A v Federal Commissioner of Taxation
[2016] FCA 1307
•4 November 2016
FEDERAL COURT OF AUSTRALIA
A v Commissioner of Taxation [2016] FCA 1307
File number: NSD 1882 of 2016 Judge: PERRAM J Date of judgment: 4 November 2016 Catchwords: PRACTICE AND PROCEDURE – suppression and non-publication orders – grounds for making an order – prejudice to the proper administration of justice Legislation: Federal Court of Australia Act 1976 (Cth) ss 37AF, 37AG Cases cited: ASE16 v Australian Securities and Investments Commission [2016] FCA 321
Rinehart v Rinehart (2014) 320 ALR 195
Date of hearing: 28 October 2016 Registry: New South Wales Division: General Division National Practice Area: Administrative and Constitutional Law and Human Rights Category: Catchwords Number of paragraphs: 16 Counsel for the Applicant: Mr J Hmelnitsky SC with Mr M Cosgrove Solicitor for the Applicant: Thomson Geer Counsel for the Respondent: Mr S Lloyd SC with Ms L Coleman Solicitor for the Respondent: Australian Government Solicitor ORDERS
NSD 1882 of 2016
BETWEEN: A
Applicant
AND: COMMISSIONER OF TAXATION
Respondent
JUDGE:
PERRAM J
DATE OF ORDER:
4 NOVEMBER 2016
THE COURT ORDERS THAT:
1.The Court’s file in this matter is to be marked suppressed.
2.Access to the Electronic Court File within the Court is to be limited to the chambers of Perram J and the Senior Co-ordinator responsible for his Honour’s docket.
3.No access is to be granted to any document filed in this proceeding to any person apart from the parties or those representing them in these proceedings.
4.The applicant is to be identified as ‘A’ in all court documents including the transcript.
5.These orders are made because they are necessary to prevent prejudice to the proper administration of justice.
6.List the matter for directions on 13 November 2018 to review whether the orders should remain in place.
7.Orders 1 to 4 expire on 4 November 2026 or when the applicant commences proceedings under Part IVC of the Taxation Administration Act 1953 (Cth) in this Court, whichever comes first.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
PERRAM J:
The applicant applies for orders pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth) (‘the FCAA’) which, if made, would have the effect of restricting any access to the evidence in this case, any judgments or orders made and any information tending to identify the applicant. Orders were also sought that the proceeding be anonymised with the applicant to be referred to only as ‘A’ and the respondent as ‘X’. In addition, it was sought, at least in writing, that the whole of the proceeding be conducted in camera.
The proceeding was commenced at 4.19pm on Wednesday, 26 October 2016 by the electronic lodgement of an originating application for judicial review. It first came before the Court on Friday, 28 October 2016 at 9.30am. The hearing on the first return date took place in public. However, in light of the application which had been made for the suppression orders, I caused the matter to be removed from the publicly available Court List.
At the hearing on 28 October 2016, the Commissioner was represented by Mr Lloyd SC and the applicant by Mr Hmelnitsky SC who appeared with Mr Cosgrove of junior counsel.
By the present application, the applicant seeks to set aside various notices which have been issued to him by the Commissioner of Taxation. These notices require the provision of information about his tax affairs and the affairs of various companies with which he is associated. The notices have been issued in a context of a substantial difference of opinion between the applicant and the Commissioner as to his taxation liabilities.
The Commissioner has conducted an audit into his taxation affairs and has issued amended notices of assessment which substantially increase the applicant’s income tax liability. A part of the Commissioner’s reasons for doing so was his conclusion that the applicant has engaged in fraud and evasion. The audit process was, however, conducted without the applicant’s knowledge and he has had, at this stage, no direct input into the audit process leading to the issue of the amended assessments. Reasons for the Commissioner’s views have been produced, but this has been in circumstances where the applicant has had no opportunity to offer his side of the story.
The applicant is closely associated with a group of companies providing services in a particular industry. The industry is international in nature, and the group has members in a number of nations. There are other businesses providing similar services in the industry, albeit these are few in number. There was evidence before me from the group’s Chief Executive Officer that revelation of the fact that the applicant was involved in a dispute with the Commissioner of Taxation in which it was alleged that he had engaged in fraud and evasion was likely to have three effects:
(a)a negative impact on the reputation of the applicant;
(b)a negative impact on the business interests of the group of companies with which the applicant is associated; and
(c)industry participants with which the group transacts its business would be less likely to do business with it in the future.
The business in which the group is involved is substantial. The industry in which it operates is also large and important. There was evidence that the group’s clients commonly ask, during the negotiations leading to transactions with it, whether any of its directors are presently being accused of any crime. Although the applicant apparently is not a director of any of the group entities that engage in these transactions, his position within, and his relationship with, the group as a whole means that he is sufficiently closely associated with it that it can be said that reputational damage to him will accrue to it.
I accept these matters. I also accept that:
(a)the allegations against the applicant involve allegations of serious misconduct in response to which he has yet to adequately put his side of the story and have it considered;
(b)in the present proceeding he will have no opportunity to put his side of the story, as the issues will be confined to technical questions concerned with whether the notices should be set aside;
(c)there is a real risk that the revelation of the existence of this dispute will cause the group to lose customers to its competitors; and
(d)there is a certainty that the reputation of the applicant will be damaged.
At the moment, the whole dispute between the applicant and the Commissioner is subject to statutory requirements of confidentiality. The tax dispute has not yet found its way to this Court as an appeal under Part IVC of the Taxation Administration Act 1953. The present action, in a sense, relates to a procedural question arising as part of the taxation assessment process which, leaving aside proceedings of the present kind, is ordinarily required to be conducted in private.
The grounds for making a confidentiality order are set out in s 37AG of the FCAA, which is as follows:
37AG Grounds for making an order
(1)The Court may make a suppression order or non‑publication order on one or more of the following grounds:
(a)the order is necessary to prevent prejudice to the proper administration of justice;
(b)the order is necessary to prevent prejudice to the interests of the Commonwealth or a State or Territory in relation to national or international security;
(c) the order is necessary to protect the safety of any person;
(d)the order is necessary to avoid causing undue distress or embarrassment to a party to or witness in a criminal proceeding involving an offence of a sexual nature (including an act of indecency).
(2)A suppression order or non-publication order must specify the ground or grounds on which the order is made.
Only 1(a) is relevant.
The principles governing whether and, if so, in what circumstances an order should be made suppressing publication of certain aspects of a proceeding are well-known. They were usefully collected by Jacobson J in Rinehart v Rinehart (2014) 320 ALR 195 at [21]-[31]. There is no need to set them out, but it should at least be said that the order must be ‘necessary’ to prevent prejudice to the administration of justice (which is a high standard) and that the principle of open justice is a fundamental aspect of the system of justice in Australia. In itself, therefore, embarrassment is not a reason to make an order, except in criminal cases of a sexual nature.
Apart from that circumstance, as Jacobson J observed in Rinehart (at [28]), the reputational distress which litigation often brings about is a distress which happens in an arena where the parties are heard and in which each may make a response to the other.
But in a case such as the present this will not occur. If limits are not placed on the extent to which this proceeding may be publicised, then the allegations against the applicant will be placed in the public domain. But this will occur in circumstances where the applicant will have had no opportunity to respond, because the correctness of the Commissioner’s views will not be a matter calling for resolution in the present proceeding. Furthermore, the revelation of the dispute is likely to cause commercial damage to the group. Finally, it is not without relevance that the taxation process currently in train is required by statute to be conducted in private, although by itself this would perhaps not be such a strong point.
Rather similar circumstances led Markovic J to conclude that her Honour should make suppression and anonymisation orders in ASE16 v Australian Securities and Investments Commission [2016] FCA 321 at [86]-[94]. I agree with her Honour’s approach to the issue and propose to follow it. The key aspects are the commercial damage which will accrue to the group, and the inability of the applicant usefully to respond to the Commissioner’s fraud and evasion opinions in the present proceeding.
In those circumstances, I conclude that it is necessary for the applicant’s identity and that of the group to be suppressed to prevent prejudice to the proper administration of justice. It seems to me that these orders should remain in place until any Part IVC proceedings in this Court are commenced or the expiration of ten years, whichever comes first. I will list the matter for further directions in two years’ time to review the matter. The orders will be expressed to be made as s 37AG(2) requires, on the basis that they are necessary to prevent prejudice to the proper administration of justice.
Although an order was sought that the proceeding should be conducted in camera, I do not think this is necessary. With care, the proceeding can be conducted in public without the identity of the applicant or the group becoming known. It is also not necessary for the Commissioner to be identified by a pseudonym.
I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram. Associate:
Dated: 4 November 2016
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