Deputy Commissioner of Taxation v Karas
[2011] VSC 304
•1 July 2011
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
No. 2986 of 2011
| DEPUTY COMMISSIONER OF TAXATION | Plaintiff |
| v | |
| TOM KARAS & ORS (according to the attached schedule) | Defendants |
---
JUDGE: | Davies J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 23 June 2011 | |
DATE OF JUDGMENT: | 1 July 2011 | |
CASE MAY BE CITED AS: | Deputy Commissioner of Taxation v Tom Karas & Ors | |
MEDIUM NEUTRAL CITATION: | [2011] VSC 304 | |
---
PRACTICE AND PROCEDURE – Application to keep evidence and orders confidential – Principles applicable – Supreme Court (General Civil Procedure) Rules 2005 rr 28.05, 37A.03(1), 37A.05 – Supreme Court Act 1986 (Vic) ss 18, 19 – Federal Court of Australia Act 1976 (Cth) s 50
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S.A. Linden | Solicitor for the Deputy Commissioner of Taxation |
| For the Defendants | Mr R. Greenberger | Lewenberg & Lewenberg |
HER HONOUR:
INTRODUCTION
On 15 June 2011 I made ex parte interim freezing orders against the defendants on the application of the plaintiff (“DCT”). The application was supported by three affidavits sworn by taxation officers which were read by the Court for the purpose of determining the application. On the return date, 21 June 2011, the freezing orders were extended by consent of the defendants to 28 July 2011. At the same hearing, counsel for the first, second and third defendants made an oral application for a suppression order prohibiting the publication or release of both freezing orders and the affidavits filed on behalf of the DCT in support of his application for the freezing orders until 28 July 2011. I refused to make a suppression order based on the oral application. However I made a short term confidentiality order over those documents to enable the application for a suppression order to be made on proper material. On 22 June 2011 the first, second and third defendants issued a summons returnable on 23 June 2011. The application by summons was that “until further order”, the affidavits filed in support of the freezing orders, the freezing orders and the affidavit of the first defendant in support of the application by summons “be kept confidential”. On the hearing of the summons, counsel for the DCT, Mr Linden, neither consented to nor opposed the order sought but, consistently with the obligations of the DCT as a model litigant,[1] made submissions to the Court on the law for the assistance of the Court in determining the application. A journalist from the business section of the Age, Mr Butler, was allowed to be heard in opposition to the making of the order sought.[2]
[1]Noone, Director of Consumer Affairs Victoria v Operation Smile (Australia) Inc (No 2) [2011] VSC 153, 9 [12].
[2]AAA v BBB (VSC, Ashley J No 7283/92, 26 August 1994, unreported).
The summons did not identify the power that the Court was asked to exercise to make the order of confidentiality. Counsel for the first, second and third defendants, Mr Greenberger, informed the Court that he relied on the ancillary order power in rule 37A.05 of the Supreme Court (General Civil Procedure) Rules 2005. Rule 37A.03(1) provides:
The Court may make an order (an ancillary order) ancillary to a freezing order or prospective freezing order as the Court considers appropriate.
Rule 37A.05 of the Supreme Court (General Civil Procedure) Rules 2005 is not the source of the Court’s power to make an order for confidentiality. The Court can make such an order in the exercise of its inherent jurisdiction to control its own processes[3] or under sections 18 and 19 of the Supreme Court Act 1986 (Vic), which provide that the Court may make an order prohibiting the publication of a report, of the whole or any part of a proceeding, or of any information derived from, a proceeding. Rule 28.05 of the Supreme Court (General Civil Procedure) Rules 2005 also places limitations on the ability of members of the public to inspect and obtain a copy of any document filed in a proceeding. The rule provides that no person may inspect or obtain a copy of a document that “the court has ordered remain confidential” or, without the leave of the Court, that the Prothonotary is of the opinion ought to remain confidential to the parties.
[3]John Fairfax & Sons v Police Tribunal of New South Wales (1986) 5 NSWLR 465, 476
The Court’s power to make an order of the kind sought is constrained by the principle that justice should be conducted in open court. The Court will more readily make an order for confidentiality of documents on the Court file that contain commercially sensitive material or material of a personal or private nature that has not been received into evidence. If the documents have been received into evidence, the interests of open justice are engaged and the question is whether an order is necessary to prevent prejudice to the administration of justice.[4]
[4]Hogan v Australian Crime Commission (2010) 240 CLR 651.
In the present case, the affidavits in respect of which the confidentiality order is sought have been adduced into evidence and the orders pronounced in open court. The interests of open justice have been engaged in relation to that material.
Open justice is a fundamental axiom of the Australian legal system.[5] In John Fairfax & Sons v Police Tribunal of New South Wales[6] McHugh JA explained the rule:
The fundamental rule of the common law is that the administration of justice must take place in open court. A court can only depart from this rule where its observance would frustrate the administration of justice or some other public interest for whose protection Parliament has modified the open justice rule. The principle of open justice also requires that nothing should be done to discourage the making of fair and accurate reports of what occurs in the courtroom. Accordingly, an order of the court prohibiting the publication of evidence is only valid if it is really necessary to secure the proper administration of justice in proceedings before it. Moreover, an order prohibiting publication of evidence must be clear in its terms and do no more than is necessary to achieve the due administration of justice. The making of the order must also be reasonably necessary; and there must be some material before the court upon which it can reasonably reach the conclusion that it is necessary to make an order prohibiting publication. The belief that the order is necessary is insufficient.[7]
The public administration of justice ensures transparency and accountability which is fundamental to preserving the integrity of the justice system and the public’s confidence in it. That is not to say that an order preventing or restricting publication of evidence or other material in a proceeding may not be necessary in order to prevent prejudice to the administration of justice. This is made specific in sections 18 and 19 of the Supreme Court Act 1986 (Vic).
[5]John Fairfax Publications Pty Ltd v Ryde Local Court (2005) 62 NSWLR 512, 525 [60] (Spigelman CJ).
[6](1986) 5 NSWLR 465.
[7]Ibid 476 - 77.
Sections 18 and 19 of the Supreme Court Act 1986 (Vic) authorise the Court to depart from the principle of open justice in circumstances that include where the Court considers that “it is necessary to do so in order not to prejudice the administration of justice”.[8] Section 50 of the Federal Court of Australia Act 1976 (Cth), the counterpart to these provisions, was recently the subject of judicial consideration by the High Court in Hogan v Australian Crime Commission.[9] The High Court stated that ”necessary” is a strong word and “that the collocation of necessity to prevent prejudice to the administration of justice … "suggests Parliament was not dealing with trivialities".”[10] The High Court went on to state:
… as indicated earlier in these reasons: (a) s 50 is an example of a provision authorising the Federal Court to make orders for the exercise of its jurisdiction other than in open court as mandated by s 17(1);[11] and (b) "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.
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.
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 [the] 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.[12]
The critical question for the Court in this application is whether an order for confidentiality is necessary in order to prevent prejudice to the administration of justice.
[8]Supreme Court Act 1986 (Vic) s 19(b).
[9](2010) 240 CLR 651.
[10]Ibid 664 (French CJ, Gummow, Hayne, Heydon and Kiefel JJ).
[11]Section 17(1) of the Federal Court of Australia Act 1976 (Cth) provides that the jurisdiction of the Federal Court is to be exercised in open court.
[12](2010) 240 CLR 641, 664 (footnotes omitted).
Mr Greenberger argued that the order for confidentiality should be made because the affidavits contained private and confidential information about the defendants and their business and financial activities which was obtained by the DCT by the use of its statutory powers, including coercive powers. It was further submitted that the affidavits, unless kept confidential, could threaten the activities of the first and second defendants because of the commercially confidential and sensitive information contained in them and could provide those defendants’ business competitors with information which would normally be kept private and confidential and could be used to harm their businesses. Mr Greenberger also submitted that the Court should take into consideration that the affidavits were filed in support of the freezing orders. Mr Greenberger placed reliance on the observations of the learned authors of Williams – Civil Procedure Victoria that:
The freezing (Mareva) order is quite a different form of order from any other. An application for the order, when ruled upon, decides no rights in controversy in the litigation, and calls into existence no process by which rights will be decided.[13]
Mr Greenberger submitted that the present case was “an extreme illustration of this principle” as the freezing orders were made in circumstances where there is no primary proceeding before the Court and the material in the affidavits “is entirely one-sided”.
[13]Butterworths, Civil Procedure Victoria, vol 1 (at 4202.2) 37A.01.15.
The submissions were supported by an affidavit of the first defendant (“Karas”). Karas deposed to matters about the nature of the business conducted by the second defendant (“Capital One Securities”), of which Karas and his wife are the directors and his belief that adverse publicity regarding the issues that had been raised by the DCT in its affidavits would be detrimental to him and the business, including the potential to jeopardise his livelihood. Karas further deposed that the DCT’s affidavits contained many errors and incorrect assumptions “however, it is not appropriate for [him] to establish the correct situation in this proceeding”. The implication was that the defendants would not be putting their version of the relevant facts and matters before the Court in this proceeding because of the nature of the proceeding.
In my view, the first, second and third defendants have not established a case for an order for confidentiality over the DCT’s affidavits. Although the material furnished in those affidavits may have come into the possession of the DCT using his coercive powers, the desire of the defendants to preserve confidentially over that material because of their concern to keep their affairs private and avoid potential adverse publicity which may impact on their businesses does not provide sufficient warrant for the orders sought. In Hogan v Australian Crime Commission the High Court held that it is not sufficient simply to claim that a document is commercially confidential and rely upon assumptions about how the person may be adversely affected by disclosure, without an evidentiary basis for that claim.[14] A document does not become confidential because the publication of it may cause embarrassment or damage to reputation. As Kirby P explained in his dissenting judgment in John Fairfax Group Pty Ltd v Local Government of New South Wales:[15]
It has often been acknowledged that an unfortunate incident of the open administration of justice is that embarrassing, damaging and even dangerous facts occasionally come to light. Such considerations have never been regarded as a reason for the closure of courts, or the issue of suppression orders in their various alternative forms … a significant reason for adhering to a stringent principle, despite sympathy for those who suffer embarrassment, invasions of privacy or even damage by publicity of their proceedings is that such interests must be sacrificed to the greater public interest in adhering to an open system of justice. Otherwise, powerful litigants may come to think that they can extract from courts or prosecuting authorities protection greater than that enjoyed by ordinary parties whose problems come before the courts and may be openly reported.[16]
The position is not made any different because the proceedings in question were instituted to obtain freezing orders against the defendants and will not determine the primary controversy with the DCT.
[14](2010) 240 CLR 651, 667 [43].
[15](1991) 26 NSWLR 131.
[16]Ibid 142-43.
On any view furthermore, there can be no justification for keeping the orders which were pronounced in open court confidential.
Finally, confidentiality was also sought over affidavits yet to be filed by the defendants in accordance with the terms of the freezing orders made against them. Those affidavits have yet to be filed. The appropriate time when such an order may be sought with respect to those affidavits is once they have been filed and not in contemplation of their filing.
For the above reasons, the application for an order for confidentiality is refused.
SCHEDULE OF PARTIES
S CI 2011 2986 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Plaintiff - and - TOM KARAS First Defendant CAPITAL ONE SECURITIES PTY LTD
(ACN 125 836 160)Second Defendant SECURITIES AND INVESTMENT GROUP PTY LTD (ACN 117 407 986) Third Defendant PLATINUM UNITED SECURITIES PTY LTD
(ACN 124 756 921)Fourth Defendant
---
3
0