Deputy Commissioner of Taxation v Reardon
[2017] VCC 99
•20 February 2017
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-15-03105
| Deputy Commissioner of Taxation | Plaintiff |
| v | |
| Reardon | Defendant |
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JUDICIAL REGISTRAR: | Judicial Registrar Tran | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 13 February 2017 | |
DATE OF RULING: | 20 February 2017 | |
CASE MAY BE CITED AS: | Deputy Commissioner of Taxation v Reardon | |
MEDIUM NEUTRAL CITATION: | [2017] VCC 99 | |
REASONS FOR RULING
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Subject: Application for release from implied ‘Harman v Home Office’ undertaking
Catchwords: PROCEDURE – discretion to set aside implied undertaking, factors governing release from the undertaking, admissibility of evidence in related proceedings, giving effect to the administration of justice whether there is a superior public interest in admitting the evidence, application of legislative provisions
Legislation Cited: Civil Procedure Act 2010 (Vic), Taxation Administration Act 1953 (Cth)
Cases Cited:Harman v Secretary of State for the Home Department [1983] 1 AC 280, Ah Choo Teo v Pacific Media Group [2016] VSC 626, Hearne v Street (2008) 235 CLR 125, Springfield Nominees v Bridgelands Secutiries (1992) 110 ALR 685
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S B Rosewarne | Minter Ellison |
| For the Defendant | Mr I R Jones QC | Aitken Partners |
JUDICIAL REGISTRAR:
1 On 29 June 2015, the Australian Taxation Office (ATO) sued Ms Rosemary Reardon for payment of an outstanding tax debt owed in her capacity as the trustee of the ANH Property Trust (“the County Court proceedings”). The tax debt arose after the ATO made the decision, in about August 2014, to transfer an amount held in Ms Reardon’s running balance account into the running balance account of other taxpayers, the Digneys.
2 On 15 February 2016, I took the somewhat unusual course of ordering the ATO to give discovery of certain documents (“the Documents”) to Ms Reardon before she had filed a defence. I did so after hearing submissions made on her behalf that the Documents were necessary for her to determine:
a. the nature of her defence to the statement of claim and in particular whether the decision made by the ATO to transfer amounts in her running balance account into the running balance account of the Digneys was open to challenge; and
b. whether to file and serve a third party notice against the Digneys seeking to clawback those amounts.
3 Ultimately, having received the Documents, Ms Reardon did not file a defence or a third party notice and default judgment was entered against her by the ATO in the County Court proceedings on 10 June 2016.
4 Ms Reardon now seeks to be released from any undertaking in respect of the use of the Documents and granted leave to refer and use the Documents in a Supreme Court proceeding No S CI 4220 of 2016 (“the current Supreme Court proceeding”) which she has commenced against the Digneys.
Background
5 Ms Reardon is the ex-wife of the Digneys’ former accountant. The Digneys commenced proceedings against the accountant and others in the Supreme Court in 2013 (“the 2013 Supreme Court proceeding”). Ms Reardon was joined to the 2013 Supreme Court proceeding on 16 July 2013.
6 As I have already mentioned, in about August 2014, apparently as a result of communications by the Digneys with the ATO, the ATO transferred money held in Ms Reardon’s running balance account into the running balance account of the Digneys.
7 A mediation was held on 24 September 2014, and Ms Reardon settled the claims against her. She says that the claims made against her in the 2013 Supreme Court proceeding included a claim for the money held in her running balance account with the ATO and that, at the time of the settlement, the Digneys did not disclose their communications with the ATO or the ATO’s decision to transfer that money out of her running balance account into the Digneys’ account.
8 In late 2016, Ms Reardon commenced the current Supreme Court proceeding, alleging misrepresentation and breaches of the Civil Procedure Act 2010 (Vic) (“CPA”) by the Digneys because of the non-disclosure of these matters regarding the ATO and the recovery of funds and non-discovery of the Documents.
9 She now seeks to use and disclose the Documents for the purposes of the current Supreme Court proceeding.
Applicable principles
10 Special circumstances must be shown to justify release a person from the Harman v Home Office[1] undertaking (or its equivalent under sub-s. 27(3)(b) of the Civil Procedure Act 2010 (Vic).[2] There is no exhaustive list of the factors relevant to the exercise of my discretion, however factors which have been identified in the cases include: [3]
[1]Harman v Secretary of State for the Home Department [1983] 1 AC 280
[2]Hearne v Street (2008) 235 CLR 125 (Hayne, Heydon and Crennan JJ)
[3] Springfield Nominees v Bridgelands Secutiries (1992) 110 ALR 685 per Wilcox J; Ah Choo Teo v Pacific Media Group [2016] VSC 626
a. the nature of the documents;
b. the circumstances under which they came into existence;
c. the attitude of the author and any prejudice they may sustain;
d. whether the document pre-existed litigation or was created for that purpose and therefore expected to enter the public domain;
e. the nature of the information in the document;
f. the circumstances in which it came into the hands of the applicant; and
g. the likely contribution of the document to achieving justice in the second proceeding.
Consideration of facts of present case
11 In the present case, disclosure is proposed to the Digneys themselves and to the Court. There has been no objection to the orders sought by the Digneys. There is no evidence of any relevant prejudice if the Documents are used as proposed. There is no suggestion that these Documents were initially obtained for an ulterior purpose. There is no evidence that they contained particularly private or sensitive information. The Documents pre-existed the County Court proceedings.
12 There is a compelling public interest in all relevant material being before a Court. Where leave is sought to use the Documents for subsequent court proceedings, it has been said that: “Generally, use in a subsequent proceeding would not be an improper use of material previously obtained subject to an implied undertaking, unless that material was obtained in the first proceeding for an ulterior purpose.”[4]
[4]Laen Pty Ltd v At the Heads Pty Ltd [2011] VSC 315 at [10]
13 Ah Choo Teo v Pacific Media Group [2016] VSC 626 concerned an application for release from the Harmon v Home Office undertaking with respect to documents obtained under subpoena in VCAT for the purpose of use in subsequent Supreme Court proceedings. Citing dicta of the High Court in John Fairfax & Sons Ltd v Cojuangco,[5] John Dixon J recognised the existence, in such applications of the “paramount interest in the administration of justice” in having cases tried on all relevant and admissible evidence. That paramount interest “yields only to a superior public interest, such as the public interest in the national security.”[6]
[5](1988) 165 CLR 346 at 354 (Mason CJ, Wilson, Deane, Toohey and Gaudron JJ)
[6] Citing John Fairfax & Sons Ltd v Cojuangco (1988) 165 CLR 346 at 354 Mason CJ, Wilson, Deane, Toohey and Gaudron JJ
14 The critical question is, then, whether there is a superior public interest applicable in the present case to which the public interest in all relevant material being before the Court should yield. The ATO submitted that Schedule 1 of the Taxation Administration Act 1953 (Cth) (“the TAA”) articulated a superior public interest which militated against releasing Ms Reardon from her undertaking.
15 Division 355 of Schedule 1 of the TAA sets up a scheme for limited disclosure of “protected information” collected or recorded by a taxation officer. Section 355-1 explains that the “disclosure of information about the tax affairs of a particular entity is prohibited, except in certain specified circumstances. Those exceptions are designed having regard to the principle that disclosure of information should be permitted only if the public benefit derived from the disclosure outweighs the entity's privacy.”
16 I note that it is apparent from this statement of purpose that it is anticipated that greater public interests may outweigh the public interest in preventing disclosure of protected information.
17 The “main protection for taxpayer confidentiality”[7] is contained in subdivision 355-B. Section 355-25 makes it an offence, punishable by up to two years’ imprisonment, for a taxation officer to disclose protected information.
[7]s.355-20 of Schedule 1 of the TAA
18 Sub-section 355-50(1) provides that s.355-25 does not apply if:
“(a) the entity is a taxation officer; and
(b) the record or disclosure is made in performing the entity's duties as a taxation officer.”
19 Sub-section 355-50(2) goes on to provide a non-exhaustive list of circumstances which amount to “records or disclosures made in performing duties as a taxation officer”. Relevantly for present purposes, that list includes:
(1) The record is made for or the disclosure is to “any entity, court or tribunal” and the record or disclosure is “for the purpose of administering any taxation law”; and
(3) The record is made for or the disclosure is to “any entity, court or tribunal” and the record or disclosure is “for the purpose of criminal, civil or administrative proceedings (including merits review or judicial review) that are related to a taxation law”.
20 It was accepted by the parties that the original discovery of the Documents by the ATO fell within the scope of both paragraphs (1) and (3) of sub-s. 355-50(2) and so was not a breach of s.355-25.
21 Subdivision 355-C concerns the on-disclosure of information permitted to be disclosed in subdivision 355-B or 355-C. It is structured similarly to subdivision 355-B, with the creation of an offence then the listing of various exceptions. Section 355-155 makes it an offence for an entity to make or record or disclose “information to another entity (other than the entity to whom the information relates or that entity's agent in relation to the information) or to a court or tribunal...” that was acquired under an exception in subdivision 355-B or 355-C.
22 Of the provisions containing exceptions, s.355-175 is most relevant for present purposes. It is headed “Exception-on-disclosure for original purpose”. Sub-section 355-175(1) provides as follows:
(1) Section 355-155 does not apply if:
(a) the information was originally disclosed under an exception in Subdivision 355-B for a purpose specified in that exception (the original purpose ); and
(b) the information was acquired by the entity under this section or an exception in Subdivision 355-B; and
(c) the record or disclosure is made by the entity for the original purpose, or in connection with the original purpose.
Note: A defendant bears an evidential burden in relation to the matters in this subsection: see subsection 13.3(3) of the Criminal Code .
Instances of disclosures in connection with the original purpose
(2) Without limiting subsection (1), a record or disclosure is made by the entity in connection with the original purpose if:
(a) the record is made for, or the disclosure is to, any entity, court or tribunal; and
(b) the record or disclosure is for the purpose of criminal, civil or administrative proceedings (including merits review or judicial review) that are related to the original purpose.
23 In the present case, the parties agreed that the “original purpose” was one or both of those contained in paragraphs (1) or (3) of sub-s. 355-50(2), namely “for the purpose of administering any taxation law” or “for the purpose of criminal, civil or administrative proceedings (including merits review or judicial review) that are related to a taxation law”. If one inserts these specified purposes into the text of s.355-175(2), it appears that the exception in s.355-175 applies to a record or disclosure to an entity, court or tribunal if it is “for the purpose of criminal, civil or administrative proceedings....that are related to”:
a) the purpose of administering any taxation law; or
b) the purpose of criminal civil or administrative proceedings (including merits review of judicial review) that are related to a taxation law”
24 It is thus not necessary for the purposes of s.355-175 for the disclosure to be for the purpose of administering taxation law or for the purpose of criminal, civil or administrative proceedings that are (directly) related to a taxation law. It is sufficient that the proceedings be for the purpose of proceedings that are related to the purpose of administering any taxation law or are related to the purpose of proceedings that are related to a taxation law.
25 I was not taken to any authority directly on the question of how these provisions are to be interpreted. But it seems to me that the present case can be seen as falling within the scope of this exception. One of the express purposes for which discovery of the Documents was originally sought was consideration of whether a third party notice ought to be filed against the Digneys. Had this occurred, there would have been no question that the documents would have been permitted to be used and disclosed in the County Court proceedings. Ultimately, Ms Reardon decided to proceed against the Digneys in separate proceedings in the Supreme Court, at least in part because only the Supreme Court has jurisdiction to consider whether the Digneys conduct in the 2013 Supreme Court proceedings constituted a breach of the CPA and, if appropriate, to grant relief under s.29 of that Act. Fundamental to both the current Supreme Court proceedings and these proceedings in the County Court was the transfer of funds from Ms Reardon’s running balance account into the Digneys running balance account and the circumstances in which this occurred. This seems to me to be a sufficient connection for the Supreme Court proceedings to be proceedings which are “related to” the purpose of the County Court proceedings.
26 I am conscious that the TAA can be viewed as evincing a parliamentary intention that in the ordinary course protected information not be used or disclosed for civil litigation between private parties. On the other hand, the long and detailed list of specific exceptions to the general prohibitions in s.355-25 and s.355-155 demonstrate that the public policy those provisions support is not insurmountable by other public interests. In the particular circumstances of this case, I have formed the view that the public interest in preventing use and disclosure of protected information within the meaning of the TAA is surpassed by the public interest in having all relevant material before the Supreme Court in a case which due to its common facts and context is closely connected and related to a proceeding (the County Court proceeding) which was related to a taxation law.
27 Accordingly, I will make the following orders:
1 In respect of documents discovered to the Defendant by the Plaintiff in these proceedings, the Defendant is:
(a) released from the implied undertaking described in Harman v Secretary of State for the Home Department [1983] 1 AC 280 insofar as is necessary to refer to and use such documents in Supreme Court Proceeding No. S CI 4220 of 2016 (“the current Supreme Court proceeding”); and
(b) given leave under section 27(3)(b) of the Civil Procedure Act 2010 (Vic) ("CPA") to be released from any obligations imposed on her by section 27(1) of the CPA in respect of such documents insofar as is necessary to refer to and use such documents in the current Supreme Court proceeding.
28 The parties are invited to make brief written submissions on costs, to be emailed to my associate by 4 pm on Monday 27 February 2016.
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I certify that these 9 pages are a true copy of the reasons for decision of Judicial Registrar Tran delivered on 20 February 2017.
Dated: 20 February 2017
Simon Bobko
Associate to Judicial Registrar Tran
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