Federal Court of Australia Nicols, in the matter of Anatax Pty Ltd (in liq) [2020] FCA 1320 File number: NSD 1236 of 2019 Judgment of: MARKOVIC J Date of judgment: 16 September 2020 Catchwords: PRACTICE AND PROCEDURE – application for confidentiality orders – application allowed Legislation: Federal Court of Australia Act 1976 (Cth), ss 37AF, 37AG Cases cited: C7A/2017 v Minister for Immigration and Border Protection (No 2) [2020] FCAFC 70 Tech Mahindra Limited v Commissioner of Taxation (No 2) [2016] FCAFC 136 Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 17 Date of hearing: Determined on the papers Date of last submissions: 4 August 2020 Counsel for the Plaintiff: Mr P Afshar Solicitor for the Plaintiff: MinterEllison ORDERS NSD 1236 of 2019 IN THE MATTER OF ANATAX PTY LTD (IN LIQUIDATION) (ACN 071 644 098) STEVE NICOLS IN HIS CAPACITY AS LIQUIDATOR OF ANATAX PTY LTD (IN LIQUIDATION) (ACN 071 644 098) First Plaintiff ANATAX PTY LTD (IN LIQUIDATION) (ACN 071 644 098) Second Plaintiff order made by: MARKOVIC J DATE OF ORDER: 16 september 2020 THE COURT ORDERS THAT: 1. Pursuant to s 37AF(1)(b)(iv) of the Federal Court of Australia Act 1976 (Cth) and on the ground that it is necessary to prevent prejudice to the proper administration of justice, the deed of assignment dated 18 April 2019 at pp 68-79 of exhibit SN-1 and the deed of amendment dated 31 July 2019 at pp 80-85 of exhibit SN-1 are to remain confidential and are prohibited from disclosure to any person, except pursuant to an order of the Court, until 30 June 2021. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT MARKOVIC J 1 On 30 July 2020, on the application of Anatax Pty Ltd (in liquidation) (Anatax) and the Commissioner of Taxation (Commissioner) I made orders in proceeding NSD716/2020 including an order pursuant to r 1.39 of the Federal Court Rules 2011 (Cth) (Rules) extending the time for service pursuant to r 8.06 of the Rules of the originating application and statement of claim filed in that proceeding. 2 In support of that application the plaintiffs relied on an affidavit sworn on 24 July 2020 by their solicitor, Michael Richard Hughes. Exhibited to Mr Hughes' affidavit was exhibit MRH-1 which, in turn, included at pp 1-179 thereof an affidavit of Kathleen Chau sworn on 1 August 2019 and an affidavit of Steve Nicols sworn on 1 August 2019 and the exhibits thereto. Those affidavits and their exhibits had been filed and relied on by Mr Nicols in his capacity as liquidator of Anatax and Anatax, the first and second plaintiffs respectively in this proceeding, in support of their application pursuant to s 477(2B) of the Corporations Act 2001 (Cth) (Corporations Act) for entry into a deed of assignment and a deed of amendment, described more fully below. 3 On 30 July 2020 in proceeding NSD716/2020 Anatax and the Commissioner also sought an order pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act) that pp 1-179 of exhibit MRH-1 remain confidential and not be disclosed to any person until 30 June 2021. I declined to make that order as it was apparent that, despite the submission that Mr Nicols and Anatax had intended to seek an order pursuant to s 37AF of the Federal Court Act in relation to the material comprised in those pages of exhibit MRH-1 in this proceeding, such an order had not been made. Rather, I made the following additional orders in proceeding NSD716/2020: 3. Subject to further order and pending the determination of the application pursuant to s 37AF of the Act made by the plaintiffs, pages 1-179 of Exhibit MRH-1 are to remain confidential and not be disclosed to any person. 4. Leave be granted to the plaintiffs to file an application in proceeding NSD1236/2019 seeking orders pursuant to s 37AF of the Act in relation to pages 1-179 of Exhibit MRH- 1 together with any affidavit in support and submissions, not exceeding five pages in length, with such application to be determined on the papers. 4 Anatax has now filed the application foreshadowed by Order 4 made on 30 July 2020 seeking an order, pursuant to s 37AF(1)(b)(iv) of the Federal Court Act and on the ground that the order is necessary to prevent prejudice to the proper administration of justice, that the documents at pp 68-79 and 80-85 of exhibit SN-1 remain confidential and be prohibited from disclosure to any person until 30 June 2021. Anatax and the Commissioner also seek an order to the same effect in relation to the same documents at pp 162-173 and 174-179 (rather than pp 1-179 as previously foreshadowed) of exhibit MRH-1 in proceeding NSD716/2020. Anatax's application is supported by an affidavit sworn by Mr Hughes on 12 August 2020. 5 The documents at pp 68-79 and 80-85 of exhibit SN-1 that are the subject of this application are a deed of assignment dated 18 April 2019 between the Commissioner, on the one hand, and Anatax and Mr Nicols in his capacity as liquidator of Anatax, on the other, and a deed of amendment dated 31 July 2019 between those same parties which amends one aspect of the deed of assignment. 6 The effect of the deed of assignment is to assign the beneficial right, title and interest in Anatax's causes of action to the Commissioner. 7 Mr Hughes has been informed by his instructing officers that this is the first time that the Commissioner has taken an assignment of that nature pursuant to s 100-5 of the Insolvency Practice Schedule (Corporations) (IPSC), which is Sch 2 to the Corporations Act, and otherwise. He has also been informed by the Commissioner that there may be other present or future instances where the Commissioner wishes to negotiate a similar or different arrangement pursuant to s 100-5 of the IPSC and, in those circumstances, the Commissioner is concerned that access to and disclosure of the deed of assignment might affect any negotiations in the future for a similar transaction. 8 In addition, cl 6.1 of the deed of assignment provides: 6.1 Confidential Information The Parties must keep the Confidential Information confidential and may only disclose the Confidential Information: (a) to (and the only to the extent necessary) enforce a term or condition of this Deed; (b) where disclosure is required by law or a regulatory body; or (c) to its professional advisors. 9 Pursuant to the deed of amendment, the definition of "Sunset Date" in the deed of assignment has been amended. 10 On 16 September 2019 Perram J made orders pursuant to s 477(2B) of the Corporations Act approving the entry by Mr Nicols and Anatax into the deed of assignment and the deed of amendment: see Nicols, in the matter of Anatax Pty Ltd (in liquidation) [2019] FCA 1528. consideration 11 Section 37AF(1)(b) of the Federal Court Act provides that the Court may make a suppression order or non-publication order prohibiting or restricting the publication or other disclosure of information that relates to a proceeding before the Court and is, relevantly, information lodged with or filed in the Court. The documents at pp 68-79 and 80-85 of exhibit SN-1 are of that nature. 12 Section 37AG of the Federal Court Act sets out the grounds upon which such an order can be made including that the order is necessary to prevent prejudice to the proper administration of justice. A suppression order or non-publication order must specify the ground or grounds on which the order is made: see s 37AG(1)(a) and (2) of the Federal Court Act. 13 In Tech Mahindra Limited v Commissioner of Taxation (No 2) [2016] FCAFC 136 at [11] a Full Court of this Court (Robertson, Davies and Wigney JJ) said: Section 37AG provides that the Court may make a suppression order or non-publication order on the ground that the order is necessary to prevent prejudice to the proper administration of justice. We construe that provision in light of the judgment in Hogan v Australian Crime Commission [2010] HCA 21; 240 CLR 651 concerning what was then s 50 of the Federal Court of Australia Act: 30 As it appears in s 50, "necessary" is a strong word. Hence the point made by Bowen CJ in Australian Broadcasting Commission v Parish, that the collocation of necessity to prevent prejudice to the administration of justice and necessity to prevent prejudice to the security of the Commonwealth "suggests Parliament was not dealing with trivialities". Further, as indicated earlier in these reasons: (a) s 50 is an example of a provision authorising the Federal Court to make orders for the exercise of its jurisdiction other than in open court as mandated by s 17(1); and (b) "the administration of justice" spoken of in s 50 is that involved in the exercise by the Federal Court of the judicial power of the Commonwealth; this is a more specific discipline than broader notions of the public interest. 31 It 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. (Footnotes omitted.) 14 In C7A/2017 v Minister for Immigration and Border Protection (No 2) [2020] FCAFC 70 at [12]-[14] a Full Court of this Court (Katzmann, Wigney and Abraham JJ) relevantly said: 12 Second, contrary to the appellants' submission, the Court is not permitted to engage in "some 'balancing exercise'" in which it weighs the competing considerations: Liverpool City Council v McGraw-Hill Financial, Inc (now known as S&P Global Inc) [2018] FCA 1289 at [109] (Lee J). The balance is struck by the legislation itself: see Minister for Immigration and Border Protection v Egan [2018] FCA 1320 at [4] (Allsop CJ). 13 Third, a suppression order cannot be made unless it is "necessary" for one or more of the purposes specified in s 37AG. The appellants bear the onus of persuading the Court to make the order and the onus has been described as "a very heavy one": Australian Competition and Consumer Commission v Valve Corporation (No 5) [2016] FCA 741 (Edelman J) at [8], citing Computer Interchange Pty Ltd v Microsoft Corporation (1999) 88 FCR 438 at 438 (Madgwick J). The onus has not been discharged. 14 It is trite to observe that "necessary" is "a strong word": Hogan v Australian Crime Commission (2010) 240 CLR 651 at [30]. It is not enough that suppression be considered desirable. In John Fairfax & Sons Ltd v Police Tribunal of New South Wales (1986) 5 NSWLR 465, where a non-publication order was sought, McHugh JA, with whom Glass JA agreed, said at 477 that, "there must be some material before the court upon which it can reasonably reach the conclusion that it is necessary to make an order prohibiting publication" and "[m]ere belief that the order is necessary is insufficient." 15 Anatax submits that the order it seeks pursuant to s 37AF(1)(b)(iv) of the Federal Court Act should be made for the following reasons: (1) the deed of assignment is the subject of an inter partes confidentiality obligation (see [8] above). Whilst the presence of such a term is not determinative of the Court's discretion to make confidentiality orders, the Court would be most vigilant about the requirement of such protection in those circumstances. The deed of amendment does not contain a confidentiality clause but its contents are likely to fall at least within (c) of the definition of "Confidential Information" as included in the deed of assignment; (2) the deed of assignment and deed of amendment embody a private arrangement between three parties in which no outside party has any prima facie interest and at least one of the parties to those deeds, namely Mr Nicols, the liquidator, is party to this proceeding but not to proceeding NSD716/2020. In other words, there is no discernible interest in the documents beyond the parties thereto and no public interest (or interest of non-parties). Further, the arrangements were lodged with the Court only for the purposes of seeking approval pursuant to s 477(2B) of the Corporations Act; and (3) as has been explained by Mr Hughes, the terms of the private arrangements included in the deed of assignment and deed of amendment, in particular, the consideration for which rights were assigned to the Commissioner, ought to be protected because their disclosure would likely affect similar arrangements between the Commissioner and liquidators in the future. The Court would consider that the administration of justice would benefit from the protection of such arrangements, especially given the Commissioner's role as the person charged with the general administration of the Taxation Administration Act 1953 (Cth) (Tax Administration Act). 16 I am satisfied that the order sought by Anatax should be made. The documents embody a private arrangement between the parties. But as Mr Hughes deposes, they also effect a transfer of causes of action for the benefit of the principal creditor of Anatax. The Commissioner sought the assignment so that he could take action for the recovery of monies. This is the first time he has done so in furtherance of his role as the person charged with the administration of the Tax Administration Act. He may wish to do so again in order to recover funds owing by taxpayers for the benefit of creditors including the Commonwealth. His ability to do so may be compromised if the terms on which this assignment was effected become known at least in the near future. 17 Accordingly, I am satisfied that it is in the interests of justice that an order be made, pursuant to s 37AF(1)(b)(iv) of the Federal Court Act and on the ground that it is necessary to prevent prejudice to the proper administration of justice, that pp 68-79 and 80-85 of exhibit SN-1 are to remain confidential and are prohibited from disclosure to any person, except pursuant to an order of the Court, until 30 June 2021. I will also make an order to that effect in proceeding NSD716/2020 in relation to the same documents at pp 162-173 and 174-179 of exhibit MRH-1 and an order discharging Order 3 made in that proceeding on 30 July 2020. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Markovic. Associate: Dated: 16 September 2020