Commissioner of Taxation v Israel Discount Bank Limited

LEE J: 3 The present application for leave to appeal has an unusual provenance, set out in some detail in the judgment below (J): Binqld Finances Pty Ltd (In Liq) v Israel Discount Bank Limited; In the Matter of Binqld Finances Pty Ltd (In Liq) [2019] FCA 1186. 4 For present purposes, it is sufficient to note that it is brought by a stranger to a proceeding, the Commissioner of Taxation (Commissioner), against interlocutory orders of the primary judge made in July last year, which required the Commissioner to provide to the plaintiffs a redacted copy of a settlement deed entered into by him and a number of individuals and entities (ATO Deed). The plaintiffs were then required to produce the redacted version of the ATO Deed to the Associate to the primary judge. 5 The orders in dispute were made following an interlocutory application brought by the Commissioner in which he sought a variation of an earlier order of the primary judge which had required the production to Israel Discount Bank Limited (Bank) of: (a) the entire ATO Deed; and (b) another settlement deed between the plaintiffs and a number of defendants. The initial order for production was made in relation to an application by the Bank to reopen an application filed in February 2017 to discharge an ex parte order made in September 2016 granting leave to serve originating process on the Bank in Israel. It is unnecessary to go into the details, but leave to reopen was granted in November 2018 and the documents ordered to be produced last July were said to be apparently relevant to a contention made by the Bank that the plaintiffs' claims for compensation in the underlying proceeding against the Bank were "fatally damaged", due to the plaintiffs having recovered substantial compensation pursuant to settlements with defendants other than the Bank. Claims by the plaintiffs against all other defendants in the proceeding have been settled. 6 Following the reopening and the making of the orders in July 2019, further argument on the discharge application was heard by the primary judge in November 2019 and judgment is presently reserved. The July orders requiring production of a redacted copy of the ATO Deed had been stayed pending the determination of the present leave application, and any appeal. Although the Bank raised the prospect of adjournment with the plaintiffs, no application was made to the primary judge in November 2019 for an adjournment of further argument on the discharge application until after any argument as to production of the ATO Deed had been determined. It follows that, as matters currently stand, the merits of the discharge application will be determined by the primary judge on the evidence that was adduced on that application and the submissions made by reference to that evidence in November last year. It is also evident that there is at least some prospect that the discharge application will be successful, in which case the service on the Bank (which had sought access to the ATO Deed) will be set aside and, subject to any applications for leave to appeal, the proceeding will be at an end. 7 Returning to the orders the subject of the application for leave to appeal, the Commissioner adduced evidence before the primary judge and argued that the entire ATO Deed was "protected information", being information that was "disclosed or obtained under or for the purposes of a law that was a taxation law … when the information was disclosed or obtained" (s 355-30(1)(a) of Sch 1 to the Taxation Administration Act 1953 (Cth) (Act)). It followed, the Commissioner contended, that by reason of s 355-205 of Sch 1 to the Act, no order for production or disclosure could be made by the Court in respect of the ATO Deed, even in partially redacted form. 8 Importantly, at J[90], the primary judge concluded that the evidence adduced on the application did not establish that the schedules to the ATO Deed contained protected information because it was insufficient, being "general and somewhat vague". Although (at J[86]-[88]), the primary judge accepted that some information in the ATO Deed was protected information, relevantly because it recorded matters which had been disclosed to the Commissioner by persons (details of their assets and liabilities) or was derived from such information (details of income tax and related liabilities as assessed by the Commissioner), his Honour further held (at J[89]) that some information was not protected information to the extent it merely recorded the terms upon which the Commissioner and other parties agreed to resolve their disputes and did "not contain information that was provided or obtained by the Commissioner under or for the purposes of a taxation law". 9 As a consequence, the primary judge: (a) ordered the Commissioner to review and redact the ATO Deed to ensure that protected information (as defined in s 355-30) contained in the ATO Deed is not visible or readable (order 11); (b) ordered the Commissioner to provide the redacted ATO Deed to the plaintiffs (order 12) who would then produce the redacted ATO Deed to the Court (order 13); and (c) thereby reserved the question of whether access to the redacted ATO Deed would be granted to the Bank. 10 As noted above, the stay has meant that these orders have not been the subject of compliance. But even if the Commissioner had complied with the orders of the primary judge and a copy of the redacted ATO Deed was provided to the Court, the Bank could not obtain access to the ATO Deed without the Court making an order for inspection. By parity of reasoning to the position that obtains in relation to the "second step" of the procedure upon a subpoena duces tecum, once produced, the document is then in the control of the Court, whose function it is to deal with any application for inspection by either party on the basis of the material before the Court at the time it deals with that adjectival application. The rights of a third party are "jealously guarded" and an application for inspection would only be granted "if it is legitimate to do so": see National Employers' Mutual General Association Ltd v Waind and Hill [1978] 1 NSWLR 372 at 383-4 (Moffat P). Why an order for inspection would presently be granted to inspect the redacted ATO Deed produced in relation to the discharge application (when evidence has closed and judgment is reserved on the application) was never satisfactorily explained. We were not told any application has been made to discharge the order for production, now that the hearing to which it related has been heard. 11 Pausing here, one would have thought an application for leave to appeal in these circumstances must be highly problematical. Even if any application for access to the ATO Deed (as redacted) is ever entertained and there was dispute as to: (a) whether those redactions were properly undertaken; and/or (b) any application is made by the Bank to access the material, any such application would be the subject of further argument (and potentially further evidence) before the primary judge. 12 The applicable principles attendant on an application for leave to appeal are well known and were not in dispute. I summarised them in Nationwide News Pty Limited v Rush [2018] FCAFC 70 at [2]-[4] (in terms with which Allsop CJ and Rares J generally agreed) as follows: The principles informing the determination of whether to grant leave to appeal from a decision of a single judge of this Court are not novel. The starting point is that in exercising the power to grant leave, regard must be had to the statutory charge in s 37M(3) of the Federal Court of Australia Act 1976 (Cth) … that the power must be exercised or carried out in the way that best promotes the overarching purpose, being the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible. Consistently with the facilitation of a just resolution, an applicant must usually show that: (a) in all the circumstances, the decision to be appealed is attended with sufficient doubt to warrant its reconsideration on appeal; and (b) supposing the decision to be wrong, substantial injustice would result if leave were refused: Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398-399 (Sheppard, Burchett and Heerey JJ). The sufficiency of the doubt in respect of the decision to be appealed and the question of substantial injustice bear upon each other so that the degree of doubt which is sufficient in one case may be different from that required in another. It has also been said that the considerations are cumulative such that leave ought not be granted unless each limb is made out: Rawson Finances Pty Ltd v Deputy Commissioner of Taxation [2010] FCAFC 139; (2010) 81 ATR 36 at 38 [5] (Ryan, Stone and Jagot JJ); Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd [2017] FCAFC 98; (2017) 252 FCR 1 at 4 [3] (Jagot, Yates and Murphy JJ). Additionally, consistent with the facilitation of a quick, inexpensive and efficient resolution is the principle which emerges from the oft-cited warning of Jordan CJ in In re the Will of F. B. Gilbert (Deceased) (1946) 46 SR (NSW) 318 at 323, that if a tight rein is not kept upon the interference with orders of judges at first instance in the exercise of discretion on a point of practice and procedure, the result will be "disastrous to the proper administration of justice". (emphasis in original) 13 The argument made as to why leave ought to be granted came down to the proposition that the entire ATO Deed was protected information, and thus by reason of s 355-205, no order for production or disclosure could be made by the Court in respect of the ATO Deed, even in partially redacted form. The Commissioner further contended that substantial injustice would result if leave were refused because the public interest objective of Div 355 would be defeated (T26.27-38). It is not obvious that this outcome is accurately described as a substantial injustice, particularly where the practical result is limited to the provision of information falling within the broad definition of "protected information" to the Court. The Commissioner did not identify any particular prejudice or consequence that would be suffered by any person as a result of disclosure to the Court: cf Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 400 (Sheppard, Burchett and Heerey JJ). 14 The application for leave to appeal fails because to grant leave would be inimical to facilitating the overarching purpose and no injustice of any substance would result if leave was refused. Even if there is further dispute as to access to the ATO Deed (and this eventuality is far from assured), that dispute will be determined in a different context and potentially on the basis of different evidence. This is enough to dismiss the application, but in considering at a "reasonably impressionistic level" what might broadly be described as the 'merits' on the application for leave (see MZABP v Minister for Immigration and Border Protection [2016] FCAFC 110; (2016) 152 ALD 478 at 482-3 [21], 486 [38] (Tracey, Perry and Charlesworth JJ)), there is further reason to pause before granting leave. 15 The contention that no order for production or disclosure could be made by a Court in respect of information that the Commissioner asserts is protected information is, at the very least, highly questionable, if expressed at this level of generality. 16 Leaving aside any implied powers as a superior court and the Court's equitable jurisdiction to compel production of documents or information to assist it in quelling a legal controversy, the Court has a wide armoury of specific powers to require the production of documents and information, including by discovery (Federal Court Rules 2011 (Cth) (FCR), Div 20.2), notices to produce (FCR Div 20.3), interrogatories (FCR Pt 21) and subpoenas (FCR Pt 24). The width of such powers can be seen, by way of illustration, by the Full Court's recent discussion in Crown Resorts Ltd v Zantran Pty Ltd [2020] FCAFC 1; (2020) 374 ALR 739 at 759-60 [82] (Lee J, with whom Allsop CJ and White J generally agreed) of the possibility of pre-trial oral discovery directed to a third party: see also Australian Securities and Investments Commission v Australia and New Zealand Banking Group Limited [2019] FCA 1284 (Allsop CJ). 17 Of course, these powers, whatever their origin, are subject to restraints, including by reason of the operation of common law principles, the most common being legal professional privilege (although, unlike discovery, in the context of subpoenas, this is often mistakenly seen as a right to prevent inspection not production: see Hancock v Rinehart (Privilege) [2016] NSWSC 12 (Brereton J) at [22]-[23]), or statutory provisions preventing the issue of orders for production. One such statutory restraint is ordering documents to be produced which contain protected information (as defined): see ss 355-75 and 355-205. But this statutory restraint only applies to the extent the relevant document contains protected information. If this is disputed, as a matter of fact and/or characterisation, then it will be necessary for the Court to determine this issue (including, in appropriate cases, by inspecting the relevant document). 18 As summarised above, two of the orders made by the primary judge were in the following terms: 11 By 13 August 2019, the [Commissioner], as a model litigant, review the [ATO Deed] and redact the ATO Deed in order to ensure that protected information (as defined in s 355-30 of the [Act]) contained in the ATO Deed is not visible or readable in such a fashion as to make clear the volume of text so masked. 12 Within three (3) working days after effecting such redactions, the Commissioner produce the redacted version of the ATO Deed to the solicitors for the plaintiffs herein. 19 The orders went on to provide that following this process, the redacted version of the ATO Deed was to be provided to the Associate of the primary judge pending any application that might thereafter be made. 20 Assuming for present purposes that the regime of redaction and production to the Associate amounts to an order requiring disclosure "to a court or tribunal" for the purposes of s 355-205, the statutory prohibition on disclosure could not, it seems to me, prevent an order requiring production to a court for the purpose of determining whether or not the prohibition applies, and no criminal offence would occur upon production in such circumstances. Hence there is reason to doubt the correctness of the Commissioner's submission that by reason of s 355-205, no order for production or disclosure could be made by the Court in respect of a document containing information the Commissioner asserted contained protected information, even in partially redacted form. 21 Returning to the utility of the proposed appeal, the fact that evidence closed last November on the discharge application might now provide a basis for vacating the orders for production made last July. Although the prospect of an application for inspection was not explored in the course of submissions and is not determinative, the prospect of the July orders now being regarded as superseded by the completion of the hearing of the discharge application (and its pending determination), is a further discretionary factor pointing against the grant of leave. 22 The application for leave to appeal must be dismissed for the reason identified at [14] above. The expedient adopted by the primary judge means that there will be no disclosure to the Bank of any protected information as an immediate consequence of the impugned orders and, if it ever becomes relevant, any dispute as to any application for inspection by the Bank will be determined following further argument, perhaps on an evidentiary basis other than one that caused the primary judge to remark "[a]s matters presently stand, I am not satisfied that those schedules do contain … [protected] information" (at J[90]). 23 The Commissioner should pay the costs of the application. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lee.