La Mancha Africa S.A.R.L. v Commissioner of Taxation

DAVIES J: 1 These proceedings are brought by the applicant (the taxpayer) under pt IVC of the Taxation Administration Act 1953 (Cth). In the course of these proceedings, the taxpayer sought and obtained leave to issue subpoenas to three non-parties for the production of documents. The subpoenaed documents contain information of a confidential nature and the parties agreed on confidentiality regimes with two of the addressees of the subpoenas in relation to the parties' access and use of the documents produced to the Court in compliance with the subpoenas. In respect of the third subpoena, a dispute arose as between the addressee, Ernest Henry Mining Pty Ltd (Ernest Henry Mining) and the respondent (the Commissioner) in relation to whether the obligation of law commonly referred to as the Harman undertaking (or obligation) constrained the Commissioner to use the subpoenaed documents only for the purposes of these proceedings. That dispute was determined by the Court which held that the Harman undertaking did not operate to constrain the Commissioner's lawful exercise of his statutory functions and powers: La Mancha Africa S.A.R.L. v Commissioner of Taxation [2021] FCA 1564. Ernest Henry Mining and the Commissioner are now in dispute over the orders to be made and the cost orders that should follow. 2 The issue concerning the form of the orders relates to whether the Court should make confidentiality orders along the lines of the confidentiality regimes agreed to by the Commissioner in respect of the confidential material produced under the subpoenas issued to the other non-parties. Ernest Henry Mining has filed evidence to establish that the subpoenaed documents contain material that is highly confidential and commercially sensitive to it. The Commissioner does not contest the confidential nature of the information contained in the documents but has argued that Ernest Henry Mining's proposed orders are "manifestly excessive" to what is reasonably required to protect the interests of Ernest Henry Mining. Those proposed orders relevantly provide for confidentiality undertakings to be given by: (1) employees of the Commissioner; (2) external solicitors and barristers and independent experts retained by the Commissioner for the purposes of these proceedings; and (3) administrative staff of those persons. With respect to employees of the Commissioner, the undertaking is expressed not to limit any use or disclosure of the confidential material "as required or permitted by law". Subject only to the addition of the express exception, the proposed confidentiality regime was said to be "almost wholly" identical to the confidentiality regime which the Commissioner was originally prepared to agree to and "provides practical protections for [Ernest Henry Mining's] confidential material to ensure those receiving the material are cognisant of its highly confidential nature". It was submitted that access on the basis proposed is consistent with the Harman undertaking and pt 24 of the Federal Court Rules 2011 and is reasonable and proportionate in order to minimise the risk of inadvertent leakage of the confidential material. 3 I am not persuaded that the Court should make orders imposing the confidentiality regime sought by Ernest Henry Mining. This is not a case where divulging the contents of the documents to the Commissioner as a party to the proceeding of itself prejudices the commercial sensitivity of the contents of those documents which, if it were the case, may provide reason for a more rigorous confidentiality regime to be put into place. Moreover, both the implied undertaking and the secrecy provisions in div 355 of sch 1 to the Taxation Administration Act 1953 ordinarily would provide sufficient protection to Ernest Henry Mining: Cadbury Pty Ltd v Amcor Limited (No 2) [2009] FCA 663 (Cadbury) at [7]. As I understand the argument, the additional confidential regime is sought as a practical protective measure against inadvertent disclosure. However it seems to me that there is no warrant for the Court imposing a more rigid confidentiality regime where the confidentiality would otherwise be adequately protected by the obligations that exist by operation of law. To put it another way, before making such orders the Court should be satisfied that protection additional to that provided by the implied undertaking and secrecy provisions is needed in order to give sufficient protection to Ernest Henry Mining in respect of the commercially sensitive information contained in the documents produced under the subpoena. Whilst it is good practice for the Commissioner to agree to an additional confidentiality regime, where appropriate, it is not for the Court to impose such a regime on the Commissioner unless the Court considers that such orders are required in the interests of justice. The desire to protect against inadvertent disclosure is understandable but it is not suggested here that there is a legitimate concern that there may be inadvertent disclosure and, in the circumstances, I do not think that the desire of itself provides sufficient foundation to justify the Court making the orders proposed by Ernest Henry Mining. 4 Notwithstanding the protections outlined above, I consider that it is appropriate to make some orders to protect Ernest Henry Mining's interests and the orders proposed by the Commissioner strike the right balance in my view. The Commissioner's proposed orders provide for the Commissioner to inform any independent expert to whom the Commissioner provides copies of the subpoenaed documents that the information in the documents is not to be used or disclosed by that person except for the purpose of the proceeding or as otherwise authorised or required by law. The proposed orders also provide for 14 days' notice to be given by the Commissioner to Ernest Henry Mining if he intends to rely on any of the documents or their contents in evidence in the proceedings or intends to file any pleadings or particulars in the proceeding that disclose the content of the documents. Such an order appropriately provides opportunity to Ernest Henry Mining to protect its interests by seeking suppression or non-publication orders under s 37AG of the Federal Court of Australia Act 1976 (Cth) if it so chooses. The submissions for Ernest Henry Mining did not address why those orders were insufficient to protect its interests and, in the circumstances, I do not think there is reason to impose any more stringent regime on the Commissioner. The fact that the Commissioner has agreed to more onerous confidentiality regimes with the addressees of the other two subpoenas does not mean that the same regime should also apply to the documents subpoenaed by Ernest Henry Mining. Whether the Commissioner might agree to such a confidential regime is a matter for the Commissioner, subject to the Court being persuaded that such a confidential regime is justified for the protection of the confidential nature of information, which, presently, I am not. 5 There is also dispute over the costs that should follow. Both the taxpayer and Ernest Henry Mining took issue with the Commissioner putting Ernest Henry Mining to proof in relation to the confidential nature of the documents subject to the subpoena. 6 The taxpayer argued that the Commissioner should bear the costs of Ernest Henry Mining being required to establish the confidential nature of the documents in circumstances where the approach by the Commissioner was said to be contrary to the approach adopted by him with respect to the addressees of the two other subpoenas, not reasonable in the circumstances and contrary to his obligations as a model litigant. I do not accept that submission. The Commissioner was entitled to put Ernest Henry Mining to proof of the confidential nature of the documents, as would be any other litigant, in circumstances where Ernest Henry Mining sought to make a case for a more stringent confidentiality regime in relation to commercially sensitive documents: Cadbury at [7]. Further, Ernest Henry Mining has not satisfied me, for the reasons stated, that such a confidentiality regime is needed to protect its interests. 7 Ernest Henry Mining submitted that establishing the confidentiality of documents is a matter that goes to its compliance with the subpoena, and thus it is appropriate that it not be left out of pocket with respect to doing so. Its primary submission was that the Commissioner should be ordered to pay those costs because it was the Commissioner who took issue with the confidentiality of the subpoenaed material and Ernest Henry Mining merely sought judicial determination of a term of access required by the Commissioner. Alternatively it was submitted that the taxpayer should pay those costs, consistent with the underlying principle of r 24.22 of the Federal Court Rules that third parties should not be out of pocket for expenses in complying with a subpoena. I do not accept either submission. Ernest Henry Mining had the onus of establishing that the Commissioner should be required to enter into the confidentiality regime that it proposed and it was unsuccessful. Given that it was unsuccessful, there is no warrant to order the Commissioner to pay Ernest Henry Mining's costs in being put to proof in support of that confidentiality regime. Nor do I think that Ernest Henry Mining's costs should visited upon the taxpayer given that the taxpayer did not require Ernest Henry Mining to establish its claim for the imposition of that confidentiality regime. 8 It was also submitted by Ernest Henry Mining that the Commissioner ought to pay its costs or, alternatively, that there be no order as to costs, in relation to the Harman undertaking issue on the basis that the Harman undertaking issue ought properly be regarded as a test case which raised a point of general importance "for the benefit of the administration of taxation laws by the Commissioner", as evidenced by AGS's public statement following the publication of the Court's reasons that the decision clarified the law and was "likely to have widespread application for Commonwealth litigants, regulators and law enforcement agencies". However, the application to the Court was not conducted as a test case and it does not follow that the case ought to be considered as a test case because the decision may have broader significance than as between the parties themselves. The Harman undertaking issue arose for judicial determination because Ernest Henry Mining objected to the Commissioner carving out of the confidentiality regime the exception in relation to employees of the Australian Taxation Office that: … nothing in the undertaking limits any use or disclosure that [the taxation officer] may make of any part of the Confidential Material or the Information as required or permitted by law including, without limitation, in administering a 'taxation law' as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (Cth) and including, without limitation, as required or permitted by section 166 of the Income Tax Assessment Act 1936 (Cth). It is recognised by the authorities that test cases may warrant a special costs rule on the basis that the costs incurred are "incidental to the proper exercise of public administration": Oshlack v Richmond River Council (1998) 193 CLR 72 at [136]. But here the question as to whether the Harman undertaking prevented the Commissioner from using the subpoenaed material for purposes outside the proceeding, absent leave of the Court, did not arise in the context of "public interest" litigation but in the context of Ernest Henry Mining seeking to have resolved whether or not the Harman undertaking precluded the Commissioner from using the documents it produced under subpoena other than for the purposes of the proceeding. In the circumstances, there is no warrant for departing from the usual rule that costs should follow the event and the Commissioner should be awarded the costs he incurred in relation to the determination of that issue. 9 The Commissioner sought an order that those costs, if awarded in his favour, be payable forthwith. No submissions were made either in support of or against that order but I think that the Commissioner should be entitled to have his costs taxed and made payable forthwith, rather than adopting the ordinary rule under r 40.13 of the Federal Court Rules in respect of interlocutory applications (assuming that the application should be characterised as interlocutory) as the issues agitated both in La Mancha Africa S.A.R.L. v Commissioner of Taxation [2021] FCA 1564 and these reasons for decision stand alone from the proceeding itself and have been finalised by the orders made. 10 Finally, the taxpayer sought an order that Ernest Henry Mining should pay its costs in relation to the Harman undertaking issue on the basis that, as a party to the substantive proceeding and the party which had the subpoena issued to Ernest Henry Mining, its presence at the hearing was entirely appropriate. Contrary to the taxpayer's submission, its role was not merely passive, however. The taxpayer elected to play a supporting role to Ernest Henry Mining, filing a written submission in support of Ernest Henry Mining's case and appearing at the hearing. In the circumstances, in my view, the appropriate order should be that it bear its own costs (including its costs in relation to this judgment). I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Davies.