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1. This proceeding concerns a long-running dispute about two commercial leases in respect of premises located at Denman Prospect shopping precinct, from which the first and second plaintiffs respectively operated a café trading as “Morning Dew”, and a bar and restaurant trading as “Honeysuckle”. The procedural history is set out in CDLC Pty Ltd v Capital Estate Developments Pty Ltd (No 3) [2024] ACTSC 304 (CDLC (No 3)) at [3]- [19].

2. The original leases held by each plaintiff were terminated by the first defendant in 2022 and interim leases were entered into through a deed of settlement, the intent of which was to enable each of the plaintiffs to sell their respective business with a short-term lease that would then be renegotiated with the new business owner.

3. The interim leases provided for the plaintiffs to request the consent of the first defendant as lessor to the proposed sale of either business. Such consent was sought but refused in December 2022.

4. The proceeding was initially commenced on an urgent basis to protect the plaintiffs’ right to possession and enable the sale of the businesses. Neither plaintiff now has possession of either of the premises. The first plaintiff has subsequently gone into liquidation but the liquidator is still pursuing this proceeding.

5. The consequence of that chain of events is that the overarching dispute is now confined to seeking damages. At the heart of the litigation is whether the first defendant’s refusal to consent to the sale of the business by each of the plaintiffs in December 2022 was a breach of the terms of their respective deeds granting interim leases, and if so, the quantum of damages that may arise from the breach.

6. The first defendant has counter-claimed against the plaintiffs, alleging misleading or deceptive conduct under the Australian Consumer Law and/or a breach of an express contractual duty of good faith by the plaintiffs. The first defendant has also joined the sole director and shareholder of the plaintiffs, Mr Arthur Choi, as a third party to the proceeding (Third Party), alleging that he was knowingly involved in the misleading and deceptive conduct and that he breached the deed of settlement that provided for the interim leases.

Interlocutory application for determination

7. The application presently for determination was filed in March 2024 by CDLC Pty Ltd (In Liq) (ACN 624 214 400), the first plaintiff. It seeks to set aside a number of subpoenas issued by the first defendant, Capital Estate Developments Pty Ltd (ACN 137 573 632) as trustee for the Capital Estate Developments Trust. The basis for seeking to set aside each subpoena was that they lacked legitimate forensic purpose.

8. The subpoenas were issued some time ago. However, the parties left this issue in abeyance while they litigated a number of interlocutory disputes, including a preliminary question as to the proper interpretation of s 100 of the Leases (Commercial and Retail) Act 2001 (ACT) (Leases Act), and disputes over amendments to pleadings and security for costs. However, they are now in the position of preparing for trial (again) and the scope of what may legitimately be subpoenaed as potential evidence at a final hearing needs to be determined.

9. Among the subpoenas the plaintiffs seek to set aside are subpoenas that were issued to the plaintiffs and Third Party. In respect of those subpoenas, the first defendant has filed an application for non-compliance. The application was listed for hearing at the same time. However, during the hearing I canvassed with the parties that, if the court did not set aside the subpoenas, an appropriate course may be to allow a further period of time to answer the subpoenas but to also include an order requiring an affidavit to be prepared dealing with subsequent non-compliance. I intend to adopt that course.

The Court’s power and applicable principles

10. Rule 6604 of the Court Procedures Rules 2006 (ACT) (Rules) governs the Court’s power to set aside a subpoena, in whole or in part, on application of a party. The principles applying where a party seeks to set aside a subpoena are well-established.

Legitimate forensic purpose

11. Of significance in this particular dispute is the principle that a subpoena will be set aside if there is no legitimate forensic purpose (including a lack of relevance) or the subpoena is seriously and unfairly burdensome or prejudicial: Trade Practices Commission v Arnotts (1989) 88 ALR 90 (Arnotts) at 103.

12. When assessing what meets the threshold for relevance, a mere “fishing” expedition is impermissible. That is, an issuing party (the first defendant here) cannot seek documents in an attempt to discover if he has a case (hence the fishing metaphor of casting a net to see what is caught). A party can only seek documents to support a case that has already been articulated: Commissioner for Railways v Small (1938) 38 SR (NSW) 564 (Commissioner for Railways) at 575.

13. The party issuing the subpoena bears at least a forensic onus of showing the relevance of the documents sought to the issues in the proceedings: see Portal Software v Bodsworth [2005] NSWSC 1115 (Portal Software) at [29] and the cases there-cited.

14. Determining whether there is a legitimate forensic purpose requires an assessment of whether the documents sought will assist in the resolution of the issues in the main case. It has been described as asking whether the documents would be reasonably likely to add in the end to the relevant evidence in the case, including apparent or adjectival relevance, in the sense that the documents could “possibly throw light on the issues in the main case” (being the language used by Beaumont J in Arnotts at 103).

15. It will be sufficient if it appears to be “on the cards” that the documents will materially assist the party: Alister v The Queen (1984) 154 CLR 404 at 414. See also DPP v Warren [2015] ACTSC 111 at [22] and Elmaraazey v Capital Lawyers Pty Ltd [2016] ACTSC 54 at [44] where Mossop AsJ (as his Honour then was) cited in addition Spencer Motors Pty Ltd v LNC Industries Ltd [1982] 2 NSWLR 921 at 926-927 and Re North Coast Transit Pty Ltd [2013] NSWSC 1912 at [7]-[9].

16. The principle has been stated in different ways in numerous authorities, but from the above it can be seen that the threshold for relevance of the documents sought under a subpoena is low. It has been described as less stringent than that which applies in the context of admissibility of evidence at trial: Gloucester Shire Council v Fitch Ratings, Inc [2016] FCA 587 (Gloucester Shire Council) per Wigney J at [23], where his Honour stated: … the court should be wary of too readily excluding the possibility that a document or class of documents might at the end of the day be relevant to a fact in issue in the litigation.

17. Informing that principle and the low threshold is the public interest in a fair trial, which should be conducted on the footing that all relevant documentary evidence is available, subject to other public interest considerations, such as legal professional privilege: see Grant v Downs (1976) 135 CLR 674 at 685, cited in Gloucester Shire Council at [23].

18. Detailed consideration of what constitutes a legitimate forensic purpose was given in Secretary of the Department of Planning, Industry and Environment v Blacktown City Council [2021] NSWCA 145 (Dept PIE v Blacktown CC), where the NSW Court of Appeal cautioned against using the language of “tests” for the setting aside of subpoenas: see [60] per Bell P, [88] per Brereton JA, and [98] per McCallum JA.

19. President Bell (with whom McCallum JA, as her Honour was when sitting in that Court, agreed) stated at [41] that care must be taken before transposing observations in Alister, a case primarily concerned with a claim for public interest immunity, to the general law relating to the setting aside of subpoenas. Through a careful discussion of the authorities at [33]–[67], it was clarified that “apparent relevance” will be established if “it can be seen that the documents sought to be produced by way of subpoena will materially assist on an identified issue or there is a reasonable basis beyond speculation that it is likely the documents subpoenaed will so assist”: Dept PIE v Blacktown CC at [65] (emphasis in original).

20. An issuing party is not required to show that it is “on the cards” that the documents sought will materially assist its case, as distinct from adding in some way to the relevant evidence in the case more generally: see Dept PIE v Blacktown CC at [65] per Bell P, [89] per Brereton JA, and [98] per McCallum JA.

21. In Wornes v Freewater Australia Pty Ltd [2022] ACTSC 147, having referred to and applied Dept PIE v Blacktown CC, Kennett J stated at [16]: Consideration of whether a subpoena lacks any legitimate forensic purpose, and is therefore to be set aside, must now proceed by reference to the main purpose set out in s 5A. In particular, attention needs to focus on whether the subpoena is apt to assist “the just resolution of the real issues” in the proceeding rather than taking any narrow view of what is put in issue by the pleadings or what material is apparently relevant to those issues. It must also recognise that a “subpoena to produce documents is an important means of establishing the facts in issue in litigation and thereby enabling justice to be done”: Lane v Registrar of the Supreme Court of New South Wales(1981) 148 CLR 245, 259. However, other considerations referred to in s 5A (including proportionality between the importance of the dispute and the costs generated) should not be ignored. Use of the subpoena process to obtain discovery

22. Of potential significance for the subpoenas issued to the plaintiffs in this proceeding, a subpoena may also be set aside if it is used for the purpose of obtaining discovery against a third party or to obtain discovery against a party: Commissioner for Railways at 573-574. Although similar considerations which apply to the setting aside of subpoenas are applicable to notices to produce (see Portal Software at [10] and the cases there-cited), the distinction between obtaining documents through subpoena or discovery is important. In the former case, the recipient of the subpoena is ordered to produce the documents specified, without any knowledge about the issues in the proceedings to which the subpoena relates. In the latter case of discovery, the person or party obliged to discover documents must engage with the material being produced, deciding whether they relate to the issues in the action: Lucas Industries Ltd v Hewitt (1978) 18 ALR 555 at 569.

23. It is impermissible to ask a recipient of a subpoena to undertake the task of discovery — that is, to sort through the documents sought to decide if they are relevant or material to the issues in the action. Documents sought under subpoena

24. The subpoenas that are the subject of the application (helpfully included in the affidavit of Jacinta McGilvray dated 22 March 2024 and read in support of the application) were issued to the following organisations, through their proper officers: (a) The first plaintiff (two subpoenas issued, on 11 and 23 January 2023); (b) The second plaintiff (two subpoenas issued, on 11 and 23 January 2023); (c) Third party (7 February 2023); (d) Bates & Pickering (ABN 40 471 856 843) (8 March 2024); (e) Bendigo and Adelaide Bank Limited (ACN 068 049 178) (8 March 2024); and (f) Commonwealth Bank of Australia (ACN 123 123 124) (8 March 2024).

25. It will be seen immediately that five of the eight subpoenas challenged were issued to parties in the proceeding. They seek documents that, in my view, were more appropriately the subject of discovery or notices to produce. However, because of the procedural history, the parties have not engaged in any formal discovery processes.

Defendant’s position on the forensic purpose of the documents sought

26. The application to set aside the subpoenas was opposed by the first defendant. The relevance of the disputed subpoenas was set out in a schedule (MFI 2). Two affidavits of Ip Hin Hong were also read, the latter of which dealt with aspects of establishing legitimate forensic purpose in relation to some of the documents sought from the accountant.

27. The forensic purpose was ventilated in detail during the hearing. The subpoenas generally seek financial documents relevant to either the financial position of the plaintiffs or the state of the businesses at the time they were proposed to be sold, including who were properly characterised as employees of the businesses.

28. I have summarised the various forensic purposes identified across the documents sought as follows: (a) Liability: to establish the objective reasonableness of the landlord’s refusal to consent to the transfer of the leases, to the extent that the financial viability of the businesses or the incoming purchaser’s financial capacity were reasons for that refusal. (b) Additionally on liability: the first defendant seeks to traverse whether the incoming purchasers (through their director) objectively had the necessary business skills to operate the businesses, including circumstances where those businesses were taken over running at a loss when they were purchased. (c) Quantum on the plaintiffs’ claim: in terms of valuing the plaintiffs’ losses arising from the loss of the ability to sell the business. If that business was in fact close to insolvency, the loss of the opportunity to sell it may be significantly less. (d) The first defendant’s counterclaim: it raises a legal argument that in order for the plaintiff’s application to transfer the lease to be valid (a “compliant application”), the information supporting it must be truthful. It is a different way of pleading that the plaintiffs misrepresented the position as to the state of their businesses and the financial acumen of the proposed purchaser. The defendant seeks to obtain the financial documents to assist it in establishing the plaintiffs’ and incoming purchasers’ true financial position, as compared with what was communicated to the first defendant. (e) Good faith and credit: the documents will also assist the first defendant in pursuing their claim for the plaintiffs’ breach of a contractual obligation of good faith. Separately, the first defendant anticipates putting the plaintiffs’ credit, as well as that of the Third Party who is the subject of an accessorial liability claim in misleading and deceptive conduct, in issue. There is a money tracing exercise the first defendant seeks to undertake, to understand the true financial arrangements between them, but this is also relevant to the plaintiffs’ and the Third Party’s credit. As part of the proposed sale of the businesses, the director of the plaintiffs (the Third Party) made a loan to a company, which then transferred a sum of money to the director of the incoming purchasers. Specifically, a screen shot of a bank account was provided by the director of the incoming purchasers, for the purpose of representing to the first defendant that the purchasers had the financial wherewithal to proceed with the purchase. It transpired that the $200,000 figure disclosed in the screen short was only deposited the day before the screen shot was taken and was then transferred out of the director’s bank account the day afterwards.

29. That last point concerns the first defendant’s scepticism about the financial picture that was presented to it at the time its consent to transfer the leases was sought. From discussions during the hearing as to loan documents that appear to have been documented after they were apparently agreed and implemented, I accept that such suspicion is not purely hypothetical, such as might otherwise have given rise to concerns about the first defendant fishing for a defence.

30. There were also specific documents sought from Bates & Pickering which fell into a different category. The documents requested included financial information relating to one of that firm’s clients. That person was proposed as the incoming guarantor of the prospective purchasers (replacing the Third Party as guarantor of the plaintiffs’ commitments to the landlord under the leases). The purpose of seeking documents disclosing information about that individual’s financial affairs in a case about unreasonable withholding of consent is that one of the matters the first defendant says it was entitled to consider when making the decision whether to consent was the financial state of the guarantor, effectively to ensure that any guarantee provided by that person was not hollow.

Do the subpoenas have a legitimate forensic purpose?

31. From setting out the variety of purposes identified by the first defendant, I accept that the subpoenas have a legitimate forensic purpose subject to one critical matter that was really the focus of this application. Indeed, it has been a source of controversy since the proceeding commenced and was the reason the parties sought a preliminary ruling on the proper interpretation of s 100 of the Leases Act, resolved in CDLC Pty Ltd v Capital Estate Developments Pty Ltd [2023] ACTSC 284 (CDLC (No 1)).

32. The plaintiffs argued that the scope of the documents able to be subpoenaed is confined by the first defendant’s letter refusing consent to the sale of the businesses dated 13 December 2022 (Refusal Letter). The relevant parts of the Refusal Letter were extracted by the plaintiffs in their submissions. Under the heading “Conclusion” the following is recorded: Conclusion We specifically note: 19. section 100(2)(b) of the Leases Act, which is relevant pursuant to clause 2.4 of the Deed of Settlement, makes it reasonable for a Lessor to refuse consent if it has reasonable grounds to believe: “the prospective assignee or subtenant (taking into consideration information about any proposed guarantor for the assignee or subtenant) does not have the financial resources to run the business”; 20. section 100(2)(d) of the Leases Act, which is relevant pursuant to clause 2.4 of the Deed of Settlement, makes it reasonable for a Lessor to refuse consent if it has reasonable grounds to believe: “the prospective assignee or subtenant does not have adequate skills to run the business”; and 21. clause 2.8(4) of the Deed of Settlement which prohibits Vendor Finance being provided to any proposed purchaser, except on very specific terms. Given the above, our client does not grant its approval and believes it to be reasonable in all of the circumstances not to do so.

33. I have emphasised those last words to draw attention to the fact that they echo but do not replicate the words of s 100(1), set out below.

34. The plaintiffs plead at [33] of the Further Amended Statement of Claim filed 30 January 2024 (Claim) that the first defendant’s refusal was based on: (a) Section 100(2)(b) of the Leases Act, in a belief that the incoming purchasers and their director (Mr Jahangir) did not have the financial resources to run the businesses; (b) Section 100(2)(d) of the Leases Act, in a belief that the incoming purchasers and their director (Mr Jahangir) did not have adequate skills to run the businesses; and (c) The proposed sale being in breach of clause 2.8(4) of the settlement deed between the plaintiffs and first defendant, which prohibited Vendor Finance.

35. The plaintiffs further plead at [33b] and [33A] of the Claim that the first defendant did not state its refusal to be based on any other objective fact or circumstance and that in those circumstances, the first defendant is confined to the grounds of refusal stipulated in the Refusal Letter.

36. The first defendant denies both [33b] and [33A] of the Claim. Both parties relied on CDLC (No 1), where the Court considered – really as a preliminary question of statutory construction – how reasonableness of the first defendant’s refusal was to be determined under s 100 of the Leases Act.

37. There is force to each of the parties’ positions, in light of paragraph 21 of the Refusal Letter, set out above.

38. Section 100 is in the following terms (emphasis added): 100 Refusal to consent to assignment or sublease (1) The lessor may refuse consent to the assignment of a lease or granting of a sublease requested under section 95 (Request for consent to assignment, sublease or mortgage) only if it is reasonable in all the circumstances to do so. (2) For subsection (1), the lessor’s refusal is taken to be reasonable if the lessor has reasonable grounds for believing that— (a) the prospective assignee or subtenant intends to use the premises for a purpose not allowed under the lease; or (b) the prospective assignee or subtenant (taking into consideration information about any proposed guarantor for the assignee or subtenant) does not have the financial resources to run the business; or (c) the tenant cannot produce a current certificate of occupancy for the premises; or (d) the prospective assignee or subtenant does not have adequate skills to run the business; or (e) the prospective assignee or subtenant, or the business conducted by the prospective assignee or subtenant, will not be compatible with other tenants in the building containing the premises; or (f) the tenant has failed to rectify a breach of the lease (other than a breach that has been waived by the lessor). (3) If the lessor withholds consent on a ground not mentioned in subsection (2), the lessor has the burden of establishing that refusal to consent is reasonable. (4) This section does not authorise anything that would, if it were not authorised, contravene the Competition and Consumer Act 2010 (Cwlth), part 4. (5) In this section: business includes proposed business.

39. The emphasised parts of the section are those that are material to the present proceeding.

40. As discussed in CDLC (No 1) at [52]-[53], there are two different paths for refusal. The first is under s 100(2), the grounds of which are confined to the state of mind or belief of the lessor. The second is under s 100(3), which permits reliance on a ground that has nothing to do with the belief or state of mind of the lessor.

41. CDLC (No 1) held (at [58], [92]) that where the ground relied upon is confined to the lessor’s belief at the time of refusal, reasonableness of that belief is based on what was known by the lessor at the time. Insofar as it was made under s 100(2) of the Leases Act, the lessor’s refusal is confined to the material that was provided to it and the reasonableness of the belief formed, based on the material provided to the lessor.

42. CDLC (No 1) further held (at [58], [92]) that if the reason for refusal is within s 100(3) of the Leases Act – being a ground that is not mentioned in s 100(2) – the scope of the material that may be relevant to reasonableness is broader. That is because reasons under s 100(3) may be objective facts that are determined not just by material that was in the hands of the lessor.

43. The plaintiff takes the view that the express references in the refusal letter to grounds under s 100(2) were the communicated reasons for the first defendant’s refusal of consent, and not any other ground under s 100(3). It argued that none of the subpoenaed material has a legitimate forensic purpose at even the low threshold of apparent relevance, because the subpoenas seek documents that were not in the possession of the first defendant at the time it made its decision.

44. The difficulty is that the first defendant has joined issue with [33b] and [33A] of the Claim. It does not accept that its communicated reasons in the Refusal Letter were limited to grounds under s 100(2) of the Leases Act.

45. The Refusal Letter includes as a reason for refusal a prohibition on Vendor Finance unless it was in accordance with certain stipulated matters. There was evidence before the court on this interlocutory application about what those matters were. There was a concern on the part of the first defendant to prevent the ability of the plaintiffs as vendors to impose a charge by way of security for any vendor finance, which could have included a charge over the purchaser’s interest in any lease. That is a matter that on its face does not fall within the reasons listed in s 100(2) and must therefore fall within s 100(3). Whether the first defendant’s pleaded denial extends more broadly than that is not known.

46. The reasons of CDLC (No 1) informed the ultimate issue of whether the landlord’s refusal of consent to the purchase of the businesses, with the consequent assignment of the leases, was reasonable. However, it did not determine the precise reasons which the landlord communicated to the plaintiffs as being its reasons for refusing consent, nor did it make any findings as to whether those reasons fell within s 100(2) or s 100(3) of the Leases Act. Questions as to whether the entirety of the communicated reasons were matters about which the landlord had a belief are matters to be determined in the substantive hearing. Those facts, and the admissibility of the material relevant to those facts, are not for the court to determine at the stage where documents are being produced under subpoena.

47. Overlaid with this is the first defendant’s counter-claim, the whole point of which is that if its refusal of consent is ultimately found by the court to be unreasonable (or limited to a belief that the court finds was unreasonable), the plaintiffs nevertheless misrepresented the financial position of their businesses and that of the proposed incoming lessee, a claim that has a novel causative link but has nevertheless not been struck out: see CDLC (No 3).

48. Accordingly, by reference to the pleadings there is a legitimate forensic purpose in obtaining the documents being subpoenaed.

Procedural consequences

49. The fact that the subpoenas may legitimately be pursued does not deal with the question of access to the documents that will be produced in answer to them. I have referred to the fact that much of the material sought under subpoena from the plaintiffs was really a form of discovery in lieu of that process otherwise occurring, due to the way in which the proceedings evolved. While the plaintiffs did not take the point (because this would have further delayed the matter and increased the already disproportionate legal costs), it is important that the alternative basis on which the first defendant has sought to obtain documents from the plaintiffs does not divert the parties from following the proper procedural steps that would have otherwise been taken. The corporate state of mind of the parties will be material to any ultimate determination. Given the facts that are in issue in this dispute, the parties should complete the service of their evidence in chief on the claim and the counterclaim before any access orders to the material produced under the subpoenas that are the subject of this application are made.

Costs

50. Costs are in the discretion of the court and ordinarily would follow the outcome of the interlocutory application. However, in this case, the subpoena dispute is so intricately bound to the factual issues to be finally determined in the case that I consider the fairest thing for all parties is to allow the costs of this interlocutory skirmish to follow the ultimate event. An order pursuant to r 1728 of the Rules is appropriate, namely reserving costs with the intent that they become costs in the cause.

Orders

51. For the above reasons, the orders of the court are as follows: (1) The application in proceeding filed by the first plaintiff on 22 March 2024 is dismissed. (2) The following subpoenas are made returnable before the Registrar on 28 April 2025 at 9.00am:

Subpoena recipient Issue Date(s) The proper officer, CDLC Pty Ltd (ACN 11 January 2023 and 23 January 2023 624 214 400)

The proper officer, Pouring Pty Ltd (ACN 11 January 2023 and 23 January 2023 637 678 310) Arthur Choi 7 February 2023

The proper officer, Bates & Pickering 8 March 2024 (ABN 40 471 856 843) The proper officer, Bendigo and 8 March 2024 Adelaide Bank Limited (ACN 068 049 178)

The proper officer, Commonwealth Bank 8 March 2024 of Australia (ACN 123 123 124),

(3) Before any access orders are made in respect of the subpoenas referred to in order 2, the parties are to complete the service of their evidence in chief on the claim and the counterclaim. (4) If any of the plaintiffs or Third Party do not complete production of the material subpoenaed by 28 April 2025, the non-complying party is to file and serve an affidavit explaining the non-compliance, with such affidavit to be filed by 5 May 2025. (5) Costs are reserved.

I certify that the preceding fifty-one [51] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Justice McWilliam Associate: Date: