Deputy Commissioner of Taxation v Shi

• Jurisdiction: Australia Federal only
• Court: High Court
• Judge: Kiefel CJ,Gageler,Gleeson JJ,Gordon J,Edelman J.
• Judgment Date: 04 August 2021
• Neutral Citation: [2021] HCA 22
• Docket Number: S211/2020

[2021] HCA 22

HIGH COURT OF AUSTRALIA

Kiefel CJ, Gageler, Gordon, Edelman and Gleeson JJ

S211/2020

Deputy Commissioner of Taxation

Appellant

and

Zu Neng Shi

Respondent

Representation

S T White SC with T R Epstein for the appellant (instructed by Australian Government Solicitor)

T A Game SC with K J Edwards and W R Johnson for the respondent (instructed by Uther Webster & Evans)

Evidence Act 1995 (Cth), ss 128, 128A.

Federal Court Rules 2011 (Cth), rr 7.32, 7.33.

Evidence — Privilege against self-incrimination — Where appellant obtained ex parte orders freezing worldwide assets of respondent — Where disclosure orders made in connection with freezing orders required disclosure of worldwide assets — Where respondent objected to disclosure of certain information on basis that it may tend to self-incriminate — Where respondent prepared privilege affidavit under s 128A(2) of Evidence Act 1995 (Cth) — Whether information in privilege affidavit could be disclosed to parties under s 128A(6) — Whether interests of justice required disclosure of information in privilege affidavit.

Words and phrases — “certificate”, “commission of a foreign offence”, “disclosure order”, “freezing order”, “interests of justice”, “may tend to prove”, “onus of proof”, “privilege affidavit”, “privilege against self-incrimination”, “reasonable grounds for an objection”.

ORDER

• 1. Appeal allowed with costs.

• 2. Set aside the orders made by the Full Court of the Federal Court of Australia on 4 June 2020, and, in their place, order that:

  • (a) the appeal be allowed;

  • (b) order 2 of the orders made by the Federal Court of Australia on 24 July 2019 be set aside;

  • (c) subject to orders (d) and (e) below, the privilege affidavit delivered by Mr Shi pursuant to s 128A(2) of the Evidence Act 1995 (Cth) (“the Privilege Affidavit”) be filed and served on the Deputy Commissioner of Taxation;

  • (d) order (c) be stayed pending the hearing and determination by a single judge of the Federal Court of Australia, pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth), whether suppression or non-publication orders should be made in relation to the Privilege Affidavit;

  • (e) there be a hearing before a single judge of the Federal Court of Australia on a date to be fixed in respect of whether suppression or non-publication orders should be made in relation to the Privilege Affidavit pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth);

  • (f) the Court grant a certificate pursuant to s 128A(7) of the Evidence Act 1995 (Cth) in respect of the Privilege Affidavit; and

  • (g) Mr Shi pay the Deputy Commissioner of Taxation's costs of the appeal.

1 Kiefel CJ, Gageler And Gleeson JJ. The Deputy Commissioner of Taxation appeals by special leave from a decision of the Full Court of the Federal Court 1 dismissing by majority (Lee and Stewart JJ, Davies J dissenting) an appeal by leave from a decision of a primary judge of the Federal Court 2 (Steward J) refusing to make an order under s 128A(6) of the Evidence Act 1995 (Cth) that a privilege affidavit be filed and served on the Deputy Commissioner. The privilege affidavit was prepared by Mr Shi in support of an objection to compliance with a disclosure order made by another judge of the Federal Court 3 (Yates J) under r 7.33 of the Federal Court Rules 2011 (Cth) ancillary to a freezing order under r 7.32 of the Federal Court Rules in a civil proceeding brought by the Deputy Commissioner against Mr Shi for the recovery of tax.

2 Section 128A of the Evidence Act relevantly provides:

• “(2) If a relevant person [being a person to whom a disclosure order is directed] objects to complying with a disclosure order on the grounds that some or all of the information required to be disclosed may tend to prove that the person:

  • (a) has committed an offence against or arising under an Australian law or a law of a foreign country; or

  • (b) is liable to a civil penalty;

  the person must:

• (c) disclose so much of the information required to be disclosed to which no objection is taken; and

• (d) prepare an affidavit containing so much of the information required to be disclosed to which objection is taken (the privilege affidavit) and deliver it to the court in a sealed envelope; and

• (e) file and serve on each other party a separate affidavit setting out the basis of the objection.

  …

• (4) The court must determine whether or not there are reasonable grounds for the objection.

• (5) Subject to subsection (6), if the court finds that there are reasonable grounds for the objection, the court must not require the information contained in the privilege affidavit to be disclosed and must return it to the relevant person.

• (6) If the court is satisfied that:

  • (a) any information disclosed in the privilege affidavit 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;

  the court may make an order requiring the whole or any part of the privilege affidavit containing information of the kind referred to in paragraph (a) to be filed and served on the parties.

• (7) If the whole or any part of the privilege affidavit is disclosed (including by order under subsection (6)), the court must cause the relevant person to be given a certificate in respect of the information as referred to in paragraph (6)(a).

• (8) In any proceeding in an Australian court:

  • (a) evidence of information disclosed by a relevant person in respect of which a certificate has been given under this section; and

  • (b) evidence of any information, document or thing obtained as a direct result or indirect consequence of the relevant person having disclosed that information;

  cannot be used against the person. However, this does not apply to a criminal proceeding in respect of the falsity of the evidence concerned.”

3 There is, and was before the Full Court, no dispute that making or refusing to make an order under s 128A(6) is a discretionary decision in respect of which the applicable standard of appellate review is that identified in House v The King 4.

4 Within the context of s 128A as a whole, s 128A(5) makes clear that the discretion to make or refuse to make an order under s 128A(6) arises for consideration by a court only where the person to whom a disclosure order is directed has taken an objection to disclosure of information under s 128A(2) and only where the court has found under s 128A(4) that there are reasonable grounds for the objection that has been taken. Section 128A(6) in that context operates to permit the court to make an order requiring information that the court is satisfied under s 128A(6)(a) may tend to prove that the person has committed an offence against Australian law to be filed and served on the parties only if the court is also satisfied that both of the propositions in s 128A(6)(b) and (c) apply to that information.

5 Whether it is open to the court to be satisfied of the negative proposition in s 128A(6)(b) – that the information in the privilege affidavit does not tend to prove that the person has committed an offence against or arising under, or is liable to a civil penalty under, a law of a foreign country – turns on inferences available to be drawn by the court in light of the objection the relevant person has taken under s 128A(2) and in light of the finding the court has made under s 128A(4) that the objection is on reasonable grounds.

6 The method by which the relevant person is required to take an objection to the disclosure of information under s 128A(2) can be seen to have two elements. In accordance with s 128A(2)(d), the person must prepare and deliver to the court in a sealed envelope a privilege affidavit containing the information that is the subject of the objection. In accordance with s 128A(2)(e), the person must file and serve a separate affidavit setting out the basis for the objection. Both elements are important.

7 For the person to comply with the requirement of s 128A(2)(e) that the separate affidavit set out the basis for the objection that is taken, the separate affidavit must indicate, at least in outline, the legal and factual foundation for that objection. For the court then to find under s 128A(4) that there are reasonable grounds for the objection taken, the court must be satisfied on the evidence before it that there is a legal and factual foundation for the objection that is sufficient for the court itself to conclude that the objection is reasonably maintained at the time

the court makes its decision 5. Only where that conclusion has been reached by the court does the question arise as to whether the court is also to be satisfied of the negative proposition in s 128A(6)(b)

8 Where the person has set out in the separate affidavit filed and served in accordance with s 128A(2)(e) that a basis for the objection is that the information contained in the privilege affidavit may tend to prove that the person has committed an offence against or arising under, or is liable to a civil penalty under, a law of a foreign country, and where the objection that has been made on that basis has been found by the court under s 128A(4) to be on reasonable grounds, the satisfaction of the court that the objection has a sufficient legal and factual foundation to allow the court itself to conclude that the objection is reasonably maintained necessarily means that the court will be unable to be satisfied of the negative proposition in s 128A(6)(b). The court acting rationally could not be satisfied under s...