Leagou Pty Limited v Commissioner of Taxation [2020] FCA 1162 | Case summary | Zoe

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Leagou Pty Limited v Commissioner of Taxation [2020] FCA 1162 | Case summary | Zoe

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Background 4 The Defamation Proceedings concern statements made by Mr Jordan to the National Press Club on 5 July 2017 in response to a question from a member of the audience. They included the following: It intrigues me, if I can give another example, this Hua Wang Bank case. It was a Wickenby case It involved one promoter with over $350 million dollars we've collected. They formed this Samoan bank and did all these transactions to hide profits. And you had the principal of that scheme appearing before the House of Reps committee on tax disputes giving evidence and being cited saying how difficult and awful of the tax office. You had his barrister appearing on one of the major radio stations in Sydney … saying they are like the Gestapo, the whole lot should be sacked and sent out. And the Federal Court said it was the most disgraceful behaviour they have ever seen. They referred the matter for money laundering, insider trading and tax evasion of the worst kind. Confirmed by the Full Federal Court. Confirmed by the High Court. So here's one side, they're actually going to have the gall to appear before an inquiry to say how bad we are in terms of the way we handle disputes. The other side is the court found that it was the most disgraceful behaviour they had ever seen involving money laundering, … tax fraud and insider trading of Australian shares. So you know sometimes there is two sides to a story and I can't always tell the other side. 5 Mr Gould alleges that these statements of Mr Jordan conveyed the following defamatory meanings (or meanings not substantially different from them): (a) he has engaged in the worst kind of money laundering; (b) he has engaged in the worst kind of insider trading; and (c) he has engaged in the worst kind of tax fraud. 6 By his amended defence in the Defamation Proceedings, Mr Jordan denies that his statements conveyed the defamatory meanings alleged by Mr Gould and raises a number of substantive defences. These include defences of justification and contextual truth, pursuant to ss 25 and 26 respectively of the Uniform Defamation Acts. In each of these defences, the Commissioner pleads that the imputations pleaded by Mr Gould are substantially true. 7 Mr Jordan's particulars to the defences of justification and contextual truth include allegations that Mr Gould: (a) conducted transactions through his use of offshore companies, of which he disguised his control, and either his or his clients' ultimate beneficial ownership; (b) sought to evade Australian taxation by establishing purported banks in tax havens for the purpose of disguising his interest in those offshore entities; (c) caused Hua Wang Bank Berhad to be established and owned by a Samoan creditor controlled company in order to avoid its profits being assessable to taxation in Australia; (d) engaged in money laundering, utilising trusts and shell companies to disguise the true owners of funds held by those entities, thereby enabling financial transactions involving those entities to appear to have been with independent and unrelated third parties; and (e) engaged in dishonest conduct.

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The relevant principles 14 The Harman undertaking (the name of which derives from Harman v Secretary of State for the Home Department [1983] 1 AC 280) was stated by Hayne, Heydon and Crennan JJ in Hearne v Street [2008] HCA 36; (2008) 235 CLR 125 in the following terms: [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 … (Emphasis added and citation omitted) 15 In Esso Australia Resources Limited v Plowman [1995] HCA 19; (1995) 183 CLR 10, Mason CJ, with whom Dawson and McHugh JJ agreed, said at 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, e.g. discovery and inspection, but that circumstance is not a reason for denying the existence of the implied obligation. 16 The Harman undertaking is an obligation of substantive law: Hearne v Street at [3], [105]-[106]. Its rationale is to ensure that litigants are not subject to burdens more onerous than are strictly required for the purpose of securing that justice is done in the litigation in which coerced disclosure of documents or information is made: Hearne v Street at [107]. 17 The authorities indicate that, in order to be released from the Harman undertaking, the applicant should show the existence of "special circumstances": Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 38 FCR 217 at 223-5. The notion of "special circumstances" does not require that extraordinary factors exist before the discretion will be exercised, only that good reason must be shown in all the circumstances why, contrary to the usual position, documents produced or information obtained in one litigation should be able to be used for the advantage of a party in other litigation or for non-litigious purposes: Liberty Funding Pty Ltd v Phoenix Capital Ltd [2005] FCAFC 3; (2005) 218 ALR 283 at [31]. 18 A number of matters have been identified as bearing upon the existence of special circumstances and the exercise of the discretion. These include: 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 into the hands of the applicant; and most importantly of all, the likely contribution of the document to achieving justice in the other proceedings. See Springfield Nominees at 225; Liberty Funding at [31].

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Are the Harman undertakings applicable presently? 19 There is no difficulty in concluding that the Harman undertaking may be applicable to an affidavit of evidence filed in the Court in compliance with a court order. The passage from Hearne v Street set out above included in the class of documents which may be the subject of the undertaking, witness statements served pursuant to a judicial direction and affidavits. The plurality cited Central Queensland Cement Pty Ltd v Hardy [1989] 2 Qd R 509; Springfield Nominees at 223; and State Bank of South Australia v Smoothdale (No 2) Ltd (1995) 64 SASR 224 at 229 as indicating the applicability of the undertaking to witness statements, and Medway v Doublelock Ltd [1978] 1 WLR 710; and Re Addstone Pty Ltd (In liq); Ex parte Macks (1998) 30 ACSR 156 as supporting the applicability of the undertaking to affidavits. 20 There is, however, some difference in the authorities on the question of whether affidavits filed in compliance with orders of the Court fixing a timetable for the provision of trial evidence are disclosed under the relevant degree of coercion. Counsel for the Commissioner provided a helpful outline of submissions on this topic. 21 The issue is pertinent in the present case because, in each of the six actions, it may be inferred that the applicants filed the affidavits of Mr Gould in compliance with orders requiring the affidavits containing the lay evidence proposed to be led by them to be filed and served by a nominated date. 22 In Comfort Hotels Ltd v Wembley Stadium Ltd [1988] 1 WLR 872, Hoffman J considered that the fact that a court had made it a condition of a party's ability to lead oral evidence at the trial that notice of the evidence be given in the form of a witness statement, did not mean that a party was compelled to disclose any information or document, as the party could choose to keep the document to himself or herself, at 877. 23 The reasons of Perram J in Hua Wang Bank Berhad v Commissioner of Taxation (No 8) [2013] FCA 1021; (2013) 96 ATR 576 are also pertinent in this respect. That decision concerned, amongst other things, the application of the Commissioner for leave to use the First and Second Leagou Affidavits in the 2011 Proceedings. His Honour noted, at [1], that Leagou had been ordered to file its evidence in chief and that the First and Second Leagou Affidavits had been filed pursuant to that order. On the topic of voluntariness, Perram J said: [16] It is relevant also, I think, that the affidavit was produced by Mr Gould voluntarily in the course of the Leagou proceeding. There are a number of aspects to this. First, it is true that Leagou had been required by the Court to file, in the form of affidavits, its evidence in chief and that the evidence it served included Mr Gould's affidavit. But this Court's orders placed no legal compulsion on Mr Gould to swear the affidavit. Secondly, there is nothing to suggest that Leagou had it in its power to compel Mr Gould to swear the affidavit nor any evidence that the affidavit was prepared by him in consequence of such an exercise in compulsion. All that was compulsory as a result of the Court's orders was that if Leagou had any affidavits upon which it was going to rely then it had to serve them. That order did not require Mr Gould to do anything. 24 Likewise, in Anglo American Investments Pty Ltd (Trustee) v Commissioner of Taxation [2019] FCA 1027, Logan J said of the First Leagou Affidavit, the first HWBB Affidavit and the Bywater Affidavit, that the making of them had not been the subject of compulsion. They had instead been filed voluntarily in response to a Court order for the filing within a particular time of such affidavits as were proposed to be relied on by a particular party, at [12]. 25 In Helicopter Aerial Surveys Pty Ltd v Robertson [2015] NSWSC 2104, Brereton J took a similar view: [39] Accordingly, I seriously doubt whether in principle the implied obligation attaches to affidavits sworn and served in the ordinary way in the course of proceedings. By reference to "the ordinary way", I exclude affidavits sworn in response to orders for disclosure, such as of the type referred to in Medway v Doublelock. But, in referring above to "the ordinary course", I do not regard a mere timetable requiring affidavits to be used in proceedings to be served by a particular date as amounting to compulsory process. Such a timetable does not compel a party to disclose information that it does not wish to disclose, and it does not compel a witness to disclose any information; it simply fixes a time by which any evidence to be relied on must be served. It is quite distinct from an order which requires a party to make an affidavit deposing to certain matters, which would amount to compulsory process in the relevant sense. 26 On the other hand, in Complete Technology Pty Ltd v Toshiba (Australia) Pty Ltd (1994) 53 FCR 125, Hill J, while discussing legal professional privilege attaching to witness statements filed in accordance with a court's timetabling orders, seemed to consider that the Harman undertaking was applicable, at 132D-133D. Similarly, in Action Scaffolding & Rigging Pty Ltd (in liq) v Citadel Financial Corporation Pty Ltd [2019] FCA 327 at [150], Gleeson J, while noting the doubt expressed by Brereton J in Helicopter Aerial Surveys, regarded the affidavits in question as attracting the Harman undertaking. 27 Several of the authorities bearing upon the issue of coercion more generally were reviewed by Jackson J in Frigger v Trenfield (No 5) [2020] FCA 827. It is not necessary to refer to his Honour's review in detail. Instead, the authorities to which I have referred indicate that it is appropriate to accept the Commissioner's submission that, on the present state of the authorities, there is at least some uncertainty as to the applicability of the Harman undertaking in circumstances of the present kind. The resolution of that uncertainty should await a case in which the Court has the benefit of submissions on all sides. 28 Given the uncertainty, I consider it appropriate for the Court to proceed conservatively, that is, to assume that the Harman undertakings are applicable and that the Commissioner does require the release from the undertakings which he seeks.

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The appropriateness of determining all the applications 29 The Commissioner has filed interlocutory applications seeking release from the implied undertaking in each of the six actions listed above. As noted earlier, the interlocutory applications are brought on the instructions of the Second Commissioner of Taxation. That is because the Commissioner has delegated to the Second Commissioner responsibility for making or implementing any decisions relating to the Australian Taxation Office which concern Mr Gould's defamation proceedings. 30 No person appeared before the Court to oppose the making of the orders. 31 The solicitors for the applicants in three of the proceedings (Leagou Pty Ltd, Chemical Trustee Limited (now known as "Chemical Overseas Limited") and Derrin Brothers Properties Limited) informed the Court that their respective clients neither consent to, nor oppose, the Commissioner's interlocutory application in the proceedings concerning those applicants. The solicitor for Mr Gould, who was heard as an "interested party", informed the Court that Mr Gould neither consents to, nor opposes, any of the Commissioner's interlocutory applications. 32 Of the remaining three companies, two have been deregistered, namely, Bywater Investments Limited and Southgate Investment Funds Limited. Searches commissioned by the Commissioner in relation to the third, Hua Wang Bank Berhad, have not revealed any current registration, so that it has not been served with the applications concerning it. 33 I am satisfied that it is appropriate to hear and determine all of the Commissioner's interlocutory applications as this stage. First, it would not be reasonable to require the Commissioner to seek the re-registration of Bywater Investments and Southgate Investment Funds simply for the purposes of the present application. To do so would mean delay and expense in circumstances in which it appears improbable that those entities would take a position which differs from that of Leagou, Chemical Trustee and Derrin Brothers Properties. Secondly, I consider it appropriate to have regard on the present interlocutory applications to the findings of Perram J in Hua Wang Bank Berhad v Commissioner of Taxation [2014] FCA 1392; (2014) 100 ATR 244 (HWBB v CoT) that Hua Wang Bank Berhad, Bywater Investments and Southgate Investment Funds were controlled by Mr Gould (at [340], [344], [364], [366] and [371]) and, as noted, Mr Gould, while not consenting to the orders sought by the Commissioner, did not oppose the Court making them. Thirdly, the affidavit of Mr Gould concerning Bywater Investments was a single affidavit filed in each of the proceedings commenced by it, Chemical Trustee and Derrin Brothers Properties and those entities are not opposing the making of the orders.

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The purpose for which the releases are sought 34 The Commissioner wishes to be able to use the affidavits in the Defamation Proceedings because he contends that, in those affidavits, Mr Gould deposed to matters which were subsequently found by this Court to be false or which are contradicted by other evidence. The Commissioner refers in this respect to findings of Perram J in HWBB v CoT which included: [344] [Hua Wang Bank Berhad] was controlled by Mr Gould's company JA Investments. I am satisfied, therefore, that the Bank was yet another of Mr Gould's disguised entities … [345] As with the others, JA Investments' register gave the impression that Mr Borgas was the owner but this was simply part of Mr Gould's elaborate deceit … 35 Justice Perram also found that Mr Peter Borgas, who purportedly owned Hua Wang Bank Berhad, was Mr Gould's "puppet" and "a name for hire", at [57], [76], [295] and [326]. His Honour made a finding with respect to each of the companies in the 2011 proceedings, that their directors did not exercise independent judgment in the discharge of their offices but merely carried into effect Mr Gould's wishes in a mechanical fashion, and that their places of central management and control were in Sydney, at [60]. 36 Justice Perram concluded, at [364], in relation to Hua Wang Bank Berhad: 1. at all times Mr Gould has owned and controlled the Bank; 2. the directors of the Bank have at all times acted on his instructions; and 3. the directors were never placed in a position where they had to exercise the slightest judgment. Whilst they would not have knowingly transacted any illegal business they had no idea what the business of the Bank was and this was, therefore, an empty reservation. 37 The Commissioner referred to a number of passages in Mr Gould's affidavits which he contends are to the contrary of the findings made by Perram J. In relation to the first Leagou affidavit, the Commissioner referred to [88]-[92] in which Mr Gould had deposed "I do not hold, and have never held, any interest in HWBB". Mr Gould made a similar statement in [5] of the second Leagou affidavit. 38 The Commissioner referred to a number of matters to which Mr Gould deposed in the First HWBB affidavit, each of which suggested that Hua Wang Bank Berhad had been established independently of Mr Gould and are seemingly inconsistent with him having been in control of it. These included [24]-[34], [60]-[61], [63], [65]-[67], [71], [73], [78], [82]-[90] and [107]-[109]. I accept that each of the paragraphs to which the Commissioner referred may be capable of supporting the inference for which the Commissioner contends and, potentially, able to support the pleas of justification and contextual truth. 39 In relation to the SIF Affidavit, the Commissioner referred to [24] in which Mr Gould had deposed to the intention of a client, Mr Gowrie Smith, to establish a private bank in Samoa (which was incorporated as Hua Wang Bank Berhad); to [53]-[58] in which Mr Gould deposed to his having provided assistance to a Dr Ross to obtain finance from Southgate Investment Funds in a way suggesting that this was an arms-length transactions, when Perram J had found at [366]-[384] of the Hua Wang Bank Berhad judgment that the ultimate beneficial ownership of Southgate Investment Funds lay with Dr Ross and his wife; and to [59]-[67] in which Mr Gould had deposed to dealings with Apollo Solutions Limited in a way which suggested that these were arms-length transactions, when Perram J had found, at [228]-[230], that Apollo Solutions Limited was ultimately beneficially owned by Mr Tod McGrouther, a client of Mr Gould's, "despite the rather elaborate corporate camouflage put in place to obscure Mr McGrouther's identity". 40 In relation to the Bywater Affidavit, counsel referred to passages which are seemingly inconsistent with evidence given in the trial before Perram J by a Mr Leaver concerning Mr Gould's involvement in Derrin Brothers Properties and to passages which may be supportive of Mr Gould's involvement in money laundering. 41 It is not necessary to detail in these reasons the passages to which the Commissioner referred. It sufficient to say that I accept that those passages may be capable of supporting the inferences for which the Commissioner contends and, potentially, able to support the pleas of justification and contextual truth in the Defamation Proceedings. The purpose for which the Commissioner seeks the releases is therefore legitimate. I make no finding as to whether the affidavits do or will have the effect for which the Commissioner contends.

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The exercise of the discretion 42 A number of matters bear upon the exercise of the discretion in the present case and are supportive of it being exercised in the way for which the Commissioner contends. 43 The first is that Mr Gould made the affidavits in the very proceedings which were the subject of Mr Jordan's statements to the National Press Club and, seemingly, in relation to the same subject matters to which Mr Jordan was referring. It would not be consistent with the interest of justice, in my opinion, if Mr Jordan was not able to refer to Mr Gould's affidavits in proceedings brought by Mr Gould concerning the same subject matter. 44 Secondly, it is pertinent that the Commissioner seeks to have the documents available for use in proceedings commenced by Mr Gould and not in proceedings against him. Further, the relief which Mr Gould seeks is damages. Although the circumstances under consideration in Ex parte Coventry Newspapers Ltd [1993] QB 278 are not exactly analogous with the present case, the statement of the Court of Appeal at 292 is pertinent: [I]t is surely not to be tolerated that [police officers reasonably suspected of corruption who have brought defamation proceedings] should continue to mulct the press in damages whilst the courts disable their adversaries from an effective defence by withholding the documents from them. That we believe would be repugnant alike to justice [and] to the public … 45 Counsel for the Commissioner submitted that a matter favouring the exercise of the discretion is that each of the affidavits had, in a sense, been made voluntarily by Mr Gould and voluntarily served on the Commissioner by the applicant company in each proceeding. The decisions of Perram J and of Logan J to which I referred earlier provide support for this submission, but given that I am proceeding on the basis that the requisite degree of coercion for the applicability of the Harman undertaking was present, consider it inappropriate to attach more than modest weight to this consideration. 46 Like Logan J in Anglo American, I consider it pertinent that the documents in question are affidavits made for the purpose of providing evidence in chief of Mr Gould in Court proceedings. They were accordingly important documents to which it can be expected that Mr Gould gave proper attention to the detail involved. With respect to the two Leagou Affidavits, he affirmed their accuracy. With respect to the affidavits in the 2011 Proceedings, he swore on his oath that their contents were accurate. In my view, this tends to diminish the potential for unfairness to him in the proceedings which he has brought against Mr Jordan. 47 Finally, it is pertinent that Mr Gould, while not consenting to the orders sought by the Commissioner, does not oppose them being made. The attitude of each of Leagou, Chemical Trustee and Derrin Brothers Properties is the same. Thus, this is not a case in which the Court need be concerned, in the same way, about possible prejudice to the maker of the affidavits, or to the party which filed them.