Ceramic Fuel Cells Limited (In Liq) v McGraw-Hill Financial, Inc

1. The interlocutory application filed by the respondents on 21 December 2016 to set aside the notice to produce dated 30 November 2016 is dismissed.
2. The respondents pay the applicant's costs of and associated with the interlocutory application. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

WIGNEY J: 1 Ceramic Fuel Cells Limited is the representative applicant in representative proceedings that have been commenced against McGraw-Hill Financial, Inc and Standard & Poor's International LLC. In simple terms, Ceramic alleges that it suffered loss and damage arising from its acquisition of financial products in reliance on credit ratings assigned to those products by Standard & Poor's, a business operated by or associated with the respondents. The financial instruments acquired by Ceramic were mortgage-backed collateralised debt obligations. They may conveniently be referred to as Duke CDOs. Standard & Poor's initially assigned the Duke CDOs an A rating. 2 Ceramic acquired €2,000,000 worth of Duke CDOs on 27 July 2006. It sold them in September 2009 for about $20. There is a dispute between the parties as to exactly when that sale occurred. Standard & Poor's says it occurred on 16 September 2009 when Ceramic entered into a contract to sell them. Ceramic says it occurred on 24 September 2009 when the sale settled or was completed. That dispute is important and will need to be resolved. That is because these proceedings were commenced on 21 September 2015. If Standard & Poor's is right about the sale date, Ceramic's action will have been commenced outside the six year limitation period and will most likely be statute-barred. If Ceramic is right, the proceedings may not be statute-barred. 3 Standard & Poor's contends that, irrespective of the date of Ceramic's sale of the Duke CDOs, Ceramic suffered immeasurable loss or damage in respect of the Duke CDOs before 21 September 2009. It says that Ceramic suffered loss or damage either on the date it acquired the Duke CDOs on 27 July 2006 or, alternatively, at some stage prior to mid-2009 when the market value of the Duke CDOs decreased. 4 Standard & Poor's has applied for the summary dismissal of the proceedings on the basis that the proceeding is statute-barred. That application is listed for hearing on 15 March 2017. 5 The present interlocutory dispute arises because Ceramic has served a notice to produce on Standard & Poor's in respect of the summary dismissal application. The notice to produce relevantly requires Standard & Poor's to produce documents that meet one or more of the following three descriptions: 1. A copy of all documents disclosing or recording the reasons for the downgrading by S&P of the rating of the Duke Funding XI Ltd Series 2006 Class A-3 synthetic collateralized debt obligation (Duke CDO) from A to B+ on or about 14 March 2008 (the first downgrade). 2. A copy of all documents disclosing or recording the reasons for the downgrading by S&P of the Duke CDO from B+ to CC on or about 7 August 2008 (the second downgrade). 3. A copy of all documents disclosing, recording or relating the Respondent's analysis or assessment of the creditworthiness of the Duke CDO between 1 June 2006 and 21 September 2009. 6 Ceramic says that the documents sought by the notice to produce are likely to be relevant to the issues to be addressed at the hearing of the summary dismissal application. Standard & Poor's, on the other hand, says that the documents sought by the notice to produce are, or are likely to be, irrelevant to its summary dismissal application and that, in any event, the notice is oppressive. It applies for the notice to produce to be set aside. It should be noted that an earlier notice to produce was also originally in issue, but the dispute concerning that notice has essentially been resolved. 7 Standard & Poor's application to set aside the notice to produce raises two questions. 8 The first question is whether the documents sought have some apparent relevance to the proceeding. The authorities have described the requirement of apparent relevance in various different and colourful ways, often employing metaphors like whether the documents are likely to "throw light" on the issues, or whether it is "on the cards" that the documents will assist the applicant's case. It is sufficient to say that the relevance test in this context is not a high threshold. The test is whether the documents are reasonably likely to add, in the end, in some way or other, to the relevant evidence in the case: Seven Network Ltd v News Ltd (No 11) [2006] FCA 174 at [6]; McGrath v HNSW Pty Ltd (No 2) (2015) 232 FCR 532 at [21]. It is enough if, viewed realistically, the documents sought are likely to have a bearing on an issue that is not unreal, fanciful or speculative: Lowden v Elliott Harvey Securities Ltd (No 2) [2016] FCA 740 at [14]; Wong v Sklavos [2014] FCAFC 120; (2014) 319 ALR 378 at 381-2 [12]. 9 The second question is whether the notice to produce is oppressive in the sense of being unduly burdensome. Oppression may be found to exist where the categories of documents to be produced are expressed in overly broad and general terms, or because the difficulty and cost of complying with the notice is, in all the circumstances, excessive.