FEDERAL COURT OF AUSTRALIA Hua Wang Bank Berhad v Commissioner of Taxation (No 12) [2013] FCA 1091 Citation: Hua Wang Bank Berhad v Commissioner of Taxation (No 12) [2013] FCA 1091 Parties: HUA WANG BANK BERHAD v COMMISSIONER OF TAXATION BYWATER INVESTMENTS LIMITED v COMMISSIONER OF TAXATION CHEMICAL TRUSTEE LIMITED v COMMISSIONER OF TAXATION SOUTHGATE INVESTMENT FUNDS LIMITED v COMMISSIONER OF TAXATION DERRIN BROTHERS PROPERTIES LIMITED v COMMISSIONER OF TAXATION DEPUTY COMMISSIONER OF TAXATION v HUA WANG BANK BERHAD DEPUTY COMMISSIONER OF TAXATION v CHEMICAL TRUSTEE LIMITED, DERRIN BROTHERS PROPERTIES LIMITED, BYWATER INVESTMENTS LIMITED File numbers: NSD 653 of 2011 NSD 652 of 2011 NSD 654 of 2011 NSD 655 of 2011 NSD 656 of 2011 VID 672 of 2010 VID 887 of 2010 Judge: PERRAM J Date of judgment: 21 October 2013 Catchwords: PRACTICE AND PROCEDURE - Application to set aside subpoena – Application not determined on merits – Whether justification to depart from usual rule as to costs Legislation: Evidence Act 1995 (Cth) s 128(4) Federal Court of Australia Act 1976 (Cth) s 43 Cases cited: Ann Street Mezzanine Pty Ltd v Beck [2011] FCA 1328 cited Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 cited Date of hearing: 16 October 2013 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 12 Counsel for the Taxpayers: Ms R L Seiden SC, Mr J Hyde Page, Mr G Antipas Solicitor for the Taxpayers: Henry Davis York Counsel for the Commissioner of Taxation & Deputy Commissioner of Taxation: Mr D J Fagan SC, Ms J E Jaques, Ms J Gatland Solicitor for the Commissioner of Taxation & Deputy Commissioner of Taxation: Australian Government Solicitor Counsel for Mr McGrouther: Mr H K Dhanji SC Solicitor for Mr McGrouther: Kreston Dormers IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 653 of 2011 BETWEEN: HUA WANG BANK BERHAD Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: PERRAM J DATE OF ORDER: 21 october 2013 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Mr McGrouther's application to set aside the subpoena addressed to him be dismissed. 2. There be no order as to costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 652 of 2011 BETWEEN: BYWATER INVESTMENTS LIMITED Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: PERRAM J DATE OF ORDER: 21 october 2013 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Mr McGrouther's application to set aside the subpoena addressed to him be dismissed. 2. There be no order as to costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 654 of 2011 BETWEEN: CHEMICAL TRUSTEE LIMITED Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: PERRAM J DATE OF ORDER: 21 october 2013 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Mr McGrouther's application to set aside the subpoena addressed to him be dismissed. 2. There be no order as to costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 655 of 2011 BETWEEN: SOUTHGATE INVESTMENT FUNDS LIMITED Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: PERRAM J DATE OF ORDER: 21 october 2013 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Mr McGrouther's application to set aside the subpoena addressed to him be dismissed. 2. There be no order as to costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 656 of 2011 BETWEEN: DERRIN BROTHERS PROPERTIES LIMITED Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: PERRAM J DATE OF ORDER: 21 october 2013 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Mr McGrouther's application to set aside the subpoena addressed to him be dismissed. 2. There be no order as to costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION VID 672 of 2010 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Applicant AND: HUA WANG BANK BERHAD Respondent JUDGE: PERRAM J DATE OF ORDER: 21 october 2013 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Mr McGrouther's application to set aside the subpoena addressed to him be dismissed. 2. There be no order as to costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION VID 887 of 2010 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Applicant AND: CHEMICAL TRUSTEE LIMITED First Respondent DERRIN BROTHERS PROPERTIES LIMITED Second Respondent BYWATER INVESTMENTS LIMITED Third Respondent JUDGE: PERRAM J DATE OF ORDER: 21 october 2013 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Mr McGrouther's application to set aside the subpoena addressed to him be dismissed. 2. There be no order as to costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 653 of 2011 BETWEEN: HUA WANG BANK BERHAD Applicant AND: COMMISSIONER OF TAXATION Respondent IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 652 of 2011 BETWEEN: BYWATER INVESTMENTS LIMITED Applicant AND: COMMISSIONER OF TAXATION Respondent IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 654 of 2011 BETWEEN: CHEMICAL TRUSTEE LIMITED Applicant AND: COMMISSIONER OF TAXATION Respondent IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 655 of 2011 BETWEEN: SOUTHGATE INVESTMENT FUNDS LIMITED Applicant AND: COMMISSIONER OF TAXATION Respondent IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 656 of 2011 BETWEEN: DERRIN BROTHERS PROPERTIES LIMITED Applicant AND: COMMISSIONER OF TAXATION Respondent IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION VID 672 of 2010 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Applicant AND: HUA WANG BANK BERHAD Respondent IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION VID 887 of 2010 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Applicant AND: CHEMICAL TRUSTEE LIMITED First Respondent DERRIN BROTHERS PROPERTIES LIMITED Second Respondent BYWATER INVESTMENTS LIMITED Third Respondent JUDGE: PERRAM J DATE: 21 October 2013 PLACE: SYDNEY REASONS FOR JUDGMENT 1 On the 19th day of the trial Mr Fagan of senior counsel called upon a subpoena to give evidence addressed to Mr Tod McGrouther. Mr McGrouther appeared in response but at the same time, through Mr Dhanji of senior counsel, applied to set the subpoena aside. A number of bases were pursued. However, for the purposes of these reasons it is necessary to mention only one. This concerned Mr McGrouther's desire to avoid giving evidence which might incriminate him. 2 After substantial debate the Commissioner decided to prove what he desired to obtain from Mr McGrouther through the tender of documents. Objections were taken by the taxpayers to portions of this tender but I overruled those objections and admitted the material. In light of that development Mr Fagan indicated that the Commissioner no longer needed to call upon the subpoena to give evidence issued to Mr McGrouther. 3 As a matter of formality this means that Mr McGrouther's application to set the subpoena aside has become otiose. In that circumstance, I will dismiss it. 4 Mr Dhanji then sought an order that the Commissioner pay Mr Grouther's costs of the application to set the subpoena aside. 5 The Court has the power to order the party issuing a subpoena to pay the costs of a third party who succeeds in having it set aside. The source of this power is most likely s 43 of the Federal Court of Australia Act 1976 (Cth) and the usual approach to costs applies to the exercise of the discretion which arises. As Kenny J observed in Ann Street Mezzanine Pty Ltd v Beck [2011] FCA 1328 at [3] this will generally mean that the successful party on such an application will be entitled to its costs. 6 In this case the application has been dismissed without any consideration of its merits. The principles to be applied in that circumstance were explained by McHugh J in Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622. In that case the prosecutrix sought writs of prohibition, certiorari and mandamus in respect of a decision to deny her a protection visa. A week after the commencement of her proceedings, however, the Minister granted her a visa rendering her application pointless, a situation not altogether dissimilar to Mr McGrouther's. McHugh J accepted that the proceedings had been reasonably commenced but also reasonably resisted. No order as to costs was made in respect of the substantive costs of the proceedings, although costs were awarded against Lai Qin on the costs application itself. 7 McHugh J accepted that a defendant may act unreasonably and thereby force a plaintiff to commence proceedings. In such cases, a costs order may well be appropriate: see 624-625. 8 In this case, however, I do not think it was unreasonable for the Commissioner to issue a subpoena to Mr McGrouther. In principle, there can be nothing wrong with seeking to obtain evidence from a competent and compellable witness. It might well be unreasonable to issue a subpoena to a witness who was either not competent or not compellable. It might also be unreasonable to issue a subpoena to produce documents which could only be the subject of a proper claim for privilege. But the current situation was not an example of any such unreasonable use of a subpoena. 9 On the other hand, at least one of the grounds pursued to set aside the subpoena was reasonable. The Commissioner, quite properly, accepted that Mr McGrouther would probably be exposed to a risk of self-incrimination if he were called to give evidence. Mr McGrouther indicated he was not willing to give evidence voluntarily. At that point, the discretionary power nevertheless to order Mr McGrouther to give evidence would arise under s 128(4) of the Evidence Act 1995 (Cth) only if both of the requirements of that section could be satisfied. It provides: 128 Privilege in respect of self incrimination in other proceedings (4) The court may require the witness to give the evidence if the court is satisfied that: (a) the evidence does not tend to prove that the witness has committed an offence against or arising under, or is liable to a civil penalty under, a law of a foreign country; and (b) the interests of justice require that the witness give the evidence. 10 The effect of the double negative inherent in s 128(4)(a) is that the Court would need to be affirmatively satisfied that Mr McGrouther's evidence did not tend to prove he had committed an offence under the laws of a foreign country. Mr McGrouther's evidence was likely to concern events in Samoa concerned with the affairs of the Hua Wang Bank Berhad. It is at least reasonably arguable that I could not be satisfied of the matter in s 128(4)(a) and hence at least reasonably arguable that no power to direct Mr McGrouther to answer the questions might arise. It seems to me, therefore, that he had reasonable grounds to set aside the subpoena. 11 The position of both parties was, therefore, reasonable. This seems to bring the matter within what McHugh J said in Ex parte Lai Qin at 625: If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the costs discretion will usually mean that the court will make no order as to the cost of the proceedings. 12 The appropriate order is, therefore, that Mr McGrouther's application to set aside the subpoena addressed to him be dismissed with no order as to costs. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram. Associate: Dated: 21 October 2013