Deputy Commissioner of Taxation v Shi
[2021] HCATrans 69
[2021] HCATrans 069
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Sydney No S211 of 2020
B e t w e e n -
DEPUTY COMMISSIONER OF TAXATION
Appellant
and
ZU NENG SHI
Respondent
KIEFEL CJ
GAGELER J
GORDON J
EDELMAN J
GLEESON J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON WEDNESDAY, 14 APRIL 2021, AT 10.01 AM
Copyright in the High Court of Australia
MR S.T. WHITE, SC: May it please the Court, I appear with MS T.R. EPSTEIN, for the appellant. (instructed by the Australian Government Solicitor)
MR T.A. GAME, SC: If the Court please, I appear with MS K.J. EDWARDS and MR W.R. JOHNSON, for the respondent. (instructed by Uther Webster & Evans)
KIEFEL CJ: Yes, Mr White.
MR WHITE: May it please the Court. This appeal has its genesis in freezing orders and ancillary orders made by the Federal Court of Australia in November 2018 in proceedings commenced by the appellant for taxation liabilities, penalties and interest. On 27 November 2018, ex parte freezing orders were made in respect of the worldwide assets of the respondent by Justice Yates.
Disclosure orders were also made by his Honour requiring the respondent to file and serve an affidavit disclosing his worldwide assets. Those orders are contained in tab 15 of the joint book of authorities and may I take the Court to the orders that were made by his Honour on that occasion, behind tab 15 commencing at page 437 of that bundle.
Your Honours will see at page 438 the orders that were made by his Honour on 27 November 2018 and could I direct your Honours’ attention to paragraph 4, which contains the orders that were made pursuant to rule 7.32 of the Federal Court Rules:
freezing orders be made addressed to ‑
4(a), the respondent, on this application. Your Honours will see in the form of Annexure A to the orders which commence at page 441 of the bundle. The relevant orders for the purposes of this appeal appear at page 443, where the Court will see in paragraph 6 freezing orders that were made by his Honour, which I will not read to the Court but your Honours can see there that the respondent was not permitted to:
remove from Australia or in any way dispose of, deal with or diminish the value of [his] assets in Australia . . . up to the unencumbered value of AUD$41,092,548 ‑
His Honour also made orders at page 444, paragraph 8 and following, in relation to the provision of information and there his Honour made orders which are known as “disclosure orders” requiring the respondent, on the return date of the matter, to the best of his ability to inform the applicant in writing of his worldwide assets and giving their value, location and details. Then in paragraph 8(b):
within 14 working days after being served with this order, swear and serve on the applicant an affidavit setting out the above information.
Paragraph 9(a), which is relevant, if the respondent is not a corporation:
and you wish to object to complying with paragraph 8 on the grounds that some or all of the information required to be disclosed may tend to prove that you:
(i)have committed an offence against or arising under an Australian law or the law of a foreign country; or
(ii) are liable to a civil penalty.
Then in paragraph (c), certain things were required to be done:
(i)disclose so much of the information required to be disclosed to which no objection is taken; and
(ii)prepare an affidavit containing so much of the information required to be disclosed to which objection is taken, and deliver it to the Court in a sealed envelope; and
(iii)file and serve on each other party a separate affidavit setting out the basis of the objection.
The respondent, in consequence of those orders, filed two affidavits. The first was dated 13 December 2018 and was served on the appellant. That affidavit disclosed assets of approximately $360,000.
The second affidavit, which was not served on the appellant but was delivered to the court in a sealed envelope, that affidavit, the privileged affidavit dated 16 March 2019, set out various assets not disclosed in the first open affidavit and it is this affidavit for which privilege is claimed that is the subject of the appeal to this Court.
On 24 April 2019, judgment was entered by consent for the appellant in an amount in excess of $42 million. The judgment debt remains unpaid and the freezing orders remain in place. The timing of the entry of judgment and the fact that freezing orders remain in place have some significance to this appeal.
One week prior to judgment being entered, the respondent brought an interlocutory application claiming privilege in respect of the privileged affidavit pursuant to section 128A of the Evidence Act. The hearing of that application took place on 15 May 2019 after judgment had been entered for the appellant. Could I now take your Honours to section 128A of the Evidence Act which appears behind tab 3 of the joint bundle of authorities?
EDELMAN J: Sorry, which tab?
MR WHITE: Tab 3, your Honour, at page 14 of the bundle. Your Honours see in subsection (1), a definition section. Relevantly, in subsection (1), it provides that a:
disclosure order means an order made by a federal court in a civil proceeding . . . in connection with a freezing or search order –
So, in other words, the section is specifically directed towards disclosure orders made as part of, or in connection with, freezing or search orders. The appellant submits that that is an important contextual consideration when one comes to consider construing the section, which is a matter to which I shall return shortly.
If a deponent objects to complying with the disclosure order on the grounds of self‑incrimination, as I indicated in the orders that were made by Justice Yates:
the person must:
(c)disclose so much of the information required to be disclosed to which no objection is taken –
As one can see from subsection (2), prepare:
(the privilege affidavit) and deliver it to the court in a sealed envelope –
and:
file and serve on each other party a separate affidavit setting out the basis of the objection.
The objection can be taken on the basis, first, that the information contained in the privileged affidavit may tend to prove that a person:
has committed an offence against or . . . under, an Australian law –
Second:
against or arising under –
a foreign law. Or third, because the person:
is liable to a civil penalty.
Pursuant to subsection (4):
The court must determine whether or not there are reasonable grounds for the objection.
If the court finds there are reasonable grounds then:
Subject to subsection (6) . . . the court must not require the information contained in the privilege affidavit to be disclosed –
and one can see that from subsection (5). Subsection (6) provides the exception pursuant to which the court may order the privileged affidavit be served on the other party. That subsection requires three matters to be satisfied. First:
(a)any information disclosed in the privilege affidavit [that] may tend to prove that the relevant person has committed an offence against or arising under, or is liable to a civil penalty under, an Australian law; and
(b)the information does not tend to prove that the relevant person has committed an offence against or arising under, or is liable to a civil penalty under, a law of a foreign country; and
(c)the interests of justice require the information to be disclosed ‑
If those matters are satisfied then the court may make such an order for disclosure. Subsection (7) is important because it requires the issue of a certificate if the court so orders the disclosure of the affidavit. Subsection (8) sets out the effect of the certificate which is, in summary terms, that the information contained in the privileged affidavit “cannot be used against” the deponent in any proceedings in an Australian court. Moreover, that:
evidence of any information, document or thing obtained as a direct result or indirect consequence of the [deponent] having disclosed that information –
is also prohibited from being used in any proceedings in an Australian court.
The first instance decision is at tab 1 of the core appeal book, if I could take your Honours to that decision, and at appeal book page 16, paragraphs 18 through to 21, your Honours will see that the primary judge explained that he had seen the privileged affidavit, and at paragraph 18, he was satisfied that the affidavit disclosed:
reasonable grounds for the making of the claims for the privilege against self‑incrimination ‑
At paragraph 20, his Honour expressed the view that some parts of the privileged affidavit:
would not . . . on a stand‑alone basis, merit a claim for the privilege against self‑incrimination.
However, his Honour regarded that redactions to the affidavit would be pointless. At paragraph 22 of his Honours reasons his Honour was:
satisfied that the information disclosed in the privileged affidavit may tend to prove that Mr Shi committed an offence against or arising under an Australian law ‑
for the purposes of subsection (6)(a), to which I took the Court a moment ago. At appeal book page 17, at paragraphs 23 through to 25, his Honour set out his reasons for why he was not satisfied the information intended – sorry the:
information which tended to prove [the respondent] had committed an offence ‑
in China, for the purposes of subsection (6)(b). And your Honours can see at paragraph 23, his Honour considered it was for the respondent to:
demonstrate that there was information which tended to prove that he had committed an offence under foreign law.
That is, the respondent bore the onus of satisfying the court of the matter set out in subsection (6)(b). And your Honours can see ‑ I will not take your Honours it ‑ but your Honours can see in the fourth line at paragraph 23 of his Honour’s reasons, what his Honour says about the content of the affidavit, which of course my client has never seen, as to why he formed the view that the respondent was unable to demonstrate that he had committed an offence under foreign law.
Turning to the interests of justice test under subsection (6)(c), the trial judge found that:
But for one consideration [he was] of the clear view that the interests of justice –
required disclosure. His Honour deals with this at appeal book page 19, paragraph 30.
The reason his Honour found was the availability of the appellant’s compulsory information gathering powers, under section 353‑10 of Schedule 1 of the Taxation Administration Act – his Honour found that in circumstances where there was a public interest in ensuring taxpayers paid the correct amount of tax based on all the relevant facts, and where the privileged affidavit contained information that bore on that issue, it was preferable the appellant obtained the same information via those alternate means.
KIEFEL CJ: Does his Honour’s reasons in this regard reflect one of the parties’ submissions?
MR WHITE: No, your Honour. His Honour raised this during the course of the hearing, none of the parties had raised this previously, albeit his Honour did give the parties further time to provide written submissions in relation to the point.
KIEFEL CJ: Thank you.
MR WHITE: If I can just highlight, without taking your Honours to it, the relevant passages in his Honour’s reasons on this point, at page 19 of the appeal book, paragraph 31. His Honour deals with the – and sets out the relevant power provided by section 353‑10 of the Act. At page 22, paragraph 35, his Honour sets out the availability of the power to obtain information. That was the subject of the disclosure orders.
At paragraphs 44 to 45 on appeal book page 25, again his Honour sets out the powers afforded by the Act and that it was a relevant consideration that the Commissioner could exercise those powers untrammelled by privilege against self‑incrimination. Those were the reasons in relation to the primary judge on that issue.
The appellant sought leave to appeal to the Federal Court on the grounds that the primary judge’s consideration of the power afforded by section 353‑10 was an irrelevant consideration in determining where the interests of justice lay. The Full Court’s decision is behind tab 6 of the core appeal book, if I can take your Honours to that. In that appeal, the Full Court unanimously granted leave to appeal, however the majority dismissed the appeal. The Full Court unanimously held the primary judge erred in his consideration of the section 353‑10 power.
Justice Lee, who at paragraph 101, page 117, sets out the reasons that his Honour gave in respect of that issue. Again, I will not read your Honours what his Honour said, but his Honour clearly formed the view that the trial judge was in error in considering the availability of the 353‑10 power, principally because it would have circumvented the respondent’s entitlement to claim privilege against self‑incrimination and their Honours did not regard that as a compelling consideration.
At paragraph 31 of appeal book page 94, Justice Davies agreed with the conclusions of the Full Court that the section 353‑10 power was not a relevant consideration. She was in the minority in relation to the way in which the appeal should be dealt with more generally. At paragraph 31, on page 94, her Honour found it was a relevant consideration that the appellant had not sought:
to rely on his s 353‑10 power to obtain the –
same information as that contained in the privileged affidavit. If I can interpolate there, the appellant also did not seek to rely on section 108 of the Civil Procedure Act. Her Honour also considered that to rely on such a power would be a wrongful exercise of the appellant’s discretion:
to cut down a privilege against self‑incrimination –
Her Honour says that at page 96 of the appeal book, paragraph 33, in the last sentence.
GORDON J: Do you accept the other matters raised by Justice Davies in the consideration of the interests of justice question, which start, as I read it, from paragraph 26 and following? Would you adopt that analysis, that there is to be a balance and that the considerations are not confined – they depend upon the facts of the case, et cetera?
MR WHITE: Yes. But her Honour, together with the other members of the Full Court, accepted that the 353‑10 power was not relevant. We obviously accept that. Her Honour did not deal with the section 108 issue that was raised for the first time on the hearing of the appeal in the Full Federal Court by Justice Lee, which I will come to in a moment.
GORDON J: Is your submission that that is to be treated in the same manner as the 353‑10 analysis by Justice Davies?
MR WHITE: Yes. However one might characterise the error, it is quite clear, with respect, from the reasoning of the judges of the Full Court, that the section 353‑10 power was not a matter that should have been taken into account in determining where the interests of justice lie. As to the determination of the appeal, the relevant reasons of Justice Lee, with whom Justice Stewart agreed, are found at appeal book pages 118 to 119 where his Honour, at paragraph 104 and paragraph 105, makes a number of observations.
Your Honours will see from those paragraphs that his Honour reasoned that this was a case in which judgment had already been entered for the appellant and, therefore, disclosure of the privileged affidavit was for the purpose of assisting methods of execution of the judgment debt. That being the case, his Honour considered it was relevant to consider whether there were other available ways that execution could be assisted, including the appellant’s ability to examine the respondent as a judgment debtor. His Honour says that in paragraph 106. At pages 119 to 120, in paragraphs 109 to 110, his Honour had:
regard to the risk that the information –
contained in the privileged affidavit:
could be used in or in relation to future criminal proceedings –
it not being in any contest that no charges had been laid – no charges had been laid against the respondent. At paragraph 109, his Honour observed that if:
“there are reasonable grounds for the objection” –
under section 128A, it was necessarily the case that provision of the information contained in the privileged affidavit:
“would give rise to a real and appreciable risk of prosecution, in the case of the privilege against self‑incrimination –
At paragraph 110, his Honour accepted the:
derivative use immunity in respect of compulsorily acquired information . . . is very difficult to enforce . . . in part this is because . . . investigators and prosecutors may not even be aware they have -
such information. That being the case, at paragraph 111, his Honour took into account:
the risk the information –
contained in the privilege affidavit:
could be used in or in relation to the accusatorial process of criminal justice –
in determining where the interests of justice lay. Justice Davies dealt with that very issue as well in her reasons at pages 100 and 101. I can take your Honours to those pages and in particular to paragraphs 46 and 47. We embrace these reasons of her Honour, who was in dissent in relation to this point. At paragraph 46, she sets out the submission of the respondent on this point and her Honour dealt with it at paragraph 47. Again, I will not read it to your Honours but your Honours can see that her Honour said:
The short answer to the submissions is that the contentions put are purely speculative at this stage. Mr Shi has not been charged and any projections about what might happen if he is charged are not matters bearing on the interests of justice as things presently stand.
Finally, on this introductory point, relevant to the notice of contention filed by the respondent, the majority of the Full Court ‑ her Honour Justice Davies, the presiding judge, being in dissent on this point – considered the appellant bore an onus to establish each of the matters in section 128A(6), including the onus that the privileged affidavit did not reveal an offence against foreign law.
I will come to this in more detail, but it is important again to remember that my client has never seen the content of the privileged affidavit, does not know what it contains, and it is relevant because, if he bears the onus, he needs to establish a matter of which he is unaware. We say that is relevant in construing who bears the onus in relation to subsection (6)(b).
GAGELER J: Do you say that you bear any onus under subsection (6)?
MR WHITE: We do not bear an onus in paragraphs (a) and (b). We conceded that we might bear the onus in paragraph (c), but her Honour Justice Davies said that we were probably wrong on that in paragraph 41 of her reasons, for the reason that she said we do not bear the onus in paragraphs (a) and (b).
I accept that her Honour’s reasoning in relation to that is quite compelling. So although we did accept at the trial that we bore the onus in paragraph (c) to establish that the interests of justice required disclosure, we accept that what Justice Davies says on that point is correct.
EDELMAN J: What does the word “satisfy” do?
MR WHITE: Her Honour is correct is deciding that “satisfy” means that the affidavit that is filed, which needs to show reasonable grounds, is relevant to whether the court is satisfied of the matters in paragraphs (a), (b) and (c). Her Honour, with respect, again, her analysis is, we submit, correct. There is no real onus in the sense that the appellant in this case does not bear it.
If it is to be borne by anyone, it is borne by the respondent, who has to satisfy the court in subsection (4) that there are reasonable grounds for the claim for the privilege and her Honour says that informs one about the matters contained in subsection (6)(a), (b) and (c). So to the extent that “satisfy” means onus, she said that it is the respondent who bears that onus to satisfy the court of those matters.
In paragraph 40 as I took your Honours to a moment ago on page 98:
An affidavit having been furnished as directed by s 128A(2), it is for the Court to consider whether there are reasonable grounds to claim the privilege . . . and the Court having found that there are reasonable grounds to claim the privilege, it is then a matter for the Court to consider and assess whether such information satisfies the criteria –
in paragraphs (a), (b) and (c). So, her Honour reasoned and, with respect, we accepted that there is no shift in onus from subsection (4) to subsection (6). It remains with the respondent at all times. In the last sentence of paragraph 40 of her Honour’s reasons at page 99 she noted that:
It is the party claiming the privilege that has the knowledge of the content of the privilege affidavit –
and is best positioned to discharge the onus in paragraphs (a) and (b). Of course, as I mentioned before, the only party who had access to the content of the affidavit and knowledge of it was the respondent.
EDELMAN J: Do you accept that if the court is not satisfied, the court must not require – or must not disclose and must not require disclosure?
MR WHITE: Yes.
EDELMAN J: So what does onus really do then?
MR WHITE: Well, as her Honour I think said in paragraph 40, if I may just take your Honours to that, paragraph 40 on page 98 and 99, her Honour does speak of onus. At paragraph 40, about line 42, her Honour says:
There is no shift in onus –
between subsection (4) and subsection (6) and therefore – there is an onus on the respondent to satisfy the court there are reasonable grounds for the claim of privilege, and I do not think there was any issue at any time in these proceedings that the respondent bore that onus. If the respondent has that onus, to satisfy the court of that matter, then we would submit that – and as her Honour accepted – he also bore the onus to satisfy the court of the matters in (a) and (b), because if you do not satisfy the court of the onus in subsection (4), you do not get to subsection (6) because the affidavit has to be handed over, and there is no issue. You do not get to subsection (6).
EDELMAN J: What I am asking is, assuming that the onus as it was here under subsection (4) was satisfied or discharged, what does it mean to say that one or other party bears the onus under subsection (6) when the default – there is already a default rule that disclosure must not be ordered unless the requirements in subsection (6) are met?
MR WHITE: Yes, well, perhaps the best way of trying to answer your Honour’s question is to observe that subsection (4) reveals which party bears the burden of satisfying the court. If that burden is not discharged, then the court will not be satisfied of the matters in paragraphs (a) or (b) in subsection (6).
GORDON J: Is that because when (4) talks about grounds for the objection it is directed back to subsection (2) which sets out what those objection grounds are that have to be set out in the affidavit?
MR WHITE: Yes.
GORDON J: Is that the way it works?
MR WHITE: Yes, that seems to be way it works.
EDELMAN J: Subsection (4) was met here, was it not?
MR WHITE: I beg your pardon, your Honour.
EDELMAN J: It was accepted here that there were reasonable grounds for the objection?
MR WHITE: Yes, yes, and it was also accepted the respondent bore the onus of satisfying the court of that matter. In our respectful submission, by ground 1(a) of the grounds of appeal, the appellant submits the Full Court erred in having regard to the availability of the power to order the examination of the respondent as a judgment debtor. That requires an analysis of the purpose of freezing orders which is well established, and your Honours will see at tab 9 of the joint bundle of authorities the decision of the High Court in Jackson v Sterling Industries (1987) 162 CLR 612.
There, in that decision, at pages 622 and following, Justice Deane explained the purpose of Mareva injunctions, which are now commonly referred to as freezing orders or asset preservation orders, and your Honours will see at page 622, which is in the bundle at page 189, at about line 25 on the page his Honour set out the history and purpose of Mareva orders and at page 623, about line 20, his Honour said:
That general power should, however, now be accepted as an established part of the armoury of a court of law and equity to prevent the abuse or frustration of its process in relation to matters coming within its jurisdiction.
His Honour found that the Federal Court had the power to do so by:
s. 23 of the Federal Court of Australia Act.
His Honour also noted, if I might just also direct your Honours attention to, at about line 7 – his Honour said:
Arguably, it extends to the making of an ancillary order after judgment to protect the efficacy of execution -
So, his Honour there recognised the power to grant a Mareva injunction extended post the entry of judgment and, of course, we are dealing here with a circumstance in which judgment has been entered and, indeed, the Rules of Court now adopt that in the sense that the rules now provide for the granting of such relief in circumstances where judgment has been entered.
Your Honours can see that from rule 7.32 of the Federal Court Rules, which is set out in tab 4 of the joint bundle of authorities. Your Honours will recall that that was the rule that his Honour Justice Yates relied on when granting the orders against the respondent. Tab 4, your Honours see are the Federal Court Rules – 7.32 is at page 19 of the bundle, and it refers to a “freezing order” that might be made:
with or without notice to a respondent, 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 partly unsatisfied.
Ancillary orders are referred to at rule 7.33:
(1)The Court may make an order (an ancillary order) ancillary to a freezing order or prospective freezing order as the Court considers appropriate.
(2)Without limiting the generality of subrule (1) an ancillary order may be made for either or both of the following purposes –
(a)eliciting information relating to assets relevant to the freezing order or prospective freezing order;
(b)determining whether the freezing order should be made.
It is clear that the rules provide that these orders can be made for the purpose of preventing frustration of the Court’s process, by seeking to meet a danger that judgment or prospective judgment will be unsatisfied. They are commonly made ex parte in circumstances of urgency, and certainly in circumstances where the applicant does not have full visibility over the nature and scope of the respondent’s assets.
They can be made at all stages of the proceedings. In this case, the freezing orders were made early on. However, the Federal Court Rules, as I have taken your Honours to, specifically provide for freezing orders to be made at various points in time including against judgment debtors. Can I hand up to the Court copies of rules 7.35 and 7.36 of the Federal Court Rules which appear to have missed the bundle, I apologise. There are nine copies for the Court.
GORDON J: While they are being handed out, Mr White, the position is that there was never an application made to discharge this order, was there?
MR WHITE: That is right, your Honour. There was no appeal from Justice Yates’ findings or orders in relation to the grant of the freezing orders ‑ ‑ ‑
GORDON J: There would not be an appeal ordinarily. There would be – when it came back for full hearing after the orders were made ex parte there would usually be a substantive hearing then, would there not?
MR WHITE: Yes.
GORDON J: The position would be put that the order should be discharged.
MR WHITE: No such application was made.
GORDON J: Thank you.
MR WHITE: Your Honours, I have handed up rules 7.35 and 7.36 because this makes it quite clear that, as the rule is entitled “Order against judgment debtor or prospective judgment debtor or third party” and in paragraph 1:
This rules applies if:
(a)judgment has been given in favour of an applicant by:
(i)the Court –
and then, further down, in paragraph (4):
The Court may make a freezing order or an ancillary order or both against a judgment debtor or prospective judgment debtor if the Court is satisfied, having regard to all the circumstances, that there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because any of the following ‑
Your Honours can see in (a) and (b), which include the assets of the judgment debtor are:
removed from Australia or from a place inside or outside Australia ‑
As Justice Yates found in his judgment, there were multiple transfers of money from Australia to China. That was one of the reasons why his Honour made a finding that there was a risk of dissipation of assets justifying the grant of the orders.
Without taking your Honours to the decision of Witham v Holloway (1995) 183 CLR 525, which is behind tab 12, at page 535, the Court explained that ancillary orders have the same purpose as freezing orders to prevent abuse or frustration of the Court’s process, which seems to be reflected in the rules that I have taken your Honours to.
Ancillary orders assist in identifying the subject assets of the freezing order. The disclosure affidavit enables the applicant and the court to monitor compliance with the freezing order and it enables the applicant to notify third parties of the existence of the orders – those third parties who may be holding assets on behalf of the respondent.
Indeed, the disclosure affidavit may also be relevant in determining whether the applicant should provide or continue any undertaking as to damages and whether the terms of the freezing orders are appropriate. Those purposes, with respect, remain extant until such time as the judgment debt is satisfied. It does not change merely because judgment has been entered.
That all provides important context in construing 128A of the Evidence Act. As I mentioned previously, the Act is limited to two types of proceedings: applications for freezing orders and search orders. The fact that the legislature has put in place a mechanism to protect a claim for privilege specifically in relation to those types of orders bears upon how a court should determine a claim for privilege.
Now, we do not submit that section 128A is generally facilitative of the disclosure of a privileged affidavit as contended by the respondent. That would not be supported by the provision. However, we submit that one has to have regard to the making of the freezing orders to meet and address a risk of asset flight which imperils the integrity of the court’s processes as important in construing what are the interests of justice in a particular circumstance.
The respondent places great weight on the phrase “the interests of justice” and calls in aid that as being a very broadly construed phrase, and we do not, with respect, submit otherwise. There is a broad discretionary power. However, with any broad discretionary power there are limitations on the matters, we submit, that may be permissibly taken into account by the court. It must be exercised obviously in a principled way, and this appeal concerns whether there were two matters that were impermissibly taken into account by the Full Court.
The first of those was section 108 of the Civil Procedure Act which appears behind tab 5 of the bundle of authorities. I need to take the Court to that provision because that was relied upon by the majority in the Full Court as determining where the interests of justice lay in this case.
Your Honours will see from section 108 of the Civil Procedure Act 2005, at page 22 of the bundle, that where judgment has been entered, a judgment creditor may make an application that a judgment debtor attend court to be examined. That procedure is applicable to the Federal Court by reason of the Federal Court Rules, which appear behind tab 4 of the bundle, and your Honours will see rule 41.10 on page 20 of the bundle has the effect that section 108 and the procedure identified by that provision applies to judgments in the Federal Court.
The way in which section 108 is to operate is in part informed by the Uniform Civil Procedure Rules which appear behind tab 6 of the bundle and tab 6 which sets out Part 38 of the rules sets out what must occur before an examination can take place, and your Honours see that at the bottom of page 25 of the bundle behind tab 6.
It is relevant because it highlights the clear purpose of this process and the very great differences that exist between this process and disclosure orders made for the purpose of assisting freezing orders. As your Honours will see from rule 38.1, the judgment debtor must first serve on the judgment creditor an examination notice requiring the person to answer specified questions. If the notice does not yield a response, then rule 38.2 provides that the judgment creditor can make an application for examination of the judgment debtor.
Justice Lee, in the majority decision in the Full Court, gave prominence to the availability of this power as a relevant consideration determining where the interests of justice lay and in relation to the relevance of this section 108 procedure, his Honour’s reasons are at pages 118 and 119 of the core appeal book, specifically at paragraphs 104 to 107.
When your Honours read those paragraphs, your Honours will see that Justice Lee’s reasons were premised on the fact that judgment had been entered for the appellant. That being the case, he considered the only continued relevance of the disclosure order was to facilitate enforcement of the judgment debt and it is in this respect that we say, with respect to his Honour, that he fell into error. That reasoning, with respect, places somewhat of a gloss on the purpose of disclosure affidavits, which are made ‑ ‑ ‑
GLEESON J: I am sorry, Mr White. I missed the paragraph reference from Justice Lee’s judgment.
MR WHITE: Paragraphs 104 to 107 at pages 118 and 119.
GLEESON J: Thank you.
MR WHITE: As submitted previously, asset disclosure orders or freezing orders serve a number of purposes, but critically to preserve and ensure the integrity of the court’s processes are maintained and not frustrated by assets being dissipated. These freezing orders remain extant, as do the asset disclosure orders, and without taking your Honours to it – I mentioned it a moment ago – Justice Yates made some important findings in his reasons, which are behind tab 15 of the authorities bundle. At paragraph 20 of his Honour’s reasons at page 475, he found there was a real risk of dissipation of assets. Section 108 is an examination for, with respect, entirely different purposes, in different circumstances to orders ancillary to freezing orders.
GLEESON J: Mr White, is the first sentence of paragraph 104 accurate or is it incomplete?
MR WHITE: I used the phrase “a gloss”. Maybe that is not fair. It is disclosure. It is not merely a means of assisting execution.
GLEESON J: Has his Honour correctly described the case that was being put?
MR WHITE: No, that is not the way it was put, your Honour. The purpose of the disclosure was to identify the worldwide assets of the respondent, so that both the appellant and the court could monitor compliance with the freezing orders. Thank you, your Honour.
An examination of the kind that his Honour considered as having relevance is not ancillary to a freezing order. It is not undertaken to meet the danger that a judgment creditor will frustrate the courts – a judgment debtor will frustrate the courts’ processes – for example, by removing property from the jurisdiction.
Its only purpose is if a judgment debtor fails to comply with an examination notice. to then examine the judgment debtor about assets that he or she may have to satisfy a debt, which is, with respect, a very different purpose to that which is for a freezing order and an ancillary order. Of course, the circumstances in which those orders might be obtained in circumstances of urgency is very different to the circumstances in which an examination under section 108 whereby there might be significant delay between obtaining judgment and hearing of the examination.
In our respectful submission, where there are circumstances of an ongoing risk of dissipation and where the court has considered that the appropriate mechanism to address that risk is the making of freezing orders and disclosure orders, the availability of the appellant to examine a respondent was an irrelevant consideration.
EDELMAN J: Can you just perhaps explain to me why it is that the purposes are so very different in circumstances where, on the one hand, there is a threat of – or potential threat of disposal of assets that would undermine the enforcement of the courts’ processes and, on the other side, the threat of disposal of assets would undermine the enforcement of a judgment debt and, therefore, the enforcement of the courts’ processes?
MR WHITE: There may not be any threat unless section 108 is not premised on any risk of disposal of assets.
EDELMAN J: I appreciate that. I am just talking about in the circumstances where there is such a threat, is not the purpose of the two provisions aligned?
MR WHITE: If there was a threat, one would have thought that one would have obtained the disclosure order either ex parte or very quickly after the commencement of proceedings and that would mean that one would achieve the same practical outcome as section 108 examination was intended to achieve.
GORDON J: Is that right? I thought 108 was addressed, “identification of assets”.
MR WHITE: It is.
GORDON J: Is not the disclosure order addressed at a number of purposes that you identified earlier, not only identification of assets but the ability, consistent with the freezing order, for, for example, third parties to be notified of the existence of the freezing order?
MR WHITE: Yes.
GORDON J: At a different point in time?
MR WHITE: Correct.
GORDON J: So, in answer to Justice Edelman, am I right to say that you do not accept that?
MR WHITE: Correct.
GORDON J: You do not accept what I just put to you?
MR WHITE: I accept what your Honour has just said. Yes, yes, there are significant differences between the two.
GORDON J: Because if you are in section 108 territory and you wish to preserve the position pending the inquiry, you would have to apply separately for a Mareva or a freezing order, would you?
MR WHITE: You would. Section108 is not directed to that area of inquiry. The very reasons that your Honour has just identified are the reasons why we say his Honour was mistaken in having regard to the section 108 inquiry.
The other difficulty with the section 108 inquiry is that privilege against self‑incrimination can be called in aid of during any examination and that of course now just throws up the very problem that we are faced with here, which is presumably section 128 would then be in play, not section 128A.
I will come to his Honour’s reasons as to why that would not be a relevant consideration. We say it would be a very relevant consideration in considering whether section 108 and the examination conducted pursuant to it was relevant to this interest of justice question.
Dealing with that now, the parties were in agreement that Justice Davies in another case, Deputy Commissioner of Taxation v Gould, which is behind tab 14 of the authorities, at paragraph 9, found that privilege against self‑incrimination may be claimed in the course of a judgment debt as examination. That being so, section 128 of the Evidence Act would apply. Now, of course, that is different to the 353-10 power that the trial judge relied on, because no claim can be made in respect of such an examination, but it could be made in respect of a section 108 examination.
Justice Lee, at appeal book page 118, paragraph 106, reasoned that despite the entitlement of the judgment debtor to claim the privilege, questions during the oral examination:
could be framed to obtain information as to assets in a direct way, thus avoiding, to the extent possible, questions which called for answers trespassing on potentially privileged information.
Now, with great respect, whether or not that is so will depend on the facts, which may not be known at the time judgment is obtained, and indeed may not be known until the examination commences.
Taking the present case as an example, the primary judge in the Full Court found the privileged affidavit could not be redacted to exclude privileged information. We say that simply highlights the difficulty of identifying assets without descending into privileged information. There is, with respect, no reason to think an oral examination could be framed in a way to achieve a different outcome to that required by the disclosure orders.
EDELMAN J: This is a different argument, though. This is an argument that is directed towards saying that the interests of justice would not require 108 to be preferred to a 128A‑type approach. It is not an argument that says that 108 cannot be one of the factors in the mix.
MR WHITE: We say this is another reason why 108 is not a relevant consideration because it is simply another process, albeit for different purposes and in different timeframes, but a process in which the claim for privilege can be made under section 128, similar to the process that the respondent has adopted here, under section 128A.
The 108 process means in effect that if the same claim for privilege was made as the respondent makes in these proceedings, then we go through this whole process in a section 108 examination. In our respectful submission, that further highlights why section 108 is an irrelevant consideration.
KIEFEL CJ: Mr White, how would you describe his Honour Justice Lee’s reasoning in relation to the interests of justice question? Did his Honour make a finding or a preliminary conclusion that the section 128A process was not in the interests of justice, that is, a negative finding and did his Honour find that there was a positive finding that the section 108 method would be in the interests of justice or did his Honour reason that the section 108 process was preferable?
MR WHITE: I think what his Honour said on that point was at paragraph 111 of his Honour’s reasons at page 120 of the core appeal book. In about the third line his Honour said:
the relevant curial context being a consideration of the interests of justice at a time post‑judgment and when other procedures are available to obtain information relevant to the enforcement of judgment -
So, his Honour, in our respectful submission, is saying that when one has regard to the availability of section 108 as another procedure to obtain information relevant to enforcement meant that it was not in the interests of justice to require disclosure.
KIEFEL CJ: That implies that section 128A has a much more limited purpose, that it is meant to be utilised only in special or particular circumstances.
MR WHITE: Well, in the sense that it is only to be used in circumstances where freezing orders or search orders are in play. That is what subsection (1) of, I think, 128 says. It confines the operation of the 128A process to circumstances involving freezing orders. Your Honour sees that in section 128A(1). So it does have a very limited role in that sense.
GLEESON J: Mr White, that reference in 111:
(c) the purpose of disclosure identified by the Commissioner -
am I right to think that that is a reference back to the first sentence of 104?
MR WHITE: It could be, your Honour, it is not clear. There was no concession by the Commissioner that the purpose of disclosure was no more than to assist with execution.
GLEESON J: Well, at paragraph 31 of Justice Davies’ reasons, she seems to identify the submission of the Commissioner, at least in the court below, in a different way, which was that:
compliance with the asset disclosure order was in the interests of justice to enable identification of the assets subject to the freezing orders and to verify whether the freezing orders had been complied with.
MR WHITE: Yes, correct.
GLEESON J: You say that is an accurate identification?
MR WHITE: It is. With great respect to Justice Lee, if one considers the transcript of what was said at the Full Court – and I understand it might be before this Court in a bundle – there was no concession of the kind that his Honour seems to be referring to, and I understand that is the case, from my reading at least of the – my recollection of what was said during the course of that hearing.
Of course, if I may say with no criticism to his Honour at all, this was a point that was raised for the first time during the course of the hearing and obviously that is not a criticism. It was just that it had not been previously considered or dealt with by the parties or the trial judge.
The respondent relies on the decision of Justice Austin in the Bax Global (Aust) v Evans 47 NSWLR 538 decision in tab 13. As we understand it, the respondent relies on an observation that his Honour made in that case, and if I could just take your Honours to it because we would like to deal with it now.
That was a case that was heard by his Honour before section 128A of the Evidence Act had been introduced and it was at a time in which the Supreme Court and maybe other courts had introduced a procedure whereby the person who had been ordered to disclose the location and value of assets sought to claim privilege and because there was no statutory provision to deal with such a circumstance the court had brought into play, if I may say, a procedure whereby the court, not ad hoc, but introduced a way in which privilege could be preserved, albeit that there was no statutory provision dealing with the issue. It was in that context that his Honour said at paragraph 23 on page 419 that other:
procedures should be considered as alternative methods of compelling disclosure, where they are available.
There his Honour was considering the jurisdictional basis for making of the ancillary disclosure orders and his Honour was considering whether there existed alternate procedures that could be invoked by the court to achieve the same purpose as the asset disclosure order, including verified interrogatories or orders in the nature of discovery.
But, given that this was in a circumstance in which it was unclear how and whether, if at all, a person ordered to make an asset disclosure could make a claim for privilege it was perfectly sensible, with respect, for his Honour to give consideration to whether there were other statutory or other ways in which the privilege could be preserved.
Now, of course, we have recourse to section 128A in relation to asset disclosure orders and, in our respectful submission, the decision does not stand for the proposition that in circumstances where asset disclosure orders have been made, it is a relevant consideration to look at alternate means of compelling production of the same information from the respondent.
In our respectful submission, the appellant submits that the availability of a mechanism to examine the respondent as a judgment creditor was an irrelevant consideration for the reasons I have identified.
KIEFEL CJ: Mr White, when you identified the problem as being an irrelevant consideration, is it in part because the context for that is that the section 128A is really just dealing with objections to evidence? It is a ruling on whether or not an objection can be upheld on particular grounds and whether or not the privilege can be maintained.
MR WHITE: One has section 128, which deals with circumstances where someone is being cross‑examined and questioned in relation to privileged information. Section 128A is clearly dealing with a circumstance where someone has been ordered to provide a disclosure affidavit and takes objection in relation to the disclosure.
KIEFEL CJ: It is talking about how the court deals with the objection.
MR WHITE: Yes.
KIEFEL CJ: That is the context in which what may or may not be taken into account is to be determined.
MR WHITE: Yes.
KIEFEL CJ: That is not of some importance?
MR WHITE: Yes, we accept that. The second error in relation to interests of justice was taking into account the risk of derivative use. I have taken your Honours to the reasoning of the presiding judge, who regarded the respondent’s submissions on this point as speculative – that is at paragraph 47, page 101 of the appeal book.
EDELMAN J: Just before you move to the second error, is the entirety of your submissions in relation to the first error dependent upon a conclusion that the interests of justice in subsection (6)(c) is a concept which necessarily requires, in section 128A, an irrelevant consideration to be the matters that are contained within section 108, or does your submission also extend to the possibility that giving too much weight or excessive weight to the matters in section 108 was an error?
MR WHITE: If I understand what your Honour is suggesting to me is: is this an evaluative matter or a discretionary matter?
EDELMAN J: The short point is, is the entirety of your submission dependent upon establishing that section 108-type considerations are entirely irrelevant to subsection (6)(c)?
MR WHITE: Yes.
EDELMAN J: Right.
GORDON J: Is that right? One of the other ways of looking at it may be to say, “I can look at section 108 and see that it does not” – as I understand the argument you have put to us, especially in answer to Justice Edelman’s questions – “provide the same purposes, objectives as those provided by section 128A”, which would reinforce why you would need the power and exercise the power in the interests of justice under section 128A.
So it is not necessarily an irrelevant consideration. It may be that, when you look at it in the mix, it is something which in effect reinforces why you need the power in section 128A and why it should be exercised in the particular case.
MR WHITE: Yes. We accept that, your Honour.
EDELMAN J: That is a very different submission, though. That is a submission that says there could be some circumstances, albeit, you could say, not these circumstances, but there could be some circumstances where section 108 might tip the balance in favour of the opposite conclusion in the interests of justice.
MR WHITE: Your Honour, I cannot think, with respect, of any such circumstance, because of the very different way in which these provisions were intended to operate, and it is difficult to see any crossover whereby 128A and the requirement for – and the consideration of the interests of justice – would intersect with a circumstance in which 108 would play a relevant role. But, if there was an occasion, and this clearly is not one, but if there was an occasion, it is difficult to see what that might be.
EDELMAN J: But is that because you say the interests of justice will never permit a court to have regard to a provision with different purposes even if it might achieve a similar or in some cases same result.
MR WHITE: Well, can I put it this way, I hope in answer to your Honour’s question. It is an irrelevant consideration, or it is a consideration that had little if any weight and should not have, as his Honour found, turned the scales in favour of the court finding the interests of justice meant no disclosure because there was this other procedure available to the applicant.
GLEESON J: The notice of appeal is not - perhaps a little ambiguous, but it does not refer to relevant considerations. It does talk about error in taking into account the mechanism.
MR WHITE: Yes. That is absolutely right, your Honour. So, it comes within the ground of appeal for us to make a submission of the kind that I just have, with respect.
KIEFEL CJ: What do you say the question under subsection (6)(c) “the interests of justice require the information to be disclosed” - what do you say are the relevant considerations that are required to be addressed in the context of, as it is, an extant disclosure order?
MR WHITE: Well, each case may depend on their own facts. For example, if someone had been charged with an offence and the disclosure affidavit contained information for which privilege was claimed it was directly relevant to that charge, that may be, may be a circumstance in which the court would have regard to the interests of justice as not requiring disclosure because there was a real risk that the rights of the respondent in those circumstances might be imperilled.
KIEFEL CJ: But these all take place in the context of the disclosure order and what may happen as a result of the information disclosed and the privileged affidavit being made available? I am just wondering whether your – the error that you are pointing to is really one of irrelevant consideration or whether his Honour addressed the right question. That is, was the question: do the interest of justice require the information to be disclosed? His Honour appears, on one view, to have thought the question was: do the interests of justice require section 128A procedure to be followed?
MR WHITE: Yes. With respect, I think that is right, your Honour. Can I also go back to the question your Honour asked about what other matters you might have regard to in considering the interests of justice. There are, for example, the quantum of the judgment debt might be a relevant consideration; the extent of the assets that are to be disclosed might be a relevant consideration; and, evidence of anticipation of assets may well be a relevant consideration in determining where the interests of justice lie.
GORDON J: Although we are not allowed to look at the common law, some of the common law cases of course have looked at things like the nature of the offence, all of the factors you have raised. They reinforced that the considerations are just according to the facts and circumstances in what they call the justice of the case.
MR WHITE: Yes.
GORDON J: Do you accept that those are potentially open under 128A(6)(c)?
MR WHITE: Yes. If I can in short compass, because I notice the time, make a submission about Justice Lee’s reasoning in respect of ground 1(b) of the appeal. His Honour found it was not speculative, unlike the presiding judge:
to pay regard to the risk that the information could be used in or in relation to future [unidentified criminal] proceedings.
His Honour says that in paragraph 109 on page 119 of the appeal book. In the same paragraph, his Honour accepted that whenever there is found to be a reasonable basis for the objection giving rise to the claim for privilege, there will be a real and appreciable risk of prosecution or a real and appreciable risk of the institution of proceedings for a civil penalty.
The fact that such a risk will always be present whenever there are reasonable grounds for the claim is indicative that the risk of derivative use is not a relevant factor to be taken into account in determining where the interests of justice lie, absent some evidence there is a real possibility of such derivative use, despite the issuance of a certificate.
Section 128(8) is not in qualified terms. It is absolute. It is the procedure that has been determined by the legislature as the appropriate mechanism to guard against the risk of derivative use and in circumstances where, even accepting what the trial judge said at page 25 of the appeal book that there was a realistic possibility of criminal charges, does not elevate this to anything more than a possibility.
As her Honour the presiding judge said, that is purely speculative, it is hypothetical and it cannot be a relevant consideration. Otherwise, as I mentioned a moment ago, it would always be a consideration. That cuts across section 128A because the procedure was introduced to avoid that possibility, and yet it is that very possibility which is being used by his Honour Justice Lee to determine where the interests of justice lie.
EDELMAN J: It does not dictate the result. You are saying that it must be excluded entirely from the interests of justice, a possibility of something that relates to justice concerns.
MR WHITE: Yes, because, for the reasons that Justice Davies gave, it is purely hypothetical and speculative. We do accept that and Gedeon v The Queen, a decision of the New South Wales Court of Criminal Appeal, is an example, and it is behind tab 16 of the authorities.
GORDON J: What is wrong with that analysis, that is, the analysis by the New South Wales Court of Appeal?
MR WHITE: Nothing, your Honour. It is one example of where one might have regard to derivative use where a person has been charged and it is no longer a hypothetical or speculative possibility. It is actuality. As the Chief Justice in that case found, at paragraphs 292 to 294, it was relevant to have regard, as the primary judge did, to the risk that the person who had been charged was about to be cross‑examined on the very issues for which he had been charged. The trial judge said it was not in the interest of justice to allow that to continue in those circumstances. That is an example where we accept that one might have regard to the risk of derivative use.
EDELMAN J: What if it is merely certain that a person is about to be charged? Is that also an irrelevant consideration?
MR WHITE: If the police had informed the respondent that it was intending to charge him, then that may be a relevant consideration. But there is nothing like that here. The problem, your Honour, is, that because 128A(4) in order to satisfy reasonable grounds requires you to show that there is a realistic possibility of criminal charges, then if Justice Lee is correct, you will always have regard to derivative use in considering where the interests of justice lie.
The whole purpose of the certificate process is to say you cannot use this evidence in other proceedings on the issuing of the certificate. It seems it deconstructs and dismantles the whole utility of the certificate process if you can have regard to the hypothetical possibility of someone being charged in the future.
KIEFEL CJ: That might be a convenient time for the Court’s morning break.
MR WHITE: Thank you, your Honour.
AT 11.16 AM SHORT ADJOURNMENT
UPON RESUMING AT 11.31 AM:
KIEFEL CJ: Yes, Mr White.
MR WHITE: Your Honour, we have nothing further to say in relation to our grounds of appeal and we assumed that your Honours would wait until you hear the respondent’s argument on the notice of contention before hearing us.
KIEFEL CJ: I am sorry, I did not hear the last ‑ ‑ ‑
MR WHITE: I am sorry, I am assuming your Honours would hear the respondent’s argument in relation ‑ ‑ ‑
KIEFEL CJ: And then you reply to it.
MR WHITE: Yes.
KIEFEL CJ: Yes, thank you.
MR WHITE: Thank you, your Honour.
KIEFEL CJ: Yes, Mr Game.
MR GAME: If the Court pleases. So the first thing is Justice Edelman made some confidentiality orders on 12 March 2021 and, your Honours, those orders referred to a confidential annotation and a confidential affidavit. The Court has both of those and should read them. The confidential annotation is significant because we have provided two annotations, a confidential annotation and an open one, and from what I said in court – I will come to this shortly – and from what I said in court and what was in the open annotation, the appellant could have been in no doubt as to what we were talking about in terms of foreign offences. So that is material before the Court and it is not necessary to make any other orders. It is just there and it has come up with the order made in the Federal Court.
Now, on a matter of substance, your Honours, in their grounds of appeal the appellant makes two arguments and they are not ambiguous. The first is erred taking into account the availability of an examination in mechanism, and second, taking into account derivative use. It is plain from the written submissions and from the way in which the argument was put right up until the point at which the appellant agreed with some submissions put to him, that their case was a House v The King irrelevant considerations case and there has not been a word of it. Mr White has agreed with propositions little if any weight, in the mix, should not have turned the scale, too much weight, wrong question – none of those things are the subject of this appeal, and he should be held to the appeal the way in which he has argued it and he has not sought to amend.
KIEFEL CJ: It is a pretty fine line between saying something was taken into account which should not have been taken into account and that the question that the decision‑maker framed for themselves was framed in the wrong way. It is a pretty fine line, Mr Game.
MR GAME: In relation to framing the question about taking into account, but not in terms of weight or in a mix or those other House ‑ ‑ ‑
KIEFEL CJ: I agree.
MR GAME: So in that area, yes, I would ‑ ‑ ‑
KIEFEL CJ: It is only in that area where I say that you might be being a bit technical, as they say.
MR GAME: No, I accept that. If it is how you go about that exercise, I would accept that, but not the other submissions.
KIEFEL CJ: Yes, I understand what you are saying.
MR GAME: Now, I am going to speak by reference to our hand‑up outline and I will use it as speaking points, effectively. So, the first thing is that this was no ordinary criminal investigation and no ordinary tax case. The freezing order was made the day before the warrants were issued, and the fact that the warrants were to be issued was a matter that was disclosed for the purposes of confidentiality. The freezing orders were made on 27 November 2018, the warrants were issued on 28 November, and allegations of significant monetary transfers to China were well and truly before the court.
If your Honours look at page 76 of the appellant’s additional materials, you will see that it is being said that approximately $43 million had been illegally taken overseas. There were nine search warrants issued, and if I just show you one of them. If you look to Ms Evans’ affidavit, which is at page 5 of that material, in the second condition, literally hundreds of companies were identified, and hundreds of employees. And, in the third condition, elaborate information in relation to what is described as phoenixing.
EDELMAN J: Sorry, Mr Game, where is the affidavit?
MR GAME: Page 19 of the book of further materials of the appellant, your Honour. So, and money laundering offences, and, so, it is a major criminal investigation, the affidavit from Mr Kelly in the material, he is the head of criminal enforcement in the Tax Department, and that appears at page 31 of this material and you can see where the nine search warrants were issued.
Now, if one couples that material with an inspection of the confidential affidavit, then what one has is a very useful tool of investigation and there is absolutely nothing to stop the Tax Commissioner using, in effect, the 128A material as investigative material. The only prohibition is on using it against the appellant himself in evidence, directly or indirectly, and there are a huge number of other potential parties involved, companies and individuals.
So, that is the landscape, and that is the landscape that was understood, both at first instance and on appeal, and it is a different picture, we submit, than the one that has been framed by the appellant. Now – so I say that just by way of introduction. As I say, what is put against us is two House v The King errors in taking into account two matters in 128A determination.
Now, we put that 128A works in a much more restrictive way than the appellant’s submissions would have it. I will just take your Honours to a little of the material that historically – see, Parliament took up the Victorian Law Reform Commission model and not the Australian Law Reform Commission model and the Victorian Law Reform Commission model can be seen in the joint book of authorities at page 716 – 715 to 716 – we have extracted some of this but 2.66 at 715 to 716, we see the fourth dot point:
in line with the operation of the privilege at trial under section 128, limit the court’s ability to require disclosure to instances where the certificate procedure is able to provide either an absolute or a reasonable degree of protection.
Then, footnote 81 is important – reference to:
foreign jurisdiction and by making the power discretionary and subject to an ‘interests of justice’ test –
If you go back a little bit in this material to the explanatory memorandum which is at page 691 to 692, you will see that the construction we put of 128A, we submit, is pretty much borne out by that which appears between 190 and 192 – particularly 192. For present purposes, what is important about that is this – that the model in section 128 was adopted. The model was adopted and 128 is a provision which the courts have now been utilising for nigh on 25 years.
So, it is a provision the courts are familiar with. But 128A was drafted in such a way as to mirror 128. It is 128 that was considered closely in Gedeon. I want to draw out some points about it just by looking, first, at 128. So, 128 relates to witnesses and 128(1)(a) talks about domestic or foreign offences and the Court has to determine whether there are reasonable grounds for the objection. It seems to be accepted that the onus is on the person seeking to be excused to establish that there are reasonable grounds.
Then, subsection (3) has in it a proviso and that is in subsection (a) and that works as the same way as the proviso that we see in 128A that I will come to in a moment. But we see that subsection (4) – incidentally, Justice Stewart said that there was not an equivalent of subsection (6)(a) and (b) in 128. There is 128(4)(a) and (b). It is slightly different but what it means is if the Court is satisfied at that point that the evidence does not tend to prove a foreign offence and the interests of justice require the evidence to be given.
So, what that means is, there is an exposure, domestically, that the Court is satisfied that it does not tend to prove a foreign offence and the interests of justice require that. In practice, it may seem counterintuitive, but witnesses often want to be put in a position where they are not given the certificate and not required to give the evidence. That is how, in practice ‑ and alternatives, other ways of getting the evidence are closely considered by the Court.
So a person in a 128 situation might be an unindicted co‑conspirator who has not been given an immunity and they might come forward and say, “I don’t want the certificate because it is going to expose me in a way that” – there are cases where it actually comes down to a question of looking at different ways of dealing with it and people are excused and they are not given certificates, but you cannot get to that if you have a foreign exposure.
That is how it works in practice. But you can only get to the interests of justice requiring the witness to give evidence if you have got through exposure to domestic, that is established, but the prosecution, or whoever it is wants to call you, has not established that the court material does not tend to prove that the witness has committed a foreign offence. That is how it works and these things are argued about in the courts I would say every day of the week. I have had these arguments many times myself.
GAGELER J: In those stoushes, is it generally accepted that the prosecution bears the onus of proving (4)(a)?
MR GAME: Absolutely, your Honour. There is no doubt about it, and in Gedeon it was accepted that the prosecution has the onus under subsection (4). It was also accepted that one looks at alternatives and there is a reference to Odgers and an approval of it and Odgers lists all the different kinds of considerations that might apply.
And alternatives are very high on the – so in the Standen situation, there were other ways of getting at the material that was cross‑examined from Mr Standen and there was a risk of derivative use. That is a very good example ‑ it is just a way of seeing it but it is a very good example of looking at the weighing process and it is a very good example of looking at how the structure of 128 has been worked through, in a practical example, by an experienced intermediate court with this kind of problem.
GLEESON J: But, Mr Game, are you saying that the question of alternative methods of obtaining the information is relevant to the question of what the interests of justice require?
MR GAME: Absolutely. It is quite critical, or it could be quite critical, and I am not saying that 108 might or might not in a particular case weigh one way or the other so that is why I was very sensitive about this weighing ‑ ‑ ‑
KIEFEL CJ: But it was never suggested in the courts below that it was relevant.
MR GAME: Sorry?
KIEFEL CJ: It was never suggested by your client in the courts below that it was relevant so how does it become relevant now ‑ ‑ ‑
MR GAME: How does it become relevant ‑ ‑ ‑
KIEFEL CJ: ‑ ‑ ‑ or how do you make your argument when it was never put below?
MR GAME: How do I make my – so what we say is that alternatives are relevant and at the point of judgment, at the point of time at which the order is sought. So we say 108 is a relevant consideration because ‑ ‑ ‑
GORDON J: But the order has already been made. The order was made before. I mean, I understand that one can have this description and analysis of section 128 but 128A is in a very different context, is it not?
MR GAME: Yes, but I am about to come to 128A, but my point about 128 is that you have to look at 128 to see how you go about construing 128A because it mirrors it structurally.
KIEFEL CJ: You are reasoning from it, yes.
MR GAME: When you come to 128A, you either have got a Mareva or you have got an Anton Piller order, and they are still in place. Incidentally, we do not agree that the appellant is correctly putting their case that they were saying that there were other uses, and I will take you to some passages, that it was all concerned with enforcement of the judgment, and I will take you to what was said in the Federal Court about that, shortly.
I should say one other thing about 128 I wanted to mention is that often enough people to whom 128 applies are people who are unrepresented. It is very common, so the Court has to kind of work their way through the exercise with an unrepresented litigant. That is kind of understood in the way in which courts – sorry there was a cognate provision in other legislation that takes this language and puts it in the Coroners Act and other places. It has a kind of very widespread operation.
GORDON J: Do you accept that 128 is dealing with objections to evidence in a proceeding?
MR GAME: Yes, your Honour.
GORDON J: Before the Court, as it is seating, having to rule on it?
MR GAME: Yes, your Honour, but all I am saying is, when you come to 128A, and one is looking at the structure of it, the structure of it is the same. So, we do not for a moment question that 128 would operate in a 108 situation, but it would be a court‑managed exercise, focusing on – with freezing orders in place – focusing on what are described as material questions in the rules. So 128 would apply to a 108 situation, there is no question about that. But that is not to say the evidence would not be given, that is to say the certificate could be given. Now, in 128A ‑ so subsection (2):
If a relevant person objects –
so that is all they have to do, is object, and then they have to serve – I accept that is all they have to do – they object and then they file and serve their material, setting out the basis of the objection. Subsection (4) is:
The court must determine whether or not there are reasonable grounds –
Again, it is using the same language as 128. Again, that is the language of onus, in sections 140 and 142, particularly, of the Evidence Act. “Satisfaction” is also, in our submission, the language of onus.
GAGELER J: Why?
MR GAME: Why is “satisfaction” the language of onus?
GAGELER J: It is just an inclination of the mind, is it not?
MR GAME: No, they have to be satisfied of those things. Either you are or you are not satisfied that the interests of justice require that, so satisfied is the language of onus. In fact, 142 refers to “satisfaction”; 142 has the word ‑ so does 140 – the word “satisfaction” in it. In our submission, it would be incongruous to say that “satisfaction” is not the language of onus.
GORDON J: I am a bit lost. Is not 140 and 142 dealing with the standard of proof?
MR GAME: Sections 140 and 142, yes, but your Honour, they say, if it is satisfied – that is, yes, it is dealing with it, but it is telling you that if there is something – a question to be determined under the Act, and you have to find the facts necessary, it is a question arising under the Act, then the question whether it has been – that is the operative provision that tells you what you do when you are the ‑ ‑ ‑
KIEFEL CJ: But saying the court is satisfied is to say the conclusion reached which, as Justice Gageler points out, is to indicate the inclination of the mind to a certain result. It does not tell you about the process by which it is reached. Onus of proof just depends upon the questions to be directed, who is usually in a position to prove them and those sorts of matters, is it not, Mr Game?
MR GAME: No, respectfully I disagree, your Honour. When it says subsection (6) says “may tend to prove” or “does not tend to prove”, there are facts about which one makes findings about that issue.
GAGELER J: One would do that with Blatch v Archer in mind. You weigh the evidence, such as it is, in the light of the ability of the parties before the court to lead relevant evidence, do you not?
MR GAME: Well, your Honour, we say that the idea of weighing things does not detract from the idea of onus; in fact, Justice Davies was in error when she said that because it involved weighing of considerations it did not attract an onus because ‑ ‑ ‑
EDELMAN J: But it tells you what the extent of your onus is.
MR GAME: Yes, your Honour.
EDELMAN J: The onus becomes much weaker where it is nearly impossible to prove something.
MR GAME: Yes, your Honour, but ‑ ‑ ‑
EDELMAN J: Your onus argument is really rooted in subsection (5), is it not? It is the “must not require”. The default position is you cannot require ‑ ‑ ‑
MR GAME: That is right.
EDELMAN J: ‑ ‑ ‑ and then one turns to what has to then be done to require it.
MR GAME: Yes, whether one uses – I am not withdrawing any argument about onus, but the default position is subsection (5) and that is the end of it from the perspective of the person who is making the objection. They have no further interest in the question because the proviso would take them out of the protection. So they are not engaged with subsection (6) at all and the idea in Justice Davies’ judgment was that – and she used the word “onus” in the passage you were taken to, that the onus stayed on us under (a) and (b), but that there was no onus with respect to (c). But any question of onus on us has gone. Somebody has to satisfy the court of a negative, that it does not tend to prove something, then have to produce some material to satisfy the court about that, and that is the way it works. The idea of a negative, of us having to come along and satisfy the court that it does not not tend to prove ‑ ‑ ‑
KIEFEL CJ: Mr Game, you have identified that having satisfied the court that there are reasonable grounds for the objection that the party claiming the privilege in a sense does not have to do anything further under subsection (6), and of course the other party does not know what is in the affidavit, so it tends to suggest that subsection (6) is concerned with the court determining it, basically for the judge themselves.
MR GAME: Well, it was held against us at first instance that the onus was on us and it was held ‑ ‑ ‑
KIEFEL CJ: Is that a bit of a distraction from the main questions, though?
MR GAME: No, your Honour, because what happened in the Full Court was that they accepted our argument about onus, but they said that we had made a – I will have to come to this – they said we had made a concession but we did not ‑ ‑ ‑
KIEFEL CJ: Is this going to be determinative of anything though on this appeal?
MR GAME: Well, yes, your Honour, because we would succeed on our notice of contention.
KIEFEL CJ: On the notice of contention, yes.
MR GAME: So, yes, it is determinative because we say that the appellant has never engaged with this question at all and they know perfectly well what the subject of this is, which is exporting proceeds of crime.
KIEFEL CJ: How does the appellant before the primary judge – how does the appellant or the party in the appellant’s position prove (6)(b) when they have not seen the material. How do they prove whether or not it tends to prove the commission of an offence under the law of a foreign country?
MR GAME: Well, your Honour, I will have to take ‑ ‑ ‑
KIEFEL CJ: Is it just by the usual presumptions?
MR GAME: No, your Honour. So they know from the open document that we provided that it is about sending very large sums of money overseas. They know from our document that proceeds of crime legislation is engaged, and they know that it involves dealing in those funds. They know those facts from the open affidavit, and from their own investigation, they know that perfectly well. And I said it in court, and what they need to do is to lead evidence that it is not an offence in China to bring proceeds of crime to China. And that is all that it amounts to, and it is not an offence in China to deal in proceeds from a foreign country. That is all they had to do, and they knew it perfectly well and I said it. It is in the transcript. It is in the open document.
Now, so, that is how we say subsection (6) works, so that onus or not one has to have some way of progressing to reach that satisfaction, and if the court is not satisfied that something does not tend to prove then that is it.
GORDON J: What does not tend to prove mean, given that your submission just a moment ago was they needed to lead evidence that it was not an offence in China?
MR GAME: Okay, so you would have to lead evidence that – the evidence about money going to China did not tend to prove an offence in China.
GORDON J: Well, that is the just the section. That is just repeating back to me the words of the section.
MR GAME: Sorry.
KIEFEL CJ: But it is not what ‑ ‑ ‑
MR GAME: They have to establish – sorry.
KIEFEL CJ: The level of satisfaction relates to the information disclosed in the privileged affidavit.
MR GAME: Yes, your Honour, but it is a negative, and it is not at all unusual for – so, public interest immunity claims are made all the time, determined when one does not see the material and one has an onus.
KIEFEL CJ: But it is not referring to a requirement that the court be satisfied that the relevant person may not be liable under the law – may be liable under the law of a foreign country; it is more limited. It is that the information disclosed in the privileged affidavit may suggest that.
MR GAME: Well, yes, your Honour. The language is identical to the language of subsection (4)(a) of 128, and it could not be that a different question was posed under 128(6)(b) than was imposed under 128(4)(a). So, in fact ‑ ‑ ‑
KIEFEL CJ: Except that that is taking place in the course of a proceeding ‑ ‑ ‑
MR GAME: Yes, your Honour.
KIEFEL CJ: ‑ ‑ ‑ where witnesses are being called.
MR GAME: Yes, but in this situation ‑ ‑ ‑
KIEFEL CJ: And the matter is finally ruled on.
MR GAME: Yes, but the convening of a court in a 128A exercise is not something – somebody has to facilitate the hearing, but that does not mean they ‑ ‑ ‑
KIEFEL CJ: But the reference is the evidence, and that would be the whole of the evidence, evidence of other witnesses. If anything, that points up the distinction in 128A(6), that it is only the “information disclosed in the privilege affidavit” ‑ ‑ ‑
MR GAME: Yes. But, your Honour.
KIEFEL CJ: ‑ ‑ ‑ that the court is concerned with.
MR GAME: Yes, but it does limit it. At the bottom it says:
requiring the whole or any part of the privilege –
So you can limit – and it says:
containing information –
So you could limit the information. You could say some of the information. And there would be no difficulty – and we say there is no difficulty in the judge showing that to the ‑ the relevant material to the parties.
EDELMAN J: Do you accept that you have got some form of evidentiary onus, in the sense that a person in the position of the appellant in this Court would not be required to turn up to court with a list of all possible offences in all possible foreign countries saying that, “Well, some of these might have been committed by evidence that we have not seen”?
MR GAME: Yes, I accept that, your Honour.
EDELMAN J: But you say that once you have effectively disclosed that, or satisfied that evidentiary onus by putting before the court the fact that you say there had been transfers of money to China, the onus was then upon the appellant to lead evidence as to how those matters would tend to disclose an offence in a foreign country?
MR GAME: Yes, your Honour, I accept that. But if you go to the supplementary application book, at page 35 is our open annotation. And we had a closed annotation, which is one of the documents I have referred you to today, so the court could see straight away what the parties had been told and what they had not been told. So we set out the Criminal Code offences ‑ ‑ ‑
GORDON J: Sorry, where are you, Mr ‑ ‑ ‑
MR GAME: Page 35 of the appellant’s supplementary book of further materials.
GORDON J: Yes, and page? I missed it.
MR GAME: So page 35.
GORDON J: Thank you.
MR GAME: That is our open annotation. And one needs to look at our open annotation and our closed annotation and the affidavit. But what the appellant knew was – so we were raising issues about dealing with proceeds of crime. We see section 400 referred to. We see the offences. And then in annotation ‑ so paragraph 10 of the annotation tells you about transferring to China a large amount of funds.
GORDON J: My problem with this open annotation is this, Mr Game. It is that when one sets out the introduction to the grounds of objection, one has a statement of facts from your client about suspicion of domestic offences, contravention of domestic offences identified. One then has, “Annotated grounds of objection”. Other than the reference of the fact, which as I understand from the earlier paragraphs underpins the domestic offences, there is no similar statement in respect to foreign offences.
MR GAME: No, but, your Honour – so part of our thinking at the time related to a presumption about foreign law being the same as domestic law, but I am not pursuing that ‑ ‑ ‑
GORDON J: You cannot do that, though, can you?
MR GAME: No, I am not pursuing that. No, but what ‑ ‑ ‑
GORDON J: No.
MR GAME: No, no.
GORDON J: But that, in effect, exposes the issue.
MR GAME: Yes. But, your Honour, we were putting this in the open annotation so they could understand what the issue was, which was proceeds of crime going to China and dealing in those funds, if you see at page ‑ ‑ ‑
GORDON J: But where does it say that? Where does it say, “I am really concerned that I am going to be exposed to a foreign offence under the law of China, and here is the law which says what it is”?
MR GAME: Well, I think you will find that in the closed affidavit, your Honour, but it is not an absence of – all we have to do is show – we say that the onus is on the appellant to show that the evidence did not tend to show a state of affairs.
GORDON J: The consequence of that submission is that in a sense you have to have a little trial on the application for an objection to evidence which identifies a whole range of possible foreign offences and that the evidence does not tend to prove that they have been contravened.
MR GAME: Not a whole – yes, a little trial, but not a whole range of offences, and these little trials happen all the time in 128 issues.
GORDON J: They do in 128 because it is in the context of evidence before a court which has a framework against which they are assessing the questions. This is a very different context.
MR GAME: But neither the party – the appellant - or the court at first instance ever grappled with the issue, and I pointed out to – it is in the transcript – I pointed out in an exchange with Justice Lee that – and this is in this blue book of respondent’s further material – that there had never been a curial exercise without an onus engaged in by the trial judge. So we put the material up, but nobody engaged with it and we say that we were not obliged to do anything more than put the material up.
EDELMAN J: I suppose on one view it might be said that a person in the position of your client is in a circumstance where it would not be difficult to put before the court evidence that would show that there is a fear of possible exposure to criminal liability for domestic offences, but there may be as a matter of policy real concerns with having a person in the position of your client effectively prepare an indictment against themselves by obtaining expert evidence about how they might have committed foreign offences.
MR GAME: So in our position we would have a great reluctance to go into evidence with a Chinese expert to say that we had committed offences in ‑ ‑ ‑
KIEFEL CJ: But on the other hand, it is in your interest to state your concerns about foreign law, about offences under foreign law.
MR GAME: Yes, but we say that 128A(6) creates a default position, or there is a default position in (5), but if there could be any doubt about what I was talking about, Justice Lee asked a question about putting the court in a particular task and I said at page 34 of the document:
We’re talking about something rather obvious to everybody which is - we’re talking about large sums of money being taken out of Australia and sent by various means ‑ ‑ ‑
GAGELER J: Sorry, Mr Game, where ‑ ‑ ‑
GLEESON J: Can you give us a page – a line reference?
MR GAME: Page 34 of the respondent’s further book of materials. So we say that we were not obliged to do anything more than that which we did.
GORDON J: Sorry, Mr Game, what page was that?
MR GAME: That is in this supplementary ‑ ‑ ‑
KIEFEL CJ: There are so many supplementary books, it gets a bit confusing.
MR GAME: I know, I am sorry, your Honour. It is a transcript. It looks like this.
KIEFEL CJ: It is the respondent’s book of further materials, page 34.
MR GAME: Yes, at the top right‑hand corner. So Justice Lee was asking me similar questions at the bottom of page 33 and I was responding at the top of page 34. I also pointed out at page 44, line 33, that if this:
was a curial exercise without an onus, then that exercise has not been engaged in by the trial judge, nor has it been dealt with by the parties, because the judge has dismissed our arguments completely on the basis that we bear the onus under (6)(a) and (b).
That is what we say the judge did do. It may be awkward, but we say the exercise in subsection (b) has never been engaged with.
EDELMAN J: Is there anything in the extrinsic materials that bears upon questions of foreign evidence relating to subsection (6) or subsection (4) of section 128?
MR GAME: In our submissions, we have extracted something about that in respect of 128 but not in respect of 128A and the closest that it would come to in respect of 128A is I think that paragraph 190 of the explanatory memorandum that I showed you a little while before.
EDELMAN J: But what about 128?
MR GAME: Yes. Ms Edwards is telling me that yes, there is material about foreign law in respect of 128. I will have to find it, your Honour.
GAGELER J: Mr Game, going back to section 128A(2), you have to identify - or a person in your client’s position has to identify the ground of the objection. Your ground of objection was limited to a tendency to prove the commission of an offence arising under an Australian law, I think, was it not?
MR GAME: Sorry, the court was satisfied on the Australian law part of it, yes, your Honour.
GAGELER J: No, I am asking about the ground of the objection.
MR GAME: The ground of the objection was taken under domestic law.
GAGELER J: Only?
MR GAME: Sorry, it is both, I beg your pardon.
GAGELER J: It was taken under both?
MR GAME: It was taken under both; I am sorry.
GAGELER J: I see.
MR GAME: Can I say this. To put this in perspective, if it were the case that we had the onus of establishing a foreign exposure for the purposes of taking us out of the further question about whether the interests of justice require it, then you would not need any of this. You would just have (a), (b) and (c) and it would be if you established (a) domestic only, then you are exposed; if you established (b) you are not exposed. So the structure of this provision would not be like this at all.
GORDON J: Well. it might be, because it might be that the interests of justice question – which is the subject of debate with Mr White, may raise a whole range of matters peculiar to the situation.
MR GAME: But you would not need subsection (6).
GORDON J: Well, you would. What (6) says is, if the court is satisfied, in a sense – one does not have an overriding interests of justice question which trumps everything. It is in the context of the grounds of objection raised under (2), necessary to ensure that, notwithstanding that, that the interests of justice require the information to be disclosed.
MR GAME: Yes, but all you had to establish, all you had to establish was that the exposure – you get to the interests of justice if it is just domestic exposure. If you just had a provision at the very beginning that said if all – (a), (b), (c), if you have established (a) but not (b), then the interests of justice question arises. That is all that subsection (6) would be doing.
EDELMAN J: Although there may be a distinction, it may be very fine, between whether there are reasonable grounds for tending to prove something, and whether the court is satisfied that it does actually tend to prove something.
MR GAME: Possibly. So, our objection appears at page 6 of the appellant’s further book of authorities, and it went to both Australian and foreign law.
GAGELER J: Thank you.
MR GAME: The discussion about foreign law in respect of 128 is referred to at footnote 106 of our submissions in‑chief, and that is in the joint bundle at page 658.
KIEFEL CJ: Mr Game, in the context of section 128, does the question under section (4)(b), the interests of justice question, usually revolve around the witness themselves, the consequences for the witness?
MR GAME: Yes, partly yes. So, whether or not – so subsection (7) – and this is why I took your Honours to the Victorian provision, because subsection (7) does not create any presumption about exposure. So that, if the person is saying my exposure is great, I may in fact be charged with this very offence that is currently before the court - so there may be discretionary factors relating to that, but it could also be more, and it is on occasion more nuanced than that, which is – and there is an uncertainty about my position in foreign exposure.
So there could be discretionary considerations that do not get to the point, for example, of establishing something particular. But a group of considerations leads to a conclusion that the interests of justice does not require it, and that is what happens. Alternatives of getting the evidence – say the witness is producing documents, and you could get to the documents and it was really the documents that you were interested in, that would be a consideration ‑ ‑ ‑
KIEFEL CJ: They are alternate methods of proof.
MR GAME: That is right ‑ ‑ ‑
KIEFEL CJ: In the one proceeding.
MR GAME: So, with Standen there were other ways of getting hold of much of the evidence and in the Full Court that was - and the trial judge thought that was relevant to the material.
KIEFEL CJ: The concept of – or the potential for there to be alternative methods of proving the same fact that the witness is being asked about are brought into more stark relief in the context of a proceeding.
MR GAME: But the point I am trying to make is that if one looks at 128A and we have the litigant, the Tax Commissioner, and the litigant, the Tax Commissioner gets this order in every single case and it becomes a formality, then the Commissioner has been given another means of investigation.
When one looks at the affidavit in this case, it is an investigative tool and the protection in 128A(8) is only a small part of it. It has a much wider significance than that. Our exposure to prosecution, when one looks at this material – when one looks at what must have laid behind the informations in support of the search warrant and the nature of the allegations against us – they are as serious as they could possibly be.
We do not know why we have not been charged at this point. The appellant says in their written submissions that there is no evidence a brief has been sent to the AFP. The AFP has had their hands all over - the AFP is investigating this case. They are the people who issue the search warrants. So, anyway, that is what I say about that.
GAGELER J: Mr Game, can I just understand that? You are saying that the information provided in an affidavit required by the disclosure order pertinent to the freezing order can be used in criminal proceedings, are you? Is it available to be used?
MR GAME: It can be used as an investigative tool. It can be used in criminal proceedings against other parties. Anybody else except for us.
GAGELER J: Without leave of the Court? I mean, this is an order.
GORDON J: It is Harman.
MR GAME: No, sorry, this is a statement which is a document – I do not think a Harman – a Harman document would be required for it to be tendered in other proceedings. But no Harman undertaking would affect its use as an investigative tool. So, I should just qualify something I said to your Honour Justice Gageler. Yes, release from the Harman undertaking would be required before it was tendered in other proceedings. But a Harman undertaking is irrelevant to this being used as an investigative tool by the Tax Commissioner. There is no limit to it.
GAGELER J: By the Tax Commissioner, perhaps.
MR GAME: And the AFP.
GAGELER J: I am not sure about that, Mr Game.
MR GAME: There is no limit on them providing it to the AFP. It is, after all, a joint investigation. The tax man comes from the AFP. The idea that this thing will just sit quietly and be used against – used just for the purposes of enforcing this judgment – in my submission, is fanciful.
When one comes to this part of Justice Lee’s judgment concerning section 108, I just want to take your Honours to – I have finished with what I wanted to say, particularly about the legislative structure and I am dealing with matters towards the bottom of page 2 of the outline. Sorry, I should just say, I think I said this, Gedeon in those paragraphs I have referred to both refers to other alternatives and exposure as relevant considerations in that particular case.
Now, when one comes to how Justice Lee dealt with the issue, if I go to his judgment at paragraph 98 to start with. In 98, one can see what was put to the court below, and his Honour has emphasised it:
In that respect, in my view, there is a clear public interest in having Mr Shi’s debt to the Commonwealth discharged as fulsomely as is possible.
That is the Commissioner’s submission Now, in the exchange in the Full Federal Court – which is in the respondent’s book of further materials, page 21 – there is an exchange between Justice Lee and Mr White, and it seems to be a robust exchange. But in any event, if one reads from lines 25 to the bottom of the page, the essential focus of it is “in aid of the enforcement” of the judgment. It is not really the point that Justice Davies was making. When one combines that with what was said to the court below, when we come to that which Justice ‑ ‑ ‑
GORDON J: Sorry, I am a bit lost, Mr Game.
GLEESON J: I am not seeing this.
GORDON J: No, nor am I. Can I just ask about page 21?
GLEESON J: It is not page 21 of the transcript ‑ ‑ ‑
MR GAME: It is not 21 of the transcript. It is 21 of the ‑ ‑ ‑
KIEFEL CJ: It is the respondent’s further materials.
MR GAME: It is 18 of the – it has actually got three different page numbers on it. I cannot keep apologising, but I am sorry, your Honour.
KIEFEL CJ: The procedural problem of page numbering is being attended to by the Court, Mr Game. Stay tuned for further advice in the future.
MR GAME: Thank you.
GORDON J: So we are in the transcript?
MR GAME: So in the transcript, top right‑hand corner at page 21.
GORDON J: Yes, I have that.
MR GAME: There is the, as I said ‑ ‑ ‑
GORDON J: There seems to be a debate and discussion between Mr White and Justice Lee.
MR GAME: That is right.
GORDON J: Mr White says ‑ ‑ ‑
MR GAME: “We are concerned about”, yes.
GORDON J: But before we get to that, the freezing order orders are in place, and you want to be able to identify where the assets are.
MR GAME: I accept that, your Honour. I accept that.
GORDON J: So that is not just enforcement, that is exactly what the disclosure orders are directed at in order to be ancillary to the freezing order.
MR GAME: But it is full enforcement.
GORDON J: But that is ‑ ‑ ‑
MR GAME: That is what he concedes, is that it is for the purpose of enforcement, which is what he says at line 34.
GORDON J: Yes. But that is – that is what he says. But it recognises that the purposes of disclosure consistent as an ancillary order to the making of a freezing order is to identify the assets that might be available in order not to frustrate the benefit for the judgment debt.
MR GAME: But, your Honour, the freezing order is in place, it has not gone, so he is obliged by that ‑ ‑ ‑
GORDON J: But we have third parties and the like.
MR GAME: Sorry.
GORDON J: We have third parties and the like, who need to be given notice, like bank accounts and bankers and ‑ ‑ ‑
GLEESON J: But then Justice Stewart goes on and seems to question whether or not what Justice Lee is driving Mr White to is really a complete statement of the position.
MR GAME: There are different – I see that as well, your Honour, but the nub of it is that it is all directed, ultimately, towards enforcement.
GLEESON J: Well, in a sense that could not be otherwise - in the broader sense.
MR GAME: No, but our position is, though, that an examination at the – a section 108 exercise, with 128 engaged, is an exercise that is nowhere – that does actually put one in the same position, at the point of enforcement and the court ‑ ‑ ‑
GORDON J: But it does not deal with identification of assets, which is what this is about.
MR GAME: But there is no limit on identification of assets in an examination for the purposes of enforcement.
GORDON J: But we already have the identification of the assets as a result of the disclosure. That is the point. Section 108 is about the very step which has already taken place here, i.e. what assets do you have? Here you are, here is an affidavit. Section 108 is about asking questions about identification of the assets. We are past that point, are we not?
MR GAME: Yes, but there is no assumption that, for the purposes of enforcing judgment under section 108, one has access to the affidavit, and what I am saying is that there is a very high bar in 128A that has to be – there is no presumption that you will get it. That really is the nub of this case, is that there is no assumption that you will get it, and if you are talking about recovering the judgment, there are not relevant constraints in terms of recovery. There may be things - in fact, the orders made by Justice Yates are so wide because they cover things about which you may have control, which will not be your assets.
GORDON J: You did not challenge them.
MR GAME: The order was made ex parte and the judgment ‑ ‑ ‑
GORDON J: But you could have ‑ ‑ ‑
MR GAME: But, your Honour, the judgment was entered within a month, I think, of the ‑ ‑ ‑
GORDON J: But there is procedure to come back and have a substantive hearing when you know, as a matter or practice, that judges all the time revisit the making of the orders and the basis upon which they are made, upon additional material being provided, orders are modified.
MR GAME: But, your Honour, the issue with respect of 128A was seized of as – we did not challenge the freezing orders, but the issue about 128A was seized of as soon as it could be. This further affidavit, I do not know if it was quite made clear, but this further affidavit came at the point at which a first affidavit had been filed, and the further affidavit was filed after an issue was raised about the level of disclosure in the first affidavit.
One of the appellant’s submissions to the courts below was that somehow or another we may have disclosed too much. That was their grounds 2 and 3, that it should be redacted, and just referred to property, and the court looked at the material and said that could not be done.
But as I say, yes, the sticking point of this case is do they get the – they have the 108 procedure, do they get - are they entitled, do they get though the interests of just requiring, in these circumstances? We say, and that is why I kind of focus on the grounds of appeal, that it may be a matter of weight, but it was certainly a relevant consideration and, on that basis, we succeed.
That is what I wanted to say about – sorry, there were a couple of other paragraphs of his judgment that I will just refer to – it comes through to – we say 104 first sentence and 111 are fair descriptions. But we say that the question of error is – we say the judge did ask the right question if that is before the Court, because the right question is – his Honour concludes:
this is not a case where the interests of justice require a disclosure order to be made.
We also say, and this is the second ground, that it is too much of a gloss to say, because we have not been charged, therefore there is no risk. We say that the circumstances of this case are special because of the nature of the investigation and the nature of the criminality born in the very allegations that are the subject matter of this case. It is not an ordinary tax case. It is a tax fraud case.
GORDON J: Can I ask just one question and then I am going to be quiet ‑ ‑ ‑
MR GAME: Sorry, we are talking about ‑ ‑ ‑
GORDON J: You put a moment ago this idea that they could use this information for the purposes of the criminal investigation.
MR GAME: Into other entities and companies and they could – the only risk for them is of derivative use against the appellant. In fact one of the things that Justice Lee said was – it appears in paragraphs 109 and 110 ‑ ‑ ‑
GORDON J: Is that because you describe the litigation for the purposes of a Harman undertaking as something broader than an application for a freezing order and identification of assets?
MR GAME: No, the Harman order was taken as being relevant to these proceedings alone, but that involves – that is the tax proceeding – that is the proceeding in which the Commissioner seeks - - -
GAGELER J: I think the Harman principle is embodied in rules in the Federal Court, I might be wrong.
MR GAME: I have to check, but I am reasonably confident that it relates to the use of it in evidence.
GORDON J: I thought it was ‑ ‑ ‑
MR GAME: Would it be of assistance - I hate offering to do things because it means my junior then has to do them – but would it be of assistance if we gave you a note about what a Harman ‑ ‑ ‑
GAGELER J: Maybe somebody could just have a look at the rules over lunch.
MR GAME: All right, yes, sure, we will tell you. But what was being cited there at paragraphs – I am not sure whether I am answering your Honour’s question at all, but anyway – paragraphs 109 and 110 is where Justice Lee is addressing some of the unknowns in relation to derivative use, but my point about this is that it is not an ordinary case. That is something that the Full Court was well and truly seized of.
GLEESON J: I am not quite sure that I understand the import of that submission?
MR GAME: Your Honour, the import of the assumption is that this is not an inter partes piece of litigation, this is not a straightforward tax case involving unpaid tax. It is a tax case involving allegations upfront of tax fraud by the Commissioner.
GLEESON J: Is this directed to the derivative use?
MR GAME: Yes, your Honour.
GLEESON J: Yes.
MR GAME: There is also what I might describe as the Hamilton v Oades aspect of this, which is us disclosing material about criminality – or dealing with criminality, where that material is the very same subject matter as the subject matter of any prosecution. Now, really when the appellant says we have not been charged, we have not been charged yet is about as high as they can put it.
So what I wanted to say about 111 is that what is being brought together is an unexceptional combination of factors brought to bear on a determination that coming back to 128A(6)(c), the interests of justice did not require that disclosure in this case. So that is really our case on the appellant’s case.
In respect of the notice of contention, there are just a couple of matters that I wanted to add to. First of all, if you look at the core appeal book at page 70, we abandoned ground 2 in the context of the onus being on us, but we did not abandon ground 1b where we put that the primary judge should have found that under 128(6)(b) the applicant did not meet his onus.
Now, you have seen also that passage that I referred to, that if it is for the court there had not been any curial examination of the question of the kind that would be contemplated if it is a kind of court‑driven exercise, but we never abandoned 1b and there was no discussion about this. So we had no intention of abandoning our notice of contention and that is effectively what we would have been doing if what Justice Lee says about us - him saying the point did not go anywhere.
That is at paragraph 92 of his Honour’s judgment – sorry, it is at 92 and then at 93 his Honour refers to a passage in the judge below’s judgment which I will come to in one moment. He says in the last sentence:
It follows that the error that it was up to Mr Shi to satisfy the court of this proposition goes nowhere.
But it did because, in our submission, the question was alive and so ground 2 was never intended to abandon the substance of our case. What we say in respect – and the last thing I am going to do before I resume my seat – what the judge at first instance said about this is - that is in his judgment at page 17 of the core appeal book. So when in 25 he says he is satisfied the information does not tend to prove, he is just adopting the language of the provision because what he said in 23 is that we had not satisfied the onus and that we were wrong to say that there was no onus on us.
In paragraph 24 he rejected arguments that we put about assumptions about foreign law. So 25 involves no reasoning other than that we had not satisfied the onus and that an argument about foreign law being the same as domestic law did not run. So what appears in 25 is not an actual consideration of the question from the perspective of the onus being on the appellant and, in any event, we would submit that it was not open for his Honour to come to such a conclusion. That is it for me, your Honours.
GORDON J: Can I ask one question? I am coming back to this Harman question. I am sorry to harp on it.
MR GAME: That is all right.
GORDON J: But, there was a decision of this Court in Hearne v Street where Justices Hayne, Heydon and Crennan went through the Harman undertaking and identified that it extended to material provided and seized pursuant to Anton Piller orders and the like and, in effect said, listen, one is limited to the use to which one can put in the context of the litigation. The litigation there being an Anton Piller order. You cannot use it for other purposes without the leave of the Court. Why is it here that it can be used for any purpose other than the identification of the assets and the attachment of the freezing order to those assets that are identified?
MR GAME: I am not sure that I can answer, on my feet, the question about whether or not external use is warranted. But it is – sorry, can happen – without the release from the order. But, at the least, the document is in the hands of those responsible for this investigation. So, how would one even ‑ ‑ ‑
GORDON J: I do not know that it is. That is the question. The moment the affidavit is sworn by somebody who is in the debt department, it may be that is, in effect, a distinction without a difference, but they are alive and well to the fact that the purpose for which the information is obtained is a very different purpose from that which you are suggesting it might be used for. It really requires identification of what is the litigation.
MR GAME: I took the litigation to be the litigation ‑ ‑ ‑
GORDON J: Or it might be.
MR GAME: I took the litigation to be the litigation involving the tax judgment but extending to the freezing orders. That is how I took it to be.
GORDON J: Thank you.
MR GAME: The person in charge of this investigation is in charge of criminal investigations, that is at page 31 of the supplementary book. This is a slightly different point, but one would not know if use had been made of this document in the choice of investigative steps taken; one would not know if it had been used in the choice of charges; one would not know if it had linked to other lines; and one would not have a means of scrutinising it. That is not answering your Honour’s question, but it is a point that I want to make.
GORDON J: Thank you.
MR GAME: So I am resuming my seat, and I have not answered Justice Gageler’s same question.
KIEFEL CJ: I think Justice Gageler does not require a note if we do not go over lunchtime.
MR GAME: Thank you, your Honour.
KIEFEL CJ: Yes, Mr White.
MR WHITE: Thank you, your Honours. What my friend said at the very end there was what we do not know is if the information might be used for an investigative process, or in relation to charges. That presupposes that the affidavit will be used for an improper purpose, because paragraph 96 of the decision of Hearne v Street makes it quite clear, as the Court has already identified, that the use to which this affidavit could be put is quite limited.
That is, for the purpose of the ancillary order under rule 7.35 and 7.34, as ancillary to the freezing order, and for the purpose of the taxation proceedings for which judgment has been given. Anything beyond that would be an improper use of the affidavit. And, of course, there cannot be any suggestion that the appellant would embark on that course.
My friend points to the annotated or open annotated affidavit as asserting that we were on notice, and as a basis for contending that as a matter of principle, we bear the onus in relation to subsection (6)(b). However, the section does not require an open annotated affidavit to be provided. There was no order that it be provided, and whatever it might say it cannot be used to support, as a matter of principle, the suggestion that we bear the onus under section 128(6).
In relation to the issue of onus, without taking the Court to our written submissions, can we simply highlight paragraph 53 of our written opening submissions which we respectfully submit set out the four avenues open to the Court in relation to the correct analysis of who bears the onus in relation to section 128A(6).
In relation to the question of onus, can we also point out that if the Full Court was correct in relation to that issue the applicant would bear the onus in relation to precondition (a), namely, that the information disclosed in the affidavit may tend to prove the person had committed an offence against Australian law. But it is not clear why the applicant would be required to satisfy the court of that fact, which is not in the interests of the Commissioner to do so because it is the absence of that evidence as a basis for there not being any entitlement to claim the privilege. So, it is rather curious that the Court would find that we had an onus to discharge in respect of a fact which is not in our interest to do so.
Finally, can we point out that the majority placed emphasis on the fact that the party in the appellant’s position was the party advocating that disclosure should be made, and his Honour Justice Lee made that finding in paragraph 83 of the appeal book page 112. But it was not the appellant who was seeking access to the privileged affidavit, that access was already mandated by the disclosure order.
The raising of an objection did not alter the continuing application of the disclosure orders. There was no requirement found in the text of section 128A for the applicant to apply for disclosure of the privileged affidavit. To the contrary, it was the respondent who applied for an exception to the disclosure orders by availing himself of the protection afforded by section 128A. In our respectful submission, that was another reason why the onus was borne by the respondent. May it please the Court.
EDELMAN J: Just before you sit down, is it your submission that the extent of the Harman implied undertaking, or the Hearne v Street obligation would include disclosure of the information rather than use of it? So, do you accept that the Commissioner would be prohibited from merely disclosing the information to the AFP?
MR WHITE: Yes. Paragraph 96 of the decision that your Honour referred to, Hearne v Street, their Honours said:
Where one party to litigation is compelled, either by reason of a rule of court, or by reason of a specific order of the court, or otherwise, to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use it for any
purpose other than that for which it was given unless it is received into evidence.
EDELMAN J: I suppose what I am asking is, is the mere disclosure or revealing of information, which might no longer be strictly confidential because it has now been disclosed to the Commissioner, does that amount to a “use”?
MR WHITE: Yes, it would. May it please the Court.
KIEFEL CJ: The Court reserves its decision in this matter and adjourns to 9.30 am tomorrow for pronouncement of orders and otherwise to 9.45 am.
AT 12.46 PM THE MATTER WAS ADJOURNED
Key Legal Topics
Areas of Law
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Tax Law
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Administrative Law
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Civil Procedure
Legal Concepts
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Appeal
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Judicial Review
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Statutory Construction
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Jurisdiction
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Procedural Fairness
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