International Litigation Partners Pte Ltd v Commissioner of Taxation

REASONS FOR JUDGMENT 1 This proceeding involves an appeal against an appealable objection decision under s 14ZZ of the Taxation Administration Act 1953 (Cth). The applicant is International Litigation Partners Pte Ltd and the respondent is the Commissioner of Taxation. In the course of this proceeding, the Commissioner has sought leave to inspect all documents on a file provided to this Court by the Federal Circuit Court of Australia (Federal Circuit Court) other than documents on that file relating to a child. The file in question is a Federal Circuit Court (Family Law Division) file between Mr Paul Lindholm and his former wife, apparently involving their dispute concerning property and in respect of a child of their marriage (the Family Law file). The file was produced to this Court following a request by the Commissioner under Rule 24.24 of the Federal Court Rules 2011 (Cth), which provides: Documents and things in custody of Court (1) A party who seeks production of a document or thing in the custody of the Court or of another court may inform the Registrar in writing, identifying the document or thing. (2) If the document or thing is in the custody of the Court, the Registrar must produce the document or thing: (a) in Court or to any person authorised to take evidence in the proceeding, as required by the party; or (b) as the Court directs. (3) If the document or thing is in the custody of another court, the Registrar must: (a) ask the other court to send the document or thing to the Registrar; and (b) after receiving it, produce the document or thing: (i) in Court or to any person authorised to take evidence in the proceeding as required by the party; or (ii) as the Court directs. 2 Following the Commissioner's application for access to inspect the Family Law file, and at counsel for the Commissioner's suggestion, I requested the Registrar of this Court to notify both Mr Lindholm and his former wife of the Commissioner's application. 3 Mr Lindholm's former wife does not object to access being granted. Mr Lindholm, however, opposes the Commissioner's application. This was communicated in a letter from Mr Lindholm's solicitors dated 22 May 2014. In accordance with a further direction, the Commissioner wrote to Mr Lindholm's solicitors identifying the basis upon which access and inspection were sought. 4 The letter from the Commissioner's solicitors to Mr Lindholm's solicitors explaining the basis for the application included the following paragraphs: Reason for the application to access the Family Court [sic] file 6. The issues in the Federal Court proceeding include:- (a) whether the applicant company was an Australian resident company for tax purposes because the central management and control of the applicant was exercised in Australia by Mr Paul Lindholm, or, (b) in the alternative, if the Applicant was not a resident of Australia, whether pursuant to s 7 of the International Tax Agreements Act 1953 (Cth) and Articles 4 and 5 of the double taxation treaty between Singapore and Australia, the Applicant derived profits in Australia from a litigation funding enterprise it carried on in Australia which were attributable to a permanent establishment maintained in Australia by Mr Lindholm, and thus taxable in Australia pursuant to the double tax treaty. 7. The Commissioner's contention in the Federal Court proceedings as to residence, is that: (a) the litigation funding undertaken by the Applicant in Australia was conducted in such a fashion as to amount to carrying on business in Australia and (b) the central management and control of the Applicant was exercised by Mr Lindholm In Australia. 8. In respect of the Commissioner's alternative contention as to permanent establishment, the Commissioner's contention is that the Applicant derived profits in Australia from a litigation funding enterprise it carried on in Australia which were attributable to a permanent establishment maintained in Australia by Mr Lindholm, and thus taxable in Australia pursuant to the double tax treaty. 9. Specific information that would be relevant to this issue would include: a. Mr Lindholm's involvement or that of any entity related to him, in the Applicant; b. Mr Lindholm's dealings or those of any entity related to him, with the Applicant: c. Whether Mr Lindholm or any entity related to him, has declared an interest in the Applicant and the nature of such interest; d. The relationship of any entity related to Mr Lindholm, with the Applicant. 10. Our client believes information relevant to the Federal Court proceedings, including the above matters, could be contained in affidavits and documents filed in the Family Court proceeding including but not limited to:- a. the initiating application; b. any affidavit of Mr Lindholm or any other person, which deals with the matters in paragraph 9 above; and c. any financial statements or similar documents filed by Mr Lindholm. 11. As stated above, the Commissioner does not seek access to any documents forming part of proceedings in relation to a child under Part VII of the Family Law Act 1975. 5 The Commissioner drew my attention to what might be the only decision of this Court relating to a similar application, Graham v Colonial Mutual Life Assurance Society Limited [2013] FCA 1213 (Graham). At [11], McKerracher J identified certain key considerations which he considered to be of some guidance to factors relevant to the exercise of the discretion to permit access to a Family Court file. 6 The factors which McKerracher J identified as key considerations were as follows: (a) Contrary to what I take to be the submission for CML, I do consider that Family Court WA proceedings stand in a special category. So much appears to be accepted in relation to child-related documents but, in my view, unlike a commercial dispute, for example, there are clear indications that the legislature contemplated that Family Court WA proceedings should remain private and that the exchanges arising in those proceedings should not in the ordinary course of events enter the public domain. (b) Further, in my view, access to the Family Court WA file should not be permitted until the views of the former wife are sought, obtained and considered by the Registrar in relation to access. (c) Again, contrary to the submissions for CML, the implied obligation of confidentiality is a factor to take into account. Parties engaging in dispute resolution being required to observe obligations of confidentiality would not in the ordinary course of events expect third parties to obtain access to those confidential materials. (d) Contrary to the submissions for M/s Graham, however, I am unable to discern any client legal privilege or other privilege which would be relevant to matters currently under my consideration. (e) Also contrary to the submissions for M/s Graham, all other matters being equal, particularly, public interest factors, the fact that inspection may constitute 'fishing' would not be sufficient to preclude it. However and importantly, it must be clear that some specific utility would be produced by the inspection. (f) It is accepted that the request of the Registrar of the Family Court WA that there be no copying of child-related documents should be complied with, although this presents a difficulty in this application in that the entire file which has been produced is essentially comprised of child-related documents as the dispute between the parents pertained to access, custody, and maintenance of children of the former marriage. This must, as the Registrar's request implies, be a particular consideration because the children were neither capable of instituting the proceedings themselves and/or placing evidence on record. 7 McKerracher J also referred to a decision of the Full Family Court in Oates v Q [2010] FamCAFC 202 in which the Full Court accepted that there was no prohibition placed on so-called "fishing" by the terms of the equivalent rule in the Family Court, Rule 24.13. The issue, the Full Court said, was whether the person seeking access had the requisite proper interest, in which event it was within the discretion of the Court to grant access to the entire Court record or file. In Graham itself, McKerracher J was not satisfied that inspection of the file should be permitted. At [25], his Honour concluded that, while it was evident from the authorities that a Family Court file, particularly one devoted to custody and access issues concerning children of a marriage, may become "a treasure house on issues of credit for cross-examiners", it "still demands a relatively high value in confidentiality when considering a claim for inspection and copying". 8 His Honour also considered it improbable that additional utility would be gained by access to the confidential records in the Family Court file; what would be disclosed by giving such access was personal information in relation to the children of the former wife who were uninvolved in the dispute. McKerracher J concluded that he was not satisfied that the special protection which should be afforded to the former wife and children should give way to the possibility, even the likelihood, that there may be additional information available which might be of relevance to the proceedings which were before him. 9 My attention was also drawn by the Commissioner to a decision of the Full Court of the Family Court, Commissioner of Taxation v Darling [2014] FamCAFC 59 (Darling), in which the Commissioner, by direct approach to the Family Court Registry, obtained access to certain documents relevant to a tax audit in respect of one of the parties. Having obtained access, the Commissioner then sought leave to be released from the implied obligation not to make use of those documents for purposes other than the proceedings themselves. The Full Court released the Commissioner from the undertaking and, in so doing, noted inter alia that (at [198]): (7) The affidavits and financial statements were not given in discovery or obtained under a warrant but were sworn by the parties for the purposes of the proceedings and therefore in the expectation that they might be read in open court. Having served the documents, the decision as to whether the documents would pass into the public domain moved from the control of the party who filed them. Whilst in no way determinative, this factor is of significance: Moage Ltd (in liq) v Jagelam [2002] NSWSC 953; (2002) 43 ACSR 173 at [22]. 10 The decision in Darling is apparently the subject of an application to the High Court for special leave. 11 In the present case, as the correspondence from the Commissioner's solicitors to Mr Lindholm's solicitors discloses, the issue is whether the applicant company was an Australian resident company for tax purposes on the basis that Mr Lindholm exercised, in Australia, the central management and control of the company or, in the alternative, if the applicant was not a resident of Australia, whether it derived from a litigation funding enterprise carried on in Australia profits which were attributable to a permanent establishment maintained in Australia by Mr Lindholm. 12 Accordingly, the Commissioner submitted, there is utility in the Commissioner being able to inspect the Family Law file as it may shed light on Mr Lindholm's activities. The Commissioner also submitted that the outcome in Graham is distinguishable because in the present case the Commissioner does not seek to inspect any documents relating to a child. Further, in Graham there was no utility in obtaining access to the documents in question, whereas in the present case there may well be such utility. The Commissioner submitted that the activities of Mr Lindholm are plainly a significant issue in the proceeding as disclosed in particular by [50] and [51] of the Commissioner's appeal statement. Importantly, the former wife of Mr Lindholm does not object to access being granted. Accordingly, Mr Lindholm's objection should not be seen as determinative. More to the point, no cogent reason has been advanced by Mr Lindholm as to why inspection should not be permitted. Also relevant is that secrecy provisions in the Taxation Administration Act 1953 (Cth) would prevent the documents from being further disclosed by any taxation officer. In respect of the personal and confidential nature of the documents, the Commissioner relies on the observation in Darling at [198] to which reference has already been made. 13 Insofar as the applicant in this proceeding also objected to inspection, the Commissioner's point, which I accept, is that the applicant was not a party at the Family Law proceedings. While I consider that the applicant does have standing to object to the application by the Commissioner, it is Mr Lindholm's submissions, rather than those of the applicant, which should be given weight. His submissions were as follows: (1) It is inherently unlikely, given the nature of the issues in this proceeding, that the Family Law file will be of any real utility. (2) The Family Law file involves personal information confidential to Mr Lindholm and his former wife and information relating to child custody issues the confidentiality of which, in accordance with Graham, should be given a high value. (3) It should be anticipated that there would be significant or real practical difficulty in separating out documents relating to child custody from other material, which the Commissioner seeks to inspect. (4) Unlike the situation in Darling, Mr Lindholm is not the taxpayer the subject of this proceeding. The taxpayer is International Litigation Partners Pte Limited. Further, the proceeding as between the applicant and the Commissioner is at the stage of an objection appeal. Accordingly, the circumstances are quite different from those in Darling where the Commissioner was involved in an audit process of one of the parties to those proceedings. (5) In any event, the Commissioner otherwise has, and has exercised, extensive powers to carry out audits of both International Litigation Partners Pte Limited and Mr Lindholm. This supports the submission that inspection of the Family Law file will be of little, if any, utility. 14 While I accept, in accordance with Graham and the authorities referred to therein, that the test is not one of relevance, the exercise of discretion must still involve weighing the likelihood of the Family Law file disclosing to the Commissioner anything of any real utility against the interest in preserving the confidential and personal nature of the documents contained in the file. In this respect, particular regard must be had to the fact that Mr Lindholm is not a party to this proceeding. While he is referred to in and relevant to the proceeding, he is not a party. This is a relevant distinguishing factor from the circumstances in Darling. The proceeding to which the Family Law file relates also involves issues relating to a child. I accept Mr Lindholm's submission there is likely to be substantial practical difficulty in separating documents dealing with issues that might be of relevance to the Commissioner from those which disclose information touching upon the interests and concerns of the child. 15 While the Commissioner has submitted, and it is necessarily the case, that it is pure speculation to surmise that the Family Law file does not contain relevant information, the reverse is necessarily also true. It is pure speculation on the Commissioner's part to surmise that the file might contain some relevant information. In that regard, I consider that there is force in Mr Lindholm's submission that the very nature of the issues in the present proceeding, compared to the nature of the issues in the Family Law proceeding, make it improbable that the file will yield any information of real additional utility. 16 For these reasons, I am not satisfied that the Commissioner has presented a rational foundation for inferring that such additional utility as there might be in the Commissioner inspecting the Family Law file outweighs the interest of Mr Lindholm in maintaining the confidential status of that file or, indeed, the public interest that must exist in such confidentiality being maintained. The fact that Mr Lindholm's former wife does not object to access is a relevant consideration, but the fact also remains that Mr Lindholm does object to that access, and his grounds of objection, in all of the circumstances, are persuasive. 17 Accordingly, the application for leave to inspect to the Family Law file should be dismissed. The respondent should pay Mr Lindholm's costs. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.