Gloucester (Sub-Holdings 1) Pty Ltd v Chief Commissioner of State Revenue

Supreme Court of NSW|2013-08-09|Before: White J, Giles J

arman [2005] EWCA Civ 1606; [2005] All ER (D) 298 Texts Cited: David M. Simon, "Extraterritorial Service of Administrative Subpoenas: Federal Trade Commission v Compagnie de Saint-Gobain-Pont-a-Mousson", (1981) 13 Law & Policy in International Business 847 at 855-857; Rachel Treichler, "Service of Process Abroad", (1981) 16 Texas International Law Journal 565 American Law Institute, Restatement (Second) of Foreign Relations Law (1965) s 44 Practical Handbook on the Operation of the Hague Service Convention, 3rd ed (2006) Wilson & Lafleur Ltée Category: Interlocutory applications Parties: Gloucester (Sub-Holdings 1) Pty Ltd (Plaintiff) Chief Commissioner of State Revenue (Defendant) Representation: Counsel: M Sealey (Defendant) Solicitors: Crown Solicitors (Defendant) File Number(s): 2012/255431

Nature of Proceedings 3The plaintiff purportedly seeks review of the defendant's decision to disallow its objection to the defendant's decisions made on 22 February and 17 April 2012 not to grant a full exemption, or alternatively a partial exemption, under s 163H of the Duties Act 1997 from duty otherwise exigible under Chapter 4 of the Duties Act on the plaintiff's acquisition of all the issued shares in Donaldson Coal Holdings Limited ("Donaldson Coal") completed on 14 July 2011. The application is made pursuant to s 97 of the Taxation Administration Act 1996. (The application for review should have been brought in respect of the decisions not to grant the exemptions that were the subject of the objection, not from the decision to disallow the objections, but nothing turns on this for present purposes.) 4According to the plaintiff's Appeal Statement, in the period prior to 15 May 2011 it was a direct wholly owned subsidiary of Gloucester Coal Limited ("Gloucester Coal") , a listed entity whose shares were traded on the Australian Securities Exchange. According to the plaintiff's Appeal Statement, Noble Group held an indirect interest of 65.3 per cent in Gloucester Coal through wholly owned subsidiaries. Noble Group is said to be incorporated in Bermuda and registered in Hong Kong. Its shares are listed on the Singapore Stock Exchange. According to the plaintiff's Appeal Statement, Donaldson Coal was an indirect wholly owned subsidiary of Noble Group. Donaldson Coal was a New South Wales based coal producer. The immediate holding company of Donaldson Coal was Mt. Vincent Holdings Pty Limited ("Mt Vincent") which was in turn an indirect wholly owned subsidiary of Noble Group Limited. 5According to the plaintiff's Appeal Statement on 15 May 2011 Mt. Vincent agreed to sell all its shares in Donaldson Coal to the plaintiff in consideration for $360 million to be satisfied by Gloucester Coal's issuing 36,923,076 fully paid ordinary shares at $9.75 per share to Noble Group. According to the plaintiff's Appeal Statement the transaction was completed on 14 July 2011 when the plaintiff acquired all of the shares in Donaldson Coal from Mt. Vincent. 6It appears from the Appeal Statements of the plaintiff and the defendant that it is common ground that Donaldson Coal was a "private landholder" within the meaning of the Duties Act 1997 and that the acquisition by the plaintiff of the shares in Donaldson Coal was a "relevant acquisition" of a "significant interest" in a landholder which, if not exempt, rendered the plaintiff liable to pay ad valorem duty at the general rate of duty prescribed by s 32 of that Act (Duties Act 1997, ss 146, 148, 149, 150, 151, 155, 157, 32). Section 155(7) provides that duty is not chargeable under that section on the acquisition of an interest in a landholder that is required to be disclosed in an acquisition statement if the acquisition is an exempt acquisition. The plaintiff contends that the acquisition was an "exempt acquisition" because the defendant ought to have exercised a discretion under s 163H of the Duties Act to exempt the acquisition from duty. The plaintiff has sought review of the defendant's refusal to exercise his discretion to grant an exemption in respect of the acquisition. The issue in the proceedings will be whether the Court, which will be required to exercise the discretion afresh (Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue [2011] HCA 41; (2011) 245 CLR 446), should be satisfied that the application of Ch 4 (dealing with acquisition of interests in landholders) to the acquisition in this case would not be just and reasonable. If so satisfied, either a full exemption or a partial exemption could be granted in respect of the acquisition. On 13 October 2011 the plaintiff paid $30,911,918.50 to the defendant on a without prejudice basis being what the plaintiff says was a "high level" estimate of the duty that would be payable if the acquisition is not exempt from duty. 7So far as can be discerned from the plaintiff's Appeal Statement, it appears that the ground upon which the plaintiff contends it is not just and reasonable for Ch 4 to apply to the acquisition was that the transaction was a "restructure of Noble's interest in Donaldson Coal" whose overall effect was to divest Noble Group of a 36.58 per cent economic or beneficial interest in Donaldson Coal and for that interest to be effectively acquired by Gloucester Coal's minority shareholders, with no person unrelated to Noble Group acquiring a "significant interest" or otherwise making a "relevant acquisition" in Donaldson Coal. It appears that the plaintiff contends that because Noble Group at all relevant times held a majority voting interest in Donaldson Coal and in Gloucester Coal, it would not be just and reasonable for the landholder provisions to apply to the acquisition by the plaintiff of the shares in Donaldson Coal.

The Proposed Subpoena 8The defendant sought leave to issue a subpoena requiring the production by Noble Group of documents containing advice from investment bankers and accountants about: a) the acquisition of Donaldson Coal by the plaintiff; b) a merger of Gloucester Coal and Yang Coal Australia Limited ("Yang Coal"); or c) acquiring, combining and/or divesting interests in Australian coal assets. 9The reason for seeking these documents is that on 23 December 2011 Gloucester Coal issued a market release about a proposed merger with Yang Coal. It announced that it had entered into a merger proposal deed with Yanzhou Coal Mine & Co Limited and its wholly owned Australian subsidiary, Yang Coal and that under the merger proposals, Gloucester Coal's assets would be combined with certain Australian assets of Yang Coal. Under the proposal Yang Coal would be owned 23 per cent by Gloucester Coal shareholders and 77 per cent by Yanzhou. According to Gloucester Coal's market release, Noble Group had stated that subject to approval by its directors and in the absence of a superior proposal, Noble Group intended to vote its shareholding in favour of the merger proposal and would elect to receive shares as scheme consideration. According to the market release Noble Group at that time controlled 64.5 per cent of the ordinary shares in Gloucester Coal. 10The defendant submitted that he required the subpoenaed documents from Noble Group to test the plaintiff's proposition in its Appeal Statement that the transfer of shares in Donaldson Coal from Mt. Vincent to the plaintiff was merely a restructure within the Noble Group. The defendant's position is that the acquisition was part of a wider strategy by Noble Group, that commenced well before the acquisition, to acquire and combine Australian coal assets into a package that would be attractive to a third party purchaser. He will submit that whether the acquisition was part of a wider strategy is relevant to the exercise of the discretion under s 163H. The defendant notes that because Gloucester Coal was a listed company and therefore a "public landholder" the duty on the acquisition by Yang Coal of the shares in Gloucester Coal was chargeable at ten per cent of the duty that would be chargeable at the general rate on the transfer of all of the landholdings and goods of Gloucester Coal in New South Wales to Yang Coal (Duties Act, s 156). The defendant submits that if the acquisition by Gloucester Coal of Mt. Vincent's shares in Donaldson Coal was part of a wider strategy of packaging the coal assets into a listed company (Gloucester Coal) to enable a third party (Yang Coal) to acquire a 100 per cent interest in the New South Wales landholdings of Noble Group's subsidiaries at the substantially reduced listed company landholder duty rate, that is relevant to whether the discretion under s163H should be exercised in the plaintiff's favour. 11I accept that the documents sought by the defendant from Noble Group are likely to be relevant to the determination of the issues raised. Although Noble Group Limited did not appear on the application for leave to issue the subpoena, the defendant tendered a letter from its solicitors, Clayton Utz, objecting to the subpoena. In that letter, Clayton Utz contended that the breadth of the categories of documents that the subpoena sought was in the nature of general discovery and was a fishing expedition. Without having heard Noble Group in support of that argument, it appears to me, prima facie, that the subpoena is not merely fishing and it is likely that documents of the kind sought exist. If Noble Group had a presence in Australia, I would see no reason not to issue the subpoena for service on it in Australia.

Uniform Civil Procedure Rules: Rule 11.5 12Rule 11.5 of the UCPR 2005 provides: "11.5 Service of documents other than originating process (cf SCR Part 10, rule 3) Service outside Australia of a document other than originating process is valid only if it is effected pursuant to the leave of the Supreme Court or is subsequently confirmed by the Supreme Court." 13A subpoena is a document other than an originating process and consequently r 11.5 regulates the service of subpoenas outside Australia. 14The reason I refused leave to serve the subpoena on Noble Group in Hong Kong is because to do so would be to exercise the judicial power of New South Wales in a foreign State, contrary to the principles of international comity. The reason I indicated my willingness to sign a Letter of Request for the purposes of the procedure specified in the Hague Evidence Convention (to which China is a party) is because to do so would be consistent with principles of comity. 15In CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345 at 396-397 Dawson, Toohey, Gaudron, McHugh, Gummow and Kirby JJ approved an explanation of comity by the United States Supreme Court in Hilton v Guyot (1895) 159 US 113 at 163-164, which described comity as: "the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws." 16Comity includes that principle of restraint by which courts, recognising the essentially territorial nature of their jurisdiction, are slow to assert their judicial power beyond the limits of their own jurisdiction so as to interfere with the sovereignty of a foreign State. The defendant recognised that this aspect of the principle of comity is a relevant factor when a court is considering exercising its judicial power in a foreign State through the issue of a subpoena to a recipient in that foreign State. However, the defendant submitted that considerations of globalisation mean that comity should now be regarded as a less important factor than was formerly the case when a court is considering whether to exercise restraint. 17In support of this submission, the defendant referred to Caswell v Sony/ATV Music Publishing (Australia) Pty Ltd [2012] NSWSC 986 ("Caswell") in which Hallen AsJ (as his Honour then was) dismissed an application to set aside a grant of leave to issue a subpoena in the United States. His Honour said at [117]: "In this day and age, in a highly integrated world economy, I am of the view that the principle of comity may have less weight than it did in the past. Developments in communication and transport are practical considerations that should also be considered. Issues of extraterritoriality must now be viewed in the light of the substantial changes that have taken place, in recent times, in the way businesses communicate with each other. As is obvious from the connection between the Defendant and the Applicant, the business of each operates in a global economy." 18The defendant also submitted that UCPR, r 11.5 was to be interpreted and applied in a way that would facilitate the quick, cheap and just resolution of the real issues in the proceedings (Civil Procedure Act 2005, s 56) and this meant that leave should be granted. 19Rule 11.5 is silent as to when the Court can or should give leave for the service outside Australia of a document other than an originating process or subsequently confirm such service.

The Decision in Caswell 20In the absence of statutory authority the Court does not have power to issue a subpoena for service in a foreign State (Ward v Interag Pty Ltd [1985] 2 Qd R 552; Re Austral Oil Estates (in liq) (1986) 7 NSWLR 440). Rule 11.5 or its predecessor (Supreme Court Rules 1970, Pt 10 r 3) has been construed as providing such statutory authority. Where there is statutory authority for the extra-territorial exercise of jurisdiction, the jurisdiction has been described as "exorbitant", although the expression has been criticised (Arhill Pty Ltd v General Terminal Company Pty Ltd (1990) 23 NSWLR 545 at 551 citing The Siskina [1979] AC 201 at 254). Where possible, statutes are to be construed conformably with the comity of nations and established rules of international law (Barcelo v Electrolytic Zinc Co of Australasia Ltd (1932) 48 CLR 391 at 423-424; Polites v Commonwealth (1945) 70 CLR 60 at 68-69; Minister for Immigration and Ethnic Affairs v Teoh (1995) 183 CLR 273 at 287; Plaintiff M70/2011 v Minister for Immigration and Citizenship (2011) 244 CLR 144 at 234). 21 In Arhill Pty Ltd v General Terminal Co Pty Ltd, Rogers CJ Comm D said of a similar earlier rule of court (at 553): "Part 10, r 3 is in terms clear authority for the Court to give leave to serve a subpoena outside Australia. The fact that an order made pursuant to it could, in some instances, involve an infringement of the sovereignty of another country does not mean that it is a reason for holding the rule to be invalid. Nonetheless, the rule should be construed consistently with 'the established criteria of international law with regard to comity': cf [Re Tucker; ex parte Tucker] [1988] 2 WLR 748 at 758; [1988] 1 All ER 603 at 611]" 22Rogers CJ Comm D held that Part 10, r 3 of the Supreme Court Rules (the predecessor to UCPR, r 11.5) did not authorise the grant of leave for the service of a subpoena on a Japanese company in Japan (at 553). The reason was that to do so would be contrary to principles of international law and comity that require respect to be given to the sovereignty of the foreign State where that sovereignty would be infringed by the exercise of judicial power by this Court in the foreign State. 23In Re Deposit and Investment Co Ltd (1991) 30 FCR 463, Lockhart J held that a rule of the Federal Court similar to UCPR, r 11.5 was not to be read as an extension of the Court's jurisdiction. His Honour said (at 466): "To invade the sovereignty of another country's jurisdiction and interfere with its sole power over persons present within it, stronger and clearer language is needed ..." 24In that case counsel had relied on Order 8, r 3 of the Federal Court Rules as authority for the service of examination orders under s 597 of the Corporations Law on persons resident in Hong Kong and Japan. His Honour held that although the rule was couched in very wide terms, it must be read as a procedural provision and not as an extension of the Court's jurisdiction over persons outside Australia. (Examination summonses pursuant to ss 596A and 596B of the Corporations Act 2001 (Cth) may be issued to persons overseas pursuant to UCPR Pt 11.5 and its equivalents because of the express extra-territorial operation of that Act provided by s 5 (Waller v Freehills [2009] FCAFC 89; (2009) 258 ALR 67 at [53]-[58]).) 25Other decisions to the same effect of Arhill and Re Deposit and Investment Co. Ltd include Aetna Pacific Securities Limited v Hong Kong Bank of Australia Limited (Supreme Court of NSW, Giles J, 29 April 1993, unreported; BC9301701); News Corporation Limited v Lenfest Communications Inc (1996) 40 NSWLR 250 at 261; Gao v Zhu [2002] VSC 64 at [13]; Stemcor (A/sia) Pty Ltd v Oceanwave Line SA [2004] FCA 391 at [11]; Ives v Lim [2010] WASC 136 at [18]; Levy Schneider v Caesarstone Australia Pty Ltd [2012] VSC 126 at [6]; and Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International NV [2007] FCAFC 43; (2007) 157 FCR 558 at [13]-[16]. In all these cases it has been held either that the relevant rule does not confer power to issue a subpoena or make an order requiring the production of documents from a person overseas, or that, assuming such power to exist, it would not be proper to exercise the power because to do so would invade the sovereignty of the foreign State. Some cases have held that it is only in exceptional or most exceptional circumstances that such a power should be exercised (e.g. Mackinnon v Donaldson, Lufkin and Jennette Securities Corporation [1986] Ch 482 at 493; Stemcor (A/sia Pty Ltd v Oceanwave Line SA at [11]; Gao v Zhu at [15]; but cf Hua Wang Bank Berhad v Commissioner of Taxation [2013] FCAFC 28; (2013) 296 ALR 479 at [15]-[26]). (Different considerations may apply if the overseas person is a party in respect of whom the Court has jurisdiction, as in Hua Wang Bank Berhad v Commissioner of Taxation at [26]). 26In Sweeney v Howard [2007] NSWSC 262, Windeyer J dismissed a notice of motion seeking to set aside a subpoena served on the applicant in the United Kingdom by way of substituted service on her solicitors. His Honour said (at [11]): "[11] I consider that r 11.5 does give authority for a subpoena to be served outside Australia and, in the circumstances of the present case, there is nothing in the comity of nations which would require the court to resist this. According to information made public by the Attorney-General, the government of the United Kingdom does not consider service in the United Kingdom of a subpoena issued out of a foreign court to be an interference with the governance of that country, or an interference in its sovereign affairs. Nevertheless, the position has at least ordinarily been accepted that there is no jurisdiction to serve this type of process overseas. It is true that in cases where the court has assumed extended jurisdiction under Pt 11 of the Rules originating process can, as a matter of course, be served overseas. However, in such a case, if there is no appearance, leave to proceed is necessary before the matter can be taken further." 27Windeyer J did not further identify the information made public by the Attorney-General that the Government of the United Kingdom does not consider service in the United Kingdom of a subpoena issued out of a foreign Court to be an interference with its sovereign affairs. There is no such evidence about the attitude of the Government of the People's Republic of China in relation to the Special Administrative Region of Hong Kong. 28In Caswell, Hallen AsJ referred to many of these cases and said: "[101] The conclusion I draw from this survey of authority is that the court, under UCPR r 11.5, has power to authorise a subpoena to be served outside Australia, with the leave of the court, and it has power to subsequently confirm service of that subpoena. The burden of convincing the court to accept jurisdiction is on the Plaintiff. Doubt should be resolved in favour of the recipient located outside Australia and the court should be careful in acceding to jurisdiction. [102] I then turn to the question whether leave in this case should have been granted, or whether having been granted, the subpoena should be set aside, now, on discretionary grounds. In doing so, I recognise the special need for care when exercising an extra-territorial discretionary power and the use of the phrase 'exceptional circumstances' in some of the authorities. (I take that phrase to apply to a variety of circumstances. It generally means circumstances that are unusual, or special, or uncommon, or out of the ordinary. They need not be unique, or unprecedented, or very rare, but they cannot be circumstances that are regularly, routinely or normally encountered. The circumstances may be considered either singularly or combined. No definition that limits the application of the phrase should be adopted.) ... [112] However, all of the authorities to which I have referred, have discussed the caution that is required where there is an intrusion upon the sovereignty of a foreign state." 29With respect, the authorities establish more than that. They establish that the Court's power to grant leave to issue a subpoena to a person outside Australia is to be exercised in accordance with the principle of comity that respects the sovereignty of a foreign country, unless it is shown that the foreign country does not object to the purported exercise of judicial power by this State against persons in the foreign State. Thus in Spirits International, the Full Court of the Federal Court set aside an order of a primary judge requiring discovery against an overseas third party whom the primary judge considered to be the "real" applicant on the cross-claim saying: "[13] ... In considering, however, whether there was an error of principle in making the order, its effect must be looked at to see whether appropriate regard has been paid to international comity and to whether the order involves an inappropriate intrusion upon the sovereignty of a foreign state. [14] It is in these respects that we are persuaded that his Honour made an error of principle. His Honour was undoubtedly concerned about the invasion of the sovereignty of a foreign state. He considered the principles referred to in Stemcor (Australasia) Pty Ltd v Oceanwave Line SA [2004] FCA 391 at [12] per Allsop J; Arhill Pty Ltd v General Percival Company (1990) 23 NSWLR 545 and Aetna Pacific Securities Ltd v Hong Kong Bank of Australia Ltd (unreported, Supreme Court of New South Wales, Giles J, 29 April 1993) in respect of applications for leave to serve subpoenas outside the jurisdiction upon a non-party foreign entity. Nevertheless, his Honour did not, we consider, act with the caution that the principled exercise of the discretion requires where there is an intrusion upon the sovereignty of a foreign state. [15] The nature of the required caution was explained by Rogers CJ Comm D in Arhill 23 NSWLR 545. His Honour there emphasised the need for restraint upon subjecting a foreign entity (not, of course, in that case a foreign state) to local jurisdiction and the need to construe any powers conferred upon the court 'consistently with the established criteria of international law with regard to comity' (at 553). It is important to note that, as in this case, the third party affected by the order in Arhill 23 NSWLR 545 was regarded by the judge as a 'real' party to the action (at 555). Despite this, the subpoenas were set aside. The approach in Arhill 23 NSWLR 545 was adopted by Allsop J in Stemcor [2004] FCA 391 at [12] where his Honour said that 'the service of an order upon a German company demanding that it do something in Australia on pain of punishment in proceedings to which it has not submitted is such an invasion of German sovereignty as not to be contemplated except in the most exceptional circumstances'. His Honour there was discussing service in Germany of a subpoena issued by an Australian court, in circumstances where there was no sanction for non-compliance. Whilst the only sanction for non-compliance in this case would have been a stay of the main proceedings, which would have operated only indirectly on the Russian Federation, we are of the view that the approach adopted in Arhill 23 NSWLR 545 and Stemcor [2004] FCA 391 ought to have guided the exercise of the discretion in the present case." 30The better view, consistently with the principle that statutes are to be construed conformably with the comity of nations and established rules of international law, where that is possible, is that this is a restriction on power and not merely a guide to the proper exercise of discretion. But if the question is characterised as one of discretion, all of the cases, except Sweeney v Howard, where issues of comity did not arise, are authority for the proposition that the discretion to make such orders against an overseas non-party should not be exercised where to do so would be to infringe the sovereignty of the foreign State.

Globalisation: Analogy with Service of Originating Process Overseas 31In Caswell, Hallen AsJ went on to say: "[117] In this day and age, in a highly integrated world economy, I am of the view that the principle of comity may have less weight than it did in the past. Developments in communication and transport are practical considerations that should also be considered. Issues of extraterritoriality must now be viewed in the light of the substantial changes that have taken place, in recent times, in the way businesses communicate with each other. As is obvious from the connection between the Defendant and the Applicant, the business of each operates in a global economy. [118] This view is supported by what was noted by Gaudron, McHugh, Gummow and Hayne JJ in Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552, at 570-1, albeit dealing with service of originating process outside the jurisdiction: 'Considerations of comity, and consequent restraint, have informed many of the reported decisions about service out of the jurisdiction. It is, however, important to notice that rules of court, or local statutes, providing for service outside the jurisdiction are now commonplace - at least in jurisdictions whose legal systems have been formed or influenced by common law traditions. Further, as the Court of Appeal rightly noted in its reasons in these matters, contemporary developments in communications and transport make the degree of "inconvenience and annoyance" to which a foreign defendant would be put, if brought into the courts of this jurisdiction, "of a qualitatively different order to that which existed in 1885"' The considerations of comity and restraint, to which reference has so often been made in cases concerning service out of the jurisdiction, will often be of greatest relevance in considering questions of forum non conveniens. The starting point for the present inquiry, however, must be the terms of the Rules, not any general considerations of the kind just mentioned. [119] I accept, however, that whilst the principle of comity should be adjusted in the light of a changing world order, this is not to say that those principles should be ignored or diminished. They are clearly relevant at the discretionary phase. I have borne these principles in mind." 32I do not consider that Agar v Hyde supports the view that comity is a less important factor than it has been considered to be in the authorities concerning the issue of a subpoena to a non-party in a foreign State. In my view, considerations relevant to the issue of an originating process overseas are different from those pertaining to the issue of a subpoena to a person overseas because of the compulsive nature of the subpoena. Service of an originating process notifies the defendant of the proceedings and renders the defendant liable to judgment thus compelling the defendant to choose whether or not to appear and defend the proceedings. Service of a subpoena is a more direct exercise of judicial power. A person, including a resident of a foreign State, who is validly served with a subpoena, but fails to comply with it, will be liable to punishment for contempt for failing to comply with the order of the local court that issues the subpoena. Punishment for the contempt could include sequestration of any property of the person in the State from which the subpoena was issued. 33In News Corporation Limited v Lenfest Communications Inc, Giles CJ Comm D (as his Honour then was) referred (at 259) to academic commentary that question the validity of drawing a distinction between the service overseas of a subpoena and originating process. The articles to which his Honour referred (David M. Simon, "Extraterritorial Service of Administrative Subpoenas: Federal Trade Commission v Compagnie de Saint-Gobain-Pont-a-Mousson", (1981) 13 Law & Policy in International Business 847 at 855-857; Rachel Treichler, "Service of Process Abroad", (1981) 16 Texas International Law Journal 565 at 569, 571) considered Federal Trade Commission v Compagnie de Saint-Gobain-Pont-à-Mousson 636 F 2d 1300 (DC Cir 1980) ("SGPM") in which the Court of Appeals for the District of Columbia held that the service of a subpoena issued by the Federal Trade Commission outside the United States as part of an antitrust investigation was contrary to international law as a violation of the sovereignty of the State in which the subpoena was sought to be served. The Court (at 1311) distinguished a subpoena from an originating process, saying that the latter was merely giving notice of a complaint initiating a lawsuit. There is no coercive power brought to bear on the recipient by the issue of the originating process itself, as distinct from the consequences of default judgment. On the other hand, a subpoena compels the recipient to do something with the penalty for non-compliance being contempt proceedings. 34This distinction was doubted by the District Court in Indiana in Doe v Hersemann 155 FRD 630 (1994) and the District Court in New York in Ultradent Products, Inc v Hayman 2002 WL 31119425 ("SDNY"). However, it was referred to with apparent approval by the Ninth Circuit of the United States Court of Appeals in Securities and Exchange Commission v International Swiss Investments Corporation 895 F 2d 1272 (1990). 35I think that there is a valid distinction between an originating process and a subpoena for the reasons advanced in SGPM. A subpoena compels the recipient to do something on pain of contempt proceedings for non-compliance. The issuing of the subpoena to the recipient is an assertion by the Court that the recipient, on pain of punishment, must comply with the court's order even though he is on foreign soil. It is a very real exercise of the judicial power of the issuing State over the recipient in the territory in which the recipient is located. 36On the other hand, by issuing originating process a New South Wales Court does not claim a jurisdiction over the recipient to compel the recipient to answer. Failure to enter an appearance is not punishable by contempt. Rather, by entering a default judgment the Court claims jurisdiction over the subject matter of the proceeding. As the High Court observed in Agar v Hyde the assumption of jurisdiction over persons outside the State where the subject matter of the cause of action has a sufficient connection with the State is now commonplace in common law jurisdictions. The same cannot be said in respect of service of subpoenas abroad. Hence I regard the issue of a subpoena outside Australia as potentially involving substantially greater offence to the principle of comity than service of an originating process. 37For completeness, I note that in the United States Blackmer v United States 284 US 421 (1932) indicates that in some situations and in some jurisdictions a subpoena may not be regarded as coercive but rather has effect as a form of notice. That case concerned the issue of a subpoena to attend issued to a United States citizen resident in France and purportedly served in France. The United States Supreme Court held that service of the subpoena did not violate international law. The conclusion that service of the subpoena did not violate France's sovereignty turned substantially on the fact that as the recipient was a United States citizen, the United States claimed an in personam jurisdiction over the recipient to require him to return (at 437-438) and that in the circumstances the subpoena constituted mere notice of this in personam compulsion, thereby not offending France's sovereignty (at 439). It appears that Blackmer is regarded as standing for the proposition that the restraint exercised by courts in not asserting their jurisdiction in the territory of a foreign State does not extend to routine administrative actions such as giving of notice (see American Law Institute, Restatement (Second) of Foreign Relations Law (1965) s 44 comment (b)). Regardless of whether the same principle would apply in Australia, the instant case is not one of mere notice. It is distinctly one of compulsion. Moreover, the recipient of the subpoena is not incorporated in Australia and so there is no question of an in personam jurisdiction equivalent to that in Blackmer. 38In my view, Agar v Hyde does not warrant departing from the principles, established by the line of authorities considered in Caswell. 39The fact that the world economy is more highly integrated than it was in the past and that there have been developments in communication and transport does not mean that countries are more relaxed than they would formerly have been to the exercise in their territory of the judicial power of a foreign State. Such a proposition would require evidence. As I have said, there was no evidence that the People's Republic of China would have no objection to the exercise by this Court of judicial power over a company registered in Hong Kong. The fact that China is a signatory to the Hague Evidence Convention and to the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters done at the Hague on 15 November 1965 ("the Hague Service Convention") indicates the contrary. I infer that China would expect the Convention procedures to be followed.

The Hague Service Convention and the Hague Evidence Convention 40Both Australia and the People's Republic of China have acceded to the Hague Service Convention. The Convention provides a means by which documents may be served in Contracting States. Article 1 provides that the Convention applies in all cases, in civil or commercial matters, where there is occasion to transmit a judicial or extra judicial document for service abroad. Under Article 2 each Contracting State is to designate a Central Authority to receive requests for service coming from other Contracting States. By Article 3 the authority or judicial officer competent under the law of the State in which documents originate is to forward to the Central Authority of the State a request conforming to a model annexed to the Convention. Article 5 provides for the Central Authority of the State addressed to itself serve the document or arrange to have it served by an appropriate agency. Article 10 provides: "Provided the State of destination does not object, the present Convention shall not interfere with - a) the freedom to send judicial documents, by postal channels, directly to persons abroad, b) the freedom of judicial officers, officials or other competent persons of the State of origin to effect service of judicial documents directly through the judicial officers, officials or other competent persons of the State of destination, c) the freedom of any person interested in a judicial proceeding to effect service of judicial documents directly through the judicial officers, officials or other competent persons of the State of destination." 41The Convention prescribes the standard forms that are to accompany the documents to be served and makes provision for how costs of sending the documents are to be borne. 42The Service Convention was extended to Hong Kong by the United Kingdom with effect from 19 July 1970. By a note dated 10 June 1997 the People's Republic of China declared that the Convention would apply to the Hong Kong Special Administrative Region with effect from 1 July 1997 and that the Government of the People's Republic of China would assume responsibility for the international rights and obligations arising from the application of the Convention to Hong Kong. The following declaration (which repeated an earlier declaration that had been made by the United Kingdom in relation to Hong Kong) was made: "With reference to the provisions of sub-paragraphs b and c of Article 10 of the Convention, documents for service through official channels will be accepted in the Hong Kong Special Administrative Region only by the Central Authority or other authority designated, and only from judicial, consular or diplomatic officers of other Contracting States." 43There was no objection to the service of judicial documents by postal channels directly to persons abroad pursuant to Article 10(a). However, pursuant to UCPR, r 33.5 a subpoena issued by the Supreme Court must be served personally on the addressee. 44Part 11.A of the Uniform Civil Procedure Rules implements the Hague Service Convention and provides the procedures for the transmission of judicial documents by the Registrar to the relevant authorities in the convention country in which service is to be effected. 45In Schneider v Caesarstone Australia Pty Ltd [2012] VSC 126, Davies J considered O 80 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic), which implements the Convention in Victoria. In that case the plaintiffs urged that O 80 abrogated the need to seek the Court's leave to serve a subpoena to give evidence on a person outside Australia pursuant to r 7.06(c) of those rules, which is materially similar to r 11.5 of the UCPR. Davies J rejected that submission. Her Honour said at [4]: "Order 80 simply prescribes the process which must be undertaken in order for a request for service to be made to the relevant authority of the foreign Convention country. Order 80 does not give authority to the Prothonotary to allow service of a local judicial document outside of Australia. Where O 80 applies, the Convention may be relied [on] for the purposes of transmitting a request for service of a local judicial document abroad. But the Convention does not by its own force authorise service of documents abroad. The Convention's purpose is to facilitate the transmission of a letter of request where a document is to be served abroad and to facilitate the execution of service in the foreign country." 46I agree. In Practical Handbook on the Operation of the Hague Service Convention, 3rd ed (2006) Wilson & Lafleur Ltée, the Permanent Bureau of the Hague Conference on Private International Law records at xxv that: "The Convention deals primarily with the transmission of documents from one State to another State; the Convention does not address or comprise substantive rules relating to the actual service of process." (emphasis in original) 47The Convention recites: "The States signatory to the present Convention, Desiring to create appropriate means to ensure that judicial and extrajudicial documents to be served abroad shall be brought to the notice of the addressee in sufficient time, Desiring to improve the organisation of mutual judicial assistance for that purpose by simplifying and expediting the procedure, Have resolved to conclude a Convention to this effect and have agreed upon the following provisions..." 48An English translation of the Explanatory Report of the Convention can be found at p 5 (para [6]) of the Practical Handbook referred to above, which states that the objectives of the Convention are: "a To establish a system which, to the extent possible, brings actual notice of the document to be served to the recipient in sufficient time to enable him to defend himself. b To simplify the method of transmission of these documents from the requesting State to the requested State. c To facilitate proof that service has been effected abroad, by means of certificates contained in a uniform model." 49The recital to the Hague Service Convention and the objectives as reflected in the Explanatory Report demonstrate that the purpose of the Convention is to deal with aspects of form and notice in respect of transmission of documents. It does not go to authority to serve processes in foreign States. The fact that a State has acceded to the Hague Service Convention does not indicate that that State is willing to accept foreign processes served in accordance with the domestic law of the foreign State. On the contrary, if leave were given under UCPR, r 11.5 for service of the subpoena in Hong Kong then, unless personal service were dispensed with, service would have to be effected in accordance with the Service Convention procedures. Nonetheless the Service Convention is not directly relevant to the decision whether leave can or should be given under UCPR, r 11.5 (cf Caswell at [35]). 50On the other hand, the Hague Evidence Convention is directly relevant. Australia and the People's Republic of China are parties to the convention. Article 1 provides: "In civil or commercial matters a judicial authority of a Contracting State may, in accordance with the provisions of the law of that State, request the competent authority of another Contracting State, by means of a Letter of Request, to obtain evidence, or to perform some other judicial act." 51A Contracting State is to designate a Central Authority to receive Letters of Request coming from a judicial authority from another Contracting State and to transmit them to the authority competent to execute them. The Supreme Court of Hong Kong is the Central Authority for Hong Kong. Article 9 provides that the judicial authority which executes the Letter of Request is to apply its own laws to the methods and procedures to be followed but will follow a request of the requesting authority that a special method or procedure be followed unless this is incompatible with the internal law of the State of execution or is impossible of performance by reason of its internal practice and procedure or by reason of practical difficulties. A Letter of Request is to be executed expeditiously. By Article 10 the requested authority is to apply appropriate measures of compulsion. By Article 12 execution of a Letter of Request may be refused only to the extent that in the State of execution, the execution of the letter does not fall within the functions of the judiciary or the State addressed considers that its sovereignty or security would be prejudiced. 52Part VIII of the Evidence Ordinance (Hong Kong) provides for execution of Letters of Request received by Hong Kong. Section 75 provides jurisdiction to the Hong Kong Court of First Instance to hear applications for an order for evidence to be obtained in Hong Kong made pursuant to a request from a court or tribunal exercising jurisdiction in a country or territory outside Hong Kong. Section 76 provides that that Court has power to make provision for obtaining evidence in Hong Kong for the purpose of giving effect to the request as the Court considers appropriate, and it goes on to provide particular examples of orders that may be made. In particular, subs (2)(b) provides for the power to make an order to produce documents. Similar provision is made in New South Wales for dealing with incoming Letters of Request by ss 32 and 33 of the Evidence on Commission Act 1995 (NSW). 53The defendant submitted that the existence of the Hague Evidence Convention and the fact that the domestic law of Australia and Hong Kong have a "parallel process" for obtaining evidence locally for the use in foreign proceedings mean that the issuing of a subpoena by this Court to be served in Hong Kong would not offend Hong Kong's sovereignty. He submitted that membership of the Convention and provision of domestic processes to implement the Convention effectively constituted consent to receipt of documents such as subpoenas within Hong Kong from foreign States. 54I do not accept that submission. Hong Kong is a signatory to the Convention and it has implemented the Convention in its domestic law by providing a process for obtaining evidence locally for use in foreign proceedings. This is a specific process governed by the laws of Hong Kong and overseen by the Hong Kong Supreme Court. This does not evince an intention by Hong Kong for foreign States to exercise their judicial power in Hong Kong for the purposes of obtaining evidence by whatever means the domestic law of the issuing foreign State provides. One cannot infer from Hong Kong's implementation of the Convention that by permitting evidence to be obtained locally for foreign proceedings by one particular method under the aegis of Hong Kong's judiciary that it is equally welcoming of attempts to obtain evidence by a different method controlled by a foreign State's judiciary. While the Convention may be consonant with a broad theme of increasing globalisation and international trade and commerce, this does not mean that States are more willing to allow the exercise of foreign judicial power within their territory. Indeed, that the Convention provides a protocol whereby Letters of Request are executed by local judicial authorities, rather than those of the issuing foreign State, suggests the obverse. 55In Caswell, the unsuccessful applicant argued that it was inconsistent with the reciprocal arrangements embodied in the Hague Evidence Convention for the Court to grant leave to serve a subpoena outside Australia which would circumvent the Letters of Request procedure under Chapter 1 and in effect remove the oversight that would be exercised by a United States court receiving the request (at [43]). That submission was not separately dealt with in the reasons for judgment. In my view, it is a compelling consideration.

Jurisdiction to Issue a Letter of Request for Production of Documents 56The Hague Evidence Convention provides the means by which one Contracting State can request the common authority of another Contracting State by means of a Letter of Request to "obtain evidence, or ... perform some other judicial act". In the context of a Convention that applies both to common law and civilian systems, the obtaining of evidence would include requiring the production of documents that might or might not be tendered into evidence in the proceeding. In any event the service of a subpoena for the production of documents that might be tendered in evidence would be a judicial act that is covered by the Convention (Panayiotou v Sony Music Entertainment (UK) Limited [1994] Ch 142). 57The submissions for the defendant assumed that this Court has power to issue a Letter of Request pursuant to the Hague Evidence Convention. When I indicated that I would be willing to issue such a Letter of Request, I made the same assumption. I have heard no argument on that question. However, it may be that s 6 of the Evidence on Commission Act 1995 (NSW) would not confer the requisite power on this Court to issue such a Letter of Request. That section provides: "6 Orders for taking evidence abroad (1) In any proceeding before a superior court, the court may, if it appears in the interests of justice to do so, on the application of a party to the proceeding, make an order relating to a person outside Australia: (a) for examination of the person on oath or affirmation at any place outside Australia before a judge of the court, an officer of the court or such other person as the court may appoint, or (b) for issue of a commission for examination of the person on oath or affirmation at any place outside Australia, or (c) for issue of a letter of request to the judicial authorities of a foreign country to take the evidence of a person or cause it to be taken. (2) In deciding whether it is in the interests of justice to make such an order, the matters to which the superior court is to have regard include the following: (a) whether the person is willing or able to come to the State to give evidence in the proceeding, (b) whether the person will be able to give evidence material to any issue to be tried in the proceeding, (c) whether, having regard to the interests of the parties to the proceeding, justice will be better served by making or refusing to make the order." 58Section 6 of the Evidence on Commission Act is in materially the same terms as s 7V(1) and (2) of the Evidence Act 1905 (Cth) considered by Gummow J in Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd (1987) 14 FCR 461. His Honour held that the section only authorised the issue of a Letter of Request to the judicial authorities of a foreign country for the production of documents ancillary to the taking of the oral testimony of a witness and did not authorise orders that in effect provided for discovery of documents against a person not a party to the action otherwise than at a proceeding for the taking of evidence (at 465). 59In Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd, Gummow J also held that although the Federal Court was established as a court of equity and a superior court of record with "judicature" powers, those powers did not extend to issuing a Letter of Request for evidence to be obtained by an order of the English High Court of Justice for the production of documents pursuant to the Hague Evidence Convention because that was not an inherent power exercised by the Court of Chancery or the Court of Exchequer on its equity side. Those courts had claimed and exercised an inherent power to issue commissions for the taking of evidence overseas. The exercise of that power had led to objections from foreign governments. It was those procedures that were replaced by the issue of Letters of Request to foreign courts, but the English courts had not sought either to issue a subpoena for the production of documents to persons overseas nor to issue a Letter of Request to foreign courts to require the production of such documents (at 466-467). 60In Panayiotou v Sony Music Entertainment UK Limited, Sir Donald Nicholls VC held that the English High Court of Justice had inherent jurisdiction to make a request to a court in New York to obtain the production of specified documents because both England and the United States were parties to the Hague Evidence Convention. His Lordship was not referred to Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd. 61In McGrath as Liquidators of HIH Insurance Ltd [2008] NSWSC 780 and [2008] NSWSC 881, Barrett J issued letters of request to the courts of England and Wales and Hong Kong for the issue of examination summonses, but did so pursuant to the power conferred in corporations matters by s 581(4) of the Corporations Act. 62It would be inappropriate for me to express a view as to whether this Court does have jurisdiction to issue a Letter of Request to the Supreme Court of Hong Kong for the production of documents pursuant to the Hague Evidence Convention. Although I indicated that I would be willing to accede to such a request, I did so in the course of argument on the assumption that there was jurisdiction to do so, as the defendant's argument also assumed, without having occasion to consider the question. That question would only need to be considered if an application is made by the defendant for the issue of such a Letter of Request. I express no view on that question. 63I recommend that the Uniform Rules Committee consider the adoption of a rule for the express conferral of the requisite power. 64Even if this Court does not have jurisdiction to issue such a Letter of Request pursuant to the Hague Evidence Convention either under the Evidence on Commission Act 2006 or in the Court's inherent jurisdiction, that does not mean that UCPR, r 11.5 provides the necessary jurisdiction. The rule should be construed in accordance with principles of international law that include principles of comity that respect the sovereignty of foreign States that would be infringed by the purported exercise by this Court of the judicial power of New South Wales in those foreign States. That is so even if there is no power for this Court to make a request pursuant to the Hague Evidence Convention to the Central Authority of another Convention country to order the production of documents for proceedings in this Court. Assuming, without deciding, that neither the Evidence on Commission Act 2005, nor the inherent jurisdiction of the Court provides the necessary authority for the issue of the Letter of Request, the absence of such authority would simply be the result of neither the New South Wales Parliament nor the Uniform Rules Committee passing the necessary legislation or making the relevant rule to permit New South Wales to have the full benefit of the Convention. If, which I do not decide, New South Wales does not have the full benefit of the Convention because legislation, or delegated legislation, is needed and has not been passed, that does not alter the fact that for the Court to issue a subpoena requiring compliance by a company in Hong Kong would be to encroach on the sovereignty of the People's Republic of China.

Section 56 of the Civil Procedure Act 65In Caswell, Hallen AsJ supported his construction of r 11.7 by reference to s 56 of the Civil Procedure Act. Section 56 provides that when interpreting any provision of the Civil Procedure Act or the Rules of Court, the Court must seek to give effect to the overriding purpose of facilitating the just quick and cheap resolution of the real issues in the proceedings. Rule 11.5 was made by the Uniform Rules Committee in the exercise of the power conferred by s 9. Both the rule-making power and the rule itself are to be construed in accordance with the comity of nations and established principles of international law unless the contrary clearly appears. In my view, r 11.5 is to be interpreted in a way that would facilitate the quick, cheap and just resolution of the real issues in the proceedings insofar as that it is in accordance with the comity of nations and principles of international law. 66Further, I am not persuaded that the issue of a subpoena for service on Noble Group in Hong Kong would facilitate the quick and cheap resolution of the real issues in the proceedings. Nor do I consider that refusal to give leave for the issue of such a subpoena at the request of the defendant would militate against the just resolution of the issues in the proceedings. If the subpoena were issued to Noble Group in Hong Kong, it is clear that that company would apply to have the order granting leave set aside. That application could spawn its own litigation with the prospect of an application for leave to appeal being made by a party that was unsuccessful in the application. That would be likely to delay the resolution of the proceedings and result in additional costs. 67It is the defendant that is seeking the production of documents from Noble Group. But it is the plaintiff that will have the onus of establishing that the Court should exercise the discretion conferred by s 163H to grant a full or partial exemption. Prima facie it is the plaintiff who would be expected to adduce evidence to establish the facts relied upon for the favourable exercise of the discretion. At the time of the transaction the plaintiff was an indirect subsidiary of Noble Group and there is no evidence that Noble Group has not made or would not make available relevant documents to the plaintiff. It would at least be arguable for the defendant that the discretion should not be exercised if the Court did not have before it material of likely probative value.

Particularity of Documents to be Sought 68If an application were made for the Court to issue a Letter of Request, the question would arise whether the documents sought have been identified with sufficient particularity. Section 33(6) of the Evidence on Commission Act provides that where the Court is dealing with an application from a Court or Tribunal outside the State for an order for evidence to be obtained in the State, the Court may make an order for the production of documents, but an order under s 33 must not require a person to state what documents relevant to the proceedings to which the application for the order relates are or have been in the person's possession, custody or power and must not require a person to produce any documents "other than particular documents specified in the order and appearing to the Court making the order to be, or likely to be, in the person's possession, custody or power." (Section 33(6)(b).) Section 76(4) of the Hong Kong Evidence Ordinance is to the same effect. 69There is authority that a Letter of Request for the production of documents should not be expressed more widely than a request to which this Court would give effect pursuant to s 33 of the Evidence on Commission Act (Panayiotou v Sony Music Entertainment UK Limited at 152; Charman v Charman [2005] EWCA Civ 1606; [2005] All ER (D) 298 at [29]). 70It may be that a subpoena for production could be expressed more widely than a letter of request that sought an order from the foreign court for the production of particular documents specified in the order as being documents appearing to the Court making the order to be, or to be likely to be, in the possession, custody or power of the person subject to the order (but cf Panayiotou v Sony Music Entertainment UK Limited at 152). That question can be addressed if and when the issue of a Letter of Request is sought. I do not consider the possibility that the avenue for production of documents pursuant to a Letter of Request is more restricted than the avenue of production pursuant to a subpoena is sufficient reason to construe the power under r 11.5 as authorising the issue of a subpoena where to do so would infringe the sovereignty of a foreign State.

Enforcement of Subpoena 71Finally, the Chief Commissioner pointed to the fact that one of the grounds upon which courts have expressed a reluctance to exercise a discretion to issue a subpoena for service abroad was the impossibility of enforcing compliance with the subpoena (e.g. Stemcor (A/sia) Pty Ltd v Oceanwave Line SA at [12]). The Chief Commissioner correctly submitted that in this case it appears that Noble Group owns shares in a listed Australian company that could be attached in the event of disobedience to a subpoena. I accept that this is so and that the difficulties of enforcement are not a reason for refusing to grant leave for the issue of a subpoena on discretionary grounds. However that does not meet the objection based on the need to respect the sovereignty of a foreign State. 72It was for substantially these reasons that I refused the application. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 26 September 2013

Supreme Court (General Civil Procedure) Rules 2005(Vic)

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