Summary
- There is the potential for the Commissioner of Taxation to potentially gain access to and use documents filed in the Family Court of Australia.
- However this power is not unfettered and the boundaries are perhaps more constrained than originally feared.
- The Federal Court has made it clear that each case must be considered on its own facts.
- Given the jurisprudence is in its infancy, it is likely that there will be more distinguishing factors in the future that bar the Commissioner from gaining access to Family Court of Australia files.
- However, where similar factual circumstances arise in the future, it is likely that the court will find in the Commissioner’s favour.
- There is also the lingering question of whether other authorities performing public functions will be granted the same liberties as the Commissioner.
Justin Byrne , Alexandra Moles and Rosalie Cattermole of HopgoodGanim write in Lexology:
The recent decision of International Litigation Partners Pte Ltd v FCT [2014] FCA 671 has cast further light on the potentially game-changing decision of the Full Court of the Family Court of Australia in FCT v Darling [2014] FAM CAFC 59 (Darling) which considers the ability of the Commissioner of Taxation to gain access to and use documents filed in proceedings in the Family Court of Australia.
In this Alert, Special Counsel Justin Byrne and Alexandra Moles, together with Senior Associate Rosalie Cattermole consider the commercial implications of these judgments and whether initial concerns regarding the potentially significant scope of Darling has been cooled by the decision of Litigation Partners.
Key points
- The Darling decision verified the Commissioner of Taxation’s ability to gain access and also use documents filed in proceedings in the Family Court of Australia for an unrelated purpose;
- The Litigation Partners decision has dispelled the concern from Darling that the Commissioner would have unfettered access in all circumstances by setting in place a ‘book end’ where the Commission will be denied access to use Family Court Documents; and
- A number of factors have been identified by the Court as being significant when weighing up whether access will be granted, including:
- Weighing the utility of the information sought against the implied right of confidentiality and the potential disincentive to the parties in litigation giving full and frank disclosure in the future;
- Whether the information is to be used by the Commissioner against the parties in their personal capacity rather than a company; and
- The nature of the issues in the Family Court of Australia, for instance whether the proceedings are also related to child matters.
Access to Family Court Documents and the implied obligation not to use the documents
Documents filed in the Family Court can be obtained by third parties only in limited circumstances, including:
- Pursuant to Rule 24.13 of the Family Court Rules, if a person has a ‘proper interest’ in either the case or in the information itself [1];
- Statutory Authority;
- Referral by the Court; and
- Where the parties provide the information themselves to third parties.
However, as it was held in the leading decision of Hearn v Street [2008] HCA 36 there is an implied obligation on those who obtain Family Court documents, whatever manner such documents are obtained, not to use these documents for any purpose unrelated to the Family Court proceedings without first obtaining the leave of the Court.
The Darling Decision
In Darling, the Full Court of the Family Court of Australia was called to decide whether the implied obligation should be overridden in circumstances where the Commissioner of Taxation had obtained Family Court documents and sought to use those documents for the purpose of a tax audit.
The Full Court found in favor of the Commissioner and allowed them to use the documents basing their decision on the following material factors:
- The Commissioner was performing an important public duty;
- The audit was substantial and targeted;
- The documents were of material value in conducting the audit;
- There was limited risk of further dissemination considering the Commissioner would be bound not to disclose further pursuant to section 121 of the Family Law Act 1975;
- Having filed the documents freely, the parties had the expectation that the documents would be read in open court; and
- The most important factor in the Full Court’s view was whether or not it would be likely to deter future litigants from providing full and frank disclosure in their Family Court proceedings knowing that their documents could end up in the hands of the Commissioner.
Although the Commissioner had not used rule 24.13 of the Family Court Rules in this instance to access the Family Court of Australia documents, the Full Court made an important and potentially influential obiter comment about the application of rule 24.13 and a presumption in future cases, stating:
“Had the underlying premise been made out, we would have accepted that an unconditional grant of leave to inspect and copy given by a judge would carry with it a release from the implied obligation.”[2]
It would therefore be prudent for practitioners to keep this presumption (ie to broaden the powers under rule 24.13) in mind regarding future applications.
The Litigation Partners Decision
In Litigation Partners, the Federal Court held that they would not grant the Commissioner leave to gain access to and use documents that had been transferred from the Family Court of Australia to the Federal Court in determining the tax residency of a company related to the husband.
It is also important to note that the Commissioner was also denied access to use the documents at first instance under rule 24.13 of the Family Court Rules 2004.
In deciding the question of whether the implied obligation barred the Commissioner, the Federal Court drew on the decisions of Graham v Colonial Mutual Life Assurance Society Limited [2013] FCA 1213 and Darling.
The significant distinguishing factors from Darling that influenced the Federal Court were:
- That it was unlikely that the Family Court of Australia file would be of any real utility to the Commissioner in the intended use of the documents;
- The Family Court of Australia file contained issues relating to child custody and therefore the need for confidentiality of the information was given greater weight;
- The Commissioner was seeking to use the information against a third party that was not a party in the Family Court of Australia proceedings, being the husband’s company, International Litigation Partners Pte Ltd; and
- There were indications that the Family Court of Australia file should not enter the public domain.
Other significant factors were:
- There is an implied obligation of confidentiality that needs to be considered; and
- Access should not be granted until both parties had an opportunity to express their views on its release.
- The Federal Court was not satisfied that the usefulness of the information outweighed the implied obligation of confidentiality, and the Commissioner was therefore denied access to the file.
Conclusion
The Darling decision has undoubtedly paved the way for the Commissioner to potentially gain access to and use documents filed in the Family Court of Australia. However, the Litigation Partners decision is a clear sign that this power is not unfettered and the boundaries are perhaps more constrained than originally feared given the decision in Darling.
In Litigation Partners, the Federal Court made it clear that each case must be considered on its own facts and given the jurisprudence is in its infancy, it is likely that there will be more distinguishing factors from Darling in the future that bar the Commissioner from gaining access to Family Court of Australia files. However, where similar factual circumstances to Darling arise in the future, it is likely that the court will find in the Commissioner’s favour. There is also still the lingering question of whether other authorities performing public functions will be granted the same liberties as the Commissioner.
