FEDERAL COURT OF AUSTRALIA Deputy Commissioner of Taxation v Oswal [2014] FCA 318 Citation: Deputy Commissioner of Taxation v Oswal [2014] FCA 318 Parties: DEPUTY COMMISSIONER OF TAXATION v RADHIKA PANKAJ OSWAL File number(s): WAD 95 of 2011 Judge(s): SIOPIS J Date of judgment: 31 March 2014 Catchwords: PRACTICE AND PROCEDURE – confidentiality orders - whether confidentiality orders should be made in relation to the amount of costs which litigant had incurred in pursuing litigation – whether disclosure of that information would prejudice the applicant in settlement negotiations. Legislation: Federal Court of Australia Act 1976 (Cth) ss 37AG(1)(a), 53B Evidence Act 1995 (Cth) s 131 Cases cited: Australian Competition and Consumer Commission v Air New Zealand Ltd (No 3) [2012] FCA 1430 Hogan v Australian Crime Commission (2010) 240 CLR 651 Pinot Nominees Pty Ltd v Commissioner of Taxation (2009) 181 FCR 392 Lake Cumberline Pty Ltd v Effem Foods Pty Ltd (1994) 126 ALR 58 Date of hearing: 19 March 2014 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 23 Counsel for the Applicant: Mr NJ Williams SC and Mr DFC Thomas Solicitor for the Applicant: Australian Government Solicitor Counsel for the Respondent: Mr M Walton SC and Mr A McLure Solicitor for the Respondent: Kennedys Counsel for Mercury Services Limited: Ms KR Lendich IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 95 of 2011 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Applicant AND: RADHIKA PANKAJ OSWAL Respondent JUDGE: SIOPIS J DATE OF ORDER: 31 march 2014 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. Order 4 made on 19 February 2014, as amended by the orders made on 10 March 2014, is discharged. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 95 of 2011 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Applicant AND: RADHIKA PANKAJ OSWAL Respondent JUDGE: SIOPIS J DATE: 31 march 2014 PLACE: PERTH REASONS FOR JUDGMENT 1 On 9 August 2011, the Deputy Commissioner of Taxation, the applicant in this proceeding, obtained judgment against Mrs Radhika Oswal in the amount of $186,321,790.11. Mrs Oswal is not a resident of Australia. On 1 November 2011, Gilmour J varied a freezing order he had made on 18 April 2011, to require Mrs Oswal not to diminish the value of her assets in Australia below the judgment sum. 2 Mrs Oswal is party to a large number of legal proceedings in different Australian courts which she hopes will yield her a very considerable amount of money – sufficient in fact to exceed the judgment sum. Mrs Oswal has, of course, incurred legal fees in relation to the conduct of that litigation. The evidence is that Mrs Oswal has received the assistance of family and friends in meeting these fees. She has also had the benefit of litigation funding from two companies. However, these sources of funding are said, now, to be exhausted. In order to continue to fund the legal costs of the litigation Mrs Oswal, on 16 December 2013, entered into a litigation funding agreement with Mercury Services Limited. This company is registered in Dubai in the United Arab Emirates. 3 On 13 February 2014, Mrs Oswal applied by an interlocutory application to amend the freezing order insofar as it was necessary to accommodate the making of the agreement. 4 In support of her interlocutory application, Mrs Oswal filed a number of affidavits made by solicitors who are representing Mrs Oswal in some of the numerous legal proceedings to which I have referred. Each of the deponents to the affidavits deposed as to the nature of the legal proceeding and, by way of information recorded in exhibits (which each deponent designated as "confidential"), the amount of the legal fees that Mrs Oswal had incurred in the litigation to date, and, in some cases, the amount of the external funding which Mrs Oswal had obtained to pay legal fees and the sources of that funding. Some of the "confidential" exhibits also disclosed information about Mercury Services Limited. The litigation funding agreement was also the subject of a "confidential" exhibit. When these affidavits were filed in the Court's registry they did not include the "confidential" exhibits. 5 At the mention on 19 February 2014, counsel for Mrs Oswal asked the Court to make confidentiality orders in respect of the exhibits that had been marked "confidential", on the basis that they would be filed once those orders were made. The exhibits, of course, were not before the Court nor was there any argument on the issue. On 19 February 2014, I made orders that the exhibits marked "confidential" only be disclosed to four named individuals working for the applicant. 6 At the hearing on 10 March 2014, the Deputy Commissioner challenged the continuance of the confidentiality orders contending that they were only provisional and it was incumbent upon Mrs Oswal to justify the continuance of the confidentiality orders. On 10 March 2014, I made directions for the filing of submissions on that issue. I also varied the 19 February confidentiality orders by adding two further categories of persons to whom the confidential exhibits may be disclosed. 7 In her submissions, Mrs Oswal abandoned claims for confidentiality orders to be maintained in respect of a number of the documents, the subject of the 19 February confidentiality orders. However, Mrs Oswal maintained her claim for confidentiality orders in respect of two classes of information in the exhibits marked "confidential". 8 First, Mrs Oswal claimed confidentiality in respect of cl 1.8 of the litigation funding agreement. Clause 1.8 sets out, in effect, the premium payable to the litigation funder. As is not uncommon with these kinds of agreements, the litigation funder is entitled to a greater proportion of the proceeds of the litigation the longer the litigation proceeds. 9 Secondly, Mrs Oswal claimed confidentiality in respect of the evidence disclosing the amount of costs she has incurred in the litigation in which she is involved; and also the amount of those costs which had been funded by family and friends and by third party corporate funders. 10 In short, Mrs Oswal contended that the confidentiality orders should be maintained because disclosure of the designated information to her opponents in the litigation would provide them with an unfair advantage in any settlement negotiations. 11 The Deputy Commissioner neither consented to, nor opposed, the making of the limited confidentiality orders sought by Mrs Oswal in her submissions. 12 Section 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act) provides 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. 13 In Australian Competition and Consumer Commission v Air New Zealand Ltd (No 3) [2012] FCA 1430, Perram J considered the application of s 37AG(1)(a). Perram J referred to Hogan v Australian Crime Commission (2010) 240 CLR 651 and observed that the High Court had emphasised that it must be "necessary" to make the order, which is a high standard that is different to "convenient, reasonable or sensible". Also, Perram J observed that orders of this kind were not concerned with trivialities. Further, at [21], Perram J observed: It is not a question, on the one hand, of seeking to serve, as best one can, the interests of open justice and, on the other hand, considering the prejudice which may occur if the information is released. The test to be applied is the posing of the question as to whether it is necessary to make the order to prevent prejudice to the proper administration of justice. No balancing exercise is required or permitted. 14 Mrs Oswal contended that confidentiality orders under s 37AG(1)(a) of the Federal Court Act were frequently made to protect from disclosure commercially sensitive information. Mrs Oswal contended that the position of opposing litigants was analogous to rivalous conduct between business competitors. Mrs Oswal went on to say that the failure to make confidentiality orders in respect of the designated information, would give her opponents an unfair advantage in any settlement negotiations in relation to her litigation. Mrs Oswal said that the facilitation of the settlement of litigation was a fundamental element of the administration of justice. Therefore, contended Mrs Oswal, as with commercially sensitive information, information which would give an opponent an unfair advantage in settlement negotiations fell within the ambit of s 37AG(1)(a). 15 It is the case, of course, that the facilitation of the settlement of litigation is an important element of the administration of justice. It is also the fact that the amount of costs which have been incurred, or may be likely to be incurred, in any piece of litigation, will often be a consideration affecting settlement of a proceeding. 16 However, in my view, these circumstances in themselves are not sufficient to lead to the conclusion that the confidentiality orders should be made. 17 The importance of settlement of litigation for the administration of justice is well recognised in the law. There is in existence a regime which identifies the categories of communications made for settlement purposes which are to be protected. First, the common law recognises that admissions made in the course of without prejudice communications, orally or in writing, cannot be used for the purpose of undermining the claims which are made by the parties in the proceedings. Secondly, there is also a statutory protection for certain communications made in the course of settlement negotiations. (See, for example, s 53B of the Federal Court Act and s 131 of the Evidence Act 1995 (Cth). See, also, Pinot Nominees Pty Ltd v Commissioner of Taxation (2009) 181 FCR 392.) Further, of course, the doctrine of legal professional privilege provides protection from disclosure of communications between a lawyer and a client or other third parties made predominantly for the purpose of litigation, or anticipated litigation. 18 However, that is not to say that a circumstance may conceivably arise in relation to the settlement of proceedings, outside of the circumstances covered by the legal regime referred to above, when it may be necessary to make orders under s 37AG(1)(a) to prevent prejudice to the administration of justice. However, in my view, this is not such a circumstance. 19 Mrs Oswal does not in her evidence or submissions identify any specific settlement negotiations between her and an opponent which may be undermined by the disclosure of the information sought to be protected, nor is there evidence of how specifically Mrs Oswal would be prejudiced by the disclosure of the costs information. Mrs Oswal's contention rises no higher than an assertion at a high level of generality. In this regard, it is pertinent to observe that invoices for legal costs, rendered to a client by a solicitor, are not among the class of communications protected by legal professional privilege (Lake Cumberline Pty Ltd v Effem Foods Pty Ltd (1994) 126 ALR 58). 20 Similar considerations apply in relation to Mrs Oswal's contention as to the content of cl 1.8 of the litigation funding agreement. There is no evidence adduced by Mrs Oswal to support her contention that she would be prejudiced because the disclosure of the content of cl 1.8 could influence the timing of the making of a settlement offer. Further, it is not immediately obvious how disclosure of the fact that the premium increases the longer the duration of the litigation, would adversely affect Mrs Oswal, when the acceptance of any settlement offer requires the approval of the litigation funder. It is the funder, therefore, that is able to control the timing of the acceptance of any settlement offer. 21 In short, in my view, Mrs Oswal has not met the high standard demanded of an applicant to establish that the making of confidentiality orders are "necessary" to prevent prejudice to the administration of justice. 22 Counsel for Mercury Services Limited contended that the details of cl 1.8 should not be revealed because this was commercially sensitive information which could be used by competitors of Mercury Services Limited. On the face of it, there is some merit in an argument that the terms upon which one litigation funder is prepared to provide funding would be of commercial value to another litigation funder. However, in this case, the evidence does not support the contention that Mercury Services Limited is an active participant in a competitive litigation funding market. Rather, the evidence is to the effect that Mercury Services Limited is an investment company. 23 Accordingly, the confidentiality orders which I made on 19 February 2014 and varied on 10 March 2014 are discharged. There will be no order as to costs. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis. Associate: Dated: 31 March 2014