FEDERAL COURT OF AUSTRALIA
Deputy Commissioner of Taxation v Wu [2024] FCA 250
ORDERS
DEPUTY COMMISSIONER OF TAXATION Applicant | ||
AND: | First Respondent JINA CHEN Second Respondent MICHAEL WU Third Respondent JACK WU Fourth Respondent | |
DATE OF ORDER: |
THE COURT ORDERS THAT:
1. Pursuant to section 37AF(1) of the Federal Court of Australia Act 1976 (Cth), and on the ground in s 37AG(1)(a) of that Act, the parts of:
(a) the affidavit of Sumitha Elizabeth George filed 20 December 2023;
(b) Exhibit SEG-1 to that affidavit; and
(c) the submissions filed by the applicant on 20 December 2023;
identified in Annexure A to these orders are not to be published or otherwise disclosed to any person or entity except the parties to this proceeding and their legal representatives or the Court and Court Staff.
2. The respondents are to file by 5:00pm on 19 March 2024 versions of:
(a) the affidavit of Sumitha Elizabeth George filed 20 December 2023;
(b) Exhibit SEG-1 to that affidavit; and
(c) the submissions filed by the applicant on 20 December 2023;
which have been redacted to give effect to Order 1.
3. Unless the Court otherwise orders, Order 1 continue until the earlier of:
(a) 4:00pm on the first day of the hearing of any appeal to this Court from a review by the Administrative Appeals Tribunal (or any tribunal or body charged with review of objection decisions under Part IVC of the Taxation Administration Act 1953 (Cth)) related to an objection decision the subject of any notice of assessment the subject of this proceeding; or
(b) 4:00pm on 18 March 2029.
4. Order 1 does not prevent disclosure by the applicant or an officer or employee of the applicant from disclosing any part of the documents referred to in Order 1 above or any information contained in those documents:
(a) in compliance with any undertakings provided by him in the proceeding; or
(b) as required for enforcement of any order made in this proceeding; or
(c) for the purpose of performing their statutory duties and functions under the taxation laws.
5. These reasons for judgment not be published beyond the parties until 4:00pm on 20 March 2024.
6. The parties have liberty to apply until 12:00pm on 19 March 2024, including in relation to any orders sought for redaction of these reasons for judgment. If this liberty is exercised, the proceedings be listed for a case management hearing at 10:00am on 20 March 2024.
7. Unless the Court otherwise orders, these reasons for judgment be published after 4:00pm on 20 March 2024.
THE COURT NOTES THAT:
1. Fairfax Media Publications Pty Ltd is not a party.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ANNEXURE A
(a) the affidavit of Sumitha Elizabeth George filed 20 December 2023
• the exhibit referred to in [21], being the Commissioner’s reasons for decision
• [23] and [24]
• [27(a)] and [27(b)]
• the exhibits referred to in [28(c)], [28(d)], [28(e)] and [28(f)]
• the exhibits referred to in [29(c)], [29(d)], [29(e)] and [29(f)]
• the exhibits referred to in [30(b)], [30(c)], [30(d)] and [30(e)]
• the exhibits referred to in [31(b)], [31(c)], [31(d)] and [31(e)]
• [76]
• [82] to [138]
• [141] to [165]
• [176] to [182]
• the exhibits referred to in [189] and [195]
• [198]
• [204] to [208]
• the exhibits referred to in [209] and [210]
(b) pages to Exhibit SEG-1 of the affidavit of Sumitha Elizabeth George filed on 20 December 2023
• 1 – 963
• 1012 – 1030
• 1404 – 1538
• 1543 – 1545
• 1549 – 1551
• 1552 – 1841
• 2096 – 2099
• 2147 – 2161
• 2162 – 2370
• 2590 – 2670
• 2671 – 2681
• 2682 –– 3401
• 3402 – 3459
• 3460 – 3504
• 3505 – 3904
• 3905 – 4236
• 4237 – 4482
• 4499 – 4510
(c) the submissions filed by the applicant on 20 December 2023
• in [6], the final three sentences
• in [24], the second sentence until the end of the paragraph
• in [36], the second sentence until the end of the paragraph
• in [37], the second sentence
• [38] (and the heading to [38])
• [44] to [50]
• [51] to [54]
• [79]
• [81]
• [89] to [93]
THAWLEY J:
1 These reasons address an application made by the respondents for orders under s 37AF of the Federal Court of Australia Act 1976 (Cth) (FCA Act). The Deputy Commissioner of Taxation neither consents to nor opposes the application. Fairfax Media Publications Pty Ltd appeared and was heard on the respondents’ application.
BACKGROUND
2 On 20 December 2023, the duty judge made “freezing orders” against the respondents on the application of the Commissioner. The Commissioner’s application was made in the absence of the respondents and without notice to them. In support of the application, the Commissioner relied on:
(a) an affidavit dated 20 December 2023 made by Ms Sumitha Elizabeth George, an officer in the Australian Taxation Office;
(b) an exhibit comprising 4510 pages which accompanied Ms George’s affidavit (Exhibit SEG-1); and
(c) written submissions dated 20 December 2023 which had been prepared by senior counsel for the Commissioner.
3 Ms George’s affidavit was not formally read on the application and Exhibit SEG-1 was not tendered. However, it is clear from the transcript that the duty judge considered all of the material in chambers before the Court convened. His Honour made the freezing orders sought by the applicants.
4 On 21 December 2023, the Court received a request from a non-party media organisation to inspect documents under r 2.32 of the Federal Court Rules 2011 (Cth). The non-party sought access to:
(a) the originating application dated 20 December 2023 by which the proceedings had been commenced (an “unrestricted” document in terms of the Court’s “Access to Documents and Transcripts Practice Note” (GPN-ACCS)); and
(b) Ms George’s affidavit (a “restricted” document in terms of GPN-ACCS).
5 The proceeding was next before the Court on 22 December 2023. On this occasion, the respondents were represented, with senior counsel for the respondents appearing remotely.
6 The respondents did not oppose the freezing orders, but there was a dispute about the terms the orders should take. A hearing commenced and Ms George’s affidavit was read, but not otherwise referred to. Exhibit SEG-1 was not separately tendered, but it is repeatedly referred to in Ms George’s affidavit. There was no reference to the written submissions of 20 December 2023. A consent position was quickly reached. The duty judge then informed the parties of the existence of the access request. The respondents opposed access being granted, noting that there had been insufficient time properly to review the material in respect of which access had been sought.
7 On 28 December 2023, the respondents filed an interlocutory application seeking interim and final suppression orders under ss 37AI and 37AF of the FCA Act in relation to the whole of Ms George’s affidavit and Exhibit SEG-1. In support of the interlocutory application, the respondents filed an affidavit dated 28 December 2023 made by the respondents’ solicitor, Mr Ryan Eather. On the same day, the duty judge made an order that the interlocutory application be listed for case management before the duty judge on 22 January 2024 and also made the following order:
The contents of the affidavit of Sumitha Elizabeth George filed on 20 December 2023 and exhibit SEG-1 to that affidavit are not to be published or otherwise disclosed to any person or entity except the parties to this proceeding and their legal representatives, the Court and Court staff until the Respondents’ interlocutory application has been determined.
8 On 19 January 2024, the duty judge made various timetabling orders and the proceeding was later allocated to my docket.
9 I listed the matter for a case management hearing for 21 February 2024. Shortly before the case management hearing, the respondents filed an affidavit dated 16 February 2024 made by Mr Jack Pembroke-Birss, a solicitor for the respondents, and sent a note to my chambers dated 20 February 2024 in support of their application for orders under s 37AF of the FCA Act. At the case management hearing, I made orders for the respondents to file any further evidence and any further written submissions by 6 March 2024 and for the application to be determined on the papers.
10 On 6 March 2024:
(1) The respondents foreshadowed making a further amended interlocutory application and filed written submissions and a further affidavit from Mr Pembroke-Birss, dated 6 March 2024.
(2) Fairfax lodged a “Notice of Acting” and written submissions. The written submissions stated that Fairfax wished to exercise its entitlement under s 37AH(2)(d) of the FCA Act to appear and be heard on the respondents’ application.
(3) The respondents indicated that they wished to respond to Fairfax’s submissions.
11 In light of the fact that: (a) Fairfax’s submissions had not been drafted on the basis of the respondents’ foreshadowed further amended interlocutory application; (b) the respondents wished to make submissions responding to Fairfax’s submissions; and (c) the Court’s upcoming commitments which might delay determination of the respondents’ application, the matter was listed for hearing on 11 March 2024.
12 At the hearing on 11 March 2024, the respondents were granted leave to file a second further amended interlocutory application. By that application, the respondents sought an order under s 37AF of the FCA Act, on the grounds in ss 37AG(1)(a) and (c), suppressing publication or disclosure of:
(a) The following paragraphs of Ms George’s affidavit: Paragraphs 19 – 24, 25 – 27, 28(c) – (f), 29(c) – (f), 30(b) – (e), 31(b) – (e), 42 – 44, 53 – 74, 76 – 77, 80 – 138, 141 – 169, 176 – 182, 189, 195, 198, 204 – 212 and 227(b) – (d).
(b) The following pages of Exhibit SEG-1: Pages 1 – 963, 1012 – 1371, 1404 – 1538, 1543 – 1545, 1549 – 1953, 2096 – 2099, 2147- 2161, 2162 – 4236, 4237 – 4382, 4383 – 4482, 4499 – 4510.
(c) The following paragraphs of the submissions filed on 20 December 2023: Paragraphs 6 – 8, 14 – 54, 79, 81 and 89 – 93.
13 At the hearing on 11 March 2024, the respondents read the two affidavits of Mr Pembroke-Birss, referred to above. On the respondents’ application, an interim suppression order was made under s 37AI of the FCA Act in relation to those affidavits and in relation to the oral submissions to be made at the hearing by senior counsel for the respondents.
14 Fairfax’s Executive Counsel, Ms Alick, appeared and made submissions.
15 Near the conclusion of the hearing, the respondents provided Ms Alick with redacted copies of Ms George’s affidavit and a redacted copy of the submissions of 20 December 2023. These were admitted as Exhibit 2 on the application. The redacted documents were intended to reflect the material over which no order for suppression was sought. Fairfax was provided until 5:00pm on 13 March 2024 to make any further written submissions.
16 Fairfax’s further submissions were received on 13 March 2024. Amongst the submissions made by Fairfax (at [23]) was the submission that the following allegations were already in the public domain:
the respondents failed to declare their income from the proceeds of selling shares in Nature’s Care (a reference to Australia Nature’s Care Biotech Co Ltd) through their British Virgin Islands entities;
the respondents have a history of failing to disclose their assessable income; and
Alex Wu and Jina Chen, by their contentions made during the audit, sought to mislead the Commissioner in relation to the true nature of transactions that were examined during the audit.
17 On 15 March 2024, the parties were informed that judgment would be delivered on 18 March 2024, whereupon the respondents sought leave to file further submissions responding to Fairfax’s submissions of 13 March 2024. Leave was granted to the respondents to file further submissions and those submissions were filed shortly after.
18 In their submissions filed on 15 March 2024, the respondents submitted that Fairfax’s submission of 13 March 2024 appeared to have been based on [9] and Annexure A of the Commissioner’s submissions dated 20 December 2023, which had been provided by the respondents to Fairfax near the end of the hearing on 11 March 2024. The respondents submitted that there was no evidence that this information was in the public domain and that “[t]o the extent that … [9] and Annexure A were not included in the respondents’ interlocutory process, that [was] an unfortunate oversight”. The respondent contended that “the Court would consider it appropriate to extend non-publication orders over” this material.
19 The “extent to which” [9] and Annexure A of the Commissioner’s submissions dated 20 December 2023 were not included in the respondents’ interlocutory application is the full extent of non-inclusion possible.
20 The respondents’ interlocutory application has been amended a number of times. The respondents have provided two sets of written submissions (before the third) and made oral submissions. No relief was sought in respect of [9] and Annexure A and, further, those parts of the submission dated 20 December 2023 were provided to Fairfax at the hearing. The issue was first raised after the hearing.
21 No express application has been made to further amend the second further amended interlocutory application and, if such an application had been made, I would have first inquired whether the information or some of it had entered the public domain after it had been provided to Fairfax on 11 March 2024 and afforded Fairfax an opportunity to adduce further evidence on the issue.
22 In any event, the material is in the nature of general unsubstantiated allegations and is for this reason distinguishable from the material which I consider should be the subject of an order under s 37AF. I do not accept that the material in [9] of Annexure A would cause commercial harm beyond that already caused by the facts which have entered the public domain, including the fact of the assessments having been issued and the freezing orders having been made. Accordingly, the Court declines the implicit invitation made in the respondents’ third set of written submissions to extend, of its own motion, the orders it might otherwise make under s 37AF to the material referred to.
EVIDENCE
23 The affidavits of Mr Pembroke-Birss identified the following concerns should suppression orders not be made.
24 First, it was observed that the material disclosed personal information, including dates of birth, bank account details, sources of income and details of travel arrangements. It was said that disclosure of this information may expose the respondents to a risk of identity theft, scams or fraud.
25 Secondly, the respondents were concerned that the material disclosed confidential details regarding their personal tax affairs.
26 Thirdly, it was observed that the respondents had not had the opportunity to respond to the allegations made in the material relied upon by the Commissioner in obtaining the freezing orders, and it was contended that the disclosure of the various allegations would have a serious and negative impact on the respondents’ business and personal reputations, including a risk of loss of business or business opportunities and negative effects on the respondents’ relationship with stakeholders and customers. Mr Pembroke-Birss’ affidavit dated 16 February 2024 identified that the proceedings and the associated freezing orders had caused issues with two of the respondents’ third party financiers. Mr Pembroke-Birss’ affidavit dated 6 March 2024 identified commercial projects that the respondents were currently undertaking in Australia.
27 Fourthly, it was observed that the material disclosed confidential information of third parties and descriptions of confidential contracts and transactions.
28 Fifthly, it was said that the proceedings and media reporting continued to impact the second respondent’s mental health. The respondents were also concerned for their safety, identifying an incident where a stranger had approached the fourth respondent’s home following publication of the media articles, and another incident where two cars were parked outside the fourth respondent’s home for a prolonged period.
29 Sixthly, Mr Pembroke-Birss’ affidavit dated 6 March 2024 referred to proceedings in the Supreme Court of New South Wales, in which Mr Michael Wu and Ms Jina Chen are defendants. Interim confidentiality orders have been made in respect of evidence filed by the plaintiffs in those proceedings. The confidentiality orders apparently apply to certain documents admitted into evidence in those proceedings, some of which are the same as those to which access is sought in the present proceeding. The confidentiality orders in the Supreme Court are apparently soon to come to an end and Mr Wu and Ms Chen are said to be preparing an application for continuation of those orders.
30 A number of news articles were also in evidence. Some of these were contained in Mr Pembroke-Birss’ affidavit of 16 February 2024 and others, which had been referred to in the submissions made by Fairfax, were admitted as Exhibit 1 on the application.
STATUTORY FRAMEWORK
31 Section 17 of the FCA Act requires the Court to exercise its jurisdiction in “open court”. Section 17 is qualified by s 37AF which empowers the Court in certain circumstances to restrict the publication of evidence and other material – see, in relation to the operation of former s 50 of the FCA Act: Hogan v Australian Crime Commission [2010] HCA 21; 240 CLR 651; Hogan v Hinch [2011] HCA 4; 243 CLR 506 at [89].
32 The grounds for making a suppression or non-publication order under s 37AF(1) of the FCA Act are found in s 37AG, which provides:
37AG Grounds for making an order
(1) The Court may make a suppression order or non-publication order on one or more of the following grounds:
(a) the order is necessary to prevent prejudice to the proper administration of justice;
(b) the order is necessary to prevent prejudice to the interests of the Commonwealth or a State or Territory in relation to national or international security;
(c) the order is necessary to protect the safety of any person;
(d) the order is necessary to avoid causing undue distress or embarrassment to a party to or witness in a criminal proceeding involving an offence of a sexual nature (including an act of indecency).
(2) A suppression order or non-publication order must specify the ground or grounds on which the order is made.
33 Section 37AJ(2) of the FCA Act constrains the Court to making an order for no longer than is reasonably necessary to achieve the purpose for which it is made. Section 37AJ provides:
37AJ Duration of orders
(1) A suppression order or non-publication order operates for the period decided by the Court and specified in the order.
(2) In deciding the period for which an order is to operate, the Court is to ensure that the order operates for no longer than is reasonably necessary to achieve the purpose for which it is made.
(3) The period for which an order operates may be specified by reference to a fixed or ascertainable period or by reference to the occurrence of a specified future event.
34 Section 37AE provides:
37AE Safeguarding public interest in open justice
In deciding whether to make a suppression order or non-publication order, the Court must take into account that a primary objective of the administration of justice is to safeguard the public interest in open justice.
35 Safeguarding the public interest in open justice is “a” not “the” primary objective of the administration of justice, reflecting the fact that there are other primary objectives, including those in s 37M of the FCA Act: Porter v Australian Broadcasting Corporation [2021] FCA 863 at [83]; Lee v Deputy Commissioner of Taxation [2023] FCAFC 22; 296 FCR 272 at [83]. Safeguarding the public interest in open justice is an important primary objective. Open justice facilitates public scrutiny of the way in which courts decide cases and enables the public to understand how the justice system works and why decisions are taken – see: Lee at [84].
CONSIDERATION
36 Ms George’s affidavit, Exhibit SEG-1 and the written submissions dated 20 December 2023 were considered by the duty judge in chambers as part of the process which led to the making of the freezing orders on 20 December 2023 in the absence of the respondents. Each of the three documents was deployed in obtaining the freezing orders – see: Deputy Commissioner of Taxation v Shi (No 2) [2019] FCA 503 at [20] to [22].
37 Ms George’s affidavit was read in open court on 22 December 2023. No objection was taken to that affidavit being read, although objection was taken to access being granted as soon as the respondents were informed of the access request. Exhibit SEG-1 was not separately tendered on 22 December 2023. However, the exhibit was referred to in Ms George’s affidavit and should be treated as having been read in open court when the affidavit was read.
38 Senior Counsel for the respondents submitted, in substance, that Ms George’s affidavit and Exhibit SEG-1 had already been “read” (in chambers) on 20 December 2023 without a suppression order having been made, with the result that an objection on 22 December 2023 to that material would not have altered the position that the material had already been “read” in open court. I accept that submission.
39 Ms George’s affidavit, Exhibit SEG-1 and the submissions dated 20 December 2023 were each deployed in open court and should be disclosed unless an order under s 37AF of the FCA Act is “necessary to prevent prejudice to the proper administration of justice” or “necessary to protect the safety of any person”, being the two grounds upon which the respondents relied: s 37AG(1)(a) and (c).
40 If it is established that a suppression order is “necessary” on either of those two grounds, then it would be erroneous not to make the order: Hogan at [33]. If it is not “necessary” on either of those bases, then it cannot be made. The word ‘necessary’ is a “strong word”, not dealing with trivialities: Hogan at [30]. It is insufficient that the making of the order is seen to be “convenient, reasonable or sensible”: Hogan at [31].
Prejudice to the administration of justice
41 It is important to understand the particular context of the present case. It includes the following:
(1) In the proceeding, the Commissioner seeks judgment against the respondents for debts of over $200 million, representing taxation liabilities. Production of the notices of assessment in the proceeding is conclusive evidence that the assessments were properly made and that the amounts and particulars of the assessments are correct: s 350-10(1) of Schedule 1 to the Taxation Administration Act 1953 (Cth) (TAA 1953). The respondents can only challenge the amount of the assessments which give rise to the debts in these proceedings on a “review” to the Administrative Appeals Tribunal or an “appeal” to this Court under Part IVC of the TAA 1953.
(2) In aid of recovering the debt, the Commissioner applied to the Court for freezing orders and did so in the absence of the respondents. It was necessary for the Commissioner to point to a risk of dissipation of assets in order to obtain the relief which was sought. The Commissioner did this, in part, by asserting that the respondents had engaged in dishonest conduct and evasion and by revealing detailed information about various transactions and the respondents’ conduct, movements and business associations.
(3) Because the Commissioner’s application was (appropriately) made in the absence of the respondents, the respondents did not have the opportunity to: object to the evidence relied upon; seek to restrict the basis on which the evidence might be admitted; seek suppression orders at the time the evidence was deployed; or consent to the freezing orders being sought before the relevant material was deployed against them.
(4) The respondents have not had a meaningful opportunity in the proceedings to respond to the allegations made against them, or to address the affidavit and other material.
(5) The respondents will not in these proceedings have an opportunity to respond properly or fairly to the detailed allegations made or to explain their version of events by evidence or otherwise. This is because the proceedings are debt recovery proceedings in which the amounts of the assessments are not capable of challenge. Evidence explaining the relevant transactions, or the various assertions made by the Commissioner in seeking the freezing orders, is irrelevant to any remaining issue in the proceedings and therefore inadmissible: s 56(2) of the Evidence Act 1995 (Cth).
(6) If the respondents were to seek review in the Tribunal that proceeding could, and typically would, be conducted in private – see: s 14ZZE of the TAA 1953.
42 In the circumstances just described, the administration of justice is prejudiced if the necessary consequence of reading or deploying evidence on an ex parte application for a freezing order is complete disclosure of all the material regardless of the consequences. People would rightly think that the law is inadequate if it were unable to respond by protecting from disclosure material likely to result in harm to third parties (who might not be aware of the proceedings) or to respondents to a proceeding in which the respondents so harmed could not adduce evidence in defence of the position taken against them. Section 37AF is one means of response. Section 37AF and s 37AE, read together, recognise that the administration of justice might be prejudiced if the open justice principle is pursued without regard to context or consequences.
43 Some of the allegations made against the respondents in the material deployed on the ex parte application are serious and disclosure of them is reasonably likely to result in commercial harm. The result, in the absence of limited orders under s 37AF, would be unfairness to the respondents of a kind which prejudices the administration of justice. The prejudice to the administration of justice lies in the procedural and substantive unfairness to the respondents (and the same applies a fortiori to third parties) in not having had the opportunity to seek to prevent the material from being deployed in open court and in not having the opportunity in the proceedings to answer the material which is likely to cause them harm. In the absence of an order under s 37AF, in respect of limited material, the principle of open justice will have been pursued inflexibly without regard to the context or circumstances of the particular case.
44 The prejudice to the administration of justice is amplified where the harmful material does not materially assist an understanding of what has occurred in the proceeding, or the Court’s reasons for making orders, or does not otherwise materially assist the achievement of the objectives underlying the open justice principle.
45 It is desirable at this point to address one of the submissions made by Fairfax in its written submissions dated 6 March 2024. To do so, it is convenient to begin with Jagot J’s summary of some of the relevant principles in Porter at [84] and [85]:
[84] Sections 37AE-37AL of the Court Act recognise that in order to do justice it is sometimes necessary that information filed or given in a proceeding not be disclosed or published. This is because justice will be undermined if people are not free to seek the exercise of judicial power confident that, amongst other things, their safety and the safety of others will not be compromised, that national or international security will not be prejudiced, and that the administration of justice will not itself be prejudiced: s 37AG(1). The administration of justice may be prejudiced in a variety of ways. If, for example, people cannot come to a court confident that some kinds of information can be protected from disclosure if necessary (such as commercially confidential information valuable to a person or a third party, or sensitive information about a person’s health, or personal information about parties or third parties of no more than prurient interest to others) then public confidence in and access to justice may itself be undermined.
[85] The purpose of the principle of open justice has been said to be at least two-fold, to “enable public scrutiny of the way in which courts decide cases” and “to enable the public to understand how the justice system works and why decisions are taken”: Dring v Cape Intermediate Holdings Ltd [2019] UKSC 38; [2020] AC 629 at [42]-[43]. That said, there are well-recognised cases in which the overall administration of justice requires the suppression of some information from the public, reflected in s 37AG(1) of the Court Act. In Dring at [46] these well-recognised categories were said to include “national security, the protection of the interests of children or mentally disabled adults, the protection of privacy interests more generally, and the protection of trade secrets and commercial confidentiality”.
46 In Porter at [85], Jagot J gave, as examples of categories of cases in which the ground in s 37AG(1)(a) might be engaged, the protection of trade secrets and commercial confidentiality, together with others. Section 37AG(1)(a) is often engaged in the situations identified by Jagot J because people should be able to “come to a court confident that some kinds of information can be protected from disclosure if necessary”. If disclosure of such material was not possible “public confidence in and access to justice may itself be undermined”: Porter at [84]. The “categories” of cases mentioned by her Honour are examples of well recognised situations which commonly arise, but the categories are not closed. As mentioned, however, an order under s 37AF can only be made if it is necessary for one of the reasons in s 37AG(1). As a practical matter, it is therefore necessary to identify how the ground in s 37AG(1) is engaged if disclosure were not prevented by an order under s 37AF – see: Lee at [95].
47 An important aspect of the decision in Lee was that the appellant (at trial) adopted an all or nothing approach. The appellant submitted that everything should be suppressed and did not advance a narrower case that particular documents or evidence should be the subject of an order under s 37AF. The Full Court at [97] suggested that, had the situation been otherwise, an order under s 37AF might have been available on the ground in s 37AG(1)(a) in respect “particular information which could be misused or cause significant harm, being information which is not germane to securing the objective of open justice”. The Full Court stated:
A suppression order might be shown to be “necessary to prevent prejudice to the proper administration of justice”, for example, where it is made in respect of particular information which could be misused or cause significant harm, being information which is not germane to securing the objective of open justice. If the principle of open justice is not advanced by publication of particular information in the evidence (such as bank account details or passwords), the publication of which might reasonably be expected to facilitate wrongdoing, it might reasonably be concluded that a suppression order is “necessary to prevent prejudice to the proper administration of justice”. No such case was advanced by the appellants. Rather, the appellants contended for expansive orders suppressing all evidence, without advancing any alternative narrow case.
48 In the present case, the respondents relied on Perram J’s decision in A v Federal Commissioner of Taxation [2016] FCA 1307. In A, the taxpayer sought to set aside statutory notices by which the Commissioner was compelling production of information about the taxpayer’s tax affairs and the affairs of various associated companies: at [4]. Perram J at [8] accepted that:
(a) the allegations against the applicant involve allegations of serious misconduct in response to which he has yet to adequately put his side of the story and have it considered;
(b) in the present proceeding he will have no opportunity to put his side of the story, as the issues will be confined to technical questions concerned with whether the notices should be set aside;
(c) there is a real risk that the revelation of the existence of this dispute will cause the group to lose customers to its competitors; and
(d) there is a certainty that the reputation of the applicant will be damaged.
49 At [11] and [12], Perram J referred to the relevant principles and observed that “reputational distress which litigation often brings about is a distress which happens in an arena where the parties are heard and in which each may make a response to the other”:
[11] The principles governing whether and, if so, in what circumstances an order should be made suppressing publication of certain aspects of a proceeding are well-known. They were usefully collected by Jacobson J in Rinehart v Rinehart (2014) 320 ALR 195 at [21]-[31]. There is no need to set them out, but it should at least be said that the order must be ‘necessary’ to prevent prejudice to the administration of justice (which is a high standard) and that the principle of open justice is a fundamental aspect of the system of justice in Australia. In itself, therefore, embarrassment is not a reason to make an order, except in criminal cases of a sexual nature.
[12] Apart from that circumstance, as Jacobson J observed in Rinehart (at [28]), the reputational distress which litigation often brings about is a distress which happens in an arena where the parties are heard and in which each may make a response to the other.
50 Perram J made suppression orders under s 37AF on the ground in s 37AG(1)(a).
51 Parts of the context in A are similar to certain features of the present case. Unlike the present case, however, it was the taxpayer who initiated the proceedings.
52 The decision in A was considered by the Full Court in Lee. The Full Court stated at [94]:
Justice Perram in A v FCT concluded that reputational and commercial harm which might ensue if no suppression order was made (and his Honour appears to have been appropriately restrained in setting out facts to avoid aggravating the problem) was, in the circumstances identified by his Honour, such that a suppression order was “necessary” to prevent prejudice to the proper administration of justice. There is something wrong with the administration of justice if disclosure of information which will cause significant harm is the necessary corollary of the tender of material, in the ex parte circumstances of that case, when that disclosure does not advance the open justice principle. This appears to be the conclusion Perram J reached. His Honour expressly linked the reputational and commercial harm to s 37AG(1)(a).
53 Fairfax relied on Commissioner of Taxation v [Respondent] [2023] FCA 1176, in which Kennett J considered A. Fairfax also referred to the decision of Anderson J on the application for leave to appeal from that decision: [Redacted] v Commissioner of Taxation [2024] FCA 185.
54 Kennett J referred (at [23]) to Applicant Y v Australian Prudential Regulation Authority [2005] FCAFC 222 at [13] and [16], in which the Full Court noted that the applicants in that case would not have commenced the proceedings or continued them if the suppression order had not been made. Kennett J also referred in this regard to Applicant X v Australian Prudential Regulation Authority [2005] FCA 1288.
55 At [24], Kennett J concluded that Perram J’s decision in A should be understood as being underpinned by the fact that the applicant for the suppression orders was the applicant in the proceeding and that the prejudice to the proper administration of justice arose because an applicant, faced with the prospect of damaging material coming to light in the proceedings, might not be prepared to seek to vindicate their rights unless a suppression order is made. His Honour stated at [24] and [25]:
[24] Where an applicant in a proceeding before the Court faces the prospect of damaging allegations or other material entering the public domain in the course of the proceeding, without an opportunity to rebut those allegations or that material in the context of the proceeding, it may be that the prospect of such material being disclosed will deter that applicant (or others in a similar position) from coming to court to protect their legal rights. This prospect is clearly capable of being regarded as inimical or prejudicial to “the proper administration of justice” (although that conclusion is not always reached, as the question is context-specific (see, eg, Huikeshoven v Secretary, Department of Education, Skills and Employment [2021] FCA 1359 (Jackson J))). Attention to this factor is evident in Applicant Y and should, in my view, also be understood to underpin the decision in A v Commissioner. Absent that factor, there was nothing to elevate the unfortunate position of the applicant in A v Commissioner into something that threatened prejudice to the administration of justice. If A v Commissioner were taken to stand for the broad position put by [the respondent]—effectively, that the ground in s 37AG(1)(a) is made out because the damaging allegations against him may not be tested in the proceeding—it would be difficult to reconcile with the stream of authority holding reputational distress to be insufficient in itself: see Lee at [93]–[95].
[25] The position is different where proceedings commenced in the Court involve potential disclosures of material that the respondent would prefer not be made public. Respondents are necessary participants in proceedings whether they like it or not, and are therefore (at least normally) not capable of being deterred from seeking vindication of their rights by the prospect of embarrassment or distress. Cases can possibly be imagined where a respondent, despite having a good defence to a claim, could be driven to consent to judgment by desperation to avoid public disclosure of material damaging to their reputation. Such an outcome could, depending on the nature of the issues in the case, potentially be seen as prejudicial to the proper administration of justice. However, I was not referred to a case in which this conclusion was reached; and it has not been suggested that [the respondent] is in this position.
56 The decision in A is not expressly underpinned by the consideration mentioned by Kennett J at [24]. There was no mention in Perram J’s reasons of the applicant giving evidence, or making the submission, that he would not have brought the proceeding if a suppression order could not have been obtained. It was not mentioned as a more general consideration applicable to all applicants. I read A as being underpinned by the specific findings made by Perram J at [8] and the consequential view that his Honour took, informed by the matters referred to at [11] and [12], that an order under s 37AF was necessary on the particular facts in that case on the ground in s 37AG(1)(a).
57 In the proceeding before Kennett J, the Commissioner sought declarations that the respondent had engaged in a tax exploitation scheme in contravention of s 290-50(1) of Schedule 1 to the TAA 1953. The respondent in such proceedings would ordinarily have the opportunity to adduce evidence in respect of, and respond to, the allegations made against him or her, those being the central issues in the case. The taxpayer argued that the allegations against him might not be tested in the proceeding because of an argument he intended to make that the proceeding was incompetent having been commenced after the relevant four year time limit. Kennett J held that the question of competency would not be determined as a preliminary issue and would need to be determined in light of all of the evidence as part of the final judgment: at [19].
58 In the present case, evidence in response to the detailed allegations made on the Commissioner’s ex parte application is not relevant to the remaining issues in the proceeding. The allegations made by the Commissioner are not capable of being answered by admissible evidence.
59 In any event, the observations of Kennett J at [24] relied upon by Fairfax, do not go so far as to state that it is irrelevant to take into account the fact that a respondent will not have an opportunity in the proceeding to answer harmful allegations made against the respondent in assessing whether an order is necessary to prevent prejudice to the administration of justice. The facts in this proceeding are different to the scenario posited by his Honour in the last sentence of [24] in at least two ways:
(a) First, the limited material in respect of which I consider an order under s 37AF should be made is not made on the basis that it might cause “reputational distress” to the respondents. I consider that disclosure of the material is reasonably likely to cause commercial harm to the respondents and third parties.
(b) Secondly, it is not just the lack of opportunity to respond in these proceedings which is relevant. It is the unfairness of a procedural and substantive nature which:
(i) manifested in an inability on the part of the respondents to prevent the material being deployed in open court (or in chambers) because of the ex parte nature of the application; and
(ii) now manifests in an inability to answer the material in the proceedings in any fair or meaningful way because of the particular statutory regime which precludes a challenge to the amount or particulars of the assessment.
60 Absent the material being read or deployed in open court, the open justice principle would not have been engaged. Now that it has been engaged, the consequence of the statutory regime – s 350-10(1) of Schedule 1 to the TAA 1953 and Part IVC of the TAA 1953 – is that the allegations deployed in open court cannot be answered by admissible evidence. It is not a satisfactory answer to say that the respondents could dispute the detailed allegations made by disputing the continuation of the freezing orders and seeking to address the allegations in a lengthy and expensive contested interlocutory hearing.
The limited material in respect of which an order should be made
61 Having reviewed the material, I am satisfied that it is necessary to make an order under s 37AF(1) on the ground in s 37AG(1)(a) in relation to limited parts of Ms George’s affidavit, Exhibit SEG-1 and the submissions dated 20 December 2023. The material in respect of which I conclude an order under s 37AF is necessary falls into three broad categories (I should not be understood as meaning that all material in these categories should be the subject of an order):
(1) an account of various facts, coupled with documents and reasoning explaining the Commissioner’s view that the respondents behaved dishonestly;
(2) confidential information of entities which are not a party to the proceedings; and
(3) personal information including bank statements identifying individual transactions, detailed travel movements and taxation information.
62 Disclosure of some material which falls in category (1) is likely to cause commercial harm to the respondents beyond the harm already caused by the fact that freezing orders have been made and that various aspects of the dispute between the Commissioner and the respondents have already been published or are otherwise in the public domain. As indicated earlier, the peculiar context includes that the respondents have not had an opportunity to prevent the material being deployed in open court and will not have an opportunity in these proceedings to answer the material. What has been disclosed already, and what will be disclosed by the material in respect of which no suppression order is to be made, provides an understanding of the proceedings and the reasons the freezing orders were made. I consider an order under s 37AF is necessary on the ground in s 37AG(1)(a) in respect of limited parts of the material.
63 Limited parts of the material which fall in category (2) is confidential material of third parties which, if disclosed, carries a risk of commercial harm to those third parties. This material does not materially advance an understanding of this proceeding or the reason the freezing orders were made. Given that disclosure of this information does not advance an understanding of the proceeding, and that there is a risk of harm to third parties who have not been heard in relation to disclosure of the material, an order under s 37AF is “necessary to prevent prejudice to the proper administration of justice” – see: Porter at [84]; Lee at [94].
64 Disclosure of some material which falls in category (3) carries a material risk of harm to the respondents in that it facilitates identity theft and fraud. The material in this category does not advance an understanding of this proceeding or the reasons the freezing orders were made. Given that disclosure of this information does not materially assist an understanding of the proceeding or the reason the freezing orders were made and that there is a material risk that the information could facilitate wrongdoing and harm to the respondents, an order under s 37AF is “necessary to prevent prejudice to the proper administration of justice” – see: Porter at [84]; Lee at [94], [97]. It is not necessary to determine whether, in respect of the material in category (3), an order under s37AF might also be necessary on the ground in s 37AG(1)(c).
65 Fairfax properly submitted that it would not publish bank account and other personal details. I accept that submission. This is, however, only a partial answer to this aspect of the respondents’ application. The respondents seek a suppression order not merely a denial of an access request. Whilst it is only media organisations which have to date sought access to the material identified, there is nothing to prevent others from seeking access to that material. Others are not bound by the same obligations as the media, such as those set out in the Statement of Principles of the Australian Press Council.
Material subject to an order under s 37AF
66 I will make an order under s 37AF(1) only where I have concluded it is “necessary” to do so. In each case, it is necessary on the ground in s 37AG(1)(a). The material in respect of which an order should be made is as follows:
(1) Ms George’s affidavit:
• the exhibit referred to in [21], being the Commissioner’s reasons for decision;
• [23] and [24];
• [27(a)] and [27(b)];
• the exhibits referred to in [28(c)], [28(d)], [28(e)] and [28(f)];
• the exhibits referred to in [29(c)], [29(d)], [29(e)] and [29(f)];
• the exhibits referred to in [30(b)], [30(c)], [30(d)] and [30(e)];
• the exhibits referred to in [31(b)], [31(c)], [31(d)] and [31(e)];
• [76];
• [82] to [138];
• [141] to [165];
• [176] to [182];
• the exhibits referred to in [189] and [195];
• [198];
• [204] to [208]; and
• the exhibits referred to in [209] and [210].
In [211], there is a reference to pages 4511 – 4529 of Exhibit SEG-1. These were not in fact contained in Exhibit SEG-1 and therefore no occasion arises for a suppression order in respect of [211] or the (non-existent) pages referred to in that paragraph.
(2) Exhibit SEG-1:
• 1 – 963: income tax returns and Department of Immigration and Border Protection movement records;
• 1012 – 1030: confidential FIRB application;
• 1404 – 1538 and 1543 – 1545 and 1549 – 1551: various AUSTRAC Reports;
• 1552 – 1841: various notices of amended assessment, ATO reasons for decision, position papers and tax-related communications;
• 2096 – 2099: incoming passenger cards;
• 2147 – 2161: various tax-related communications;
• 2162 – 2370: various overseas tax-related communications;
• 2590 – 2670: communications between PwC and the ATO;
• 2671 – 2681: various bank statements, ledgers and receipts;
• 2682 –– 3401: communications between PwC and the ATO, information obtained pursuant to requests made by the ATO and notices issued by the ATO;
• 3402 – 3459: bank statements;
• 3460 – 3504: financial statements and a tax return;
• 3505 – 3904: AUSTRAC reports;
• 3905 – 4236: communications between PwC and the ATO;
• 4237 – 4482: various reasons for decisions issued by the ATO; and
• 4499 – 4510: various notices of assessment of administrative penalties.
(3) Submissions filed on 20 December 2023:
• in [6], the final three sentences;
• in [24], the second sentence until the end of the paragraph;
• in [36], the second sentence until the end of the paragraph;
• in [37], the second sentence;
• [38] (and the heading to [38]); and
• [44] to [50]; [51] to [54]; [79]; [81]; [89] to [93].
Material not to be the subject of an order under s 37AF
67 The reasons for refusing the application in relation to the balance of the material sought to be suppressed are as follows.
68 As to [19] to [22] of Ms George’s affidavit: these contain an account of the fact that an audit was conducted and the essential outcome of the audit in terms which convey that the Commissioner holds a particular view about the relevant facts which has led the Commissioner to issue default assessments. These paragraphs do not contain any allegation of impropriety or necessary implication of wrongdoing. The fact that the Commissioner conducted an audit has been disclosed as has the fact that the Commissioner considers he was misled during the audit. The fact that default assessments have been issued is in the public domain. The fact that the Commissioner has taken a different view to the respondents of the amount of tax payable is in the public domain as is the amount of tax claimed and the fact that the Court has made freezing orders against the respondents. The evidence does not establish or permit a reasonable inference that the disclosure of this information would cause any commercial or other harm beyond what has already occurred. These paragraphs do not contain material which it is necessary to suppress on a ground mentioned in s 37AG(1)(a) or (c).
69 As to [25], [26], [27(c)] to [27(f)] of Ms George’s affidavit: these contain an expression of concern on the part of the Commissioner that the respondents might dissipate assets in light of the amount of tax payable and the view that recovery of the debt may be hampered. The tax payable is in the public domain and the fact that the Commissioner is concerned about dissipation of assets follows from his making the application for freezing orders.
70 As to [28(c)] to [28(f)]; [29(c)] to [29(f)]; [30(b)] to [30(e)]; [31(b)] to [31(e)] of Ms George’s affidavit: once disclosure of the underlying exhibits is suppressed, these paragraphs only reveal information which is in the public domain (some of which is in the originating application and some of which is in freezing orders) and to the extent that further information is revealed, there is nothing about the content of that information which can be seen to make it necessary to make an order under s 37AF on the grounds mentioned in s 37AG(1)(a) or (c).
71 As to [42] to [43] of Ms George’s affidavit: these explain the Commissioner’s views about the liability of the respondents, in neutral terms. The evidence does not establish that disclosure of this material would cause commercial or other harm, particularly in light of the information already in the public domain. The evidence adduced on this application does not establish that an order under s 37AF is necessary.
72 As to [44] of Ms George’s affidavit: the table reveals the level of penalties from which certain inferences can be drawn. These inferences are the kinds of inferences about the Commissioner’s views which would be drawn from facts already in the public domain, in particular the fact that the assessments have been issued and the freezing orders sought and obtained. In light of the material already in the public domain, it is not necessary to make an order under s 37AF in relation to [44] of Ms George’s affidavit.
73 As to [53] to [74] of Ms George’s affidavit: these paragraphs set out the Commissioner’s understanding of relevant facts concerning the sale of certain shares and the making of various loans. The evidence does not establish or permit a reasonable inference that the disclosure of this information would cause any commercial or other harm. These paragraphs do not contain information which it is necessary to suppress on a ground mentioned in s 37AG(1)(a) or (c).
74 As to [77] of Ms George’s affidavit: the paragraph refers to a share sale agreement dated 11 April 2018, a copy of which is located in Exhibit SEG-1. I am not satisfied, on the evidence, that the disclosure of this information will prejudice the administration of justice or cause harm to any person, including third parties.
75 As to [80] to [81] of Ms George’s affidavit: these paragraphs contain capital gains tax calculations said to have been provided to the Commissioner by one of the respondents. The evidence does not establish that the disclosure of this information would cause any commercial or other harm. These paragraphs do not contain information which it is necessary to suppress on a ground mentioned in s 37AG(1)(a) or (c).
76 As to [166] to [169] of Ms George’s affidavit: these paragraphs disclose an arrangement entered into between the Commissioner and the respondents in 2018. The evidence does not establish that the disclosure of this information would cause any commercial or other harm. These paragraphs do not contain information which it is necessary to suppress on a ground mentioned in s 37AG(1)(a) or (c).
77 As to [189] and [195] of Ms George’s affidavit: if the exhibits referred to in these paragraphs are suppressed, the paragraphs contain information which is in the freezing orders which have been made.
78 As to [209] and [210] of Ms George’s affidavit: if the exhibits referred to in these paragraphs are suppressed (as they will be), these paragraphs do not contain information which it is necessary to suppress on a ground mentioned in s 37AG(1)(a) or (c).
79 As to [211] of Ms George’s affidavit: as noted above, [211] does not of itself disclose any confidential information and refers to pages that do not exist in Exhibit SEG-1. It follows that no order is necessary.
80 As to [212] and [227(b)] to [227(d)] of Ms George’s affidavit: in light of the information in the public domain, including information contained in the originating application, this paragraph does not contain information which it is necessary to suppress on a ground mentioned in s 37AG(1)(a) or (c).
81 As to Exhibit SEG-1, the following pages were said to comprise information containing allegations made by the Commissioner, confidential agreements of the respondents and confidential agreements of, or confidential information relating to, third parties:
(a) 1031 – 1371: a Share Sale Agreement dated 11 April 2018;
(b) 1842 – 1953: notices issued in 2018 by the ATO and associated documents;
(c) 2371 – 2540: an email attaching an “Agreement for assistance with first stock listing”, an IPO timeline, a “Discussion” document, an Information Memorandum and other documents dated February 2014 and April and May 2015;
(d) 2541 – 2589: various loan agreements.
82 In relation to this material, I am not satisfied on the evidence adduced that an order under s 37AF is “necessary” on the grounds identified in s 37AG(1)(a) or (c). There is no sufficient basis to infer that commercial harm is likely if these documents are not suppressed. In addition to the lack of evidence or cogent inference of any harm, I have had regard to the dates of the documents and the fact that the freezing order and the nature of the dispute between the parties is in the public domain. Apart from commercial or reputational harm linked to s 37AG(1), there was no other identified basis upon which an order under s 37AF could be made.
83 As to [6] of the submissions filed on 20 December 2023: if the final three sentences are suppressed (as they will be), this paragraph provides an account of the background to the issue of the assessments in terms which convey that the Commissioner holds a particular view about the relevant facts which has led the Commissioner to issue assessments. The fact that the assessments have been issued is in the public domain. The fact that the Commissioner has taken a different view to the respondents about the amount of tax payable is in the public domain as is the amount of tax claimed and the fact that the Court has made freezing orders against the respondents. The evidence does not establish that the disclosure of this information would cause any commercial or other harm. The paragraph does not contain information which it is necessary to suppress on a ground mentioned in s 37AG(1)(a) or (c).
84 As to [7] of the submissions: this paragraph contains a summary of the contended effect of various legislative provisions. The table does not need to be suppressed for reasons equivalent to those given in relation to [44] of Ms George’s affidavit – see [72] above.
85 As to [8] of the submissions: this paragraph explains that alternative assessments have been issued. It does not contain information warranting an order under s 37AF.
86 As to [14] to [22] of the submissions: the evidence does not establish that a suppression order is necessary in respect of this information. The paragraphs indicate that the respondents have taken the position that they did not at certain relevant times have a direct or indirect interest in a CFC and it is clear that the Commissioner has reached a different conclusion. It is not necessary to make an order under s 37AF to suppress this information on a ground in s 37AG(1)(a) or (c). The fact that the Commissioner and the respondents have taken a different view about the underlying facts is evident from the issue of assessments and the pursuit by the Commissioner of freezing orders.
87 As to [23] to [27] of the submissions: these paragraphs set out the basis for the amended assessments. Apart from in respect of the second to fourth sentences of [24] (see [66] above), it is not necessary to make an order under s 37AF to suppress this information on a ground in s 37AG(1)(a) or (c).
88 As to [28] to [37] of the submissions: these paragraphs set out the Commissioner’s account of the background to the sale of certain shares. Once parts of [36] and [37] are supressed (as indicated above), these paragraphs do not contain information warranting an order under s 37AF.
89 As to [39] to [43] of the submissions: these paragraphs set out the Commissioner’s account of the sale of certain shares. These paragraphs do not contain material warranting an order under s 37AF.
Mental health and anguish
90 The evidence on this application does not justify an order under s 37AF on the ground in s 37AG(1)(c) on the basis of the distress and anguish that the respondents might suffer.
CONCLUSION
91 For the reasons above, orders under s 37AF are necessary on the ground in s 37AG(1)(a) only in relation to some of the material the subject of the application. The application is otherwise dismissed.
92 These reasons should be published only to the parties until 4:00pm on 20 March 2024, after which, if no other orders are made, the reasons will be published generally.
I certify that the preceding ninety-two (92) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Thawley. |
Associate:
