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[2017] WASC 147
General information, not legal advice.
Supreme Court of WA
2017-05-29
Smith J
Original judgment source is linked above.
1 This is an aggressively fought dispute. Already, the parties have brought numerous interlocutory applications. They include applications for an interlocutory injunction, for production of documents, to transfer to an interstate jurisdiction, for further and better discovery, to set aside an earlier suite of subpoenas and to challenge privilege claims.[1]
2 By this application, the plaintiff (ARG) applies to set aside three subpoenas issued at the request of the defendants for the purpose of the defendants' pending security for costs application.
3 The security for costs application was filed on 28 February 2017. Standard programming orders were made for the filing of affidavit evidence and submissions.
4 After the exchange of evidence, the defendants issued the subpoenas.
5 The subpoenas were served on, respectively, ARG, Vantage Holdings Group Pty Ltd (Vantage - the sole shareholder and parent company of ARG) and Ferrier Hodgson. Originally, the return date for the subpoenas was such that the parties would not have been in a position to consider any produced documents for the purpose of the security hearing. The hearing date was accordingly vacated to permit determination of this application, and compliance with the subpoenas has been stayed in the interim.
6 The lists of the requested documents sought from each recipient are set out in the schedule below for ease of reference.
(a) are an abuse of process (for a range of reasons);
(b) are drafted in excessively broad terms and seek documents irrelevant to any issue to be determined at trial; and
(c) are not properly addressed (insofar as Ferrier Hodgson is concerned).
8 I will deal with the issues raised by ARG by referring first to some particular topics. I will then set out briefly my determination as to the categories of documents sought in the three subpoenas
Subpoena issued to ARG as a party to proceedings
9 ARG complains that, as a party, it ought not be the recipient of a subpoena. I do not agree that the mere fact of being a party protects against compliance with a subpoena.
10 ARG relies upon Wintle v Yilgarn Shire Council.[2] The case is distinguishable: the court was dealing with the issue of a subpoena in circumstances where the same result could and should have been achieved through the discovery regime.
11 In this case, documents relevant to a security for costs application are not apparently relevant to the triable issues, and so would not be (and have not been) produced by way of discovery.
12 Further, seeking financial records by subpoena or notice to produce issued to a party for the purpose of a security application is not unknown.
13 In Bailey v Beagle Management Pty Ltd,[3] the court held that the financial position of the corporate applicant was a matter raised on the respondents' application for security and so it was not an abuse of process to seek documents by notice to produce. It refused to set aside a notice to produce from five respondents that sought:[4]
(i) the latest balance sheet;
(ii) the latest forecast balance sheet;
(iii) the latest profit and loss forecast;
(iv) the latest consolidated profit forecast;
(v) monthly accounts for the past 12 months;
(vi) the latest two sets of unaudited accounts;
(vii) the income tax returns for the financial years ended 30 June 1998, 30 June 1999 and 30 June 2000 (if available).
14 It refused to set aside a notice to produce from the sixth respondent that sought:[5]
All accounts, profit and loss statements, statements of assets and liabilities, annual reports and income tax returns of Equuscorp Pty Limited (ACN 006 012 344):
for, or in respect of, the year ended 30 June 1999;
for, or in respect of, the six months ended 30 June 1999;
for, or in respect of, the six months ended 31 December 1999;
for, or in respect of, the year ended 30 June 2000.
15 The court considered that the documents sought were relevant to the issues which have to be determined on the application for security for costs and did not consider the position would be any different if the documents were sought by subpoena.[6]
16 An application to appeal against the decision was dismissed. The Full Court confirmed the documents were relevant, saying:[7]
In the present case it can be safely assumed that the documents sought by the notices to produce in fact exist, they being standard financial documents which the law and proper accounting practice would require companies of any substance to generate. Likewise, as already mentioned, there can be no doubt that these documents contain information relevant to the issues which arise on a security for costs application. The only uncertainty is whether that information would help or hinder the security application. But unpredictability of response has never been a bar to the pursuit of relevant evidence, as many a hapless cross-examiner who received an unexpected answer will attest.
Against this position, it is to be noted that the Amcor parties did not undertake the exercise of eliciting such material before the Court, either by way of subpoena or notice to produce.
18 The implicit suggestion is that such course was open to them.
19 I note that similar financial information is sought from Vantage. I accept that the financial position of Vantage is evidence relevant to the exercise of the court's discretion on a security application. The ability of a third party (such as a parent company) to meet an order for security for costs is relevant to the question as to whether an order for security would stultify proceedings.
20 The defendants seek production of two affidavits filed in a separate interlocutory matter, determined by Martino J in Vantage Holdings Group Pty Ltd v Donnelly.[10] Vantage is the first plaintiff and ARG is the fourth plaintiff in those proceedings. In summary, the proceedings relate to a freezing order made as to the assets of the defendants. The plaintiffs allege that the defendants caused funds to be removed from trust accounts maintained by the second and third plaintiffs. A careful reading of the case suggests that his Honour commented on the financial position of the second and third plaintiffs but the financial position of Vantage and ARG is not materially discussed. As to ARG there is little comment, other than to note potential risk as to repayment to it of a $10,000 loan.[11]
21 However, based on the indorsement of claim, the question in the Vantage proceedings is whether or not the defendants are liable to restore trust funds or pay damages or compensation to the plaintiffs (including Vantage and ARG).
22 It is not clear how the affidavits filed in the Vantage proceedings will materially assist in disclosing the current or anticipated financial position of Vantage or ARG, other than disclosing the cause of action and the potential for recovery of funds. The Vantage proceedings are still to be determined and it is unlikely the court in these proceedings could form any useful view as to either the prospects of liability on the part of the defendants in the Vantage proceedings, the potential for recoverability of any judgment sum or the possibility of any funds or payment flowing through to Vantage or ARG.
23 However, I accept there may be evidence relevant to the question of the financial position of Vantage or ARG and on that basis the request for copies of the affidavits is not an abuse of process.
24 ARG's complaints as to the production of the affidavits are that the defendants could have sought leave to access them on the court file, presumably under O 67 r 11 of the Rules of the Supreme Court 1971 (WA). It also contends it is oppressive to seek copies of the same affidavits from both Vantage and ARG.
25 Although it was open to the defendants to seek access to the court file to inspect the affidavits, they were not obliged to take that step before issuing subpoenas. The chosen course does not amount to an abuse of process.
26 The requirement that more than one subpoena recipient produce the same document does not constitute an abuse, in circumstances where the number of documents sought is not large. However, in circumstances where it is clear that ARG and Vantage have access to the same affidavits (as parties to the Vantage proceedings) and the parties are represented, in the ordinary course there should be conferral as to the potential to produce only one set of documents and avoid unnecessary cost. That, however, is a practical matter.
The Vantage proceedings - The Ferrier Hodgson discussion paper
27 Martino J's reasons disclose that Ferrier Hodgson prepared a draft discussion paper at the request of Vantage addressing some of the issues as to the trust accounts which are raised in those proceedings.[12] The discussion paper is said to be limited in that it does not comprise an opinion and the matters in it have not been verified. It is apparent that Vantage provided documents for the purpose of the discussion paper.
28 The defendants in their subpoena to Ferrier Hodgson seek copies not only of the discussion paper but of all documents provided for its purpose and all documents 'relating to and/or referring to and/or evidencing' the discussion paper and investigations into two other entities (see schedule for the full terms). Taken with the definition of 'Document' in the draft subpoenas, it is apparent how broad this category of documents may be. I consider it oppressive to require a third party to produce such a broad range of documents. It must be remembered that the court here is not concerned with the Vantage proceedings but a security for costs application in quite separate proceedings. This is not an application for third party discovery in the Vantage proceedings. The request is disproportionate to the likely forensic value. The evidentiary reliability of any documents produced will be questionable in light of Ferrier Hodgson's own qualifications on the discussion paper. Production of the discussion paper itself is not oppressive.
29 In opposition to the security for costs application, ARG (by its sole director, Mr Asquith) refers to a potential source of funds available to it by way of a sale of shares owned by a subsidiary, Austin Financial Services Pty Ltd (Austin) in a company known as Super Advice Corporate Services Pty Ltd (Super Advice). Implicit in the evidence is the suggestion that Austin would make such finds available to ARG.
30 Mr Asquith says that in March 2016, he rejected an offer by Mr Allan Rickerby on behalf of the majority shareholder of Super Advice to purchase Austin's shares for $800,000, but based on his discussions with Mr Rickerby he believes Austin's shares in Super Advice could be sold to the majority shareholder for a similar price in the future.
31 It is clear that the evidence does not rise above the following:
(b) potentially no contract will be made in the future;
(c) there is a possibility there may be a contract in the future.
32 The defendants seek by subpoena all documents that record the offer.
33 Assuming there are any such documents, they are of no relevance. The offer was not accepted. Whether or not any weight should be accorded a statement that there is a possibility of a sale of shares in the future is a matter for consideration in the security application.
34 ARG complains that it provided its evidence in response to the evidence filed by the defendants in support of the security application and that forensic decisions were made on that basis. ARG rightly points out that it was not obliged to put on evidence as to its financial position.[13] It also refers to case management principles as telling against the issue of subpoenas in circumstances where the hearing of the application has already been adjourned.
35 In the circumstances of this case, I accept that there is room for forensic disadvantage and unfairness if the defendants at the hearing intend to rely on documents produced by subpoena that go beyond the evidence upon which they rely in their supporting affidavits and beyond the evidence the subject of submissions (both parties have already filed submissions for the security for costs application).
36 However, assuming the subpoenas were not otherwise set aside, ARG's complaint is not a reason to set aside the subpoenas in this case. Prejudice and unfairness could be guarded against by requiring the return of the subpoenas prior to the hearing, requiring the defendants to file supplementary written submissions and according ARG the opportunity to evince further reply evidence and submissions should it wish to do so.
37 Category (a) is inadequately described. It is not clear what is meant by 'details' or what would be required in order to comply. A company search of ARG is in evidence that discloses certain share capital and shareholding information.[14]
38 Category (c) is objectionable on two grounds. First, the reference to, 'including but not limited to' has the potential to open up a very large class of documents, the relevance of which is questionable, and imposes an unfair obligation on ARG to determine the scope of its search. As was the case in Bailey v Beagle Management Pty Ltd, it is not oppressive to require ARG to produce standard financial documents which the law and proper accounting practice would require it to generate. However, the requirement in the subpoena that all financial statements or other documents including all bank statements dating from 1 September 2015 to date be produced is oppressive. It is unclear why sufficient information would not be ascertained from production of the latest versions of statutory and management accounts (regardless of date), and statements of assets and liabilities and monthly accounts for the period immediately preceding and since the date of the security application. However, it is not for the court to re-write the category. In my view, category (c) as presently drafted overreaches in a manner that is oppressive.
39 Category (d) is objectionable: the court is unable to place any real evidentiary weight on a draft document of that nature.
40 Category (e) is objectionable in that the requirement for such evidence for the whole period is unnecessary and oppressive. A narrower request which results in the production of statements that indicate ARG's current cash balance position and from the date of the security application would likely produce documents relevant to the security application.
41 Category (f) is objectionable. It is not for ARG to determine or disclose by subpoena the evidence it may rely upon. That is the role of the process of exchange of affidavits.
42 Category (g) is objectionable on the basis that relevance is not established for the security application.
43 Category (l) is said to be objectionable in that it does not identify the name of the debtor, but in context it is clearly intended to be ARG. The class is sufficiently confined. The objection is not upheld as to this category.
44 Category (m) is objectionable for the reasons set out above.
45 The categories align with those in the subpoena issued to ARG and the objections are upheld on the same basis as for those corresponding categories.
46 As to categories 2 and 3, ARG contends that the drafting of the categories offends the requirement of certainty and requires evaluative judgments. In particular, as to the subpoena issued to Ferrier Hodgson the requirement that the recipients provide documents, 'relating to and/or referring to and/or evidencing' the prescribed matters, when taken with the broad definition of 'Documents', creates a task which is oppressive to a recipient and adds unnecessary ambiguity. (The defendants suggest in their submissions that the words, 'relating to' will suffice and the subpoena should be amended by the court).
47 Insofar as this case is concerned, I accept ARG's submission. In any event, I uphold the objection as to categories 2 and 3 for the reasons set out above that deal with the discussion paper.
48 Accordingly, I do not need to deal with the conflicting submissions as to whether or not the subpoena was properly served on Ferrier Hodgson.
49 I dismiss the objections insofar as they relate to other categories in the subpoenas that are not addressed individually above. The documents sought are sufficiently identified and appear relevant to the security application.
50 As is apparent, I consider that some documents sought are relevant and otherwise properly sought. However, changes to the subpoenas to take into account the upheld objections are too significant for the court to simply amend the subpoenas.[15]
52 The parties should confer as to orders, including orders relevant to the pending hearing of the security application.
The documents and things you must produce are as follows:
(a) Details of the Plaintiff's issued and paid up shareholding;
(b) All certified Tax Returns and assessments lodged with the Australian Taxation Office for the Plaintiff for the financial year 30 June 2016;
(c) All financial statements or other documents of the Plaintiff from 1 September 2015 to date, including but not limited to:
(d) In the event that any tax return or financial documents referred to in paragraphs (a), (b) and (c) above have not been finalised, any draft version(s) of that document.
(e) All documents recording the cash-balance held by the Plaintiff in accounts with financial institutions for the period 1 September 2015 to date.
(f) Any other evidence or information upon which the Plaintiff may rely to show that it could pay the Defendant's costs, should it be ordered to do so.
(g) Correspondence regarding the entry into the Confidentiality Agreement dated 9 December 2015 referred to in clause 4 of the Term Sheet dated 17 December 2015 between PSC Insurance Group Pty Ltd and Vantage Holdings Group Pty Ltd.
(h) Ferrier Hodgson Discussion paper dated 8 January 2016 prepared for Vantage Holdings Group Pty Ltd.
(i) Affidavit of Keith Joseph Muller made on 18 January 2016 (and the annexures and exhibits thereto) read in Vantage Holdings Group Pty Ltd v Donnelly [2016] WASC 311.
(j) Affidavit of Jonathon Neil Asquith made on 7 September 2016 (and the annexures and exhibits thereto) read in Vantage Holdings Group Pty Ltd v Donnelly [2016] WASC 311.
(k) Documents (a) to (j) attached to the Vantage Holdings Group Pty Ltd Board Meeting Minutes dated 18 December 2015.
(l) Records of any debts owed to Fopar Nominees Pty Ltd during the period 1 September 2015 to date.
(m) All documents recording the offer from Super Advice Corporate Services Pty Ltd to buy the business of Austin Financial Services Pty Ltd that is referred to in paragraphs 4 to 9 of the Fourth Affidavit of Jonathan Neil Asquith in Opposition to the Defendants' Application for Security for Costs sworn 6 April 2017.
The documents and things you must produce are as follows:
(a) Details of Vantage Holdings Group Pty Ltd (Vantage)'s issued and paid up shareholding;
(b) All certified Tax Returns and assessments lodged with the Australian Taxation Office for Vantage for the financial year 30 June 2016;
(c) All financial statements or other documents of Vantage from 1 September 2015 to date, including but not limited to:
(d) In the event that any tax return or financial documents referred to in paragraphs (a), (b) and (c) above have not been finalised, any draft version(s) of that document.
(e) All documents recording the cash-balance held by Vantage in accounts with financial institutions for the period 1 September 2015 to date.
(f) Any other evidence or information upon which Vantage may rely to show that as a holding company of the Plaintiff, it could pay the Defendant's costs, should it be ordered to do so.
(g) Correspondence regarding the entry into the Confidentiality Agreement dated 9 December 2015 referred to in clause 4 of the Term Sheet dated 17 December 2015 between PSC Insurance Group Pty Ltd and Vantage Holdings Group Pty Ltd.
(h) Ferrier Hodgson Discussion paper dated 8 January 2016 prepared for Vantage Holdings Group Pty Ltd.
(i) Affidavit of Keith Joseph Muller made on 18 January 2016 (and the annexures and exhibits thereto) read in Vantage Holdings Group Pty Ltd v Donnelly [2016] WASC 311.
(j) Affidavit of Jonathon Neil Asquith made on 7 September 2016 (and the annexures and exhibits thereto) read in Vantage Holdings Group Pty Ltd v Donnelly [2016] WASC 311.
(k) Documents (a) to (j) attached to the Vantage Holdings Group Pty Ltd Board Meeting Minutes dated 18 December 2015.
(l) Records of any debts owed to Fopar Nominees Pty Ltd during the period 1 September 2015 to date.
The documents and things you must produce are as follows:
In this Subpoena, the term 'Document' unless otherwise stated includes a reference to:
(a) letters, facsimiles, emails, memoranda, file notes, diary notes, notes, working papers, spreadsheets, board papers, board minutes, board reports, board meeting agendas, presentations, contracts, deed and agreements;
[1] See Australian Reliance Group Pty Ltd v Coverforce Insurance Brokers Victoria Pty Ltd [2016] WASC 244; Australian Reliance Group Pty Ltd v Coverforce Insurance Brokers Victoria Pty Ltd [No 2] [2017] WASC 41; Australian Reliance Group Pty Ltd v Coverforce Insurance Brokers Victoria Pty Ltd [No 3] [2017] WASC 60; Australian Reliance Group Pty Ltd v Coverforce Insurance Brokers Victoria Pty Ltd [No 3] [2017] WASC 60 (S).
[2] Wintle v Yilgarn Shire Council [2015] WASC 445 [16].
[3] Bailey v Beagle Management Pty Ltd [2000] FCA 1577.
[4] Bailey v Beagle Management Pty Ltd [2].
[5] Bailey v Beagle Management Pty Ltd [3].
[6] Bailey v Beagle Management Pty Ltd [5] - [7], [11].
[7] Bailey v Beagle Management Pty Ltd [2001] FCA 60; (2001) 105 FCR 136 [26].
[8] Amcor Ltd v Barnes [2015] VSC 90.
[9] Amcor Ltd v Barnes [32]. See also Second Lenbourne Pty Ltd v Beagle Management Pty Ltd [1999] FCA 486 [27].
[10] Vantage Holdings Group Pty Ltd v Donnelly [2016] WASC 311.
[11] Vantage Holdings Group Pty Ltd v Donnelly [18], [19], [36], [65], [66], [69] - [75], [78].
[12] Vantage Holdings Group Pty Ltd v Donnelly [14] - [15].
[13] Christou v Stanton Partners Australia Pty Ltd [2011] WASCA 176 [34].
[14] Affidavit of Rebecca Dunn filed 1 March 2017 [RMD1].
[15] Findley v Grimmer [2013] WASC 234 [17]; Perdaman Chemicals and Fertilisers Pty Ltd v The Griffin Coal Mining Company Pty Ltd [No 6] [2012] WASC 450 [11] [16].
(2001) 105 FCR 136