ACN 117 641 004 Pty Ltd (in liq) v S&P Global, Inc

Federal Court of Australia|2023-03-01|Before: Mr J, Lee J

The notice to produce filed on 6 February 2023 be set aside.
S&P be granted leave to serve a notice to produce on Vale returnable at 9:30am on 8 March 2023 before Registrar Rubenstein in the terms referred to in document MFI-1. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

(Delivered ex tempore, revised from the transcript)

A INTRODUCTION AND BACKGROUND 1 Before the Court is an application to amend pleadings in a class action concerning collateralised debt obligations (CDO). It is unnecessary to canvass the complex background to these proceedings, save to note that the fundamental issue is one of fraud. 2 An issue has arisen in relation to the proposed amended application as to the date upon which Banton Group, the solicitors for the applicants in NSD 881 of 2020 (Vale Proceeding), was aware of certain facts. The reason for seeking the amendment application is the subject of an affidavit sworn by Amanda Kim Banton on 9 December 2022 (Banton Affidavit). 3 A view was apparently formed by Ms Banton in the course of reviewing documents discovered in the proceeding that, among other things, there were deficiencies in the respondents' (S&P) use of the Gaussian copula in evaluating risks associated with certain CDO products: Banton Affidavit at [11]-[16]. It is said that S&P's contemporaneous awareness of such deficiencies may expose it to an additional claim in fraud, hence the proposed amended pleading. 4 The application to amend, in turn, prompted S&P to file and serve a notice to produce on the applicants in the Vale Proceeding pursuant to r 30.28 of the Federal Court Rules 2011 (Cth) (FCR).

B THE NOTICE TO PRODUCE 5 The notice to produce seeks documents bearing upon the applicants' decision to introduce the additional fraud claim at this juncture of the proceedings. The first two paragraphs of the notice to produce provide as follows: To the First and Second Applicants The First and Second Respondents require you to produce the following documents or things by no later than 5pm on Monday 20 February 2023: … 6 Apparently, a practice has arisen whereby parties have been advised that such a formulation conforms to the requirements of FCR 30.28 and documents can just be produced outside of a hearing between the parties in compliance with the notice. 7 No-one wishes to stop informal production between parties if such a course is consensual and expedient, but if it is thought such an expedient should be reflected in the terms of a formal notice, this heresy should be stamped out.

C THE RELEVANT RULES 8 FCR 30.28 relevantly provides: Notice to produce (1) A party may serve on another party a notice, in accordance with Form 61, requiring the party served to produce any document or thing in the party's control: (a) at any trial or hearing in the proceeding; or (b) at any hearing before a Registrar or any examiner or other person having authority to take evidence in the proceeding. … (3) If a notice under subrule (1) specifies a date for production, and is served 5 days or more before that date, the party served with the notice must produce the document or thing in accordance with the notice, without the need for a subpoena for production. 9 It is trite that a notice to produce under FCR 30.28 has the same coercive effect as a subpoena for production and the party served with the notice must comply with the requirement to produce the document or thing sought, unless excused by the Court: see Suzlon Energy Ltd v Bangad (No 2) [2011] FCA 1152; (2011) 284 ALR 98 (at 102 [13]-[14] per Rares J). 10 That said, although a notice to produce has the same effect as a subpoena, it is not a subpoena, and the source of the obligation which it carries differs from that of a subpoena which is an order of the Court. It is the subrule embodied in FCR 30.28(3) which obliges the party served to comply with the notice to produce: see Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd (No 2) [2012] FCA 707 (at [10]-[11] per Jessup J). 11 Critically for present purposes, FCR 30.28(1) makes pellucid that a notice to produce is a form of process that is returnable before the Court and is called upon in Court. It does not provide a formal mechanism for an inter partes exchange of documents. 12 In Deep Investments Pty Ltd v Casey (No 1) [2017] FCA 1643, Gleeson J had cause to consider a similarly drafted notice in terms that required production of specified documents "at the offices of [the respondents' solicitor] or at the Registry of the Federal Court of Australia …" (at [5]). Her Honour noted (at [6]) that while the notice purported to be in accordance with Form 61, by requiring production at one of those locations instead of an occasion of the kind defined in FCR 30.28(1), the notice was deficient in form and liable to be set aside. 13 These formalities are important because of the analogous three stage process identified by Moffitt P in National Employers' Mutual General Insurance Association Ltd v Waind & Hill [1978] 1 NSWLR 372 (at 381) as applicable to subpoenas (which is also applicable to notices to produce: see Seven Network Limited v News Limited (No 11) [2006] FCA 174 (at [5] per Sackville J)). 14 The significance of the requirement in FCR 30.28(1) that the documents the subject of the notice are produced before the Court is seen through the first and second steps identified by Moffitt P, which involve first, the bringing of the documents to the Court; and secondly, the determination by the Court of any objections to production (at 381). As Moffitt P said (at 383): At this point documents are in the control of the court, pursuant to the valid order of the subpoena. As pointed out in Small's case ((1938) 38 S.R. (N.S.W.) 564, at p. 574; 55 W.N. 215) at this time the witness may state he objects to their being handed to the parties for inspection. … However, the documents are under the control of the judge and … there may be good reason in the elucidation of the truth why the judge may e.g. defer inspection by one party or the other … The documents are in its control and are used on its responsibility so far as properly required for the purpose of the proceedings. (Emphasis added) 15 Seen in this light, the notion that FCR 30.28 provides for the production of documents out of Court willy-nilly by the party served, prior to the expiry of a nominated time, is inconsistent with the nature of the type of process as contemplated by the FCR. Formalities sometimes matter and this is an occasion when they do. It is fundamental that a notice to produce is a mechanism of requiring production to the Court at a hearing - not directly to another party.

D CONCLUSION 16 There should be no criticism of the solicitors who filed and served the notice to produce, as apparently, they were mistakenly informed by the Registry that the course suggested was licit. Nor should these formalities be seen as doing anything whatever to discourage consensual and informal production of documents by an exchange of correspondence between solicitors. 17 In all the circumstances, I propose to make orders, among other things, setting aside the notice to produce, but allowing for the relevant documents to be called upon in Court pursuant to s 36 of the Evidence Act 1995 (Cth). I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Lee.

Federal Court Rules 2011(Cth)rr 30.28, 30.28(1), 30.28(3)

At a glance

Court

Decision date

Before

Source

Judgment (6 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (5)