Dense Medium Separation Powders Pty Limited trading as DMS Powders v Gondwana Chemicals Pty Ltd & Anor

Supreme Court of NSW|2010-09-03|Before: Einstein J

CITATION : Dense Medium Separation Powders Pty Limited trading as DMS Powders v Gondwana Chemicals Pty Ltd & Anor [2010] NSWSC 994

JURISDICTION : Equity Division Commercial List

DECISION : Application to set aside subpoena dismissed.

CATCHWORDS : Practice and procedure - Application to set aside subpoenas - Discussion or relevant principles

Alister v R [1983] HCA 45; (1984) 154 CLR 404 Attorney General for New South Wales v Dylan Chidgey [2008] NSW CCA 65 Fitzgerald v Magistrate's Court of Victoria [2001] VSC 348; [2001] 34 MVR 448 CASES CITED : Lakatoi v Walker [1999] NSWSC 1036; ([1998] NSWSC 470 R v Le [2000] NSWCCA 49 Regina v Saleam [1999] NSWCCA 86 Roads and Traffic Authority of NSW v Conolly (2003) 57 NSWLR 310

TEXTS CITED : S Odgers, Uniform Evidence Law (Thomson Reuters, 8th ed, 2009)

Dense Medium Separation Powders Pty Limited trading as DMS Powders (Plaintiff) PARTIES : Gondwana Chemicals Pty Limited (First Defendant) David Maxwell Willetts (Second Defendant)

COUNSEL : Ms V McWilliam (Plaintiff) Mr AP Cheshire (Defendants)

SOLICITORS : PricewaterhouseCoopers (Plaintiff) Colin Biggers & Paisley (Defendants)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

2010/00059719 Dense Medium Separation Powders Pty Limited trading as DMS Powders v Gondwana Chemicals Pty Ltd & Anor JUDGMENT

The notice of motion 1 There is before the Court a notice of motion filed by the defendants seeking an order that a subpoena issued on behalf of the plaintiff to Marsh Pty Ltd, the defendants' insurance broker, on 20 July 2000 be set aside. The proceedings 2 The proceedings are brought by the plaintiff which contends that it and the first defendant are parties to an agency agreement entered into in or about July 2006 pursuant to which the plaintiff appointed the first defendant its exclusive agent for the sale of Ferrosilcon Product in Australia. 3 In these proceedings the plaintiff alleges that the defendants conducted certain importing activities in breach of an exclusive agency agreement between the plaintiff and defendants. 4 There are two issues on the overall proceedings:

i. Firstly, whether there was an exclusive agency agreement;

ii. Secondly whether the defendants have acted in breach of such an agreement. 5 The defendants contend that there was never a binding exclusive agency agreement but admit that they have engaged in conduct that would breach such an agreement if it existed. 6 The plaintiff by its amended commercial list statement filed on 3 September 2010 has provided particulars of the subject agreement which particulars contend that the agency agreement is contained in, evidenced by ought or to be inferred from 15 particular matters. Those matters are as follows:

Agency Agreement between the plaintiff's predecessor, Samancor Limited and the first defendant dated 31 May 2005 [Document 189 of plaintiff's discovered documents];

the second defendant's knowledge that the plaintiff had succeeded to the DMS business of Samancor Limited;

An email form the plaintiff to the second defendant dated 27 June 2006 [Document 1 of the plaintiff's discovered documents];

An email from the defendants to the plaintiff dated 24 July 2006 [Document 6 of the plaintiff's discovered documents];

An email from the plaintiff to the defendants dated 27 July 2006 [Document 6 of the plaintiff's discovered documents];

An email from the defendants to the plaintiff dated 28 July 2006 [Document 6 of the plaintiff's discovered documents];

The Agency Agreement sent by the plaintiff to the defendants in or about July 2006 (2006 Agency Agreement), in the form of the 2005 Agreement amended to show a new commission rate of 2.75% [Document 190 of the plaintiff's discovered documents];

The performance by the defendants of their obligations under the 2006 Agency Agreement;

The claiming of commission by the defendants in accordance with the 2006 Agency Agreement;

The absence of any communication from the defendants disputing the terms of the 2006 Agency Agreement;

An email from the defendants to the plaintiff dated 28 August 2006 [Document 7 of the plaintiff's discovered documents];

An email from the defendants to the plaintiff dated 31 May 2007 [Document 349 of the defendants' discovered documents];

An email from the plaintiff to the defendants dated 28 August 2007 [Document 160 of the plaintiff's discovered documents];

An email from the defendants to the plaintiff dated 30 August 2007 [Document 150 of the plaintiff's discovered documents];

The defendants' confirmation of acceptance of the 2006 Agency Agreement during a conversation on 9 February 2010 between Mr Willetts on behalf of the first defendant and Ms Kemink and Mr Vosloo on behalf of the plaintiff. The authorities 7 In Attorney General for New South Wales v Dylan Chidgey [2008] NSW CCA 65, Beazley JA [with whom James and Kirby JJ agreed] had occasion to examine the correct test for determining whether a party is required to produce documents pursuant to a subpoena, doing so inter alia by reference to the decision of Simpson J (Spigelman CJ and Studdert J agreeing) in Regina v Saleam [1999] NSWCCA 86. 8 Beazley JA observed as follows:

64 The test for determining whether a party is required to produce documents pursuant to a subpoena was stated by Simpson J (Spigelman CJ and Studdert J agreeing) in Regina v Saleam [1999] NSWCCA 86 at [11], in the following terms: "The principles governing applications [for an order that documents not be produced] are no different from those governing applications for access to documents produced in answer to a subpoena. Before access is granted (or an order to produce made) the applicant must (i) identify a legitimate forensic purpose for which access is sought; and (ii) establish that it is 'on the cards' that the documents will materially assist his case. …

65 The genesis of the expression " on the cards " is to be found in the judgment of Gibbs CJ in Alister v R [1983] HCA 45; (1984) 154 CLR 404 at 414. …

72 In Roads & Traffic Authority of NSW v Conolly , Adams J referred to a decision of Balmford J in Fitzgerald v Magistrate's Court of Victoria [2001] VSC 348; [2001] 34 MVR 448, in which her Honour, at [20], stated, " I note that in the second edition of the Oxford English Dictionary 'on the cards' is defined as meaning 'within the range of probability' ". Adams J said at [12]: "Accepting this to be so, it seems to me that the relevant "range" is therefore between the barely probable and highly probable. With respect, it seems to me that this area of the law is bedevilled with metaphors. I think the essential notion is that there is a reasonable chance that the material sought will assist the defence. If it is reasonable to infer that the material sought exists and that it is relevant to an issue, though its content is unknown, it will almost invariably be logically the case (as it seems to me) that such a chance exists, even though it might be thought to be unlikely. Seeking that material therefore seems to me to be a legitimate forensic purpose, providing of course that the factual issues and the character of the material sought are precisely identified." (Emphasis added) 9 In Lakatoi v Walker [1999] NSWSC 1036, I outlined an earlier interlocutory judgment of Rolfe J in the same proceedings ([1998] NSWSC 470) which dealt with a number of subpoenas which had been issued and dealt with a number of notices of motion seeking to set aside those subpoenas. The judgment included a reasonably detailed examination of the authorities and of the principles involved. Rolfe J enunciated, in a fashion which I would not depart from, the basic parameters which are to inform the Court in the exercise of its discretion where an application to set aside a subpoena is pursued. 10 On the one hand, there is clearly to be recognised, the obvious danger of permitting a party by use of the subpoena procedure, to investigate issues of credit having no conceivable relevance to issues pleaded, in the sense that to permit subpoenas of that type to be called would open up matters falling outside the legitimate field of enquiry raised by the issues in contest. On the other hand, it seems to me quite clear that inspection should be granted, so far as is necessary, in the proper conduct of the litigation, where the Court forms the view that the material falls within the legitimate field of enquiry raised by the issues in contest and is reasonably likely to add in the end in some way or other to the relevant evidence in the case. The exercise, recognised by Rolfe J, involves the need to balance these alternative considerations. 11 The determination of the Court in the balancing exercise and in particular the proper approach to the question of relevance, requires the Court, as Rolfe J indicated, to bear in mind the entitlement of the parties to build up what his Honour referred to as 'an evidentiary mosaic'. 12 As Rolfe J said, that exercise generally cannot be done, particularly in complicated commercial litigation, by the tender of one piece of evidence or the assertion that only limited material is relevant to the issues involved. As his Honour said, 'particularly is that so when one must have regard to the desirability of as full a cross-examination as possible, assisted by the availability of documents which will aid that'. Hence, as his Honour stated, both as to issues and as to the issue of credit, the Court should not be astute to find irrelevance at an early stage in the proceedings. 13 The breadth of the definition of relevance should also be borne in mind. As Sully J observed in R v Le [2000] NSWCCA 49 at [19]:

[Section] 55 speaks of a rational effect that is brought about "directly or indirectly". This is very broad language, and it suggests, in my opinion, a wide rather than a narrow focus to the inquiry whether a proffered piece of evidence has the rational potential which s55 requires. See further S Odgers, Uniform Evidence La w (Thomson Reuters, 8 th ed, 2009) at p182-183. Returning to the matter in hand 14 The subpoena in question seeks production of the following documents:

all documents including but not limited to all emails, correspondence and file notes relating to the provision or the proposed provision of product liability insurance to David Maxwell Willetts ("Willetts") and/or Gondwana Chemicals Pty Ltd (ABN 20 060 315 684) (Gondwana Chemicals") during the period 1 April 2006 to date;

all documents including but not limited to all emails recording any communications in relation to the matters raised in the email dated 25 August 2006 from Monika A Walter on behalf of Marsh Pty Limited to Willetts, a copy of which is attached and marked "A";

any copies of all or part of any agency agreement between Dense Medium Separation Powders trading as DMS Powders and Gondwana Chemicals ("Agency Agreement") received by Marsh Pty Limited in the period from 1 January 2006 to date in relation to the provision or proposed provision of insurance of Gondwana Chemicals and/or Willetts; and

All documents recording any communications between Marsh Pty Limited on the one hand and either, Gondwana Chemicals or Willetts or both of them on the other hand, brought into existence in the period 1 April 2006 to date in relation to or in connection with the Agency Agreement. The defendants' submissions 15 In the argument on the notice of motion, the defendants contended that although the plaintiff had originally pleaded that a written contract existed which evidenced the alleged agreement, the proper interpretation of the plaintiff's revised pleading was that it now pleaded that the agreement should be inferred from various matters. 16 The defendants submitted that the proper interpretation of the seventh particular outlined above was that it only referred to the relevant contractual document and did not plead that the document was executed. 17 The defendants had two major submissions in support of the notice of motion.

i. Firstly that under the objective theory of contract it is the communications between the contracting parties that are relevant to the issue of formation and thus whatever the defendants may have said to their insurance broker was irrelevant.

ii. Secondly the defendants submitted that if the subpoena was allowed it should be limited to documents up until and including 11 February 2010 [on that date it was common ground that the plaintiff gave notice of termination of a relevant agreement between the parties and this was accepted by the defendants]. Accordingly the defendants contended that documents passing between them and their insurance broker after 11 February 2010 could only go to whether there was a continuing breach of whatever agreement existed between the parties, it could not go whether an agreement existed at all. 18 The defendants further contended that an email in evidence indicated that the agreement on the broker's file was only a draft. This was consistent with the defendants' overall proposition that no executed agreement existed. The plaintiff's submissions 19 The plaintiff drew on the breadth of the pleading as to the agreement between the parties, noting that it referred to an agreement "evidenced by, or inferred from" a number of matters. 20 The plaintiff contended that the proper interpretation of the amended pleading was that firstly it was pleaded that the relevant agreement was in written form, but alternatively it was pleaded that the agreement should be inferred from a number of matters.

21 In reply the defendants contended that it was not ever put by the plaintiffs on their amended pleading that the parties had ever signed an exclusive agency agreement 22 The plaintiff rejected this characterisation of its case. 23 It was the defendants' position that the documents sought through the subpoena were irrelevant to the issue of contractual formation. Furthermore the defendants contended that the plaintiff could ascertain any ongoing contractual breaches from other evidence obtained from relevant customs authorities. Decision 24 It is unnecessary to repeat the above described principles save perhaps to emphasise the following:

i. Before access is granted (or an order to produce made) the applicant must (i) identify a legitimate forensic purpose for which access is sought; and (ii) establish that it is 'on the cards' that the documents will materially assist his case. …

ii. The genesis of the expression " on the cards " is to be found in the judgment of Gibbs CJ in Alister v R [1983] HCA 45; (1984) 154 CLR 404 at 414. …

iii. In Roads & Traffic Authority of NSW v Conolly , Adams J referred to a decision of Balmford J in Fitzgerald v Magistrate's Court of Victoria [2001] VSC 348; [2001] 34 MVR 448, in which her Honour, at [20], stated, " I note that in the second edition of the Oxford English Dictionary 'on the cards' is defined as meaning 'within the range of probability' ". Adams J said at [12]: "Accepting this to be so, it seems to me that the relevant "range" is therefore between the barely probable and highly probable. With respect, it seems to me that this area of the law is bedevilled with metaphors. I think the essential notion is that there is a reasonable chance that the material sought will assist the defence. If it is reasonable to infer that the material sought exists and that it is relevant to an issue, though its content is unknown, it will almost invariably be logically the case (as it seems to me) that such a chance exists, even though it might be thought to be unlikely. Seeking that material therefore seems to me to be a legitimate forensic purpose, providing of course that the factual issues and the character of the material sought are precisely identified." (Emphasis added) 25 In my view there is no substance in the defendants' contentions. Clearly from the materials before the Court the plaintiff has identified a legitimate forensic purpose for which access to the subject documents now sought and has established that it is "on the cards" that the documents will materially assist the plaintiff's case. 26 The defendant's notice of motion is dismissed. 27 The parties will be given an opportunity to address on costs. ****************

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