Integrated Insurance Planning Pty Ltd v The Commissioner of Taxation

REASONS FOR JUDGMENT 1 A notice of motion is brought on behalf of the applicant, moving the Court for orders that subpoenas for production dated 17 July 2003 be set aside in matters W16 of 2002 and W17 of 2002. The subpoenas of that date are directed in wide terms, namely, that they relate to, firstly, various correspondence, in particular concerning agency development loan arrangements between the Colonial Mutual Life Assurance Society Ltd and other companies in what is described as the Colonial Group and certain entities; secondly, all accounts, journals, ledgers, statements and other financial records relating to the Colonial Group and to others listed in the subpoena; thirdly, records relating to the advance of certain sums by Colonial Mutual Life Society Ltd to certain named parties on 11 February 1987 and 30 June 1990; fourthly, records relating to sums advanced on 18 March 1988 and 26 April 1991 to certain named parties; fifthly, all documents relating to Colonial Mutual Deposit Services accounts of certain entities for the period 1 January 1987 to 30 June 1999 and 1 September 1988 to 30 June 1999; sixthly, validation budges, retail sales budgets, earnings, commissions or other budgets concerning the named parties in relation to agency development loan arrangements for the period from 1 January 1987 to 30 June 1999 and 1 September 1998 to 30 June 1999; and seventhly, all reports prepared for and/or provided to the Society and any other company in the group of that character for the period 1 January 1987 to 30 June 1999 and 1 September 1998 to 30 June 1999. In matter W16 of 2002 the subpoenas are issued against the applicant and Mr and Mrs van Rens, Mr Mead and the applicant in that matter, and in matter W17 of 2002, against Mr and Mrs van Rens and the applicant in that matter. 2 The subpoenas are issued in the following circumstances. On 10 June 2002 the applicant filed in each case the grounds on which the applicant's case proposes to rely. On 3 July 2002 consent orders were made in relation to particular discovery, those orders being in the respondent's formulation. They were designed to ensure a return by 31 July 2002. However, that did not occur and following various extensions, it was on 20 March 2003 that the applicant filed an affidavit of discovery and other affidavits were filed. 3 At a directions hearing on 3 April 2003 it was pointed out that the affidavits so filed had not exhibited documents. Orders were made to achieve that and that occurred on 24 April 2003. 4 On 13 May 2003 the respondent applied to the Court for the issue of subpoenas in respect of the Commonwealth Bank which, I am told, is now the holder of the papers of the Colonial Mutual Society. On 3 June 2003 approval was given for the issue of such subpoenas. Those subpoenas were returnable on 12 June 2003. 5 The matter is set down for trial on 30 and 31 July. 6 The motion is brought in reliance upon O 27 r 9 of the Federal Court Rules. The arguments upon which the case for the applicant in each matter relies are basically that the subpoenas are in fact seeking further and better discovery; secondly, that no forensic purpose would be served by issuing them; and thirdly, that there is exceptionally short notice in circumstances where the respondent could have taken other steps on earlier occasions. 7 For these arguments, the case for the applicants in each matter places reliance on the reasoning in Diddams v Commonwealth Bank of Australia (unreported, Branson J, 12 May 1998). In that case Branson J made an order setting aside a subpoena served on the first respondent by the applicants. The factual circumstances are distinguishable in some ways from the present matter, and it is not material to examine all of her Honour's reasoning, save that which relates to the question of the setting aside of the subpoenas. 8 In her Honour's reasons, it is stated that neither counsel before her was able to refer her to any authorities of the Court directly on the issue of whether a subpoena may be served on a party to proceedings from whom discovery has been or may be obtained. She stated that a subpoena addressed to a party is not necessarily bad, and that on occasions such subpoenas are issued and answered without objection. However, she continued: '… the usual legal processes by which a party to a proceeding obtains access to the documents of opposing parties are the processes of discovery and inspection. Where the court has by detailed directions set a timetable for the undertaking of procedural steps necessary to bring a matter to readiness for trial, including a timetable for the discovery and inspection of documents, it is to be expected that the parties will seek such documents "relating to any matter in question between [them]" as they wish to have access to through the process of discovery and inspection (O 15 r 2(2)). If such documents are sought by subpoena or notice to produce issue close to trial, the Court's endeavours to manage the process of the preparation of the matter for trial, and to ensure that no interlocutory issues are outstanding at the hearing date, may be subverted.' 9 She referred specifically to the existence of O 15 r 8 and the opportunity which it provides when a party is dissatisfied with the extent of discovery. Her Honour also noted that the applicants before her did not in their submissions in opposition to the motion to set aside the subpoena advance any justification for their failure to pursue the options of seeking further and better discovery or particular discovery pursuant to O 15 r 8 from the first respondent. She concluded, therefore, that the subpoena should be set aside pursuant to O 27 r 9 of the Federal Court Rules on the basis it was an abuse of the privilege of requiring documents to be produced to the Court and would have undermined the effectiveness of the steps taken by the Court to ensure the orderly and timely preparation of the matter for trial. It was in terms of that reasoning that arguments were made for the applicants in each of the present cases. 10 Turning to the argument relating to forensic purpose, I am not satisfied that the subpoena would not serve a forensic purpose. A purpose for which the contentions for the respondent in each case asserted was that it would enable the particulars of the loan arrangements to be truthfully made apparent to the Court and that issue relating to the utilisation of funds, the valuation budget, the retail sales budgets, the waiver of the loans and the use of the Colonial Mutual deposits in a savings account would be better exposed if the subpoenas were to issue. I do not consider that the case for the applicant has discharged a burden of proving that the asserted forensic purpose might not be served by the issue of the subpoenas. 11 Turning to the first contention which was the one that the subpoenas seek further and better discovery, in the circumstances of the calendar which I have outlined, it seems to be the case that it is a fair characterisation of the subpoenas that are presently in issue that they would seek further discovery; that is, they would expand the scope of the discovery placed on the applicant in each of the cases in issue. That was a scope which the respondent sought to inform itself on by discovery directed to the bank. That, however, has not proved adequate. It has yielded only a partial result. However, the inadequacy of that response is not itself a reason for placing now upon the applicant in each matter the obligation of further discovery. 12 That obligation has to be assessed in the context of the time frame. There is no affidavit before me as to the extent or burden or inconvenience involved in complying with the subpoena, save that the affidavit of the solicitor for the applicant in each case states: 'I believe that the Applicant would suffer real and substantial interference with the Applicant's ability to prepare for trial if the Applicant and Applicant's directors are required to comply with the Subpoenas. …' (sic) 13 The question of whether a subpoena is burdensome is in any event to be decided on the face of the terms of the subpoena. I have already referred to those terms earlier and I regard them as extensive in their application and in the period which they cover and as likely to impose a burden or inconvenience of high relevance at this stage of the trial process. 14 There is also not before me any explanation why the respondent did not seek to further pursue the discovery process upon the outcome of the discovery from the bank having failed to meet the objectives which the respondent clearly initially hoped that it would. 15 I am, therefore, of the view that in relation to the first and third of the applicant's arguments, a case is established that would make it appropriate on the balancing of all the factors involved that the discretion pursuant to O 27 r 9 should be exercised so as to grant the motion. There is no evidence here of any mal‑intent by the respondent to seek to swamp each of the applicants so that their preparation of the case is hampered. Nevertheless, I have already made a finding on the extent of the likely impact. I am of the view that this is a case which is fairly seen as seeking further pursuit of discovery and as at odds with the orderly and timely preparation of the matter for trial which, as I have outlined, has extended over a period of time. 16 For those reasons, I consider that each of the applicants succeeds in the notice of motion and that the subpoenas for production should be in each case set aside. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice RD Nicholson.