FEDERAL COURT OF AUSTRALIA

Hua Wang Bank Berhad v Commissioner of Taxation (No 12) [2013] FCA 1091

THE COURT ORDERS THAT:

1.    Mr McGrouther’s application to set aside the subpoena addressed to him be dismissed.

2.    There be no order as to costs.

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

THE COURT ORDERS THAT:

1.    Mr McGrouther’s application to set aside the subpoena addressed to him be dismissed.

2.    There be no order as to costs.

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

THE COURT ORDERS THAT:

1.    Mr McGrouther’s application to set aside the subpoena addressed to him be dismissed.

2.    There be no order as to costs.

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

THE COURT ORDERS THAT:

1.    Mr McGrouther’s application to set aside the subpoena addressed to him be dismissed.

2.    There be no order as to costs.

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

THE COURT ORDERS THAT:

1.    Mr McGrouther’s application to set aside the subpoena addressed to him be dismissed.

2.    There be no order as to costs.

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

THE COURT ORDERS THAT:

1.    Mr McGrouther’s application to set aside the subpoena addressed to him be dismissed.

2.    There be no order as to costs.

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

THE COURT ORDERS THAT:

1.    Mr McGrouther’s application to set aside the subpoena addressed to him be dismissed.

2.    There be no order as to costs.

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

REASONS FOR JUDGMENT

1    On the 19th day of the trial Mr Fagan of senior counsel called upon a subpoena to give evidence addressed to Mr Tod McGrouther. Mr McGrouther appeared in response but at the same time, through Mr Dhanji of senior counsel, applied to set the subpoena aside. A number of bases were pursued. However, for the purposes of these reasons it is necessary to mention only one. This concerned Mr McGrouther’s desire to avoid giving evidence which might incriminate him.

2    After substantial debate the Commissioner decided to prove what he desired to obtain from Mr McGrouther through the tender of documents. Objections were taken by the taxpayers to portions of this tender but I overruled those objections and admitted the material. In light of that development Mr Fagan indicated that the Commissioner no longer needed to call upon the subpoena to give evidence issued to Mr McGrouther.

3    As a matter of formality this means that Mr McGrouther’s application to set the subpoena aside has become otiose. In that circumstance, I will dismiss it.

4    Mr Dhanji then sought an order that the Commissioner pay Mr Grouther’s costs of the application to set the subpoena aside.

5    The Court has the power to order the party issuing a subpoena to pay the costs of a third party who succeeds in having it set aside. The source of this power is most likely s 43 of the Federal Court of Australia Act 1976 (Cth) and the usual approach to costs applies to the exercise of the discretion which arises. As Kenny J observed in Ann Street Mezzanine Pty Ltd v Beck [2011] FCA 1328 at [3] this will generally mean that the successful party on such an application will be entitled to its costs.

6    In this case the application has been dismissed without any consideration of its merits. The principles to be applied in that circumstance were explained by McHugh J in Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622. In that case the prosecutrix sought writs of prohibition, certiorari and mandamus in respect of a decision to deny her a protection visa. A week after the commencement of her proceedings, however, the Minister granted her a visa rendering her application pointless, a situation not altogether dissimilar to Mr McGrouther’s. McHugh J accepted that the proceedings had been reasonably commenced but also reasonably resisted. No order as to costs was made in respect of the substantive costs of the proceedings, although costs were awarded against Lai Qin on the costs application itself.

7    McHugh J accepted that a defendant may act unreasonably and thereby force a plaintiff to commence proceedings. In such cases, a costs order may well be appropriate: see 624-625.

8    In this case, however, I do not think it was unreasonable for the Commissioner to issue a subpoena to Mr McGrouther. In principle, there can be nothing wrong with seeking to obtain evidence from a competent and compellable witness. It might well be unreasonable to issue a subpoena to a witness who was either not competent or not compellable. It might also be unreasonable to issue a subpoena to produce documents which could only be the subject of a proper claim for privilege. But the current situation was not an example of any such unreasonable use of a subpoena.

9    On the other hand, at least one of the grounds pursued to set aside the subpoena was reasonable. The Commissioner, quite properly, accepted that Mr McGrouther would probably be exposed to a risk of self-incrimination if he were called to give evidence. Mr McGrouther indicated he was not willing to give evidence voluntarily. At that point, the discretionary power nevertheless to order Mr McGrouther to give evidence would arise under s 128(4) of the Evidence Act 1995 (Cth) only if both of the requirements of that section could be satisfied. It provides:

128 Privilege in respect of self incrimination in other proceedings

(4)    The court may require the witness to give the evidence if the court is satisfied that:

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

(b)    the interests of justice require that the witness give the evidence.

10    The effect of the double negative inherent in s 128(4)(a) is that the Court would need to be affirmatively satisfied that Mr McGrouther’s evidence did not tend to prove he had committed an offence under the laws of a foreign country. Mr McGrouther’s evidence was likely to concern events in Samoa concerned with the affairs of the Hua Wang Bank Berhad. It is at least reasonably arguable that I could not be satisfied of the matter in s 128(4)(a) and hence at least reasonably arguable that no power to direct Mr McGrouther to answer the questions might arise. It seems to me, therefore, that he had reasonable grounds to set aside the subpoena.

11    The position of both parties was, therefore, reasonable. This seems to bring the matter within what McHugh J said in Ex parte Lai Qin at 625:

If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the costs discretion will usually mean that the court will make no order as to the cost of the proceedings.

12    The appropriate order is, therefore, that Mr McGrouther’s application to set aside the subpoena addressed to him be dismissed with no order as to costs.

Associate:

Dated:    21 October 2013