Burchell & Anor v Hill & Ors [2010] VSC 96

2 Under Rule 42A.07, the Bank objected to producing the documents on three grounds. First, the subpoena was "fishing" for documents and was an abuse of process because it was in truth seeking discovery to see whether the plaintiff has a case against the Bank. Secondly, it was oppressive and too wide as the documents concerned communications with seven persons over a nine-month period between January 2008 and September 2008. Thirdly, the documents were irrelevant.

3 The Bank's submissions took a course that drew attention away from those grounds, but raised a point of principle or construction of the rules. It concerns the expression "to produce any document for evidence". The question is: does the expression "for evidence" mean that the only document capable of being sought under this rule is a document - a tenderable document - that the subpoenaing party wants to tender into evidence at trial? The Bank says the rule is to be so circumscribed and relies on the decision of Gillard J in Kennedy Taylor (Vic) Pty Ltd v Grocon.[1]

4 There are other decisions of this Court which, the plaintiffs contend, result in not such a stringent test. The plaintiffs submit the test of legitimacy of a subpoena is whether the issuing party has a legitimate forensic purpose in having the documents produced. They say the expression "for evidence" does not alter that, but only adds the requirement that the documents may be needed for evidence at trial, either to adduce in chief, or to use in cross-examination. It is accepted by the plaintiff, realistically, that as a matter of principle a subpoena against a non party cannot be used as a means of obtaining or inflicting the burdens of discovery, that being a procedure available under rule 32.07.[2] The plaintiff contends they have taken care to stipulate the nature or type of documents with precision here, limited to matters they may have to prove or use at trial to impeach the defendants' case.

5 In Kennedy Taylor (Vic) Pty Ltd v Grocon,[3] the plaintiff was under threat of an application to strike out its statement of claim. It conceded to the Court it was having difficulties amending its pleading because of a lack of information, said to be in the possession of non-parties. Thus, it needed the documents to plead its case. It issued a subpoena under rule 42.10, which was the predecessor of the rule under present consideration. Gillard J held that "It is inescapable that the procedure under [rule] 42.10 is only available where the document is potentially required for evidence at the trial of a proceeding."[4] His Honour added:

That is not to say that the procedure is not available if in the end result the document is not adduced into evidence but is available to enable a party to inspect a document in order to make a decision whether or not to adduce it in evidence.

6 Therefore, and I think not surprisingly or questionably, his Honour held that the use of a subpoena to obtain facts to plead a case did not satisfy the "for evidence" test. Rather, the proper course was for a rule 32.07 application. In that case, interlocutory steps were incomplete and trial was 12 months away.

7 The question subsequently arose before Byrne J in Yunghanns v Candoora No. 19 Pty Ltd.[5] His Honour affirmed that a subpoena may not be used for the purpose of discovery and must sufficiently describe the documents to be produced so as to not require the recipient to make a judgment about the documents being sought. (I interpolate that in practice much will depend on how precisely the documents sought are described.) Secondly, and more pertinently, his Honour held that "for evidence" includes a possibility that the documents be produced and inspected to enable a party to determine whether to adduce the documents, including whether to put the document in the court book. In that regard the question was one of relevance. His Honour stated:[6]

The test of relevance at this stage, therefore, is a very general one. The court, which at this stage has only a general idea of the nature of the evidence which may be led as relevant to an issue or as to credit of an expected witness, should not be unduly astute to reject the possibility that a document does not meet this test of relevance. Indeed, it may be that it will so conclude only where it appears that no useful evidentiary purpose could be attributed to the document, raising in this way an inference that the order for production is sought for some illicit purpose, or for no good purpose.

8 But, it will be said, not everything produced on subpoena or in discovery for that matter is capable of being used "for evidence" if that means being received by a Court into evidence. This was considered by Bongiorno J in Atlas v DPP.[7] In that case, there was a pending criminal trial in the County Court. In the course of preliminary arguments, medical files were subpoenaed under order 42. The Judge found that the plaintiff had a legitimate forensic purpose in seeking production of the file. In play were the provisions of the Evidence (Confidential Communications) Act 1988, which, in essence, prohibited adducing evidence in a legal proceeding if it would disclose a confidential communication in cases of a sexual offence. This led his Honour to examine the concepts of information and evidence. His Honour said: [8]

Much of the information collected, processed and exchanged in the course of a legal proceeding is not evidence at all. It may not satisfy the relevance criteria. It may not comply with any one or other of the technical rules of evidence. It may be inadmissible hearsay. Some of the information collected by a solicitor from his client or from a potential witness or information obtained by an investigator (whether documentary or otherwise) for use in any one of a number of different ways in a legal proceeding (eg, for use in cross-examination) may never qualify as evidence.

Although a subpoena for production is defined by reference to documents produced "for evidence" (rule 42.01, Rules of Civil Procedure) persons producing documents pursuant to a subpoena will often not be witnesses and the documents they produce will often not be tendered or, to use the words of s.32C, not "be adduced in a legal proceeding" unless that phrase has a much wider meaning than the words suggest. In many instances the documents will not be "evidence" as that word is properly understood. They may be no more than documents containing information which the party who issued the subpoena may have (or alleges he has) a legitimate forensic purpose in having produced.

10 Those last two sentences are important. That takes me to Killorgan Investments Pty Ltd v Baycorp Advantage Business Information Services Ltd.[10] There, an objection was raised to a subpoena made returnable before the Prothonotary on the grounds of relevance. Byrne J applied the rule that the degree of relevance required is not high and that the inspecting party need only show a legitimate forensic purpose in the inspection. I draw special attention to his Honour's statement that "A party is entitled to inspect documents not only to see if they contain relevant facts, but also to see if they contain information which may be proved otherwise than through that document."[11]

11 To the same effect was the decision of Nettle J in Skrijel v Mengler.[12] It is not clear if the subpoena in that case was an interlocutory subpoena. It could be this was a dispute over documents subpoenaed at trial, but it certainly did involve a subpoena to a non-party. The utility of the case, so the plaintiff urged here, was a reaffirmation of the test of relevance as being whether the subpoenaing party has demonstrated a legitimate forensic purpose for the production of the documents.

12 Finally the question of "for evidence" was considered by Kaye J in Newnham v Davis.[13] Citing Kennedy Taylor, his Honour said of rule 42A.01 that:

That rule specifically provides that the rule applies where a party seeks to require a person, not a party, to produce any document "for evidence" before the hearing of an interlocutory or other application in the proceeding, or before the trial of the proceeding. Thus, by its express terms the rule only authorises the issue of such a subpoena where the document, the subject of the subpoena, may potentially be admissible as evidence in the proceeding. Obviously, in order to be admissible, the document, of which production is sought, must have at least some potential relevance to the issues defined in the proceeding.[14]

13 What emerges from this review of authorities is uncertainty whether rule 42A requires that the document subpoenaed must itself be potentially capable of being admissible in evidence. And how is that to be determined before the machinations of trial ? Is assertion enough? Or, is it enough as some Judges have said, that the document is apparently relevant (and therefore admissible) or that there is a legitimate forensic purpose in obtaining the document to see if can be used in the course of evidence at trial or to adduce the information in the document by some other means?

14 Rules of practice and procedure are tools of justice designed to enable litigants to advance their case or to impeach the opposing case and to enable the Court to try to get to the truth of the matter. Views about the processes of civil procedure should not be ossified. So much depends on the individual case. I think the decisions of this Court are reconcilable or are collectively capable of supporting the following propositions.

15 First, the expression "for evidence" might be conjectural but the idea, I think, is to convey an intention that an interlocutory subpoena under rule 42A should not be used as a substitute for non-party discovery. It is looking to obtain documents after the completion of the ordinary pleading and discovery process for use, or potential use, at trial. Whether the subpoena does, or does not, will depend on the terms of the subpoena. For example, a non-party subpoena to a bank to produce an original of a specified mortgage or cheque has the specificity to demonstrate it is not in the nature of discovery. Yet a subpoena to the same bank for production of any mortgages or cheques between A and B in a certain period, although not specific as to a particular document, could not in my view be necessarily said to be in the nature of discovery. In the end, it will come to an examination, some times an impression by the Judge, of the breath of amplitude of the document description and nature, and whether the recipient is required to make a judgment whether a particular document satisfies the description.

16 Secondly, I think expression "for evidence" means no more than the document produced may be potentially required for evidence, either in-chief or by cross-examination. In some cases, like Kennedy Taylor v Grocon, it will be apparent or conceded that it is for some anterior purpose such as to improve a pleading. Even then, there could be a question whether a document to help compose a pleading could also be potentially capable for use for evidence depending on what is in issue after the close of pleadings.

17 Thirdly, what dominates is the test for relevance, that is, whether there is a legitimate forensic purpose in seeking the document. In practice, I would think that once a legitimate forensic purpose could be shown then it is reasonable to suppose that the documents may well be used in evidence.

18 Fourthly, even before rules such as order 42 and 42A, courts allowed the use of the interlocutory subpoena to avoid the inconvenience and disruption caused in dealing with subpoenas returnable at trial. Indeed, it might be far less inconvenient for a non-party to produce a document before the hearing. The use of the interlocutory subpoena was seen as an incident of the Court's inherent jurisdiction over its own processes: see for example Hughes v Western Australian Cricket Association[15] and Re Federal Commissioner of Taxation, Ex parte Swiss Aluminium Australia Limited.[16] According to those two cases, the test was whether there was a legitimate forensic purpose in seeking documents before trial, and if it would be in the interests of justice to compel production. The Court might set aside the subpoena until the outcome of discovery. But the essential test was whether the documents were identified with sufficient particularity.

19 Fifthly, much might depend on the timing. At an early stage, a court might be more inclined to direct a party to rule 32.07 because at that stage attention is usually focussed on case formulation or pre-trial process. However, closer to trial, a court might be more supportive of the subpoena as long as it was not too wide.

20 I am conscious of what Kaye J said in Newnham v Davis as possibly supporting a strict view that the document must appear by description at least to be admissible or potentially so. But I do not read into his Honour's reasoning a view that a rule 42A subpoena can only identify a specific document (such as my example of a distinct mortgage or cheque) and that it cannot describe a document or class of documents. A useful test and one which I shall apply here is to ask whether the subpoena would have been objectionable if it was made returnable at trial. Ordinarily, and at least in my experience, a trial Judge would wish to be satisfied that the documents were sought for a legitimate forensic purpose and potentially for the purposes of evidence at trial. This is why, I think, the question of relevance and specificity truly does inform the analysis over this rule.

21 In my view, the documents sought from the National Bank are relevant. The case for the second plaintiff, Laen Pty Ltd, in paragraph 18ff of the statement of claim is twofold. First, that in September 2008, it agreed with the first and third defendants to purchase shares in the fifth defendant and units in a trust. The sale agreement gave Laen warranties about the true and fair financial position of the fifth defendant (and the trust) and its liabilities, mortgages, charges, and encumbrances on property. Laen alleges that earlier in August 2008, the third defendant borrowed $180,000 from the Bank, secured by a charge. As additional security, the fifth defendant gave the Bank a guarantee for that loan, a fixed and floating charge, and a mortgage of a lease. It is alleged the $180,000 loan was obtained to enable the third defendant to purchase shares in the fifth defendant and units in the trust from the sixth and seventh defendants who were the former shareholders and controlling minds of the fifth defendant. Ashley Killen and Sanders Killen Pty Ltd were the accountants acting for the third and fifth defendants. And, in further breach of the warranties, Laen alleges there was non-disclosure of the fifth defendant's indebtedness to the first and second defendants and to the Australian Taxation Office.

22 Another dimension of the plaintiffs' case is that those acts of the fifth defendant amounted to giving financial assistance for the purchase of its own shares, in contravention of s 260A of the Corporations Act, and that the first, sixth and seventh defendants as directors of the fifth defendant had knowledge of the financial assistance and its detrimental impact on the company and its ability to pay creditors. From there, the case is that those defendants had accessorial liability or were involved in the contravention.

23 The subpoena confines itself to those two aspects of the case. It confines itself in category 1 to documents concerning the charges, mortgages given by the fifth defendant and the loan of $180,000. I accept the plaintiffs' submission that these are matters that have not been admitted to a degree or with precision and that the Laen is justified in seeking the facts that renders them irrelevant because they are admitted. Although the subpoena uses the phraseology "all documents . . . that refer or relate to", which is verbiage of discovery, nevertheless, the documents have in my view been identified with reasonable particularity. They do not call for the Bank to form a judgment. They will be documents to be typically found in a lending or securities file.

24 The second type of documents concern the contravention of the financial assistance provisions of the Corporations Act. The relevant defendants deny any acts of involvement in the giving of financial assistance to the third defendant to purchase shares in the fifth defendant. There is an ancillary question whether the relevant defendants knew that the relevant notices about the financial assistance and the acquisition had been lodged with ASIC.

25 The subpoena seeks documents passing between the Bank and the defendants concerning the steps taken by the fifth defendant to lodge notices with ASIC. On the questions of relevance, I accept the plaintiff's submissions that such documents are relevant to the timing and acts of involvement, and the proof of contravention and a state of knowledge. There is, on the tests I have referred, an apparent legitimate forensic purpose in seeking these documents and they are capable of being put to witnesses and tendered in evidence or adduced into evidence by the plaintiffs. There is sufficient particularity as far as the subject matter will allow, of the documents so as to not transgress into a request for discovery.

26 I am sure not sure if the Bank's objection about oppression, as that term is ordinarily understood in the field of discovery, was in the end maintained. But if it was, I would reject it. The Bank is a non-party but it is no means a stranger to these transactions which are ordinary commercial banking transactions for its business. I see no obvious oppression or overreaching in the subpoena fixing the relevant period from January 2008 to 30 September 2008. The Sale of Share Agreement was made in September 2008. Although arbitrary, fixing that commencement date eight months earlier on the supposition that there is a lead up in the conception and planning of these transactions is, I think, reasonable and certainly not oppressive for the Bank. The timing of the actions and transactions is relevant.

27 The Bank submitted there was evidence of illicit purposes. The subpoena was issued on 5 February 2010. In a letter dated 25 January 2010, the plaintiffs' solicitors contended the plaintiffs had ground to believe that the Bank was involved in the contravention of s 260A of the Corporations Act. The letter said:

Prior to making a claim against the NAB (whether in the current proceeding or otherwise), our client invites the NAB to respond to, and explain, the above matters, including any reason why the NAB believes that it is not liable to compensate our client for the loss and damage it has suffered. Please ensure that response is sent by 4 February 2010.

28 If the purpose of the subpoena can be exposed as being a belated means to find a case against the Bank, then I think that would be illicit or at least questionable purpose. I must say this has caused me little restlessness. These sorts of cases raise a dichotomy about subjective or objective intentions. In this application, the plaintiffs disavow in Court any ulterior purpose. They contend that if the subpoena is unimpeachable on the grounds of relevance and particularity, then the Court should not be astute to find an ulterior or hidden purpose if a secondary or incidental outcome of production is that that the documents expose a case of wrongdoing against the Bank.

29 A trial is looming. Orders are in place for evidence and the compilation of a Court Book. I apply the consideration that coercive process such as a subpoena is there to be used to assist the Court to get to the truth of a matter in dispute. I regard the documents as relevant and, as I have said, the Bank is no stranger to the dealings. I think the Bank's documents may well expose the defendants' actions and knowledge as well as the precise facts about the financial affairs of the fifth defendant (the subject of the warranties) and I think that purpose must prevail. Should it eventuate that the documents are to be used for some other purposes then I should think there would be a real question whether the Court's leave would be needed.

30 Applying the principles from the cases, I think it can be said that there is a legitimate forensic purpose in seeking the documents are of a nature that they are potentially capable of being adduced into evidence, used in cross-examination and certainly being part of the Court Book.

31 For those reasons, I will order that the Court will disallow the objection of the National Australia Bank Limited to the subpoena and I will direct the Prothonotary to permit the plaintiff to inspect and take copies of all of the documents produced by the Bank in compliance with subpoena. If the documents were not produced by the stipulated date of 19 February 2010 because of the objection, I would allow an extension of time for compliance with the subpoena.

[1] [1999] VSC 242.

[2] See Commissioner for Railways v Small (1938) 38 SR (NSW) 564 and Waind v Hill [1978] 1 NSWLR 372.

[3] [1999] VSC 242.

[5] [2000] VSC 505.

[7] [2001] VSC 209; (2001) 3 VR 211.

[10] (2002) VSC 270.

[12] (2003) VSC 55.

[13] (2010) VSC 13.

[15] (1986) 66 ALR 541.

[16] (1986) 68 ALR 587.