Binqld Finances Pty Ltd (In Liq) v Israel Discount Bank Limited; In the Matter of Binqld Finances Pty Ltd (In Liq)
[2019] FCA 1186
•31 July 2019
FEDERAL COURT OF AUSTRALIA
Binqld Finances Pty Ltd (In Liq) v Israel Discount Bank Limited; In the Matter of Binqld Finances Pty Ltd (In Liq) [2019] FCA 1186
File number: NSD 1600 of 2015 Judge: FOSTER J Date of judgment: 31 July 2019 Catchwords: TAXATION – Meaning of “protected information” in s 355-30 of Sch 1 to the Taxation Administration Act 1953 (Cth) – whether information in a settlement deed with the Australia Taxation Office is “protected information” – whether disclosure of information would be an offence under s 355-155 of Sch 1 to the Taxation Administration Act 1953 (Cth) – whether the exceptions in s 355-175 and/or s 355-205 of Sch 1 to the Taxation Administration Act 1953 (Cth) engaged or applicable – whether disclosure of “protected information” “necessary” to give effect to a provision of taxation law – whether entire deed “protected information” – whether disclosure of non-protected information in an ATO settlement deed would contravene s 355-155 of Sch 1 to the Taxation Administration Act 1953 (Cth)
PRACTICE AND PROCEDURE – Application for suppression orders in relation to a settlement deed – whether power under s 37AF of the Federal Court of Australia Act 1976 (Cth) should be exercised – whether sufficient grounds established under s 37AG(1) of the Federal Court of Australia Act 1976 (Cth) – whether grounds specified in accordance with s 37AG(2) of the Federal Court of Australia Act 1976 (Cth) – whether necessary to prevent prejudice to the proper administration of justice – whether the risk of exposure to cross-claims a sufficient reason to suppress – whether disclosure of personal information a sufficient reason to suppress
Legislation: Federal Court of Australia Act 1976 (Cth), ss 37AE, 37AF and 37AG
Taxation Administration Act 1953 (Cth), ss 355-10, 355-25, 355-30, 355-50, 355-75, 355-155, 355-175 and 355-205
Federal Court Rules 2011, r 10.43(4)(c), r 13.01(1)
Cases cited: Australian Competition and Consumer Commission v Cascade Coal Pty Ltd (No 4) [2018] FCA 1243
BCI Finances Pty Limited (in liq) v Binetter (No 4) (2016) 348 ALR 227; [2016] FCA 1351
BCI Finances Pty Limited (in liq) v Binetter (No 5) [2017] FCA 1524
BCI Finances Pty Limited (in liq) v Binetter (No 6) [2018] FCA 500
BCI Finances Pty Ltd (in liq) v Binetter (2018) 362 ALR 597; [2018] FCAFC 189
Binqld Finances Pty Ltd (In Liq) v Tamarama Fresh Juices Australia Pty Limited; In the Matter of Binqld Finances Pty Ltd (In Liq) (2017) 156 ALD 49; [2017] FCA 358
Burswood Management Limited v Attorney-General (Cth) (1990) 23 FCR 144
Elliott v State of Victoria(Department of Education & Training) [2018] FCA 1029
Federal Commissioner of Taxation v Tamarama Fresh Juices Australia Pty Ltd (2017) 252 FCR 471
Hogan v Australian Crime Commission (2010) 240 CLR 651
Minister for Immigration and Multicultural Affairs v Singh (2000) 98 FCR 469
Sheahan, in the matter of BCI Finances Pty Limited (in liq) [2018] FCA 1499
White v Norman (2012) 199 FCR 488
Date of hearing: 11 February 2019 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 125 Counsel for the Plaintiffs: Mr JA Arnott and Mr B Mostafa Solicitor for the Plaintiffs: Clayton Utz Counsel for the Defendant: Mr TE O’Brien Solicitor for the Defendant: Arnold Bloch Leibler Counsel for Tamarama Fresh Juices Australia Pty Limited (ACN 003 994 072), 12 Years Juice Pty Ltd (ACN 102 660 024), 12 Years Juice Foods Pty Ltd (ACN 107 914 554), 12 Years Juice Foods Australia Pty Ltd (ACN 110 000 265), 12 Years Juice Franchising Systems Pty Limited (ACN 102 561 928), Real Juice Pty Ltd (ACN 102 244 842), Winmar Investment Holdings Pty Ltd (ACN 111 902 517), Dunba Investments Pty Ltd (ACN 125 403 072), Dunmaf Investments Pty Ltd (ACN 125 403 072), Ligon 237 Pty Limited (ACN 003 994 090), Andrew Binetter and Margaret Binetter: Mr A Russoniello Solicitor for Tamarama Fresh Juices Australia Pty Limited (ACN 003 994 072), 12 Years Juice Pty Ltd (ACN 102 660 024), 12 Years Juice Foods Pty Ltd (ACN 107 914 554), 12 Years Juice Foods Australia Pty Ltd (ACN 110 000 265), 12 Years Juice Franchising Systems Pty Limited (ACN 102 561 928) and Real Juice Pty Ltd (ACN 102 244 842): Speed and Stracey Lawyers Solicitor for Winmar Investment Holdings Pty Ltd (ACN 111 902 517), Dunba Investments Pty Ltd (ACN 125 403 072), Dunmaf Investments Pty Ltd (ACN 125 403 072), Ligon 237 Pty Limited (ACN 003 994 090), Andrew Binetter and Margaret Binetter: Pitcher Partners Legal (NSW) Pty Limited Counsel for the Commissioner of Taxation of the Commonwealth of
Australia:Mr SB Lloyd SC and Mr LT Livingston Solicitor for the Commissioner of Taxation of the Commonwealth of Australia: Australian Government Solicitor Counsel for Michael Thomas Robert Binetter: Mr CD Freeman Solicitor for Michael Thomas Robert Binetter: Braddon Marx Lawyers ORDERS
NSD 1600 of 2015 IN THE MATTER OF BINQLD FINANCES PTY LTD (IN LIQUIDATION)
BETWEEN: BINQLD FINANCES PTY LTD (ACN 119 243 220) (IN LIQUIDATION)
First Plaintiff
LIGON 268 PTY LTD (ACN 051 824 081) (IN LIQUIDATION)
Second Plaintiff
E.G.L. DEVELOPMENT (CANBERRA) PTY LIMITED (ACN 008 517 646) (IN LIQUIDATION)
Third Plaintiff
AND: ISRAEL DISCOUNT BANK LIMITED
Defendant (formerly the Thirteenth Defendant)
JUDGE:
FOSTER J
DATE OF ORDER:
31 JULY 2019
THE COURT ORDERS THAT:
1.Order 2 made by Foster J on 1 November 2018 be vacated.
2.By 19 August 2019, the plaintiffs, Tamarama Fresh Juices Australia Pty Limited (ACN 003 994 072) and the other five corporations named as applicants in the Interlocutory Application filed herein on 8 February 2019 (the Nudie entities), Winmar Investment Holdings Pty Ltd (ACN 111 902 517) and the other three corporations named as applicants in the Interlocutory Application filed herein on 8 February 2019 (the Winmar companies), Andrew Binetter, Margaret Binetter and Michael Thomas Robert Binetter, and their respective legal representatives, do all things reasonably necessary to agree appropriate terms as to confidentiality and use upon which access to the Deed of Settlement, Release and Covenant Not to Sue dated 5 October 2018, to which the plaintiffs, the liquidators of the plaintiffs and others are parties (Settlement Deed) (excluding Annexure 18 thereto) by the legal representatives and two named executives of the thirteenth defendant (IDB) is to be provided.
3.In the event that terms as to access are agreed, within three (3) working days after such agreement has been reached, the solicitors for the plaintiffs produce a copy of the Settlement Deed to the solicitors for IDB and thereafter access to the said Deed upon the agreed terms may be exercised by the legal representatives for IDB and the two named executives of IDB authorised to have such access.
4.In the event that terms as to access and use are not agreed by 19 August 2019, the solicitors for the plaintiffs are immediately to inform the Associate to Foster J of that fact so that arrangements to re-list the matter can be made.
5.The Interlocutory Application filed by the Nudie entities on 8 February 2019 otherwise be dismissed.
6.The Nudie entities pay IDB’s costs of and incidental to the said Interlocutory Application.
7.The Interlocutory Application filed on 8 February 2019 by the Winmar companies, Andrew Binetter and Margaret Binetter otherwise be dismissed.
8.The Winmar companies, Andrew Binetter and Margaret Binetter pay IDB’s costs of and incidental to the said Interlocutory Application.
9.The Interlocutory Application filed by Michael Thomas Robert Binetter on 8 February 2019 otherwise be dismissed.
10.Michael Thomas Robert Binetter pay IDB’s costs of and incidental to the said Interlocutory Application.
11.By 13 August 2019, the Commissioner of Taxation of the Commonwealth of Australia (the Commissioner), as a model litigant, review the Deed dated 5 October 2018 between himself and others, a draft of which is Annexure 18 to the Settlement Deed (the ATO Deed), and redact the ATO Deed in order to ensure that protected information (as defined in s 355-30 of the Taxation Administration Act 1953 (Cth)) contained in the ATO Deed is not visible or readable in such a fashion as to make clear the volume of text so masked.
12.Within three (3) working days after effecting such redactions, the Commissioner produce the redacted version of the ATO Deed to the solicitors for the plaintiffs herein.
13.Forthwith after receiving the said redacted version of the ATO Deed, the solicitors for the plaintiffs produce that document to the Associate to Foster J.
14.The Interlocutory Application filed by the Commissioner on 30 January 2019 otherwise be dismissed.
15.The question of the costs of the said Interlocutory Application be reserved, such costs to be dealt with on the papers after the proposed redacted ATO Deed has been produced to the Associate to Foster J.
16.By 4.00 pm on 19 August 2019, IDB file and serve any further evidence and submissions upon which it intends to rely at the hearing of its Interlocutory Application filed on 10 February 2017 (including in relation to its application for a permanent stay) (IDB’s Discharge Application).
17.By 4.00 pm on 5 September 2019, the plaintiffs file and serve any further evidence and submissions upon which they intend to rely at the hearing of IDB’s Discharge Application (including in relation to any application by IDB for a permanent stay).
18.By 16 September 2019, IDB file and serve any evidence and submissions in reply.
19.IDB’s Discharge Application be listed for hearing on a date to be fixed by arrangement with the Associate to Foster J.
20.There be no other orders as to the costs of any of the Interlocutory Applications referred to at Orders 1–19 above.
21.Liberty be granted to all parties to apply on three (3) days’ notice.
22.The proceeding be listed for further case management at 9.30 am on 19 September 2019.
THE COURT NOTES THAT:
23.The plaintiffs are to bear their own costs of and incidental to the Interlocutory Applications referred to above including in respect of the listings on 1 November 2018, 20 December 2018 and 11 February 2019.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
FOSTER J:
The thirteenth defendant in this proceeding, Israel Discount Bank Limited (IDB), is a corporation which was incorporated in Israel and which carries on business there. It has no presence in Australia.
On 30 September 2016, I granted leave to the plaintiffs to serve IDB outside Australia in Israel with the Originating Application, Genuine Steps Statement and Amended Statement of Claim which they had filed in this proceeding. The plaintiffs’ application for that leave was made ex parte. Pursuant to that leave, service was effected on IDB in Israel in accordance with the Hague Convention as to service of process on 4 December 2016.
By Interlocutory Application filed on 10 February 2017 (IDB’s Discharge Application), IDB applied for the following relief:
1.The Thirteenth Defendant seeks an order under r 13.01(1)(d) of the Rules to discharge the orders of Foster J made on 30 September 2016 giving leave to the First, Second and Third Plaintiffs to serve the Originating Application dated and filed 3 December 2015 in this proceeding (NSD 1600 of 2015) on Israel Discount Bank Limited, in Israel in accordance with the Hague Convention.
2.Further or alternatively, the Thirteenth Defendant seeks an order under r 13.01(1)(b) of the Rules to set aside service of the Originating Application dated and filed 3 December 2015 in this proceeding (NSD 1600 of 2015) on Israel Discount Bank Limited, in Israel in accordance with the Hague Convention.
3.Further or alternatively, the Thirteenth Defendant seeks an order for a permanent stay of the proceedings against it.
On 29 September 2017, I heard IDB’s Discharge Application.
After I reserved my decision in respect of that application, the plaintiffs settled all of their claims in this proceeding except those against IDB. IDB is the only defendant which remains a party to this proceeding. The settlement also dealt with certain other claims made by the plaintiffs against persons and entities who were not parties to this proceeding. In these Reasons, I shall refer to this overall settlement as “the settlement”.
In light of the settlement, IDB applied to re-open its case in support of the claims for relief made by it in its Discharge Application. It made that application upon the ground (inter alia) that it was entitled to have access to the relevant settlement documentation in order to investigate whether or not the existence and terms of that documentation had any impact upon the case which it had sought to advance in support of the claims for relief made by it in its Discharge Application and, if so, the nature and extent of that impact. In particular, IDB wished to investigate whether the plaintiffs’ claims for compensation in this proceeding were fatally damaged by the circumstance that the plaintiffs had recovered substantial compensation under the settlement. Should that turn out to be the case, it is likely that IDB would wish to argue that the plaintiffs have not established the requisite prima facie case for the purposes of the Federal Court Rules 2011 (FCR) dealing with service out of the jurisdiction (r 10.43(4)(c) FCR).
In order to progress matters, on 1 November 2018, I ordered the plaintiffs to produce to IDB by 14 November 2018 copies of:
(a)Any executed version of the draft settlement agreement annexed to the affidavit of Ian Russell Lock sworn on 28 September 2018 and filed in proceeding SAD 233 of 2018 which was the proceeding in which the plaintiffs sought an order approving their entry into the draft settlement documentation;
(b)Any executed version of the collateral agreement referred to in Sheahan, in the matter of BCI Finances Pty Limited (in liq) [2018] FCA 1499 (being the judgment delivered by White J on 28 September 2018 in the proceeding referred to in subpar (a) above) at [20]; and
(c)Any other related settlement agreements entered into by any of the first to third plaintiffs which are relevant to the loss and damage claimed in this proceeding.
On the same day, I also granted leave to IDB to reopen its case in support of its Discharge Application.
At the same time, I required the plaintiffs to amend their Originating Application and Amended Statement of Claim so as to remove therefrom all matter that was not relevant to their sole remaining case, that is to say, their case against IDB.
By early November 2018, I had been informed that some of the parties to the settlement wished to apply to the Court for orders preventing or restricting access to the settlement documentation including access by IDB. As a result, on 20 December 2018, I extended the time for compliance with the order for production which I had made on 1 November 2018.
On 28 November 2018, I required the plaintiffs to produce to me for my eyes only for the time being a complete unredacted copy of the main settlement agreement (as executed) being the Deed of Settlement, Release and Covenant Not to Sue dated 5 October 2018, to which the plaintiffs, the liquidators of the plaintiffs and others were parties (Settlement Deed). On 30 November 2018, at the request of the Commissioner of Taxation (Commissioner), who had, by then, informed the Court that he opposed any access to Annexure 18 to the Settlement Deed (hereinafter called “the ATO Deed”) being granted to any person pending the determination of an application foreshadowed by him in which he intended to seek an order relieving the plaintiffs from the obligation to produce the ATO Deed, I varied that requirement by no longer requiring production of the ATO Deed.
On 21 December 2018, I varied the orders which I had made on 1 November 2018 and made additional orders. In particular, I released the plaintiffs from their obligation to produce to IDB the Settlement Deed and other documents and ordered that they not be required to produce such documents until after the access dispute has been decided. I also formally deferred the further hearing of IDB’s Discharge Application until after the access dispute has been decided.
There are presently before the Court four applications by which a number of corporations, which were previously defendants in this proceeding, the Commissioner and other persons and entities, all seek orders suppressing certain parts of the Settlement Deed. If successful, those applications would deny to IDB access to parts of the Settlement Deed. The plaintiffs also oppose IDB having access to parts of the Settlement Deed but do so somewhat less vigorously. They have not made any formal suppression application. However, they consider that they are bound by contractual confidentiality obligations not to voluntarily disclose the contents of the Settlement Deed and have made that point to the Court.
The Settlement Deed was intended to record the settlement of all outstanding disputes among the parties to that Deed. Those disputes concerned claims made by the plaintiffs and others in proceeding SAD 5 of 2015, and related appeals, and the claims made by the plaintiffs in this proceeding. The plaintiffs’ claims against Gary Binetter in proceeding SAD 5 of 2015 and against IDB in this proceeding were excluded from the settlement.
Under the settlement, the plaintiffs were required to discontinue all of their claims made in this proceeding against all remaining defendants except IDB. In accordance with that obligation, and pursuant to leave granted by the Court on 11 October 2018, a Notice of Discontinuance dated 11 October 2018 was filed on 12 October 2018. By that Notice, the plaintiffs formally discontinued all of the claims in this proceeding which they had made against all remaining defendants except IDB. The plaintiffs had previously discontinued their claims against the eleventh and twelfth defendants (Bank Hapoalim B.M. and Bank Hapoalim (Switzerland) Limited). It appears that those claims were discontinued as part of a settlement between the plaintiffs and those banks.
There are eighteen groups of persons and entities who are parties to the Settlement Deed.
For present purposes, the relevant parties are: The plaintiffs in this proceeding, the liquidators of the plaintiffs (Messrs Sheahan and Lock), the group of corporations known as “the Nudie entities” (formerly the first and third to seventh defendants herein), the group of corporations known as “the Winmar companies” (formerly the eighth, ninth and tenth defendants herein), Ligon 237 Pty Limited (formerly the second defendant herein), Margaret Binetter, Andrew John Binetter and Michael Thomas Robert Binetter, all of whom were defendants in proceeding SAD 5 of 2015 but not parties to this proceeding. Other corporations associated with the Binetter family were also parties to the Settlement Deed. The Commissioner is not a party to the Settlement Deed.
In addition to addressing the claims made by the plaintiffs in the two sets of proceedings to which I have referred, the Settlement Deed also addressed claims made by the Commissioner against certain members of the Binetter family and their associated corporate and trust entities. This was done even though the Commissioner was not a party to the Settlement Deed.
In particular, the ATO Deed comprised a document described in the Settlement Deed as “Commissioner’s Deed”. I will refer to the ATO Deed in a little more detail later in these Reasons.
All applicants in the applications presently before me seek an order preventing access to any part of the ATO Deed or to any deed substantially in the same form as the ATO Deed which was subsequently executed by the parties thereto. In addition, the Binetter applicants seek an order placing restrictions upon the extent of access that might be granted to IDB, and its legal representatives, to the Settlement Deed itself.
At the moment, pursuant to orders made by me, there has been produced to me (and to me alone) an unredacted copy of the Settlement Deed excluding the ATO Deed. In addition, a redacted copy of the Settlement Deed has been made available to me and to the legal representatives of IDB. That redacted copy Deed contains redactions of parts of the text of the Settlement Deed itself and also excludes the ATO Deed entirely. The text which has been redacted is substantial. Initially, the parties seeking to keep the Settlement Deed confidential resisted being required to provide any part of the Settlement Deed, redacted or unredacted, to IDB. However, in the end, a sensible temporary arrangement has been agreed pursuant to which the legal representatives of IDB now have confidential access to the redacted copy of the Settlement Deed itself. As I have already noted, the ATO Deed has not been provided to IDB or its legal representatives.
I now set out the precise relief being sought by each of those persons and entities who seek orders suppressing the Settlement Deed and related documentation, or parts thereof.
On 30 January 2019, the Commissioner filed an Interlocutory Application (the Commissioner’s IA) in which he sought orders that:
1.Order 2 of the Order of Justice Foster dated 1 November 2018 be varied, as follows:
2.By 14 November 2018, the plaintiffs produce to the thirteenth defendant copies of:
(a)Any executed version of the draft settlement agreement annexed to the affidavit of Ian Russell Lock sworn on 28 September 2018, save for Annexure 18, which is a copy of a Deed of Settlement entered into by the Commissioner of Taxation;
(b)
…and(c)Any other related settlement agreements entered into by any of the first to third plaintiffs which are relevant to the loss and damage claimed in this proceeding, save for any settlement agreements or settlement terms entered into by the Commissioner of Taxation.
On 8 February 2019, the Nudie entities filed an Interlocutory Application (the Nudie entities’ IA) in which they sought orders that:
1.Until further order, pursuant to section 37AF of the Federal Court of Australia Act 1976 (Cth), to prevent any prejudice to the proper administration of justice:
(i)Annexure A to the Applicants’ Written Submissions, dated 29 January 2018 (Confidential Document), must be marked as confidential on the Court’s file and must not be available for inspection, disclosed in open court or disclosed in the open part of any court transcript; and
(ii)the Confidential Document must continue to be treated by senior counsel and junior counsel for the Thirteenth Defendant as confidential and must not be made available for inspection by the Thirteenth Defendant or the public, disclosed in open court other than or disclosed in the open part of any court transcript.
2. Order 2 of the Court made on 1 November 2018 is vacated.
3.Annexure A to the First to Tenth Defendant’s Written Submissions, dated 6 November 2018, shall be removed from the Court file and returned to the Applicants forthwith.
The “Confidential Document” referred to in the Nudie entities’ Interlocutory Application is the redacted version of the Settlement Deed itself (excluding the ATO Deed) which had been previously made available to the Court and to the legal representatives of IDB.
Also on 8 February 2019, the Winmar companies, Andrew Binetter, Margaret Binetter and Michael Binetter filed Interlocutory Applications in which they sought substantially the same relief as had been sought by the Nudie entities in their Interlocutory Application filed on the same day.
On 11 February 2019, I heard the four Interlocutory Applications by which the Commissioner and the Binetter interests seek to prevent or restrict access to the Settlement Deed and reserved my decision in respect of those applications on that day. On 11 February 2019, I also made orders that:
1.The plaintiffs have leave to amend their Further Amended Originating Application in accordance with the draft Second Further Amended Originating Application annexed to the affidavit of Tobin Philip Meagher sworn on 17 December 2018 and filed in this proceeding.
2.The plaintiffs have leave to amend their Second Further Amended Statement of Claim in accordance with the draft Third Further Amended Statement of Claim annexed to the Written Submissions of the plaintiffs filed in this proceeding on 4 February 2019.
3.By 13 February 2019, the plaintiffs file and serve the amended documents the subject of the leave granted in pars 1 and 2 above.
4.The plaintiffs pay the costs of the thirteenth defendant thrown away by reason of the amendments the subject of the leave granted in pars and 1 and 2 above.
THE COURT NOTES THAT:
5.The thirteenth defendant contends that the costs thrown away by reason of the said amendments within the meaning of par 4 above are all of the costs of the proceeding as between the plaintiffs and the thirteenth defendant to date.
THE COURT ALSO ORDERS THAT:
6.The question of whether the thirteenth defendant’s contention as noted in par 5 above should be accepted by the Court be reserved for later consideration by the Court.
The plaintiffs subsequently filed (on 12 February 2019) their Second Further Amended Originating Application and Third Further Amended Statement of Claim. These are the pleadings which the plaintiffs intend to be considered by the Court when it comes to hear and determine IDB’s Discharge Application.
BACKGROUND
In Binqld Finances Pty Ltd (In Liq) v Tamarama Fresh Juices Australia Pty Limited; In the Matter of Binqld Finances Pty Ltd (In Liq) (2017) 156 ALD 49; [2017] FCA 358 (Binqld No 1) at 50–52 [7]–[15], I set out some of the background relevant to the present applications. I said:
On 15 January 2015, the liquidators of B.C.I. Finances Pty Limited (In Liq) (BCI Finances) (Messrs Sheahan and Lock) caused that company to commence a proceeding against a number of individuals who are members of the Binetter family and against four corporations associated with that family, Erma Nominees Pty Limited, Ligon 159 Pty Limited, Ligon 158 Pty Limited and Milgerd Nominees Pty Ltd. That proceeding was commenced in the South Australian Registry of this Court (proceeding SAD 5 of 2015) (SAD5). It was subsequently transferred to the Sydney Registry. On 5 June 2015, I granted leave to BCI Finances to add as additional plaintiffs each of E.G.L. Development (Canberra) Pty Limited (In Liq), Ligon 268 Pty Ltd (In Liq) and Binqld Finances Pty Ltd (In Liq).
The Court has had to deal with many interlocutory applications in SAD5 over the last two years including multiple applications for and in relation to freezing orders.
On 18 November 2016, Gleeson J delivered a judgment in SAD5 by which her Honour determined all questions of liability (BCI Finances Pty Limited (In Liq) v Binetter (No 4) (2016) 117 ACSR 18; [2016] FCA 1351) (the liability judgment).
In the liability judgment, her Honour indicated that, subject to being satisfied that some relief was warranted, she would find in favour of the plaintiffs against all defendants except Margaret Binetter (the third defendant) and Gary Robert Binetter (the fifth defendant). Her Honour reserved for further consideration all questions of relief and the question of costs.
Her Honour did not deal with pecuniary relief in the liability judgment. Her Honour has since heard the plaintiffs’ application for such relief and has reserved her judgment in respect of that application.
It can be immediately seen from even the most cursory consideration of the liability judgment that SAD5 is a very complex piece of litigation involving many questions of fact and law. It is sufficient for present purposes for me to adopt [1]–[8] of her Honour’s Reasons for Judgment (reasons) as providing an adequate thumbnail sketch of the subject matter of SAD5. At those paragraphs, her Honour said:
The applicants are four companies formerly associated with the families of Erwin and Emil Binetter, two brothers who came to Australia from Eastern Europe as refugees in 1950. Erwin and Emil Binetter are now both deceased.
After an extensive audit by the Australian Taxation Office (“ATO”) which commenced in about July 2006 (“tax audit”), the Commissioner of Taxation (“Commissioner”) issued notices of assessment, amended assessment and penalty assessment to the various applicants between December 2009 and July 2010 (“revised assessments”). In the case of the second applicant (“EGL” or “EGL Development”), the revised assessments go back as far as the year ended 30 June 1992. In order to issue revised assessments going back so far in time, the Commissioner was required to form the opinion that there had been fraud or evasion.
After several years disputing the revised assessments, the applicants went into liquidation. The joint and several liquidators of each of the applicants are John Sheahan and Ian Russell Lock (“liquidators”).
The liquidators claim that the applicants are entitled to the monetary relief from the respondents, quantified principally by reference to the tax liabilities arising from the revised assessments. Claims for relief are also made with respect to the costs of the winding up of the applicants and there are claims for ancillary relief in the nature of charging orders over various identified assets. The claims totalled over $120 million as at 27 September 2015.
In their opening submissions, the liquidators stated that the claims are primarily made on the basis of rights to equitable compensation.
The claims are pleaded in a second further amended statement of claim filed 7 September 2015 (“statement of claim”). In summary, claims are based on allegations of:
(1)breach of fiduciary, common law, equitable and or statutory duties owed to the various applicants by various respondents who were directors of the applicants at various times; and
(2)knowing participation by other respondents in the breaches of duty by the director respondents.
The alleged breaches by the director respondents concern the applicants’ dealings with two banks in Israel: the Bank Hapoalim in the case of the first applicant (“BCI” or “BCI Finances”) and the Israel Discount Bank (“IDB”) in the case of the other applicants.
The liquidators’ case is based on a complex analysis of the transactions between the applicants and the two Israeli banks, and on the factual context in which those transactions took place from 1988. In summary, the liquidators argue that the respondents participated in a scheme for the purpose of evading or avoiding liability to pay income tax. The alleged scheme involved, as an important element, using funds in Switzerland or Israel (sometimes referred to as “offshore deposits”) as security for advances from the Israeli banks of amounts equivalent to the offshore deposits. The liquidators contend that the respondents’ conduct in participating in the scheme led the applicants to incur the liabilities which arose when the revised assessments were issued. Those liabilities comprise income tax, penalties and interest incurred under the Income Tax Assessment Act 1936 (Cth) (“ITAA 1936”), the Income Tax Assessment Act 1997 (Cth) (“ITAA 1997”) and the Taxation Administration Act 1953 (Cth) (“TAA”). In summary, the liabilities arose from the disallowance of deductions for interest expenses claimed to have been paid to the Israeli banks and the inclusion of amounts transferred from the Israeli banks to the applicants as part of the applicants’ assessable income.
On 3 December 2015, a little over ten months after SAD5 was commenced and just over two months after the liability hearing had concluded before Gleeson J, Messrs Sheahan and Lock caused the plaintiffs in SAD5 to commence this proceeding (NSD 1600 of 2015) against Tamarama Fresh Juices Australia Pty Ltd (Tamarama) and five other corporations (the third to seventh defendants) which had been associated with Tamarama in a significant Australian business called “Nudie Juices”. I shall refer to Tamarama and the other five Nudie corporations as the Nudie entities.
The Nudie Juice business had been conducted by that side of the family of which Erwin Binetter was the patriarch. His sons Andrew and Michael Binetter had operated that business in recent years until it was sold in late 2014. The other Binetter-associated defendants in this proceeding were also connected to Erwin Binetter’s side of the family. The eleventh and thirteenth defendants are domiciled in Israel. The twelfth defendant is domiciled in Switzerland. BCI Finances has discontinued all of its claims against the eleventh and twelfth defendants.
The allegations made by the plaintiffs in this proceeding are remarkably similar to the allegations made by the plaintiffs in SAD5. This proceeding is also a very complex matter both factually and legally. It may be that there is some overlap between the damages or compensation claimed in this proceeding and the pecuniary relief claimed in SAD5 but this will be a matter for trial if this proceeding survives the attack made by the Nudie entities to which I shall now refer.
The brief description of the plaintiffs’ case in proceeding SAD 5 of 2015 provided by Gleeson J at [1]–[8] of her Honour’s Reasons for Judgment in the liability judgment (BCI Finances Pty Limited (in liq) v Binetter (No 4) (2016) 348 ALR 227; [2016] FCA 1351) which I extracted at [12] of Binqld No 1 (as to which see [29] above), supplemented by a few observations which I shall now make, provides an adequate description of the plaintiffs’ case against IDB in this proceeding. The plaintiffs in proceeding SAD 5 of 2015 and the plaintiffs in this proceeding were identical when this proceeding was commenced. After the plaintiffs reached a settlement with Bank Hapoalim B.M. and Bank Hapoalim (Switzerland) Limited, BCI Finances Pty Limited (In Liq) discontinued all of the claims which it had made in this proceeding, leaving Binqld Finances Pty Ltd (In Liq), Ligon 268 Pty Ltd (In Liq) and E.G.L. Development (Canberra) Pty Limited (In Liq) as the only remaining plaintiffs in this proceeding.
Here, the plaintiffs allege that the directors of each of them (certain members of the Binetter family) caused the plaintiffs to be involved in schemes implemented to assist persons within, and entities connected to, the Binetter family in evading Australian tax. It is said that involving the plaintiffs in such schemes provided no benefit to them, while exposing them to the risk of unfavourable tax assessments. The plaintiffs argue that the schemes involved using banking services provided by IDB to bring substantial funds into Australia styled as loans to the plaintiffs, while at the same time concealing from the Commissioner the existence of offshore funds held in accounts with IDB for the purpose of evading Australian tax. It is alleged that the directors breached both statutory and general law duties owed by them to the plaintiffs and that IDB facilitated the implementation of the directors’ fraudulent scheme and was knowingly concerned in those breaches of duties. The losses which are sought to be recovered from IDB are the amounts of the taxation assessments, amended assessments and penalty assessments issued by the Commissioner in late 2009 and 2010, when the risk that the plaintiffs were exposed to by being involved in the schemes came to fruition.
The plaintiffs’ claims in SAD 5 of 2015 are substantially the same as the claims made by them in this proceeding. The main difference between the two sets of claims is that the defendants in SAD 5 of 2015 are different entities from the defendants in this proceeding.
On 15 December 2017, Gleeson J delivered judgment in respect of certain contested matters concerning the plaintiffs’ damages claims in SAD 5 of 2015 (BCI Finances Pty Limited (in liq) v Binetter (No 5) [2017] FCA 1524). After her Honour’s Reasons were published, the parties were directed to translate those Reasons into specific awards of damages. This was done and subsequently recorded in a further judgment delivered on 16 April 2018 (BCI Finances Pty Limited (in liq) v Binetter (No 6) [2018] FCA 500).
On 16 April 2018, Gleeson J ordered that:
1.Judgment be entered for the second applicant against the ninth respondent in the sum of $4,986,533.71.
2.Judgment be entered for the second applicant against the tenth respondent in the sum of $24,263,278.15.
3.Judgment be entered for the third applicant against the eighth respondent in the sum of $3,056.60.
4.Judgment be entered for the third applicant against the tenth respondent in the sum of $3,023,337.36.
5.Judgment be entered for the fourth applicant against the eighth respondent in the sum of $13,833,875.25
6.Judgment be entered for the fourth applicant against the tenth respondent in the sum of $28,281,066.70.
Several appeals were then filed from those orders.
The settlement was agreed in September 2018, which was after the appeals had been heard but before judgment in the appeals had been delivered.
Because the plaintiffs’ case against Gary Binetter had been excluded from the settlement, the Full Court was obliged to deliver judgment in the plaintiffs’ appeal from Gleeson J’s dismissal of the plaintiffs’ case against him notwithstanding the settlement of all of the other claims made by the plaintiffs in SAD 5 of 2015. The Full Court delivered judgment in that appeal on 9 November 2018 (BCI Finances Pty Ltd (in liq) v Binetter (2018) 362 ALR 597; [2018] FCAFC 189). It dismissed that appeal.
The judgments of Gleeson J and the orders made by her Honour on 16 April 2018 survived the settlement. As a result, the monetary judgments directed by her Honour to be entered on that day remain in place.
At the hearing before me on 11 February 2019, the following exchange took place between Counsel for the plaintiffs and me at Transcript p 4 l 1–p 5 l 28:
HIS HONOUR: How do you put your damages claim?
MR ARNOTT: The damages claim is put by reference to the tax liabilities that each of the plaintiffs have suffered. Now, in relation to our primary case accessorial liability claim, it’s on the basis that none of those losses will have been suffered, and then for the 37A claim, your Honour will see - - -
HIS HONOUR: Yes. But what’s the quantum? Is it the entirety of what was claimed when I granted you ex parte leave to serve out or is it something else?
MR ARNOTT: It’s all of the losses which haven’t yet been recovered. So since your Honour - - -
HIS HONOUR: Well, I know that.
MR ARNOTT: Yes.
HIS HONOUR: All right. I will ask you this question then. Is it what you had as a claim before less what you got on the settlement?
MR ARNOTT: Yes, your Honour.
HIS HONOUR: All right. Well, that’s an entirely different case, isn’t it?
MR ARNOTT: It’s not, your Honour. No. It’s not. It’s for a lower amount of damages but it’s still for a significant sum of money.
HIS HONOUR: Do you accept that you bear the onus of proving what that damages quantum is?
MR ARNOTT: Yes.
HIS HONOUR: So you have to tender the settlement deed, do you?
MR ARNOTT: Yes. Or prove it through other means. So we might be – the other way of doing it, your Honour, which I discussed with Dr Bell last year, was that we would give him enough - - -
HIS HONOUR: You can’t discuss it with him now, can you?
MR ARNOTT: Well, I can except he would probably shut the door in my face.
HIS HONOUR: I’m surprised he didn’t do it then.
MR ARNOTT: Your Honour, what I had said to Dr Bell we could do – and this continues to be the position – is that obviously, at some point, the liquidators are going to have to put on an affidavit which explains precisely what recoveries have been made. Now, that includes from Bank Hapoalim and that includes the money which has come from the Binetters, and then to show her that has all flown through, and part of the settlement deed involves us taking control of particular pieces of real property and then disposing of those, so we’re going to have to explain how that process has occurred – what was realised from all of that. So that will, absolutely, your Honour, have to be part of our evidence, and so that’s why I can’t tell your Honour to the dollar yet – because, at the moment, we’re still realising the benefits of the - - -
HIS HONOUR: I’m not asking you to tell me to the dollar.
MR ARNOTT: No.
HIS HONOUR: I’m really just probing the issue of onus of proof - - -
MR ARNOTT: Sure.
HIS HONOUR: - - - and you seem, from what you’ve just said to me, to accept that you bear the onus of proving the quantum - - -
MR ARNOTT: Yes.
HIS HONOUR: - - - which, in this particular case, requires you to prove what other recoveries you have made.
MR ARNOTT: Absolutely.
HIS HONOUR: All right.
While Counsel accepted that the damages or compensation (called hereafter “damages”) claimed by the plaintiffs in SAD 5 of 2015 in respect of the losses suffered by them as a result of the breaches of duty alleged against their directors in that proceeding are substantially the same damages as are claimed by the plaintiffs in this proceeding in respect of the same losses, he demurred from the proposition that the damages claimed by different corporations in proceeding NSD 2171 of 2016, which is a further but separate set of proceedings involving members of the Binetter family and corporations associated with them, and the present liquidators, were the same damages as are claimed by the plaintiffs in this proceeding. Proceeding NSD 2171 of 2016 is still on foot and is presently in the docket of Lee J. For present purposes, I intend to proceed upon the basis that no account need be taken in the calculation of damages in this proceeding of any recoveries that might ultimately be made in proceeding NSD 2171 of 2016.
Three important concessions were made by Counsel for the plaintiffs in the exchange which I have extracted at [39] above. First, Counsel accepted that the plaintiffs bear the ultimate onus of proving their damages claim. Second, he accepted that the damages claimed in this proceeding are the same damages as were claimed in proceeding SAD 5 of 2015 in respect of the same losses alleged in that proceeding. That is, the losses underpinning both damages claims are the same. The only point of difference is that the entities against whom those claims were made in SAD 5 of 2015 differ from the defendants in this proceeding. Third, Counsel conceded that, when due regard is had to the above propositions, it is clear that, in order to prove their damages claim in this proceeding, the plaintiffs must prove not only the quantum of compensation to which they are prima facie entitled for the losses which they contend they have suffered at the hands of IDB but they must also prove the value of the settlement to them which must then be deducted from the amount of their prima facie entitlement. In order to discharge that onus, the plaintiffs will be obliged to tender the Settlement Deed and all relevant settlement documentation in respect of the settlement or prove the terms of the settlement in some other acceptable way. They will also be required to explain and prove by admissible evidence the way in which the settlement will have been worked through and ultimately consummated. I note that Counsel also accepted that the plaintiffs had to bring to account in the calculation of their damages in this proceeding any amounts recovered from Bank Hapoalim B.M. and Bank Hapoalim (Switzerland) Limited.
In my judgment, the above concessions were appropriately made and reflected a correct understanding of the relationship between the damages claim being made by the plaintiffs in this proceeding and the damages claim made in proceeding SAD 5 of 2015 and the impact of the settlement on those claims.
Against the above background, I now turn to address the Commissioner’s IA and the IAs filed by the Binetter interests.
THE EVIDENCE
The Nudie entities read and relied upon an affidavit of Malcolm Robert Gordon Stewart sworn on 29 January 2019. Mr Stewart is the solicitor for those entities.
Paragraphs 5–14 of Mr Stewart’s affidavit are in the following terms:
I was involved in resolution of the dispute between the then Plaintiffs and the Applicants [referring to the Nudie entities]. This included my involvement in the negotiation and finalisation of the terms of the Settlement Deed between the Applicants, Respondents [referring to the plaintiffs, the Commissioner and Michael Binetter] and others dated 5 October 2018 (Liquidator’s Deed). The negotiations were complex and lasted over many months. As well as the parties to the proceedings the negotiations included representatives of the Commissioner of Taxation (“Commissioner”).
The Liquidator’s Deed did not bring to an end all issues between the then Plaintiffs and the Applicants. Nor did it bring to an end the Applicants’ potential future involvement in this or other proceedings involving the Plaintiffs and Thirteenth Defendant. Some clauses in the deed are still active in that they require the Applicants to undertake certain actions and other clauses may require certain actions to take place in the future.
I make the following comments in connection with the Liquidator’s Deed.
The confidentiality clause in the Liquidator’s Deed (clause 23 – not redacted) was subject to negotiations over a number of without prejudice meetings and communications. [Sentence rejected] I have kept abreast of reports of the settlement. The press has not made the terms of settlement publicly known.
It was not part of the settlement that any of the Applicants be placed in liquidation.
One of the issues the subject of the negotiations was whether the Applicants would be released and discharged from the claims made by the then Plaintiffs against them, or the proceedings discontinued with a covenant by the then plaintiffs not to sue the Applicants. This is covered by clause 16. The “notice in clause 5.2” has been received by the Applicants.
[Two sentences rejected] Annexure 14 (which has been redacted) contains these statements [referring to statements of assets and liabilities] for certain individuals.
The Liquidator’s Deed provides for certain assets and moneys to be transferred to the Plaintiffs. To the best of my knowledge, the terms of these transfers are not publicly known.
One of the issues for the Applicants that remains outstanding is a potential liability to Third Parties (clause 7 and foot of page 10 – both have been redacted). The liability and quantum remains in dispute and there is also a claim for a set off. The parties have commenced negotiations which have not concluded. If the Third Parties [referring to IDB and others] become aware of clause 7 it would give them an advantage in the negotiations to resolve the dispute.
The Settlement Deed contains clauses concerning non-parties to the document, such as relatives of the Binetter family, employees and/or former employees, and also concerning steps in other litigation to which the Thirteenth Defendant is not a party and has no involvement.
Mr Stewart was not cross-examined at the hearing of the Nudie entities’ IA.
In support of his application, the Commissioner read and relied upon the affidavit of Nicholas Achilleas A. Shizas sworn on 29 January 2019. Mr Shizas is an officer of the Australian Taxation Office (ATO). He is a qualified lawyer and a Director in the ATO’s Review and Dispute Resolution area.
Mr Shizas testified that he was involved to a varying extent in the settlement negotiations which resulted in the ATO Deed. He has read and reviewed an executed version of the Settlement Deed. He was present at a meeting on 5 October 2018 at which executed counterparts of the ATO Deed and the Settlement Deed were exchanged by the representatives of the various parties to those deeds.
After referring to the substance of the definition of “protected information” in s 355-30 of Sch 1 to the Taxation Administration Act 1953 (Cth) (TAA) (at par 7 of his affidavit), at pars 9–16 of his affidavit Mr Shizas said:
Information disclosed or obtained under or for the purposes of a taxation law and which relates to the affairs of an entity: s 355-30(1)(a) and 1(b)
The ATO Deed includes details of the income tax and related liabilities of the Taxpayers, including amounts of liabilities owed for specified years of income. Income tax liabilities generally are assessed by the Commissioner on the basis of:
a.income tax returns and other documents lodged with, or provided to, the Commissioner by the relevant taxpayers; and
b.other information and documents that may be obtained by the Commissioner from the relevant taxpayers and/or from other sources, including pursuant to the Commissioner’s powers under s 353-10 of Schedule 1 to the TAA (being powers to compel production of information and documents).
The ATO Deed also includes details of assets and liabilities of the Taxpayers, which were disclosed to the Commissioner for the purposes of the settlement negotiations which concluded with the ATO Deed.
The recitals contained in the ATO Deed set out information relating to the income tax and related liabilities of the Taxpayers of the Taxpayers [sic]. The clauses contained in the ATO Deed set out the terms on which the Commissioner and the Taxpayers agreed to resolve their respective positions regarding the income tax and related liabilities of the Taxpayers. The Schedules to the ATO Deed contain copies of documents relevant to the operation of the clauses contained in the ATO Deed. The information contained in the ATO Deed relating to the terms on which the settlement was agreed was information which was obtained by the Commissioner for the purposes of the settlement negotiations which concluded with the ATO Deed.
Information that identifies, or is reasonably capable of being used to identify, the Taxpayers: 355-30(1)(c)
As noted above, the ATO Deed is Annexure 18 to the Liquidators’ Deed. The orders made by this Honourable Court in this proceeding on 1 November 2018 refer in order 2(b) to “any executed version of the collateral agreement referred to in Sheahan, in the Matter of BCI Finances Pty Ltd (in Liq) [2018] FCA 1499 at [20]”. Paragraph 20 of that judgment (the Sheahan Judgment) states:
20.The number of creditors of each of the Liquidated Companies is quite small and, in some cases, it is only the Deputy Commissioner of Taxation who is the creditor. In those cases in which there is more than one creditor, the Deputy Commissioner is by far and away the largest of the creditors. The Court was informed that representatives of the Deputy Commissioner have been actively involved in the negotiation of the proposed agreement, and they have also negotiated a collateral agreement with the Liquidated Companies which will result in a significant payment to the Deputy Commissioner. The Plaintiffs are not party to that agreement.
The reference in paragraph 20 of the Sheahan Judgment to “Liquidated Companies” is defined in paragraph 1 of the judgment to mean:
a. BCI Finances Pty Limited (in liq) (BCI);
b. Binqld Finances Pty Limited (in liq) (Binqld);
c. EGL Development (Canberra) Pty Limited (in liq) (EGL); and
d. Ligon 268 Pty Limited (in liq) (Ligon 268).
Binqld, Ligon 268 and EGL are the first, second and third plaintiffs in the present proceedings.
The ATO Deed is the “collateral agreement” referred to in paragraph 20 of the Sheahan Judgment.
I can see from the ATO Deed that, throughout the ATO Deed and its Schedules, it identifies, by name, numerous Taxpayers and contains information which could be used by a reader of the ATO Deed to identify numerous Taxpayers.
The reference in Mr Shizas’ affidavit to “the Taxpayers” is a reference to a number of unidentified persons and entities who, together with the Commissioner, comprise the parties to the ATO Deed.
At the hearing of the Commissioner’s IA, Mr Shizas was cross-examined briefly by Counsel for IDB. During that cross-examination, it was put to Mr Shizas that the liquidators of the plaintiff companies were involved in the negotiations which led to the ATO Deed. Mr Shizas said that this was not correct. At Transcript p 25 ll 3–12, the following exchange took place between Counsel and Mr Shizas:
MR O’BRIEN: Your Honour, as I understand it – and Mr Shizas can correct me – that none of the entities listed in 13(a), (b), (c) or (d) are parties to the ATO deed; is that right?---That is correct.
But is your evidence also that those entities had no involvement in the negotiation of the ATO deed?---I can’t say that they had no involvement. There was – the way in which the agreements were structured was a whole settlement of both matters relating and within the decision-making ability of the liquidators, as the ATO is their creditor, in other matters which are reflected in the ATO deed which were solely matters for the ATO and the Commissioner.
Later, during his cross-examination, Mr Shizas conceded that the liquidators of the plaintiffs had some involvement in negotiating the ATO Deed. Notwithstanding that concession, Mr Shizas maintained his position that the ATO Deed does not relate to the affairs of any of the plaintiff companies. He said on a number of occasions that none of the plaintiff companies was a party to the ATO Deed.
Finally, at Transcript p 26 l 42–Transcript p 27 l 6, Mr Shizas gave the following evidence:
MR O’BRIEN: Is it your evidence, despite those facts, that the ATO deed does not relate to the affairs of the plaintiff companies?---As far as I can recall, no. They’re not parties to that deed.
That’s not what I’m asking you – whether they’re parties. I’m asking you whether it relates to their affairs. Is it your evidence that it does not relate to their affairs or that it does relate to their affairs?---As far as I can recall, it doesn’t, but I couldn’t give you categorically – it’s an over-80-page deed. I can’t - - -
So it might relate to their affairs?---I’m very doubtful that it would. They’re not a party and so they wouldn’t have reason to be. I don’t believe so but I can’t give a firmer answer. I don’t believe so.
I accept Mr Shizas’ evidence as far as it goes. It was not suggested to me that I should do otherwise.
THE COMMISSIONER’S IA
The Commissioner confined his application to the ATO Deed. He did not seek to have any part of the Settlement Deed itself (other than the ATO Deed) suppressed. Although subpar (c) of the revised order for production claimed by the Commissioner referred to “other settlement agreements or settlement terms entered into by the Commissioner of Taxation …”, there was no suggestion before me that there were in fact any documents falling within that description other than the ATO Deed itself.
The Commissioner’s Contentions
The Commissioner’s case involved the true construction of certain provisions of the TAA and the application of those provisions to the facts of the present case. His case did not rely in any way upon the exercise of a discretion by the Court.
In the succeeding paragraphs, I will endeavour to summarise the Commissioner’s arguments.
The Commissioner submitted that production of the ATO Deed to the Court by the plaintiffs and any disclosure of the terms of that Deed to IDB would constitute an offence under s 355‑155 of the TAA because the contents of that Deed comprise “protected information” within the meaning of s 355-30 of Sch 1 to the TAA.
The relevant provisions for the purposes of the Commissioner’s IA are found in Ch 5—Administration, Pt 5-1—The Australian Taxation Office in the TAA. Of particular relevance is Div 355—Confidentiality of taxpayer information found within Pt 5-1. The objects of Div 355 are set out in s 355-10 which is in the following terms:
355-10 Objects of Division
The objects of this Division are:
(a)to protect the confidentiality of taxpayers’ affairs by imposing strict obligations on *taxation officers (and others who acquire protected tax information), and so encourage taxpayers to provide correct information to the Commissioner; and
(b)to facilitate efficient and effective government administration and law enforcement by allowing disclosures of protected tax information for specific, appropriate purposes.
Section 355-25(1), which is in Subdiv 355-B—Disclosure of protected information by taxation officers, provides that it is an offence for a taxation officer to make a record of protected information or to disclose such information (including to a court or tribunal) if the information was acquired by that person as a taxation officer.
Section 355-30 defines the concepts of protected information and taxation officer in the following terms:
355-30 Meaning of protected information and taxation officer
(1) Protected information means information that:
(a)was disclosed or obtained under or for the purposes of a law that was a *taxation law (other than the Tax Agent Services Act 2009) when the information was disclosed or obtained; and
(b)relates to the affairs of an entity; and
(c)identifies, or is reasonably capable of being used to identify, the entity.
Note:Tax file numbers do not constitute protected information because they are not, by themselves, reasonably capable of being used to identify an entity. For offences relating to tax file numbers, see Subdivision BA of Division 2 of Part III.
(2) Taxation officer means:
(a)the Commissioner or a *Second Commissioner; or
(b)an individual appointed or engaged under the Public Service Act 1999 and performing duties in the Australian Taxation Office.
Note:This Division applies to certain other entities as if they were taxation officers: see section 355-15.
The Commissioner contended that the evidence of Mr Shizas established that the ATO Deed comprised information that satisfied each of the three limbs of the definition of protected information found in s 355-30 of the TAA. He submitted that the entire ATO Deed comprised protected information.
Subdivision 355-C—On-disclosure of protected information by other people provides for restrictions on the capacity of others to on-disclose protected information.
Section 355-155 of the TAA provides:
355-155 Offence—on-disclosure of protected information by other people
An entity commits an offence if:
(a) the entity:
(i)makes a record of information; or
(ii)discloses information to another entity (other than the entity to whom the information relates or that entity’s agent in relation to the information) or to a court or tribunal; and
(b)the information was acquired by the first mentioned entity under an exception in this Subdivision or in Subdivision 355-B (except subsection 355-65(1) operating in relation to item 7 in the table in subsection 355-65(4)); and
(c) the first-mentioned entity did not acquire the information as a *taxation officer.
Penalty: Imprisonment for 2 years.
Note:This section also covers information acquired by an entity (other than as a taxation officer) before the commencement of this section under certain repealed or amended provisions: see item 124 of Schedule 2 to the Tax Laws Amendment (Confidentiality of Taxpayer Information) Act 2010.
One exception to the offence provided for in s 355-155 is found in s 355-175 which provides:
355-175 Exception—on-disclosure for original purpose
(1) Section 355-155 does not apply if:
(a)the information was originally disclosed under an exception in Subdivision 355-B for a purpose specified in that exception (the original purpose); and
(b)the information was acquired by the entity under this section or an exception in Subdivision 355-B; and
(c)the record or disclosure is made by the entity for the original purpose, or in connection with the original purpose.
Note:A defendant bears an evidential burden in relation to the matters in this subsection: see subsection 13.3(3) of the Criminal Code.
Instances of disclosures in connection with the original purpose
(2)Without limiting subsection (1), a record or disclosure is made by the entity in connection with the original purpose if:
(a)the record is made for, or the disclosure is to, any entity, court or tribunal; and
(b)the record or disclosure is for the purpose of criminal, civil or administrative proceedings (including merits review or judicial review) that are related to the original purpose.
Multiple purposes
(3)Subsection (1) has effect as if a record or disclosure made by the entity for a purpose specified in column 3 of the following table were made in connection with the original purpose:
Records or disclosures for purpose connected with the original purpose
Item Original purpose Purpose connected with the original purpose 1 a *purpose of the Project Wickenby taskforce another purpose of that taskforce. 2 a purpose of a prescribed taskforce another purpose of that taskforce. 3 one of the purposes specified in column 3 of item 1 of the table in subsection 355-70(1) the other of those purposes. 4 one of the purposes specified in column 3 of item 6 of the table in subsection 355-70(1) one of the other purposes specified in column 3 of item 6 of that table.
A further exception is specified in s 355-205 (Limits on on-disclosure to courts or tribunals) which provides:
355-205 Limits on on-disclosure to courts or tribunals
An entity is not to be required to disclose to a court or tribunal *protected information that was acquired by the entity under Subdivision 355-B or this Subdivision, except where it is necessary to do so for the purpose of carrying into effect the provisions of:
(a) a *taxation law; or
(b)if the entity has or had duties, functions or powers under the ForeignAcquisitions and Takeovers Act 1975—that Act.
Note: See also section 8ZK of this Act (about protection of witnesses).
The Commissioner argued that the terms of s 355-205 of the TAA substantially accorded with the language used in s 355-75 of that Act. He then submitted that, having regard to the reasoning of the Full Court in Federal Commissioner of Taxation v Tamarama Fresh Juices Australia Pty Ltd (2017) 252 FCR 471 (Tamarama No 2), he was on strong ground in seeking the relief which he had sought in his IA. The Commissioner submitted that, in the circumstances of the present case, disclosure of the ATO Deed was not necessary for the purposes of carrying into effect the provisions of any taxation law. He relied upon the observations of the Full Court at 484 [46] in Tamarama No 2 to the following effect:
While we accept the proposition that the issue is to be resolved as one of substance rather than form, so that the fact of the Commissioner being a party to proceedings or not is not determinative, we do not agree that this factor is irrelevant. In deciding if disclosure is necessary for the purpose of giving effect to a provision of a taxation law all of the circumstances may and should be considered, including the nature of the application in aid of which disclosure is sought (in the present case, an application to stay proceedings as an abuse of process), the nature of the proceedings in which the application is made (in the present case, a proceeding by the plaintiff companies for equitable compensation from other companies), the relationship of the Commissioner to the application and the proceedings (in the present case, the Commissioner is not a party to the application or the proceedings, but is the creditor who may ultimately benefit in the winding up of the plaintiff companies if the proceedings succeed), and the relationship between the disclosure and the asserted giving of effect to the taxation laws (in the present case, a consequence of the successful prosecution of the proceedings may be the Commissioner recovering amounts equivalent to unpaid taxes, which is not the same as disclosure being necessary for the purpose of carrying into effect of any such provision).
In light of the above submissions, the Commissioner went on to argue that the protected information contained in the ATO Deed had been provided to the plaintiffs in this proceeding in accordance with the exception in s 355-50 of the TAA. In other words, the disclosure which was made to the plaintiffs was made by officers of the ATO “… in performing those officers’ duties as taxation officers”. The Commissioner then submitted that the relevant purpose on the part of those taxation officers in making that disclosure was to assist in achieving a full and final settlement of the claims made by the plaintiffs in this proceeding against other defendants and thus to secure recovery of amounts referable to taxation liabilities for the benefit of the Commissioner in his capacity as a creditor in the winding up of the plaintiffs.
The Commissioner’s contentions were then captured in the following summary at par 11 of the Written Submissions filed by him on 30 January 2019 in the following terms:
11.Any disclosure by the plaintiffs to the thirteenth defendant of the protected information in the Commissioner’s Deed would constitute an offence contrary to s 355-155, unless an exception in Sub-Div 355-C applies to that disclosure. No such exception is applicable. In particular, any “on-disclosure” of the protected information pursuant to order 2 made on 1 November 2018 would not fall within:
11.1.the exception in s 355-175(1): because it is not applicable to compulsory disclosure ordered by a Court, which is addressed by s 355-205 – instead, s 355-175(1) confers a constrained discretion on a relevant entity to disclose, voluntarily, protected information in limited circumstances; no such question arises here because the plaintiffs have been ordered to disclose the information and have not chosen to do so voluntarily;
11.2.the exception in s 355-175(1): if (contrary to paragraph 11.1 above) it is capable of applying, nonetheless the disclosure would not be made by the plaintiffs “for the original purpose, or in connection with the original purpose”, including within the meaning of s 355-175(2) – the disclosure would not be for, or in connection with, the original purpose of assisting the plaintiffs to achieve a full and final settlement of the proceeding against other defendants so as to secure greater recovery for the revenue; or
11.3.the exception in s 355-205: since it would not be a disclosure made by the plaintiffs which is “necessary … for the purpose of carrying into effect the provisions of … a *taxation law” – that result follows from the reasoning of the Full Court in Tamarama at [46].
IDB’s Arguments
IDB responded to the Commissioner’s contentions which I have summarised above as follows.
IDB submitted that, in the circumstances demonstrated in the evidence, no offence will be committed if the plaintiffs comply with the order for production which I have made and if access is then granted to IDB to the Settlement Deed and to the ATO Deed. IDB submitted that the information in the ATO Deed was not information which was obtained by the plaintiffs from a taxation officer pursuant to an exception in Subdiv 355-B or Subdiv 355-C with the consequence that the criterion specified in s 355-155(b) would not be satisfied in the present case so that the plaintiffs are, in fact, free to produce the settlement documentation including the ATO Deed without fear of committing any offence. IDB advanced two reasons in support of this argument. First, IDB submitted that the making available to the plaintiffs by the Commissioner of protected information about their own taxation affairs was not the provision of information under an exception because the primary prohibition contained in s 355-25 did not prevent that disclosure. If the primary prohibition did not prevent that disclosure, the exception could not be engaged. Second, the evidence led by the Commissioner fell short of establishing that the information contained in the ATO Deed was acquired by the plaintiffs from the Commissioner or any other taxation officer as required by s 355-155 of the TAA.
In light of the above contentions, IDB submitted that, to the extent that the ATO Deed reveals protected information about the taxation affairs of the plaintiffs, they will be able to produce the ATO Deed without committing an offence under s 355-155. IDB went on to submit that, to the extent that the ATO Deed includes protected information about the taxation affairs of entities other than the plaintiffs, those entities would not be prohibited by s 355-155 from disclosing that information. IDB then submitted that, if the Binetter parties are also parties to the ATO Deed, a pragmatic solution to the Court might be to direct the plaintiffs and each of the Binetter parties to produce the ATO Deed, but only insofar as it does not contain protected information other than protected information about the producing party.
IDB then submitted that, in any event, the production by the plaintiffs of the ATO Deed would be within the exception provided for in s 355-175 of the TAA being on-disclosure made by the plaintiffs in connection with the original purpose for which the plaintiffs were provided with the protected information contained in the ATO Deed.
IDB submitted that the “original purpose” specified by the Commissioner in par 10 of his Written Submissions was not supported by any evidence. IDB submitted that the Court should infer that the original purpose was broader than that stated by the Commissioner, being a purpose at least to facilitate the conduct and resolution of proceedings being funded by the ATO, including this proceeding. IDB submitted that the provision of the ATO Deed to IDB, as the only remaining defendant in this proceeding, must be in connection with that original purpose because (inter alia) a successful recovery against other persons (including those corporations which were previously defendants in the present proceeding) would naturally reduce the quantum of the plaintiffs’ claims against IDB.
IDB submitted that the words “in connection with” in s 355-155(c) are words of wide import that merely require some relationship between one thing and another (Minister for Immigration and Multicultural Affairs v Singh (2000) 98 FCR 469 at 477 [28]) and that the precise meaning of the words depends upon their context, the purpose of the statute in which they appear and whether there is any reason to read down the broad words (Burswood Management Limited v Attorney-General (Cth) (1990) 23 FCR 144 at 146 and White v Norman (2012) 199 FCR 488 at 506 [67]). IDB submitted that there is no reason to read down the words because the context indicates that they must have work to do beyond the original purpose because of the disjunctive “for the original purpose, or in connection with the original purpose”. If the phrase “in connection with” is narrowly read, that part of the provision will have no work to do. In addition, IDB submitted that such a construction is not inconsistent with the purpose of the provision.
IDB also argued that the Commissioner’s submission that the exception in s 355-175 applies only to voluntary disclosures should be rejected for several reasons. It submitted that the language of s 355-175 itself does not support the proposition. It also submitted that such a construction would lead to absurd results. Finally, it submitted that s 355-205 does not preclude the application of other exceptions in the subdivision.
At par 29 of its Written Submissions dated and filed on 8 February 2019, IDB submitted:
The Taxation Administration Act 1953 (Cth), which contains Subdivision 355-C and all of the relevant exceptions, is a taxation law, which is relevantly defined in section 955-1 of the Income Tax Assessment Act 1997 (Cth) to be an Act of which the Commissioner has the general administration: see Taxation Administration Act, section 3A. The disclosure of information to a Court in circumstances where the criteria of an exception in Subdivision 355-C are satisfied (i.e. such that the offence in section 355-155 does not apply), is a disclosure for the purpose of carrying into effect such a provision.
IDB also submitted that the secrecy provisions relied upon by the Commissioner apply only to “information” not documents. It then submitted that only information within the ATO Deed that can be characterised as protected information is prohibited from disclosure. IDB submitted that the evidence led by the Commissioner in support of his claim for a suppression order in respect of the ATO Deed is vague and general and does not permit the Court to make specific findings as to whether the whole of the ATO Deed is protected, as contended by the Commissioner, or whether only parts are protected.
Finally, IDB submitted that there was no evidence establishing that all of the information in the ATO Deed was not already in the public domain.
Decision
The only remedy which the Commissioner seeks at the moment is a variation of the order for production made by me on 1 November 2018. By that claimed variation, the Commissioner seeks to have the Court relieve the plaintiffs from the obligation to produce the ATO Deed to the Court pursuant to that order. As matters presently stand, despite the temporary accommodation reached amongst the parties which has enabled a redacted copy of the Settlement Deed itself to be made available to the legal representatives of IDB, the plaintiffs have not yet fully complied with my 1 November 2018 order for production and have not yet been required to do so. In particular, the plaintiffs have not yet produced to the Court a copy of the ATO Deed and have not been required to do so pending the determination of the applications currently before the Court. The plaintiffs submitted that they are bound by the confidentiality provisions in the Settlement Deed. For that reason, they will not produce a copy of the ATO Deed to the Court unless compelled to do so by order of the Court. It is clear that, in the present circumstances, there is no suggestion that the plaintiffs will voluntarily disclose the contents of the ATO Deed.
As I have already mentioned, the Commissioner does not contend that the Settlement Deed itself, or any part of that Deed, is protected from production by the secrecy provisions in the TAA. Nor does he argue that there is any other reason for suppressing the contents of the Settlement Deed itself (excepting always, of course, the ATO Deed).
The present circumstances are properly characterised as a threatened compulsory on-disclosure of information which the Commissioner asserts is protected information within the relevant secrecy provisions of the TAA. That threatened on-disclosure is said to be by the plaintiffs under compulsion of my order for production made on 1 November 2018. Having learned of the terms of that order, the Commissioner took steps to pre-empt a contravention of s 355-155 of the TAA on the part of the plaintiffs.
The Commissioner drew the attention of the Court to the exception to the offence created by s 355-155 of the TAA provided for by s 355-175 of the TAA. The Commissioner submitted that the exception in s 355-175 was not applicable in the present case because the exception applied only to a voluntary on-disclosure and then only in limited circumstances. He submitted that the plaintiffs have not yet voluntarily on-disclosed the asserted protected information and are not threatening to do so. In those circumstances, he submitted that the exception provided for in s 355-175 of the TAA was not engaged in the present case. These submissions are correct and I accept them.
The Commissioner made an alternative submission as to the correct interpretation of s 355-175 of the TAA which I have noted at [69] above. I am prepared to accept, as submitted by the Commissioner, that the asserted protected information was provided to the plaintiffs in accordance with the exception in s 355-50 of the TAA viz that the disclosure was made “in performing the entity’s duties as a taxation officer”. However, I am not prepared to accept that the relevant purpose of that disclosure was as submitted by the Commissioner (as to which, see [69] above and par 10 of his Written Submissions). There is no evidence to support that submission and there is much to be said for the submission made on behalf of IDB that the Court might infer that the original purpose was much broader than that asserted by the Commissioner. See, in particular, the submissions made by IDB which I have summarised at [73]–[76] above. For the reasons which I have explained, I do not accept the Commissioner’s alternative submission as to why the exception in s 355‑175(1) of the TAA does not apply in the present case.
As I see matters, the essential question for present purposes is whether the exception to the offence in s 355-155 of the TAA provided for in s 355-205 of the TAA is engaged in the present case. I do not accept IDB’s submission that the provision of the ATO Deed is no more than the making available to the plaintiffs of protected information about their own taxation affairs and thus not prohibited. The evidence did not support the premise of that submission. The evidence did not establish that the relevant protected information is confined to or even concerns information about the plaintiffs’ taxation affairs.
The evidence of Mr Shizas established that the ATO Deed contains some protected information. The nature of that information was described by him in the following way:
·“… details of the income tax and related liabilities [of the taxpayers who are party to the ATO Deed] including amounts of liabilities owed for specified years of income.” (par 9).
Mr Shizas went on to make the obvious point that income tax liabilities were generally assessed by the Commissioner upon the basis of income tax returns and other documents provided to the Commissioner by the relevant taxpayers and other information and documents that may be obtained by the Commissioner from the relevant taxpayers and/or from other sources, including pursuant to compulsory investigative powers exercised by the Commissioner.
·“… details of assets and liabilities [of the relevant taxpayers] which were disclosed to the Commissioner for the purposes of the settlement negotiations which concluded with the ATO Deed.” (par 10).
Mr Shizas said that the recitals in the ATO Deed set out information relating to the income tax and related liabilities of the relevant taxpayers.
I do not doubt that the information contained in the ATO Deed which I have referred to at [86] above is protected information within the meaning of s 355-30 of Sch 1 to the TAA. I so find.
At par 11 of his affidavit, Mr Shizas said that there were clauses in the ATO Deed which set out the terms on which the Commissioner and the relevant taxpayers agreed to resolve their respective positions regarding the income tax and related liabilities of the taxpayers. If the clauses to which Mr Shizas referred do not contain information that was provided or obtained by the Commissioner under or for the purposes of a taxation law, then I do not accept that those clauses contain protected information. If all that the clauses do is record the fact that a compromise agreement of some kind has been reached between the relevant taxpayers and the Commissioner and the terms upon which that arrangement has been reached, I do not consider such clauses to be protected information.
Mr Shizas went on to refer to the circumstance that the schedules to the ATO Deed contain copies of documents relevant to the operation of the clauses contained in the ATO Deed. Mr Shizas’ language in this respect is general and somewhat vague. It is difficult to come to a final view as to whether those schedules contain protected information. As matters presently stand, I am not satisfied that those schedules do contain such information.
In the last sentence of par 11 of his affidavit, Mr Shizas ultimately stated in a formulaic fashion the Commissioner’s overall position. Although I have already extracted this paragraph of Mr Shizas’ affidavit at [49] above, it bears repeating here:
… The information contained in the ATO Deed relating to the terms on which the settlement was agreed was information which was obtained by the Commissioner for the purposes of the settlement negotiations which concluded with the ATO Deed.
I have no doubt that some of the information contained in the ATO Deed satisfies the description given to it by Mr Shizas in the last sentence of par 11. However, I am not satisfied that the entire ATO Deed comprises protected information. The evidence of Mr Shizas falls well short of establishing such a conclusion and, when sensible regard is had to the nature of the instrument, I consider it unlikely that this would be so.
For the above reasons, I am therefore satisfied that the ATO Deed contains some protected information within the meaning of s 355-30 of the TAA but I am not satisfied that the entire Deed comprises such information.
I now turn to consider whether, in the circumstances of the present case, the protected information contained in the ATO Deed should nonetheless be disclosed because the exception to the offence in s 355-155 of the TAA provided for in s 355-205 of that Act is engaged in the present case. The resolution of this issue involves the application of the relevant reasoning of the Full Court in Tamarama No 2. In that case, the Full Court set aside a subpoena issued in the present case by the Nudie entities to the Commissioner requiring him to produce all documents which he had provided to the plaintiffs in order to assist them to prosecute their claims in the present case. The immediate purpose for which these documents were sought was for use in an application made by the Nudie entities for a permanent stay of the present proceeding upon the ground that, by reason of the overlap between the claims made by the plaintiffs in this proceeding with the claims made by the plaintiffs in proceeding SAD 5 of 2015, the plaintiffs were precluded from maintaining their claims in the present proceeding.
In Tamarama No 2, the Full Court recorded at 473 [4] that, contrary to the position which had obtained before me as the primary judge, it was common ground in the appeal that “necessary” in s 355-75 of the TAA meant more than merely “appropriate” and that the best synonym for “necessary” was “requisite”. The Full Court concluded that, in the circumstances of the case before it, disclosure was not necessary for the purpose of giving effect to a provision of a taxation law merely because the Commissioner is the sole creditor of the plaintiff companies, is funding the liquidators and stands to benefit if the proceedings are permitted to be prosecuted and succeed by an amount potentially equivalent to the unpaid taxes for which the Commissioner has or may prove in the winding up of the plaintiff companies (see pp 483–484 [45]). The Full Court went on to observe (at 484 [45]):
… The purpose of the disclosures does not give effect to a provision of a taxation law. Rather, a possible consequence of other related steps, being the successful prosecution of the proceedings if they are not stayed, may enable the Commissioner to recover amounts equivalent to unpaid taxes and that such recovery involves the Commissioner in administering taxation laws. This is insufficient to engage the exception in s 355‑75. No doubt the Commissioner’s provision of protected information to the liquidators satisfied the exception in s 355‑50(1) (a disclosure made in performing duties as a taxation officer), but this does not mean compulsory disclosure to a court or tribunal is necessary for the purpose of giving effect to a provision of a taxation law. The “one sided” nature of this result is a consequence of the asymmetry of the statutory provisions. Effect must be given to those provisions.
The Full Court then went on to make the remarks at 484 [46] which I have extracted at [67] above. Thereafter, at 484–485 [47]–[48], the Full Court said:
We do not accept the submissions of the Nudie entities to the contrary. In particular, we do not agree that the exception in s 355-75 is engaged in this case because the circumstances should be characterised as involving the lawfulness of the Commissioner’s attempts to secure the revenue (and thus give effect to the taxation laws) by means of this proceeding. It is not that the characterisation is inaccurate. It is that it functions at too high a level of generality to be meaningful given the terms of s 355-75. The Commissioner is attempting to secure the revenue. The Commissioner is acting in the administration of a taxation law. But, as noted, the Commissioner’s purposes are not the issue. The issue is whether the disclosure is necessary for the purpose of carrying into effect a provision of a taxation law. Disclosure to aid the stay application is not necessary for the relevant purpose merely because, if the stay is granted, the plaintiff companies in consequence cannot recover amounts equal to unpaid taxes by way of relief and in further consequence thereon the Commissioner as the sole creditor cannot recover those amounts in the winding up of the plaintiff companies. The connection between the consequence for the Commissioner and the disclosure is too tenuous and remote to satisfy the exception in s 355-75.
We also do not accept that the statutory provisions invite or permit an exercise which balances the interests of an entity in maintaining the privacy of the entity’s tax affairs against the interests sought to be advanced by disclosure. The balance has been struck by the statutory provisions. Under s 355-50 (voluntary disclosure) the test is whether the disclosure is “in performing…duties as a taxation officer”. Under s 355-75 (compulsory disclosure to a court or tribunal) the test is whether the disclosure is necessary for the purpose of carrying into effect the provisions of a taxation law. The required exercise is evaluative but not discretionary. In particular, the questions of purpose and necessity under s 355-75 are not informed by considerations of fairness or justice. The circumstances either meet the exception or they do not, albeit that minds might differ as to the result. There is no discretion to exercise.
The phrase “… necessary to do so for the purpose of carrying into effect the provisions of ... a taxation law” which appears in s 355-205 of the TAA is identical to the language in s 355-75 of the TAA which the Full Court had under consideration in Tamarama No 2. For that reason, the reasoning in Tamarama No 2 must be applied by me in the present case.
At the present time, this proceeding has not progressed very far. Service was effected upon IDB in Israel in late 2016 in accordance with the leave to serve out of the jurisdiction which I granted ex parte at that time. Since then, IDB has consistently challenged the validity of that service. It also wishes to argue that this proceeding should be permanently stayed on the basis that this Court is forum non conveniens.
IDB seeks access to the Settlement Deed itself including the ATO Deed for the purpose of assessing whether the plaintiffs can make out a prima facie case as required by r 10.43(4)(c) FCR. When granting that leave, I was satisfied that the plaintiffs had established such a prima facie case based upon the material tendered before me at that time. Since that time, Gleeson J has delivered the liability judgment in SAD 5 of 2015 and other judgments against most of the defendants in that proceeding quantifying the plaintiffs’ damages or compensation. Given the relationship between the allegations made in SAD 5 of 2015 and those made in this proceeding, albeit against different defendants, it is highly likely that the plaintiffs will succeed in establishing that they have a prima facie case for the purposes of the relevant rule of Court in due course when the question falls to be decided. I do not think that making available the protected information contained in the ATO Deed to IDB can be said to be necessary for the purpose of carrying into effect a provision of a taxation law. Production may be necessary to do justice as between the plaintiffs and IDB but cannot be said to be necessary for the purpose of carrying into effect a provision of a taxation law within the meaning of s 355-205 of the TAA.
For all of the above reasons, the Commissioner has succeeded in establishing before me that parts of the ATO Deed ought not to be disclosed to IDB (or to anyone else for that matter). However, for the reasons which I have explained at [86]–[93] above, I am not satisfied that the whole of the ATO Deed comprises protected information. The prohibition on disclosure applies to information, not documents. It follows that, subject to any discretionary considerations raised by the arguments advanced by the Binetter interests, I will require the plaintiffs to produce a copy of the ATO Deed redacted so as to ensure that there is no disclosure by reason of that production of any protected information. The protected information which, on the evidence, may be redacted is that which is covered by the descriptions referred to at [86]–[87] above as well as any text which identifies particular taxpayers. I will require the Commissioner to redact the ATO Deed accordingly and to provide a copy of that redacted Deed to the plaintiffs within a relatively short period of time. I will then require the plaintiffs to produce that redacted version of the ATO Deed to my Associate. I will then consider whether any access should be granted to IDB or its legal representatives and the terms upon which such access should be granted.
THE BINETER INTERESTS’ IA
The Relevant Principles
As already mentioned, the Nudie entities, the Winmar companies, Andrew Binetter, Margaret Binetter and Michael Binetter have all applied for suppression orders in respect of the Settlement Deed (including the ATO Deed) pursuant to Pt VAA–Suppression and non-publication orders of the Federal Court of Australia Act 1976 (Cth) (FCA Act). They do so by way of variations to my 1 November 2018 production order. Those parties rely upon s 37AE and s 37AF of the FCA Act which are in the following terms:
37AE Safeguarding public interest in open justice
In deciding whether to make a suppression order or non-publication order, the Court must take into account that a primary objective of the administration of justice is to safeguard the public interest in open justice.
37AF Power to make orders
(1)The Court may, by making a suppression order or non-publication order on grounds permitted by this Part, prohibit or restrict the publication or other disclosure of:
(a)information tending to reveal the identity of or otherwise concerning any party to or witness in a proceeding before the Court or any person who is related to or otherwise associated with any party to or witness in a proceeding before the Court; or
(b)information that relates to a proceeding before the Court and is:
(i)information that comprises evidence or information about evidence; or
(ii)information obtained by the process of discovery; or
(iii)information produced under a subpoena; or
(iv)information lodged with or filed in the Court.
(2)The Court may make such orders as it thinks appropriate to give effect to an order under subsection (1).
In s 37AG, the legislature specified the grounds upon which a suppression order or non-publication order might be made. In s 37AG(1)(a)–(d), four such grounds are set out. It is not entirely clear which ground or grounds are relied upon by the Binetter interests in the present case. However, the only ground which seems to me to be potentially available is that provided for in s 37AG(1)(a), namely, that the suppression order is necessary to prevent prejudice to the proper administration of justice. Section 37AG(2) provides that a suppression order or non-publication order must specify the ground or grounds upon which the order is made.
In Australian Competition and Consumer Commission v Cascade Coal Pty Ltd (No 4) [2018] FCA 1243 at [34]–[36], I explained the relevant principles in the following way:
In Australian Competition and Consumer Commission v Cascade Coal Pty Ltd (No 1) (2015) 331 ALR 68 at 73–74 [28]–[30], I said:
In Hogan v Australian Crime Commission (2010) 240 CLR 651; 267 ALR 12; [2010] HCA 21 at [30] , the High Court said, in respect of the use of the word “necessary” in s 50 of the FCA Act, the predecessor to Pt VAA that it is “a strong word”. The Court observed that the collocation of necessity to prevent prejudice to the administration of justice and the necessity to prevent prejudice to the security of the Commonwealth suggests that the Parliament is not dealing with trivialities. The Court went on to hold that:
“the administration of justice” spoken of in s 50 is that involved in the exercise by the Federal Court of the judicial power of the Commonwealth; this is a more specific discipline than broader notions of the public interest.
The Court continued at [31]–[33] as follows:
It is insufficient that the making or continuation of an order under s 50 appears to the Federal Court to be convenient, reasonable or sensible, or to serve some notion of the public interest, still less that, as the result of some “balancing exercise”, the order appears to have one or more of those characteristics (A statement by Fullerton J to like effect, with respect to the powers of the Supreme Court of New South Wales, was approved by Hodgson JA (Hislop and Latham JJ concurring) in Attorney-General (NSW) v Nationwide News Pty Ltd (2007) 73 NSWLR 635; [2007] NSWCCA 307 at [31]).
If it appears to the Federal Court, on the one hand, to be necessary to make a particular order forbidding or restricting the publication of particular evidence or the name of a party or witness, in order to prevent either species of prejudice identified in s 50, or, on the other hand, that that necessity no longer supports the continuation of such an order, then the power of the Federal Court under s 50 is enlivened. The appearance of the requisite necessity (or supervening cessation of it) having been demonstrated, the Court is to implement its conclusion by making or vacating the order. The expression in s 50 “may … make such order” is to be understood in this sense.
It may tend to distract attention from the particular terms of s 50 to describe the Federal Court as embarking upon the exercise of a “discretion” when entertaining an application under s 50 (Dwyer v Calco Timbers Pty Ltd (2008) 234 CLR 124; 244 ALR 257; [2008] HCA 13 at [40]). Once the Court has reached the requisite stage of satisfaction, it would be a misreading of s 50 to treat it as empowering the Court nevertheless to refuse to make the order, or to leave in operation the now impugned order. It would, for example, be an odd construction of s 50 which supported the refusal of an order under s 50 notwithstanding that it appeared to the Court to be necessary to make an order to prevent prejudice to the security of the Commonwealth.
The threshold which a suppression order applicant must satisfy is high. Mere embarrassment, inconvenience, annoyance or unreasonable or groundless fears will not suffice.
In Australian Competition and Consumer Commission v Valve Corporation (No 5) [2016] FCA 741, Edelman J, when sitting as a Judge of this Court and in determining an application pursuant to s 37AF of the FCA Act that certain answers to interrogatories be suppressed, said the following at [8]–[9]:
The onus of persuading the Court to make an order which restricts publication of evidence has been described as “a very heavy one” (see Computer Interchange Pty Ltd v Microsoft Corp [1999] FCA 198; (1999) 88 FCR 438, 442 [16] (Madgwick J)). The order must be necessary to prevent prejudice to the administration of justice, not merely that it is desirable to address a potential prejudice to the administration of justice. In Hogan v Australian Crime Commission (664 [30]) the joint judgment of the High Court emphasised that “‘necessary’ is a strong word”. Justice Perram has explained that “[m]ere embarrassment or annoyance will not suffice”: Australian Competition and Consumer Commission v Air New Zealand Ltd (No 12) [2013] FCA 533 [7].
Valve asserts that there is prejudice to the proper administration of justice due to its claimed confidentiality in relation to the information in each of the categories outlined above. It is important to draw a distinction between information which is not public and information which is truly confidential. The mere fact that information relevant to a proceeding is not in the public domain will rarely be a sufficient basis to suppress its publication. The interest in confidential information can be different if the disclosure of that information could “become a vehicle for advantaging or prejudicing trade rivals”: Australian Competition & Consumer Commission v Origin Energy Electricity Ltd [2015] FCA 278 [148] (Katzmann J); Australian Competition and Consumer Commission v Cement Australia Pty Ltd (No 2) [2010] FCA 1082 [23] (Greenwood J); see also Yara Australia Pty Ltd v Burrup Holdings Limited (No 2) [2010] FCA 1304 [25] (Barker J).
His Honour dismissed the application before him, primarily upon the ground that it had been made prematurely. In support of that conclusion, at [21]–[22], his Honour said:
Even apart from these doubts there is another fundamental obstacle for Valve. Any assessment of any prejudice to the administration of justice will require consideration of the interest in transparency and open justice. Section 37AE of the Federal Court of Australia Act provides that in deciding whether to make a suppression order or non-publication order, the Court must take into account that a primary objective of the administration of justice is to safeguard the public interest in open justice. Each of the matters over which Valve seeks confidentiality orders may be matters which are relevant to the assessment of remedies including pecuniary penalties.
Further, s 37AJ(2) of the Federal Court of Australia Act also requires that the order should operate for no longer than is reasonably necessary to achieve the purpose for which it is made. It might be open to doubt, for instance, whether it is necessary to maintain a suppression of the publication of Valve’s financial information, including in any reasons for decision which are given, even for the year 2015 beyond, say, 2017 or 2018. The extent and importance of each of these matters can only be properly assessed in light of the evidence and written submissions at the remedies hearing.
I propose to apply the relevant principles as explained in the passages extracted at [103] above.
The Parties’ Arguments
At [45] above, I have set out the evidence of Mr Stewart which was relied upon by the Binetter interests in support of their IAs. In addition to the evidence of Mr Stewart, the Nudie entities relied upon a Written Submission dated 29 January 2019 and oral submissions made by way of supplementation of that Written Submission on 11 February 2019.
The Nudie entities accept that the unredacted portions of the Settlement Deed may be relevant to a number of issues. The Nudie entities identified those issues at par 7 of their Written Submission. At pars 8 to 16 of that Written Submission, the Nudie entities explained why the unredacted portions of the Settlement Deed were sufficient for present purposes for IDB to address the three issues to which the Settlement Deed may be relevant. At pars 17 to 29 of their Written Submission, the Nudie entities made submissions seeking to justify the redactions to the Settlement Deed which they contend are reasonable and which are reflected in Annexure “A” to their Written Submissions. Those submissions may be summarised as follows:
(a)Settlement was encouraged and facilitated by the fact that the terms of settlement were agreed by all parties to the Settlement Deed to be kept confidential and would probably not have occurred without such agreement as to confidentiality. This has a public benefit in bringing to an end complex litigation which is in the interests of the administration of justice. In addition, future settlements in other matters will be facilitated because the parties to those settlements will be confident that their confidential settlements will not be unmasked by the Court. In support of this last proposition, the Nudie entities relied upon Elliott v State of Victoria(Department of Education & Training) [2018] FCA 1029 at [24].
(b)Because IDB has not yet submitted to the jurisdiction of the Court, the usual restrictions placed upon parties to litigation as to the use of documents produced to such a party through the processes of the Court cannot, in a practical sense, be enforced by the Court. At the very least, access should be confined to Senior and Junior Counsel for IDB.
(c)The disclosure of the Settlement Deed ought not to amount, in effect, to preliminary discovery in respect of a potential cross-claim by IDB against the Binetter family, since IDB has not yet submitted to the jurisdiction of the Court nor made an application for preliminary discovery in accordance with the usual principles.
(d)IDB should not be given advance notice of the Binetter family members’ financial position.
(e)The Nudie entities are currently in negotiation with some entities which are holders of redeemable notes and those holders would be assisted in their negotiations with the Nudie entities by the public disclosure of cl 7 of the Settlement Deed.
(f)Other personal information concerning members of the Binetter family should not be disclosed because the disclosure of that information can have no rational purpose in the present proceeding.
The Winmar companies, Andrew Binetter, Margaret Binetter and Michael Binetter all adopted the Nudie entities’ submissions.
IDB opposed the suppression applications made by the Binetter interests. It advanced five reasons as to why the suppression orders sought by the Binetter interests should not be granted.
First, all of the considerations advanced by those interests as to why there should be no general disclosure to the public are not presently relevant. IDB will be content if access at this stage is restricted to its legal representatives and such executives as may need to know of the contents of the Settlement Deed in order to provide sensible instructions. IDB did not submit that disclosure should be made to the public generally. In order to accommodate the concerns expressed by the Binetter interests, appropriate confidentiality terms may be imposed on any access granted to IDB and its legal representatives.
Second, IDB submitted that the submissions made on behalf of the Binetter interests to the effect that IDB does not presently require access to an unredacted copy of the Settlement Deed in order to address the issues to which that Deed may be relevant are beside the point. IDB submitted that those submissions are not relevant to the Court’s task in dealing with an application under s 37AF of the FCA Act which does not involve a balancing exercise or notions of reasonableness, sensibleness or convenience (Hogan v Australian Crime Commission (2010) 240 CLR 651 at 664 [31]–[33]).
Third, confidentiality alone is not enough to justify a suppression order unless there is shown to be a real risk of commercial harm flowing from disclosure.
Fourth, the suppression orders are not justified by the general need to keep confidential settlements confidential as that is insufficient to overcome the primary object of the administration of justice to safeguard the public interest in open justice. Confidentiality in the settlement of disputes is not absolute and is subject to numerous exceptions where the justice of the case requires it. There is nothing in the evidence adduced on behalf of the Binetter interests in support of their present application from which it could be inferred by the Court that there was a legitimate expectation that the Settlement Deed would not be disclosed to IDB and its representatives.
Fifth, no reason has been advanced as to why the legal representatives of IDB cannot be given access to an unredacted copy of the Settlement Deed so that they will be in a position to form their own views about the relevance and the terms of that Deed to IDB’s Discharge Application.
Decision
The principal concern of the Binetter interests articulated in their submissions was a concern that their private affairs will be disclosed to the public at large. At the present time, there is no threat of such disclosure. Further, IDB is quite content for any access granted to it and its legal representatives to the Settlement Deed to be granted upon appropriate practical terms as to confidentiality. For these reasons, I do not give any weight to the concerns of the Binetter interests in respect of disclosure to the public at large.
A secondary, but important, concern advanced by the Binetter interests was that the terms of the Settlement Deed might arm IDB with information which might facilitate a cross-claim in the present proceeding against parties to the Settlement Deed or even against other persons or entities who are not parties to that Deed. The Binetter interests submitted that this was a legitimate concern which was exacerbated by the circumstance that IDB had not yet submitted to the jurisdiction of the Court. I do not consider that this submission justifies the making of a suppression order in the terms sought by the Binetter interests. There is more than enough information available to IDB from the judgments of Gleeson J that might already excite its interest in potential cross-claims. It may well be that knowledge of the precise terms of the Settlement Deed will assist IDB in understanding which of such potential cross-claims may be available to it in light of the settlement. However, I do not see that circumstance as providing a justification for making a suppression order in the terms sought by the Binetter interests.
The need to protect private personal information of members of the Binetter family, being the last justification advanced by the Binetter interests in support of their claim for a suppression order, is not of sufficient weight to justify making such an order.
For the above reasons and for the reasons advanced by IDB, I do not accept that there is any justification for making a suppression order or suppression orders in the terms sought by the Binetter interests.
It follows that I am not persuaded that any suppression order pursuant to Pt VAA of the FCA Act in respect of the Settlement Deed should be made. I propose to grant access to the legal representatives of IDB and to two nominated executives of IDB upon appropriate terms as to confidentiality.
CONCLUSIONS
In light of the above reasons, there will be orders granting access to the Settlement Deed itself to two senior executives of IDB and to IDB’s legal representatives in this proceeding. That access will be on appropriate terms as to confidentiality and use which the parties will be invited to agree and which, if not agreed promptly, will be ordered by the Court.
As to the ATO Deed, I propose to order the Commissioner to review the ATO Deed and to put in place appropriate redactions to the ATO Deed in light of the reasons which I have given in respect of that document. Once those redactions have been made, the redacted version of the ATO Deed will be required to be produced to the plaintiffs and then to the Court. Thereafter, I will consider whether access to that redacted version of the ATO Deed by IDB and its legal representatives should be granted and, if so, upon what terms.
I propose to reserve the costs of the Commissioner’s IA for the time being and to decide the question of costs of that IA in light of the extent to which the ATO Deed is ultimately redacted in accordance with my directions.
As to the costs of the IAs filed on behalf of the Binetter interests, I consider that costs should follow the event. IDB has achieved substantial success in resisting the attempts by the Binetter interests to limit the extent of access to the Settlement Deed. The costs of those applications must therefore be paid by the Binetter interests.
Given the fact that the plaintiffs adopted a position of substantial neutrality in relation to the various applications determined by these Reasons for Judgment, I think that the plaintiffs’ costs should be borne by the plaintiffs themselves.
I will also now make timetabling orders in respect of IDB’s Discharge Application.
There will be orders accordingly.
I certify that the preceding one hundred and twenty-five (125) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster. Associate:
Dated: 31 July 2019
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