Belsart P/L v Man Po Holdings

11. During the relevant period of time the auditor of the Collings group was Brian Jameson of KPMG Peat Marwick.

14. On or about 28 July 1998 the defendant's solicitors served a subpoena for production on Mr. Jameson pursuant to the provisions of R.42 of the Supreme Court Rules. The subpoena required Mr. Jameson to produce to the Prothonotary of the Court on or before 3 August 1998 the following documents:

"All correspondence, memoranda, notes, working papers, documents recording or evidentiary agreements, accounting records and any other documents made during the period of 1 July 1991 to 30 June 1995 in relation to the lending of money and the provision of funds by Belsart Pty. Ltd. to Collings Ltd. and/or related companies."

18. The requirement that the documents be produced to the Prothonotary by a non-party prior to any date which may have been fixed for the trial of the proceeding (and in this case no trial date has been fixed for the proceeding) is authorised by R.42.10 the relevant sub-paragraphs of which read:

"42.10 (1) This Rule applies where a party who has a solicitor in the proceeding seeks to require a person not a party to produce any document in writing for evidence before the trial of the proceeding.

(2) A party may file a subpoena for production requiring the person named to produce to the Prothonotary on or before a day specified by the Prothonotary in the subpoena the document identified in the subpoena.

(3) A subpoena under this Rule shall be in Form 42E or Form 42F.

(4) A party who files a subpoena under this Rule shall, forthwith after service, serve a copy on each other party to the proceeding, but it shall not be necessary that the copy served be sealed or be served personally.

(5) A party who serves a copy of a subpoena under paragraph (4) shall forthwith file an affidavit of service.

(6) The person named may comply with the subpoena by producing the document to the Prothonotary by hand or by post and, if by post, the document shall be sent so that the Prothonotary receives it before the day specified in the subpoena.

(7) Where a document is produced in compliance with a subpoena under this Rule the Prothonotary shall, if requested to do so, give a receipt to the person producing the document.

(8) If the person named has any objection to producing a document identified in the subpoena or to its being inspected by any one or more of the parties to the proceeding, the person named shall notify the Prothonotary in writing of that objection before the day specified in the subpoena..

(9) If a party has any objection to the inspection by another party of a document identified in the subpoena, the party having the objection shall notify the Prothonotary in writing of that objection before the day specified in the subpoena.

(10) Upon receiving notice under paragraph (8) or (9), the Prothonotary shall refer the subpoena to a Judge or Master for the hearing and determination of the objection.

(11) The Prothonotary shall notify the party who filed the subpoena in writing of the objection and the time and place at which the objection will be heard and that party shall notify the person named and all other parties accordingly.

(12) If no objection is notified under paragraph (8) or (9) or to the extent that any such objection is disallowed, each party unless a Judge or Master otherwise orders may by appointment with the Prothonotary inspect and take copies of a document produced in compliance with a subpoena under this Rule."

25. On 3 August Mr. Jameson complied with the subpoena and produced the following documents to the Prothonotary:

" 1. 30 July 1994 financial statements. 2. File note prepared by Andrew Chadwick, Partner, dated 20 March 1995. 3. Extract of 30 June 1994 solicitors letter from Clayton Utz dated 22 September 1994. 4. Extract of Collings Limited and its controlled entities consolidation work papers for the year ended 30 June 1994. 5. Collings Limited trial balance as at 30 June 1994. 6. Lead sheet for intercompany balance as at 30 June 1994. 7. Confirmation from Belsart Pty. Ltd. of amount owing at 30 June 1993 (carried forward from 30 June 1993 audit files). 8. 31 January 1994 consolidation grid. 9. 31 December 1993 consolidation grid. 10. 31 October 1993 consolidation grid. 11. 30 June 1993 financial statements. 12. Extract of Collings Limited and its controlled entities consolidation work papers for the year ended 30 June 1993. 13. Collings Limited balance sheet as at 30 June 1993. 14. Lead sheet for intercompany balance as at 30 June 1993. 15. Confirmation from Belsart Pty. Ltd. of amount at 30 June 1993. 16. 30 June 1992 financial statements. 17. Extract of Collings Limited trial balance as at 30 June 1992. 18. Lead sheet for intercompany balance as at 30 June 1992. 19. Confirmation from Belsart Pty. Ltd. of amount owing at 30 June 1992."

29. As they had prior notice of the fact that Mr. Jameson intended to comply with the subpoena, on 31 July the defendant's solicitors notified the Prothonotary that they objected to the plaintiff's solicitors inspecting the documentation.

32. On 4 August 1998 the Prothonotary referred the subpoena to me for the hearing and determining of the objection.

35. The grounds upon which the defendant objects to the plaintiff inspecting the documents are set out in counsels' outline of submissions, the relevant paragraph of which reads:

"6. The defendant objects to the plaintiff having inspection of the documents produced on the grounds that:

(a) the subpoena is an abuse of process because it was issued by the plaintiff for the purpose of:

(i) obtaining documents in the defendant's possession, custody or power prior to discovery in this proceeding in circumstances where such documents:

(A) are or may be irrelevant to the issues in dispute in this proceeding; and/or

(B) may be privileged from production on the basis of legal professional privilege; and

(ii) obtaining discovery of documents from KPMG which is not a party to this proceeding; alternatively

(b) if the subpoena is not an abuse of process, the documents are or may be the subject of legal professional privilege."

45. Rule 42.10 was introduced into the Supreme Court Rules by Statutory Rule No. 137 of 1997 and came into operation on 2 February 1998. As far as I am aware the rule has not as yet been the subject of judicial interpretation in this State.

48. As I recall the situation Rule 42.10 was introduced into the Rules to overcome problems similar to the problems identified by Sir Donald Nichols V.C. in Khanna v. Lovell White Durrant (1995) 1 W.L.R. 121. In that case the Vice-Chancellor was dealing with an application to set aside a summons to produce documents made returnable before the date which had been fixed for the trial of the proceeding. At p.123 he said:

"The plaintiff issued the writ of subpoena in this form so as to avoid the inconveniences and disadvantages which arise from the production of documents at, and not before, the trial. For instance, the person to whom the subpoena is addressed is notified of the date of the trial and he duly attends at court on the appointed day. The trial starts, and in due course he is called to give oral evidence or to produce documents or both. Frequently the documents mentioned in the subpoena have not previously been seen by one or other, or either, of the parties. So if the documents are lengthy or numerous or of crucial importance, an adjournment is likely to become necessary to enable the parties' advisers to read the documents and obtain copies. The adjournment may be for a short while but, when the documents are voluminous, the trial may have to be adjourned for a day or longer, sometimes a considerable period. Obviously this is very inconvenient. There may be other reasons why production at the trial is not satisfactory. In some cases, and the present case appears to be one, a party may wish to see the documents before witness statements are prepared. Or a party may wish to see the documents before deciding whether or not to accept a payment in court, or to settle the action on particular terms. Then the absence of the documents is unsatisfactory and out of step with the modern approach. Increasingly court procedures are designed to require production of evidential material at an earlier rather than a later stage of the proceedings. The emphasis is on the parties knowing the strengths and weaknesses of each other's case a soon as possible, and not being kept in the dark until the trial, by which time increased costs will have been incurred on both sides."

52. At that time the English rules did not contain a rule in terms similar to Rule 42.10. Nevertheless the Vice-Chancellor held that since the Court had a wide discretion to control the conduct of a trial and the receipt of evidence so that where it was just and convenient discrete aspects of the trial could be dealt with separately and on different occasions, it was proper to fix a date for the commencement of a trial for the purpose of receiving documents from a non-party pursuant to a subpoena duces tecum in advance of the main trial.

55. As I have already observed, in the present case no date has been fixed for the trial of the proceeding.

58. It is convenient to deal first with the defendant's contention that serving the subpoena is an abuse of process in that it seeks to obtain discovery of documents from a person not a party to the proceeding.

61. It was well recognised prior to the introduction of Rule 42.10 that a subpoena issued for the purposes of discovery will be set aside whether it is addressed to a stranger or a party. In that regard see Commissioner for Railways v. Small (1938) 38 S.R. (N.S.W.) 564; Waind v. Hill (1978) 1 N.S.W.L.R. 372 and Finnie v. Dalglish (1982) 1 N.S.W.L.R. 400.

64. Does Rule 42.10 alter that situation? In my opinion it does not.

67. The Supreme Court Rules contain an established procedure for obtaining discovery from a non-party. See Rule 32.07. Rule 42.10 is not to be regarded as a substitute for that procedure. Rule 42.10 requires production of documents to the Court for the purposes of the trial of the proceeding. It does not require production of documents to a party.

70. If a party wishes to obtain production of documents by a non-party prior to a date being fixed for the trial of the proceeding, the appropriate procedure for that party to adopt is to make an application to the Court pursuant to Rule 32.07. If such an application is successful the non-party will be required to make discovery to the applicant of any such documents, and in the absence of valid objection the applicant will be entitled to inspection of such documents.

73. Although in the present case Jameson answered the subpoena served upon him, the reality of the situation is that what the plaintiff was seeking to achieve by serving the subpoena was to have KPMG Peat Marwick give discovery. In my opinion that much is clear from the terms of the subpoena itself and in particular the requirement that Mr. Jameson produce "any other documents made during the period 1 July 1991 to 30 June 1995 in relation to the lending of money and the provision of funds by Belsart Pty. Ltd. to Collings Ltd. and/or related companies". When one has regard to the fact that the sole issue in the proceedings concerns the provision of funds by Belsart Pty. Ltd. to Collings Ltd. the subpoena could not be expressed in wider terms.

76. My conclusion therefore is that the service of the subpoena was an abuse of process. In view of that finding it is unnecessary to consider the other arguments advanced on behalf of the defendant.

79. I order that the subpoena be set aside. I direct the Prothonotary to return the documents produced to the Court pursuant to the subpoena to Brian Jameson of KPMG Peat Marwick. I order that the plaintiff pay the defendant's costs of the application.