Deputy Commissioner of Taxation v Hawkins

1. Matrix and Mr Oates have leave pursuant to r 2.32(4) to inspect all documents, including affidavits and exhibits, filed in the proceeding on or before 21 December 2015 but not to those filed thereafter without further leave being granted. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

PAGONE J: 1 Matrix Group Limited (in liq) ("Matrix") and Mr Tom Oates apply for leave to inspect documents in this proceeding in which they are not parties. The proceeding was commenced by the Deputy Commissioner of Taxation on 21 December 2015 by originating application and was supported by a number of affidavits and exhibits. The application was heard ex parte by Gleeson J on 21 December 2015 when orders, including a freezing order, were made against Mr Garrick Michael Hawkins and Pegela Pty Ltd ("Pegela"). Her Honour also ordered that Mr Hawkins and Pegela be served with the Commissioner's application and supporting material and listed the proceeding for further hearing on 23 December 2015. Mr Hawkins and Pegela were represented at the hearing before her Honour on 23 December 2015 and orders were made for the filing of further evidence and material in the proceeding. There were no suppression or confidentiality orders, or prohibition or restriction from publication orders, sought or made at either hearing, and the proceeding was then listed for further directions on 9 February 2016. 2 On 23 December 2015 Messrs Henry Davis York wrote, on behalf of their client, Mr Oates, to the New South Wales Registrar of the Court requesting to inspect documents on the court file which were not restricted. Rule 2.32 of the Federal Court Rules 2011 (Cth) deals with inspection of documents in proceedings by parties and by persons who are not parties and provides: 2.32 Inspection of documents (1) A party may inspect any document in the proceeding except: (a) a document for which a claim of privilege has been made: (i) but not decided by the Court; or (ii) that the Court has decided is privileged; or (b) a document that the Court has ordered be confidential. (2) A person who is not a party may inspect the following documents in a proceeding in the proper Registry: (a) an originating application or cross‑claim; (b) a notice of address for service; (c) a pleading or particulars of a pleading or similar document; (d) a statement of agreed facts or an agreed statement of facts; (e) an interlocutory application; (f) a judgment or an order of the Court; (g) a notice of appeal or cross‑appeal; (h) a notice of discontinuance; (i) a notice of change of lawyer; (j) a notice of ceasing to act; (k) in a proceeding to which Division 34.7 applies: (i) an affidavit accompanying an application, or an amended application, under section 61 of the Native Title Act 1993; or (ii) an extract from the Register of Native Title Claims received by the Court from the Native Title Registrar; (l) reasons for judgment; (m) a transcript of a hearing heard in open Court. Note: Native Title Registrar and Register of Native Title Claims are defined in the Dictionary. (3) However, a person who is not a party is not entitled to inspect a document that the Court has ordered: (a) be confidential; or (b) is forbidden from, or restricted from publication to, the person or a class of persons of which the person is a member. Note: For the prohibition of publication of evidence or of the name of a party or witness, see sections 37AF and 37AI of the Act. (4) A person may apply to the Court for leave to inspect a document that the person is not otherwise entitled to inspect. (5) A person may be given a copy of a document, except a copy of the transcript in the proceeding, if the person: (a) is entitled to inspect the document; and (b) has paid the prescribed fee. Note 1: For the prescribed fee, see the Federal Court of Australia Regulations 2004. Note 2: If there is no order that a transcript is confidential, a person may, on payment of the applicable charge, obtain a copy of the transcript of a proceeding from the Court's transcript provider. Note 3: For proceedings under the Trans‑Tasman Proceedings Act, see also rule 34.70. The letter from Messrs Henry Davis York on behalf of Mr Oates explained that Mr Oates is a judgment creditor in relation to New South Wales court proceedings in which Mr Hawkins is the judgment debtor. On 24 December 2015 the associate to Gleeson J wrote to the parties to the proceeding informing them of the request from Henry Davis York and asked whether the parties opposed the grant of access, and if so, why. On 11 January 2016 the solicitors for Mr Hawkins informed the associate to her Honour that Mr Hawkins opposed Mr Oates having access to any of the documents in the matter and, in doing so, referred to there being substantial litigation between Mr Oates and Mr Hawkins since 2007 including an ongoing Court of Appeal proceeding between them. The email to her Honour's associate also referred to "a dispute with a liquidator of a company called Matrix Group Limited with whom Mr Oates had a funding arrangement". 3 On 21 January 2016 her Honour's associate wrote to the parties to the proceeding informing them that the Court had received "a request for access to several documents in this matter's file from Kemp Strang, who act for Matrix Group Limited and its liquidator, Scott Darren Pascoe". The email from the associate went on to ask whether the parties opposed the grant of access, and if so, why. The request for access by Matrix was signed by its lawyer and gave the following reason in support of the request: I act for Matrix […] and its liquidator, Scott Darren Pascoe. The First Defendant, Mr Hawkins, is a former director [of] Matrix. The Australian Taxation Office is a substantial creditor of Matrix, having lodged a proof of debt in the sum of $15,729,481.52. The liquidator wishes to understand whether these proceedings concern, or will have an impact on, the affairs and liquidation of Matrix, including but not limited to whether contemplated proceedings by Matrix against the defendants in these proceedings will be affected. In written submissions for Matrix it was also said that Mr Hawkins is a former director of Matrix and that both he and Pegela are the recipients of demands from Matrix in excess of $30 million in respect of funds that Mr Pascoe, as liquidator, considers to have been the income of Matrix that was misappropriated by Mr Hawkins and largely received by Pegela with the knowledge of the misappropriation. 4 The Commissioner's position was recorded in an email to her Honour's associate on 21 January 2016 that he had no objection to the release of the originating application and any notice of appearance but otherwise neither consented to nor opposed the requests. On 27 January 2016 the solicitors for Mr Hawkins and Pegela replied to her Honour's associate indicating that their clients had no objection to the release of the notice of appearance in the proceeding but that they opposed general access being granted to the file. The email submitted that access should be refused given (a) the long history of disputation between the respondents in this proceeding and those seeking access to the file in the proceeding and (b) the fact that those seeking access "would be granted access to protected information, being information obtained for the administration of the tax legislation". It was also submitted that these matters would unfairly prejudice the interests of Mr Hawkins and Pegela and requested that the Court refrain from acceding to the requests until the matter had been formally listed and argued. The applications by Mr Oates and Matrix were subsequently listed for oral hearing on 22 February 2016. 5 The court record of the proceeding reveals that four affidavits dated 21 December 2015 were read on the application. There were numerous exhibits to those affidavits which were relied upon for the orders sought and obtained on 21 December 2015 and which were referred to in open court in response to questions from the court. Those exhibits included materials obtained by the Commissioner in response to, and in interviews conducted pursuant to, s 264 of the Income Tax Assessment Act 1936 (Cth). Further affidavits were filed in the proceeding after 21 December 2015 which have not yet been "read" including an affidavit by Mr Hawkins dated 23 February 2016 pursuant to her Honour's orders that he provide a statement of his assets worldwide. 6 Her Honour gave directions on 9 February 2016 in applications by Mr Oates and Matrix, for the filing of submissions and supporting evidence. Submissions were filed on behalf of Matrix which also tendered documents without objection. Matrix was represented by a legal practitioner but Mr Oates did not appear although his solicitors wrote to the court informing the court that he maintained his application to inspect the unrestricted documents in the court file. Mr Hawkins and Pegela were represented by counsel and filed submissions and an affidavit by Mr Andrew Sutherland setting out some of the background to their clients' disputes with Mr Oates and Matrix. The Commissioner was represented by counsel but maintained a position of neither consenting to nor opposing the applications by Mr Oates or Matrix. 7 Members of the public do not have an unfettered right to inspect the documents in the proceeding but may be given leave to inspect documents pursuant to r 2.32(4) of the Federal Court Rules 2011 (Cth). The ability of members of the public, whether or not they have an interest, to have access to court documents is an important aspect of the general principle of open justice. Section 17(1) of the Federal Court of Australia Act 1976 (Cth) provides that the jurisdiction of the Court "shall be exercised in open court" except where authorised by law to be exercised by a judge sitting in chambers, and the objective of the administration of justice "to safeguard the public interest in open justice" is made an express requirement to be considered under s 37AE when deciding whether to make a suppression or non-publication order. The general principle of open justice is a fundamental aspect of the administration of justice, the rule of law and of public accountability. The ability to enjoy the incidents of open justice, including the right to ability to inspect documents, is not dependent upon a person having a specific legal right in relation to the proceeding or in relation to the parties to the proceeding. Similarly the enjoyment of those incidents is not limited to those with a disinterest curiosity in the proceeding or the administration of justice more generally. 8 Rule 2.32(2) of the Federal Court Rules 2011 (Cth) permits a person who is not a party to a proceeding to inspect a number of documents in a proceeding although the ability to inspect other documents is conditioned by r 2.32(4) upon the Court's grant of leave. That is because open justice is not a freestanding right and may be restricted where the interests of justice require otherwise. The factors relevant to the grant of leave under a provision akin to r 2.32(4) were considered in Van Stokkum v The Finance Brokers Supervisory Board [2002] WASC 192 where McLure J said at [27]: Where an application for access under O 67 r 11(1)(d) of the Rules is based on the principle of open justice it is necessary to have regard to the purpose and rationale of that principle and how it informs and affects related legal principles. Factors relevant to the exercise of the discretion in such circumstances include: (a) whether and if so to what extent the document has been referred to in open court; (b) the stage reached in the proceedings; (c) the contents of the document (to assess the nature and seriousness of any allegations made and whether there is any information on any subject matter which has the potential to damage the private or commercial interests of a party); (d) the nature of the proceedings; (e) whether access to the document is necessary or desirable to facilitate an understanding of the proceedings and thus of the judicial process; (f) the purpose for which access is required. In considering such factors it is important to bear in mind, however, the importance of the principle of open justice and that the public has a right to know, and to see, how justice is administered. 9 Affidavits and exhibits which have been read in proceedings are treated as evidence that has been given orally in open court and should generally be available for inspection by anyone wishing to do so unless the interests of justice require otherwise. An affidavit which has not been read in open court is treated differently because it may never be admitted into evidence and may contain untested prejudicial material that would be unfair to a party to be available for inspection by virtue only of the fact that it had been filed in a court registry. In Oldham v Capgemini Australia Pty Ltd [2015] FCA 1149 Mortimer J said at [24] to [27]: 24 The power to permit inspection of a document under r 2.32(4) is discretionary. In exercising that discretion, it is appropriate for the Court to consider first, the delineation apparent in the terms of r 2.32(2) and other documents which may be on the court file. Subject to the operation of ss 37AE to 37AL and r 2.32(3), the delineation is this. A non-party (and therefore, any member of the public) is entitled to know who the parties to a proceeding in this Court are, and to have an address (through a notice of address for service) for those parties. A member of the public is entitled to see those documents which will enable that person to understand what a proceeding in this Court is about, and how the parties' respective cases are framed: namely, the originating application and the pleadings. The public is entitled to be able to follow the course of the proceedings through processes such as interlocutory applications, appeals and discontinuances. The public is entitled to be able to see the Court's reasons for the disposition of a proceeding. 25 If there is a transcript of a hearing held in public on the Court's file, then by r 2.32(2)(m) that document may be inspected. The rationale for that document being available as of right would appear to be to mirror the ability of the public to be present in court and to listen to the evidence and argument in the course of a proceeding. 26 The entitlement of the public to be present when evidence is given in a proceeding (read with the underlying principles apparent in ss 17 and 37AE of the Federal Court Act) would suggest, subject to any competing discretionary considerations, that an affidavit which is "read" in a proceeding, and thus treated as if that evidence had been given orally in open court, should be made available for inspection: see Australian Securities and Investments Commission v Cassimatis (No 4) [2015] FCA 465 at [6]-[10], per Edelman J. An affidavit which is read is thus in no different position to oral evidence-in-chief given by a witness. To permit inspection of such an affidavit is consistent with inspection of transcript being available without leave under r 2.32(2)(m). 27 An affidavit which has not been read is likely to be treated quite differently, for the same reasons. Before it is read, it is not a person's evidence. It may never be admitted as the evidence of the deponent, for a variety of reasons. At that stage, it is a document yet to become part of the process of open justice. That is not to suggest an affidavit on a court file and not yet read in court may never be subject to an order under r 2.32(4). There may be no objection from the parties, and there may in any given case be discretionary considerations which favour its inspection. The purpose and rationale for allowing inspection is at least in part to enable members of the public to see why and how the Court had disposed of matters before it. That will usually mean that materials which have been used or deployed by the court will be available for inspection by any member of the public unless there is a countervailing reason not to allow inspection: see Seven Network Ltd v News Ltd (No 9) (2008) 148 FCR 1, [25]-[27]. Inspection will be allowed not because the party seeking inspection can show a right to the documents as against a party to the proceedings but because the workings of the Court should be open whatever may be the motive for the request to inspect. 10 The affidavits and exhibits which were referred to by the Commissioner in the application before her Honour for freezing orders may, therefore, be inspected by Matrix and Mr Oates. These formed part of the evidence given by the Commissioner in open court in the proceeding which have become part of the process of open justice. The documents may have been relied upon by the Commissioner without testing or may have been referred to in open court (as was submitted by counsel for Mr Hawkins and Pegela) only when "addressed in an abridged manner in response to questions from the Court", but they have been used and deployed by the Court and were part of the material upon which orders of the Court were made in open court. The fact that some of the material may have been read by her Honour in chambers without detailed reference in open court may be a stronger circumstance for the need to permit public inspection. In that regard Finkelstein J said in Australian Competition and Consumer Commission v ABB Transmission and Distributors Ltd (No 3) [2002] FCA 609 at [7]: The question that I must resolve is what principle should be applied when deciding whether to allow inspection in cases where leave is required. In giving the answer I propose to confine myself to those cases where a non-party seeks access to material which has been relied upon by the judge. In such a case I have no doubt that the proper approach is that access should be allowed unless the interests of justice require a different course. It is only by adopting this approach that, in a practical sense, the principle of open justice will be preserved. Put differently, in my view there is a strong presumption in favour of allowing any member of the public who wishes to do so to inspect any document or thing that is put into evidence. Inspection should only be refused in exceptional circumstances. I think that the position is a fortiori when the material has been read by the judge in private and is not read out in court. If that material is not made available for inspection then the manner in which the case has been conducted will only be known to the parties. That is an unacceptable position. In this proceeding the Commissioner tendered a number of affidavits and exhibits for use in obtaining orders from the Court without seeking orders for confidentiality, suppression or other restrictions upon publication. The material relied upon by the Commissioner included transcripts of answers which had been given, and materials which had been provided, pursuant to the exercise by the Commissioner of compulsory powers under s 264 of the Income Tax Assessment Act 1936 (Cth). It may be assumed, as was submitted, that the information and documents tendered by the Commissioner fell within the class of "protected information" within the meaning of s 355-30(1) of Schedule 1 to the Taxation Administration Act 1953 (Cth) the disclosure of which by a taxation officer without authority would be an offence. However, the prohibition against disclosure in s 355-25(1) is subject to the exception in s 355-50(1) where the disclosure is made in performing the duties of a taxation officer. There is no suggestion that any of the information or documents to which access is sought was other than properly disclosed by the Commissioner in the exercise of the Commissioner's duties or that orders for confidentiality, suppression or other restrictions upon publication ought to have been made. The Commissioner's application occurred in open court and no confidentiality or suppression order was sought by the Commissioner nor was one subsequently sought by Mr Hawkins or Pegela. 11 It was submitted by counsel for Mr Hawkins and Pegela that leave to inspect documents should be denied to Matrix and Mr Oates because access would give them an impermissible forensic advantage. The decision in Hewson v Gothard (2014) 222 FCR 59 at [71] was called in aid of that submission but that was not a case where access was sought of documents which had been used or deployed in court proceedings or which were concerned with the access contemplated by s 17 of the Federal Court of Australia Act 1976 (Cth) as reflected in r 2.32 of the Federal Court Rules 2011 (Cth). The applicants in Hewson had applied for access to copies of transcripts of examinations of persons connected with a company which had been brought into court by ASIC obeying subpoenas to produce issued on the application of the receivers conducting examinations. The Registrar had granted the receivers access to the documents subject to confidentiality undertakings acceptable to ASIC. Foster J said at 70-71: 67 In the present case, the ASIC documents were produced to the Court and then released to the Receivers. They were released to the Receivers upon strict terms of confidentiality and use. Subsequently, Jacobson J relaxed some of those conditions (Gothard) but not to an extent which would permit the Receivers merely to hand over the documents to the Hewsons and to Maurice Blackburn. 68 The ASIC documents are, in my view, very much within the control of the Court pursuant to the Court's power and authority to regulate its own processes, with particular regard to the way in which the Court allows access to documents produced in answer to subpoenas for production. The ASIC documents were brought to Court by ASIC in answer to subpoenas issued by the Receivers. The course followed was a compulsory forensic process authorised by the rules and practice of the Court. It was undertaken by the Receivers in aid of the examination undertaken by them pursuant to Pt 5.9 of the Act. 69 Thus, subject to considering the potential application of ss 486 and 511 of the Act, the Hewsons must persuade me that they should have access to the ASIC documents being documents produced in answer to subpoenas issued by the Receivers in circumstances where: (a) The transcripts of the s 19 examination comprise the records of compulsory examinations instigated by ASIC which are required to take place in private, the disposition of which records and "related books" is entirely at the discretion of ASIC, subject to the implications of its having published a protocol for dealing with such records. This is a very different setting from that which is contemplated by Pt 5.9, Div 1 of the Act; (b) The ASIC documents have been produced to the Receivers and allowed to be used by them upon strict terms and conditions as to confidentiality and use; and (c) The Hewsons have not yet commenced proceedings (as far as I know) and are only considering whether they will do so. 70 The fact that the Hewsons proposed to commence a class action pursuant to Pt IVA of the FCA Act does not take the matter any further. 71 The simple fact is that the Hewsons are contemplating ordinary commercial litigation against the former directors of a failed company and are endeavouring to gain an impermissible forensic advantage by securing access to documents which were created for an entirely different purpose. The present application is tantamount to a litigant who is contemplating action against party X seeking access to documents produced by a stranger to existing litigation involving party X for the purpose of assessing his or her prospects in contemplated litigation. This approach to litigation is not generally one which the Court has countenanced or would countenance. 72 Furthermore, it is not to the point that, if the foreshadowed proceedings are eventually commenced, the ASIC documents might one day find their way legitimately into the forensic arena created by the commencement of those proceedings. The question of whether such documents would be required to be produced and the disposition of them after production would be a matter for the Court in due course, having regard to the issues that might arise in the contemplated proceedings. The circumstances in Hewson, therefore, were not those of a request to inspect documents in a proceeding which had been used or deployed by the Court and do not cover the circumstances of an application under r 2.32(4). 12 The general principle that the public should have access to what is used or deployed in court proceedings does not depend upon the motives of a person seeking to obtain access. In R v Davis (1995) 57 FCR 512 the Full Court considered the likelihood of public disclosure by the media of a matter sought not to be made public and said at 514: Whatever [the media's] motives in reporting, their opportunity to do so arises out of a principle that is fundamental to our society and method of government: except in extraordinary circumstances, the courts of the land are open to the public. This principle arises out of the belief that exposure to public scrutiny is the surest safeguard against any risk of the courts abusing their considerable powers. As few members of the public have the time, or even the inclination, to attend courts in person, in a practical sense this principle demands that the media be free to report what goes on in them. The access to documents in the court file by any member of the public is similarly not dependent upon showing an approved motive for seeking access. There is no foundation to exclude Matrix and Mr Oates from the general class of the public able to access the documents in the court file in the absence of an order for confidentiality or suppression properly made upon supporting material. It was not established, however, that access by Matrix or Mr Oates to the documents read in court would, in any event, give them an impermissible forensic advantage. The application by Matrix, in particular, is sought by its liquidator with duties imposed upon him by law to investigate transactions. Mr Pascoe was appointed liquidator by the Court with a duty as an officer of the Court and under the Corporations Act to investigate the examinable affairs of Matrix including the business affairs of a connected entity in so far as they are or appear relevant to Matrix: see Corporations Act, s 9. There is no reason to deny a company an ability for its liquidator to inspect document used or deployed in court proceedings. 13 It was also submitted for Mr Hawkins and Pegela that permitting access of the court documents to Matrix and Mr Oates would deprive Mr Hawkins and Pegela of the benefit of the implied undertaking considered in Harman v Secretary of State for the Home Department [1983] 1 AC 280. It may be accepted, as was submitted, that the implied undertaking extends to strangers to a suit. In Patrick v Capital Finance Pty Ltd (No 4) [2003] FCA 436, Tamberlin J said at [16]: 16 Although the Chief Justice made reference to the obligation of "each party", there seems little doubt that the implied undertaking extends to and binds a stranger who is not a party to the proceeding in which the documents were discovered: see Distillers Co v Times Newspapers [1975] QB 613 at 621 and the cases discussed therein by Talbot J pp 619-620. Mason CJ proceeded to add at p 33: "It would be inequitable if a party were compelled by court process to produce private documents for the purposes of the litigation yet be exposed to publication of them for other purposes. No doubt the implied obligation must yield to inconsistent statutory provisions and to the requirements of curial process in other litigation, eg discovery and inspection, but that circumstance is not a reason for denying the existence of the implied obligation." [Emphasis in original] However, it is difficult to see how the question of implied undertaking arises (see British American Tobacco Australia Services Ltd v Cowell (2003) 8 VR 571, 593) and, in any event, the implied undertaking ceases to apply to a document which is read or referred to in open court in a way that discloses its contents: r 20.03(1) of the Federal Court Rules 2011 (Cth). In Hearne v Street (2008) 235 CLR 125 Hayne, Heydon and Crennan JJ said at [96]: 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. (emphasis added; footnotes omitted) It is not clear how access by Matrix and Mr Oates to the documents read in open court could attract the implied undertaking in light of r 20.03. However, any implied undertaking, if it arises upon the grant of access under s 2.32(4), would arise only after access is obtained and the consideration of any restriction that might conceivably arise as an implied undertaking upon the use of the documents is premature. 14 The material filed after the hearing on 21 December 2015, including the affidavit made by Mr Hawkins in the proceeding, is in a different category. On 23 December 2015 her Honour ordered Mr Hawkins to file an affidavit including a statement of Mr Hawkins' assets worldwide. Neither that affidavit nor any of the affidavits or other material filed after 21 December 2015 appears to have been used or deployed in open court: see Seven Network Ltd v News Ltd (No 9) (2005) 148 FCR 1, [25]-[27]; Dallas Buyers Club, LLC v iiNet Limited (No 1) [2014] FCA 1232 [2], [14]. It was submitted for Matrix that the affidavit by Mr Hawkins should be treated as material which had been read by the judge in private of the kind considered by Finkelstein J in Australian Competition and Consumer Commission v ABB Transmission and Distribution Limited (No 3) [2002] FCA 609 at [7] which was to be seen as a stronger case for allowing inspection than material read out in open court, however, there is no evidence that Mr Hawkins' affidavit was read by her Honour in the sense of being "used" or "deployed" by the court. 15 Accordingly, Matrix and Mr Oates have leave pursuant to r 2.32(4) to inspect all documents, including affidavits and exhibits, filed in the proceeding on or before 21 December 2015 but not to those filed thereafter without further leave being granted. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Pagone.