Becwell Legal Services Pty Ltd, in the matter of Griffin Energy Group Pty Ltd (Subject to Deed of Company Arrangement) v McMaster

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1966 of 2011

IN THE MATTER OF GRIFFIN ENERGY GROUP PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 008 681 696 BETWEEN: BECWELL LEGAL SERVICES PTY LTD ACN 116 449 506

AND: BRIAN KEITH MCMASTER, SCOTT BRADLEY KERSHAW AND CLIFFORD STUART ROCKE EACH IN HIS CAPACITY AS DEED ADMINISTRATOR OF GRIFFIN ENERGY GROUP PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 008 681 696

GRIFFIN ENERGY GROUP PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 008 681 696

JUDGE: YATES J DATE: 23 DECEMBER 2011 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 The plaintiff seeks orders setting aside three subpoenas to produce documents that have been addressed to companies that are not parties to this proceeding. The subpoenas were issued at the request of the first defendants. 2 Alternatively, the plaintiff seeks an order that the schedule to each subpoena be read down so as to require each addressee to produce a more limited range of documents than presently called for. 3 The subpoenas are addressed to The Proper Officer of Devereaux Holdings Pty Ltd (DH); The Proper Officer of WR Carpenter Investments Pty Ltd (Carpenter); and The Proper Officer of Carpenter Mine Management Pty Ltd (CMM), respectively. There is no evidence before me that the addressees have been served with the plaintiff's interlocutory application relating to the subpoenas. Given the nature of the plaintiff's challenge to these subpoenas, which I will describe in more detail, I am satisfied that notice of its application is not required to be given to those persons: r 24.15(3) of the Federal Court Rules 2011 (the Rules). I am also satisfied that the plaintiff has sufficient interest to make its application in this regard: r 24.15(1) of the Rules. 4 The plaintiff also seeks similar relief in relation to a notice to produce dated 5 December 2011 that was served on it by the first defendants. 5 As the application came to be argued, the real area of contest is whether the schedules to the subpoenas, which are materially in the same form, and the notice to produce, should be read down in the ways sought by the plaintiff. 6 For the reasons which follow, I am of the view that the plaintiff's application succeeds in part.

Background 7 On 28 February 2011 Griffin Energy Group Pty Limited (Subject to Deed of Company Arrangement) (GEG) and The Griffin Coal Mining Company Pty Limited (Subject to Deed of Company Arrangement) (GCMC) entered into separate deeds of company arrangement. GEG was a party to the GCMC deed of company arrangement. Under that deed, GEG assumed responsibility for all claims, except certain defined claims, made against GCMC. 8 The GEG deed of company arrangement provided a regime for dealing with the claims of an Admitted Creditor, as defined. In substance, the Deed Administrators were required to admit such a claim if, had GEG been in liquidation, and had the Deed Administrators been liquidators of GEG, they would have admitted the claim for proof in the liquidation of GEG. 9 The first defendants are the Deed Administrators under the GEG and GCMC deeds of company arrangement. 10 On 1 October 2009 the plaintiff entered into written terms of engagement with GEG and GCMC for the provision of work relating to taxation and general commercial advice. The plaintiff is an incorporated legal practice. Its solicitor/director is Donald Edward Pearson. Mr Pearson was a director of GCMC in the period from 14 November 2003 to 28 February 2011, the date on which the GCMC deed of company arrangement was entered into. Mr Pearson was also a director of DH in the period from 14 November 2003 to 14 January 2010. 11 DH, GEG and GCMC were part of the one group of companies. 12 The written terms of engagement were expressed to be a "retainer agreement" under which the plaintiff agreed to make Mr Pearson's services available to GEG and to GCMC and its subsidiary companies, "at call", for which the plaintiff would receive each month a lump sum payment of $100,000 plus GST. GEG, GCMC and the subsidiary companies were also required to reimburse the plaintiff for expenses it incurred on their behalf. 13 Clause 3 of the written terms of engagement relevantly provided: ... the company agrees to cap the aggregate of the charges it will make, pursuant to the terms of this costs agreement and to the terms of a costs agreement of even date entered into with the directors of [CMM] and Carpenter Mine Management Holdings Pty Ltd, [DH] and [Carpenter] to an annual amount of $1,452,000 (inclusive of GST) for each year during the term of this agreement. 14 The written terms of engagement were expressed to be "fully effective and binding until 20 October 2011". The plaintiff says that it performed its obligations under the written terms of engagement. It says that it continued to make Mr Pearson available at call in that period, including after the appointment of the first defendants as administrators of GEG and GCMC. It says that it performed specific tasks pursuant to requests made by the first defendants and the first defendants' legal advisers. 15 On 24 March 2011 the plaintiff lodged a proof of debt under the GEG deed of company arrangement in its capacity as a creditor of GEG. It also lodged a proof of debt under the GEG deed of company arrangement in its capacity as a creditor of GCMC. In each case its claim was for $2.42 million. 16 On 29 July 2011 the first defendants, as Deed Administrators, wrote to the plaintiff, separately in relation to the lodgement of each proof of debt. The first defendants took issue with whether the plaintiff had acted as it said it had in the documentation supporting its proofs of debt. The first defendants said that, on these occasions, their understanding was that the plaintiff was acting for "other entities of the greater Devereaux Group …". They sought further information to enable them "to adjudicate on your POD". In this connection the first defendants sought: (a) copies of agreements with DH and Carpenter referred to in clause 3 of the written terms of engagement; and (b) details of invoices issued to and payments received from DH and Carpenter for each of the years subject to the written terms of engagement (that is, the period from 1 October 2009 to 20 October 2011). 17 On 23 August 2011 the plaintiff responded to the first defendants' letters. In its response the plaintiff stated that: (a) there was no agreement with DH and Carpenter, as referred to in clause 3 of the written terms of engagement; (b) in certain prior periods the plaintiff's retainer was with DH and Carpenter but, in relation to periods ending on 20 October 2007 and thereafter, the plaintiff's terms of engagement were with GEG and GCMC; and (c) the reference in clause 3 of the written terms of engagement to DH and Carpenter was an error. 18 The plaintiff's response suggested that, for this reason, there were no details of invoices issued to and payments received from DH and Carpenter in the period 1 October 2009 to 20 October 2011, as had been sought by the first defendants. 19 On 9 November 2011 the plaintiff filed its originating process in this Court seeking declarations and orders under s 1321(1)(ca) of the Corporations Act 2001 (Cth) (the Act) against the first defendants, relating to what it claims to be the failure by the first defendants to deal with and admit the proofs of debt. It is in this context that the subpoenas were issued and the notice to produce was served. 20 On 8 December 2011 the plaintiff wrote to the first defendants' solicitors in relation to the subpoenas addressed to DH and Carpenter. The plaintiff raised a number of objections with respect to the scope of the subpoenas. The letter stated: … In the event that you disagree with some or all of the views expressed, would you please provide detailed reasons as to why you consider documents identified in each of paragraphs 1 to 6 of Schedule 1 of each subpoena are relevant to the proceedings. 21 On 9 December 2011 the plaintiff wrote to the first defendants' solicitors with respect to the notice to produce. Once again, the plaintiff raised a number of objections with respect to the scope of the notice to produce. The plaintiff requested that it be provided with detailed reasons should the first defendants disagree with the objections that had been raised. 22 On 9 December 2011 the first defendants' solicitors responded to both letters. The solicitors stated that they considered that the documents required to be produced under the subpoenas and the notice to produce "are limited in scope to matters relevant to the proceedings" and that they considered the plaintiff's objections to be "without merit".

The documents required to be produced 23 As I have noted, the schedules to the subpoenas are, materially, in the same form. They require production of the following documents: 1. Costs agreement(s) entered into between [the addressee] or the directors of [the addressee] on its behalf with [the plaintiff] and any other party dated on or about 1 October 2009. 2. Invoices issued by [the plaintiff] to [the addressee] during the period, or for work performed or services provided in the period, 1 October 2009 to 20 October 2011 inclusive. 3. Itemised bill of costs or schedule of time entries or time records of [the plaintiff] for, and provided to [the addressee] for the period 1 October 2009 to 20 October 2011 inclusive. 4. Documents evidencing, referring or relating to work performed by [the plaintiff] for [the addressee] during the period 1 October 2009 to 20 October 2011 inclusive. 5. Any correspondence with any person or file notes recording or referring to arrangements for work to be performed or services provided by [the plaintiff] on behalf of [the addressee] during the period 1 October 2009 to 20 October 2011 and for payment for any such work. 6. Records of payment(s) made by [the addressee] or any person on its behalf to [the plaintiff] during the period, or in respect of work performed or services provided in the period, 1 October 2009 to 20 October 2011 inclusive. 24 The notice to produce requires production of the following documents: 1. Costs agreement(s) entered into between [the plaintiff] dated on or about 1 October 2009, or in respect of work to be performed or services to be provided at any time in the period 1 October 2009 to 20 October 2011, and any of the following: (a) [DH] or the directors of [DH] on its behalf; (b) [Carpenter] or the directors of [Carpenter] on its behalf; (c) [CCM] or the directors of [CMM] on its behalf; and/or (d) Carpenter Mine Management Holdings Pty Ltd ACN 122 080 684 (CMM Holdings) or the directors of CMM Holdings on its behalf. 2. Any costs agreement(s) for the periods ending on or about 20 October 2007 and 20 October 2009 entered into between [the plaintiff] and: (a) DH; and/or (b) [Carpenter]. 3. Documents which record, evidence, refer to or relate to the costs agreements referred to at paragraph 2 of this schedule being amended following, or for the period following, 20 October 2009 to costs agreements between [the plaintiff], [GEG] and [GCMC]. 4. Documents which record, evidence, refer to or relate to whether the reference to [DH] and [Carpenter] in clause 3 of the costs agreement entered into between [the plaintiff] and [GEG] and [GCMC] dated 1 October 2009 is an error. 5. Invoices issued by [the plaintiff], during, or in respect of work performed or services provided in, the period 1 October 2009 to 20 October 2011 inclusive, to any of the following: (a) [DH]; (b) [Carpenter]; (c) [CMM], and/or (d) CMM Holdings. 6. Itemised bill of costs or schedule of time entries or time records of [the plaintiff] during, or in respect of work performed or services provided in, the period 1 October 2009 to 20 October 2011 inclusive relating to any of the following: (a) [DH]; (b) [Carpenter]; (c) [CMM]; and/or (d) CMM Holdings. 7. Documents evidencing, referring or relating to work performed by [the plaintiff] during the period 1 October 2009 to 20 October 2011 inclusive for any of the following: (a) [DH]; (b) [Carpenter]; (c) [CMM]; and/or (d) CMM Holdings. 8. Any correspondence with any person or file notes recording or referring to arrangements for work to be performed or services to be provided by [the plaintiff] on behalf of any of: (a) [DH]; (b) [Carpenter]; (c) [CMM]; and/or (d) CMM Holdings. during the period 1 October 2009 to 20 October 2011 and for payment for any such work. 9. Records of payment(s) made to [the plaintiff], during, or in respect of work performed or services provided in, the period 1 October 2009 to 20 October 2011 inclusive, from any of the following or any person on behalf of any of the following: (a) [DH]; (b) [Carpenter]; (c) [CMM]; and/or (d) CMM Holdings.

Relevant principles 25 A subpoena will be set aside to prevent an abuse of the Court's process. The power to control and supervise the Court's process is directed to preventing injustice: Trade Practices Commission v Arnotts Limited (No 2) (1989) 88 ALR 90 at 102 and Hamilton v Oades (1989) 166 CLR 486 at 502. 26 It will be an abuse of the Court's process to issue a subpoena whose call covers documents that have no apparent relevance to the issues in the proceeding. In that connection Beaumont J in Arnotts (at 103) posed questions to the following effect: does the material sought have an apparent relevance to the issues in the principal proceeding, that is, is adjectival, as distinct from substantive, relevance established? Does the subpoena have a legitimate forensic purpose to this extent? In a similar vein, Waddell J in Spencer Motors Pty Ltd v LNC Industries Ltd [1982] 2 NSWLR 921 at 927 invoked the question whether the material that is sought "is reasonably likely to add, in the end, in some way or other, to the relevant evidence in the case": see also Seven Network Ltd v News Ltd (No 5) (2005) 216 ALR 147 at [10]; Cosco Holdings Pty Ltd v Federal Commissioner of Taxation (1997) 37 ATR 432 at 439-440. In Tamawood Limited (ACN 010 954 499) v Habitare Developments Pty Ltd (ACN 122 935 497) [2009] FCA 364 at [13] and [35]-[38] Collier J addressed the issue by asking whether it appears to be "on the cards" that the document sought will materially assist the party on whose request the subpoena has been issued: see Alister v The Queen (1984) 154 CLR 404 at 414. 27 Apparent relevance is addressed by considering, primarily, the issues raised by the pleadings: Bailey v Beagle Management Pty Ltd (2001) 105 FCR 136 at [28]; McIlwain v Ramsey Food Packaging Pty Ltd (2005) 221 ALR 785 at [35]; Dorajay Pty Ltd v Aristocrat Leisure Limited [2005] FCA 588 at [34]. 28 A party cannot use a subpoena for the purpose of "fishing"; that is, in an endeavour to find out facts, matters or circumstances which, if forthcoming through the subpoena process, might enable that party to advance a case of which it has no present knowledge: The Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at 575; Hennessy v Wright (No 2) (1890) 24 QBD 445 at 448; Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Ltd (1952) 72 WN (NSW) 250 at 254; Treasurer of the Commonwealth of Australia v Canwest Global Communications Corp [1997] FCA 578. This principle also finds expression in relation to the use of the discovery process. Although that particular principle has undergone some modification in relation to discovery, an application for discovery will be regarded as "fishing" when its purpose, properly characterised, is to ascertain whether a case exists, as opposed to compelling production of documents for which a case is known to exist (in the sense that the plaintiff for discovery already has some evidence for it): Bertran v Vanstone [1999] FCA 1753 at [23]. It is, of course, impermissible to attempt to achieve discovery by resort to the subpoena process: Australian Competition Consumer Commission v Shell Co of Australia Ltd (1999) 161 ALR 686; Kizon v Palmer (1997) 75 FCR 261; Pasini v Vanstone [1999] FCA 1271 at [30].

What are the issues? 29 In the present case there is no pleading or other document which defines the matters that are in issue between the parties. However, the plaintiff, in oral argument, identified the way in which it supports its proofs of debt. It submits that it has contractual claims arising from the written terms of engagement said to have been in effect between itself and GEG and GCMC in the period 1 October 2009 to 20 October 2011. In the course of argument the plaintiff accepted that, in advancing those claims, it would make no difference that the plaintiff was not, in fact, required by GEG or GCMC to provide any services during that period, provided that the plaintiff held itself available during the period to provide, through Mr Pearson, the services bargained for under the written terms of engagement. It submits that it fulfilled that requirement. It submits that it is therefore entitled to the lump sum payments stipulated in the written terms of engagement. In the course of argument the plaintiff eschewed any restitutionary or other claim for services actually performed. 30 The first defendants have not, in this proceeding, articulated any particular basis for rejecting the plaintiff's proofs of debt. In the pre-litigation correspondence to which I have referred, the first defendants did raise the question whether the services which the plaintiff says it provided were in fact provided to GEG and GCMC or whether those services were provided to "other entities of the Devereaux Group". Importantly, however, the first defendants have not claimed that the plaintiff failed to provide services to GEG or to GCMC and its subsidiary companies under the written terms of engagement, as might have been requested by GEG or GCMC. Moreover, the first defendants have not challenged the validity of the written terms of engagement.

The plaintiff's challenge to the subpoenas 31 The plaintiff does not object to production being required of the documents (namely, the costs agreements) sought in paragraph 1 of the subpoenas. The plaintiff contends that no such documents exist with respect to DH and Carpenter. Nevertheless, in the case of the subpoenas addressed to DH and Carpenter, the plaintiff accepts that the first defendants are entitled to test that contention and, therefore, to issue subpoenas for that purpose. 32 Similarly, the plaintiff does not object to production being required of the various documents sought in paragraphs 2, 3 and 6 of the subpoenas, save that: (a) in each case, the documents should be limited to those issued, provided or created pursuant to or in respect of any costs agreement(s) referred to in paragraph 1 of the subpoena; and (b) in the case of the documents sought in paragraphs 2 and 3, the documents should be in a redacted form to exclude any description of the work performed. 33 The plaintiff objects to production being required of the documents sought in paragraphs 4 and 5 of the subpoenas. The substance of its objection in that regard is that documents evidencing, referring or relating to work it has performed for each of the addressees of the subpoenas, or recording or referring to arrangements for work to be performed or services to be provided to those addressees in the identified period, relate to matters that have no apparent relevance to the claims it makes in this proceeding. In that connection the plaintiff also points to the evidence given by Mr Pearson that, in the period identified in the subpoenas, he has provided advice to DH on behalf of the plaintiff, including in relation to matters affecting GCMC which are presently under investigation by the first defendants. There is no challenge to that evidence.

The plaintiff's challenge to the notice to produce 34 The plaintiff makes a similar challenge with respect to production required under the notice to produce. 35 In relation to paragraph 1 of the notice to produce the plaintiff does not object to the production of the costs agreements entered into with the companies or persons who have been specifically identified. It does, however, object to the production, more generally, of any costs agreement into which it may have entered in respect of work to be performed or services to be provided by it at any time in the period from 1 October 2009 to 20 October 2011. 36 The plaintiff does not object to the production sought by paragraphs 2, 3 and 4 of the notice to produce. 37 Paragraphs 5, 6 and 9 of the notice to produce correspond, in broad terms, with paragraphs 2, 3 and 6 of the subpoenas, considered cumulatively. These paragraphs also extend to documents relating to CMM Holdings. To that extent the scope of paragraphs 5, 6 and 9 of the notice to produce is broader. The plaintiff does not object to production being required of the various documents sought in paragraphs 5, 6 and 9 of the notice to produce but seeks the same limitations on production as it has with paragraphs 2, 3 and 6 of the subpoenas. 38 The plaintiff objects to production being required under paragraphs 7 and 8 of the notice to produce. Once again, its objection is that the documents sought in those paragraphs relate to matters that have no apparent relevance to the claims it makes in this proceeding.

Consideration 39 Subject to one matter to which I shall refer, I am of the view that the plaintiff's objections are soundly based. In essence the documents sought by the subpoenas and the notice to produce, in the paragraphs to which objection has been taken or in those parts of the paragraphs in respect of which a limitation is sought, are documents which relate to matters, or if not limited will relate to matters, that do not have an apparent relevance to the issues that currently exist between the parties to this proceeding. 40 The first defendants support the subpoenas and the notice to produce on the basis that they need to fully investigate whether the proofs of debt should be admitted. They submit that they need to investigate the circumstances in which the written terms of engagement were entered into in order to form a view whether it constitutes, for example, a voidable transaction. In this connection the first defendants instanced the possibility that the written terms of engagement might constitute an uncommercial transaction, without articulating any known and present basis for such a claim: s 588FB of the Act. In a similar fashion, the first defendants also argue that there may be other possible bases on which the written terms of engagement might be open to challenge. 41 It is not clear to me how the paragraphs or parts of paragraphs to which objection has been taken would throw up documents that might challenge the validity of the written terms of engagement. But quite apart from this, the first defendants' submissions expose the weakness of their position. Those submissions show that the first defendants are unable to identify a precise and presently known basis on which the terms of engagement will be challenged. They see the subpoenas and notice to produce as fulfilling the function of facilitating a process of investigation that might expose a presently unknown basis for such a challenge. This is not the proper function of a subpoena to produce documents or of a notice to produce documents; nor is it permissible to issue or serve such process for that purpose. 42 The first defendants did raise the possibility that the documents it seeks may expose a basis on which clause 3 of the written terms of engagement might be brought into play to provide a cap on the claims advanced under the proofs of debt. However, the plaintiff raises no objection to production of the costs agreements referred to in clause 3, assuming them to exist in the case of DH and Carpenter, or, subject to the question of partial redaction, of the invoices issued by the plaintiff and records of payments in relation to costs charged under those agreements. I am unable to see how the other paragraphs of the subpoena and the notice to produce, to which the plaintiff makes objection, will throw up documents that can assist in determining whether the cap referred to in clause 3 of the written terms of engagement is operative in relation to the period from 1 October 2009 to 20 October 2011. 43 I am not persuaded on the present material, however, that the documents that are sought, and in respect of which no objection to production is otherwise taken, should be required to be produced in the redacted form sought by the plaintiff. In my view, if the documents sought by the subpoenas and the notice to produce have an apparent relevance to the present issues in dispute (as the plaintiff seems to accept) then, subject to any valid claims of privilege or other proper objection, the documents should be produced in their entirety. As a matter of general approach, the fact that an otherwise adjectivally relevant document may include irrelevant information is not a reason for not producing the document in its entirety. 44 It will, of course, be a matter for the addressees of the subpoenas to consider whether there are claims for privilege or other objections to production in respect of particular documents or parts of documents and whether those claims or other objections should be pursued. In my view it is not appropriate to place upon the addressees, in advance of such claims, the burden of redacting documents which they do not object to producing. 45 The same general observation applies to the notice to produce. No doubt the plaintiff will consider whether the production of the documents called for will or might involve claims of privilege and seek instructions in relation to that matter and whether there are other proper objections to production raised by the companies referred to in the notice to produce. There is no evidence before me that those instructions have, to date, been sought or obtained, although the plaintiff has foreshadowed the real possibility that claims of privilege might be made by DH.

Disposition 46 In my view the most appropriate course is to set aside each of the subpoenas in their present form and to grant leave to the first defendants to issue new subpoenas in a modified form taking account of the objections that I have found to be validly made by the plaintiff. The addressees of the subpoenas, as strangers to the litigation, should not be burdened by requiring them to read and comply with the subpoenas by reference to additional and modifying requirements. They are entitled to have one document clearly setting out their obligations with respect to the production of documents. 47 The position is somewhat different in the case of the notice to produce. The plaintiff and the first defendants are well seized of the limitations sought on that notice by the plaintiff and there should be no difficulty in the plaintiff understanding its modified scope in accordance with the orders that I propose to make. 48 The plaintiff has been substantially successful in its application. The first defendants should pay the plaintiff's costs.

Further conduct of the proceeding 49 This is a matter in which it would be highly desirable for there to be greater identification and definition of the issues between the parties. At the present time the defendants are subject to an order that they file any affidavits on which they propose to rely by 8 February 2012 and the plaintiff is subject to an order that it file any affidavits in reply by 20 February 2012. I propose to vacate those orders. In lieu, I will make orders for the filing of a statement of claim, defence and, if needed, reply. Although I have endeavoured to summarise the basis on which, as presently advised, the plaintiff supports its proofs of debt, the statement of claim should nonetheless identify the precise basis on which the plaintiff will advance its claims in this proceeding. Correspondingly, the defence should identify the precise basis on which the defendants will resist those claims. The matter will come back before me early in the new law term for the making of further directions. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.