return of the affidavit to its maker; all not pursuant to statute but by the court devising a procedure intended to inhibit the direct or derivative use against the person of information tending to incriminate. Taking up the words in Reid v Howard (at 17), it is:

“… inimical to the administration of justice for a civil court to compel self-incriminatory disclosures, while fashioning orders to prevent the use of the information thus obtained in a court vested with criminal jurisdiction with respect to the matters disclosed. Nor is justice served by the ad hoc modification or abrogation of a right of general application, particularly not one as fundamental and as important as the privilege against self-incrimination.”

It was held that it was wrong for the Court to fashion a procedure to make someone a witness so that the privilege against self-incrimination could be circumvented, despite the issue of a certificate under s 128 of the Evidence Act.

20    After Ross, Campbell J in Pathways refused an application by the plaintiffs for an order for an oral examination of the defendant as to his assets as an incident of the Court’s jurisdiction to require disclosure in aid of a freezing order where the defendant would claim privilege against self-incrimination. Justice Campbell held that it would be a wrong exercise of discretion to make such an order where the only reason for the oral examination would be to get around the defendant’s privilege against self-incrimination. His Honour said at 346 [39]–[40]:

… the order which the plaintiff seeks would involve the first defendant being compelled to be in the situation of a witness. He would not be in the situation of a witness at all if such an order were not made. The only reason for putting him into the situation of a witness is so that the privilege against self-incrimination which he would otherwise have can be got around. True, if it were to be got around, it would be got around on the basis of providing him with a certificate under s 128 Evidence Act which would protect him from quite a few, though possibly not all, of the potential harmful consequences of his being required to disclose the privileged information. Even though in one sense the Court has jurisdiction to require a person to give evidence on oath, about his assets in connection with a Mareva order, it would be a wrong exercise of discretion to require such disclosure to be made when it cuts down a privilege against self-incrimination in circumstances where the legislature has not clearly indicated it is appropriate to cut the privilege down.

… here the real reason why the Court is being asked to make the first defendant a witness is so that his privilege against self-incrimination can be compromised. That privilege is preserved by all the other usual pre-trial procedures of the Court. The first defendant has it within his own power to preserve it at the trial, by not giving evidence. It is only by the active involvement of the Court, in setting a time and place for a special hearing which otherwise would never occur, that the first defendant would become a witness. I am not persuaded that these are circumstances within the scope of the circumstances for which Parliament intended s 128 Evidence Act to provide an exception to the privilege against self-incrimination.

Justice Campbell also noted there was a lack of coherence in the law concerning the privilege against self-incrimination and the law concerning compulsory disclosure of information in civil proceedings (at 347 [46]) and at 349 [49] commented that it was an appropriate topic for consideration by the New South Wales Law Reform Commission.

21    The question of whether the privilege against self-incrimination should be abrogated in relation to search and freezing orders was taken up by various law reform bodies. In a joint report published in December 2005 (Uniform Evidence Law (Australian Law Reform Commission (ALRC) Report 102, Law Reform Commission of New South Wales (NSWLRC) Report 112, Victorian Law Reform Commission (VLRC) Final Report)), the Law Reform Commissions included the following recommendation at 15–10:

The uniform Evidence Acts should be amended to provide that the privilege against self-incrimination cannot be claimed in respect of orders made in a civil proceeding requiring a person to disclose information about assets or other information (or to attend court to testify regarding assets or other information) or to permit premises to be searched. However, it should be provided that evidence obtained in compliance with such orders cannot be used against the person in a criminal or civil penalty proceeding against the person, where the Court finds that the evidence might tend to incriminate the person, or make the person liable to a civil penalty. This use immunity should only apply to documents or information created pursuant to the court order, and not to a pre-existing document or thing.

22    Following that report, the VLRC gave the matter “further consideration” (VLRC Report: “Implementing the Uniform Evidence Act”, February 2006) and prepared draft provisions said at [2.66] to be designed:

(a)    generally to abrogate privilege against self-incrimination in relation to pre-existing documents at all stages of court proceedings;

(b)    to confine the operation of the remaining provision to orders for disclosure by affidavit made in or in connection with Anton Piller or Mareva orders;

(c)    to provide a procedure by which the evidence may be secured without compromising the ability of the deponent to claim the privilege; and

(d)    in line with the operation of the privilege at trial under s 128, to limit the court’s ability to require disclosure to instances where the certificate procedure is able to provide either an absolute or a reasonable degree of protection. In this last respect, the VLRC noted at footnote 81:

This is done by excluding the power to require disclosure where the self-incrimination relates to an offence in a foreign jurisdiction and by making the power discretionary and subject to an “interests of justice” test so that consideration can be given to the extent of the protection afforded by the certificate.

The VLRC added at [2.67] that it was taking “an admittedly cautious approach to the abrogation of the privilege” but justified this caution because of the “fundamental nature of the privilege” and the likelihood that disclosure orders would be made ex parte and at short notice.

23    In 2008, s 128A of the Evidence Act was enacted with the “interest of justice” criterion recommended by the VLRC. The criterion stipulated in s 128A(6)(c) is that the court be satisfied that the interests of justice require the information contained in the privilege affidavit to be disclosed. The inquiry as to what constitutes the “interests of justice” is broad and unconfined but two observations can be made at the outset. First, the consideration of that criterion is in the context where an asset disclosure order has been made in aid of a freezing or search order and the respondent to the freezing or search order is entitled to object to the disclosure of the information on the ground that such information may tend to prove that the person has committed an offence against or arising under, or is liable to a civil penalty under, an Australian law or a law of a foreign country. Thus, as the starting point, neither the fact that an asset protection order has been made, nor the fact that the person against whom the order is made is entitled to claim privilege against self-incrimination weighs the interests of justice one way or the other. It is a matter of balancing all the considerations that may bear upon whether the interests of justice require disclosure of the privileged information: BHP Billiton Ltd v Schultz [2004] HCA 61; 221 CLR 400 (BHP Billiton Ltd v Schultz). Those factors will vary from case to case, as will the weight to be attached to those factors in any particular case. Secondly, in weighing up the interests of justice in each case, it is important to recognise that s 128A necessarily impacts on the disclosing party’s common law privilege by requiring disclosure subject only to a certificate which prevents the information disclosed, or information derived from the information disclosed, being used against the disclosing party in any proceedings in an Australian court.

24    As the primary judge correctly noted, the privilege against self-incrimination is abrogated by the Commissioner’s power under s 353-10 of Sch 1 of the TAA to obtain information from a person and, relevantly, the fact that the provision of the information may tend to incriminate a person is not reason for the person to refuse to comply with the notice: Stergis v Commissioner of Taxation (Cth) (1989) 89 ATC 4442; De Vonk; Binnetter v Deputy Commissioner of Taxation [2012] FCAFC 126; 206 FCR 37 at 47 [30]. In De Vonk Hill and Lindgren JJ explained at 583:

If the argument were to prevail that the privilege against self-incrimination was intended to be retained in tax matters, it would be impossible for the Commissioner to interrogate a taxpayer about sources of income since any question put on that subject might tend to incriminate the taxpayer by showing that the taxpayer had not complied with the initial obligation to return all sources of income.  Such an argument would totally stultify the collection of income tax.

Relevantly also, there is no limitation imposed by s 353-10 on the use of incriminating information which is obtained through the s 353-10 process.

25    The circumstance that the privilege could not be claimed in response to a s 353-10 notice was central to the reasoning of the primary judge that the interests of justice were against making an order under s 128A(6) that the privilege affidavit be filed and served. Also central to the primary judge’s reasoning was the primary judge’s view that there was not a real risk that it would constitute a contempt of court for the DCT to exercise his powers under s 353-10 to obtain the information contained in the privilege affidavit. In holding that it was not in the interests of justice to require disclosure of the privilege affidavit because the DCT had available to him a statutory power which abrogates the privilege against self-incrimination, the primary judge acted on a wrong principle and the exercise of weighing the interests of justice was affected by a material error.

26    First, it is pertinent to bear in mind the issue here was whether it is in the interests of justice to require Mr Shi to disclose the privileged information to the DCT pursuant to the disclosure order made under r 7.33(1) of the Rules as an aid to the freezing order which the DCT obtained against Mr Shi. Sub-rule 7.33(1) must be read in conjunction with r 7.32 of the Rules, which, together with s 23 of the FCA Act, provide the statutory basis for the Court’s power to make freezing orders and asset disclosure orders ancillary to the making of freezing orders. Sub-rule 7.33(2) provides that an ancillary order may be made for the purpose of eliciting information relating to assets relevant to the freezing order.

27    Rule 7.32 of the Rules provides:

(1)     The Court may make an order (a freezing order), with or without notice to a respondent, for the purpose of preventing the frustration or inhibition of the Court's process by seeking to meet a danger that a judgment or prospective judgment of the Court will be wholly or partly unsatisfied.

(2)    A freezing order may be an order restraining a respondent from removing any assets located in or outside Australia or from disposing of, dealing with, or diminishing the value of, those assets.

28    Rule 7.33 of the Rules provides:

(1)     The Court may make an order (an ancillary order) ancillary to a freezing order or prospective freezing order as the Court considers appropriate.

(2)    Without limiting the generality of subrule (1), an ancillary order may be made for either or both of the following purposes:

(a)     eliciting information relating to assets relevant to the freezing order or prospective freezing order;

(b)     determining whether the freezing order should be made.

29    It is well-settled law that the purpose of an asset disclosure order, just as the purpose of a freezing order, is to prevent frustration or abuse of the Court’s process in relation to matters coming within its jurisdiction: Witham v Holloway [1995] HCA 3; 183 CLR 525 at 535 per Brennan, Deane, Toohey and Gaudron JJ, citing Jackson v Sterling Industries Ltd [1987] HCA 23; 162 CLR 612 (Jackson v Sterling Industries) at 623 per Deane J. A requirement for making a freezing order is proof (at least on a prima facie basis where the application is made ex parte) that there is a danger of removal of assets from the jurisdiction, or dissipation of assets needed to meet any judgment the applicant has obtained or might obtain: r 7.32 of the Rules; Jackson v Sterling Industries. An asset disclosure order serves the purpose of identifying the respondent’s assets and the utility of the affidavit is to assist in ensuring that the Court’s processes for enforcement of a judgment are not frustrated by assets being dissipated between the time of commencement of proceedings and eventual enforcement: Pathways at 346 [41]. Whilst the function of a freezing order is not to provide security in respect of a judgment, freezing orders may continue to operate after final judgment to preserve assets and assist and protect the use of methods of execution: Jackson v Sterling Industries at 623 per Deane J.

30    In the present case, in granting the freezing orders and asset disclosure order, Yates J was satisfied on the evidence presented that:

… the Commissioner had established against each respondent a strong prima facie case of at least prospective indebtedness for a very large sum in respect of his or her tax liabilities. I was also satisfied that the facts and circumstances surrounding each respondent’s taxation affairs (including, on the Commissioner’s case, an apparently deliberate failure to disclose taxable income), and each respondent’s ability to access and transfer offshore large sums to other entities which he or she controls or with which he or she has an association, established that there is a real (as opposed to a supposed) danger that a judgment or prospective judgment obtained against him or her might be wholly or partly unsatisfied because assets (in particular, liquid assets) might be removed from Australia or otherwise disposed of or dealt to the disadvantage or detriment of the Commonwealth. I was satisfied that the balance of convenience favoured the grant of the relief sought and that it should be granted on an ex parte basis.

See Deputy Commissioner of Taxation v Shi [2018] FCA 1915 at [20]. Whilst the DCT has since obtained judgment against Mr Shi, the freezing orders have not been discharged and remain in force and the purpose of the making of the freezing orders remains extant.

31    Significantly, in balancing the interests of justice, it is a relevant consideration that the DCT did not seek to rely on his s 353-10 power to obtain the information from Mr Shi about his assets in lieu of seeking disclosure of the privilege affidavit. To the contrary, the DCT contended that he should not be required to rely on his s 353-10 power in circumstances where the asset disclosure order was made in aid of the freezing orders which the DCT obtained against Mr Shi, the freezing orders remained in place, there had been no application to discharge those orders and there was a judgment of the Court which had identified a real danger of dissipation of assets and a shortfall of Australian assets against Mr Shi’s total outstanding tax liability of $42 million: the DCT’s supplementary submissions in the court below at [15]. In the court below, the DCT submitted that in those circumstances, compliance with the asset disclosure order was in the interests of justice to enable identification of the assets subject to the freezing orders and to verify whether the freezing orders had been complied with, and a determination of the interests of justice was not affected by what other powers the DCT may now have available to him. The wider use of the information if the DCT was unconstrained by s 128A(8) of the Evidence Act was extraneous to the purpose of the asset disclosure order obtained by the DCT and the DCT did not seek to rely on the privilege affidavit beyond the present proceeding. Moreover, whilst in an appropriate case the interests of justice may involve considerations wider than the particular interests of the parties and include matters pertaining to the public interest more generally, there was nothing to suggest that the wider public interest in this case should override the interests of the DCT in obtaining full disclosure of the assets of Mr Shi in aid of the freezing orders obtained. The DCT’s power to compel the provision of information under s 353-10 of Sch 1 of the TAA does not provide the same mechanism for enforcing immediate compliance with the freezing orders, but is a significantly different process and the primary judge wrongly failed to take such differences into account in the assessment of the interests of justice. The error is not, as the DCT characterised it, the taking into account of an irrelevant consideration but, rather, the failure to take into account a relevant consideration bearing upon the question of the interests of justice.

32    Secondly, the primary judge formed the view there would be no legal impediment to the DCT using his s 353-10 power to obtain the same information which the Court ordered by the asset disclosure order on the erroneous basis that the question of contempt would only arise if there were criminal proceedings against Mr Shi on foot. De Vonk and Watson v Commissioner of Taxation [1999] FCA 1796; 96 FCR 48, to which His Honour referred, were both cases where the Commissioner sought to use his cognate power under the former s 264 of the Income Tax Assessment Act 1936 (Cth) to obtain information from taxpayers concerning the same factual matters which were the subject of criminal proceedings brought against them. However, it is not only in the circumstance of parallel criminal proceedings that the use of the s 353-10 power may constitute a contempt. The principle which informs contempt of court is the interference with the due administration of justice and the principle applies equally to the use of a coercive information gathering power in the context of civil proceedings: Pioneer Concrete Pty Ltd v Trade Practices Commission [1982] HCA 65; 152 CLR 460 (Pioneer Concrete); Kotan Holdings Pty Ltd v Trade Practices Commission (1991) 30 FCR 511. In Pioneer Concrete, one of the issues was whether notices issued under s 155 of the Trade Practices Act 1974 (Cth) (Trade Practices Act) (being a cognate power to s 353-10) by the Trade Practices Commission to the appellant, in relation to the same subject matter of pending civil proceedings instituted by another company under the Trade Practices Act against the appellant, constituted an exercise of judicial power and an interference with judicial proceedings. It was held that the s 155 power was not an exercise of judicial power and was capable of being exercised. The Court left open the question as to whether it constituted a contempt but, relevantly, Gibbs CJ observed at 467–8 that if the power was used to assist a party in proceedings already pending in a way that would give that party advantages which the rules of procedure would otherwise deny them, there would be a contempt of court. See also Korean Airlines v Australian Competition and Consumer Commission (No 3) [2008] FCA 701 at [104]. Applying these principles, in circumstances where the DCT has obtained the asset disclosure order and there is an affidavit of assets sworn by Mr Shi in respect of which he has claimed the privilege against self-incrimination, it is arguable that the DCT’s use of the power might be contempt or, at the least, an abuse of process, if used to enable the DCT to overcome the limitation on use and protection provided to Mr Shi by s 128A of the Evidence Act.

33    Thirdly, and more fundamentally, it was not suggested that there was any reason for the DCT to exercise his power under s 353-10 other than to enable the DCT to get the information in the privilege affidavit without the limitations on use imposed by s 128A(8). Instead of requiring disclosure of the privilege affidavit to the DCT and granting Mr Shi a certificate under s 128A(7), which would afford Mr Shi some protection in relation to the use of the information, the use of the s 353-10 process would negate Mr Shi’s entitlement to rely on the privilege against self-incrimination and circumvent the restrictions on the use of the information prescribed by s 128A(8). Mr Shi would be obliged to comply with the notice, regardless of the privilege which the Court has already held was well-founded, with the failure to comply constituting an offence under ss 8C and 8D of the TAA. Adopting the words of Campbell J in Pathways at 346 [39], it would be a wrong exercise of discretion to cut down a privilege against self-incrimination in circumstances where the legislature has not clearly indicated it is appropriate to cut the privilege down.

PROPOSED APPEAL – GROUNDS 2, 3 AND 4

34    These grounds should be considered together as they concern the content of the privilege affidavit. The DCT submitted that the primary judge erred in his approach to the privilege affidavit by failing to find that the affidavit was not in compliance with the requirements of the disclosure orders (ground 2), by failing to require Mr Shi to provide an affidavit that strictly complied with the disclosure orders (ground 3) and in finding that providing a copy of the privilege affidavit with redactions would be pointless (ground 4).

35    Order 8 of the disclosure orders required Mr Shi to make an affidavit informing the DCT of his assets worldwide “giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of [his] interest in the assets”. Order 9(c) required Mr Shi, if he objected to complying with Order 8 on the basis that some or all of the information required to be disclosed might tend to incriminate him or make him liable to a civil penalty, to “disclose so much of the information required to be disclosed to which no objection is taken… and… prepare an affidavit containing so much of the information required to be disclosed to which objection is taken, and deliver it to the Court in a sealed envelope…”. That was the course of action taken by Mr Shi.

36    At the hearing of the interlocutory application, the DCT was provided with an open annotation to the privilege affidavit which set out in a generalised manner the content of the affidavit. By reference to that document and to the submissions for Mr Shi, the DCT submitted that an appropriate course may be for redactions to be made to the privilege affidavit so that the affidavit set out no more than Mr Shi’s assets without describing why they were assets. It was submitted that the affidavit should be redacted to the extent the affidavit went beyond this. In finding that the information contained in the affidavit tended to incriminate Mr Shi, the primary judge stated that redacting the affidavit and disclosing to the DCT so much of the privilege affidavit that did not tend to incriminate Mr Shi would be pointless.

37    On appeal, the DCT submitted that if disclosure affidavits were drafted in a manner which unnecessarily included incriminatory material, the purpose of disclosure orders risked being circumvented. If it was apparent to the Court that disclosure of assets could occur without the inclusion of such incriminatory information, the appropriate course was for the Court to direct Mr Shi to file a disclosure affidavit that strictly complied with the Court orders by preparing an affidavit containing so much of the information required to be disclosed to which no objection was taken, and that the primary judge erred by failing to adopt this course.

38    Having considered the privilege affidavit, I do not think it went beyond the requirements of Order 8 of Yates J’s orders and I also agree with the primary judge that the affidavit cannot sensibly be redacted. Given the privilege claimed over the affidavit, it is not appropriate to go into reasons.

NOTICE OF CONTENTION – GROUND 1

39    Ground 1 of the respondent’s notice of contention is that the primary judge wrongly held that the onus under s 128A(6)(b) was upon the party claiming the privilege and should have found that the onus was on the DCT, which the DCT failed to satisfy. It was submitted for Mr Shi that the correct construction of s 128A(6)(b) is that the onus is on the party seeking disclosure to prove that the information contained in the privilege affidavit “does not tend to prove that the relevant person has committed an offence against or arising under…a law of a foreign country”. It was not disputed that the person claiming the privilege must first satisfy the Court that there are reasonable grounds for the objection (s 128A(4)) but, it was argued, having established that there are reasonable grounds, s 128A(6), properly construed, shifts the onus to the person seeking disclosure of the information contained in the privilege affidavit to “satisfy” the court of the criteria in s 128A(6). It was submitted that “satisfied” is the language of onus and where a statute requires a court to be satisfied before enlivening a particular outcome, the party seeking that outcome bears an onus on the balance of probabilities. In the context of s 128A, it was said to make logical sense that the onus shifted to the party seeking disclosure where the party claiming the privilege has already met the onus of demonstrating reasonable grounds for claiming the privilege and the DCT did not, in this case, discharge the onus of showing that the criterion in s 128A(6)(b) was met. I reject these submissions.

40    Section 128A(6) qualifies the protection against self-incrimination afforded by the privilege subject to the three pre-conditions. As the two pre-conditions in s 128A(6)(a) and (b) both relate to the content of the “information disclosed in the privilege affidavit”, it follows that whether those preconditions are met or not must depend upon, and fall to be determined by, the content of the privilege affidavit. An affidavit having been furnished as directed by s 128A(2), it is for the Court to consider whether there are reasonable grounds to claim the privilege for the purpose of s 128(4), and the Court having found that there are reasonable grounds to claim the privilege, it is then a matter for the Court to consider and assess whether such information satisfies the criteria in sub-ss 128A(6)(a) and (b). There is no shift in onus. If there are reasonable grounds for an objection to complying with a disclosure order on the basis that the information might tend to prove an offence under Australian law but not an offence against a foreign law, subject also to the third precondition in s 128A(6)(c), the Court may make an order that the privilege affidavit be disclosed with the protection of a certificate under s 128A(7). However, if the Court finds that there are reasonable grounds for an objection on the basis that the information might disclose an offence against a foreign law, the affidavit must be returned: sub-ss 128A(5) and (6). The question of whether the preconditions of sub-ss 128A(6)(a) and (b) are met is resolved by what the affidavit discloses, which is not a matter within the knowledge of the party seeking disclosure. It is the party claiming the privilege that has the knowledge of the content of the privilege affidavit and who is therefore positioned to establish that the information disclosed in the privilege affidavit does not meet the requirements of sub-ss 128A(6)(a) and/or (b).

41    I would also add that although it was not argued by the parties, and it was their common position that the person seeking disclosure has the onus of satisfying the Court of the third pre-condition – namely the interests of justice require the information to be disclosed – I doubt the correctness of their common position. Properly considered, it seems to me there is not an onus of proof as such upon the party seeking disclosure but, rather, the task which the Court undertakes in considering the interests of justice criterion involves a balancing and weighing up of all the matters which may bear on the question: cf BHP Billiton Ltd v Schultz.

NOTICE OF CONTENTION – GROUND 3

42    In the event that the Court found an appealable error by the primary judge in relation to the interests of justice criterion in s 128A(6)(c), it was argued for Mr Shi that the interests of justice did not require disclosure, irrespective of the DCT’s coercive powers under s 353-10 of the TAA.

43    First it was argued that the DCT has since obtained judgment against Mr Shi. It does not follow, however, that the purpose of the disclosure order is spent.

44    The reasons of the primary judge at [27] record the submission of the DCT in the court below that it was in the interests of justice that there be disclosure of the privilege affidavit having regard to the findings made by Yates J about the risk of dissipation of assets, the allegations concerning significant historical transfers of funds to China, and the negligible value of the assets disclosed in Mr Shi’s non-privilege affidavit. The primary judge also said that:

The [DCT] suspects there are more assets over which Mr Shi has effective control. He wants to know about these. As things stand, the assets so far disclosed fall far short of the $42,297,437.65 that Mr Shi owes the [DCT]. The [DCT], it was said, may wish to issue writs of execution of property, charging orders, a court ordered garnishee and may wish to perform court examinations. These remedies will be facilitated by full disclosure.

45    In considering the interests of justice criterion, it is relevant to have regard to whether there is any continuing utility in the disclosure order and bearing on that question is the purpose for which the order was made in the first instance. In this case, that purpose remains extant to prevent any frustration of the judgment which the DCT has obtained against Mr Shi, as reflected in the submissions of the DCT to the primary judge below. The purpose of a freezing order does not end with judgment being obtained and operates to preserve the efficacy of methods of execution which lie against a judgment debtor in recovery of the judgment debt: Cardile v LED Builders Pty Limited [1999] HCA 18; 198 CLR 380 at 401 [43] per Gaudron, McHugh, Gummow and Callinan JJ; Jackson v Sterling Industries at 623 per Deane J. The provision of information pursuant to a disclosure order made in aid of a freezing order serves to assist in ensuring that the Court’s processes for enforcement of the judgment are not frustrated by assets being dissipated between the obtaining of the freezing order and the eventual enforcement of the judgment: Pathways at 346 [41]. Thus, the fact the DCT now has judgment against Mr Shi does not militate against any continued utility in the disclosure. To the contrary, as the freezing orders are still in force, there remains a legitimate purpose for the disclosure order, namely that Mr Shi be required to disclose his assets worldwide to protect the efficacy of execution and abuse of the court’s processes.

46    Secondly, it was argued that the interests of justice did not require the information in the privilege affidavit to be disclosed because of the risk that information in the privilege affidavit could be used or held against Mr Shi in or in relation to criminal proceedings. It was submitted that this ground engaged the considerations of the accusatorial process of criminal justice and right to silence which has been emphasised in recent decisions of the High Court and intermediate courts of appeal. It was submitted that the accusatorial process commences pre-charge. The primary judge accepted at [45] that there may be a realistic possibility that Mr Shi will be charged. It was submitted this was unavoidable as the investigation leading to the freezing orders included execution of search warrants by the Australian Federal Police containing a variety of suspected offences. The primary judge reasoned that despite the realistic possibility of criminal charges, the information in the hands of the DCT would be protected by the Harman undertaking and the protection of a certificate would prevent the information being used by prosecutors against Mr Shi in any such criminal proceedings. It was submitted, however, that the implied undertaking only operates so long as the material is not tendered in open court, and a party can also be released from the undertaking. If the DCT were to obtain the privilege affidavit for the purposes of recovery of assets in satisfaction of the judgment against Mr Shi subject to a certificate, then, as noted by the primary judge at [27], the DCT may wish to “issue writs of execution of property, charging orders, a court ordered garnishee and may wish to perform court examinations”. In such instances, it was submitted, the DCT would need to rely on the privilege affidavit to enforce his judgment against third parties, some of whom are based in China, which would tend towards the need to disclose the privilege affidavit to those third parties as a matter of procedural fairness. It was submitted that these circumstances could give rise to the DCT being released from the Harman undertaking and it was submitted further that derivative use immunity in respect of compulsorily acquired information, such as that which is provided for in s 128A(8), is very difficult to enforce, and the nature of derivative information is such that investigators and prosecutors may not even be aware that they have it. Once in the public sphere, while a certificate would afford some degree of protection, the derivate use problem remains, which has potential to cause significant disruptions to any future criminal proceedings. It was submitted, for example, if the privilege affidavit were to be disclosed to prosecutors, Mr Shi would likely be inclined to explore whether any evidence discovered after that disclosure was directly, or indirectly, attributable to the information in the privilege affidavit and this could frustrate, or in an extreme case, entirely derail a criminal prosecution.

47    The short answer to these submissions is that the contentions put are purely speculative at this stage. Mr Shi has not been charged and any projections about what might happen if he is charged are not matters bearing on the interests of justice as things presently stand. There is no force in the submissions made because there are no current charges or criminal proceedings on foot against Mr Shi and the grant of a certificate and limitation on use of the information provide some measure of protection.

48    It was submitted further under this ground that a certificate under s 128A(7) would have no operation outside of Australia, leaving Mr Shi exposed to sanction in China. That argument also has no force as it rests on a purely hypothetical consideration.

49    Thirdly, it was argued that, having regard to the matters deposed to in the privilege affidavit at [5]–[6], which qualify the remainder of the affidavit, disclosure to the DCT would be of little or no utility. I do not accept that submission. It is not appropriate to set out what is deposed to by Mr Shi at paragraphs [5]–[6] of the privilege affidavit, other than it can be said that the matters deposed to in those paragraphs are argumentative and, given the purpose for which the disclosure order was made, disclosure nonetheless would have utility.

CONCLUSION

50    There should be leave to appeal on ground 1 of the proposed notice of appeal, the appeal should be allowed and the notice of contention dismissed.

Associate:

Dated:    4 June 2020

REASONS FOR JUDGMENT

LEE J:

A    INTRODUCTION

51    The application for leave to appeal by the applicant (Commissioner) from orders made by the primary judge ordering the return of a privileged affidavit (Privileged Affidavit) filed pursuant to disclosure orders in accordance with the procedure set out in s 128A of the Evidence Act 1995 (Cth) (Act), raises important issues as to the proper construction of s 128A and its principled operation.

52    I have had the considerable benefit of reading a draft of the reasons of Davies J, and although I agree with her Honour that leave to appeal on ground 1 of the proposed notice of appeal (NOA) should be granted and leave should be refused in relation to grounds 2, 3 and 4 (because they lack merit for the reasons expressed by Davies J), I consider the orders made below should not be disturbed, and the appeal should be dismissed.

53    As has been explained, the Commissioner commenced proceedings against Mr Shi, Mrs Shi and their son seeking judgment for taxation liabilities to the Commonwealth. On commencement, the Commissioner applied for and obtained freezing orders pursuant to r 7.32 of the Federal Court Rules 2011 (Cth) (FCR) and orders ancillary to those freezing orders: Deputy Commissioner of Taxation v Shi [2018] FCA 1915. One ancillary order required Mr Shi to provide to the Court an affidavit disclosing his worldwide assets.

54    As a consequence, Mr Shi filed two affidavits: the first, an open affidavit, disclosed assets with an estimated aggregate value of $360,100; the second was the Privileged Affidavit, which was not served on the Commissioner but a copy of it was delivered to the Court in a sealed envelope.

55    Importantly, on 24 April 2019, judgment was entered for the Commissioner against Mr Shi (in the amount of $42,297,437.65) and it was only after the entry of judgment that a hearing took place before the primary judge who, by a process of reasoning summarised by Davies J, ordered that the copy of the Privileged Affidavit be returned to Mr Shi.

56    In explaining why I have concluded the appeal should be dismissed, I will divide the balance of these reasons into the following headings:

    B    The Background to section 128A

    C    The Principled Construction of section 128A

    D    The Standard of Appellate Review

    E    Ground 1 Notice of Contention – “Onus”

    F    Ground 1 Notice of Appeal; Ground 3 Notice of Contention

    G     Orders

B    THE BACKGROUND TO SECTION 128A

57    In order to understand s 128A, it is well to examine the perceived difficulty its enactment sought to address. In doing so, it is convenient to commence with the judgment of Campbell J in Pathways Employment Services Pty Ltd v West [2004] NSWSC 903; (2004) 212 ALR 140 which, with respect, explained with clarity the then tension and incoherence occasioned by the interaction between the privilege against self-incrimination and the law concerning compulsory disclosure of information for the purpose of civil proceedings.

58    The discussion in West can itself only be understood against the background that in the late 1990s a practice had developed in the Equity Division of the Supreme Court of New South Wales in pre-trial proceedings, relating to the use of s 128 of the Act (which provision, as explained further below, relevantly provides by s 128(5) that if a witness chooses to give evidence or is compelled to give evidence at a hearing, the court must give the witness a certificate which grants that person use and derivative use immunity in relation to the particular evidence, save in criminal proceedings in respect of the falsity of the evidence).

59    This expedient of using s 128 arose because in Reid v Howard (1995) 184 CLR 1, Toohey, Gaudron, McHugh and Gummow JJ (at 14) had deprecated the practice of a court fashioning procedural orders (see, for example, Reid v Howard (1993) 31 NSWLR 298; AT&T Istel Ltd v Tully [1993] AC 45) to strike what was perceived to be an appropriate balance between the privilege against self-incrimination and relevant disclosures. The High Court explained that there was no scope for an exception to the privilege against self-incrimination other than by statute, and explained (at 17) that it was:

... inimical to the administration of justice for a civil court to compel self-incriminatory disclosures, while fashioning orders to prevent the use of the information thus obtained in a court vested with criminal jurisdiction with respect to the matters disclosed. Nor is justice served by the ad hoc modification or abrogation of a right of general application, particularly not one as fundamental and as important as the privilege against self-incrimination.

60    Of course, the commencement of the Act shortly after Reid heralded significant statutory change, including the procedure provided for in s 128. In a number of cases in the Equity Division after 1995, the practice developed of judges making ex parte orders requiring a disclosure affidavit and, after swearing but before filing, the affidavit was brought into court at a preliminary hearing (upon notice being given to the opposing party and the Director of Public Prosecutions). If an objection based on the privilege against self-incrimination was then taken at the hearing, the parties and the Director of Public Prosecutions were heard on whether a s 128 certificate should be granted: see Vasil v National Australia Bank Ltd (1999) 46 NSWLR 207 (at 222 [45] per Fitzgerald JA); Bax Global (Australia) Pty Ltd v Evans (1999) 47 NSWLR 538 (at 550–1 [41]–[46] per Austin J).

61    It was this so-called “Bax practice” that was considered in some detail by Campbell J in West. In West, the defendant West had been charged with obtaining money by deception from one of the plaintiffs. The plaintiffs commenced a recovery proceeding and had obtained an asset preservation order. In accordance with the Bax practice, an application was made that West attend the court to give oral evidence as to his assets. West resisted the order, claiming the privilege against self-incrimination; hence it was necessary for the court to determine whether s 128 of the Act could apply at the proposed preliminary hearing. Campbell J (at 154 [39]-[40]) refused the application by holding that the only purpose of forcing West into becoming a witness and giving evidence, was to negate what the High Court had made plain in Reid was his fundamental common law privilege against self-incrimination, and that s 128 was not intended to apply where it was only through the “active involvement of the court, in setting a time and place for a special hearing which otherwise would never occur”, that a person claiming the privilege against self-incrimination would become a witness.

62    After reaching this conclusion, his Honour, under the heading “Law Reform” observed (at 155–6 [46]–[49]) as follows:

The interaction of the law concerning privilege against self-incrimination and the law concerning compulsory disclosure of information for the purpose of civil proceedings is not at present coherent. In the area with which the present case deals, concerning recovery of assets alleged to have been misappropriated, statute, in the form of ss 177 and 178 of the Crimes Act 1900 has gone some way towards giving effect to a policy that a thief ought not be able to rely upon the privilege against self-incrimination to frustrate civil proceedings aimed at making him give back what he has dishonestly obtained. That policy can also be seen as providing part of the reason for s 597(12) and (12A) of the Corporations Act 2001 (Cth) abrogating the privilege against self-incrimination, with some protection, in public examinations about a corporation’s examinable affairs conducted by a liquidator or other “eligible applicant”. However, given the way that ss 177 and 178 of the Crimes Act 1900 do not attach to all offences involving obtaining property through dishonesty, the policy is imperfectly implemented. Concerning the closely analogous area of dishonest appropriation of the intangible rights involved in intellectual property and goodwill, it is not implemented at all. Part of the reason for this is because there is no New South Wales equivalent of s 31(1) of the Theft Act 1968 (UK), or s 72 of the Supreme Court Act 1981 (UK). Yet, as AT&T Istel Ltd v Tully [1993] AC 45; [1992] 3 All ER 523 illustrates, if exceptions to the privilege against self-incrimination are introduced by reference to the subject matter of particular charges, there will always be a possible charge which is outside the list concerning which the privilege is abrogated, and where the case for abrogation seems as strong as concerning those charges for which abrogation has occurred.

The lack of coherence in this area of the law has become of particular importance as a result of several different developments in recent decades. One of them is the development of Mareva orders and Anton Piller orders, arising from the decisions in Nippon Yusen Kaisha v Karageorgis [1975] 1 WLR 1093; [1975] 3 All ER 282; Mareva Compania Naviera SA v International Bulkcarriers SA [1980] 1 All ER 213; EMI Ltd v Pandit [1975] 1 WLR 302; [1975] 1 All ER 418 and Anton Piller KG v Manufacturing Processes Ltd [1976] Ch 55; [1976] 1 All ER 779. Another is the recognition that the “felonious tort rule” (Smith v Selwyn [1914] 3 KB 98) has been superseded so that it is now possible for both criminal and civil courts to investigate the same question of whether conduct which amounts to a crime has occurred, subject to the control that the civil court has an inherent jurisdiction to order a stay of the civil proceedings where the conduct of those proceedings may interfere with the fair trial of the criminal proceedings (McMahon v Gould (1982) 7 ACLR 202; 1 ACLC 98; Halabi v Westpac Banking Corporation (1989) 17 NSWLR 26). Another is the introduction of s 128 [of the Act].

Even if there were to be legislation which legitimised the Equity Division practice described in Bax Global (Australia) Pty Ltd v Evans (1999) 47 NSWLR 538, care would need to be taken about whether the cutting down of the privilege against self-incrimination so enacted was one which applied only to Mareva-style relief, or whether it also enabled information to be obtained for the purpose of use in deciding the merits of property recovery proceedings. Alternatively, given the serious criticisms that have been voiced (for example, in AT&T Istel Ltd v Tully [1993] AC 45; [1992] 3 All ER 523) about the continued appropriateness of the privilege against self-incrimination when the incrimination occurs in the context of civil proceedings, a case may be able to be made for a court to have power, analogous to that contained in s 128 [of the Act], to compel disclosure in any of the court’s interlocutory proceedings (whether by way of discovery, or interrogatories, or any other interlocutory proceedings), on terms of provision of a certificate.

These questions involve looking at the scope of existing law, and considerations of policy, which go wider than a judge writing a judgment can, or should, decide. One of the policy questions involved is whether, when there has been a dishonest appropriation of property, it is more important for the owner to get his property back, or for the wrongdoer to be punished, or whether both can be achieved. That this is no new question is shown by the fact that part of the mythology of the New South Wales Bar involves the country jury which returned a verdict of “not guilty, but he's got to give the sheep back”. These are topics appropriate to be considered by the New South Wales Law Reform Commission, or some other body which examines legislative policy. …

63    The issue then became the subject of discussion and proposals by law reform bodies. A New South Wales Law Reform Commission (NSWLRC) inquiry (commencing shortly before the tenth anniversary of the enactment of the Uniform Evidence Acts), was conducted at the same time (and on almost identical terms) as an inquiry by the Australian Law Reform Commission (ALRC). A further reference was then made to the Victorian Law Reform Commission (VLRC), and in July 2005 each law reform body produced a combined discussion paper: ALRC Discussion Paper 69, NSWLRC Discussion Paper 47, VLRC Discussion Paper, Review of the Uniform Evidence Acts (DP). In the DP, there was a discussion of the “Application of s 128 to ancillary proceedings” and the Bax practice (at [13.228]–[13.237]). A committee of the Council of Chief Justices of Australia and New Zealand, after noting that the privilege had been abrogated by statute in intellectual property and passing off proceedings in the United Kingdom, made a submission suggesting an amendment providing for the abrogation of the privilege so that an order for disclosure of a general kind was obeyed. The law reform bodies, after noting potential ways in which s 128 could be amended to abrogate the privilege for asset preservation and Anton Piller orders, expressed the view that a general abrogation was unwarranted and expressed a preference for “the limited abrogation of the privilege to specific types of orders to rectify the present problem with s 128”. Proposal 13-10 was made to the following effect:

Section 128A should be inserted in the uniform Evidence Acts to apply in respect of orders made in a civil proceeding requiring an individual to disclose assets or other information (or to attend court to testify regarding assets or other information) or to permit premises to be searched.

64    The Uniform Evidence Law (ALRC Report 102, NSWLRC Report 112, VLRC Final Report) (Joint Report) followed in December 2005. Recommendation 15-10 provided:

The uniform Evidence Acts should be amended to provide that the privilege against self-incrimination cannot be claimed in respect of orders made in a civil proceeding requiring a person to disclose information about assets or other information (or to attend court to testify regarding assets or other information) or to permit premises to be searched. However, it should be provided that evidence obtained in compliance with such orders cannot be used against the person in a criminal or civil penalty proceeding against the person, where the court finds that the evidence might tend to incriminate the person, or make the person liable to a civil penalty. This use immunity should only apply to documents or information created pursuant to the court order, and not to a pre-existing document or thing.

65    As can be seen, this recommendation proposed abrogating the privilege in the relevant context, but that protection be provided in the form of a certificate. Notably, no requirement was proposed that any disclosure was required to be in the interests of justice.

66    Following the Joint Report, the VLRC returned to the issue in the context of its broader Implementing the Uniform Evidence Act: Report published in February 2006 (VLRC Report). The VLRC explained (at [2.61]–[2.64]) the background and noted (at [2.65]) it had given the matter “further consideration” and produced draft provisions which (as noted at [2.66]) were designed to: (a) generally abrogate the privilege against self-incrimination in relation to pre-existing documents at all stages of court proceedings; (b) confine the operation of the remaining provision to orders for disclosure by affidavit made in or in connexion with asset preservation or Anton Piller orders; (c) provide a procedure by which the evidence may be secured “without compromising the ability of the deponent to claim the privilege, as was the case in NSW previously”; and (d) in line with the operation of the privilege at trial under s 128, “limit the court’s ability to require disclosure to instances where the certificate procedure is able to provide either an absolute or a reasonable degree of protection.” In this last respect, the VLRC noted (at 35 footnote 81):

This is done by excluding the power to require disclosure where the self-incrimination relates to an offence in a foreign jurisdiction and by making the power discretionary and subject to an ‘interests of justice’ test so that consideration can be given to the extent of the protection afforded by the certificate.

67    The VLRC added (at [2.67]) that it was taking “an admittedly cautious approach to the abrogation of the privilege” but justified this caution because of: (a) “the fundamental nature of the privilege”; and (b) disclosure orders will likely be made ex parte and at short notice.

68    It was in this somewhat tortuous way that s 128A came to be incorporated as part of the 2008 amendments to the Act. This is evident from the Explanatory Memorandum to the Evidence Amendment Bill 2008 (Cth), which explained (at [190]):

This item [that is, s 128A] addresses, but does not implement, recommendation 15-10 of the [Joint] Report. Recommendation 15-10 was that self-incrimination privilege be abrogated in relation to search and freezing orders. The [VLRC] revisited this issue in its [VLRC Report]. The VLRC developed draft provisions which, rather than preventing claims for privilege being made entirely, provide a means for evidence to be secured and provided to the court in a sealed envelope. Under these draft VLRC provisions the court is then empowered to require disclosure of that evidence to the party seeking it where, upon consideration, the court determines that the interests of justice require it and a certificate providing use and derivative use immunity is given to the disclosing party. The [Standing Committee of Attorneys-General] working group preferred the VLRC’s refinement of recommendation 15-10 and have based new section 128A on the work of the VLRC.

69    I now turn to the text and construction of the provision.

C    THE PRINCIPLED CONSTRUCTION OF SECTION 128A

70    The text of s 128A is set out in the reasons of Davies J (at [4]) and the following nine matters are revealed by reviewing the text, context and purpose of the provision.

71    First, consistent with the evident intention, s 128A largely reflects s 128; the principal differences being that: (a) s 128 relates to evidence which is yet to be given, but s 128A relates to evidence which, although identified in writing in a testamentary document, is not directed to the adduction of relevant evidence at a hearing to determine the facts in issue in the proceeding (see ss 55 and 56 of the Act); and (b) s 128A does not permit a person claiming the privilege to, in effect, facilitate the disclosure of the information with the benefit of a certificate.

72    Secondly, although mandating no procedure, the section creates a mechanism whereby a claim for privilege on the basis of self-incrimination in respect of a relevant disclosure order must (s 128A(4)) be determined; hence the s 128A mechanism is unusual in that it is not necessarily invoked by an application for the inspection of a document (such would be the case when seeking access to documents produced said to be subject to a claim for some other form of privilege, such as public interest immunity or legal professional privilege), but by reason of the making of the claim by the relevant person when the privilege affidavit is provided to the court. Having said this, as a practical matter, the question as to whether an affidavit will be returned or disclosed in whole or part will usually only be determined in the event a party seeks access to, or the return of, the document.

73    Thirdly, upon the making of the claim, the next step is for the court to determine whether or not there are reasonable grounds for the objection. Logically, this can be satisfied in a number of ways, in that some or all of the information may tend to prove that the person has committed an offence against or arising under an Australian law and/or a law of a foreign country, and/or is liable to a civil penalty.

74    Fourthly, the default position, upon the court finding there are reasonable grounds for the objection, is that the court must not require disclosure of the information and must return it to the relevant person (s 128A(5)).

75    Fifthly, the only circumstance in which the court “may” require the whole or any part of the privilege affidavit to be filed and served is if it is “satisfied” the interests of justice require the information to be disclosed, and the information may tend to prove the person has committed an offence or is liable to a civil penalty under Australian law, but not the law of a foreign country (s 128A(6)). This last, foreign law aspect, reflects the legislative intention to limit the court’s ability to require disclosure to instances where the certificate procedure provided adequate protection (see the observations in the VLRC Report at [2.66] and footnote 81).

76    Sixthly, it follows from the structure of the provision that upon the court finding there are reasonable grounds for the objection, sometimes the interests of justice assessment will be required, and sometimes it will not. For example, if the information tends to prove that the person has committed an offence or is liable to a civil penalty under Australian law (but not any potential foreign offence or civil penalty), the circumstances will call for consideration as to whether the interests of justice require the information to be disclosed. But if the court is satisfied that the reasonable grounds for the objection are wholly or partly based on exposure to a foreign offence or civil penalty, s 128A(6) can never be satisfied, and the default position applies, requiring the privilege affidavit to be returned as provided for by s 128A(5).

77    Seventhly, if one comes to the interests of justice assessment, it has been remarked in the context of s 128(4)(b) that the concept is necessarily broad (see Cureton v Blackshaw Services Pty Ltd [2002] NSWCA 187 (at [37] per Sheller JA, with whom Meagher and Beazley JJA agreed). But it would be a mistake to apply authorities in relation to s 128(4)(b) acontextually: here the context is not directed to the possible adduction of evidence relevant to a fact in issue, but rather whether information should be disclosed and the focus (and hence the assessment of where the interests of justice lie) involves consideration of relevant factors which include (but are not necessarily limited to): (a) the relevant curial context being, as it is in the present case, an affidavit said to be ancillary to an asset preservation order; (b) the “fundamental and … important” nature of the privilege (Reid v Howard at 17); and (c) the consequences of requiring disclosure. Obviously enough, this assessment will also necessarily involve recognition that an order for disclosure must be attended by the provision of a certificate pursuant to s 128A(7). It will be necessary to return to this point in more detail below.

78    Eighthly, one comes to the question of what was described by the parties as “onus”. This term was used in submissions without a great deal of elaboration, but the topic needs to be approached with some care. What is precisely meant by onus, like the term “burden of proof”, is ambiguous; “and its uncertainty runs into and perplexes the subject of evidence, so that the student of that subject needs to reflect carefully on these ambiguities”: Thayer JB, A Preliminary Treatise on Evidence at the Common Law (Little, Brown and Company, 1898) (at 354). It is sometimes used in the sense of the “peculiar duty of him who has the risk of any given proposition on which parties are at issue, — who will lose the case if he does not make this proposition out, when all has been said and done”: Thayer (at 355). This is often referred to as “the legal burden”: see Williams CR, “Burdens and Standards in Civil Litigation” (2003) 25(2) Sydney Law Review 165 (at 166–7). But it is also used in the sense of identifying which party has the duty of adducing evidence to sustain an issue; this is often referred to as the “evidential burden”; and as J D Heydon notes in Cross on Evidence (12th ed, LexisNexis Butterworths, 2020) (at 339 [7015]), this burden can be described as:

… the obligation to show, if called upon to do so, that there is sufficient evidence to raise an issue as to the existence or non-existence of a fact in issue, due regard being had to the standard of proof demanded of the party under such obligation.

(footnotes omitted)

79    Indeed, even within the expression “evidential burden” there is room for confusion: see Williams (at 168). But returning to s 128A, the issue of onus or burden of proof must be considered contextually by reference to the issue or issues to be determined.

80    Even though the Explanatory Memorandum refers to the court ordering disclosure of the affidavit “to the party seeking it” where it is in the interests of justice, the task for the court in assessing whether or not it is “satisfied” of the three cumulative matters identified in s 128A(6) (s 128A(6) matters) is only required to be undertaken if consideration is given to the making of a disclosure order. Read as whole, after a finding is made that there are reasonable grounds for the objection, subs (5) and (6) provide a mechanism where a “default” position is identified (the court must return the affidavit), but this is subject to the making of a disclosure order (“the court may make an order requiring” disclosure in whole or part). But the point of departure for considering whether such a disclosure order may be made, is the court being “satisfied” of the s 128A(6) matters.

81    On any view, it is for the person claiming the privilege to put before the court sufficient evidence to establish reasonable grounds for the claim under s 128A(4). It is at this point where a controversy arises. What does this notion of satisfaction entail when one comes to the s 128A(6) matters? Usually, the notion of satisfaction involves a concept of probability based on belief. As a general proposition, if a court is required to be satisfied of the existence of a fact or state of affairs, it is for the party seeking to establish that level of satisfaction to bear the burden of doing so.

82    If a disclosure order is considered by the court it is then, and only then, that the question of whether the court is satisfied of the s 128A(6) matters arises. The Act gives guidance as to how this level of satisfaction is to be reached. The question of whether the court is satisfied of the s 128A(6) matters is “a matter arising under the Act”, and s 142(1) of the Act relevantly provides that “the court is to find that the facts necessary for deciding … any … question arising under this Act … have been proved if it is satisfied that they have been proved on the balance of probabilities”.

83    It follows that unless the court has reached a level of satisfaction as to the existence of the s 128A(6) matters on the balance of probabilities on the material before the court, the facts necessary to enliven the power to make a disclosure order have not been made out and the default position of returning the affidavit applies. In this sense, if a party is advocating that a disclosure order should be made, that party has the obligation to establish the existence of the s 128A(6) matters. This construction of s 128A also means that the approach to demonstrating why a disclosure order should be made is consistent with the approach taken to satisfaction of the cognate considerations under s 128 in the context of a witness giving evidence: see Gedeon v The Queen [2013] NSWCCA 257; (2013) 280 FLR 275 (Bathurst CJ at 323 [285], with whom Beazley P, Hoeben CJ at CL, Blanch and Price JJ agreed). 

84    The principal matter relied upon to dispute this construction is that absent access to the affidavit, a party advocating for a disclosure order will be labouring under a forensic disadvantage. The Commissioner pointed to the unfairness that would result because the applicant for a disclosure order is unable to have access to the affidavit in discharging the task of persuading the court that it should be satisfied of the 128A(6) matters.

85    But analogous situations arise commonly when assertions of common law privileges are invoked, such as legal advice privilege, litigation privilege, common interest privilege and public interest immunity or other privileges under Pt 3.10 of the Act. In the absence of some consensual pragmatic expedient adopted by the parties, a party seeking access to privileged information is generally not entitled to access the privileged information for the purposes of disputing the claim. It is not a sufficient answer to remark that these analogies are inapposite to considering any issue of “onus” because it is for the person claiming the privilege to prove, by admissible evidence, the grounds of the claim. The evidence is liable to challenge by a party disputing that evidence (and this is required to be done without access to the information) and, in any event, the onus of establishing any waiver is on the party seeking to displace the existence of the privilege.

86    Ninthly, and finally, even if the court is satisfied of all of the s 128A(6) matters, the subsection provides that this means “the court may make an order requiring the whole or any part of the privilege affidavit containing information” to be disclosed. The word “may” suggests that the court can make a disclosure order “at the discretion of the … court” (see s 33(2A) of the Acts Interpretation Act 1901 (Cth)). Although, having said this, it is a little difficult to conceive of circumstances in which a court would decline to make a disclosure order if it had already reached the conclusion “the interests of justice require the information to be disclosed” (s 128A(6)(c)).

D    THE STANDARD OF APPELLATE REVIEW

87    The Commissioner was content to proceed on the basis that the orders made by the primary judge followed the making of a discretionary decision. But this oversimplifies the position. It will be recalled that the decision of the primary judge was to conclude that he was not satisfied that the interests of justice required the information to be disclosed, hence the ultimate discretionary power to make the disclosure order was not engaged.

88    Recently, the Full Court noted that “it is sometimes suggested that any decisions involving a value judgment on which reasonable minds may differ is a discretionary judgment, but the distinction between evaluative judgments and a balancing process which involves the exercise of a discretion is important”: Crown Resorts Limited v Zantran Pty Limited [2020] FCAFC 1; (2020) 374 ALR 739 (at 764 [103] per Lee J, with whom Allsop CJ and White J generally agreed). One reason for the importance of the distinction is that it determines the standard to which an appellate court must be satisfied in each case to intervene. As Gageler J explained in Minister for Immigration and Border Protection v SZVFW [2018] HCA 30; (2018) 264 CLR 541 (at 563 [49]):

The line is drawn by reference to whether the legal criterion applied or purportedly applied by the primary judge to reach the conclusion demands a unique outcome, in which case the correctness standard [in Warren v Coombes (1979) 142 CLR 531] applies, or tolerates a range of outcomes, in which case the House v The King [(1936) 55 CLR 499] standard applies. The resultant line is not bright; but it is tolerably clear and workable.

89    Like in Coal and Allied Operations Pty Limited v Australian Industrial Relations Commission [2000] HCA 47; (2000) 203 CLR 194, where the High Court considered a decision-making process in which “‘no one [consideration] and no combination of [considerations] is necessarily determinative of the result’ [and] the decision-maker is allowed some latitude as to the choice of the decision to be made” (at 204–5 [19] per Gleeson CJ, Gaudron and Hayne JJ, quoting Jago v District Court (NSW) (1989) 168 CLR 23 at 76 per Gaurdon J), here the state of satisfaction that the interests of justice require disclosure involves “a degree of subjectivity” such that the decision that the relevant statutory criterion had been met could, in a “broad sense”, be described as a discretionary decision (at 205 [20]). It follows that the correctness of this aspect of the primary judge’s decision as to the interests of justice can only be challenged on appeal by showing error of the kind identified in House. This is not to say that the determination of the other s 128A(6) matters is not more properly seen as demanding an unique outcome so that the correctness standard would apply (that is, the questions as to whether the court was satisfied that the information may tend to prove: (a) the commission of an Australian offence or liability to an Australian civil penalty (s 128A(6)(a)); or (b) the commission of a foreign offence or liability to a foreign penalty (s 128A(6)(a))).

90    With these matters of construction and the applicable standard of review in mind, it is now convenient to turn to ground 1 of the notice of contention (NOC) and then to ground 1 of the NOA and ground 3 of the NOC.

E    GROUND 1 NOC – “ONUS”

91    As noted above, the primary judge had concluded (at [23]–[25]) that Mr Shi, being the party who had established reasonable grounds, was required to satisfy the court of the negative of the proposition that the information does “not tend to prove that the relevant person has committed an offence against or arising under ... a law of a foreign country”: see s 128A(6)(b). Mr Shi’s submission that this was an erroneous approach ought be accepted and, for the reasons I have explained in Section C above, in my view, unless the primary judge was affirmatively satisfied on the evidence of all of the s 128A(6) matters (including that the evidence did not tend to prove the deponent committed an offence against or arising under a law of a foreign country), any power to make a disclosure order under s 128A(6) was not engaged.

92    Mr Shi then submitted that the Commissioner “made no effort to attempt to meet that onus”. Be that as it may, the question, properly framed, is whether it was open to the primary judge to be satisfied that the information does not tend to prove the commission of an offence against or arising under a law of a foreign country. The relevant part of the primary judge’s reasons (at [24]–[25]) is as follows:

It was also submitted that in assessing para (b) I should, absent evidence to the contrary, assume that China has enacted into law the same crimes referred to in the search warrant. Foreign law is presumed, it was said, to be same as the law in this country. Mr Shi relied upon Gedeon at [303] per Bathurst CJ and Neilson v Overseas Projects Corporation of Victoria Ltd (2005) 223 CLR 331 at [125] per Gummow and Hayne JJ, [249] per Callinan J and [267] per Heydon J. I do not think that this presumption assists Mr Shi. The information in the privileged affidavit concerned matters which had taken place in Australia which tended to incriminate Mr Shi. There was nothing to indicate that those Australian matters could give rise to any offence in China. It may also, and in any event, be inappropriate to make the usual presumption about the content of foreign law in the statutory context of s 128A. The enquiry mandated by s 128A(6)(b) is whether there is information which tends to prove the commission of a foreign offence. It would be unsatisfactory to test that proposition by making a mere assumption about the content of foreign law which may in fact be entirely wrong, especially where, as here, the issues are complex and there is no evidence before me as to the content of Chinese law: cf Damberg v Damberg (2001) 52 NSWLR 492; Severstal Export GmbH v Bhushan Steel Ltd (2013) 84 NSWLR 141; PCH Offshore Pty Ltd v Dunn (No 2) [2010] FCA 897; (2010) 273 ALR 167.

For these reasons, I am satisfied that the information in the privileged affidavit does not tend to prove that Mr Shi has committed an offence in China.

(emphasis added)

93    Mr Shi’s submissions were that the Commissioner “was in a position to lead evidence to establish that the activities and transactions which grounded his prima facie case for fraud did not run contrary to the relevant law of China”. But irrespective of the correctness of this assertion, the primary judge was affirmatively satisfied that the information did not tend to prove that Mr Shi committed an offence in China. A contention (Ground 2) that “irrespective of onus”, on the material before the court, the primary judge ought not to have been so satisfied, was abandoned. It follows that the error that it was up to Mr Shi to satisfy the court of this proposition goes nowhere.

F    GROUND 1 NOA; GROUND 3 NOC – “INTERESTS OF JUSTICE”

94    Ground 1 of the NOA and Ground 3 of the NOC reflect the competing contentions of the parties as to whether the primary judge erred in concluding that the interests of justice would have required disclosure but for the fact that the public interest in facilitating full recovery of the correct amount of tax was instead best fulfilled by the Commissioner obtaining the relevant information through reliance on his compulsory powers, as opposed to disclosure with a certificate under s 128A(7).

95    The starting point is the relevant text and context. What the primary judge was relevantly obliged to consider was whether he was satisfied “the interests of justice require the information to be disclosed”. The same word, “require”, is used in s 128(4)(b) of the Act: hence a court is unable to oblige a witness with a reasonable ground for objection to give evidence unless the court is satisfied that the interests of justice “require” that the witness give the evidence. Require is a strong word and although “interests of justice” is a broad concept, it is not enough, for example, in the s 128 context, that the evidence in question be relevant – a “relatively high standard of satisfaction” is required given that the legislation abrogates a basic common law right significantly: Gedeon (at 324 [286]).

96    What is immediately apparent is that an assessment of what the interests of justice require in these two different circumstances can be quite different. Sometimes a witness wishes to give the relevant evidence with the protection of a certificate, but with an unwilling witness, where the court is determining whether a question should be required to be answered notwithstanding the objection, the immediate focus is on the nature of the proceeding (it applies, of course, in criminal and civil proceedings), the nature and seriousness of the facts in issue, the importance of the evidence sought to be adduced, and its likely probative value to the determination of the facts in issue. The submissions usually made by an advocate seeking disclosure of privileged information are unsurprisingly directed to the inability to obtain the information by means of other evidence adduced or to be adduced at the hearing, and its likely importance to the resolution of an issue in dispute.

97    Consideration of what the interests of justice require in the context of a privileged affidavit provided under s 128A could arise at different stages of the litigation. It may be considered shortly after commencement, as access to the material might be sought to obtain information which might be thought important to the ultimate determination of the controversy, or the information may be required because it will obviate the need for extensive discovery or compulsory process. But, as the present case illustrates, the determination of what the interests of justice require may be made after there are no facts in issue to be determined and the rights of the parties have merged in a judgment. In the former case, the context is similar to that which arises under s 128; but in the latter case, it is not.

98    There is a need to focus on why, following the entry of judgment, it is said the interests of justice require disclosure. The Commissioner was alive to the necessity of explaining why, and as the primary judge recorded (at [27]), he contended:

… it was in the interests of justice that there be disclosure of the privileged affidavit having regard to the findings made by Yates J about the risk of dissipation of assets, the allegations concerning significant historical transfers of funds to China, and the negligible value of the assets disclosed in Mr Shi’s non-privileged affidavit. The Commissioner suspects there are more assets over which Mr Shi has effective control. He wants to know about these. As things stand, the assets so far disclosed fall far short of the $42,297,437.65 that Mr Shi owes the Commissioner. The Commissioner, it was said, may wish to issue writs of execution of property, charging orders, a court ordered garnishee and may wish to perform court examinations. These remedies will be facilitated by full disclosure. In that respect, in my view, there is a clear public interest in having Mr Shi’s debt to the Commonwealth discharged as fulsomely as is possible.

99    In short, the assertion of the Commissioner was that the interests of justice required disclosure of the information because it facilitated enforcement of the judgment. To this, the primary judge added that there was “a clear public interest” in the debt being discharged to the extent possible. As his Honour put it (at [30]), “the public interest in recovery of the outstanding tax is a compelling consideration”. As Davies J has explained, his Honour concluded that this clear or compelling public interest was best served by the Commissioner having scope to obtain the information compulsorily pursuant to s 353-10 of Sch 1 of the Taxation Administration Act 1953 (Cth).

100    In my view, there are, with respect, difficulties with how the primary judge came to the conclusion that he was not satisfied disclosure was required in the interests of justice.

101    First, elevating the public interest in recovery of outstanding tax distracted from consideration of what the interests of justice, in the circumstances of this case, required. On one view it might be thought these comments reflected nothing more than a conclusion that there were other and better ways of obtaining the information. As explained above, that is a common factor weighing against disclosure. But here, the alternate course fastened upon by the primary judge was a means by which the claim for an important and fundamental privilege, found to be reasonable, could be circumvented by a process foreign to the proceeding to further a broader public interest. In this regard, I agree with Davies J that error has been established by elevating and making determinative what his Honour identified as the clear or compelling public interest in having Mr Shi’s debt discharged.

102    Secondly, returning to the context, it is necessary to recall the nature of the order made to provide the Privileged Affidavit. Following the initially controversial (at least in this country) emergence of what was labelled in its place of origin as “the Mareva jurisdiction”, justification was found to grant a variety of relief ancillary to the Mareva relief itself, including requiring the defendant to give discovery of documents or otherwise provide information about assets to ensure the Mareva relief was effective (see, for example, A J Bekhor & Co Ltd v Bilton [1981] 1 QB 923; CBS United Kingdom Ltd v Lambert [1983] 1 Ch 37). Ancillary orders requiring provision of information have now become common both here and in the United Kingdom. The relevant “provision of information” orders ancillary to the freezing order in this case were made pursuant to FCR 7.33. But it is important to recall that they are ancillary orders.

103    The purpose of a freezing order is to prevent the abuse or frustration of a court’s process in relation to matters coming within its jurisdiction (Jackson v Sterling Industries Limited (1987) 162 CLR 612 at 623 per Deane J) and they operate so as to preserve assets and assist and protect the use of methods of execution and are not a substitute for them: Cardile v LED Builders Pty Limited [1999] HCA 18; (1999) 198 CLR 380 (at 401 [43] per Gaudron, McHugh, Gummow and Callinan JJ). An order ancillary to such an order must be justified by reference to the same purpose: Witham v Holloway (1995) 183 CLR 525 (at 535 per Brennan, Deane, Toohey and Gaudron JJ).

104    This was a case where it was said that disclosure was required in the interests of justice to, in effect, assist methods of execution. Once this is understood, it becomes relevant in assessing whether a disclosure order was required, to examine other available ways that execution could be assisted. Although tied up with his Honour’s consideration of a broader public interest in the payment of taxation debts, in a sense this is what the primary judge was doing by focussing on the potential compulsory disclosure outside the proceedings pursuant to s 353-10 as an aid to execution. But the most obvious way of obtaining information was not raised before his Honour.

105    Under the heading “Execution Generally”, FCR 41.10(1) provides:

A party who wants to enforce a judgment or order of the Court may apply to the Court to make an order, to issue any writ, or to take any other step that can be taken in the Supreme Court of the State or Territory in which the judgment or order has been made as if the judgment or order was a judgment or order of that Supreme Court.

106    Immediately following judgment in April 2019, and well before the hearing below, it was open to the Commissioner to make an application relying on s 108 of the Civil Procedure Act 2005 (NSW) for this Court to make an order requiring Mr Shi (being a person bound by a judgment) to: (a) attend the court to be orally examined; or (b) produce any document or thing that is in his possession and that relates to a material question as to his means of satisfying the judgment. Although Mr Shi could have objected to questions at such an examination which required disclosure of privileged information (subject to the potential operation of s 128 of the Act), adopting this course would incidentally have addressed two of the Commissioner’s concerns: first, unlike the s 353-10 procedure, there could be no suggestion of an abuse of process in conducting such an examination; and secondly, the suggestion that the Privileged Affidavit was drafted in a manner which unnecessarily included incriminatory material (which was the foundation of the submission made in the Full Court that the Court direct Mr Shi to file a different disclosure affidavit). During an oral examination, of course, questions could be framed to obtain information as to assets in a direct way, thus avoiding, to the extent possible, questions which called for answers trespassing on potentially privileged information. Indeed, in this regard the Commissioner’s submission before the Full Court proves too much: the point is made by the Commissioner that if the privilege was properly invoked, much information could be revealed about the assets of Mr Shi – this contention tends to support the conclusion that disclosure of the information in the Privileged Affidavit is not required.

107    For completeness, I do not consider that there is any circularity in this argument based on the notion that s 128 may have operation on any judgment debtor’s examination: first, the determination of “whether or not there are reasonable grounds for the objection” (s 128(2)) would direct focus to the precise question asked at the examination; and secondly, the examination of whether “the interests of justice require that the witness give the evidence” (s 128(4)(b)) would be made in a different context, including by reference to what information had been or could be elicited without revelation of privileged information.

108    Thirdly, like it is wrong to assume that the protections conferred under s 128(7) of the Act create a presumption that the interests of justice will require the person to give the evidence, the s 128A(7) protection of a certificate does not create a presumption that the interests of justice require disclosure.

109    Fourthly, I do not think it is speculative to pay regard to the risk that the information could be used in or in relation to future criminal proceedings.  The fundamental importance of the privilege to the proper operation of the accusatorial process of criminal justice has been repeatedly emphasised: see, for example, X7 v Australian Crime Commission [2013] HCA 29; (2013) 248 CLR 92; Lee v New South Wales Crime Commission [2013] HCA 39; (2013) 251 CLR 196; Lee v The Queen [2014] HCA 20; (2014) 253 CLR 455.  Much was made by the Commissioner of the fact that Mr Shi has not been charged. But that is not the point.  It should be recalled that consideration of what the interests of justice require only arises if the court has determined that “there are reasonable grounds for the objection” (s 128A(4)).  Such a basis only exists if it is established that the provision of information “would give rise to a real and appreciable risk of prosecution, in the case of the privilege against self-incrimination, or a real and appreciable risk of the institution of proceedings for a civil penalty, in the case of the privilege against exposure to penalties”: Deloitte Touche Tohmatsu (A Firm) v Sadie Ville Pty Ltd (As Trustee for Sadie Ville Superannuation Fund) [2020] FCAFC 23 (at [6] per Wigney J).  Moreover, it must be borne in mind that although “[t]he laying of a charge marks the first step in engaging the exclusively judicial task of adjudicating and punishing criminal guilt” (X7 at 138 [110] per Hayne and Bell JJ), as Kiefel CJ, Bell and Nettle JJ observed in Strickland (a pseudonym) v Director of Public Prosecutions (Cth) [2018] HCA 53; (2018) 93 ALJR 1 (at 18 [77]), a “requirement to give answers in respect of an offence of which a person is suspected, or in relation to which he or she is a person of interest, fundamentally alters the accusatorial process including for the investigation” of that offence.  Indeed, the primary judge noted (at [45]), consistently with the finding that there were reasonable grounds for the objection, that although there was no evidence establishing the likelihood of a charge, “[t]hey are under investigation. They may be charged. But there is only that possibility. The possibility may be realistic ...”.

110    Fifthly, and connected to the last two points, as Mr Shi correctly submits, any derivative use immunity in respect of compulsorily acquired information, such as that which is provided for in s 128A(8), is very difficult to enforce (see Hamilton v Oades (1989) 166 CLR 486 at 496 per Mason CJ; Strickland at 14 [61] per Kiefel CJ, Bell and Nettle JJ); in part this is because derivative information is such that investigators and prosecutors may not even be aware they have it. If the information was to be disclosed publicly (which would be quite possible if, for example, admissions in the Privileged Affidavit were tendered on an application for the appointment of a receiver or some other enforcement measure), a certificate is not a complete answer to this derivative use difficulty.

111    When one takes into account the factors explained above, including: (a) the clear and considered legislative intention to necessitate proof that disclosure is required in the interests of justice; (b) the relevant curial context being a consideration of the interests of justice at a time post-judgment and when other procedures are available to obtain information relevant to enforcement of the judgment; (c) the purpose of disclosure as identified by the Commissioner; (d) the fact that the order is ancillary to a freezing order and the purpose of the freezing order is to assist and protect the use of methods of execution but is no substitute for them; (e) the fundamental and important nature of the privilege; and (f) the consequences of requiring disclosure, including recognition of the operation of the certificate and also the risk the information could be used in or in relation to the accusatorial process of criminal justice, this is not a case where the interests of justice require a disclosure order to be made.

112    For the sake of completeness, in circumstances where the primary judge was affirmatively satisfied that the information did not tend to prove that Mr Shi committed an offence in China, I do not think there is substance in Mr Shi’s contention that it was significant that a certificate under s 128A(7) would have no operation outside of Australia.

G    ORDER

113    It follows that by a different course of reasoning, I agree with the conclusion of the primary judge. Ground 3 of the NOC is made out, with the consequence that I would make an order dismissing the appeal with costs.

Associate:

Dated:    4 June 2020

REASONS FOR JUDGMENT

STEWART J:

114    I have had the benefit of reading, in draft, the judgments of Davies J and Lee J. Like Lee J, I agree with Davies J, for the reasons given by her Honour, that leave to appeal on ground 1 of the draft notice of appeal should be granted and that leave should be refused in relation to grounds 2, 3 and 4. 

115    With regard to the ultimate disposition of the appeal, I also agree with Lee J, for the reasons given by his Honour, that the appeal should be dismissed with costs.

Associate:

Dated:    4 June 2020