Do the Notices Infringe Foreign Sovereignty?
80 ANZ's first argument that the notices are invalid because they are not authorised by s 264 is put by way of three limbs. First, s 264 does not authorise the Commissioner or Deputy Commissioner to issue a notice that would infringe upon foreign sovereignty. Secondly, s 264 does not authorise the issuing of notices which would violate, in the sense of affect, fundamental rights. Thirdly, s 264 does not authorise the issuing of a notice that would require the addressee of the notice to direct their employees to commit criminal offences in order for the addressee to comply with the notice. These three limbs to ANZ's first argument are predicated on the proposition that the law of Vanuatu prohibits the disclosure of information by ANZ to the Deputy Commissioner. If by reason of the law in Vanuatu the disclosure of the information is prohibited, then, so ANZ's first argument goes, the notices are invalid because s 264 does not confer a power on the Commissioner to issue notices that infringe upon foreign sovereignty, impinge upon fundamental rights, or require the addressee to direct its employees to commit criminal offences.
81 In my view ANZ's first argument must fail for the fundamental reason that s 264 authorises the Commissioner to issue a notice to an Australian company asking it to produce information that is stored in Australia. It is ANZ, not ANZ Vanuatu, to whom the notices are addressed. It is ANZ which holds the information in Australia and it is ANZ that is required to comply with the notices. Whether the disclosure of the information by ANZ would mean that either ANZ or ANZ Vanuatu contravenes the law in Vanuatu is not to the point. The information is held in Australia by an Australian company, and in my view s 264 authorises the Commissioner, or in this case the Deputy Commissioner, to issue the notices.
82 It is true that the Notices define ANZ to mean ANZ and any subsidiary or affiliate of ANZ "as defined in Division 6, Part 1.2 of the Corporations Act", and that ANZ Vanuatu would be a subsidiary within the meaning of s 46, which is included in that Division of the Corporations Act 2001 (Cth). Therefore, the notices require ANZ to furnish any information held by ANZ Vanuatu that is addressed by the notices.
83 However, the notices require ANZ and ANZ Vanuatu to furnish information from the GIW. ANZ Vanuatu is not required to provide any further information than that already contained in the GIW. The reach of the notices does not extend beyond information previously given by ANZ Vanuatu to ANZ in compliance with ANZ's own internal obligations. The information which is to be provided is that already contained in the GIW and in the possession of ANZ. ANZ Vanuatu is not being asked, because it is a subsidiary of ANZ, to furnish any information apart from that in the GIW.
84 It cannot be the case, as ANZ has contended, that an Australia company could avoid disclosing information it held in Australia on the basis that the information, and thereby the company, was subject to the law of another jurisdiction. If that were the case it would seriously constrain the Commissioner's ability to collect information in the course of performing the Commissioner's functions and responsibilities under the ITAA. Parliament cannot have intended this when it enacted s 264. As I have already pointed out, s 264 confers very broad investigatory powers on the Commissioner. There is no reason to read s 264 as being subject to a foreign law that might purport to have extra-territorial effect in circumstances where the information is held by an Australian company in Australia.
85 In Bank of Valletta plc v National Crime Authority (1999) 164 ALR 45; [1999] FCA 791 a notice was issued under s 29(1) of the National Crime Authority Act 1984 (Cth) which required a foreign bank to produce documents that were held in Malta. There was no argument as to the validity of the notice and the question for the court was whether the bank had a "reasonable excuse" which entitled the bank to refuse to produce the documents because compliance with the notice would mean that the bank would commit an offence against the confidentiality provisions of the laws of Malta. Justice Hely concluded that even if there was a reasonable risk that the production of the documents by the bank would involve the commission of an offence, that did not constitute a "reasonable excuse" to not comply with the notice.
86 In this case the notices given under s 264 are not rendered invalid because by providing the information in compliance with the notices and the law of Australia, ANZ, or more particularly ANZ Vanuatu, might thereby contravene the law of Vanuatu. To hold otherwise would be inconsistent with Hely J's decision in Bank of Valletta plc v National Crime Authority, a decision with which I agree.
87 ANZ also argued that s 264(1)(a) should not be construed as abrogating fundamental rights, privileges or immunities unless by necessary intendment or implication, and it is not to be read as extending to cases governed by foreign law.
88 It was contended that because of the generality of the words used the power given in s 264(1) "is unlikely to contain the necessary implication abrogating fundamental rights, privileges, immunities, and is unlikely not to be able to be construed so as to avoid breaches of international comity, because general words will almost always be able to be given some operation, even if the operation is limited in scope."
89 The issue, it was contended by ANZ, was whether the general words in s 264(1)(a) should be construed as authorising an exercise of power which infringes foreign sovereignty by overriding rights and obligations under foreign law, and at the same time violates the fundamental right of a person:
(a) not to be compelled to contravene the law, including foreign law;
(b) not to be compelled to act in a way which exposes that person to criminal punishment, including deprivation of liberty; and
(c) to privacy, including under foreign law.
90 In support of its contention ANZ relied upon the dicta of Dixon J in Wanganui - Rangitikei Electric Power Board v Australian Mutual Provident Society (1934) 50 CLR 581 at 601, where, according to ANZ, his Honour stated a common law principle or rule of construction.
91 That case was a private international law case concerning the proper law governing a contract between a resident of Australia (AMP) incorporated in New South Wales and a resident of New Zealand, Wanganui - Rangitikei Electric Power Board (the NZ Board). The NZ Board borrowed money from AMP. The NZ Board was to pay interest which was secured by AMP by debenture upon a special rate to be levied annually during the currency of the loans, on the rateable property and the district controlled by the local authority.
92 The monies were advanced in New Zealand but the repayments were made in New South Wales. The NZ Board's authority to raise the loans and secure those loans was given by New Zealand statute. The NZ Board sought to repay the debentures in New South Wales in accordance with an amount of interest which would be then reduced according to a New South Wales statute, the Interest Reduction Act 1931 (NSW) (Interest Reduction Act).
93 The Court concluded that the Interest Reduction Act did not apply to the NZ Board's obligations because of the proper construction of the Interest Reduction Act. At 600-601, in the passage relied on by ANZ, Dixon J said:
The case is one for applying what I believe to be the well settled rule of construction. The rule is that an enactment describing acts, matters or things in general words, so that, if restrained by no consideration lying outside its expressed meaning, its intended application would be universal, is to be read as confined to what, according to the rules of international law administered or recognised in our Courts, it is within the province of our law to effect or control. The rule is one of construction only, and it may have little or no place where some other restriction is supplied by context or subject matter. But, in the absence of any countervailing consideration, the principle is, I think, that general words should not be understood as extending to cases which according to the rules of private international law administered in our Courts, are governed by foreign law. As the present statute deals with the discharge pro tanto of obligations, it ought to be understood as confined to those obligations which arise under the law of New South Wales.
94 The question in that case was whether the appellant, the NZ Board, could take advantage of a New South Wales statute and obtain a reduction in interest rates which otherwise would not be available to it under New Zealand law. The principle which Dixon J said was a rule of construction has nothing, in my respectful opinion, to do with the matter under consideration in this proceeding.
95 The question in this proceeding is whether the Deputy Commissioner is entitled to issue a notice directed to an Australian company to furnish information held by that Australian company in Australia. The notices do not in any way impact upon the sovereignty of Vanuatu, or upon Vanuatu law. Nor do the notices impact or deal with the relationship between ANZ and its customers, either in Vanuatu or in Australia. The comments of Dixon J in Wanganui - Rangitikei Electric Power Board v Australian Mutual Provident Society do not mean that an Australian company is immune from the reach of s 264 where the Australian company has information relevant to a notice given under s 264(1)(a) just because the information has been provided to it by its subsidiary which carries on business in a foreign jurisdiction. The notices given under s 264(1)(a) do not purport to require ANZ to furnish any information other than the information it holds in Australia in the GIW. How ANZ came to hold that information is an internal matter between ANZ and ANZ Vanuatu.
96 ANZ also relied upon Australian Securities Commission v Bank Leumi Le-Israel (1995) 134 ALR 101, and the reasons of the Full Court on appeal in Australian Securities Commission v Bank Leumi Le-Israel (Switzerland) (1996) 69 FCR 531. In that case the Australian Securities Commission (ASC) gave notices in the form of substantial shareholder notices to two Swiss shareholders in relation to their shareholdings in an Australian company. The notices required the Swiss shareholders to disclose the persons who had the beneficial interest in their shareholdings. Both Swiss companies refused to comply with the notices on the ground that the disclosure of that information would breach Swiss secrecy regulations. The ASC then sent further notices, with which again the Swiss shareholders refused to comply.
97 Justice Sackville held at first instance, in a decision which was approved on appeal, that there was no obligation upon the shareholders to comply with the notices because, upon the true construction of the legislation under which the notices were given, the legislation did not have effect upon Swiss corporate citizens resident in Switzerland.
98 His Honour, after discussing the authorities, said at 124:
Clearly, very considerable caution must be exercised before construing legislation so as to impose duties on foreigners which create a risk that they may be required to contravene foreign law. Ultimately, however, the question is one of ascertaining the intention of the legislature by reference to the language used and the objects of the legislative scheme.
99 The facts of that case are different to the facts in the present case. The notices in the present case are directed to an Australian bank in Australia, and require it to furnish information held by it in Australia. Although, as already observed, ANZ Vanuatu is encompassed within the notices given, the notices do not require any subsidiary of ANZ to furnish information held outside of Australia. The only information which is sought is that which is contained within the GIW in Australia.
100 It follows then that I reject ANZ's argument that the notices were not authorised by s 264 because they impact upon Vanuatuan sovereignty by requiring ANZ to contravene the law of Vanuatu in order to comply with them. However, even if s 264 were limited in the manner submitted by ANZ, I am, for the following reasons, not satisfied that disclosure of the information by ANZ would contravene the law in Vanuatu.
101 ANZ argued that the applicable law to determine the banking relationship between the bank and its customers is the law of the place where the customer's account is held. The law of that place will determine the banker's obligations of confidence in respect of any information coming to the banker's attention by reason of its contractual relationship: Nanus Asia Co Inc v Standard Chartered Bank [1990] 1 HKLR 396. That contention is no doubt correct, but it goes no further than establishing that as between the banker and its customer the law governing their relationship is the law of the place where the customer account is held. Thus, it may be accepted that the law of Vanuatu governs the relationship between ANZ Vanuatu and its customers.
102 Next ANZ contended that because the law of Vanuatu governed the relationship between ANZ Vanuatu and its customers, ANZ could not be compelled to give the information sought in the notices. It was contended that under Vanuatu law there was a non-statutory obligation of confidentiality between a bank and its customers, as well as a statutory obligation of confidentiality imposed upon a bank in respect of international companies and trust companies.
103 ANZ called expert evidence for the purpose of establishing these obligations of confidentiality. It is necessary to address that evidence.
104 The opinion rule expressed in s 76 of the Evidence Act 1995 (Cth) (Evidence Act) provides that evidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion was expressed. There are exceptions to the rule. Section 79(1) provides:
(1) If a person has specialised knowledge based on the person's training, study or experience, the opinion rule does not apply to evidence of an opinion of that person that is wholly or substantially based on that knowledge.
105 ANZ tendered parts of two exhibits to two separate affidavits of Mr Ellum affirmed on 24 May 2011 and 30 June 2011, and parts of two exhibits to two separate affidavits of Dr Corrin sworn on 1 June 2011 and 30 June 2011. The exhibits were tendered pursuant to the exception in s 79 of the Evidence Act. The four exhibits contained the opinions of the authors as to the law in Vanuatu. The respondents did not take issue with their tender.
106 Both Mr Ellum and Dr Corrin were called to give evidence and were cross-examined on their reports. The respondents did not contend that Mr Ellum and Dr Corrin did not have the specialised knowledge required in s 79, or that the opinion evidence proffered by the witnesses was not wholly or substantially based upon that knowledge. Nor did the respondents contend that the opinion evidence could not be received on any other basis.
107 At the conclusion of the evidence I had doubts about whether the evidence was admissible, but because no objection was taken I admitted the evidence. However, I did not find the evidence particularly helpful.
108 Mr Ellum is a practicing solicitor who was Attorney-General of Vanuatu between 1994 and 1996. Dr Corrin is an Associate Professor of Law at the University of Queensland. Both gave evidence in relation to two aspects of the law in Vanuatu. First, they were cross-examined about whether the identity and account information of a customer who opens a bank account with a bank in Vanuatu is subject to a non-statutory obligation of confidentiality imposed upon the bank and/or a third party recipient of the information. Secondly, they were cross-examined about whether there were any statutory obligations of confidentiality in relation to such information.
109 Both Mr Ellum and Dr Corrin expressed the opinion that ANZ Vanuatu is subject to a non-statutory obligation of confidentiality under the law of Vanuatu in respect of the account information of its customers. They both agreed that the source of this non-statutory obligation of confidentiality was contractual, being either an express or implied term of the contractual arrangements between ANZ Vanuatu and its customers. Both accepted in cross-examination that if the contracts contained an express term that permitted ANZ Vanuatu to disclose any information that came into ANZ Vanuatu's possession as the customer's banker, then the non-statutory obligation of confidentiality would be displaced to the extent permitted by the express term.
110 Evidence of the terms and conditions applicable to various different types of standard ANZ Vanuatu accounts was introduced by ANZ. In cross-examination, Mr Hanks QC, counsel for the respondents, took both Mr Ellum and Dr Corrin to a number of different clauses in these terms and conditions. Both Mr Ellum and Dr Corrin agreed that the clauses they were taken to were relevant when identifying the extent of the non-statutory obligation of confidentiality.
111 Mr Ellum also agreed with the cross-examiner that the contractual obligations of confidentiality owed by ANZ Vanuatu to its customers will determine the extent of the confidentiality obligations owed by ANZ to those customers in that ANZ would be subject to the same obligations as its subsidiary. However, Dr Corrin was of the view that there could be an equitable obligation of confidence between ANZ and ANZ Vanuatu, and that this equitable obligation would not necessarily represent the contractual terms relating to confidentiality between ANZ Vanuatu and its customers.
112 I very much doubt that the extensive evidence in relation to the non-statutory obligation of confidence was admissible under s 79 of the Evidence Act. I accepted the evidence because there was no objection to me receiving it. However, I think that given the similarities between Australian law and the law of Vanuatu in this area, and because the law of Vanuatu in this respect is based largely on the English common law, I am in a position to determine the nature of any non-statutory obligation of confidence to which ANZ might be subject.
113 In my view the non-statutory obligation of confidence is no different to that which pertains under Australian law, and any express or implied contractual obligation of confidentiality will have to yield to any law that required the provision of confidential information. Therefore, if ANZ is obliged by law to produce any confidential information it has obtained from ANZ Vanuatu, the statutory obligation to which ANZ is subject will override any non-statutory obligation of confidence it may owe to ANZ Vanuatu or the customers of ANZ Vanuatu. As I have already pointed out, s 264 overrides any non-statutory obligation of confidentiality that the addressee of a s 264 notice might owe to a third party. This applies to an Australian company, which holds the information sought in Australia, regardless of whether the non-statutory obligation of confidentiality is one that arises under Australian law or a foreign law, providing that the Commissioner is exercising his or her powers for the purposes of the ITAA.
114 In any event, as I have said, both experts agreed that the source of the non-statutory obligation of confidentiality was contractual, and that the extent of the obligation would be subject to the express terms and conditions of the contracts existing between ANZ Vanuatu and its customers. There was evidence of a number of standard form agreements ANZ Vanuatu used at various times, which contained terms that would allow disclosure of the account information of any customer who was a party to the agreements to regulatory and taxation agencies outside of Vanuatu. As I have said, the two experts were taken to the terms and conditions in cross-examination, and both agreed that those terms might affect the non-statutory obligation of confidentiality. Having looked at the terms and conditions I agree.
115 However, ANZ submitted that the respondents had to establish that there was consent "across the board" in relation to all of the information stored in the GIW that is sought in the notices. The respondents argued that ANZ must establish that the disclosure of the information would amount to a breach of non-statutory obligations of confidence. Unsurprisingly, both ANZ and the respondents submitted that the other had failed to discharge their evidentiary onus.
116 I accept the respondents' argument that ANZ must establish the particular pieces of information sought in the notices that are subject to the non-statutory obligation of confidence and those that are not. It was up to ANZ to establish that there was a non-statutory obligation of confidence. The claim must identify the information subject to that obligation. Subject to what I have said about the scope of s 264, I am prepared to accept that there was such an obligation. But only ANZ can know, through ANZ Vanuatu, which customers have signed contacts that permit the disclosure of information to law enforcement and regulatory agencies outside of Vanuatu and which customers have not.
117 Dr Corrin and Mr Ellum were also asked whether there were any relevant statutory obligations of confidentiality in Vanuatu. They were provided with the International Companies Act and the Trust Companies Act, and in particular were referred to s 125 of the International Companies Act and s 9 of the Trust Companies Act.
118 It was an agreed fact that at all relevant times s 125 of the International Companies Act provided:
125 Secrecy
(1) Any person who, except when required by a court of competent jurisdiction, with respect to any company otherwise than for the purposes of the administration of this Act or for the carrying on of the business of the company in Vanuatu or elsewhere, divulges, attempts, offers or threatens to divulge or induces or attempts to induce other persons to divulge any information concerning or respecting:
(a) the shareholding in, or beneficial ownership of any share or shares in a company;
(b) the management of such company; or
(c) any of the business, financial or other affairs or transactions of the company;
shall be guilty of an offence.
(2) Any person who contravenes the provisions of subsection (1) shall, on conviction, be liable to a fine not exceeding $100,000 or to imprisonment for a term not exceeding 5 years or to both such fine and imprisonment.
119 Likewise, it was an agreed fact that at all material times s 9 of the Trust Companies Act provided:
9 Preservation of secrecy
(1) Except when lawfully required to do so by any court of competent jurisdiction within Vanuatu or under the provisions of any law in force in Vanuatu or, in the case of any public officer, for the purpose of the performance of his duties or the exercise of his functions under this Act, no person shall, unless specifically so authorised by the trust company concerned, disclose to any other person any information entrusted to him in confidence, or acquired by him, in his capacity or in the course of his duties as public officer, employee, agent, liquidator, receiver or in a professional or similar fiduciary relationship, respecting the affairs of any trust company whatsoever, whether while employed or acting in such capacity or after he has ceased to be employed or to act in such capacity or relationship. For the avoidance of doubt, the provisions of this section shall have effect with respect to any such information entrusted to or acquired by any person respecting the affairs of any trust company whether such information was entrusted to or acquired by him before or after the commencement of this subsection.
(2) Every person who contravenes the provisions of subsection (1) shall be guilty of an offence and liable on conviction to a fine not exceeding VT100,000 or to imprisonment for a term not exceeding 6 months, or to both such fine and imprisonment.
120 Mr Ellum and Dr Corrin were asked to consider the operation of s 9 and s 125. Specifically, insofar as the customers of ANZ Vanuatu comprise trust companies or international companies, they were asked to consider whether the disclosure or divulging of customer identities or account information would contravene either of these provisions.
121 Mr Ellum said that both s 125 and s 9 would be contravened if some element of the offence took place in Vanuatu. He referred to s 2(a) of the Penal Code [Cap 135] (Vanuatu) (Penal Code), which states:
2. Offences partly or wholly abroad
The criminal law of the Republic [of Vanuatu] shall apply -
(a) to any offence of which an element has taken place within the territory of the Republic [of Vanuatu];
…
Provided that no alien may be tried for an offence against the criminal law of the Republic [of Vanuatu] solely by virtue of this section unless he has been arrested within the territory of the Republic [of Vanuatu] or has been extradited to it.
122 Mr Ellum's evidence was not easy to follow, but he appeared to express the opinion in cross-examination that if ANZ disclosed the information sought in the two notices to the respondents it would thereby be contravening s 9 and s 125. His opinion appeared to be based on the following reasoning. Section 2(a) of the Penal Code means that an element of the offences contained in s 9 and s 125 has to occur in Vanuatu. The obtaining of the information mentioned in s 125(1)(a), (b) and (c) by ANZ is an element of the offence contained in s 125, just as the entrusting of information in circumstances of confidence is an element of the offence in s 9. The information in question was obtained by and entrusted to ANZ in Vanuatu. Therefore, s 125 and s 9 would operate if there was any disclosure by ANZ in Australia.
123 I reject that reasoning. The obtaining of the information by ANZ is not an element of the offence in either s 125 or s 9. With respect, I am not sure that Mr Ellum understood the elements of the offences in s 125 and s 9. He referred to the obtaining of the information as part of "the chain of causation", although at one point conceded that ANZ might be able to raise as a defence to any prosecution for disclosure of the information in Australia the fact that no element of the offence took place in Vanuatu. When Mr Hanks put to him that in order for a prosecution to be successful under s 125 the prosecution would have to establish two things, namely that the information had been divulged and that the information fell within the terms of the section, he conceded that neither of those things would occur in Vanuatu if ANZ were to disclose the information held in the GIW to the respondents. He made the same concession when Mr Hanks put to him that the three elements of the offence in s 9 were the disclosure of information; respecting the affairs of a trust company; and that the information was entrusted in confidence.
124 Dr Corrin took a different approach. She started with the proposition that there is a presumption against the extra-territorial operation of legislation in Vanuatu, and that therefore s 125 and s 9 will only attach penal consequences to disclosures outside of Vanuatu if the presumption against extra-territorial operation is displaced. In her opinion there is no express provision in Vanuatu that renders either enactment operative in relation to disclosures of information outside of Vanuatu. According to Dr Corrin, the question then is whether the terms of s 125 and s 9 displace the presumption against extra-territorial operation.
125 In Dr Corrin's opinion s 9 does not displace the presumption against extra-territorial operation, and so ANZ is not subject to that provision when it acts outside Vanuatu. However, she expressed the view that s 125 probably does apply extra-territorially. She reached this view for three main reasons. First, because the International Companies Act is a remedial piece of legislation and should be given a "fair and liberal construction and interpretation." Secondly, because "[t]he whole tenor of the Act is 'international' in the sense that it governs companies which carry on business outside Vanuatu." Thirdly, because s 125 states that the section does not apply where a disclosure takes place "for the carrying on of the business of the company in Vanuatu or elsewhere", which "strongly suggests that the duty [of confidentiality] is of extra-territorial effect."
126 She did not refer to s 2(a) of the Penal Code, and she was not taken to it during cross-examination. Therefore, she did not offer any opinion as to the effect of s 2(a) or whether that section required an element of an offence against s 125 to take place in Vanuatu.
127 Both Mr Ellum and Dr Corrin accepted that s 125 and s 9 contain exceptions that could be raised by ANZ as a defence to any prosecution, including, in relation to s 9, that the trust company consented to the disclosure.
128 Once again, I not sure that the evidence given by Mr Ellum and Dr Corrin in relation to the operation of s 125 and s 9 was expert evidence. Once it is established that s 125 and s 9 apply in Vanuatu I think that I am in a position to determine whether those sections apply to the information held by ANZ. In my view they do not. I agree with Dr Corrin that s 9 of the Trust Companies Act does not displace the presumption against extra-territorial operation. I also agree that the exception in s 125 suggests that the section is intended to apply extra-territorially. However, I think that s 2(a) of the Penal Code means that an element of the offences in ss 9 and 125 has to take place in Vanuatu. The information will be furnished in Australia, not Vanuatu, and, as I have said, the obtaining of the information by ANZ is not an element of either offence. In these circumstances none of the elements of the offences will occur in Vanuatu. In these circumstances compliance by ANZ with the notices will not mean that ANZ or any of its employees will have committed an offence against s 9 or s 125.
129 Ultimately, none of this really matters as I have found that s 264 overrides any obligation of confidence ANZ may owe to ANZ Vanuatu or ANZ Vanuatu's customers, and ANZ and its employees are subject to the law in Australia. It and its employees are required to comply with the law in Australia, and ANZ would not be acting unlawfully or in breach of any duty it owes to its employees by directing its employees to access the information in the GIW and provide it to the respondents. Section 264 authorises the issuing of notices to an Australian company that seek production of information that is stored in Australia. Accordingly, the notices are valid irrespective of whether the disclosure of the information sought in the notices by ANZ would involve a contravention of the law of Vanuatu, or would be contrary to any of the fundamental rights identified by ANZ.