Kilgour v Commissioner of Taxation
[2022] FCA 1487
•3 November 2022
FEDERAL COURT OF AUSTRALIA
Kilgour v Commissioner of Taxation [2022] FCA 1487
File numbers: QUD 99 of 2022
QUD 100 of 2022
QUD 101 of 2022
QUD 102 of 2022Judgment of: LOGAN J Date of judgment: 3 November 2022 Catchwords: PRACTICE AND PROCEDURE – application for discovery from a non-party – whether non-party discovery should be ordered – where documents originally sought by way of subpoena – where appropriate course to bring an application for non-party discovery – held: the practice of seeking the issue of subpoenas to require the production by non-parties of documents prior to trial ought to cease
PRACTICE AND PROCEDURE – application for discovery from a non-party – considerations relevant to the exercise of discretion under r 20.23 of the Federal Court Rules 2011 (Cth) – application granted
PRACTICE AND PROCEDURE – third-party application for suppression order prohibiting publication or disclosure of documents produced by non-parties pursuant to ss 37AF and 37AG of the Federal Court of Australia Act 1975 (Cth) – whether further obligation described in Hearne v Street (2008) 235 CLR 125 sufficient to protect interest of non-party – where documents produced are commercially sensitive – where interim confidentiality orders necessary to bring home confidentiality obligations to legal advisors and prospective witnesses – interim confidentiality orders made
Legislation: Federal Court of Australia Act 1976 (Cth) ss 23, 37AB, 37AE, 37AF, 37AG
Income Tax Assessment Act 1997 (Cth) s 116-30
Taxation Administration Act 1953 (Cth) Pt IVC
Federal Court Rules 2011 (Cth) r, 2.32, r 20.23
Supreme Court Rules (Qld), order 35, rule 28
Uniform Civil Procedure Rules 1999 (Qld) r 243(2), r 244
Division: General Division Registry: Queensland National Practice Area: Taxation Number of paragraphs: 41 Date of hearing: 3 November 2022 Counsel for the Applicant: Mr P Bickford Solicitor for the Applicant: Small Myers Hughes Lawyers Counsel for the Respondent: Ms A Wheatley KC Solicitor for the Respondent: McInnes Wilson Lawyers Counsel for the Interveners Mr S R Eggins Solicitor for the Interveners: Allens ORDERS
QUD 99 of 2022 BETWEEN: SARAH ALICE KILGOUR
Applicant
AND: COMMISSIONER OF TAXATION
Respondent
NEWS CORP AUSTRALIA INVESTMENTS (ACN 163 992 023)
First Intervener
NEWS CORP AUSTRALIA PTY LTD (ACN 163 992 774)
Second Intervener
NEWS PTY LTD (ACN 007 871 178)
Third Intervener
QUD 100 of 2022 BETWEEN: MELISSA PETTETT
Applicant
AND: COMMISSIONER OF TAXATION
Respondent
NEWS CORP AUSTRALIA INVESTMENTS (ACN 163 992 023)
First Intervener
NEWS CORP AUSTRALIA PTY LTD (ACN 163 992 774)
Second Intervener
NEWS PTY LTD (ACN 007 871 178)
Third Intervener
QUD 101 of 2022 BETWEEN: TAMARA LOUISE ISTERLING
Applicant
AND: COMMISSIONER OF TAXATION
Respondent
NEWS CORP AUSTRALIA INVESTMENTS (ACN 163 992 023)
First Intervener
NEWS CORP AUSTRALIA PTY LTD (ACN 163 992 774)
Second Intervener
NEWS PTY LTD (ACN 007 871 178)
Third Intervener
QUD 102 of 2022 BETWEEN: LUCAS DANIEL PETTETT
Applicant
AND: COMMISSIONER OF TAXATION
Respondent
NEWS CORP AUSTRALIA INVESTMENTS (ACN 163 992 023)
First Intervener
NEWS CORP AUSTRALIA PTY LTD (ACN 163 992 774)
Second Intervener
NEWS PTY LTD (ACN 007 871 178)
Third Intervener
ORDER MADE BY:
LOGAN J
DATE OF ORDER:
3 NOVEMBER 2022
THE COURT ORDERS THAT:
1.On or before 7 November 2022, News Corp Australia Investments Pty Ltd (ACN 163 992 774), News Corp Australia Pty Ltd (ACN 163 992 774), and News Pty Ltd (ACN 007 871 178), (collectively referred to as News Corp), make discovery of the following documents to the Applicant and the Respondent, with such discovery to be given by provision of copies of those documents to those parties:
(a)The financial model used by the News Corp Mergers and Acquisitions team (the Mergers and Acquisition team) to support the $29.3 million offer made on 8 August 2016 to the shareholders of Punters Paradise Pty Ltd (ACN 133 262 414) (Punters) to purchase 100% equity in that company including:
(i)the forecast earnings figures over five years relied upon; and
(ii)the companies used as comparatives to support the multiple applied to Punter’s earnings before interest, taxes, and depreciation (EBITA).
(b)The proposal and/or correspondence sent by the Mergers and Acquisitions team to News Corp’s Chief Executive Office on or around 14 July 2016 seeking approval to make an offer to purchase Punters and the response.
(c)The correspondence sent by the Mergers and Acquisitions team to News Corp’s Chief Executive Office just prior to 8 August 2016 seeking approval to revise the offer to purchase Punters and the response.
(d)The responses to the approval requests referred to in paragraphs 1(b) and (c) hereof.
(e)The correspondence between Mr Simon Anderson of News Corp and the Mergers and Acquisitions team between April 2016 and 8 August 2016 wherein the monetary value of Punters and/or the purchase price proposed by Punters was mentioned.
2.Pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth), until trial or further earlier order, the documents discovered pursuant to order 1 above not be disclosed (by publication or otherwise) other than to the Court, the parties, their legal representatives, and expert witnesses engaged by the parties in the related matters (as defined in orders made by Logan J on 26 April 2022 (April Orders)).
3.Each of the applicant and the respondent are directed to serve a notice in writing to News Corp, at its address for service, which identifies any document produced pursuant to order 1 that the party giving notice intends to tender in evidence at the trial of the related matters (whether by seeking inclusion in the Hearing Bundle (as defined in the April Orders) or otherwise), on or before the parties are due to endeavour to agree on the index to the Hearing Bundle referred to in paragraph 5 of the orders made by Collier J on 16 September 2022.
4.The parties and News Corp have liberty to apply upon the giving of three business days’ notice in writing.
5.The applicants in the related matters and the respondent pay one half each of News Corp’s costs of the applicants’ application filed on 1 November 2022 (including the costs of and incidental to the appearance of News Corp on 3 November 2022), and News Corp’s costs of and incidental to the provision of the discovery that is to be made pursuant to order 1, to be agreed or fixed by the Registrar and paid forthwith.
6.The costs borne by each of the applicants in the related matters and the respondent pursuant to order 5 hereof be that parties costs in the proceedings.
7.The parties’ costs be reserved.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
(REVISED FROM TRANSCRIPT)LOGAN J:
BACKGROUND
Sarah Alice Kilgour, the applicant in proceeding QUD99/2022, together with the applicants in related proceedings QUD100/2022, QUD101/2022 and QUD102/2022, have instituted proceedings, “taxation appeals”, in the original jurisdiction conferred on the Court by Pt IVC of the Taxation Administration Act 1953 (Cth) (Taxation Administration Act) to challenge objection decisions of the respondent Commissioner of Taxation (Commissioner).
These taxation appeals arise as a sequel to a share sale agreement between the shareholders of Punters Paradise Pty Ltd (Punters) and non-parties. The non-parties are News Corp Australia Investments Pty Ltd (News Corp Investments), News Corp Australia Pty Ltd (News Corp Australia), and News Pty Ltd (News) (collectively, the News Corp entities). The particular acquisition company looks to have been News Corp Australia, but at least on the present materials, News Corp Investments and News may also have had a role in relation to the acquisition.
The taxation appeals each relate to capital gains considered by the Commissioner and assessed accordingly to have arisen in respect of the acquisition transaction. The applicants’ objections to resultant amended assessments or, as the case may be, assessments, were each disallowed on objection.
One of the common grounds of objection, and thus an issue for resolution in the taxation appeals in deciding whether or not the amended assessments or assessments have been proved to be excessive, is a contention on behalf of the applicants that the market value substitution rule contained in s 116-30(2)(b)(i) of the Income Tax Assessment Act 1997 (Cth) (Income Tax Assessment Act) applies to the sale and purchase of the Punters shares in the acquisition transaction. That proposition is not accepted by the Commissioner. The applicants’ contentions include that, having regard to the circumstances surrounding the acquisition transaction, it ought to be concluded in the taxation appeals that the vendor shareholders and the News Corp entities were not dealing at arm’s length, such that the sale was effected at a price greater than the market value of the asset concerned, namely the shares.
The applicants submit – and it appears, at least for the purposes of the present application, correct – that it is material and relevant in the taxation appeals to evidence documents concerning the steps taken by the News Corp entities to ascertain the market value of the Punters’ shares which were acquired in the transaction. More generally, it was put that it is directly relevant to evidence whether or not the parties to that share acquisition transaction were indeed dealing at arm’s length.
THE ATTEMPT TO SUBPOENA THE NEWS CORP ENTITIES
Recently, the applicants applied for the issuing of a subpoena to the News Corp entities for the production of documents said to be relevant to the share acquisition transaction. That subpoena application was referred to me by the Registry. I declined to issue the subpoena, being of the view that the appropriate procedure was for the applicants to apply for non-party discovery pursuant to the rules of court, particularly having regard to an observation made by Perram J in Australian Competition and Consumer Commission v Unique International College (No 2) [2016] FCA 495, at [6], as to the issue of “…fishing expeditions and subpoenas in New South Wales” and how this “sits with this Court’s jurisdiction to order non-party discovery under r 20.23, a procedure which seems to have fallen into desuetude”.
It is desirable to expand upon why I considered that the process of seeking documents relating to the transaction from non-parties, namely the News Corp entities, was not appropriate.
Rule 20.32 of the Federal Court Rules 2011 (Cth) provides as follows:
20.23 Discovery from non‑party
(1)If a party believes that a person who is not a party has or is likely to have, or has had or is likely to have had, in the person’s control, documents that are directly relevant to an issue raised on the pleadings or affidavits, the party may apply to the Court for an order that the person make discovery of the documents to the party.
(2)An application under this rule must:
(a) be served personally on the person; and
(b) be accompanied by an affidavit:
(i) stating the facts on which the applicant relies; and
(ii)identifying, as precisely as possible, the documents, or categories of documents to which the application relates.
(3)A copy of the accompanying affidavit for an application must be served on each person on whom the application is served.
(4) In subrule (1), a reference to an affidavit is a reference to:
(a) an affidavit accompanying an originating application; and
(b)an affidavit in response to the affidavit accompanying the originating application.
As it happens, a similar issue concerning the aptness of the use of a subpoena procedure in circumstances where rules of court made express provision for the obtaining pre-trial of documents from a non-party was the subject of reflective consideration by Mackenzie J in Re: Leighton Contractors Pty Ltd v Western Metals Resources Limited [2001] 1 Qd R 261. That proceeding concerned a subpoena which had issued directed to a non-party in circumstances where, under the Uniform Civil Procedure Rules 1999 (Qld), r 242 and r 243 made express provision for a notice requiring a non-party to give disclosure. His Honour stated, at [21]:
In my opinion there is no indication in the rules that it is intended that what is really non-party disclosure in the pre-trial phase may be obtained by issuing a subpoena to produce. In my opinion the rules do not effect a change from the philosophy in that regard under the repealed rules.
The repealed rules to which his Honour referred were to be found in the Supreme Court Rules (Qld), order 35, rule 28, which provided:
28.Inspection of documents in the possession of a person not a party to the cause.
(1)Any party to a cause may apply to the Judge for an order directing any person not a party to the cause to produce for inspection any document in his possession or power relating to any matter in question in the cause and which he could be required to produce at the trial.
(2)An application under paragraph (1) shall be made by summons supported by affidavit and the summons and a copy of every affidavit in support and of any exhibit referred to therein shall be served on the person against whom the order is sought (in this Rule referred to as "the respondent") at least three clear days before the return day.
(3)If the Judge is satisfied that the respondent has in his possession or power a document of the kind referred to in paragraph (1) and that it is necessary that the party making the application should inspect the document at that stage of the cause, he may, if he deems it just, and on such conditions as he thinks fit, order that the respondent produce the document, or part thereof, for the inspection of the party at a time and place to be named in the order and that the party or his solicitor be permitted to take copies thereof.
(4)The place to be named in the order shall, if the respondent requests, be the office or place of business of the respondent or his solicitor or the place at which the document is usually kept.
(5)The Judge may, whether he grants or dismisses the application, order the party making the application to pay to the respondent the costs of the application and may order that prior payment of the costs be a condition of the inspection of the document.
(6)No order for costs shall in any event be made against the respondent.
(7)Nothing herein contained shall affect the power of the court or a Judge to order that the costs of the application (including any costs paid by the party making the application to the respondent) be borne or paid by any other party to the cause.
His Honour made reference, to a number of authorities which highlight the distinct purposes of discovery and subpoena, stating at [17]:
The distinct purposes of discovery and subpoena are reflected in numerous decisions (e.g. Burchard v. Macfarlane; Ex parte Tindall [1891] 2 Q.B. 241; Commissioner for Railway (N.S.W.) v. Small (1938) 38 S.R. (N.S.W.) 564; Waind v. Hill and National Employers’ Mutual General Association Ltd [1978] 1 N.S.WL.R. 372). Statements are to be found in some cases suggesting that a subpoena returnable at a date well in advance of trial is permissible (e.g. Lucas Industries Ltd v. Hewitt (1978) 18 A.L.R. 555; Greyhound Australia Pty Ltd v. Deluxe Coachlines Pty Ltd (1986) 67 A.L.R. 93). The courts in which these decisions were made had at that time no rules permitting discovery from non-parties (Kennedy Taylor (Vic) Pty Ltd v. Grocon Pty Ltd [1999] VSC 242, Gillard J., 1 July 1999; Greyhound Australia at 97). The decisions are based on considerations of convenience, or perhaps inconvenience if it were otherwise, in the conduct of complex litigation in the absence of a procedure for obtaining documents of non-parties.
His Honour further stated, at [18]:
On the other hand Kennedy Taylor and J. Boag & Son Brewing Ltd v. Cascade Brewery Co. Pty Ltd (1997) 7 Tas. R. 119 are examples of the reluctance of courts to recognise the use of a subpoena duces tecum in substitution for another available procedure when the purpose is to obtain production of documents in the pre-trial phase and unconnected with the hearing of an application. The mere fact that some of the documents, after inspection, will be used as evidence at trial does not qualify the case as one where a subpoena may be used.
There was a time when this Court’s rules of court did not make any provision in respect of non-party discovery. At that time, recognising not just the inconvenience but also the impact that an inability to obtain prior to trial documents from a non-party might have on the administration of justice, the Court countenanced an ability to obtain such documents by subpoena: see Lucas Industries Ltd v Hewitt (1978) 45 FLR 174. That case came on appeal to a Full Court in an intellectual property matter from an exercise of federal original jurisdiction then conferred on State Supreme Courts. The case strictly therefore concerned whether, under the Victorian rules of court, a use of a subpoena pre-trial to obtain documents from a non-party was authorised. However, the position was then the same under this Court’s then rules of court.
That position changed over time. Under the immediately past rules of this Court, the former O 15A, r 8 expressly empowered the Court at any stage of a proceeding to order a non-party to discover documents that related to any question in the proceeding. It will be seen at once that that formulation was wider than the present r 20.23, which uses the different formula of direct relevance. Under the former rule, the formula relating to any question in the proceeding picked up the broader test for discovery described in Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Co (1882) 11 QB 55, at 63; see, as to this, Spyer v Cuddles ‘N’ Mum (Franchise) Pty Ltd (No 3) [2002] FCA 1563 (Lindgren J).
Notwithstanding the express provision for non-party discovery in the Court’s present rules, it is still possible to find examples of the use of a subpoena to obtain documents from a non-party and detailed consideration of that subject, without reference to the existence of a non-party discovery procedure: see, for example, Kitchen v Director of Professional Services Review under s 83 of the Health Insurance Act 1973 (Cth) (No 3) [2020] FCA 634 (Collier J). That, with respect, underscores Perram J’s observation as to desuetude.
For like reasons to those given by Mackenzie J, it seems to me that the practice of seeking the issue of subpoenas to require the production by non-parties of documents prior to trial ought to cease. There is an express procedure in the rules to obtain such documents. An example of the use of such procedure in relation to a taxation appeal is offered by Groves v Federal Commissioner of Taxation (No 2) [2011] 83 ATR 357.
I turn then to consider whether or not the test prescribed by r 20.23 is met in the circumstances of this case. Although there are no pleadings in a taxation appeal, and although the only statutory vehicle for the identification of issues is the notice of objection for which the Taxation Administration Act provides, the Court’s practice in modern times with respect to taxation appeals has, for procedural fairness reasons, as well as the more efficient use of judicial time in hearing such appeals, evolved so as to provide for the filing by the applicant taxpayer and the Commissioner of appeal statements.
As was put helpfully by Mr Bickford of counsel on behalf of the applicants, regard to the appeal statements discloses that it is very much an issue in each of the taxation appeals as to whether the applicant taxpayer shareholders and the News Corp entities dealt with each other at arm’s length in relation to the share acquisition transaction within the meaning of s 116-30(2)(b)(ii) of the Income Tax Assessment Act.
The documents sought by way of non-party discovery from the News Corp entities are described as follows:
(a)the financial model used by the Newscorp Mergers and Acquisitions Team (the “Mergers and Acquisitions Team”) to support the $29.36 million offer made on 8 August 2016 to the shareholders of Punters Paradise Pty Ltd (“Punters”) to purchase 100% equity in that company including:
(i)the forecast earnings figures over five years relied upon; and
(ii)the companies used as comparatives to support the multiple applied to Punters’ earnings before interest, taxes and depreciation (“EBITA”);
(b)the proposal and/or correspondence sent by the Mergers and Acquisition Team to Newscorp’s Chief Executive Office on or around 14 July 2016 seeking approval to make an offer to purchase Punters and the response;
(c)the correspondence sent by the Mergers and Acquisitions Team to Newscorp’s Chief Executive Office just prior to 8 August 2016 seeking approval to revise the offer to purchase Punters and the response;
(d)the responses to the approval request referred to in paragraphs (b) and (c) hereof; and
(e)the correspondence between Mr Simon Anderson of Newscorp and the Mergers and Acquisitions Team between April 2016 and 8 August 2016 wherein the monetary value of Punters and/or the purchase price proposed by Punters was mentioned.
The News Corp entities were not disposed, at least in respect of the applicants’ application for non-party discovery, to contest whether the documents as so described were directly relevant. Indeed, it is apparent from the material read on the application that there is something of an understanding between those acting on behalf of the applicant taxpayers and the News Corp entities as to documents which uncontroversially would be the subject of non-party discovery on the application.
I make that observation because, as the hearing of the application evolved, the Commissioner, who had been served, if only for reasons concerning a proposed confidentiality order, chose to join in the application made by the applicant taxpayers for non-party discovery by way of an oral application. It may be that upon more detailed consideration, in the event of controversy, that it may be necessary to resolve whether the categories as described in the application are too wide or, in any event, the sufficiency of the discovery made by the News Corporation entities, having regard to those categories as presently described.
Nothing in the observations I have made in this judgment is intended to prejudice News Corporation’s position to resist further discovery in the event that a controversy emerges. For the present, it is sufficient to recognise that the categories as described do not do any violence whatsoever, as a matter of first impression, to the terms of r 20.23 in terms of direct relevance, having regard to the issues in the taxation appeals to which I have referred. In short, then, I am satisfied that the case is one where it is apt to make an order for non-party discovery.
Costs of the application for non-party discovery
Such an order is usually made on terms that the party seeking discovery from a non-party meet the non-party’s costs of and incidental to the provision of non-party discovery, including in that regard the costs of an appearance on the application by the non-party.
The applicant taxpayers accept that it is apt to make such an order in this case, and such an order is sought, unremarkably, by the News Corp entities. Given that the Commissioner has now joined in the application, it is appropriate and indeed accepted by the Commissioner that the costs of the News Corp entities in providing non-party discovery should be borne half by the Commissioner and half by the applicant taxpayers. As to the proportion so borne, it is appropriate that that proportion of those non-party discovery costs be the particular party’s costs in the taxation appeal proceedings.
CONFIDENTIALITY ORDERS
As I have already mentioned, occasion for the service of the application on the Commissioner was, if for no other reason, appropriate given that an order for confidentiality was sought both by the applicant taxpayers and the News Corp entities. There is no doubt that the Court has power to make a confidentiality order, although whether to make such an order requires that the court be satisfied as to the existence of one or more of the grounds set out in s 37AG of the Federal Court of Australia Act 1976 (Cth) (Federal Court of Australia Act). The starting point must be the public interest in open justice, a starting point which is confirmed, insofar as it may be within the legislative competence of the Parliament to so prescribe, by s 37AE of the Federal Court of Australia Act, which states:
37AE Safeguarding public interest in open justice
In deciding whether to make a suppression order or non-publication order, the Court must take into account that a primary objective of the administration of justice is to safeguard the public interest in open justice.
The Court’s power to make orders is stated in a non-exhaustive way – see s 37AB and s 23 of the Federal Court of Australia Act – by s 37AF of that Act, which states against this background, the grounds specified in s 37AG are as follows:
37AG Grounds for making an order
(1)The Court may make a suppression order or non-publication order on one or more of the following grounds:
(a)the order is necessary to prevent prejudice to the proper administration of justice;
(b)the order is necessary to prevent prejudice to the interests of the Commonwealth or a State or Territory in relation to national or international security;
(c)the order is necessary to protect the safety of any person;
(d)the order is necessary to avoid causing undue distress or embarrassment to a party to or witness in a criminal proceeding involving an offence of a sexual nature (including an act of indecency).
The root authority in relation to the making of any confidentiality order in the exercise of such a power is Hogan v Australian Crime Commission (2010) 240 CLR 651, at [31], where in relation to a predecessor analogue, the High Court stated:
31It is insufficient that the making or continuation of an order under s 50 appears to the Federal Court to be convenient, reasonable or sensible, or to serve some notion of the public interest, still less that, as the result of some “balancing exercise”, the order appears to have one or more of those characteristics.
32If it appears to the Federal Court, on the one hand, to be necessary to make a particular order forbidding or restricting the publication of particular evidence or the name of a party or witness, in order to prevent either species of prejudice identified in s 50, or, on the other hand, that that necessity no longer supports the continuation of such an order, then the power of the Federal Court under s 50 is enlivened. The appearance of the requisite necessity (or supervening cessation of it) having been demonstrated, the Court is to implement its conclusion by making or vacating the order. The expression in s 50 “may … make such order” is to be understood in this sense.
33It may tend to distract attention from the particular terms of s 50 to describe the Federal Court as embarking upon the exercise of a “discretion” when entertaining an application under s 50. Once the Court has reached the requisite stage of satisfaction, it would be a misreading of s 50 to treat it as empowering the Court nevertheless to refuse to make the order, or to leave in operation the now impugned order. It would, for example, be an odd construction of s 50 which supported the refusal of an order under s 50 notwithstanding that it appeared to the Court to be necessary to make an order to prevent prejudice to the security of the Commonwealth.
[footnotes omitted]
More recently, in Clark v Digital Wallet Pty Ltd [2020] FCA 877, Abraham J helpfully collected a number of authorities in relation to whether to make confidentiality orders. Her Honour stated:
19The relevant principles in relation to the making of suppression or non-publication orders under s 37AF are well settled. The question in this instance is whether the making of a suppression or non-publication order is “necessary to prevent prejudice to the proper administration of justice”. The word “necessary” in that context is a “strong word”: Hogan at [30], although it is not to be given an unduly narrow construction: Fairfax Digital Australia and New Zealand Pty Ltd v Ibrahim [2012] NSWCCA 125; (2012) 83 NSWLR 52; (2012) 293 ALR 384 at [8], citing Hodgson JA in R v Kwok [2005] NSWCCA 245; (2005) 64 NSWLR 335 at [13]. Once the court is satisfied that an order is necessary, it would be an error not to make it: Hogan at [33]. There is no exercise of discretion or balancing exercise involved: Australian Competition and Consumer Commission v Air New Zealand Limited (No 3) [2012] FCA 1430 at [21]. The onus to persuade the court to make the order has been described as “a very heavy one”: Australian Competition and Consumer Commission v Valve Corporation (No 5) [2016] FCA 741 at [8].
20Mere embarrassment, inconvenience, annoyance, or unreasonable or groundless fears will not suffice to found a suppression or non-publication order: Australian Competition and Consumer Commission v Cascade Coal Pty Ltd (No 1) [2015] FCA 607; (2015) 331 ALR 68 at [30]; Chen v Migration Agents Registration Authority (No 1) [2016] FCA 649 at [11].
21It is well established that commercial in confidence or commercially sensitive information may form a sufficient basis for the grant of a confidentiality order: Hogan at [38]-[39]; Rinehart v Welker [2011] NSWCA 403 at [37]; Australian Competition and Consumer Commission v Air New Zealand Limited (No 3) [2012] FCA 1430 at [35].
22The question whether an order is necessary will depend on the particular circumstances of the case.
Two other cases, each mentioned by Abraham J in her Honour’s reasons for judgment, should be mentioned. The first is Australian Competition and Consumer Commission v Origin Energy Electricity Limited [2015] FCA 278, at [148], in which Katzmann J stated:
148The evidence discloses that the information is not in the public domain and is confidential to SalesForce and its parent company. It is commercially sensitive. If the information were disclosed, it could be used by competitors of SalesForce and damage SalesForce in the market in which it operates. It is not in the interests of the administration of justice that the proceedings “become a vehicle for advantaging or prejudicing trade rivals”: Australian Competition and Consumer Commission v Cement Australia Pty Ltd (No 2) [2010] FCA 1082 at [23]. It is in the interests of the proper administration of justice that the value of confidential information not be destroyed or diminished. Otherwise, the parties and members of the public might lose confidence in the Court and the Court’s processes “might open the way to abuse”: Australian Broadcasting Commission v Parrish (1980) 29 ALR 228; (1980) at 230; 43 FLR 129 at 134.
The other is Australian Competition and Consumer Commission v Valve Corporation (No 5) [2016] FCA 741, at [9], in which Edelman J, then of this Court, stated:
9Valve asserts that there is prejudice to the proper administration of justice due to its claimed confidentiality in relation to the information in each of the categories outlined above. It is important to draw a distinction between information which is not public and information which is truly confidential. The mere fact that information relevant to a proceeding is not in the public domain will rarely be a sufficient basis to suppress its publication. The interest in confidential information can be different if the disclosure of that information could “become a vehicle for advantaging or prejudicing trade rivals”: Australian Competition & Consumer Commission v Origin Energy Electricity Ltd [2015] FCA 278 [148] (Katzmann J); Australian Competition and Consumer Commission v Cement Australia Pty Ltd (No 2) [2010] FCA 1082 [23] (Greenwood J); see also Yara Australia Pty Ltd v Burrup Holdings Limited (No 2) [2010] FCA 1304 [25] (Barker J).
The latter observation by Edelman J was subsequently cited with approval by the Full Court in Australian Rail, Tram and Bus Industry Union v Busways Northern Beaches Pty Ltd [2021] FCAFC 188, at [17].
When all is said and done, much turns on whether there is satisfaction on the court’s part that it is necessary in the circumstances of a particular case that, materially, the order is necessary to prevent prejudice to the proper administration of justice. “Necessary” means more than desirable. Mr Wilkinson’s affidavit read on behalf of the News Corp entities is in my view eloquent, at least to the pre-trial stage, as to necessity. As was aptly put on behalf of the News Corp entities by Mr Eggins of counsel:
15First, the documents reveal business strategies of the News Entities – and it would be disadvantageous to the News Entities if their competitors were to learn of those business strategies. Specifically, as set out in Mr Wilkinson’s affidavit:
(d)a number of the documents that are captured by the proposed categories of documents for which the Applicant seeks discovery, disclose information concerning the general business strategies of the News Entities that were relevant to its decision of whether or not to acquire the shares in Punters Paradise Pty Ltd;
(e)News Corp has and will continue to negotiate the purchase and sale of other businesses as part of the ordinary course of its own business, and each transaction is analysed and tested against the News Entities' view of value and fit within its business strategies;
(f)information concerning the News Entities’ business strategies is commercially sensitive, and it would be disadvantageous to the News Entities were its competitors to learn of those business strategies.
16.Second, the documents expose commercially sensitive information about the decision-making process of the News Entities. Specifically, again as set out in Mr Wilkinson’s affidavit:
(g)the documents sought by the Applicant pursuant to the Interlocutory Application expose the usual manner in which the News Entities privately decide what commercial position to take in the ordinary course of negotiations with counterparties in mergers and acquisitions;
(h)if information contained in the documents sought under the Interlocutory Application was publicly available, then the usual manner in which the News Entities conduct their decision-making process could be exposed to the News Entities' counterparties in future transactions;
(i)negotiations for mergers and acquisitions in the ordinary course takes place based on speculation or imperfect knowledge by counterparties;
(j)public disclosure of the documents requested in the Interlocutory Application would prejudice the News Entities’ negotiating position in relation to future mergers and acquisitions, as future counterparties would have knowledge of the News Entities’ usual manner of adopting a commercial position in transactions and could potentially use that knowledge to the detriment of the News Entities.
[emphasis in original]
The evidence of Mr Wilkinson satisfies me that the documents sought by way of non-party discovery will at least include a window into the News Corp entities’ stratagems in respect of acquisitions. The News Corp entities are strangers to the proceeding but, as a good corporate citizen might be expected to recognise, recognise that there are procedures prescribed by rules of court for the just exercise of Commonwealth judicial power to resolve controversies which entail an intrusion into the affairs of non-parties. It is an important consideration, in my view, that that recognition be tempered by a like recognition that it is desirable that there be confidence that the administration of justice will entail no more than is necessary by way of intrusion into the affairs of non-parties in order to resolve a controversy before the court.
It would be unfortunate, to say the least, if confidence in the administration of justice were diminished by non-parties losing confidence in the willingness of the court, where necessary, to preserve truly commercially sensitive material’s confidentiality. Of course, more than an intrusion into privacy must be demonstrated. Further, the very nature of the present controversy which arises from prescription by Parliament in the Income Tax Assessment Act as to the apt basis for assessing value in a capital gains context may make it inevitable, in the resolution of the controversy at trial and in any subsequent judgment, that why it is or is not that the parties to the shared transaction were dealing at arm’s length be exposed and explained. But that does not mean that pre-trial there ought not to be, where it is considered necessary in the interests of justice, a confidentiality order.
Thus, while I respect absolutely the terms of s 37AE the Federal Court of Australia Act and the sentiments voiced by Edelman J in the case mentioned, which were pressed by the Commissioner, I do not see this as a case where a confidentiality order ought not be made at this juncture. I have expressly considered whether or not the application for confidentiality is premature. Of course, it might be desirable to wait and see particular documents, but this litigation is well advanced in its progress towards trial. The filing of affidavit evidence by the applicant taxpayers is the subject of an imminent deadline. Further, I am conscious that the News Corp entities have already been put to the expense incurred in the first instance by them of an appearance, even though this and any subsequent attendance might be now underwritten by costs orders in the News Corp entities’ favour.
There has to be some pragmatic resolution of a confidentiality issue now, rather than putting that subject off with all of the consequential impact that may have on progress towards the ultimate hearing of the trial. By “pragmatic”, I do not mean unprincipled. Where I am not satisfied, having regard to Mr Wilkinson’s affidavit, that there was a necessity at present, I would not make orders at present, but there is a difference between absolute perfection and recognising that the present is sufficient enough in relation to a s 37AG(1)(a) ground. For completeness, we should record that I have expressly considered, in the context of whether or not to make a confidentiality order, whether what has been termed the implied undertaking which would fall upon the parties to the proceeding would be sufficient.
In Hearne v Street (2008) 235 CLR 125, at [96] – [97], Hayne, Heydon and Crennan JJ stated:
96Where 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. The types of material disclosed to which this principle applies include documents inspected after discovery, answers to interrogatories, documents produced on subpoena, documents produced for the purposes of taxation of costs, documents produced pursuant to a direction from an arbitrator, documents seized pursuant to an Anton Piller order, witness statements served pursuant to a judicial direction and affidavits. The appellants did not dispute the existence of this principle, and in particular did not dispute its potential application to the affidavit of Mrs Hesse and the witness statement of Dr Tonin.
97It is common to speak of the relevant obligation as flowing from an “implied undertaking”.
With reference to this statement and the making of a confidentiality order, Bond J stated, in Tri-Star Petroleum Company v Australia Pacific LNG Pty Ltd [2017] QSC 136, at [56] – [60], the following:
[56]Tri-Star correctly points out that in most cases, the fact that the documents obtained in that way may not be used except for the purposes of the litigation concerned will be sufficient protection for the party producing them: see Mobil Oil Australia Ltd v Guina Developments Pty Ltd [1996] 2 VR 34 per Hayne JA at 38 (with whom Winneke P and Phillips JA agreed); Alcoa of Australia Ltd v Apache Energy Ltd [2014] WASCA 148 per McLure P at [57], point 4 (with whom Buss and Newnes JJA agreed).
[57]Cases in which something more than the implied obligation is required are to be regarded as the exception, not the rule. In Hearne v Street the High Court made that observation when discussing the circumstances in which it might be appropriate to require a party to make the implied obligation explicit by requiring the party to provide an express undertaking. Hayne, Heydon and Crennan JJ explained (emphasis added):
The point of insisting on an express undertaking, commonly employed in relation to documents which it is particularly desired to keep secret, is to bring explicitly home to the minds of those giving it how important it is that the documents only be used for the purpose of proceedings. It does not follow that the obligation in question does not exist in more routine cases without the need for an express undertaking. If the appellants' stance were sound, it would be necessary for litigants, in order to obtain protection partially, but not completely, as effective as that given by the approach urged by the residents, to seek express undertakings to the court from all servants and agents of a party, from all potential lay and expert witnesses, and from all other persons into whose hands documents generated in the proceedings may come. At present this happens in exceptional cases for particular reasons. If it were necessary for that general practice to develop, it would be extremely cumbersome, and extremely wasteful of time, energy and money.
[58] The descriptor “exceptional” has been used in other cases. For example:
(a)In Mobil Oil Australia Ltd v Guina Developments Pty Ltd [1996] 2 VR 34 at 38, Hayne JA (with whom Winneke P and Phillips JA agreed) said that the question at issue was (emphasis added):
…whether this is an exceptional case because the persons whose secrets are to be revealed are trade rivals of the party seeking inspection of documents containing secrets of use to that party.
(b)In Bidvest Australia Limited v Auzcorp Pty Ltd [No 2] [2017] WASCA 23 at [42], Martin CJ and Newnes and Murphy JJA wrote (emphasis added):
However, it is recognised that there may be exceptional circumstances where the implied undertaking may be insufficient protection and in such circumstances the court may impose conditions on an order for inspection in order to protect the efficacy of the implied undertaking: Alcoa of Australia Ltd v Apache Energy Ltd [2014] WASCA 148 [57]. One of those circumstances is where the parties are trade rivals and the documents discovered by one party contain confidential information of use to the other party in that trade rivalry: Mobil Oil Australia Ltd v Guina Developments Pty Ltd [1996] 2 VR 34.
[59]Where the circumstances of a particular case justify protection beyond the operation of the implied obligation, the issue for the Court is to determine where to strike the balance between competing interests. Thus:
(a)In Mobil Oil Australia Ltd v Guina Developments Pty Ltd Hayne JA observed of the possibility of making arrangements restricting access only to legal advisers and experts:
… they are arrangements that are made and should be made when doing so would strike a fair balance between the competing interests of the party seeking inspection and the party claiming confidentiality. No more specific rule can be laid down - each case will fall for determination according to its own facts.
(b)In Civic Video Pty Ltd v Paterson [2013] WASCA 107 at [28], the Court of Appeal of Western Australia stated:
Where the relevant parties are trade rivals, and the documents in question contain confidential and commercially sensitive information, the court must strike a fair balance between the legitimate concerns of the party discovering the documents and the needs of the other party of the litigation…
[60]The result is that a court may impose a more onerous obligation than the implied obligation if it is persuaded by the party asserting the need for that course that the case involves exceptional circumstances such that the implied obligation provides insufficient protection. If it is so persuaded, the court will then consider whether the course proposed by that party will strike the fair balance between its confidentiality concerns and the needs of the other litigant to have access to the documents concerned.
[emphasis in original]
His Honour’s analysis in that case persuaded him that it was desirable to bring home to the parties and those acting for them the particular confidentiality attending their obligations beyond that which would in any event be applicable. This is a case where each of the parties to the proceeding have commissioned and propose to introduce expert valuation evidence, so there has already been some communication of some proposed evidence to persons beyond the parties to the proceeding and their legal advisers. It seems to me necessary in those circumstances to bring home not just to the parties and their legal advisers but also to prospective witnesses confidentiality obligations which are a necessity for protecting which is exposed in Mr Wilkinson’s affidavit.
For these reasons, then, I am satisfied that the case is one in which there should be an order for non-party discovery, and further, pursuant to s 37AF of the Federal Court of Australia Act, that there should be a confidentiality order until the trial of the proceeding or further earlier order. I also propose to require each of the parties to the taxation appeals to give notice pre-trial to the News Corp entities of documents produced on non-party discovery by those entities which it is proposed to tender in evidence at the trial. That will afford the News Corp entities an opportunity, if so advised – and pursuant to liberty to apply, which I shall reserve – to make any application which they may be advised for a continuance of confidentiality either generally or in respect of particular documents or classes of document. Doubtless, whether any such application is made will be informed by the observations which I have made as to an inherent likelihood, given the issue identified, that some exposure may well be necessary in order to resolve the revenue law controversy about whether or not the parties to the share acquisition transaction were or were not dealing at arm’s length.
I add as well, for completeness, I have adverted to the terms of r 2.32, under which a non-party may seek access to particular documents on the court file. At present, and even after non-party discovery, that rule would not be applicable, because the documents would not be produced to the Court as they would under subpoena, but rather produced to the parties in whose favour non-party discovery has been ordered.
I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Logan. Associate:
Dated: 9 December 2022
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