FEDERAL COURT OF AUSTRALIA

Fastbet Investments Pty Ltd v Deputy Commissioner of Taxation (No 2) [2018] FCA 1418

ORDERS

THE COURT ORDERS THAT:

1.    The subpoena issued on 21 August 2018 to the Deputy Commissioner of Taxation be set aside.

2.    The subpoena issued on 24 August 2018 to the Deputy Commissioner of Taxation be set aside.

3.    The applicant pay the respondent’s costs of the application to be taxed.

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

REASONS FOR JUDGMENT

DERRINGTON J:

Introduction

1    This application, made by the Commissioner of Taxation, seeks to set aside two subpoenas duces tecum issued by the Registrar of this Court on 21 and 24 August 2018 following the applicant’s requests for subpoenas accepted for filing on 20 and 24 August 2018. The action to which the subpoenas relate is, in general terms, an application to quash the decision of the Commissioner to issue a notice under s 255-100 of Schedule 1 of the Taxation Administration Act 1953 (Cth) and related orders. The relief is sought pursuant to the Administrative Decisions (Judicial Review) Act 1977 (Cth) and s 39B of the Judiciary Act 1903 (Cth).

2    The originating application has had a number of iterations. The last iteration was one in respect of which leave to file was given in August 2018. A version of that originating application was attached to an affidavit filed in May. The amendments made in the latest iteration extended the scope of reviews sought by the applicant and, in particular, for the purposes of this application, to the issuing of a s 255-100 notice and the retention of cash not supported by what was said to be the applicant’s tax liability. In particular, reference is made to paragraphs 8 through to 14 of the further amended originating application. I will return to that shortly.

3    For present purposes it is appropriate to note the applicant has taken a number of steps in this matter for the production of information from the Commissioner. They include applications under the Freedom of Information Act 1982 (Cth), an application for discovery and the issuing of the subject subpoenas.

4    The applicant filed the application for discovery on 16 August 2018. It sought nonstandard discovery under rule 21.5 of the Federal Court Rules 2011. That application also sought an order that the Commissioner produce for inspection documents which had been the subject of an FOI Request. The Commissioner subsequently provided certain documents, although, there are significant redactions of the information in them, and it is really the redactions which are of issue in relation to the second subpoena.

Subpoena issued 21 August 2018

5    For present purposes, on 20 August 2018, the applicant made the application for the issuing of the subpoena presently under consideration. Initially, it sought the production of a deed of priority and some correspondence. The correspondence is no longer pursued and nothing turns on that. The request for the issuing of the subpoena claimed the deed had some relation to the issues raised in paragraphs 8 to 14 of the applicable originating application.

6    This action commenced in this Court on 17 October 2017 and has been the subject of a number of Case Management Hearings. That is relevant in the context of this application because the applicant has also filed the application for discovery.

7    The Commissioner objects to producing the documents pursuant to the subpoena. He seeks to set aside the subpoena for a number of reasons, including because the issuing of the subpoena was an abuse of process.

8    I understand the Commissioner’s essential submission is that the procedure of issuing a subpoena, ought not be used as a substitute for discovery, particularly when the subpoena is issued inter partes. There is substantial support for that proposition. In particular, the decision of Cooper J in Australian Competition and Consumer Commission v Shell Co of Australia Ltd (1999) 161 ALR 686 at 695; [48] (ACCC v Shell) where his Honour referred to Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at [50]–[51] and emphasised that discovery applications ought be made at the proper time in the proper place and it is not legitimate to use a subpoena duces tecum as a substitute for the application of discovery of documents or as an alternative for an application for further and better discovery. Cooper J said:

[50] The rationale for this principle is, in my view, that where a particular method has been prescribed by the rules for the achievement of the particular objective, such as the obtaining of further discovery conformably with the rules relating to discovery of documents espoused in Mulley v Manifold (1959) 103 CLR 341, it is impermissible to attempt to achieve that objective through the subpoena process. This broader principle was applied by Beaumont J in Kizon v Palmer (1997) 75 FCR 261, in a case where the material sought to be produced via subpoena was prohibited from production in discovery. On that basis the subpoena was set aside as an abuse of process. This decision was affirmed on appeal: Kizon v Palmer [1998] FCA 312 (Northrop, French and Branson JJ).

[51] Like the case before Branson J in Diddams v The Commonwealth Bank of Australia, this case has been the subject of a managed timetable and, other than the issues raised by this subpoena and motion, the matter is ready for trial. In those circumstances the ACCC should not be permitted to avoid the evidentiary onus required in O 15, r 8 in order to go behind two affidavits of documents provided by Shell by issuing a subpoena in this form.

9    Another relevant decision, which was delivered around the same time as ACCC v Shell, is Diddams v Commonwealth Bank of Australia (unreported, Branson J, 12 May 1998). That decision has since become well known and in it Branson J identified that the usual process between opposing parties for obtaining documents was that of discovery and inspection, not the issuing of subpoenas. That was particularly so in this Court, where often procedures and timetables are put in place for the purposes of facilitating discovery. In effect, it was observed (at p 6 of her Honour’s reasons), that the process of issuing a subpoena might circumvent that rule or practice:

However, the usual legal processes by which a party to a proceeding in the Court obtains access to the documents of opposing parties are the processes of discovery and inspection. Where the court has by detailed directions set a timetable for the undertaking of the procedural steps necessary to bring a matter to readiness for trial, including a timetable for the discovery and inspection of documents, it is to be expected that the parties will seek such documents ‘relating to any matter in question between [them]’ as they wish to have access to through the process of discovery and inspection (O15 r2(2)). If such documents are sought by subpoena or notice to produce issued close to trial, the Court's endeavours to manage the process of the preparation of the matter for trial, and to ensure that no interlocutory issues are outstanding at the hearing date, may be subverted.

Order 15 rule 8 of the Federal Court Rules provides a procedure whereby particular discovery may be sought where a party is dissatisfied with the extent of discovery made by an opposing party. The discretion given to the Court by O15 r8, and the requirement that, before any order may be made under that rule, it should appear to the Court ‘... from evidence or from the nature or circumstances of the case or from any document filed in the proceeding that there are grounds for a belief that some document or class of document relating to any matter in question in the proceeding may be or may have been in the possession, custody or power of [the] party’, ought not, in my view, to be able to be avoided by the simple device of serving a subpoena duces tecum upon an opposing party.

... The rules of court do not place on judges the responsibility of determining for the parties which of their respective documents are required to be discovered. Judges have not traditionally assumed such a role. I do not consider that by choosing to issue a subpoena, rather than to seek an order pursuant to O15 r8 of the Federal Court Rules, a party should be able to achieve the result of placing such a responsibility on a judge. Moreover, in this case it would have been inappropriate for the conduct of the trial to have been further disrupted by my being required to read documents produced in response to a subpoena called during the course of the taking of evidence.

10    The above authorities were referred to relatively recently by Collier J in Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd (No 3) [2012] FCA 61 and are found in the various Federal Court Rules services.

11    It should be noted Diddams, which has been referred to on many occasions, was handed down well before amendments to the Federal Court Rules pertaining to Part 20, which provides for discovery and inspection of documents. That is important because the general approach now provided for in this Court is that the process of discovery ought only be implemented where it is necessary for the just resolution of proceedings, and it is well known that O 20 r 12 prohibits discovery without an order of the Court. Indeed, r 20 also prescribes detailed steps for the making of an application for discovery and identifies the important differences between standard and nonstandard discovery.

12    It also must be recognised that subpoenas are only to be used for a legitimate forensic purpose. That is a cornerstone of assessing the validity of subpoenas. In this case the document sought is, as I said, a deed of priority which is alleged to have been entered into between a financier of the applicant company and the Commissioner of Taxation subsequent to the Commissioner issuing the s 255-100 notice.

13    It is difficult to ascertain how the deed of priority relates to the alleged acts of the Commissioner of which the applicant complains. Specifically, the taking of more money from the proceeds of sale of the various apartments sold by the applicant. Mr Fickling has submitted that the document will inform the Court how the Commissioner of Taxation vis-a-vis the secured creditor can take more than the current tax liabilities owed by the applicant. That is to say, it seems the alleged relevance of the document is one which will identify how, as between the Commissioner and a prior security holder, the Commissioner is able to take more than that which is the GST component of any sale.

14    The manner in which the Commissioner receives more than he is allegedly entitled is not, in my opinion, an element of any allegation made in the proceedings. The proceedings are founded on the basis that the Commissioner does, in fact, take more than what he is entitled. That issue is set out in the amended originating application and the allegation is that the provisions of the Tax Administration Act 1953 (Cth) do not permit him to take more than the 10 per cent of what he presently takes in respect of GST on the sale of the applicant’s apartments. Whether that is an accurate statement of the law need not be decided now, but, how the Commissioner receives more from each sale is irrelevant to the legality of the Commissioner’s actions – which is, as pleaded, the basis of applicant’s complaint.

15    It was also said that the document will somehow inform the applicants as to how the Commissioner might, in the future, take money from any subsequent sale. The problem with that is any such case is purely speculative. It hinges upon the Commissioner doing something in the future, rather than identifying the legality of something already done. In those circumstances, the subpoena does not relate to a document relevant to these proceedings. I should also mention it is not “directly relevant”, but that is neither here nor there for present purposes. It simply is not relevant to any issue raised in the application.

16    The legitimate forensic use of a subpoena is for the production of documents to enhance the hearing of matters. They are, generally, returnable at a hearing so that the documents can be used for the purposes of that hearing. In general they are not to be used as sequential applications or steps for the obtaining of particular documents. Mr Fickling, in his submissions, refers to the “evidence gathering continuum”, which apparently exists in the Federal Court Rules 2011. There is no such continuum. There are specific provisions for the gathering of evidence. In relation to the gathering of evidence inter partes, the provisions are contained in Part 20 of the Rules where that is allowed. That is not to say that a subpoena may not on occasion be used inter partes, but, as the authorities show, it is relatively rare and it is not a process which is to be encouraged.

17    For these reasons, I order that:

1.    The subpoena issued on 21 August 2018 be set aside pursuant to rule 24.15.

Attempt to reopen the application

18    After the luncheon adjournment, Mr Fickling sought to reopen the evidence on the applications before the Court. This was after the oral reasons for allowing the Commissioner’s application to set aside the first subpoena were delivered. Those reasons, edited for publication, appear above at paragraphs [1] to [17].

19    The application for the setting aside of subpoenas was brought by the Commissioner in the usual way. At the commencement of the hearing, material was read by each side. I have already dealt with the first subpoena, it being easier to deal with each separately. I gave reasons for allowing the Commissioner’s application to set it aside and the Commissioner then had nothing further to say in relation to the second subpoena.

20    Thereafter Mr Fickling sought to adduce further evidence on the application. The evidence seemingly consists of documents which pertain to a request to issue a subpoena in substantially the same terms as the first one under consideration which was filed some point earlier than those in respect of which the subpoenas were actually issued. The propriety of tendering evidence at that point in time does not have to be considered. The short point is that the documents sought to be tendered are really of peripheral relevance to the outcome of the case. The judgment given in relation to the first subpoena concerned the fact that a discovery application was on foot when the requests were made. That was relevant to the particular facts of this case, but the essential point is that as between parties to litigation, the process of obtaining documents from one another is ordinarily done through the process of discovery and inspection, not by issuing subpoenas which may or may not relate to interlocutory applications rather than the action generally. Mr Schulte has directed me to correspondence which passed between the parties prior to this hearing. In particular, correspondence from the solicitors for the Commissioner to the respondent sought the identification of material on which the applicant relied. Apparently there was no response to that request. That is significant on the application as is now made.

21    Mr Fickling points to the fact that he made reference in his written submissions to the facts which he says pertain to, or emanate, from the documents which are the subject of the proposed tender. That may be so, but the documents were not tendered prior to the hearing or prior to the delivery of my oral reasons. In those circumstances, the tender is rejected.

Subpoena issued 24 August 2018

22    The applicant then informed the Court that it did not wish to further agitate the veracity of the second subpoena. It follows that the application to set aside the second subpoena is allowed on the consent of the applicant, I order:

1.    Pursuant to rule 24.15, that the subpoena issued on 24 August 2018 directed to the respondent be set aside.

Associate:

Dated:    17 September 2018