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[2006] FCA 335
Federal Court of Australia
2006-03-31
Gibbs CJ, Mason J, Murphy J, Wilson J, Stone J
Original judgment source is linked above.
REASONS FOR JUDGMENT 1 At the request of the applicant, a subpoena was issued addressed to PricewaterhouseCoopers ('PwC'), the auditors of the respondent in this proceeding. PwC produced a number of documents which have been inspected by the applicant's solicitors. Issues have arisen as to whether PwC is required by the subpoena to produce other material. Some issues about what PwC is required to produce under the subpoena have been resolved in correspondence between the parties, however some are still outstanding and on 14 October 2005 the applicant filed a notice of motion directed to compelling PwC to produce certain material. 2 Chief among the disputed material was the hard drive of the computer used by Mark Dow, a partner in PwC. Previous attempts to obtain correspondence and e-mails included in the data stored on the hard drive had been unsuccessful. PwC had advised that the hard drive had been damaged and that it was not possible to retrieve any further material from it. The applicant was not content with this explanation and sought to compel PwC to produce the hard drive to the Registry so that the applicants, with the assistance of technical experts, could attempt to retrieve the data. 3 The applicant also sought to have Mr Dow file and serve an affidavit deposing to the nature of the technical problems affecting the hard drive, the efforts made by PwC to retrieve data from the hard drive and, insofar as it comes within the terms of the subpoena served on PwC, whether any copies were made of data stored on the hard drive. 4 During the course of the hearing the parties came to an agreement as to the terms on which PwC would provide the hard drive to the applicant and, with their consent, I made orders giving effect to their agreement. The applicant also accepted that, depending on what (if anything) could be retrieved from the hard drive, it might not be necessary to press their application for an order that Mr Dow make an affidavit as referred to in [3]. Accordingly argument on that issue was deferred to a later date if required. 5 These arrangements left as the only issue presently to be determined, the application in paragraph 3 of the notice of motion. Paragraph 3 seeks orders requiring PwC to produce documents held by its "affiliated practices, including overseas practices" where those documents fall within the subpoena and relate to work undertaken by the affiliated practice on behalf of, or at the request of, PwC. 6 PwC resisted the application for its affiliates to produce the documents. It provided evidence that the Australian firm is a separate legal entity from the United States firm and from each of the PwC firms in New Zealand, South Africa, Japan, and Europe and that for this reason any documents that are in the possession of its affiliates are not in its possession. PwC submitted that Order 27 of the Federal Court Rules only obliges the addressee of a subpoena to produce relevant documents that it has in its possession and does not oblige the addressee to acquire them from the person who has possession of them. In support of this submission PwC referred to comments made by the High Court in Rochfort v Trade Practices Commission (1982) 153 CLR 134 ('Rochfort') at 138-9 per Gibbs CJ, 143 per Mason J, 149 per Murphy J and 151 per Wilson J. Rochfort certainly is authority for the proposition put forward by PwC but beyond that proposition the case is of limited relevance here. It was concerned with whether an employee who had physical access to documents was required to produce them without the authority of his employer. 7 The issue is different here. PwC's submission relies on the fact that it does not have physical possession of the documents and on a narrow meaning of possession; one that excludes what is sometimes called, 'constructive possession', that is the control of the documents or the right to require that they be delivered. 8 The concept of possession has a long history of ambiguity and controversy. It was discussed by Oliver Wendell Holmes in his classic work, The Common Law published in 1881 and has been considered by the courts on many occasions in the context of disputes over property and ownership. It is not necessary to canvass that long history here or to delve into the nuances of meaning and policy that are involved. The present issue requires a practical solution within the bounds of the law concerning the obligations of the addressee of a subpoena.
9 This is consistent with the approach of the High Court in Rochfort where the Court declined to enter into an arid technical debate. Gibbs CJ, for example commented at 140: 'it does not seem to me that it is necessary to inquire whether the person concerned is a bailee or a mere custodian. Some authorities use "custody" or "control" interchangeably with "possession" in this regard...'
10 Similarly Mason J commenced his judgment by asking what degree of 'possession, custody or control of documents' is necessary for their production to be required under a subpoena. In answering his own question his Honour said, at 143: 'Neither the Federal Court Rules nor the form of the subpoena issued by the Court explicitly limit the obligation to produce documents owed by a person served with a subpoena to documents which he holds. The subpoena, which has the effect of a court order, requires the person to whom it is addressed to produce the documents which it describes. It assumes that he has the ability or capacity to produce them. At times this idea has been expressed by saying that the person served is bound to produce any document which is in his possession, custody, or control. But these statements should not be allowed to obscure the true effect of the subpoena - it binds a person who can produce the documents to do so.' 11 It seems to me that the authorities make the position plain. The addressee of the subpoena must produce that which he has in his possession, power or control but he is not obliged to take steps to bring documents that do not fall within these concepts into his power or control: Air Pacific Ltd v Transport Workers Union of Australia (1993) 40 FCR 1 at 6-7, Pegasus Gold Australia Pty Ltd v Kilborn Engineering Pacific Pty Ltd (2000) 33 ACSR 752 ('Pegasus'). The issue in Pegasus was whether Kilborn, which was a beneficiary of an insurance policy held by its parent company, was required to produce the policy pursuant to an order for production (akin to a subpoena) addressed to Kilborn. Windeyer J applied Rochfort and dismissed the application. His Honour relevantly observed (at 755): 'It is clear that Kilborn has not the power to require the actual policy to be produced. The reason for this is that Kilborn does not own it and if it exists other persons have an interest in the policy. The best argument that could be put forward would be an argument that Kilborn had power to require its parent to furnish it with a copy of the policy, it being one of the beneficiaries under the policy and the policy to that extent being held on trust for it. I do not understand how it could be said that the order for production could give rise to a requirement that Kilborn require its parent to produce for it a document not shown to be in existence, namely a copy of the policy assuming its existence.' 12 PwC relied on Pegasus in support of its proposition that it does not, in fact, have the power to produce the documents held by its affiliates. As the comment quoted above makes clear Windeyer J found that Kilborn did not have the power to compel its parent to produce the actual insurance policy and that the most it could do would be to require its parent to make a copy. In these circumstances, his Honour held that the order to produce could not compel Kilborn to require its parent to produce a copy of the insurance policy, in order for it to be provided to the Court. The principle that the addressee of a subpoena does not have to create documents was determinative of this question. 13 The applicant readily conceded that the PwC affiliates are separate legal entities but submitted that this does not answer the question whether the relevant documents are in PwC's control. The applicant submitted that evidence produced by the applicant shows that PwC is able to produce the documents. For convenience I reproduce the applicant's summary of the evidence on which it relied in support of this proposition: '(a) The Aristocrat group of companies included substantial operations overseas … (b) The financial results of the overseas companies were incorporated into Aristocrat's annual reports, including its profit forecasts, which are the subject of this proceeding … (c) Many of the overseas companies, including all of the companies with "USA" operations, were "audited by other PricewaterhouseCoopers firms" in 2001 and 2002 … (d) "Audit and Assurance" work performed for Aristocrat by "overseas PricewaterhouseCoopers firms" was substantial. Such work cost Aristocrat AUD$244,500.00 in 2001… Work by "Related Practices of PricewaterhouseCoopers Australian firm (including overseas PricewaterhouseCoopers firms)" cost Aristocrat AUD$364,975.00 in 2002 … and AUD$745,093 in 2003. (e) PwC's Australian firm, and in particular its partners Mark Dow and DS Wiadrowski, was the contact point between the PwC organization and Aristocrat. The Sydney office was responsible for negotiating "global fee arrangements" for work including: (i) work in the United States business "Monitoring South American transactions and IGT Settlement"; (ii) "global statutory audit"; (iii) work for "each subsidiary [presumably meaning Aristocrat subsidiary] to comply with local standards, legislation and/or gaming regulations"; (iv) "any transactions or proposed transactions similar to Corporacion Meier, NeuvaStar … and the IGT Settlement".' 14 In explanation of (iv) above the written submissions for the applicant pointed out that 'the IGT Settlement is specifically mentioned in the pleadings, and Corporacion Meier and NeuvaStar refer to major South American contracts'. The submissions also asked the Court to note that PwC's arrangement with the applicant provided that all PwC fees would be issued by the Sydney firm in Australian dollars in order 'to maintain central control of our global relationship'. The applicant submitted that this evidence 'strongly suggests' that the overseas affiliates performed this audit and assurance work for Aristocrat as agents or delegates of PwC. 15 The applicant referred to the Audit and Assurance Standard 208, which requires an auditor to prepare and retain working papers including "details of procedures applied regarding components whose financial report is audited by another auditor". The applicant submitted that the obligation imposed by the standard must give PwC, at the very least, a right to inspect and obtain copies of material created or collected by its overseas affiliates in the course of the audit and assurance work which it had arranged for them to perform. That may be so, but even if PwC has the right to inspect and obtain copies, it is clear from the authorities referred to above that it is not obliged to obtain copies in response to the applicant's subpoena. I am not satisfied that the evidence is sufficient to establish that PwC has a right or power, contractual or otherwise, to compel its affiliates to provide it with the actual documents sought by the applicant. 16 In support of its conclusion that PwC had control of documents held by the overseas affiliates, the applicant argued that a Jones v Dunkel (1959) 101 CLR 298 type inference arose from PwC's failure to lead evidence as to the terms on which the overseas offices completed the audit and assurance work for the Aristocrat group. Such aninference is not appropriate here for at least two reasons. First such an inference is warranted only when 'enough has been proved to warrant a reasonable and just conclusion against him, in the absence of explanation or contradiction'; per Abbott CJ in R v Burdett (1820) 4 B & Ald 95; 106 ER 873 quoted in Fabre v Arenales (1992) 27 NSWLR 437 at 445 per Mahoney JA. In this case that condition has not been met. The fact that the overseas affiliates performed work for PwC is equally consistent with the relationship being one of independent contracting parties as of agency. 17 Secondly, as outlined above, the obligation of a subpoenaed party to provide documents is quite limited. The addressee is not required to assist the issuing party. The obligation to produce the documents that fall within the subpoena arises only in respect of those documents that the addressee can produce (see [6] above). Generally speaking, there is no verification obligation in relation to the production of documents pursuant to a subpoena. Whether in special circumstances such an obligation might arise or be imposed by a court is not presently under consideration and I make no comment on this issue. 18 In summary, I am not satisfied on the evidence before me that the documents held by PwC's overseas affiliates are in the possession, power or control of PwC or, to put it another way, that PwC can produce those documents. Consequently the application made in paragraph 3 of the notice of motion must be dismissed. I am inclined to think that PwC should have its costs incurred in respect of this aspect of the notice of motion but, if required, I will hear submissions from the parties as to the costs of this notice of motion at the next directions hearing. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stone.
Associate: Dated: 31 March 2006 Counsel for the Applicant: Mr LWL Armstrong
Solicitor for the Applicant: Maurice Blackburn Cashman
Solicitor for PricewaterhouseCoopers Mallesons Stephen Jaques
Date of Hearing: 17 March 2006
Date of Judgment: 31 March 2006
Dorajay Pty Limited
Aristocrat Leisure Limited
(1982) 153 CLR 134
(1993) 40 FCR 1
(1959) 101 CLR 298
(1992) 27 NSWLR 437