Solicitors:
Australian Securities and Investments Commission (Applicant/Plaintiff)
Squire Patton Boggs (Respondent/First Defendant)
File Number(s): 2016/376076
[2]
Judgment - ex tempore
By Interlocutory Process filed on 27 March 2017 the Plaintiff, the Australian Securities and Investments Commission ("ASIC"), moved to set aside several paragraphs of a notice to produce issued by the First Defendant, Mr Wily, on 2 March 2017. I should first set out something as to the background to the issue of that notice to produce, before identifying developments since it was issued.
Proceedings in this matter were commenced on 15 February 2017 and seek an inquiry as to the conduct of Mr Wily and Mr Hurst, as liquidators, under s 536 of the Corporations Act 2001 (Cth). It appears that, when the matter was first listed, the Registrar made a direction for the provision of a document which sets out, inter alia, a list of issues and questions. That document set out certain issues and questions which ASIC seeks to have determined, including matters in respect of any conflict of interest, failure to disclose, failure to report certain matters to ASIC and, more broadly, a suggested failure to perform faithfully the functions of a liquidator on the part of Mr Wily and Mr Hurst. Those broad heads are further expanded by identification of particular conduct which is said to give rise to a question under those heads.
By orders made at the same time, the Registrar permitted the Defendants to issue any notice to produce to ASIC in relation to the list of issues and questions on or before 2 March 2017. A question was raised in the course of submissions as to the extent to which the notice to produce could or could not be characterised as being in relation to the list of issues and questions. I do not need to address that matter given the view that I have formed on other grounds. The Registrar made clear, properly, that she had not sought to circumvent, or give leave for discovery, under Practice Note SC Eq 11. That restriction was appropriate, where there was no suggestion that there was evidence before the Registrar of the kind that that Practice Note would require. No suggestion was put in this case that the scale of the documents now sought to be produced, in the one paragraph of the notice to produce that remains in issue, constitutes a functional substitute for discovery so as to give rise to an application of Practice Note SC Eq 11 in this matter. It seems to me that the view which Counsel have taken in that respect is correct, and I am content to proceed on that basis.
The notice to produce initially sought six categories of documents, only one of which remains in dispute. That category seeks production of:
"All documents evidencing or recording a decision by ASIC to commence an investigation under s 13 of the ASIC Act against Mr Wily and/or Mr Hurst in respect of the Companies (being the 2007 Companies and the 2009 Companies)."
I pause to note that, as Ms Shepard, who appears for ASIC, at one point suggested in the course of submissions, that paragraph may in fact require production of a narrow class of documents. On its proper construction, it is likely to require no more than the production of any document which records the fact of the decision of the kind to which it refers. In particular, that paragraph does not call for all documents referring to or relating to such a decision and, had it done so, real issues as to the possible application of Practice Note SC Eq 11 might have arisen. The fact that a category is narrow does not, however, necessarily have the result that it is permissible.
ASIC relies on two affidavits in support of the application to set aside that paragraph of the notice to produce. The first is a lengthy affidavit of Ms Plowman dated 15 December 2016, sworn in support of ASIC's original application, of which several paragraphs were read by agreement of Counsel. Those paragraphs refer, relevantly, to the companies that are in issue in the application, which appears to relate to events in 2007 and 2009. Ms Plowman refers to the process of ASIC's investigation into the conduct of Mr Wily and Mr Hurst; to the date on which ASIC became aware of another investigation by the Fair Work Ombudsman in relation to other persons; and to subsequent enquiries made by ASIC. Ms Plowman also refers to ASIC's commencement of an investigation into the conduct of Mr Wily and Mr Hurst in December 2013; to subsequent steps which have been taken in the course of that investigation, including in respect of the production of documents and the conduct of examinations and interviews; and to ASIC's particular concerns, which appear broadly to correspond to those matters identified in the list of questions and issues to which I referred above. A second affidavit of Ms Plowman dated 21 March 2007, in relation to the application to set aside the notice to produce, refers, inter alia, to the circumstances in which orders were made by the Registrar and the notice to produce issued and also annexes correspondence with solicitors for Mr Wily in respect of the notice to produce.
Ms Shepard, who appears for ASIC, contends that the notice to produce should be set aside because it lacks a legitimate forensic purpose, in respect of the relevant paragraph, and in particular that it does not comply with the requirement contemplated by r 34.1 of the Uniform Civil Procedure Rules 2005 (NSW) that a notice to produce should only require production of documents if they have apparent relevance or could throw light upon the issues for determination, adapting the formulation of Brereton J in Portal Software International Pty Ltd v Bodsworth [2005] NSWSC 1115 at [19]-[26].
Ms Shepard submits, anticipating the case that is put by Mr Wily, that the documents sought by paragraph 3 of the notice to produce, namely, documents evidencing or recording ASIC's decision to commence its investigation, do not touch upon any question of the fact of delay in the commencement of these proceedings or of any prejudice to Mr Wily arising from such delay. Ms Shepard also points to the fact that ASIC's internal decision-making relating to investigations is confidential and potentially sensitive. While Ms Shepard accepts that, as Mr Assaf (who appears for Mr Wily) points out, confidentiality is not, in itself, a reason to set aside a notice to produce, it is a matter relevant to the question whether a notice to produce is or is not issued for a legitimate forensic purpose and should or should not be set aside: Re North Coast Transit Pty Ltd [2013] NSWSC 1912 at [10].
Ms Shepard also submits that the notice to produce constitutes "fishing" if it is directed to an allegation of abuse of process. I put that proposition in that way because there seems to me, throughout the submissions made by Mr Wily in this application, to be a lack of clarity as to whether, and what, allegation of abuse of process might be put, to the extent that any such allegation goes beyond, if it goes beyond, the allegation of delay in the commencement of the proceedings.
Mr Assaf in turn submits that it is sufficient to support a notice to produce that a legitimate forensic purpose for production of the documents is established, and draws attention to authority that the court may approach the question of relevance more flexibly where there are no pleadings, and at an early stage of proceedings: Kaboko Mining Ltd v Van Heerden [2016] FCA 1532 at [14]. I accept that proposition, with a qualification, namely that the court must still be satisfied that a notice to produce has a legitimate forensic purpose, and that must be shown by some identification of the matter to which the notice to produce properly goes. Mr Assaf also submits, and I accept, that an inquiry under s 536 of the Corporations Act has a supervisory and disciplinary quality, and is directed to the protection of the public interest, and that the first stage, in which it is common ground that the parties are now engaged, is the question whether an inquiry into the liquidators' conduct is warranted. Mr Assaf submits, and I understand Ms Shepard accepts, that the question of delay may well be relevant in that respect. Mr Assaf also draws attention to the decision In Re Gault; Gault v Law (1981) 57 FLR 165 at 195, where a combination of doubts as to whether an inquiry would be fruitful, and delay, appear to have led Ellicott J to decline to order that inquiry.
Mr Assaf also draws attention to Herron v McGregor (1986) 6 NSWLR 246, where the Court of Appeal (and particularly the judgment of McHugh JA) emphasised the relevance of delay to the question whether a disciplinary proceeding against a medical practitioner should be permitted to proceed. So far as Mr Assaf relies on these matters to establish that delay will be relevant to the Court's decision whether an inquiry is warranted, in the relevant circumstances, it seems to me that they support that proposition. As I noted above, Ms Shepard did not contest that proposition. It does not, however, follow from that, without further inquiry, that the documents sought in paragraph 3 of the notice to produce have a legitimate forensic purpose.
It is necessary to pause here to say something further as to the matters which are relevant in respect of a notice to produce and an application to set it aside. In Portal Software International Pty Ltd v Bodsworth above, Brereton J noted that the court has power to set aside a notice to produce, as an instance of its power to regulate its own processes and to prevent an abuse of process; but that a notice to produce can be supported if the relevant documents could "possibly throw light" on the issues in the substantive proceedings or if it is "on the cards" that they would do so. That test has been applied frequently, including in Singtel Optus Pty Ltd v Weston [2010] NSWSC 1491 at [31] where Ward J (as her Honour then was) pointed to the need to identify the matters in issue in the proceedings and to assess whether the notice to produce had a legitimate forensic purpose by reference to those matters.
This in turn directs attention to the precise identification of the way in which Mr Wily puts his case, to advance which the notice to produce is sought to be issued. The first way in which that case could be put, and was put by Mr Assaf, is that there was, objectively, delay in ASIC's commencement of the proceedings, such that the Court should not commence an inquiry into Mr Wily's conduct. The difficulty with paragraph 3 of the notice to produce, so far as that is Mr Wily's case, is that it seems to be plainly unnecessary. The period in which the relevant conduct occurred is not disputed, and it appears to have occurred in 2007 and 2009. The date upon which ASIC commenced its inquiry is set out in Ms Plowman's affidavit as being December 2013, and there was no suggestion that Ms Plowman's evidence as to that matter was not accurate, and her evidence goes further to identify the steps that took place before the inquiry was commenced, and the steps that took place after the inquiry was commenced. The date the proceedings were commenced is hardly capable of dispute. To the extent that there is an allegation of delay, arising from the fact that events occurred in 2007 or 2009; certain matters were known to ASIC prior to the commencement of its investigation, at various times; the investigation was commenced in December 2013; and the proceedings were commenced in December 2016, then all elements of that claim are already available to Mr Wily.
No doubt if, at some point, ASIC were to contend that there were particular factors in this matter that affected its decision-making in December 2013, then that might put the status of its decision in December 2013 in issue. If, however, Mr Wily seeks to establish the fact of delay, then it seems to me that it cannot seriously be contended that he requires access to the documents evidencing or recording ASIC's decision to commence its investigation in order to make that case, where all elements of that case are already plainly established by other evidence. I do not infer that Mr Wily, or his legal representatives, do not mean what they say when they say they seek these documents in order to establish a case of delay. It does, however, seem to me that it is so plainly unnecessary to access those documents for that purpose, that a legitimate forensic purpose cannot be established in respect of them.
The other way in which Mr Wily's case could be, and at times seemed to be, articulated, was that there was a question whether there was unreasonable delay by ASIC in the commencement of its inquiry. It is important to note, as I raised with Mr Assaf in the course of submissions, that the identification of a question as to that matter is not the same as advancing an allegation as to that matter. If an allegation as to that matter has been put, Mr Wily would first require a proper basis for advancing it, and it would have had to be properly particularised by reference to what was said to have been known, for example, to ASIC at an earlier time that ought to have led to the commencement of an inquiry into Mr Wily's conduct at an earlier time. Plainly, Mr Wily's legal representatives have proceeded responsibly, in not making such an allegation at a point that they may not have a proper basis on which to do so. However, the consequence of the absence of such an allegation is straightforward. The case law makes clear that neither notices to produce nor subpoenas can be used for the purpose of what is traditionally described as "fishing", namely an attempt to obtain documents to see whether a case might exist when the party has no present basis to know that that case does exist.
If, at some point, Mr Wily articulates a case that there was, in fact, an improper or inappropriate delay in ASIC's conduct, which he is capable of identifying and particularising with a proper basis, then it may be that particular steps in ASIC's decision making would be relevant to establish that case. However, unless and until such an allegation can properly be made and its factual elements can properly be identified, then it is not open to Mr Wily to use the processes for compulsory production of documents, whether by subpoena or notice to produce or otherwise, to conduct an inquiry into the "question", in Mr Assaf's term, whether such a case might or might not exist.
For these reasons I am satisfied that paragraph 3 of the notice to produce dated 2 March 2017 should be set aside.
[3]
Costs
ASIC sought its costs of the application to set aside the notice to produce. Ms Shepard put that application on the basis that costs should follow the event. Mr Assaf drew attention to the fact that the notice to produce ultimately involved several paragraphs, as to which some documents had been produced without admission and other paragraphs had not been responded to on the basis that no documents exist.
It seems to me that I ought not to order costs in respect of the application to set aside the notice to produce, so far as it related to paragraphs that are not in issue, and which have been resolved in other ways. However, the hearing today has wholly been directed to paragraph 3 of the notice to produce, as to which ASIC has been wholly successful for the reasons set out in my judgment. In those circumstances, it seems to me that the costs of today should therefore follow the event.
Accordingly I order that Mr Wily pay the costs of the hearing today in respect of paragraph 3 of the notice to produce, as agreed or as assessed.
[4]
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Decision last updated: 18 July 2017