Deputy Commission of Taxation v Elzain
[2024] FCA 342
•15 March 2024
FEDERAL COURT OF AUSTRALIA
Deputy Commission of Taxation v Elzain [2024] FCA 342
File number(s): VID 1082 of 2023 Judgment of: MCELWAINE J Date of judgment: 15 March 2024 Date of publication of reasons: 8 April 2024 Catchwords: PRACTICE AND PROCEDURE – Application by respondents for suppression and non-publication orders pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth) – where freezing orders made against the respondents on an ex parte basis – where respondents contend disclosure of a large volume of information does not advance open justice principle: various contentions that information may be misused, information is commercially confidential, disclosure would undermine public confidence in the administration of justice and respondents have not had opportunity to rebut allegations of serious misconduct – where orders sought are overly broad – application fails at the level of principle Legislation: Federal Court of Australia Act 1976 (Cth) ss 37AE, 37AF, 37AG, 37AJ
Taxation Administration Act 1953 (Cth) Sch 1 Div 355
Federal Court Rules 2011 (Cth) rr 2.32, 7.32, 7.35
Cases cited: A v Commissioner of Taxation [2016] FCA 1307
Australian Competition and Consumer Commission v Oakmoore Pty Ltd (No 2) [2018] FCA 1170
Cargill Australia Ltd v Viterra Malt Pty Ltd (No 23) [2019] VSC 417; 58 VR 611
Commissioner of Taxation v [Respondent] [2023] FCA 1176
Deputy Commissioner of Taxation v Lee [2022] FCA 1307
Deputy Commissioner of Taxation v State Grid International Australia Development Company Ltd [2022] FCA 577
Deputy Commissioner of Taxation v Vasiliades [2014] FCA 1250; 323 ALR 59
Dring v Cape Intermediate Holdings Ltd [2019] UKSC 38; [2020] AC 629
DSO18 v Minister for Home Affairs (No 3) [2020] FCA 640
Lee v Deputy Commissioner of Taxation [2023] FCAFC 22; 296 FCR 272
Morison v Moat (1851) 68 ER 492
Porter v Australian Broadcasting Corporation [2021] FCA 863
Prince Albert v Strange (1849) 47 ER 1302
The Country Care Group Pty Ltd v Commonwealth Director of Public Prosecutions (No 2) [2020] FCAFC 44; (2020) 275 FCR 377
Walter Rau Neusser Oel Und Fett AG v Cross Pacific Trading Ltd [2005] FCA 955
Division: General Division Registry: Victoria National Practice Area: Taxation Number of paragraphs: 101 Date of hearing: 31 January, 12, 13 February 2024 Counsel for the Applicant: Ms KA Brazenor Solicitor for the Applicant: Craddock Murray Neumann Lawyers Counsel for the Respondents: Mr ID Martindale KC and Ms CV Nicholson Solicitor for the Respondents: Diakou Faigen, Lawyers ORDERS
VID 1082 of 2023 BETWEEN: DEPUTY COMMISSIONER OF TAXATION
Applicant
AND: RAYMOND ELZAIN
First Respondent
EDWARD ELZAIN
Second Respondent
ANTHONY ELZAIN (and others named in the Schedule)
Third Respondent
ORDER MADE BY:
MCELWAINE J
DATE OF ORDER:
15 MARCH 2024
THE COURT ORDERS THAT:
1.Order 1 of the orders made 31 January 2024, as amended on 12 February 2024, is amended to read “until 5 pm on 25 March 2024 or until further order of the Court”.
2.Any application by the respondents for the making of orders pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth) in a form consistent with these reasons is to be filed by 4 pm on 21 March 2024.
3.The proceeding is adjourned for further hearing to 10.15 am on 25 March 2024.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
MCELWAINE J:
This proceeding is best described as an evolving duty matter. On 19 December 2023, the Deputy Commissioner of Taxation by originating application sought primary relief against Raymond Elzain, Edward Elzain, Anthony Elzain, Joanne Elzain, Carol Elzain, Mad Maxx Pty Ltd and Freda Elzain in the form of separate judgments for substantial tax related liabilities of between $3.5 million and $6.4 million. Urgent ex parte interlocutory freezing orders were also sought to prevent disposal, dealing with or taking steps to diminish the value of the assets of the respondents. The freezing order applications were determined and made by O’Bryan J on 20 December 2023, returnable on 29 December 2023.
On 28 December 2023, Button J ordered by consent that the operation of the freezing orders be extended to the adjourned return date of 24 January 2024. On 23 January 2024, I ordered by consent that the freezing orders be extended to the adjourned return date of 31 January 2024. By an interlocutory application filed on 31 January 2024, the respondents sought suppression and non-publication orders in respect of the entirety of the Court file in the proceeding on an interim basis pursuant to s 37AI of the Federal Court of Australia Act 1976 (Cth) (FCA Act) together with suppression and non-publication orders of a more permanent kind pursuant to s 37AF of the FCA Act extending to, in a very prescriptive manner, various affidavits filed in the preceding, the interlocutory application, the transcript of all hearings in the proceeding, the reasons of O’Bryan J, and related court documents such as written and oral submissions and “information about evidence referred to” in the interlocutory application or the proceeding.
When counsel appeared before me on 31 January 2024, I was informed that an in-principle settlement had been agreed to, subject to execution of a deed. In consequence, I made by consent (and without admissions) a series of modified freezing orders against the first, third, fourth, fifth, sixth and seventh respondents and discharged the freezing orders against the second respondent. I next made an order that the Court be closed pursuant to s 17(4) of the FCA Act in order that I may receive evidence and submissions on the interlocutory application. I expressed disquiet about the sheer breadth of the orders sought by the respondents. There was insufficient time available to determine the application on 31 January 2024. I adjourned the hearing of the interlocutory application to 12 February 2024, and on an interim basis I was persuaded to make suppression and non-publication orders pursuant to s 37AI of the FCA Act extending to the entirety of the Court file without determining the merit of the interlocutory application, essentially for the reasons identified by Derrington J in DSO18 v Minister for Home Affairs (No 3) [2020] FCA 640 at [4]-[5].
Doubtless mindful of the reservations that I expressed, the respondents on 9 February 2024, filed an amended interlocutory application for non-publication orders pursuant to s 37AF of the FCA Act or alternatively that the Court documents be marked as confidential and not be capable of inspection pursuant to r 2.32 of the Federal Court Rules 2011 (Cth) (Rules) by a person not a party to the proceeding (amended application).
The amended application is drawn by reference to an attachment which prescriptively lists documents in Annexures A and B, together with the interlocutory application, transcripts of hearings in the proceeding, the reasons for judgment upon the amended application, the affidavits relied upon by the Commissioner and the affidavits relied upon by the respondents. Annexure A comprises 150 individual rows of documents, or parts thereof, non-sequentially numbered from 6 to 240. Annexure B comprises 16 rows of information.
The submissions in support of the amended application broadly identify several grounds. First, that disclosure does not advance the open justice principle. Second, that certain information, such as bank account details, may be misused. Third, that some information is commercially confidential. Fourth, that disclosure is likely to undermine public confidence in the administration of justice. Fifth, that some information relates to allegations of serious misconduct that the respondents have not had, and will not likely have, the opportunity of rebutting in the proceeding or any other proceeding between the respondents and the Commissioner.
The Commissioner neither consents to nor opposes the orders sought in the amended application. However, despite that neutral position, the Commissioner has made limited submissions relating to the legal principles that apply. At the time, lurking behind the Commissioner’s neutrality was an unresolved application for leave to appeal the decision of Kennett J in Commissioner of Taxation v [Respondent] [2023] FCA 1176 (CT v Respondent), which the Commissioner contends was correctly decided and whether the earlier decision of Perram J in A v Commissioner of Taxation [2016] FCA 1307, should not be understood as standing for the proposition that the ground in s 37AG(1)(a) is made out where damaging allegations may not be tested in the proceeding, which is the view of Kennett J in CT v Respondent at [24]. I note that Anderson J dismissed the application for leave to appeal on 8 March 2024: [Redacted] v Commissioner of Taxation [2024] FCA 185. His Honour did not find it necessary to determine whether the conclusion of Kennett J at [24] was correct: [90].
Despite the content of the amended application, during argument on 12 and 13 February 2024, I maintained my initial reservations about how the breadth of the suppression and non-publication orders sought could be reconciled with the open justice principle. In response leave was sought, and granted, to the respondents to further refine the scope of the relief which resulted in the filing of a second amended interlocutory application on 23 February 2024 (February application).
Before turning to the February application, two points should be noted. First, no application has been made to vary or to discharge the freezing orders. Second, as stated to counsel during argument, these reasons will be published to the parties, prior to public release. That step is necessary because considerable work must be undertaken to reformulate the scope of the suppression and non-publication orders to conform with my reasons so that orders may then be made.
The complexity of the February application needs to be understood, as explaining one of the reasons why I am not persuaded to make the orders as sought. It provides:
1.Pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth) the following information be prohibited from publication and redacted or marked as confidential (as the case may be) and not be capable of inspection pursuant to r 2.32 of the Federal Court Rules 2011 (Cth) (FCR) by a person who is not a party to the proceeding:
(a) the following exhibits:
(i)Exhibit DD-1 to the affidavit of Dung Dinh sworn 18 December 2023, which is to be removed from the Court file and replaced with a version with the redactions described in ‘Amended Annexure A – DD-1’ and set out in ‘Annexure F – Proposed Redactions to Exhibit DD-1’;
(ii)Exhibit PH-1 to the affidavit of Puthmakara Hor affirmed 20 December 2023, which is to be removed from the Court file and replaced with a version with the redactions described in ‘Amended Annexure B – PH-1’ and set out in ‘Amended Annexure D – Proposed Redactions to Hor Affidavit and Exhibit PH-1’
(b)the interlocutory application filed 31 January 2024, including the Annexures, which is to be marked confidential;
(c)the transcripts of the hearing of this interlocutory application, which are to be marked confidential;
(d)the Court’s reasons for judgment of this interlocutory application, which are to be marked confidential;
(e)the affidavit of Dung Dinh sworn 18 December 2023, which is to be removed from the Court file and replaced with a version with the redactions described in the ‘Amended Schedule to Amended Annexure C’ and set out in ‘Amended Annexure C – Proposed Redactions to Dinh Affidavit’;
(f)the affidavit of Puthmakara Hor affirmed 20 December 2023, which is to be removed from the Court file and replaced with a version with the redactions described in the ‘Amended Schedule to Amended Annexure D’ and set out in ‘Amended Annexure D – Proposed Redactions to Hor Affidavit and Exhibit PH1’;
(g)the written submissions of the Deputy Commissioner of Taxation dated 19 December 2023, which are to be removed from the Court file and replaced with a version with the redactions described in the ‘Amended Schedule to Amended Annexure E’ and set out in ‘Amended Annexure E – Proposed Redactions to Applicant’s Submissions’;
(h)the amended interlocutory application, including the Annexures, which is to be marked confidential;
(i)the outline of submissions filed 9 February 2024, filed on behalf of the applicants in this interlocutory application, which is to be marked confidential;
(j)the affidavit of Anthony Elzain sworn 7 February 2024, filed on behalf of the applicants in this interlocutory application, which is to be marked confidential;
(k)the outline of submissions filed 12 February 2024, filed on behalf of the respondents in this interlocutory application;
(l)this second amended interlocutory application, including the Annexures, which is to be marked confidential.
2 Order 1 does not prevent disclosure by the Applicant:
(a)in compliance with any undertakings provided by him in the proceeding; or
(b)as required for enforcement of any order made in this proceeding; or
(c)for the purpose of performing his statutory duties and functions pursuant to a taxation law.
3Order 1 expires on the earlier of 24 January 2034 and four weeks after any of the first to fifth respondents commences a proceeding under Part IVC of the Taxation Administration Act 1953 (Cth) (TAA 1953) in this Court or the Administrative Appeals Tribunal.
4The ground on which the orders in [1] are made is that they are necessary to prevent prejudice to the proper administration of justice.
5Pursuant to rules 1.32, and/or 1.35, and/or 2.28(1)(a)(i), and/or 2.28(1)(b)(ii), and/or 2.32(3) of the FCR, the following documents be prohibited from inspection under r 2.32 of the FCR by a person who is not a party to the proceeding:
(a)the affidavit of Anthony Elzain sworn 18 January 2024, including exhibits;
(b)the affidavit of Dimitrios Jimmy Diakou sworn 18 January, including exhibits;
(c)the affidavit of Steven Tamvakis sworn 18 January 2024, including exhibits;
(d)the written submissions dated 18 January 2024 filed on behalf of the respondents to the freezing order application;
(e)the written reply submissions dated 25 January 2024, including the table “Summary of Orders Sought By The Applicant on 31 January 2024”, filed on behalf of the applicant to the freezing order application:
(f)the second affidavit of Dung Dinh sworn 25 January 2024;
(g)the third affidavit of Dung Dinh sworn 30 January 2024;
(h)the outline of submissions filed 7 February 2024, filed on behalf of the applicants in this interlocutory application;
(i)the outline of submissions filed 9 February 2024, filed on behalf of the respondents in this interlocutory application.
In turn, the application attaches:
(a)An amended Annexure A comprising 150 non-sequentially numbered rows identifying from the annexures to the affidavit of Dung Dinh many documents to be fully or partially redacted;
(b)An amended Annexure B comprising 9 rows of separately identified annexures to the affidavit of Puthmakara Hor to be fully or partially redacted;
(c)Annexure C, the affidavit of Dung Dinh made on 18 December 2023 in support of the freezing order applications with the identified redactions to individual paragraphs, sentences, words and annexures as sought by the respondents;
(d)Annexure D, the affidavit of Puthmakara Hor made on 20 December 2023, in support of the freezing order applications with identified redactions to individual paragraphs, sentences, words and annexures as sought by the respondents;
(e)Annexure E, a redacted version of the Commissioner’s written outline of submissions in support of the freezing order applications;
(f)Annexure F, the proposed redactions to exhibit DD-1 to the affidavit of Dung Dinh made 18 December 2023.
In the balance of these reasons, the primary affidavit that is in issue of Mr Dung Dinh dated 18 December 2023, will be referred to as the Dinh affidavit.
CONTEXT
Raymond, Edward, Anthony, Joanne and Carol are family members concerned in a construction business that operates under the name Maxcon. The business operates through various companies and trusts. One of those companies, ACN 152 259 839 Pty Ltd was known as Maxcon Developments Pty Ltd. On 11 December 2020, the Commissioner issued a notice of amended assessment to Maxcon Developments for the 2015 income tax year in the amount of $3,376,185.07. On 18 March 2022, the Commissioner issued a notice of amended assessment to Maxcon Developments for the 2018 income tax year in the amount of $6,791,323.68. By the application of penalties and interest, the amount owing by Maxcon Developments on 5 October 2023 was $21,440,285.40. It is not in dispute that Maxcon Developments does not have the capacity to discharge that debt, and it is likely that it will shortly be wound up as insolvent.
The Commissioner contends that between 12 January and 6 October 2022, Raymond, Edward, Anthony, Joanne and Carol received transfers from a Singaporean company, Seraphim Pte Ltd totalling $31,992,946 which receipts the Commissioner contends are assessable income in the hands of each. On 19 December 2023, the Commissioner issued notices of amended assessment to each of Raymond ($6,467,838), Edward ($4,202,177), Anthony ($5,006,984), Joanne ($3,592,598) and Carol ($3,592,598), including short fall interest charges and penalties.
The individual respondents did not disclose the receipt of funds from Seraphim in their individual taxation returns in relevant years. The Commissioner contends that each amount received is assessable income as a transfer of property from a foreign controlled company within the meaning of s 47A of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936) or alternatively, were deemed dividends within the meaning of s 109C of the ITAA 1936.
The Dinh affidavit evidence relied upon by the Commissioner in support of the freezing order applications, in considerable detail, set out the corporate structure of the business of Maxcon, the individual entities concerned in the business, the history of reviews and audits undertaken by the Commissioner, the precise amounts received by the individual taxpayers, the source of funds, the bank accounts from which the payments were made and the bank accounts into which the payments were received, the detailed history of correspondence between the Commissioner and the taxpayers and/or their representatives relating to reviews and audits, the interconnected nature of the business of the family members, trust distributions paid to family members from various family trusts over a number of financial years, the known assets of the individual taxpayers with estimates of value and the individual bank account details of the respondents. All of this evidence was relied on to establish the factual basis required by rr 7.32 and 7.35(4) of the Rules.
More particularly, the Commissioner’s evidence, and submissions in support, proceeded by reference to the matters identified by Gordon J in Deputy Commissioner of Taxation v Vasiliades [2014] FCA 1250; 323 ALR 59 at [35]-[37]. In summary, that the Commissioner has a good or reasonably arguable case, that there is a danger that a prospective judgment will be wholly or partially unsatisfied and that the balance of convenience favours making the freezing orders.
Justice O’Bryan was persuaded to make the freezing orders ex parte on 20 December 2023. His Honour did not publish written reasons. His Honour stated that he had read the affidavits in support and the written outline of submissions of the Commissioner, and on the basis of each, which he had considered “closely”, he was satisfied that the orders should be made. His Honour then engaged with counsel for the Commissioner in relation to particular aspects of the drafting of certain paragraphs, which do not require analysis in these reasons.
THE SECTION 37AF APPLICATION
As I have observed, the scope of the application has evolved over time. Stripped of unnecessary complexity, the respondents submit that the orders sought in the February application are properly made on several, in part interrelated, grounds. First, disclosure will not advance or serve the open justice principle. The argument is that the principle requires disclosure of material that will be of assistance to an inquirer who seeks to understand the basis for and the reasons why the freezing orders were made. In turn, this requires that attention be focussed on the material relevant to the exercise of discretion to make the orders to the exclusion of other material which may properly be the subject of a suppression or non-publication order.
Second, the respondents have not had, and likely will not have, an opportunity to respond to matters relating to misconduct as asserted by the Commissioner in the affidavit material in support of the freezing order applications. Material of that character, seriously detrimental to the interests of the respondents, will not be tested in the proceeding and if publicly available is likely to adversely impact on the reputation of the respondents or cause commercial harm.
Third, and relatedly to the second point, material that is likely to cause reputational or commercial harm if publicly available, may be the subject of suppression or non-publication orders, particularly if relied upon in ex parte applications.
Fourth, a failure to suppress in this case may adversely affect the willingness of taxpayers to be candid in the future, particularly when subject to a review or audit by the Commissioner. A non-publication order is justified in those circumstances as necessary to prevent prejudice to the proper administration of justice in unrelated cases.
Fifth, there is the secrecy regime in Div 355 of Sch 1 to the Taxation Administration Act 1953 (Cth) (TAA), where taxpayer information is treated confidentially and is protected from disclosure if it is protected information within the meaning of s 355-30. Although not determinative for the purposes of s 37AF of the FCA Act, this regime is relevantly to be considered.
Sixth, essentially private information, which has the propensity to be misused if publicly disclosed. The obvious example that is presently relevant is bank account details for various accounts held by the respondents and related entities.
Seventh, commercially confidential information which would ordinarily attract protection from disclosure in equity.
And finally, the protection of privacy interests more generally.
In the framing of the February application, there is a large degree of overlap between several of these categories with multiple outcomes. For this purpose, Ms Nicholson for the respondents, provided Excel spreadsheets for annexures A, B, C, D and E to the February application, within which one may by selecting one or more data fields navigate quickly to the documents in issue. As helpful as that is, these reasons would be most unwieldy and distractingly lengthy if I were to address each claim over each document, or part thereof, individually. For the reasons that follow, I have decided that the February application, even with the subsequently amended annexures, fails in its terms at the level of principle. For that reason, it is not necessary that I examine the minutiae of the orders sought as applied to each category of information.
However, to a more limited extent, I am satisfied that if the February application were to be narrowed then, depending of the final form of the orders sought by the respondents, I may be persuaded to make some suppression and non-publication orders pursuant to s 37AF of the FCA Act as necessary to prevent prejudice to the administration of justice within the meaning of s 37AG(1)(a).
I have decided therefore to address the broad categories of claim and, as foreshadowed during oral submissions, publish these reasons initially only to the parties and hear any application by the respondents to further reduce the scope of the orders sought conformably with my reasons. Until the application is finally determined, I will not dissolve the interim orders made pursuant to s 37AI of the FCA Act.
PRINCIPLES
This is not the occasion to restate the principles that apply in deciding whether to make a suppression or non-publication order pursuant to Pt VAA of the FCA Act. The Full Court undertook that task, particularly in the context of taxation disputes, in Lee v Deputy Commissioner of Taxation [2023] FCAFC 22; 296 FCR 272 (Thawley, Stewart and Abraham JJ). That was a freezing order application case brought by the Deputy Commissioner and where Abraham J made the orders on 15 July 2021 in her capacity as duty judge. Subsequently, on 27 September 2021, an application was made by a journalist to access all of the material relied on by the Deputy Commissioner pursuant to r 2.32 of the Rules. That application was dealt with by Bromwich J in conjunction with the interlocutory application of the respondents for suppression orders. His Honour refused the interlocutory application and ordered that access be granted: Deputy Commissioner of Taxation v Lee [2022] FCA 1307. The Full Court granted leave to appeal and dismissed the appeal although the Court indicated that it would have been inclined to make a suppression or non-publication order in respect of bank account numbers, had such an order been sought: at [107].
On the freezing order application, the Deputy Commissioner in Lee relied on a primary affidavit comprising over 17,000 pages of material, of which approximately 13,000 pages comprised bank statements and bank records. The Full Court noted at [11] that:
…As is generally the case in such applications, the Commissioner’s reasons for decision formed part of the exhibited material and these were referred to directly. These reasons for decision generally contain a thorough analysis of the underlying facts and reasons for the issuing of assessments or other action taken. The reasons for decision are based on the material in the Commissioner’s possession and make reference to that material.
That is the case in this proceeding where the Dinh affidavit is similarly comprehensive in content and attaches all relevant material for the decisions of the Commissioner to issue the amended assessments and related correspondence.
A further observation of the Full Court at [11] is also of present relevance by way of analogy:
The ex parte application involved establishing: (1) a case for the relief sought (namely judgment in the amount of about $280 million plus general interest charge) which was sufficiently strong to support the making of the ex parte freezing orders in the circumstances; and (2) a risk of dissipation of assets. The relief sought was invasive and required that care be taken, both in establishing a proper basis for the relief and in disclosing to the Court what the absent respondents might put against the granting of the relief sought. The degree to which reference is made directly to the material filed in support of the application will vary depending on the course of the hearing. It is often the case, where written submissions have been filed, that it becomes necessary, or is otherwise desirable, to refer to other material during the ex parte hearing.
In this proceeding, the Commissioner did not have the benefit of judgments against the respondents for each amended assessment. However, as explained in the Dinh affidavit, the Commissioner intended to apply for judgment for each tax-related liability, which comprised the substantive relief sought in the originating application. The Commissioner was entitled to judgment against each respondent based on the amended assessments as a debt due to the Commonwealth and in reliance upon the fact of the assessments: TAA Sch 1 s 255-5 and Pt 4-90 and ITAA 1936 s 175.
Similarly, also, the Dinh affidavit addressed in detail the evidentiary basis for the making of the freezing orders, ancillary relief for disclosure of assets by the respondents and the risk of asset dissipation to frustrate or delay the recovery of any judgment sum. To that end the affidavit is structured by division into sections as follows:
(1)Part A: records held by the Commissioner;
(2)Part B: Summary of the application;
(3)Part C: The Business of Maxcon and related entities (including trusts), the family members and their roles;
(4)Part D: Summary of tax liabilities of the respondents;
(5)Part E: Prior Review and Audit information, including an analysis of income tax returns lodged by Maxcon Developments and the subsequent disallowance of deductions claimed for payments to Seraphim;
(6)Part F: Seraphim payments to the respondents, including the Commissioner’s conclusion that Seraphim is a Controlled Foreign Company;
(7)Part G: Payments to third party respondents;
(8)Part I: The likely risk of dissipation of assets by the respondents, in part based on the interconnected nature of the Maxcon business and that the quantum of payment of distributions by Seraphim to the respondents between 2015 and 2018 broadly equates to the amounts paid by Maxcon Developments to Seraphim;
(9)Part J: Known assets of the respondents;
(10)Part K: miscellaneous matters; and
(11)Part L: substituted service applications.
Mention should be made of two other matters noted in Lee at [11]. One, the banking records were relevant to the Deputy Commissioner’s contention that there was a risk of dissipation of assets. The other, it was not submitted to the primary judge that irrelevant material was included in the application. In this case the banking records were referenced in and attached to the affidavit to demonstrate the movement of funds between Maxcon Developments and Seraphim, the substantial borrowings of Maxcon Developments, the balance of accounts of Maxcon Developments from time to time and that funds held by Maxcon Developments were insufficient to satisfy its tax-related liabilities. Further, the bank account records of the respondents were referenced as evidence of substantial receipts from and payments to related entities.
On the question of relevance, the Commissioner’s written outline of submissions before O’Bryan J substantially referenced the Dinh affidavit as establishing the factual basis for the Commissioner’s claims that the elements of rr 7.32-7.35 of the Rules were met. Particularly on the risk issue, the Commissioner’s evidence was that none of the respondents had declared receipt of the Seraphim payments as assessable income in their income tax returns, despite that the amounts were profits of Seraphim derived in consequence of payments made to it by Maxcon Developments as well as related third parties. In short, Maxcon Developments made substantial payments to Seraphim that were business profits which should have been subject to taxation in Australia, but which monies were sent offshore and for which Maxcon Developments claimed a deduction from its assessable income. Paragraphs [128]-[130] of the Dinh affidavit identifies the basis for the deponent’s belief that there is a real risk of dissipation of assets by the respondents as follows:
Based on:
(a)the interconnected nature of the family members in the “Maxcon” business;
(b)the receipt of distributions from Seraphim by each of the Taxpayer Respondents, to a total amount broadly similar to that which was paid to Seraphim by Maxcon Developments in 2015 and 2018;
(c)the pattern of the Elzain Family Trust (the Trustee of which is controlled by Raymond) making significant distributions to certain of the Trustee Respondents as set out below,
I believe that the familial and financial connections of the Respondents indicates that the assets of each Respondent may be of ongoing interest to all Respondents as a whole and that the danger and risk of the dissipation of assets in respect of one Respondent creates a parallel risk in respect of the dissipation of assets of the other Respondents.
Each Taxpayer Respondent and related entities financially benefits or has financially benefited from the Elzain Family Trust. At page 2987 - 2989 is a copy of the income tax return lodged by the Elzain Family Trust for the 2015 to 2016 income years, which records distributions made by it to the following persons and entities (amongst others):
(Table 14 is not reproduced.)
The risk issue is substantially addressed in the Commissioner’s outline of submissions, with extensive reference by way of footnoting to various paragraphs in the Dinh affidavit.
In oral submissions Ms Nicholson disagreed with my observation that one may assume that the Commissioner did not include irrelevant material in the Dinh affidavit in support of the application. However, that submission was not developed by reference to particular paragraphs in or annexures to the affidavit.
Returning to the principles identified in Lee, it was common ground that the affidavits there relied upon included “protected information” within the meaning of s 355-30 of Sch 1 to the TAA, which is also the case in this proceeding. Nonetheless, the Court held that the statutory regime in Div 355 is not determinative of, though is relevant to, the exercise of the discretion to make orders pursuant to s 37AF of the FCA Act: [99].
In reaching that conclusion, the Court commenced with emphasising the importance of the primary objective at s 37AE which is to “safeguard the public interest in open justice”, noting that this is “a”, rather than “the” primary consideration: [83]. The Court continued at [84] that: “[o]pen justice facilitates public scrutiny of the way in which courts decide cases and enables the public to understand how the justice system works and why decisions are taken”, referring, with apparent approval, to Cargill Australia Ltd v Viterra Malt Pty Ltd (No 23) [2019] VSC 417; 58 VR 611 at [61], where Elliott J emphasised that public “scrutiny informs the public as to how judicial power is exercised, and on what evidential basis”.
The power to make an order conferred by s 37AF does not involve a balancing and weighing of the interests of open justice with potential prejudice if a suppression or non-publication order is made. The question must always be whether the making of the order is (relevantly here) necessary to prevent prejudice to the proper administration of justice: s 37AG(1)(a). Such orders should only be made in exceptional circumstances: The Country Care Group Pty Ltd v Commonwealth Director of Public Prosecutions (No 2) [2020] FCAFC 44; (2020) 275 FCR 377 at [8]-[9] (Allsop CJ, Wigney and Abraham JJ).
Of relevance to the present case is the issue of reputational harm, corporate and personal, that the respondents have raised as one matter relevant to making the orders. This issue was extensively considered in Lee at [90]-[98]. It is useful to set out part of the analysis, commencing at [90]-[91]:
It follows from the statutory language that it is necessary to identify the contended prejudice to the proper administration of justice that would result if the order is not made. The fact that a person will suffer reputational or commercial harm from publication of evidence relied upon in open court does not have the necessary consequence that the proper administration of justice is or will be prejudiced. Such harm can be an inevitable part of open justice.
That is not to deny that there might be circumstances where likely reputational or commercial harm from the publication of particular information might be such that an order is “necessary to prevent prejudice to the proper administration of justice”. There are numerous examples of when that might occur. The publication of bank account numbers which might be misused if published and which are wholly irrelevant to understanding the work of the court or the reasons for a decision furnishes an example. One would justifiably think less of the justice system if there was no way of suppressing the publication and dissemination of harmful information which was unnecessary to achieving an object informing the open justice principle.
At [94], the Court considered A v Commissioner. In that case the applicant commenced a proceeding for judicial review to set aside notices that had been issued to him by the Commissioner. The notices required the provision of information about his taxation affairs and of related corporations. The notices were issued following the conduct of an audit and the issue of notices of amended assessment, which substantially increased the applicant’s taxation liability. The Commissioner in part contended that the applicant had been involved in fraud and tax evasion. Justice Perram at [6] stated that the applicant “is closely associated with a group of companies providing services in a particular industry. The industry is international in nature, and the group has members in a number of nations.” The applicant provided evidence to the effect that the Commissioner’s allegations were likely to negatively affect the applicant’s reputation, the reputation of his business interests and associated corporations and participants within the particular industry would be less likely to conduct business with the applicant in the future. At [8], His Honour accepted that evidence and also accepted that “the allegations against the applicant involved allegations of serious misconduct in response to which he has yet to adequately put his side of the story and have it considered”. His Honour continued, finding the applicant “will have no opportunity to put his side of the story as the issues will be confined to technical questions concerned with whether the notices should be set aside”. His Honour also found at [8] there is “a real risk that the revelation of the existence of this dispute will cause the group to lose customers to its competitors” and “there is a certainty that the reputation of the applicant will be damaged”.
At [9], his Honour noted that the dispute between the applicant and the Commissioner is subject to the statutory confidentiality provisions as set out in the TAA. In commendably brief reasons, his Honour explained why he was satisfied that it was necessary to make suppression orders over the entirety of the Court file and the applicant only be referred to by way of a pseudonym at [11]-[15]. His Honour accepted that in itself “embarrassment is not a reason to make an order, except in criminal cases of a sexual nature”: [11]. At [12], his Honour reasoned that: “the reputational distress which litigation often brings about is a distress which happens in an arena where the parties are heard and in which each may make a response to the other”, which his Honour then distinguished from the case before him at [13]-[15]:
But in a case such as the present this will not occur. If limits are not placed on the extent to which this proceeding may be publicised, then the allegations against the applicant will be placed in the public domain. But this will occur in circumstances where the applicant will have had no opportunity to respond, because the correctness of the Commissioner’s views will not be a matter calling for resolution in the present proceeding. Furthermore, the revelation of the dispute is likely to cause commercial damage to the group. Finally, it is not without relevance that the taxation process currently in train is required by statute to be conducted in private, although by itself this would perhaps not be such a strong point.
Rather similar circumstances led Markovic J to conclude that her Honour should make suppression and anonymisation orders in ASE16 v Australian Securities and Investments Commission [2016] FCA 321 at [86]-[94]. I agree with her Honour’s approach to the issue and propose to follow it. The key aspects are the commercial damage which will accrue to the group, and the inability of the applicant usefully to respond to the Commissioner’s fraud and evasion opinions in the present proceeding.
In those circumstances, I conclude that it is necessary for the applicant’s identity and that of the group to be suppressed to prevent prejudice to the proper administration of justice. It seems to me that these orders should remain in place until any Part IVC proceedings in this Court are commenced or the expiration of ten years, whichever comes first. I will list the matter for further directions in two years’ time to review the matter. The orders will be expressed to be made as s 37AG(2) requires, on the basis that they are necessary to prevent prejudice to the proper administration of justice.
In Lee at [94], the Court noted that the conclusion of Perram J was one made by reference to the particular factual circumstances and:
There is something wrong with the administration of justice if disclosure of information which will cause significant harm is the necessary corollary of the tender of material, in the ex parte circumstances of that case, when that disclosure does not advance the open justice principle. This appears to be the conclusion Perram J reached. His Honour expressly linked the reputational and commercial harm to s 37AG(1)(a).
At [95]-[97], the Court identified by way of example, that non-publication or suppression orders may be justified as necessary in cases involving “the protection of trade secrets and commercial confidentiality”, or a proceeding “involving a secret technical process”. At [97] there is a passage of particular relevance to this case:
A suppression order might be shown to be “necessary to prevent prejudice to the proper administration of justice”, for example, where it is made in respect of particular information which could be misused or cause significant harm, being information which is not germane to securing the objective of open justice. If the principle of open justice is not advanced by publication of particular information in the evidence (such as bank account details or passwords), the publication of which might reasonably be expected to facilitate wrongdoing, it might reasonably be concluded that a suppression order is “necessary to prevent prejudice to the proper administration of justice”. No such case was advanced by the appellants. Rather, the appellants contended for expansive orders suppressing all evidence, without advancing any alternative narrow case.
Before me counsel for the respondents repeatedly emphasised that much of the information sought to be suppressed is not relevant to the public’s understanding of why O’Bryan J made the orders and for that reason disclosure is not necessary to serve or advance the open justice principle. With respect there are two difficulties with that submission. First it misstates the question. The statutory question is whether suppression or non-publication of material is necessary to prevent prejudice, rather than whether disclosure is not necessary.
Second, the submissions did not grapple the link identified by the Full Court at [97]: whether information that is not pertinent to securing the open justice objective has the potential to be misused or cause significant harm. Rather, the submission repeatedly advanced for many documents is that if some evidence is made publicly available amounting to “enough information” to establish the basis for the orders, then “the entire particulars of the documents do not need to be disclosed in order to advance the principles of open justice”, to take one example of how the submission was framed orally. The submission omits explanation of why the particulars contain information that may be misused or cause significant harm.
Justice Kennett considered each of A v Commissioner and Lee in CT v Respondent, where the Commissioner as applicant sought declarations that the respondent had contravened the TAA by being the promoter of a tax exploitation scheme. The respondent, a legal practitioner, was at relevant times a tax partner in a major accounting firm. By interlocutory application he sought suppression orders pursuant to s 37AF of the FCA Act, extending to all documents filed in the proceeding and the claims made therein. Likely reputational damage was relied on, which his Honour accepted as “obvious”: [10].
At [11], his Honour proceeded by reference to Lee at [90] that “reputational damage, inconvenience and embarrassment do not in themselves provide a basis” for the making of orders pursuant to s 37AG(1)(a). At [13]-[14], his Honour referenced A v Commissioner and emphasised in that case the allegations of misconduct could not have been addressed in that proceeding. At [15], his Honour summarised in the steps in the respondent’s argument before him:
[The respondent] seeks to build on the reasoning in A v Commissioner in the following way.
(a)Section 290-55(4) and (5) prohibit the Commissioner from applying for orders under s 290-50 against an entity in relation to a scheme more than four years after the entity last engaged in the conduct said to constitute the relevant breach. Section 290-55(6) provides that these limitations do not apply if the relevant scheme involved “tax evasion”.
(b)The Commissioner’s originating application is therefore incompetent, unless it is established that (i) the pleaded “schemes” involved “tax evasion” (which is disputed) or (ii) [the respondent’s] activity in promoting those schemes continued up to a time less than four years before the originating application was filed (ie 18 August 2019).
(c)If the originating application is held to be incompetent for this reason, it will necessarily be dismissed without any finding on the substantive merits of what is alleged against the applicant. He will therefore not have an opportunity to respond, in the course of the litigation, to what is put against him.
(Original emphasis.)
His Honour identified two reasons for rejecting the respondent’s arguments, one narrow and the other broad at [18]-[22]:
The narrower reason is that resolving the dispute as to competence will involve evidence, argument and a need to make findings concerning:
(a)what conduct of [the respondent] constituted being a promoter of either the Tax Loss Access Scheme or each of the narrower schemes, and when it occurred; and
(b)where the relevant conduct ended before 19 August 2019, whether the scheme concerned had the characteristics of a “scheme involving tax evasion”.
It is unrealistic to expect these issues to be able to be resolved following a preliminary hearing. Each plainly involves questions that ought not to be decided otherwise than in the light of all the relevant evidence in the case. Questions of competency will therefore almost certainly need to be decided as part of the final judgment.
Further, even if it were realistic to hold a preliminary hearing on the issues of competency, it is apparent that that hearing would need to canvass not only what [the respondent] actually did and at what times, but whether or not he was involved in “evasion”. The Commissioner would need to adduce evidence on these topics and [the respondent] would have an opportunity to answer it as part of the curial process.
The circumstances of the present case are therefore quite different from those that presented themselves in A v Commissioner.
The broader reason is that, even if there is a realistic prospect of the case being disposed of after a preliminary hearing limited to questions of competency (with the consequence that allegations of misconduct against [the respondent] enter the public domain but are not debated in the proceeding), that does not go any further than establishing unavoidable reputational distress to [the respondent]. The necessary link with “the proper administration of justice” is not made out. Prejudice to the administration of justice is not established simply because the allegations against [the respondent] may not be tested and decided on their merits (assuming that to be correct), not least because the Court is entitled to proceed on the basis that any reporting of the allegations would be undertaken responsibly (cf Kaplan v State of Victoria [2022] FCA 590 at [50] (Mortimer J).
(Original emphasis.)
At [24], his Honour accepted that where an applicant faces the prospect of damaging allegations which will enter the public domain if a proceeding is commenced, that consideration may act as a deterrence to seeking relief, which prospect “is clearly capable of being regarded as inimical or prejudicial to ‘the proper administration of justice’”. His Honour reasoned that this consideration should be “understood to underpin the decision in A v Commissioner” continuing:
Absent that factor, there was nothing to elevate the unfortunate position of the applicant in Av Commissioner into something that threatened prejudice to the administration of justice. If A v Commissioner were taken to stand for the broad position put by [the respondent]—effectively, that the ground in s 37AG(1)(a) is made out because the damaging allegations against him may not be tested in the proceeding—it would be difficult to reconcile with the stream of authority holding reputational distress to be insufficient in itself: see Lee at [93]–[95].
(Original emphasis.)
In rejecting the application, his Honour considered that different considerations apply where a proceeding involves the “potential disclosures of material that the respondent would prefer not be made public” because respondents are “necessary participants in proceedings whether they like it or not and are therefore (at least normally) not capable of being deterred from seeking vindication of their rights by the prospect of embarrassment or distress”: [25]. His Honour, however, considered that there might be cases where a respondent, who has a good defence, may be driven to consent to judgment to avoid public disclosure of adverse material, but that was not suggested in the evidence. No other basis for making the orders was relied on.
The respondents submit that CT v Respondent should be distinguished, or if not that I should not follow it because it is wrongly decided. On their arguments, it is distinguishable because the reasoning cannot apply to a freezing order application where, as here, allegations of misconduct cannot be answered and determined. Alternatively, they submit that the decision is wrong in that the reasoning cannot be reconciled with Lee at [93]-[95] and A v Commissioner, the correctness of which was accepted in Lee at [94].
I do not consider it necessary to decide whether CT v Respondent was correctly decided. The power to make a suppression or non-publication order may only be exercised when it is necessary to prevent prejudice to the proper administration of justice in “the particular circumstances of the case” (Country Care at [9]) which by its very nature is a fact sensitive and fact intensive inquiry. The onus of demonstrating necessity in this case rests on the respondents, and it is a heavy one to discharge: Australian Competition and Consumer Commission v Oakmoore Pty Ltd (No 2) [2018] FCA 1170 at [22] (Gleeson J). And as her Honour further observed in Oakmoore at [23] in cases involving claims to commercial confidentiality, that claim “alone is not enough to justify a non-publication order. There must also be a real risk of commercial harm flowing from disclosure.”
APPLICATION OF THE PRINCIPLES
I proceed as a matter of convenience by reference to the respondents’ claims, noting that in large measure there is a degree of overlap between the individual claims and the corresponding documents. Many of the categories of claim overlap across multiple documents which requires assessment of the combined merit of the claims.
For amended Annexure A the categories are taxation returns, contracts, invoices, ATO position papers, correspondence between the Commissioner and the respondents and related entities and professional advisers, the submissions of Maxcon Developments to the Commissioner, material obtained from third parties in the course of the Commissioner’s inquiries, ATO audit documentation, meeting minutes with ATO officers, notices of objection to amended assessments, decisions made by the Commissioner on objections and the reasons therefor, AUSTRAC funds transfer reports and international travel data for the respondents.
For amended Annexure B, the only documents now pressed are individual notices of assessment and shortfall penalty notices.
Amended Annexure C, seeks redaction of various paragraphs, sentences, words or figures in the Dinh affidavit.
Amended Annexure D seeks redactions to the Hor affidavit.
Amended Annexure E seeks redaction of portions of the written submission of the Commissioner in support of the freezing order applications.
Amended Annexure F is the exhibit to the Dinh affidavit comprising 3287 pages marked up with the redactions proposed in Annexure A.
And finally, there is what might be described as a miscellaneous category being the transcripts of hearings in this proceeding, each interlocutory application of the respondents, the respondents’ affidavits, the written submissions of the respondents and prospectively, these reasons.
The first claim is that disclosure will not advance or serve the principle of open justice. The submission focuses sharp attention on the matters that the Commissioner was required to establish as prerequisites to the making of the freezing orders pursuant to rr 7.32 and 7.35 of the Rules. The first provides that the Court may make a freezing order “for the purpose of preventing the frustration or inhibition of the Court’s process by seeking to meet a danger that a judgment or prospective judgment of the Court will be wholly or partially unsatisfied.” The latter requires evidence that the applicant has a good arguable case on an accrued or prospective cause of action and where it is demonstrated that “there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied” because, amongst other things, the assets of the prospective debtor may be “removed from Australia or from a place inside or outside Australia” or “disposed of, dealt with or diminished in value”.
On that basis, the submission is that a person who seeks to understand the basis for the orders made by O’Bryan J “would therefore be looking to understand why the court was satisfied that the danger existed so as to justify making ex parte freezing orders”. That distinction, between “a person whose interest is prurient or abnormal” is said to follow from Lee at [72], [84], [86] and [91]. Those references provide some support for the submission, but as always context is important. At [72] there is a reference to Deputy Commissioner of Taxation v StateGrid International Australia Development Company Ltd [2022] FCA 577 (Thawley J), where orders were made in respect of commercially sensitive information. Of that case the Full Court said:
The confined pieces of information over which a non-publication order were granted were considered to be of no benefit to an understanding of the court’s reasoning and there was a perceived risk that the information could be misused.
I note that the orders in State Grid were made in respect of affidavit evidence filed by the Commissioner upon an ex parte freezing order application where later there was a request for non-party access. Thawley J was satisfied that orders were necessary relating to tax file numbers and bank account details, the latter on the basis that the information “is of no benefit to an understanding of what has occurred to date and why and, although perhaps unlikely, the information could be misused”: [14]. Dealing next with the claims for commercially sensitive information, his Honour accepted that this could provide a basis the making of orders “if properly linked to a ground in s 37AG(1)”: [16]. Ultimately on the facts, his Honour was persuaded to make limited non-publication orders concerning sensitive commercial information being the sale and acquisition prices of businesses and valuations: [19]. It is in that context that one must understand what Thawley J said about information that was of no benefit to understanding the basis for making the freezing orders.
Paragraph [84] of Lee (referenced above) does not support the submission. The open justice principle requires exposure of information to understand “why decisions are taken”. If a decision is made based on an assessment of all the evidence adduced, it is difficult to understand how, at a later point in time, effect can be given to the principle by careful dissection of the evidence and excision of parts from public scrutiny. That is a fundamental problem with this aspect of the respondent’s submissions, to which I return below.
Paragraph [86] does not assist for similar reasons in that the Court accepted that the principle requires disclosure of affidavit material that is deployed “in open court”.
Finally, as to [91], the key phrase is that certain information, bank account numbers in the example, may be irrelevant to understanding why a particular decision has been made and on what evidence. That example supports the submission of the respondents that orders should be made in relation to bank account numbers and portions of bank statements that contain entries that were not referred to in paragraphs in the Dinh affidavit. I am satisfied that it is necessary to do so to protect the administration of justice. That conclusion extends to tax file numbers and personal details of each taxpayer, such as private addresses to the extent not disclosed in publicly available information, such as ASIC company searches.
However, it does not assist the broader argument that a considerable volume of the affidavit evidence should be suppressed for the same reason. The starting point is that the Commissioner upon the ex parte application was duty-bound to place before the Court all relevant material, including material favourable to the respondents in defence: Walter Rau Neusser Oel Und Fett AG v Cross Pacific Trading Ltd [2005] FCA 955 at [38] (Allsop J).
Next, as I have noted, O’Bryan J stated that he had read all of the affidavit material and the Commissioner’s submissions which he had considered “closely”, from which he understood the basis for the application and considered it “appropriate to make the freezing orders” on an ex parte basis. Considered together, there is not a principled basis to draw the fine distinction that the respondents urge by way of dissection to carve out the evidence and submissions said to be identifiable as sufficient to explain to “the normally curious inquirer who wants to understand the court’s reasoning and the evidential basis for its decision” by which process of reduction, the submission strays from why the Court was satisfied as to the strength of the Commissioner’s case and that the dissipation danger existed so as to justify the making of the orders. That approach, with respect, is highly artificial where O’Bryan J relied on all of the Commissioner’s evidence.
Further, as I have noted the submission when applied to individual documents fails to engage with the relevance link with misuse or significant harm in Lee at [97].
The second claim is that the respondents have not had and will not have in this proceeding an ability to respond to contentions of misconduct. If publicly exposed, contentions of that character will likely be accepted by the public as very damaging with consequential personal and business reputational harm. This submission largely rests on the analysis of Perram J in A v Commissioner and that I should distinguish or regard as wrong the decision of Kennett J in CT v Respondent.
I accept that if the allegations of misconduct enter the public domain, the likely adverse consequences will be as deposed to by Anthony Elzain. I also accept that the respondents will not have an opportunity in this proceeding to “vindicate their reputation in open court” as submitted by Mr Martindale KC in that, if the respondents dispute their taxation liabilities in proceedings under Pt IVC of the TAA, the misconduct referred to will not be relevant to any challenge to the amended assessments.
The likelihood of severe reputational harm to the respondents in my view justifies the making of orders to the effect that, to the extent that the material contained in the affidavits relied upon by the Commissioner in support of the freezing order applications makes reference to misconduct, suppression or non-publication orders are justified as necessary to prevent prejudice to the proper administration of justice in the particular circumstances of this case. The same applies to the corresponding submissions of the Commissioner.
The third claim concerns reputational and commercial harm and is closely related to the second. I have formed the same view as to its merit.
The fourth claim as formulated in written submissions is that the orders are necessary because, if not made, that circumstance “may adversely affect the willingness of litigants in a like position to be candid in the future, so that [a] suppression order collaterally protects the administration of justice that without such an order would be thereby prejudiced”. Reliance is placed on Lee at [93], where part of the reasoning of the primary judge is extracted. What the primary judge said ([2022] FCA 1307 at [41]) must be read in context. His Honour extensively essayed the relevant authorities commencing at [16] and concluding at [42]. Within that analysis (at [40]) his Honour recognised as “critical that connection be made between the asserted necessity, and the prevention of prejudice to the proper administration of justice. Both ingredients and a genuine connection between them are essential.”
It is the next paragraph that the Full Court extracted in Lee. The “possible example” that his Honour gave as affecting the willingness of litigants in the future to be candid, concerns commercial in confidence material. That is far removed from the circumstances of this case. The Commissioner obtained a large amount of information by exercise of coercive powers. Taxpayers are duty-bound to be truthful in providing information to the Commissioner and in the verification process which is required when an income tax return is prepared and lodged. There is no merit in the submission that if orders are not made in this case taxpayers the subject of an ATO review or audit may not respond “fully, frankly and willingly”.
There is, however, some information within this category of claim that supports the making of the orders to the extent that it is commercially confidential and sensitive, but which in my view is properly assessed under that separate head of claim.
The fifth claim concerns the relevance of the confidentiality regime at Div 355 of Sch 1 to the TAA. As explained in Lee, this is clearly relevant but not determinative. It supports the making of orders that extend to essentially private information provided to and exchanged with the Commissioner, such as tax file numbers, correspondence between the Commissioner and the respondents and their advisers relating to the review and amendment assessment process, minutes of meetings with officers of the ATO, correspondence from the Commissioner requesting information, notices issued pursuant to the coercive powers at Div 353 of Sch 1 to the TAA and the documents obtained in consequence the exercise of those powers, the AUSTRAC funds transfer documents and the international travel records of individual respondents.
My reasons for being satisfied that it is necessary to make the orders sought in accordance with this claim overlap with the justification for making the orders on other grounds. I have concluded that the application fails in relation to the position papers of the Commissioner, and other documents that explain the reasons of the Commissioner for the amended assessments, save that those documents should be redacted to remove the contentions of misconduct, and personal data such as bank account details. It is also the case that the amended redactions now sought to the Dinh affidavit and my conclusions as to which remaining portions in issue may properly be the subject of orders pursuant to s 37AG of the FCA Act makes available a large amount of the material relevant to the freezing order applications. On that basis an inquirer will be able to determine why O’Bryan J made the orders based on the summaries and analysis in that material and the requirement to safeguard the public interest in open justice will be met.
The sixth claim concerns the bank records, which as I have explained satisfies the necessity criterion, limited in the manner set out in the respondents’ written submissions to specific transactions that are identified in the Dinh affidavit and in the Commissioner’s written outline of submissions. Redaction of the balance of the banking records is necessary to prevent prejudice to the administration of justice, particularly because of the risk of misuse and the irrelevance of transactions not germane to the amended assessments and risk of asset dissipation. This extends to the account numbers and the personal address details of each of the respondents.
The seventh claim concerns confidential and commercially sensitive information, which is a well-accepted category of case as explained in Lee at [95]-[96]. Primarily, the documents in issue in this category are contracts entered into by entities in the Maxcon group. In his affidavit made on 7 February 2024, Anthony deposes in considerable detail as to contracts entered into by Maxcon Constructons Pty Ltd for various projects that are current, recently completed and one long term investment. He also gives evidence about various financing and syndicate agreements entered into to facilitate the activities of the Maxcon group. Those contracts were specifically relied upon as evidence in the Dinh affidavit supporting the disallowance of the claims for deductible expenses by Maxcon Developments and the subsequent amended notices of assessment to it and to the respondents. The claim is that these contracts be fully redacted is a significant overreach, which I reject. The documents are central to the Commissioner’s case and the material considered by O’Bryan J. Anthony in his affidavit deposes that if financing agreements were to be cancelled in consequence of an event of default, then severe negative financial consequences would follow for the Maxcon group. Likely consequential impacts for guarantors are deposed to. In his experience any default leading to a loss of finance would become widely known in the construction industry and have “negative financial and commercial impacts for the Maxcon group.” He deposes that the garnishee orders in favour of the Commissioner have negatively affected the group. His overall concern is that if the material relied on by the Commissioner is publicly available, then suppliers, clients and or financiers will likely withdraw support for the Maxcon group, which would jeopardise the viability of the entire business.
The confidentiality claim extends to the whole of the affidavit of Anthony.
The evidence of Anthony is difficult to reconcile with the fact that Maxcon Developments has a very significant taxation liability which it cannot satisfy, has been the subject of a winding up proceeding which the Commissioner did not proceed with (where no suppression orders were made) and will be the subject of a new application to wind up which counsel for the respondents frankly conceded will likely result in the appointment of a liquidator, although he did not have instructions as to the inevitability of that outcome.
The respondents have failed to satisfy me as to why suppression, non-publication, confidentiality and or redaction orders would be properly made as necessary to prevent prejudice to the administration of justice in respect of the entirety of the affidavit of Anthony together with contracts as attached to the Dinh affidavit. This material formed an important component of the evidence relied on by the Commissioner, which O’Bryan J accepted and on which he was satisfied that the freezing orders should be made. None of this material was irrelevant and it is all germane to a proper understanding of the basis for making the orders. Further, the respondents have not demonstrated why or how public access to the contracts or the references to the various projects and finance agreements in the affidavit of Anthony may give rise to a real risk of commercial harm (Oakmoore at [23]) or gives rise to a risk of misuse (Lee at [97]), save as follows.
As an example of the excessive breadth of the February application, the orders sought extend to completed development projects at various addresses in Melbourne. Each is referred to in the Dinh affidavit and copies of the relevant agreements are attached. The respondents seek redaction of references to the address of each property in the Dinh affidavit together with the entirety of each contract. For developments at Southbank and Richmond, the redactions extend to the address of each property and to the entirety of the management, facilitation and funding services agreements relating thereto plus the subcontract between Seraphim and Maxcon developments pursuant to which Seraphim provided services to Maxcon Developments for a non-refundable fee. The fact that the Maxcon group was concerned in the development of property projects in Melbourne is hardly sensitive commercial information: it is a public fact, evidenced at least by development approvals, building permits, certificates of completion, occupancy certificates and the myriad of forms and approvals that are required to lawfully undertake the development and use of land.
Further, the website extract for the Maxcon group that is attached to the Dinh affidavit lists the Southbank development as “a relatively tricky project” and descends into the detail of the engineering challenges involved.
In my view the only valid claim supporting the making of orders pursuant to s 37AG of the FCA Act on grounds relating to confidential and commercially sensitive information is to those parts of each contract that specify the contracting amounts, or the mechanisms for determination of the contract price, the amounts of each financing facility, including fees and charges and the terms of repayment, personal details of persons referred to in contracts who are not parties to this proceeding, the amounts specified in invoices or in payment claims issued pursuant to contracts, bank account details, rates of interest and other related financial information. If the February application were to be further refined so as to isolate these types of confidential commercial in confidence information, then I may be persuaded to make orders to that extent.
The eighth claim concerns general private information and is formulated by reference to Porter v Australian Broadcasting Corporation [2021] FCA 863 at [85] (Jagot J), which passage was approved in Lee at [95]. In Porter the parties settled a claim for defamation and requested that orders be made by consent, including that an unredacted version of pleadings be permanently removed from the Court file. Her Honour made that order, having comprehensively considered the law about the exercise of the power to do so at [62]-[118]. The passage at [85], appears in that part of her Honour’s reasons concerned with the drafting of the Rules and the primary objective at s 37AE of the FCA Act. Her Honour said:
The purpose of the principle of open justice has been said to be at least two-fold, to “enable public scrutiny of the way in which courts decide cases” and “to enable the public to understand how the justice system works and why decisions are taken”: Dring v Cape Intermediate Holdings Ltd [2019] UKSC 38; [2020] AC 629 at [42]-[43]. That said, there are well-recognised cases in which the overall administration of justice requires the suppression of some information from the public, reflected in s 37AG(1) of the Court Act. In Dring at [46] these well-recognised categories were said to include “national security, the protection of the interests of children or mentally disabled adults, the protection of privacy interests more generally, and the protection of trade secrets and commercial confidentiality”.
In the next passage ([86]) her Honour stated (citing Keyzer v La Trobe University [2019] FCA 646 at [29] (Anastassiou J)) that “mere embarrassment, inconvenience or annoyance will not suffice” as a ground, the open justice principle is “fundamental” (citing Scott v Scott [1913] UKHL 2; [1913] AC 417) but “has always yielded to contrary necessity” and “in contrast to the mere convenience or preference of parties”.
The reference to private interests in Dring v Cape Intermediate Holdings Ltd [2019] UKSC 38; [2020] AC 629 should be understood in context. An application was made for non-party access to documents, produced at a trial which settled before judgment was pronounced. Two issues arose: (1) whether the records of the court under a rule provision permitting non-party access extended beyond documents kept by the court for its purposes to include all documents filed or lodged in a proceeding; and (2) whether the inherent jurisdiction to grant access in furtherance of the open justice principle operated more widely. In the inherent jurisdiction (quite unlike the requirements of s 37AF of the FCA Act) a balancing exercise is required where the court weighs why the non-party seeks access and the potential value of the information against the risk of harm if it is released: [45]-[47]. Baroness Hale, for the Supreme Court, did not elaborate as to the type of privacy interests that may justify refusing access in the inherent jurisdiction.
In equity the publication of private information may be restrained as a breach of confidence: Prince Albert v Strange (1849) 47 ER 1302; Morison v Moat (1851) 68 ER 492. How the principles in these cases might assist the respondents’ arguments, in addition to the other specific grounds relied on, was not addressed in any detail beyond the generalised claim deployed on multiple occasions in the amended forms of Annexures A and B labelled: “private” or “private contract” when read with “does not advance the principle of open justice”, and or “undermining public confidence”.
The respondents have failed to articulate how the protection of privacy interests more generally operates in a principled manner in relation to these categories of claim and on this aspect have not discharged the burden of establishing the necessity of making the orders sought.
The respondents’ case is not improved by considering the combined force of each category of claim. In approaching the February application in that way, the fact that certain information is said to attract more than one basis for making the orders fails to address the underlying weakness that is apparent from the very broad scope of the orders sought when each category is considered against the statutory requirement of necessity. In making the freezing orders, O’Bryan J had regard to all of the material filed by the Commissioner and the dissection and fragmentation now sought by the respondents is not in my view consistent with the primary objective of safeguarding the public interest in open justice.
There are two other matters. The February application proposes that the orders apply to the earlier of 24 January 2034 or four weeks after any of the first to fifth respondents commences a proceeding under Pt IVC of the TAA in this Court or the Administrative Appeals Tribunal. Section 37AJ of the FCA Act requires that a suppression or non-publication order must operate for a specified period, not longer than is reasonably necessary to achieve the purpose for which it is made. The respondents did not explain why a period of 10 years, on one view, is consistent with that requirement. Prima facie it is excessive.
The proposed orders also provide for the removal of certain documents from the Court file and replacement with redacted versions. Justice O’Bryan did not make the freezing orders on the basis of redacted material and the respondents did not explain why these orders are appropriately made. It is a very serious step to remove from the Court file material that has been read in Court or otherwise relied on as a basis for making orders. No principle was identified as supporting these orders.
On the evidence and arguments formulated thus far, I am not persuaded to make either order.
OUTCOME
For these reasons, I am not satisfied that orders should be made as formulated in the February application or as amended in each of the amended annexures A, B, C, D, E or F. On one view, the February application should simply be dismissed. However, in oral submissions I indicated that if I were to be persuaded that some form of order may be appropriate, that I would hear the parties further.
I therefore order as follows:
1.Order 1 of the orders made 31 January 2024, as amended on 12 February 2024, is amended to read “until 5 pm on 25 March 2024 or until further order of the Court”.
2.Any application by the respondents for the making of orders pursuant to s 37AF of the Federal Court of Australia Act 1976 in a form consistent with these reasons is to be filed by 4 pm on 21 March 2024;
3.The proceeding is adjourned for further hearing to 10.15 am on 25 March 2024.
I certify that the preceding one hundred and one (101) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McElwaine. Associate:
Dated: 8 April 2024
SCHEDULE OF PARTIES
VID 1082 of 2023 Respondents
Fourth Respondent:
JOANNE ELZAIN
Fifth Respondent:
CAROL ELZAIN
Sixth Respondent:
MAD MAXX PTY LTD (ACN 151 503 669)
Seventh Respondent:
FEDA ELZAIN
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