B.C.I Finances Pty Limited (in liq) v Commissioner of Taxation - [2015] FCA 679 - FCA 2015 case summary — Zoe

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B.C.I Finances Pty Limited (in liq) v Commissioner of Taxation

[2015] FCA 679

Federal Court of Australia|2015-07-07|Before: Mr JA, Jagot J

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Source facts

Court

Federal Court of Australia

Decision date

2015-07-07

Before

Mr JA, Jagot J

Source

Original judgment source is linked above.

Judgment (35 paragraphs)

[1]

The interlocutory application filed by Andrew Binetter and dated 24 April 2015 (the Binetter application) be dismissed.
Andrew Binetter pay the costs of the Commissioner of Taxation and of John Sheahan and Ian Russell Lock as liquidators of BCI Finances Pty Ltd (in liq) in connection with the Binetter application, as agreed or taxed.
The Commissioner of Taxation be released from the implied obligation not to make use of documents filed in these proceedings for purposes other than those of the proceedings, so far as is necessary to enable the Commissioner of Taxation (the Commissioner) to use the documents identified in Schedules A and B as attached to the interlocutory application filed by the Commissioner and dated 3 June 2015 for the following purposes: (a) The administration of the Income Tax Assessment Act 1936 (Cth), the Income Tax Assessment Act 1997 (Cth) and the Taxation Administration Act 1953 (Cth) as they apply to Andrew Binetter, Michael Binetter, Margaret Binetter, the estate of the late Erwin Binetter, the estate of the late Emil Binetter, Gary Binetter and their related persons and entities: (i) in respect of any of the years of income ended 30 June 1993 to 30 June 2015; and (ii) the determination of any objections to assessments of tax, penalties or interest issued to or referable to those persons or entities in respect of any of those income years and any appeals or review thereon. (b) For provision to a Law Enforcement Agency as defined in section 355-70(4) of Schedule 1 of the Taxation Administration Act 1953 (Cth) and for use by the Law Enforcement Agency for purposes that relate to any of the functions of the Law Enforcement Agency.
The Commissioner of Taxation be released from the implied obligation not to make use of documents filed in these proceedings for purposes other than those of the proceedings, so far as is necessary to enable the Commissioner of Taxation to use the documents identified in the attached Schedule A in the proceedings of Commissioner of Taxation of the Commonwealth of Australia v Rawson Finances Pty Ltd NSD 1329 of 2014 in the Federal Court of Australia.

[3]

Background and issues 1 The remaining issues in this matter concern the use of documents obtained by the respondent, the Commissioner of Taxation (the Commissioner) and the applicant (BCI Finances Pty Ltd (in liq)) (BCI), as well as the liquidators of BCI, John Sheahan and Ian Lock (the liquidators), through the course of the proceeding. 2 The proceeding was commenced in 2011. The applicant, BCI (then not in liquidation and under the control of its directors), appealed against various decisions by the Commissioner rejecting objections to assessments of tax payable by BCI and related penalties. 3 On 9 August 2012, I made orders as follows consequential on reasons for judgment published the same day (BCI Finances Pty Limited v Commissioner of Taxation [2012] FCA 855), which I refer to below as the letter of request (LOR) judgment: 1. A letter of request be sent to the judicial authorities of Israel to take or cause to be taken the evidence of Mr Ilan Mazur. A draft of the proposed letter of request is annexed to these orders and marked 'Annexure A'. 2. The applicant provide to the Court a document signed on or behalf of the applicant in the form of the document in Schedule A in aid of and for transmission with the letter of request. 4 The draft letter of request (and its attachments) is annexed to these reasons for judgment. 5 In the LOR judgment I explained that: [2] The application seeks to engage the provisions of s 7 of the Foreign Evidence Act 1994 (Cth), which provides that: (1) In any proceeding before a superior court, the court may, if it appears in the interests of justice to do so, on the application of a party to the proceeding, make an order, relating to a person outside Australia: (a) for examination of the person on oath or affirmation at any place outside Australia before a judge of the court, an officer of the court or such other person as the court may appoint; or (b) for issue of a commission for examination of the person on oath or affirmation at any place outside Australia; or (c) for issue of a letter of request to the judicial authorities of a foreign country to take the evidence of the person or cause it to be taken. (2) In deciding whether it is in the interests of justice to make such an order, the matters to which the court is to have regard include the following: (a) whether the person is willing or able to come to Australia to give evidence in the proceeding; (b) whether the person will be able to give evidence material to any issue to be tried in the proceeding; (c) whether, having regard to the interests of the parties to the proceeding, justice will be better served by granting or refusing the order. [3] As stated in s 7(1)(c) of the Foreign Evidence Act, the Court may, if it appears in the interests of justice to do so, on an application by a person who is a party to the proceeding, make an order relating to a person outside Australia for issue of a letter of request to the judicial authorities of a foreign country to take the evidence of the person, or cause it to be taken. Section 7(2) sets out the matters to which the Court must have regard in determining whether it is in the interests of justice for such an order to be made. I note, however, that s 7(2) is expressed inclusively and therefore does not provide an exhaustive list of the relevant considerations. [4] Division 29.2 of Part 29 of the Federal Court Rules 2011 is also relevant, in particular rules 29.11 and 29.12 which set out procedural and related requirements for the making of such an application and the consequences of the making of such an application. In the present case there is no dispute that the application, at least in terms of form, meets those procedural requirements. It is accompanied by a draft of the proposed letter of request as Annexure A. Annexure A sets out as required the nature and purpose of the proceeding and summary of facts, the evidence to be obtained or other judicial act to be performed, the questions to be put to the person to be examined or statement of the subject matter about which they are to be examined and the proposed letter of authority from the applicant. 6 I also noted the following at [6] of the LOR judgment: The essential issue in dispute between the parties is the status of the arrangements between the applicant [BCI Finances] and Bank Hapoalim. It is the Commissioner's position that the available evidence is insufficient to support the existence of these arrangements as loans and that the genuineness of the arrangements is in question. The Commissioner contends that there are numerous indicia which indicate that the arrangements should not be accepted as genuine arrangements. Accordingly, it was put by senior counsel for the Commissioner in support of the application that it must be recognised that the provenance, integrity and adequacy of the documents evidencing the loans and other arrangements between the applicant and Bank Hapoalim are themselves the critical issue in the proceeding. As such, it was pointed out for the Commissioner that the current application is somewhat unusual in that the Commissioner is seeking to obtain evidence from Bank Hapoalim which if in fact obtained would support the applicant's case rather than the Commissioner's case. Nevertheless, the applicant opposes the making of the order sought. 7 I reached the following conclusions: [19] It seems to me that there are a number of important factors to the resolution of the issues in dispute between the parties in respect of this application. In terms of s 7(2)(a) of the Foreign Evidence Act, which requires me to have regard to "whether the person is willing or able to come to Australia to give evidence in the proceeding", I infer from the whole of the evidence before me, in particular the course of conduct of the bank with the applicant itself, that there is no real prospect that Mr Mazur would be willing or able to come to Australia to give evidence in the proceeding. Even when dealing with the applicant, the other party to the loan and the account holder, the bank insisted upon, as no doubt it was entitled to do, proper authority before it would communicate or engage in communication with persons said to be acting on behalf of the applicant. In these circumstances, s 7(2)(a) of the Foreign Evidence Act is satisfied. [20] Section 7(2)(b) refers to the question of "whether the person will be able to give evidence material to any issue to be tried in the proceeding". As I have emphasised, I accept that a central issue in this proceeding is the provenance, integrity and adequacy of documents evidencing the loans and other arrangements between Bank Hapoalim and the applicant. I have no doubt that an officer of the bank could give evidence relevant to the proceeding in terms of what has been described by the Commissioner as evidence of the bank's systems in relation to its administration of its credit arrangements, its processes for requiring and maintaining documents, and its processes and systems for ensuring the provenance and authenticity of documents. In this case, given that the provenance and authenticity of documents already produced by the applicants is in issue, that relevant evidence could also be given by Mr Mazur as to those issues. Accordingly, I also have no doubt that s 7(2)(b) of the Foreign Evidence Act is satisfied. [21] Section 7(2)(c) requires me to have regard to "whether, having regard to the interests of the parties to the proceeding, justice will be better served by granting or refusing the order". On the evidence that has been adduced before me, and in the circumstances of the proceeding as referred to above, I have no doubt that it is in the interests of the parties to the proceeding that the order be made and that justice will be better served by the granting of the order. This is the applicant's appeal seeking to set aside the Commissioner's disallowance of objections on the basis that the taxation amount in the assessments is excessive. The basis upon which the applicant seeks to do so essentially is the existence of loans and other credit arrangements between it and Bank Hapoalim. Despite numerous attempts to obtain relevant documents so as to demonstrate the genuineness of those loans the documents which have been produced thus far by the applicant, not unreasonably from the Commissioner's point of view, raise more questions than they answer. In these circumstances, for Bank Hapoalim to be required to give evidence in accordance with the interlocutory application would be in the interests of both parties and would serve justice, because it would ensure that the parties and indeed the Court will be determining the appeal on the basis of a proper evidentiary foundation and not an incomplete or dubious evidentiary foundation, as the Commissioner currently asserts is the case. 8 On 5 March 2014 administrators were appointed to BCI. 9 On 10 March 2014 I made orders by consent dismissing the proceeding. 10 On 23 April 2014 the liquidators were appointed to BCI. 11 By 28 April 2014 the Commissioner's position was that the costs of the proceeding should be paid on an indemnity basis by BCI and its directors, Andrew Binetter, Gary Binetter and Margaret Binetter. 12 On 22 May 2014, by consent, I ordered that Andrew Binetter, Gary Binetter and Margaret Binetter, BCI's former directors (the directors), be joined as parties to the proceeding and that each pay the Commissioner's costs of the proceeding on a full indemnity basis. I also granted leave to permit the Commissioner's claim against BCI for indemnity costs to be prosecuted despite BCI having been placed in liquidation. 13 The proceeding was then adjourned on a number of occasions throughout 2014 and 2015 at the request of the liquidators and with the consent of the Commissioner but over the objections of the directors. The LOR remained on foot. Ultimately, there being no objection by BCI and its liquidators, I ordered on 12 May 2015 that BCI pay the Commissioner's costs on an indemnity basis up to and including 23 April 2014.

[4]

The interlocutory applications 14 Three interlocutory applications remain for determination. 15 By an interlocutory application dated 24 April 2015 Andrew Binetter seeks orders as follows: 1. An order, pursuant to section 16 of the Foreign Evidence Act, alternatively under the inherent and implied powers of this Court, that order 1 made by the Court on 9 August 2012 be and is hereby revoked. 2. A direction that all parties to this application do all things necessary and sign all documents necessary to inform the judicial authorities of Israel that the purpose for the issuing of the Letter of Request is spent and that the proceedings, the subject of the Letter of Request, were dismissed by this Court on 10 March 2014. 3. A direction that a Registrar of this Court take all necessary steps to inform the judicial authorities of Israel that the purpose for the issuing of the Letter of Request is spent and that the proceedings, the subject of the Letter of Request, were dismissed by this Court on 10 March 2014. 4. A direction, pursuant to section 25 of the Foreign Evidence Act, alternatively under the inherent and implied powers of this Court, that no Foreign Material be adduced as evidence in this proceeding. 5. An order that, in respect of all hard copies of any Foreign Material,: (a) Such hard copies be delivered up to the Court and be kept in a sealed envelope marked "Not to be opened without an order of the Court"; and that (b) Each of the Respondents file and serve an affidavit identifying, as at the date of this order, the location of all hard copies of the Foreign Material and confirming that all copies have been collected and delivered up to the Court pursuant to this Order. 6. An order that, in respect of all electronic copies of the Foreign Material,: (a) The electronic copies be permanently deleted; and that (b) Each of the Respondents to this application file and serve an affidavit identifying the device and location of the device upon which such electronic copies was stored and the steps taken by them to delete such electronic copies permanently. 7. An order restraining the Respondents to this application, their servants and agents from using any information obtained from the Foreign Material for any purpose. 8. An order joining John Sheahan and Ian Lock in their capacities as the liquidators of BICI Finance Pty Limited (in liq) as respondents to these proceedings. 9. An order that the Respondents pay the Applicant's costs of this application. 10. Such further or other orders as the Court deems fit. In the orders sought, the following definitions apply: Foreign Evidence Act means the Foreign Evidence Act 1994 (Cth); Foreign Material means any document within the definition of "document" in the Dictionary referred to in s 3 of the Evidence Act 1995 (Cth) which was provided in response to or obtained as a result of the Letter of Request, by any person, whether in Israel or elsewhere and any copy, translation or summary of such document; Letter of Request means the letter of request issued by the Court pursuant to the orders of the Court made on 9 August 2012 in these proceedings; Respondents means the Commissioner of Taxation, BCI Finance Pty Ltd (in liq), and John Sheahan and Ian Lock as liquidators of BCI Finances Pty Ltd (in liq). 16 By an interlocutory application dated 3 June 2015 the Commissioner seeks the following orders: 1. The Commissioner of Taxation be released from the implied obligation not to make use of documents filed in these proceedings for purposes other than those of the proceedings, so far as is necessary to enable the Commissioner of Taxation to use the documents identified in the attached Schedules A and B for the following purposes: a. The administration of the Income Tax Assessment Act 1936 (Cth), the Income Tax Assessment Act 1997 (Cth) and the Taxation Administration Act 1953 (Cth) as they apply to Andrew Binetter, Michael Binetter, Margaret Binetter, the estate of the late Erwin Binetter, the estate of the late Emil Binetter, Gary Binetter and their related persons and entities; i. in respect of any of the years of income ended 30 June 1993 to 30 June 2015; and ii. the determination of any objections to assessments of tax, penalties or interest issued to or referable to those persons or entities in respect of any of those income years and any appeals or review thereon. b. For provision to a Law Enforcement Agency as defined in section 355-70(4) of Schedule 1 of the Taxation Administration Act 1953 (Cth) and for use by the Law Enforcement Agency for purposes that relate to any of the functions of the Law Enforcement Agency. 2. The Commissioner of Taxation be released from the implied obligation not to make use of documents filed in these proceedings for purposes other than those of the proceedings, so far as is necessary to enable the Commissioner of Taxation to use the documents identified in the attached Schedule A in the proceedings of Commissioner of Taxation of the Commonwealth of Australia v Rawson Finances Pty Ltd NSD 1329/2014 in the Federal Court of Australia. 17 Schedule A consists of documents obtained by the Commissioner in the proceeding pursuant to the LOR. 18 Schedule B consists of documents obtained by the Commissioner in the proceeding, being documents filed on behalf of BCI or the directors or otherwise produced under subpoena by them or their lawyers separate from the LOR. 19 Commissioner of Taxation of the Commonwealth of Australia v Rawson Finances Pty Ltd NSD 1329 of 2014 is a matter in this Court in which the Commissioner seeks: 1. an order that the orders made by the Full Court of the Federal Court in matter No. NSD 1067 of 2012 be set aside; 2. further or alternatively, an order that the orders made by the Full Court of the Federal Court in matter No. NSD 1067 of 2012 and the Federal Court in matter No. NSD 1711 of 2011 be set aside and the decision of the AAT be quashed; 3. an order that the respondent pay the costs of these proceedings and of the proceedings in the Federal Court in matter No. NSD 1711 of 2011 and the Full Federal Court in matter No. NSD 1067 of 2012 on the indemnity basis. 20 Proceedings NSD 1711 of 2011 and NSD 1067 of 2012 involved an appeal from the Administrative Appeals Tribunal (the Tribunal) (see Commissioner of Taxation v Rawson Finances Pty Ltd [2012] FCA 753 and Rawson Finances Pty Ltd v Commissioner of Taxation [2013] FCAFC 26) which had allowed objections by Rawson Finances Pty Ltd (Rawson Finances) against objection decisions by the Commissioner. The appeal against the Tribunal's decision was dismissed by the Full Court. 21 By an interlocutory application dated 2 June 2015 the liquidators seek the following order: That John Sheahan and Ian Russell Lock, as the joint and several liquidators of the applicant ('BCI Finances') be given leave to use each and all of the documents described in the schedule to this interlocutory application for the purposes of the winding up of BCI Finances, including in the proceedings instituted by BCI Finances in this Court in proceedings no. SAD 5 of 2015. 22 The schedule to the liquidators' interlocutory application consists of documents obtained by the liquidators in this proceeding as a result of the LOR. 23 Proceedings SAD 5 of 2015, commenced in January 2015, involve claims by the liquidators against the directors and other persons and entities, amongst other things, for breaches of their duties as directors. The amended statement of claim in that proceeding pleads that the directors and others, in effect, established a scheme involving the establishment of companies (including BCI), referred to as the "Binetter Entities", the purpose of which was to conceal offshore funds and offshore income from the Commissioner, enable those companies to claim deductible expenses in connection with the use of the offshore funds, and to evade or avoid taxation liabilities to the Commissioner. 24 Margaret Binetter made no submissions about the interlocutory applications. Gary Binetter adopted the submissions of Andrew Binetter on his interlocutory application and made no submissions about the interlocutory applications of the Commissioner and liquidators.

[6]

Foreign Evidence Act issue 26 The first issue is whether, as Andrew Binetter contends, the applications by the Commissioner and liquidators to use the documents obtained through the LOR process are precluded by the provisions of the Foreign Evidence Act 1994 (Cth) (the Foreign Evidence Act). 27 The argument is that the Foreign Evidence Act constitutes an exhaustive code under which evidence obtained in accordance with the procedures of that Act may be used in proceedings. By that code, the Foreign Evidence Act permits the use of the documents, as prescribed, for the purpose of this and no other proceeding or purpose. 28 Reliance is placed on a number of provisions of the Foreign Evidence Act. 29 First, s 7(1) relates to "any proceeding before a superior court". In the present case, relevantly, the LOR was issued in accordance with s 7(1)(c), the relevant provision stating: (1) In any proceeding before a superior court, the court may, if it appears in the interests of justice to do so, on the application of a party to the proceeding, make an order, relating to a person outside Australia: … (c) for issue of a letter of request to the judicial authorities of a foreign country to take the evidence of the person or cause it to be taken. 30 Second, if action is taken in accordance with s 7(1) then s 9 provides that: (1) Subject to subsection (2), the court may, on such terms (if any) as it thinks fit, permit a party to the proceeding to tender as evidence in the proceeding: (a) a person's evidence taken in an examination held as a result of an order under subsection 7(1); or (b) a record of that evidence. (2) Evidence of a person so tendered is not admissible if: (a) it appears to the court's satisfaction at the hearing of the proceeding that the person is in Australia and is able to attend the hearing; or (b) the evidence would not have been admissible had it been adduced at the hearing. 31 Section 9, it was submitted for Andrew Binetter, is an exhaustive statement of the circumstances in which such evidence may be used. 32 Third, it was submitted, ss 13 and 14, as well as s 15, confirm this construction. Those sections regulate the use of such evidence in other proceedings. Hence, if a superior court has made an order in response to an application by a party to a proceeding before an inferior court which is a committal proceeding (s 10) then s 13 permits the evidence obtained to be used in any subsequent criminal proceeding that results from the committal proceeding or a related civil proceeding. Section 14 permits evidence to be used in proceedings to which a direction included in an order under ss 7(1) or 10(1) relates. Section 15 provides that: (1) This section applies to any civil proceeding or criminal proceeding in a superior court, the Federal Circuit Court of Australia or an inferior court. (2) If it is in the interests of justice to do so, a court may exclude from the proceeding evidence obtained under this Part, even if it is otherwise admissible. (3) This Part does not affect a court's power under any other law to exclude, or limit the use of, evidence: (a) because it has been obtained unlawfully or improperly; or (b) because it would, if admitted, operate unfairly or be unfairly prejudicial to a party; or (c) for any other reason. 33 According to the submissions for Andrew Binetter, ss 13 to 15 would be unnecessary if a court had an inherent power to release a party from the implied obligation not to use documents other than for the purpose of the proceeding in which the documents were obtained (unless adduced into evidence). Sections 13 and 14 relate to limited classes of proceedings. Section 15 concerns the exclusion, not the admission, of evidence. If not construed as a code, ss 9, 13 and 14 become redundant. The use of evidence obtained in accordance with the procedure established by the Foreign Evidence Act would be subject only to the discretion of the court. 34 As the submissions for Andrew Binetter put it: 22. …this Court has no jurisdiction to permit the use of the material for purposes other than these proceedings. As noted above, the Act governs how "evidence" taken pursuant to an order made under section 7(1) of the Act can be used. Beyond the specific uses identified and permitted by the Act, the Act does not contemplate, or give this Court the power to permit, its use for any other purpose. The intention of the legislature was clearly to limit the use of evidence taken pursuant to a letter of request to the proceedings in which the request was issued, and a limited category of related proceedings (which, critically, must be identified and included in the order issuing the letter of request). There are good reasons why, when invoking the assistance and judicial resources of another state, the purposes for which the process can be used is tightly controlled. It may be that certain jurisdictions may not accede to the request if the material generated by it may be used for purposes not contemplated by the terms of the LOR. It is for that reason that the Act requires that a direction for its use in the limited categories of other proceedings identified by the Act is to be included in the order pursuant to which the LOR is issued. 23. Accordingly, the Act prescribes the manner in which the letter of request procedure operates. It does not contemplate, nor authorise, the approach now sought to be advanced by the Liquidators and Commissioner. In those circumstances, this Court does not have power to permit the use of the "evidence" taken as a consequence of the LOR for the purposes identified by the Commissioner or the Liquidators, and the Liquidators' and Commissioner's applications must fail. 35 The implied obligation (referred to also as the Harman undertaking, Harman v Secretary of State for the Home Department [1983] 1 AC 280) is that described in Hearne v Street [2008] HCA 36; (2008) 235 CLR 125 at [96] as follows: Where one party to litigation is compelled, either by reason of a rule of court, or by reason of a specific order of the court, or otherwise, to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use it for any purpose other than that for which it was given unless it is received into evidence. The types of material disclosed to which this principle applies include documents inspected after discovery, answers to interrogatories, documents produced on subpoena, documents produced for the purposes of taxation of costs, documents produced pursuant to a direction from an arbitrator, documents seized pursuant to an Anton Piller order, witness statements served pursuant to a judicial direction and affidavits. 36 The case on which the Commissioner and liquidators relied, Dendron GmbH v Regents of the University of California [2004] EWHC 589; [2005] 1 WLR 200 (Dendron), it was submitted for Andrew Binetter, did not assist them. The observations of Laddie J at [24] and [38] to the effect that permission of the author of the document or of "the requesting court" was required before documents obtained pursuant to a letter of request could be used for purposes other than the proceeding in which the letter of request was issued were made without the benefit of argument, the parties having accepted (wrongly) that such permission could be granted (see the record of the agreement at [35]). 37 I do not accept these submissions for Andrew Binetter. 38 I consider that the Foreign Evidence Act regulates the matters which are expressly dealt with in that Act but says nothing about the discretion a court has to permit documents obtained as a result of a proceeding before that court to be used for a purpose other than the proceeding. Consistent with this construction, s 9 regulates the tendering of the evidence in the proceeding in which the order was made or letter of request issued. Section 12 is an equivalent provision for orders made under ss 9A, 10 or 11. Section 13 relates to use after committal proceedings. Section 14 relates to other proceedings the subject of a direction in an order under ss 7(1) or 10(1) (presumably, proceedings contemplated at the time such orders were made). In all of these cases, the Foreign Evidence Act provides that use may be made of the evidence. In any such case, accordingly, no consideration need be given to the implied obligation, but that is as far as the provisions go. 39 Section 15 weighs against construing the Foreign Evidence Act as an exhaustive code. This is because it applies to "any civil proceeding or criminal proceeding in a superior court, the Federal Circuit Court of Australia or an inferior court". Section 15 contemplates that evidence obtained under the Act may be admissible in such proceedings and provides an additional basis upon which such evidence may be excluded. 40 Further, the provisions of the Foreign Evidence Act operate against the background of the common law. The implied obligation is part of the common law. Section 15 must be construed as contemplating that, irrespective of the regulatory provisions in ss 9, 12, 13 and 14, evidence obtained by reason of the Act might be admissible in other proceedings if the court to which the implied obligation is owed has permitted such use but might be excluded if it is in the interests of justice to do so. In our system of law such evidence would only be admissible if leave had been granted to release a party to the implied obligation so they could make use of the evidence in the other proceeding. In other words, far from excluding the potential operation of the implied obligation, s 15 of the Foreign Evidence Act would appear to implicitly recognise the existence of that obligation and the inherent power of a court to relieve a party from the burden of that obligation.

[7]

The relevant court or courts? 41 It was submitted for Andrew Binetter that this Court was not the relevant body to grant leave to the Commissioner and the liquidators to use the material obtained pursuant to the LOR for purposes other than this proceeding. Given that the implied obligation is a corollary of the fact that the material is obtained under compulsion it is the court which has exercised its compulsory processes which is relevant, in this case, the Israeli Court. The implied obligation, it was argued, was owed to the Israeli Court. That this is so is evident from art 10 of the Convention on the Taking of Evidence Abroad in Civil or Commercial Matters (the Convention) which provides that in executing a letter of request the requested authority shall apply its own measures of compulsion as appropriate to the matter. In the alternative, it was submitted, the position of the Israeli Court is relevant to any exercise of discretion by this Court, it being appropriate to assume that the position of the Israeli Court on the use of the documents (that is, they could not be used without leave) would be the same as this Court (applying Damberg v Damberg [2001] NSWCA 87; (2001) 52 NSWLR 492 at [144] - [147] (Damberg v Damberg)). As the position of the Israeli Court is unknown, the grant of leave by this Court would be futile. 42 I do not accept these submissions. 43 Leaving aside the fact that it did not occur to Laddie J or those appearing in Dendron that the relevant discretion was vested in other than the requesting court alone (it thus being effectively assumed that the implied obligation was owed to the requesting and not the executing court), I consider that the submission is inconsistent with the operation of the Foreign Evidence Act. This Court alone determined to issue the LOR. Once issued, it was a matter for the Israeli Court, as the requested authority, to execute the LOR. But the Israeli Court executed the LOR in furtherance only of and for the purposes of the proceeding in this Court. While it was the Israeli Court that brought to bear its powers of compulsion as contemplated by art 10, it did not do so for any purpose of its own. It did so solely for executing the LOR, an execution which was in aid of the processes of this Court alone, not the Israeli Court. The material obtained under the LOR was for the purpose of use by the parties in the proceeding in this Court. As such, it was this Court which caused compulsory processes to be brought to bear and the implied obligation on the parties which arose was owed to this Court. Moreover, it is the parties to the proceedings in this Court, the Commissioner and the liquidators, who now seek to be released from the implied obligation. 44 Accordingly, where documents have been obtained through a letter of request process under the Foreign Evidence Act, I am satisfied that the relevant court for determining whether or not a party to a proceeding should be released from the implied obligation not to use documents so obtained for any purpose other than that of the proceeding is the court that issued the letter of request. It is to this court that the implied obligation is owed. 45 I consider these conclusions consistent with the observations of Flick J in Commissioner of Taxation v Rawson Finances Pty Ltd [2015] FCA 628 at [7] that: Such an application is to be made in the proceeding in which the undertaking was impliedly given: Holpitt Pty Ltd v Varimu Pty Limited [[1991] FCA 269;] (1991) 29 FCR 576 at 577 per Burchett J. The forum in which the undertaking was given, it is accepted, is "the most appropriate place in which to make such an application" and that forum is "in the best possible position to determine such an application": Transfield Philippines Inc v Pacific Hydro Ltd [2006] VSC 175 at [133] to [134] per Hollingworth J. 46 I also do not accept that the court which executed a letter of request is relevant to the exercise of determining whether or not a party should be released from the implied obligation. The court which executed the LOR in the present case, the Israeli Court, did so solely in aid of the processes of this Court. But for the litigation in this Court, the Israeli Court would have had no reason to undertake any judicial process. It would be a time wasting and futile exercise to ask the Israeli Court to consider a leave application in respect of the use of documents which it enabled to be obtained solely for the purpose of the the resolution of litigation in this Court. 47 There is also an inconsistency in the submissions for Andrew Binetter about this issue. On the one hand, the Israeli Court is said to be the relevant court or at least relevant for any leave application, but on the other hand it is said that in accordance with Damberg v Damberg it is it should be assumed that the Israeli Court would apply Australian law to the question of leave (an assumption consistent with the recognition of the implied obligation by the Supreme Court of Israel in Yosef Muskona v Gideon Maor, No's 632/77 and 662/77, dated 2 May 1978). If this is so, there is no reason for this Court not to determine the question of leave without reference to the Israeli Court; there is no reason to infer other than that the Israeli Court would reach the same conclusions as this Court.

[8]

LOR miscarried 48 The next argument for Andrew Binetter is that the applications for the Commissioner and the liquidators should be denied because the LOR miscarried. In short, the LOR related to the examination of one person, Ilan Mazur. Documents produced were in aid of or ancillary to that proposed examination (see the LOR judgment at [22]). A letter of request cannot be issued for the mere production of documents (Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd (1987) 14 FCR 461 at 465). However, Mr Mazur was not examined. Instead, Baruch Etzion and Emilia Mandel were examined, as the submissions put it, purportedly pursuant to the LOR. Mr Etzion and Ms Mandel were not the subject of the Commissioner's application for the issue of the LOR, the LOR judgment, or the orders made consequential on that judgment. The documents obtained, accordingly, were not obtained in the execution of the LOR. They were irregularly obtained. 49 These points were made on behalf of Andrew Binetter: a. By examining persons other than Mr Mazur pursuant to the LOR that was issued, the requirements of the Act have been by-passed. There is no power in the Act for a party that seeks a LOR to unilaterally alter its terms once it has been issued. That power is vested in the issuing Court: see section 16(1) of the Act. No application for a variation of the LOR was made. Further, it does not appear that this Court was ever informed of the significant departure from the terms of the LOR that was occurring in the Israeli Proceedings. b. By altering the identity of the persons to be examined pursuant to the LOR, there has been no examination of mandatory considerations contained in section 7(2) of the Act in relation to either Mr Etzion or Ms Mandel. Without an assessment as to those matters, a letter of request for their evidence to be taken could not be properly issued. It is particularly noteworthy in the circumstances of this case that Mr Etzion was a witness in what has been described as the "Rawson Proceedings". By proceedings filed on 15 December 2014, the Commissioner seeks to set aside the judgment obtained in the Rawson Proceedings on a number of bases, including that the evidence by Mr Etzion was "false or materially misleading". The Commissioner now seeks to use material obtained in response to the LOR in relation to those proceedings. c. Further, the production of documents was sought by the LOR in relation to the examination of Mr Mazur. There has been no assessment by this Court as to whether production of the documents set out in the LOR was properly "in aid or and ancillary to" the examinations of either or both of Mr Etzion or Ms Mandel. That is particularly significant given that there is no power for the Court to issue a letter of request merely for the production of documents: Elna (supra) at 465. By failing to seek an amendment to the LOR, the Commissioner and Liquidators deprived the Court of the opportunity to conduct a proper assessment of whether the process which was in fact adopted in the Israeli Proceedings is one which was supported by the Act, and which was properly the subject of a letter of request in these proceedings. d. The extent to which the Israeli Proceedings diverged from the terms of the LOR is not supported by section 7 of the Act. Section 7 of the Act gives the Court the power to issue a letter of request for the examination of a "person". That person was identified in the 9 August Orders and the LOR as being Mr Mazur. Whilst it has been held that it is not necessary for the applicant for a letter of request to identify the examinee by name, here the Commissioner did so and it was on that basis that this Court considered the application, and orders made. In particular, Jagot J made an assessment of the requirements of section 7(2) of the Act in relation to Mr Mazur, and only Mr Mazur. 50 Section 16 of the Foreign Evidence Act, referred to in these submissions, is in these terms: (1) A superior court may vary or revoke an order made by the court under section 7, 9A, 10 or 11. (2) The power to vary an order includes the power to: (a) include in the order a direction under section 13; or (b) vary or revoke a direction under section 13 that is included in the order. (3) If an order under section 7 or 10 that includes a direction under section 13 is revoked, the direction under section 13 is taken to have been revoked at the same time. 51 It is true that no application was made by any person to alter or revoke the order for the LOR. This observation, however, applies equally to all parties. The Commissioner and liquidators did not apply to this Court to vary the LOR. The directors did not apply to this Court to revoke the LOR. The relevant circumstances, apart from these observations, include the following. 52 First, all relevant parties to this proceeding were parties to or had the opportunity to seek to be joined to the proceeding in the Israeli Court. Specifically, there is no doubt on the available material that the directors were aware of all steps taken in the Israeli Court and, at any time, could have made an application for the LOR to be revoked if they believed the process was miscarrying. No such application was made. 53 Second, while the LOR related to the examination of Mr Mazur, he was required to give evidence not in any personal capacity but in his capacity as the Chief Legal Officer of Bank Hapoalim. The documents required to be produced to aid the examination of Mr Mazur were all documents of Bank Hapoalim. The questions proposed to be asked of him all related to the documents and activities of Bank Hapoalim. At [20] of the LOR judgment I said this: I have no doubt that an officer of the bank could give evidence relevant to the proceeding in terms of what has been described by the Commissioner as evidence of the bank's systems in relation to its administration of its credit arrangements, its processes for requiring and maintaining documents, and its processes and systems for ensuring the provenance and authenticity of documents. 54 Moreover, it was Bank Hapoalim itself that applied to the Israeli Court to cancel the summons to Mr Mazur on the basis that he could not give information relevant to the LOR as he had no involvement in the transactions. In response to that application the Israeli Court determined that another officer of Bank Hapoalim should be examined, which was Ms Mandel. It was also Bank Hapoalim that applied for Mr Etzion to be joined as a party, Mr Etzion being the former officer of Bank Hapoalim directly involved in the contested loan arrangements. This application resulted in the making of orders by the Israeli Court for the examination of Mr Etzion. 55 The available material discloses that at all material times the Israeli Court was acting to execute the LOR. Articles 9 and 10 of the Convention provide as follows: Article 9 The judicial authority which executes a Letter of Request shall apply its own law as to the methods and procedures to be followed. However, it will follow a request of the requesting authority that a special method or procedure be followed, unless this is incompatible with the internal law of the State of execution or is impossible of performance by reason of its internal practice and procedure or by reason of practical difficulties. A Letter of Request shall be executed expeditiously. Article 10 In executing a Letter of Request the requested authority shall apply the appropriate measures of compulsion in the instances and to the same extent as are provided by its internal law for the execution of orders issued by the authorities of its own country or of requests made by parties in internal proceedings. 56 The submissions for Andrew Binetter relied on these provisions to support the proposition that the Israeli Court had exceeded its remit and had not executed the LOR by not examining Mr Mazur, requiring documents to be produced by another officer of Bank Hapoalim, and by requiring the examination of Ms Mandel and Mr Etzion. I disagree. The Israeli Court, at all times, was executing the LOR. Accordingly, this argument should not be accepted. Moreover, even if the argument were correct, the Commissioner and the liquidators still obtained the documents as a result of the LOR. As explained below, the discretionary factors in favour of releasing them from the implied obligation are so strong that any miscarriage of the LOR process (which I do not accept occurred) would be an insufficient reason to deny the leave which is sought.

[10]

The costs purpose was improper 60 This, and the next argument on behalf of Andrew Binetter, are (in effect) a complaint that the LOR process should have been terminated as at the date the proceeding was dismissed (10 March 2014) and that the maintenance of the LOR thereafter was an abuse of process. 61 First, I note that no application was made under s 16 of the Foreign Evidence Act to revoke the order for the LOR. The only action the directors took was to oppose the adjournment of the proceeding to enable the liquidators to determine their position on costs on the basis of arguments which I rejected. No application for leave to appeal against any order I made adjourning the proceeding was filed. Without an order revoking the order for the LOR, the Israeli Court was bound to continue to execute the LOR. 62 The second point in respect of the costs purpose is that, despite the attempts to prove to the contrary, the evidence was all one way. After 10 March 2014 and until 12 May 2015 there was a live issue in this proceeding, being whether BCI should be ordered to pay the Commissioner's costs on an indemnity basis. The fact that the liquidators had accepted for voting and dividend purposes the Commissioner's proof of debt which included the Commissioner's costs of this proceeding on an indemnity basis and never suggested a different amount said to be owing to the Commissioner does not establish that the costs issue was in truth resolved. Nor does the deed of indemnity between the Commissioner and the liquidators establish that proposition. At all times the liquidators remained free to review the position as more information came to light (see reg 5.6.55(1) of the Corporations Regulations 2011 (Cth) and cl 14.3 of the deed of indemnity). The liquidators made clear at all times that their purpose in seeking to adjourn the proceeding and to obtain more material through the completion of the LOR process was to enable resolution of the costs issue in this proceeding. As John Sheahan, one of the liquidators, explained in evidence, in light of that material the liquidators might consent to an order that BCI pay the Commissioner's costs on an indemnity basis, might oppose an order that the costs be paid on an indemnity basis, or might claim that no costs order at all should be made against BCI by reason of the misconduct of the directors. These are all uses of the material obtained under the LOR in this proceeding. It is only the fact that the liquidators decided to consent to an order that BCI pay the Commissioner's costs on an indemnity basis which avoided the need for the relevant material obtained under the LOR to be adduced into evidence. The distinction which the submissions for Andrew Binetter sought to draw between the liquidators merely considering their position and obtaining evidence for this proceeding is unsustainable. The liquidators were not considering their position at large or in the abstract. They had to deal with an application by the Commissioner that BCI pay the Commissioner's costs on an indemnity basis. While there are no funds presently available in BCI for distribution, so such an order presently would have no practical impact, the liquidators were entitled, indeed bound, to consider the fact that if funds became available (for example, through the claims in SAD 5), then such an order would be able to be executed against BCI. They had to determine whether to oppose such an order or not. In so doing, they were using the material obtained under the LOR in this proceeding. 63 The third point is that the notion that the purpose of obtaining material to enable orders to be made in respect of costs was outside the scope of the LOR is untenable. The LOR was issued in this and for the purpose of this proceeding. Costs are as much a part of this proceeding as the present interlocutory applications. As the liquidators submitted: 11. … a dispute as to costs is a part of the proceeding in which that dispute arises, and is not a separate proceeding: see, eg, ss 4 and 43 of the Federal Court of Australia Act 1976 (Cth); New South Wales Insurance Ministerial Corporation v Edkins (1998) 45 NSWLR 8 at 12; Leibler v Air New Zealand Ltd [1998] 2 VR 525 at 529-30. As such, while the indemnity costs issue remained unresolved, there was an issue in dispute in the proceedings. BCI 2012 [the LOR judgment] simply does not support the proposition that the only issue in relation to which the LOR served a purpose was whether BCI's objections to the Commissioner's assessments should be allowed. 64 For these reasons I accept the submissions to the contrary put by the Commissioner and the liquidators and, in this regard, adopt the liquidators' submissions as follows: 20. In these circumstances, Mr Binetter claims that the maintenance of the LOR and the Israeli Proceeding was an abuse of process. The authorities regarding abuse of process through the maintenance of proceedings are well known. In order to establish an allegation of abuse of process in such a case, a party must show that the proceedings are maintained for the purpose of obtaining some advantage for which they are not designed, or some collateral advantage beyond that which the law offers: Williams v Spautz (1992) 174 CLR 509 at 526-527. It is not enough that the party is able to identify one improper purpose amongst other proper purposes. An abuse of process is only made out if the improper purpose is the predominant purpose, and the onus of proving an abuse of process is "a heavy one": Williams v Spautz at 529. 21. The submissions made above show that it was entirely proper for the LOR and Israeli Proceedings to be maintained in order for the Liquidators to obtain information regarding the true position as between BCI and Bank Hapoalim, and to thereby form a view in respect of the Commissioner's indemnity costs application. Mr Binetter's submission, that the LOR and the Israeli Proceeding were maintained to enable the Liquidators to "consider their position" (AS [9(a)]) is without substance. The first stage in leading evidence is to consider it and form a view as to whether it is relevant and can properly be deployed in the proceedings; similarly, if the evidence is deployed against one's case, it is necessary to consider whether it can be answered and the effect of such evidence on the dispute. The content of the documents and examinations arising out of the LOR could not be known until they were received. There was nothing improper in the Liquidators wishing to consider their position based on the evidence that was produced under the LOR; indeed, it would not have been a diligent execution of their duty to do otherwise.

[11]

The winding up purpose was not a proper purpose 65 This argument is that the liquidators (and, by inference, also the Commissioner who consented to the adjournment of the proceeding as the liquidators sought) maintained the LOR for the purpose of the winding up of BCI which was not a proper purpose but, rather, an abuse of process. 66 The evidence did not support this submission. From the time of their involvement the liquidators disclosed that if documents became available pursuant to the LOR process which were relevant to the winding up then the liquidators, if appropriate, would make an application to be permitted to use the documents obtained for that purpose. There is no suggestion in the evidence, however, that the liquidators (or the Commissioner) sought to maintain the LOR other than for the purpose identified by the liquidators - being the costs purpose. The position on the evidence, and the consequences of it, are accurately set out in the liquidators' submissions as follows: 23. This leaves only Mr Binetter's claim that what he describes as "the Winding-Up Purpose" should lead the Court to conclude that the maintenance of the LOR and Israeli Proceedings was an abuse of process: AS [applicant's submissions] [11]-[16]. On this point, the Liquidators have communicated to the Court and the parties that, if any evidence became available through the LOR or the Israeli Proceedings that was relevant to the winding up of BCI generally, the liquidators would seek the permission of the Court to use that evidence more broadly: JS [affidavit of John Sheahan] 2 June [44]. Mr Sheahan considers such a position to be consistent with the Liquidators' duties as liquidators of BCI: JS 2 June [44]. 24. The Liquidators' attempts to consolidate these proceedings with the winding up proceedings simply reflected that the Liquidators had identified the potential benefit of using evidence obtained through the LOR and Israeli Proceedings in the winding up proceedings (cf AS [12]). The Liquidators' cognisance of the availability of that benefit, and the reliance on it in support of the consolidation application, does not lead to a conclusion that the LOR and Israeli Proceedings were maintained for the purpose, much less the predominant purpose, of achieving that benefit. 25. Ultimately, as outlined above, it was proper for the LOR and Israeli Proceedings to be maintained while the indemnity costs issue was on foot. The evidence of Mr Sheahan supports the conclusion that the maintenance of the LOR and Israeli Proceedings was, from the Liquidators' point of view, necessary for the Liquidators to properly deal with the Commissioner's indemnity costs application. Once that is accepted, the fact that the Liquidators knew of a potential further benefit to the maintenance of the LOR and Israeli Proceedings, which they disclosed to the Court, goes nowhere in proving an abuse of process. Mr Binetter's claim of abuse of process must be rejected.

[12]

Should leave be granted 67 The submissions for Andrew Binetter did not address the documents in schedule B of the Commissioner's interlocutory application, being documents filed on behalf of BCI or the directors or otherwise produced under subpoena by them or their lawyers in this proceeding but separate from the LOR. In respect of the material in schedule A and the subject of the liquidators' application, the submissions for Andrew Binetter were as set out above. 68 The applicable principles to an application to be relieved of the implied obligation not to use documents other than for the purpose of the proceeding in which they were obtained were not in dispute. As the liquidators put it: (a) the implied undertaking is "thought to encourage frank and full compliance" with disclosure obligations [Northbuild Construction Pty Limited v Discovery Beach Project Pty Limited (No 4) [2011] 1 Qd R 145 at [13]]; (b) a party will usually be relieved from the implied undertaking where, after considering the public policy considerations behind the implied undertaking - which "are about securing justice between the parties and maintaining public confidence in the justice system" - the circumstances of the case show that relief would be plainly in the interests of justice [Northbuild at [16]]; (c) whilst "exceptional circumstances" must be shown in order to obtain relief from the implied undertaking, all that is required to make out exceptional circumstances is that "good reason" is shown why the documents or information in question should be used for the advantage of a party in another piece of litigation or for other purposes [Liberty Funding Pty Limited v Phoenix Capital Limited (2005) 218 ALR 283 at [31]]. 69 Adopting the Commissioner's submissions: 12. In Liberty Funding Pty Limited v Phoenix Capital Limited [[2005] FCAFC 3] (2005) 218 ALR 283, Branson, Sundberg and Allsop JJ specifically adopted Wilcox J's formulation [Springfield Nominees Pty Limited v Bridgelands Securities Limited (1992) 38 FCR 217 at 225] as a helpful guide: [31] … The notion of "special circumstances" does not require that some extraordinary factors must bear on the question before the discretion will be exercised. It is sufficient to say that, in all the circumstances, good reason must be shown why, contrary to the usual position, documents produced or information obtained in one piece of litigation should be used for the advantage of a party in another piece of litigation or for other non-litigious purposes. The discretion is a broad one and all the circumstances of the case must be examined. In Springfield Nominees, Wilcox J identified a number of considerations which may, depending upon the circumstances, be relevant to the exercise of the discretion. These were: • the nature of the document; • the circumstances under which the document came into existence; • the attitude of the author of the document and any prejudice the author may sustain; • whether the document pre-existed litigation or was created for that purpose and therefore expected to enter the public domain; • the nature of the information in the document (in particular whether it contains personal data or commercially sensitive information): • the circumstances in which the document came in to the hands of the applicant; and • most importantly of all, the likely contribution of the document to achieving justice in the other proceeding. 13. In Australian Trade Commissioner v McMahon (1997) 73 FCR 211, Lehane J said at 217C: Where an application for release is decided in contested proceedings, it seems that 'special circumstances' will fairly be found where it is established that the use of documents discovered in proceedings is reasonably required for the purpose of doing justice between the parties in other proceedings. 70 I am satisfied that the relevant circumstances, which I accept includes how the material was obtained pursuant to the Foreign Evidence Act, weigh heavily in favour of making orders as sought by the Commissioner and the liquidators. There are undoubtedly good, indeed exceptionally compelling, reasons to make the orders sought in the interests of justice. 71 Insofar as the Commissioner is concerned, there is a close relationship and overlap between the issues in this proceeding which caused the issue of the LOR and those in the Rawson proceeding. As the Commissioner submitted: 26. The documents itemised at Schedule A of the interlocutory application establish that, or may be held to establish that, contrary to the evidence and submissions put in Rawson, Bank Hapoalim did not grant a loan to BCI on the basis of corporate and personal guarantees, but instead on a back-to-back basis (that is, that the loans were supported by cash deposits). That material suggests that Baruch Etzion's evidence in Rawson was knowingly false and that Mr Andrew Binetter's evidence was also knowingly false. The material supports a submission that certain material submissions advanced for Rawson were known by Rawson to be false. 72 Otherwise: 33. The documents outlined above (from Schedule A) and the documents itemised in Schedule B (and analysed by Edmonds J) are all documents which may have implications for Andrew Binetter, Michael Binetter, Margaret Binetter, the estate of the late Erwin Binetter, the estate of the late Emil Binetter, Gary Binetter and their related persons and entities. This is because each of Andrew, Margaret, Emil and Gary were directors of BCI and because the documents reveal Michael Binetter's involvement in relation to the cash deposit held in Bank Hapoalim (Switzerland) Limited. 34. The Commissioner is responsible for the administration of the ITAA 1936, the ITAA 1997 and the TAA 1953 in relation to a taxpayer's taxation obligations and is subject to various constraints in the exercise of that function. In particular, he and his officers have a duty of confidentiality which constrains the manner in which he can use information obtained by him in the exercise of his functions: see TAA 11953, Schedule 1, s 355-25. 35. It is also relevant to the favourable exercise of the discretion that in tax 'appeals' under Part IVC of the TAA 1953 the taxpayer bears the onus of proof reflecting "the circumstance that the facts relating to the taxpayer's income are peculiarly within the taxpayer's own knowledge": Politis v Commissioner of Taxation (1988) 16 ALD 707 at 708 per Lockhart J. This can present a difficulty for the Commissioner if he is unable to test the taxpayer's contentions as to the relevant facts. While the Commissioner has broad information gathering powers under the tax legislation to assist in overcoming this issue, those powers are subject to practical and legal constraints where the relevant information is held offshore and concerns transactions with non-residents. It is only if the Commissioner is able to obtain access to documents of the kind involved in the present application that he will be able properly to test the taxpayer's contentions as to the relevant facts. 36. The Rawson proceedings, and the BCI proceedings along with other AAT proceedings (since withdrawn but the subject of an application before Jagot J: see the application filed by the Commissioner in these proceedings on 31 March 2014 and the orders made by Jagot J on 6 May 2014) are all proceedings under Part IVC of the TAA 1953 concerning taxpayers who are related to one another. 37. As the Full Court of the Family Court observed in Commissioner of Taxation v Darling (2014) 285 FLR 428 [[2014] FamCAFC 59] at [174] that the audit referred to in those proceedings "would surely be greatly enhanced by the auditor having access to the widest range of materials available, particularly those which the person the subject of the audit may not have anticipated the auditor would be able to access", and considered that it was not necessary for the Commissioner to explain why the information already available to the ATO on audit was insufficient to complete the audit (at [178]-[179]). 38. It is clear from the nature of the Rawson and BCI proceedings and the documents itemised in Schedules A and B that there is a high likelihood that any or all of Andrew Binetter, Margaret Binetter, Erwin Binetter, Emil Binetter, Gary Binetter and their related persons and entities had interests in overseas assets which were not declared or were utilised to avoid their taxation obligations. 39. Hence, it is in the interests of justice to permit the Commissioner to use those documents: 39.1. to fulfil his own statutory duties and obligations; and 39.2. to provide the documents to Law Enforcement Agencies for use by those agencies in relation to their functions. 73 I accept these submissions. 74 Insofar as the liquidators are concerned, six points were said to support the grant of leave as follows: 52. First, the documents are directly relevant to the central issue in the winding up, including SAD 5, being the nature of the true arrangements between Bank Hapoalim and BCI: JS 2 June at [50]. In relation to SAD 5 in particular, whilst each case depends upon its own facts, the existence of subsequent judicial proceedings in which the material is relevant is a powerful factor in favour of release : Griffiths v Duggan (No 2) [2008] VSC 230 at [11]. … 55. Second, the material in question was not produced by Mr Binetter. To the extent the material contains private or confidential information about the affairs of any person, that person is BCI. Mr Binetter does not suggest, nor could he, that he has any relevant interest in the material. 56. Third, it is in the interests of justice for the Court to determine the allegations made in SAD 5 having regard to all available relevant material. Currently, the Liquidators have available to them documents obtained through the winding up, including through the issue by the Court of orders for production, and documents produced by BCI's former lawyers that Gleeson J granted leave to use in the winding up generally (see BCI Finances Pty Ltd (in liq) v Commissioner of Taxation [[2014] FCA 898;] (2014) 317 ALR 727). If leave was not granted, then the Court would be deprived of some of the material relevant to SAD 5. … 57. Fourth, while the material will be available for use in SAD 5 as a consequence of the leave, any actual use as evidence will be subject to the supervision and evidentiary rulings of this Court when it hears SAD 5. The Court will be reluctant to permit the implied undertaking to cloak a document with protection from use in other judicial proceedings where there are ample powers in that other proceeding to ensure that its processes are not abused: Griffiths v Duggan (No 2) [2008] VSC 230 at [11]. It must be recalled that s 15 of the Foreign Evidence Act would apply in SAD 5. 58. Fifth, if leave is not granted, the documents would have to be sought to be obtained again through another letter of request issued by this Court. The Israeli Court has already provided extensive assistance to this Court through executing the LOR. Vexing the Israeli Court twice for the same evidence would be contrary to the principles of comity and cooperation underlying the Convention, when this Court has ample power to grant leave for the evidence to be used. 59. Sixth, if the Liquidators were required to take steps to obtain the material again, this would be costly and would have the potential to place in jeopardy the timely resolution of SAD 5, assuming the material could not be reobtained before that matter is due to be heard commencing 31 August 2015. 75 I accept these submissions.

[31]

Signature and seal of the requesting authority Attachment "A" to the letter of request Nature and purpose of the proceedings and summary of the facts (article 3, c)

The proceedings are an appeal by the applicant, BCI Finances Pty Ltd, from a decision of the respondent, the Commissioner of Taxation, to disallow an objection to assessments of income tax for the tax years ending 30 June 1997 to 30 June 2008.
In the relevant income years, the applicant claimed that it had loan agreements in place with Bank Hapoalim, BM in respect of which it had made interest payments. The applicant claimed deductions in respect of these interest payments. The loans that the applicant claimed and claims to exist comprise a loan of 12,000,000 Swiss Francs said to have been entered into on 25 April 1993 and a loan of A$3,848,552 said to have been made on 24 April 2006.
In issuing the assessments the subject of the appeal proceedings, the respondent Commissioner of Taxation disallowed certain deductions claimed by the applicant as interest and withholding tax in respect of the loans, included as income a payment made pursuant to the claimed loan arrangements in the 2006 tax year and imposed administrative penalties.
In the proceedings, the applicant has the burden of proving that the assessments are excessive. The applicant contends that the loans were made to it by Bank Hapoalim, BM, that it made the interest payments and that the interest payments and withholding tax were and are properly deductable. The respondent contends that the applicant has not discharged its burden of proving that the loans were made, or made on the terms contended by the applicant, that the payments made by the applicant were interest payments and that such payments as were made were properly deductable. Attachment "B" to the letter of request Evidence to be obtained or other judicial act to be performed (article 3,d)
The evidence to be obtained is the evidence of Mr Ilan Mazur
The general nature and subject matter of the examination of Mr Ilan Mazur and the nature of the questions to be put during the examination are detailed in attachment "C" to the letter of request.
It is also requested that, in aid of and ancillary to the examination, a subpoena decus tecum, summons or equivalent order which requires Mr Ilan Mazur, as the proper officer of Bank Hapoalim, BM to produce documents that fall within the categories of documents described in the schedule. Submitted with the letter of request is a letter executed by or on behalf of B.C.I Finances Pty Limited which consents to the production of documents by Bank Hapoalim, BM pursuant to a subpoena, summons or order and waives any rights of secrecy, privacy or confidentiality in respect of the documents that may arise or exist by reason of the relationship between Bank Hapoalim, BM and B.C.I Finances Pty Ltd. Schedule
All documents recording or evidencing the application for, approval of, granting or making of, and terms of (including terms relating to any security and guarantees), any loan, finance facility or advance of money by Bank Hapoalim, BM to B.C.I Finances Pty Ltd during the period 1 January 1993 to 30 June 2008, including but not limited to any agreement for general business terms; agreement for opening a current account and its management; agreement for credit; agreement for collateral deposit safekeeping; personal guarantee; pledge and set off agreement; notice of pledge or negative pledge undertaking; pledge agreement or deed of pledge; bank guarantee or standby letter of credit.
For the period 1 January 1993 to 30 June 2008, all documents recording: 2.1 any payments or transfers of funds by Bank Hapoalim, BM to B.C.I Finances Pty Ltd or any person or entity at the direction of B.C.I Finances Pty Ltd; 2.2 any payments or transfers of funds received by Bank Hapoalim, BM from B.C.I Finances Pty Ltd or from any person or entity at the direction of B.C.I Finances Pty Ltd; 2.3 the balance standing to the credit or debit of any loan account, finance facility or deposit account held at Bank Hapoalim, BM on behalf of or in the name of B.C.I Finances or Erwin Binetter, Emil Binetter, Andrew Binetter, Michael Binetter, Margret Binetter, Gerda Binetter Ligon 158 Pty Ltd, Ligon 159 Pty Ltd, Milgerd Nominees Pty Ltd or Erma Nominees Pty Ltd.
All documents recording or evidencing any agreement, arrangement or understanding between Bank Hapoalim, BM and B.C.I Finances or Erwin Binetter, Emil Binetter, Andrew Binetter, Michael Binetter, Margret Binetter, Gerda Binetter Ligon 158 Pty Ltd, Ligon 159 Pty Ltd, Milgerd Nominees Pty Ltd or Erma Nominees Pty Ltd which is or was collateral to, or connected in any way with, any loan, finance facility or advance of money by Bank Hapoalim, BM to B.C.I Finances Pty Ltd during the period 1 January 1993 to 30 June 2008.
All documents recording or evidencing any communication between Bank Hapoalim, BM or any of its officers, employees, representatives or agents and B.C.I Finances or Erwin Binetter, Emil Binetter, Andrew Binetter Michael Binetter, Margret Binetter, Gerda Binetter relating to or in connection with any loan, finance facility or advance of money by Bank Hapoalim, BM to B.C.I Finances Pty Ltd during the period 1 January 1993 to 30 June 2008.
For the period 1 January 1993 to 30 June 2008, all documents recording or evidencing the following in relation to Baruch Etzion: 5.1 the dates during which Mr. Etzion was employed or retained by Bank Hapoalim, BM or by any company associated with Bank Hapoalim, BM in respect of services to be provided to Bank Hapoalim; 5.2 the terms and conditions of any employment contract between Bank Hapoalim, BM and Mr. Etzion, or between Mr. Etzion and any company associated with Bank Hapoalim, BM in respect of services to be provided to Bank Hapoalim, BM; 5.3 the terms and conditions of any agency, consultancy or service contract between Bank Hapoalim, BM and Mr. Etzion, or between any company associated with Bank Hapoalim, BM in respect of services to be provided to Bank Hapoalim, BM; 5.4 the position, duties and responsibilities of Mr. Baruch Etzion as an officer, employee, agent or consultant to Bank Hapoalim, BM. Attachment "C" to the letter of request Questions to be put to the person to be examined or statement of the subject-matter about which they are to be examined (article 3, f)
The general subject-matter of the examination is the description, nature and provenance of the documents that have been produced by the applicant in the Federal Court proceedings as well as any documents located, identified and produced by or on behalf of Bank Hapoalim in response to a subpoena decus tecum, summons or equivalent order issued or made to Bank Hapoalim.
The general nature of the questions to be put to the examinee are detailed in schedule 1 below, though allowance is to be made for the judicial rules, procedures and practices of the requested State. It may be necessary to ask additional or varied questions depending on what, if any, documents are produced by Bank Hapoalim in answer to the subpoena, summons or equivalent order. Schedule 1
What is your full name and occupation and where do you work?
What are your duties and responsibilities in your work position?
In your position, are you aware that a subpoena decus tecum, summons or equivalent order has been issued or made to Bank Hapoalim has been issued requiring it to produce documents that fall within specified categories of documents?
Do you have with you and are you able to produce the subpoena decus tecum, summons or order or a copy thereof?
Have searches been made by yourself, or to your knowledge other officers of Bank Hapoalim, to locate and identify documents that fall within the categories of documents detailed in the subpoena decus tecum, summons or order?
If yes, what searches have been made?
Have any documents been identified and located as a result of the searches?
If yes, do you produce, or are you aware that there has been produced by Bank Hapoalim, documents in answer to the subpoena decus tecum, summons or order?
If yes, the following questions should be put in relation to each document: 9.1 what is the document? 9.2 is it dated and if so, what is its date? 9.3 is the author or maker of the document, if any, known or ascertainable and if so, who was the author or maker? 9.4 does the document, or did the document at any time, form part of the records belonging to or kept by Bank Hapoalim, BM? 9.5 does the document contain representations or statements made or recorded in the course of or for the purpose of the business of Bank Hapoalim, BM? 9.6 if yes, were the statements or representations made by a person who might reasonably be supposed to have had personal knowledge of the facts in the statements or representations, or on the basis information directly or indirectly supplied by such a person?
During or as a result of the searches, were any documents identified as having once existed and been in the custody or control of Bank Hapoalim, but which either do not now exist, or are no longer in the custody and control of Bank Hapoalim and as a result cannot be produced?
If yes, in respect of each such document: 11.1 what is or was the document? 11.2 why is it not possible to produce the document? 11.3 what information, if any, is known about the contents of the document?
The following questions should be put in relation to each of the documents listed in schedule 2 below, being copies of documents produced by the applicant in the Federal Court proceedings: 12.1 is this a copy of a document which was within the material that Bank Hapoalim has produced (and about which questions have just been asked); 12.2 if not, are you able to identify what the document is; 12.3 is it a document that you recognise to be in a form used in the ordinary course of the business of Bank Hapoalim; 12.4 if yes, what is the nature of the document and what is its purpose and role in terms of the ordinary business of Bank Hapoalim?
How are the bank's records maintained?
If in hard copy are there multiple copies kept - for example a "head office" and "branch" copy; a "credit" copy; etc?
Are the hard copy documents also maintained in electronic form? If so, who has access to those records?
Is the data contained in the documents maintained in electronic form?
If so: 17.1 who has access to that data? 17.2 What automatic communications and reports are generated using the data? 17.3 What language are those communications and reports generated in? 17.4 Can the data be accessed to create supplementary communications and reports? 17.5 If so, who has the authority to generate such supplementary communications and reports?
[The following questions need only be asked if no documents, or no documents additional to the documents in schedule 2, are produced by Bank Hapoalim pursuant to the subpoena, summons or order] Assume for the purposes of the following questions that the documents in schedule 2 are the only documents that have been able to be produced in respect of purported dealings between a customer and Bank Hapoalim. 18.1 Would it be expected, in the ordinary course of Bank Hapoalim's business, that the bank would have created, received, or maintained further documentation to record or evidence the entire dealings and agreements between the customer and the bank recorded in these documents; 18.2 If so, what additional documents; 18.3 Are you aware of a reason why the bank would no longer have copies or records of those additional documents; 18.4 What if there were related or collateral agreements or arrangements between the bank and the customer? Schedule A [ON LETTERHEAD OF B.C.I. FINANCES PTY LTD] The purpose of this letter is to confirm and advise that B.C.I Finances Pty Limited consents to Bank Hapoalim, BM producing any and all documents that fall within the categories of documents listed in the schedule to this letter in accordance with any subpoena decus tecum, summons or equivalent order issued or made by any Israeli court, tribunal or judicial officer. For these purposes, B.C.I Finances Pty Ltd unconditionally waives any rights of secrecy, privacy or confidentiality in respect of the documents that may arise or exist by reason of its relationship with Bank Hapoalim, BM. [To be signed by any officer or duly authorised representative of B.C.I Finances Pty Ltd] Schedule
All documents recording or evidencing the application for, approval of, granting or making of, and terms of (including terms relating to any security and guarantees), any loan, finance facility or advance of money by Bank Hapoalim, BM to B.C.I Finances Pty Ltd during the period 1 January 1993 to 30 June 2008, including but not limited to any agreement for general business terms; agreement for opening a current account and its management; agreement for credit; agreement for collateral deposit safekeeping; personal guarantee; pledge and set off agreement; notice of pledge or negative pledge undertaking; pledge agreement or deed of pledge; bank guarantee or standby letter of credit.
For the period 1 January 1993 to 30 June 2008, all documents recording: 2.1 any payments or transfers of funds by Bank Hapoalim, BM to B.C.I Finances Pty Ltd or any person or entity at the direction of B.C.I Finances Pty Ltd; 2.2 any payments or transfers of funds received by Bank Hapoalim, BM from B.C.I Finances Pty Ltd or from any person or entity at the direction of B.C.I Finances Pty Ltd; 2.3 the balance standing to the credit or debit of any loan account, finance facility or deposit account held at Bank Hapoalim, BM on behalf of or in the name of B.C.I Finances or Erwin Binetter, Emil Binetter, Andrew Binetter, Michael Binetter, Margret Binetter, Gerda Binetter, Ligon 158 Pty Ltd, Ligon 159 Pty Ltd, Milgerd Nominees Pty Ltd or Erma Nominees Pty Ltd.
All documents recording or evidencing any agreement, arrangement or understanding between Bank Hapoalim BM and B.C.I Finances or Erwin Binetter, Emil Binetter, Andrew Binetter, Michael Binetter, Margret Binetter, Gerda Binetter Ligon 158 Pty Ltd, Ligon 159 Pty Ltd, Milgerd Nominees Pty Ltd or Erma Nominees Pty Ltd which is or was collateral to, or connected in any way with, any loan, finance facility or advance of money by Bank Hapoalim, BM to B.C.I Finances Pty Ltd during the period 1 January 1993 to 30 June 2008.
All documents recording or evidencing any communication between Bank Hapoalim, BM or any of its officers, employees, representatives or agents and B.C.I Finances or Erwin Binetter, Emil Binetter, Andrew Binetter Michael Binetter, Margret Binetter, Gerda Binetter relating to or in connection with any loan, finance facility or advance of money by Bank Hapoalim, BM to B.C.I Finances Pty Ltd during the period 1 January 1993 to 30 June 2008. Schedule E In this schedule: "Applicant" means BCI Finances Pty Limited "borrowings" includes loans and advances. "document" or "documents" includes: Any record of information, including: (i) anything on which there is writing including letters, emails, notes, diaries, memorandums, minutes of meetings, agendas, reports; (ii) anything on which there are marks, figures, symbols, seals or perforations having a meaning for the persons qualified to interpret them; (iii) anything from which sounds, images or writings can be reproduced with or without the aid of anything else, including computer hard discs or drives containing information stored electronically and electronic storage devices, computer hard drives or back-up tapes used for storage or backup of information; (iv) a map, plan, drawing or photograph. "entity" includes person. "financial record" includes: (i) invoices, receipts, orders for the payment of money, bills of exchange, cheques, promissory notes and vouchers; (ii) documents of prime entry; (iii) working papers and other documents to explain or which explain: a. the methods by which financial statements are made up; b. adjustments to be made in preparing financial statements "lending" includes loans and advances. "security" includes any security, guarantee or collateral or any other arrangement supporting any borrowings.

[32]

All documents (including all banking records, bank statements, cheques and cheque stubs) and financial records for the period 1 July 1992 to 30 June 2008 which evidence, record or relate to: (a) any borrowings by the Applicant from Bank Hapoalim (including the calculation and payment of interest on, and repayment or forgiveness of, any such borrowings); (b) any lending by the Applicant to any entity (including the calculation and payment of interest on, and repayment or forgiveness of, any such lending) (c) the use to which any borrowings by the Applicant from Bank Hapoalim were put; (d) the use to which any lending by the Applicant to any entity was put; and (e) any security (including the value thereof) offered or provided by the Applicant or any other entity in relation to any borrowings by the Applicant from Bank Hapoalim or any lending by the Applicant to any entity and any discharge or potential discharge of any such security.
Profit and Loss statements (including any drafts thereof) for the years ended 30 June 2007 to 30 June 2008;
Balance Sheets (including any drafts thereof) for the years ended 30 June 2003 to 30 June 2008;
Cash flow statements (including any drafts thereof) for the years ended 30 June 2002 to 30 June 2008.
General ledgers and any trial balances (including any drafts thereof) for the years ended 30 June 2007 and 30 June 2008.
Any journal books or other document or records listing journal entries for any of the years ended 30 June 2008 to date.
Any cash books or other document, ledger or record recording cash entries for any of the years ended 30 June 1992 to 30 June 1994 and 30 June 2001 to 2008.
Any document (including minutes), evidencing or recording: (a) the basis upon which the financial statements for the Applicant are prepared including whether they are prepared in accordance with accounting standards and, if so, which; (a) whether the Applicant did prepare, or considered preparing, financial statements and other information on a consolidated basis.

B.C.I Finances Pty Limited (in liq) v Commissioner of Taxation

At a glance

Court

Decision date

Before

Source

Judgment (35 paragraphs)

Parties

Legislation Cited (8)

Cases Cited (23)

Cited By (3)