IO Group Inc v Prestige Club Australasia Pty Ltd

Federal Court of Australia|2008-08-08|Before: Flick J

The First, Second and Fourth Respondents are to pay: (i) the costs of the Applicants up to 7 August 2007 on a party/party basis; (ii) the costs of the Applicants as from 7 August 2007 up to and including 1 April 2008 on an indemnity basis; and (iii) 1/3 of the costs of the Applicants incurred on 2 April 2008. 2. The Notice of Motion as filed by the First, Second and Fourth Respondents dated 30 June 2008 be dismissed. 3. The Notice of Motion as filed by the Fifth Respondent dated 1 July 2008 be dismissed. 4. The First and Fourth Respondents are to provide further discovery of documents in the following categories: (a) the existing categories of documents (annexed and marked "Schedule A"); and (b) the additional categories of documents (annexed and marked "Schedule B"). 5. In respect to those documents identified in Schedule B to these orders, the Fourth Respondent is to file and serve an Affidavit stating whether any document or documents there identified have been in his possession, custody or power and, if it is not now in his possession, custody or power, when he parted with it and what has become of it. 6. Liberty is reserved to the First and Fourth Respondents to vary the form of Orders 4 and 5, any such application to be made on 11 August 2008. 7. Costs of and incidental to the hearing on 14 and 15 July 2008 be reserved. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

SHEDULE B CATEGORIES

All Documents recording the names and addresses of people to whom PCA and/or Top End sent mail order catalogues during the Period, including but not limited to any customer lists or mailing lists.
All Documents recording or evidencing orders placed with PCA and/or Top End for adult films during the Period.
All Documents recording, evidencing or relating to PCA and/or Top End's employment records, including but not limited to group certificates, wage slips and superannuation contributions during the Period.
All Documents recording or evidencing PCA's Operating Expenses during the Period.
All Documents recording, evidencing or relating to forms lodged by any of the PCA Respondents with ASIC in respect of changes to the ownership of PCA and/or Top End during the Period.
Copies of each issue of mail order catalogues distributed by Top End during the Period. DEFINITIONS Categories for Discovery means the categories for discovery issued by the applicants to the PCA Respondents on 16 April 2007. Documents means, including without limitation, any;
letters, facsimiles, notes, diary notes, memoranda, applications, reports, working papers or any drafts of any of those documents or other written records of any kind;
electronic files, emails, computer discs, tapes or other storage devices of any kind containing electronic files or emails;
any paper or other material which there is writing or printing on or which there are marks, figures or symbols having a meaning for persons qualified to interpret them; and
any disc, tape or other article from which sounds, images or other records of information are capable of being recorded. PCA means the first respondent. PCA Respondents means the first, second and fourth respondents. PCA's Operating Expenses means PCA's operating expenses, including but not limited to the expenses (and service providers) identified in: a) Exhibit RC-1 to the affidavit of Rebecca Conoulty sworn on 19 March 2008 at paragraphs 13(b)(ii)-(iv), 22-32, 35, 37, 39, 41, 43-44, 46, 50, 52, 54, 56, 58, 60, 62, 64, 66, 68, 70, 72, 75, and appendix H; and b) the affidavit of Jordan Kiriakidis sworn on 22 April 2008 at paragraphs 20-22. Period means, unless indicated to the contrary, the period 1 January 2004 to date. Top End means the second respondent.

NSW DISTRICT REGISTRY NSD 1940 OF 2006

CHANDLER TOLUCA LAKE STUDIOS INC T/AS COLOSSAL ENTERTAINMENT

GREENWICH TECHNOLOGIES PTY LIMITED (ACN 100 519 177)

Fourteenth Applicant AND: PRESTIGE CLUB AUSTRALASIA PTY LTD (ACN 088 953 566)

REASONS FOR JUDGMENT 1 Three matters presently need to be addressed, namely: (a) whether the First, Second and Fourth Respondents should be ordered to pay the costs occasioned by the making of declaratory and injunctive orders by consent on 2 April 2008 on an indemnity basis; (b) whether Subpoenas issued to each of Jordan Djundja Lawyers, Simpsons Solicitors, and Tzovaras Legal Solicitors should be set aside; and (c) the nature of orders to be made consequent upon the cross-examination of the Fourth Respondent, Mr Kiriakidis, in respect to further discovery to be provided. 2 A fourth matter was sought to be raised by way of a Notice of Motion filed by the Fifth Respondent on 31 July 2008 seeking to set aside part of a Notice to Produce served by the Applicants upon the Fifth Respondent. Documents pursuant to that Notice to Produce were produced on 24 July 2008. When such documents as were produced were made available, neither the Court nor the Applicants were told that there were additional documents which, it was later said, also fell within the terms of one of the Subpoenas presently sought to be set aside by the Fifth Respondent and that those documents were being withheld. A notice to produce has the same coercive effect as a subpoena: Federal Court Rules, O 33 r 12; Seven Network Ltd v News Ltd (No 11) [2006] FCA 174 at [4] per Sackville J. The procedure to be followed when there is a "call" upon a notice to produce has been long-settled: Glass H (ed), Seminars on Evidence (1969) at 12-18. If documents which fall within a notice are not produced, it is incumbent upon those who have been served with such a notice to unequivocally identify those documents and the reason for their non-production. 3 All other outstanding Motions in the proceeding are to be heard on 11 August 2008. The First Respondent's Notice of Motion filed 31 July 2008 can also be heard on that date. The intent in resolving all outstanding interlocutory matters as quickly as possible is self-evidently to facilitate a final hearing at the earliest possible date. This proceeding has already taken far longer to resolve than is desirable - or necessary, given the issues in dispute. It is hoped that on 11 August 2008 dates for the final hearing can be fixed for later this year.

Orders as to Costs 4 The relevant orders as to costs against the First, Second and Fourth Respondents as made on 2 April 2008 were as follows: 12. The First, Second and Fourth Respondents are to file and serve any Affidavit and submissions as to why an order for the payment of the Applicants' costs to date on an indemnity basis payable forthwith should not be made for any particular period from the commencement of this proceeding to date, by 5:00pm on 8 April 2008. 13. If the First, Second and Fourth Respondents do not file and serve an Affidavit and submissions in accordance with Order 12, the First, Second and Fourth Respondents are to pay the Applicants' costs to date on an indemnity basis with such payment to be made forthwith. 5 The issues left open on that occasion, and upon which evidence and written submissions were (perhaps not surprisingly) subsequently filed, were: (a) whether different orders as to the basis upon which costs should be paid should be made in respect to different stages in the litigation to date; (b) whether costs should be ordered to be paid on an indemnity basis in respect to any particular stage of the litigation; and (c) whether any order as to costs should include an order that they be paid "forthwith". By way of supplementary written submissions dated 1 August 2008, the Applicants indicated that they no longer pressed for an order that costs be paid "forthwith". 6 A very broad overview of the conduct of the proceeding to date is as follows. 7 The Application and Statement of Claim were first filed on 5 October 2006. Thereafter, and without detailing each event, a Defence was filed on behalf of the First, Second and Fourth Respondents in February 2007. A Reply to that Defence was filed by the Applicants in April 2007. An Amended Defence was filed by those Respondents on 7 August 2007. An Amended Application and an Amended Statement of Claim were filed in October 2007. A Further Amended Defence was then filed by the First, Second and Fourth Respondents in April 2008. A Further Amended Application and a Further Amended Statement of Claim were subsequently filed in April 2008. 8 The proceeding has been the subject of numerous directions hearings dating from those before His Honour Justice Conti in 2006, those before His Honour Justice Gyles in 2007, and those conducted thereafter. 9 Declaratory and injunctive relief was finally entered against the First, Second and Fourth Respondents on 2 April 2008. 10 The discretion in respect to costs conferred by s 43 of the Federal Court of Australia Act 1976 (Cth) unquestionably extends to a power to order that costs be paid on an indemnity basis. In Sony Computer Entertainment Australia Pty Ltd v Dannoun (No 2) [2001] FCA 1530, Lindgren J helpfully summarised the approach to be adopted in ordering indemnity costs as follows: [4] The question of the circumstances in which costs should be awarded on an indemnity basis has been discussed in many cases, recently in this Court by me in NMFM Property Pty Ltd v Citibank Ltd (No 11) [2001] FCA 480 and by Katz J in Waverley Council v Refkin Pty Ltd [2001] FCA 1469. I will not refer to the various judicial formulations to date of the grounds on which it is proper to award costs on an indemnity basis. It suffices that I acknowledge that the circumstances must be "special", must take the case out of the "ordinary" category of case, and must involve behaviour associated with the conduct of the proceeding by the person sought to be made liable which is so unreasonable as to make it unjust that the other party should be limited in its recovery to party and party costs. 11 Notwithstanding the manner in which the proceeding has been conducted to date, the four factors relied upon by the First, Second and Fourth Respondents to oppose an order for costs on an indemnity basis are: (a) the fact that those Respondents have made "significant admissions", being admissions in respect to matters previously denied in their Defence but later admitted "consequent on service of evidence by the Applicants"; (b) the conduct of those Respondents in respect to discovery, including the fact that their very consent to the order for cross-examination of the Fourth Respondent is a tacit acknowledgment on their part that the deficiencies therein are sufficient to justify the unusual exercise of the Court's power to permit cross-examination on Affidavits filed in respect to discovery; (c) a contention that such delay as has occurred is "not all … attributable to the Respondents"; and (d) a contention that a number of the Affidavits as filed by the Applicants "go predominately [sic] to the assessment of damages" and therefore would have been filed in any event. 12 A review of the materials as filed discloses that the First, Second and Fourth Respondents initially put in issue all aspects of the Applicants' case. They thus disputed (for example) whether the films in issue were "cinematograph film[s]" and the subsistence of copyright in those films and ownership of copyright. These matters were the subject of some admissions on 7 August 2007, but it was only on 2 April 2008 that orders for declaratory and injunctive relief were made by consent. 13 Any order as to costs is not a precise science and inevitably involves matters of judgment and discretion. It is not possible with mathematical precision to isolate that point of time when matters which previously were put in issue should thereafter have been abandoned or admitted. And, even if an approximate time could be so isolated, there must be some flexibility to permit a party seeking to change its position time within which to reflect upon its position and obtain advice. A respondent is entitled to be given some time to assess whether an applicant can indeed make out a case. To adopt any other approach may be to discourage parties from properly reconsidering their position and instead persevering in a previously committed but unmeritorious approach. 14 In the present proceeding, having considered the submissions of the parties, it is not considered that an order should be made that the First, Second and Fourth Respondents pay the costs of the Applicants on an indemnity basis for the period up to 7 August 2007. Prior to that date, it is not considered that those Respondents engaged in any conduct sufficiently egregious to warrant an indemnity costs order. The Amended Defence filed on 7 August 2007 made some admissions - for example, it "partly" admitted copyright infringement, but did not identify those works in respect to which that admission was made. 15 But it is considered that the First, Second and Fourth Respondents thereafter did continue to put in issue matters which properly should have been the subject of admissions made at an earlier point of time. It may be arguable that even prior to 7 August 2007 those Respondents properly should have more clearly focussed upon the admissions which it was appropriate to make. Although there is no mathematical certainty in fixing that point of time, it is considered that certainly as from 7 August 2007, those Respondents should pay costs on an indemnity basis up to and including 1 April 2008. A Defence was first filed on 22 February 2007. The course to be charted by those Respondents was thereafter considered and their Amended Defence was filed in August 2007. Even if not prior to 7 August 2007, from that date onwards it is not considered that there was any concerted effort on the part of the First, Second and Fourth Respondents to have such outstanding issues as they considered in need of resolution properly prepared for hearing. 16 No costs order should be made, as sought by the Applicants, that those Respondents pay costs on an indemnity basis for the entire period from 23 February 2007 to 20 January 2008. 17 It is thus considered that the First, Second and Fourth Respondents should pay costs:

up to 7 August 2007 on a party/party basis; and
as from 7 August 2007 up to and including 1 April 2008 on an indemnity basis. 18 It was on 2 April 2008 that the declaratory and injunctive relief was made. Other matters addressed on that day concerned issues as between the Applicants and the Fifth Respondent. The Applicants seek an order that the First, Second and Fourth Respondents should pay 1/3 of their costs of that day. Such an order is appropriate and should be made. 19 Prior to the revised position of the Applicants being communicated on 1 August 2008, that left outstanding the question as to whether any costs should be ordered to be paid forthwith. Notwithstanding that revised position, the principles relevant to the discretion to make an order that costs be paid forthwith nevertheless remain of relevance. 20 The power to make an order that costs be paid "forthwith" is that conferred by O 62 r 3(2) of the Federal Court Rules. Rule 3 in its entirety provides as follows: Time for dealing with costs (1) The Court may in any proceeding exercise its powers and discretions as to costs at any stage of the proceeding or after the conclusion of the proceeding. (2) Where the Court makes an order in any proceeding for the payment of costs the Court may require that the costs be paid forthwith notwithstanding that the proceeding is not concluded. (3) An order for costs of an interlocutory proceeding shall not, unless the Court otherwise orders, entitle a party to have a bill of costs taxed until the principal proceeding in which the interlocutory order was made is concluded or further order. 21 In Spotwire Pty Ltd v Visa International Service Association (No 2) [2004] FCA 571 Bennett J summarised the principles to be applied when considering an application that costs be paid forthwith. Her Honour observed: [104] … the following principles emerge: • The general principle is that costs ought to be resolved when the proceeding has been concluded and the rights of the parties have been finally determined. However, O 62 rule 3(3) contemplates that, in certain circumstances, the general principle can be varied, as a matter of the court's discretion. • The exercise of the discretion should only be exercised where the interests of justice in the particular case require a departure form the general practice. • The discretion should be exercised in favour or [sic] a party who establishes that the demands of justice require that there be a departure from what appears to be the general practice envisaged by the rule. • One consideration is the length of time that the proceedings will conclude, in the ordinary course of events. • Where costs are sought in respect of a successful strike out application, the fact that the unsuccessful party failed to remedy defects despite clear notice of those defects, may make appropriate immediate taxation and payment. • Costs incurred by reason of an ill-considered pleading may give rise to an exception to the principle that the costs await the final resolution of the issues between the parties. • In ordinary circumstances, it would be inappropriate that an unsuccessful party in an interlocutory proceeding be required to pay costs immediately, since that party might ultimately be entitled to an order for costs in the substantive proceeding. 22 The making of declaratory and injunctive orders on 2 April 2008 unquestionably brought that aspect of the claims for relief as against those Respondents to an end. Left to be resolved was a determination of damages. 23 Even though declaratory and injunctive relief has been granted already, it is not considered that an order would have been made that such costs as are to be paid should be paid forthwith. The conduct of the litigation to date has certainly not been characterised by any degree of expedition; but the hearing of the balance of the proceeding and the resolution of all outstanding issues, it is anticipated, can be accommodated at a comparatively early date: cf Australian Securities and Investments Commission v Mining Projects Group Ltd (No 3) [2008] FCA 952 at [24] per Gordon J; Smart Co Pty Ltd v Clipsal Australia Pty Ltd [2008] FCA 1008 at [43] per Lander J. In such circumstances it is not considered that there should be a departure from the general principle that costs should be payable when the rights of the parties - including any liability in damages - are finally determined. 24 In abandoning their application that costs should be paid "forthwith", the Applicants in their written submissions, dated 1 August 2008, contend that the Court should "take into account the applicants' decision as a factor in determining the relevant periods for which costs should be made payable on an indemnity basis". It is not at all self-evident that such a "trade-off" is appropriate. Those principles by reference to which an indemnity costs order may be made are necessarily different from those guiding the discretion when ordering that costs be payable forthwith. But, even if it were proper to merge those considerations, no different decision would have been reached in the present proceeding. 25 It is only at the conclusion of a proceeding that a view can finally be reached as to the conduct of the parties and the manner in which the litigation has been progressed. Adverse inferences and tentative views which may have seemed justified at an earlier point of time may well be answered when all of the evidence has been considered.

Setting Aside the Subpoenas 26 Leave was previously given to issue a number of Subpoenas in this proceeding, relevantly including a Subpoena addressed to each of: (a) Jordan Djundja Lawyers; (b) Simpsons Solicitors; and (c) Tzovaras Legal Solicitors. 27 Simpsons Solicitors were retained by the Fifth Respondent, Mr Elias Armenis, in October 2007. Prior to that time, Mr Armenis retained Tzovaras Legal Solicitors. Jordan Djundja Lawyers act for the First, Second and Fourth Respondents. 28 A Notice of Motion dated 30 June 2008 has been filed on behalf of the First, Second and Fourth Respondents seeking to have the Subpoena addressed to Jordan Djundja Lawyers set aside in its entirety. 29 A Notice of Motion dated 1 July 2008 has been filed on behalf of the Fifth Respondent which seeks orders setting aside: (a) paragraphs [2], [7] and [8] of the Subpoena addressed to Jordan Djundja Lawyers; (b) paragraphs [2], [3] and [4] of the Subpoena addressed to Simpsons Solicitors; and (c) paragraphs [2] and [3] of the Subpoena addressed to Tzovaras Legal Solicitors. 30 Paragraphs [2], [7] and [8] of the Jordan Djundja Lawyers Subpoena are as follows: 2. All Documents that constitute, record, or evidence the identity of any person providing directions or instructions to Jordan Djundja Lawyers in respect of the conduct of the Proceeding. 7. All Documents that constitute, record, or evidence any communications between Jordan Djundja Lawyers on the one hand and Elias Armenis or any person purporting to act on behalf of Elias Armenis, including without limitation Tzovaras Legal and Simpsons Lawyers, on the other in respect of the Proceeding. 8. All Documents that refer or relate to the creation, or possible creation, of the affidavit of Jordan Kiriakidis sworn 22 April 2008, including without limitation any instructions or directions given by or to Simpsons Lawyers or any barrister in respect of the creation of the affidavit. 31 Paragraphs [2], [3] and [4] of the Simpsons Solicitors Subpoena are as follows: 2. All Documents that constitute, record, or evidence any communications between Simpsons Lawyers on the one hand and the PCA Respondents or any person purporting to act on behalf of any of them (including without limitation Jordan Djundja Lawyers, Tzovaras Legal or any other firm of solicitors or barrister), on the other, in respect of the Proceeding. 3. All Documents that refer or relate to the creation, or possible creation, of the affidavit of Jordan Kiriakidis sworn 22 April 2008, including without limitation any instructions or directions given by or to Simpsons Lawyers or any barrister in respect of the creation of that affidavit. 4. All Documents that constitute, record, or evidence payments made to Simpsons Lawyers or any other firm of solicitors or barrister, by any person in respect of work undertaken by Simpsons Lawyers, or any other firm or solicitors or barrister, in respect of the Proceeding. 32 Paragraphs [2] and [3] of the Tzovaras Legal Solicitors Subpoena are as follows: 2. All Documents that constitute, record, or evidence any communications between Tzovaras Legal on the one hand and the PCA Respondents or any person purporting to act on behalf of any of them (including without limitation Jordan Djundja Lawyers, Simpsons Lawyers, or any other firm of solicitors or barrister), on the other, in respect of the Proceeding. 3. All Documents that constitute, record, or evidence payments made to Tzovaras Legal or any other firm of solicitors or barrister, by any person in respect of work undertaken by Tzovaras Legal, or any other firm of solicitors or barrister, in respect of the Proceeding including the Tzovaras Invoice. 33 The issues sought to be resolved by all Respondents can satisfactorily be addressed by considering these paragraphs. 34 In summary form, the contentions of the Respondents are that one or other of the paragraphs of the Subpoenas should be set aside because: (a) the Subpoenas are but a fishing exercise and serve no legitimate forensic purpose; (b) compliance with the provisions set out in the Subpoenas would be oppressive; and (c) particular paragraphs of the Subpoenas seek the production of material which is privileged from production. Each of these contentions should be separately addressed. 35 The Applicants contend that the Subpoenas do serve a legitimate forensic purpose. As an adjunct of an order that the First, Second and Fourth Respondents should pay the costs of the Applicants, the Applicants seek by way of a Notice of Motion dated 18 June 2008 a further order that those costs be paid by the Fifth Respondent. The basis for seeking such an order is that it is contended that the Fifth Respondent is the person who in substance is controlling the present litigation on behalf of all Respondents. 36 An inference that the Fifth Respondent is indeed the person controlling the present litigation is said by Counsel for the Applicants to be available from the following facts: (a) the fact that an Affidavit sworn by the Fourth Respondent on 22 April 2008: · was witnessed by the solicitor for the Fifth Respondent; · was filed immediately before an application was made for summary judgment; and · was filed, so it is contended, to make good the factual assumptions made in an expert's report prepared by Ms Rebecca Conoulty dated 19 March 2008 and filed by the solicitors for the Fifth Respondent. The report of Ms Conoulty sets forth 1½ pages of the assumptions made, including an assumption that the description of expenses set forth in an earlier Affidavit are correct. (b) the fact that the place of business of the First Respondent is the Fifth Respondent's residence; and (c) the fact that the First, Second and Fourth Respondents have as from 2 April 2008 significantly changed their position by consenting to declaratory and injunctive relief. The Applicants further rely upon their Particulars of Further Amended Statement of Claim dated 10 April 2008, being Particulars providing details as to the basis upon which it is contended that: (d) the Fifth Applicant is in control of the First Respondent. 37 Senior Counsel for the Fifth Respondent denies that any inference should be drawn that the Fifth Respondent is controlling the litigation and denies that the Affidavit dated 22 April 2008 is in substance a "collaborative" attempt to thwart such success as the Applicants may ultimately have in the proceeding. Senior Counsel further submits that relevant to a consideration as to whether the Subpoenas should be set aside is a further consideration, namely the inappropriateness of now making any order that the Fifth Respondent pay the costs of the Applicants. Whether or not any such order should be made, he contends, should be resolved at the conclusion of the proceeding and not as part of an order for costs made before findings are ultimately made as to the role in fact played by the Fifth Respondent. If such an order is not appropriate to be made now, Senior Counsel contends that there is no legitimate forensic purpose in now seeking the production of documents. They may become relevant later; but not now. 38 When considering whether or not a subpoena has been issued for a legitimate forensic purpose, it is sufficient if the material sought to be subpoenaed has some "apparent relevance to the issues in the principal proceedings" that is "adjectival": Trade Practices Commission v Arnotts Ltd (1989) 88 ALR 90 at 103 per Beaumont J. Relevance which is purely "speculative" will not suffice: Mandic v Phillis [2005] FCA 1279 at [36], 225 ALR 760. Conti J there noted Beaumont J's reference in Arnotts to the judgment of Deane and Gaudron JJ in Hamilton v Oades (1989) 166 CLR 486 at 502 and continued: [35] Drawing on Deane and Gaudron JJ's above dicta, Beaumont J next stated that the determination of whether a subpoena was issued for a legitimate forensic purpose depends not just on an analysis of the motive of the issuing party, but also on the impact of the subpoena on the party upon whom it is served. His Honour enumerated two questions to be asked (at ALR 103 of his reasons for judgment): (1) Does the material sought have an apparent relevance to the issues in the principal proceedings, that is, is adjectival, as distinct from substantive, relevance established? Does the subpoena have a legitimate forensic purpose to this extent? This involves a consideration of the matter from the standpoint of [the issuing party]. (2) Is the subpoena seriously and unfairly burdensome or prejudicial? This is to look at the matter from the point of view of [the party subpoenaed]. [36] His Honour (at ALR 103) referred to the meaning of "apparent relevance" in the following terms: The test of adjectival relevance is satisfied if the material has apparent relevance. In my opinion, the documentation called for here could possibly throw light on the issues in the main case. In my opinion, adjectival relevance is established. In Kimberley Homes at 115-16, Hill J referred with approval to Beaumont J's test for relevance and emphasised that it was not necessary for the court to determine whether the documentation or material, the subject of the subpoena, would be admissible in any final hearing of the proceedings. Although it is not necessary for the material to meet the standards of relevance required of evidence adduced at trial, Hill J considered that it was appropriate to have regard to the issues in dispute, as they appeared in the pleadings. In Cosco Holdings Pty Ltd v Cmr for Taxation (1997) 37 ATR 432, Spender J also considered Beaumont J's test of "adjectival relevance" and explained it (at 439) as follows: Notwithstanding the use of the word "possibly" in this paragraph, in my opinion, that word is not used in any speculative sense. I take his Honour's conclusion expressed in that paragraph as an acquiescence to the correctness of the submission that the material sought could reasonably be expected to throw light on some of the issues in the principal proceedings. It is not a question of looking at the documents to see if the documents might permit a case to be made. As is the case presently before the court, Spender J was there concerned with a submission that a request for documents (contained in a summons) amounted to merely a "fishing expedition". 39 It is not considered that any of the Subpoenas or any part of the Subpoenas should be set aside upon the basis that there is no legitimate forensic purpose. That forensic purpose is to pursue the question as to whether the Fifth Respondent is in substance the person behind the litigation and the person in control of the litigation. That is both an issue raised by the Particulars of Further Amended Statement of Claim and relevant to the Notice of Motion of the Applicants seeking that the Fifth Respondent pay such costs as have been ordered as against the First, Second and Fourth Respondents. Whether or not such an order will be made, and whether consideration should be given to making such an order (if at all) only at the conclusion of the proceeding, such questions provide no reason why the Subpoenas should be set aside now as having been issued for no legitimate forensic purpose. 40 The other bases upon which it is contended that the Subpoenas or particular parts of the Subpoenas should be set aside are also rejected. 41 In respect to the Subpoena to Jordan Djundja Lawyers, paragraphs [2], [7] and [8] are considered to be directed to the question as to who is the person controlling the litigation. So construed, the use in paragraph [8] of the phrase "without limitation" does not make the Subpoena oppressive. If there is a claim (for example) for privilege in respect to those documents or parts of those documents which otherwise fall within the ambit of those provisions, that claim may be advanced. 42 A like comment may be made in respect to paragraphs [2], [3] and [4] of the Subpoena directed to Simpsons Solicitors. Paragraph [3] of that Subpoena employs the language of documents "that refer or relate to" a particular document - as does paragraph [8] of the Subpoena to Jordan Djundja Lawyers. Again, properly construed, it is not considered that those paragraphs are oppressive. The use of the phrase "relating to" in a subpoena does not necessarily mean that the subpoena has been drafted too widely or is otherwise oppressive: cf Lucas Industries Ltd v Hewitt (1978) 45 FLR 174 at 192 per Smithers J. Paragraph [3] of the Simpsons Solicitors Subpoena, when read in its entirety, is confined to the circumstances in which the Affidavit of Mr Kiriakidis of 22 April 2008 was sworn. The confined nature of the documents required to be produced in answer to paragraph [3] is not rendered oppressive by reason simply of the use of phrases such as "relating to" or "without limitation". The use of those phrases is in a context where the person upon whom the Subpoena has been served is not required to form a view as to whether other documents "relate to" a particular subject-matter (cf Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at 573 per Jordan CJ); the task is confined to locating those documents "relating to" a particular document. In Spencer Motors Pty Ltd v LNC Industries Ltd [1982] 2 NSWLR 921 at 929 Waddell J relevantly observed: Use of expressions such as "relating to" need not result in there being any oppression or abuse of process. It all depends on the context in which the expression is used. For instance, it could hardly be said to be objectionable to require a person to produce all "invoices" relating to sales of a particular item to the defendant on a particular day. The use of the word "invoices" would restrict the potential width of the expression "relating to". Similarly, in American Express Warehousing Ltd v Doe [1967] 1 Lloyd's Rep 222, the Court of Appeal held that a requirement to produce the "contract slips" and "quote slips" relating to each of a number of insurances was not objectionable. A much more complicated set of circumstances in which use of the expression "related to" was held not to be objectionable appears in the decision of the Federal Court of Australia in Lucas Industries Ltd v Hewitt (1978) 45 FLR 174; 18 ALR 555. … 43 The same comments and conclusions are expressed in respect to the Subpoena directed to Tzovaras Legal Solicitors. 44 It is not without relevance to note that no affidavit was filed in support of any contention that the documents sought to be produced by any of the Subpoenas could not readily be located and produced if required. The position advanced on behalf of the Respondents in seeking to have the Subpoenas set aside either in whole or in part sought refuge in the form in which those Subpoenas had been drafted - as opposed to any difficulty in compliance. 45 It is also of relevance to note that the Subpoenas were not addressed to persons who may have no knowledge of the issues to be pursued in the proceeding; they were addressed to the very solicitors who act for (or previously acted for) one or other of the Respondents. 46 No claim for privilege was made in respect to those documents which merely recorded (for example) the fact of payments by the Fifth Respondent or documents which simply recorded trust account records of payments of legal fees by the Fifth Respondent or cost agreements. Such a concession was rightly made both by Counsel for the First, Second and Fourth Respondents and by Senior Counsel for the Fifth Respondent. See: Lake Cumbeline Pty Ltd v Effem Foods Pty Ltd (1994) 126 ALR 58 at 67-8 per Tamberlin J; Cook v Pasminco Ltd (No 2) [2000] FCA 1819 at [45]-[48], 107 FCR 44 at 52-3 per Lindgren J; Allen Allen & Hemsley v Deputy Commissioner of Taxation (NSW) (1989) 20 FCR 576 at 583-4 per Bowen CJ and Fisher J. 47 If there is to be a claim for confidentiality or legal professional privilege in respect to particular documents, such a claim should have been made at the same time as the hearing of the present Motions. But if there is to be any such claim, it should be made forthwith. 48 The Notice of Motion of the First, Second and Fourth Respondents dated 30 June 2008 and the Notice of Motion of the Fifth Respondent dated 1 July 2008 are dismissed.

Cross-Examination on Discovery 49 Orders were made on 10 June 2008 for the Fourth Respondent, Mr Kiriakidis, to attend for cross-examination on his Affidavits as to the discovery he had previously provided. The making of those orders had previously been mooted over some period of time. Ultimately there was no opposition to those orders and they were made by consent. In issue was the adequacy of the discovery previously provided. 50 Notwithstanding the circumstances in which the orders were made, on 14 July 2008 the unusual course of permitting cross-examination was again raised with Counsel for the Applicants and, more relevantly, Counsel for Mr Kiriakidis. Reference was made to the observations of Menzies J in Mulley v Manifold (1959) 103 CLR 341. Counsel for Mr Kiriakidis requested, and was granted, a short adjournment to obtain further instructions in light of reference being made to the unusual course being pursued. The cross-examination thereafter continued without any submissions being advanced on his behalf. As events unfolded, it was probably the only effective means whereby the Applicants could have exposed what they believed were inadequacies in the existing discovery as provided particularly by the Fourth Respondent. As a result of the cross-examination, the Applicants were proved right. An order requiring a further affidavit to be filed in respect to particular documents, without knowledge of the manifest deficiencies in the existing discovery, may well have proved as ineffective as the discovery previously provided. 51 At least two observations need to be made. 52 First, some evidence given during cross-examination was that documents had been destroyed. As explained by Mr Kiriakidis, the destruction of documents occurred by reason of either: · such records as had been kept by Mr Kiriakidis being stored in boxes in a room behind a café where he was then residing, and being thrown out when he was in Greece for a period of six months from July 2006 to January 2007. The owner of the premises was said to have thrown out the boxes when Mr Kiriakidis did not return after what was expected to be only a three month visit; and · such other records as may have been maintained being routinely destroyed by employees, upon instructions, at the conclusion of every two week period. Mr Kiriakidis explained his concern as to whether or not the business was illegal and that he did not want records being maintained in such circumstances. Whether or not there was a basis for those concerns was not an issue pursued by Counsel for the Fourth Respondent during his cross-examination. It is a matter, however, which it is expected will emerge as an issue to be resolved at the final hearing. 53 That evidence prompted a series of questions in cross-examination directed to identifying who else may have retained copies of the documents destroyed. Concern was raised as to whether such a course of cross-examination was permissible - the concern was whether or not cross-examination should be confined to determining whether the person giving discovery had in his possession further documents not already discovered, or whether it could be extended to identifying those persons who may have had copies of such documents or those persons over whom the person required to give discovery had some element of control. 54 Initially, questions in cross-examination directed to identifying who else may have retained copies of the destroyed documents wererejected or (at the very least) discouraged - but the issue was revisited when cross-examination resumed on 15 July 2008. The cross-examination continued without the issue being resolved. 55 The question as to whether such cross-examination was permissible need not thus now be resolved. But what should be resolved is whether any order can now be made requiring Mr Kiriakidis to disclose those persons to whom he gave copies of the documents otherwise destroyed or documents which were for some reason not destroyed pursuant to the instructions he had given. Of relevance is O 15 r 8 of the Federal Court Rules which provides as follows: Order for particular discovery Where, at any stage of the proceeding, it appears to the Court from evidence or from the nature or circumstances of the case or from any document filed in the proceeding that there are grounds for a belief that some document or class of document relating to any matter in question in the proceeding may be or may have been in the possession, custody or power of a party, the Court may order that party: (a) to file any affidavit stating whether that document or any document of that class is or has been in his possession, custody or power and, if it has been but is not then in his possession, custody or power, when he parted with it and what has become of it; and (b) to serve the affidavit on any other party. That rule would permit an order to be made requiring Mr Kiriakidis to file an affidavit setting forth what has become of a document which was once in his possession, custody or power where such a document was copied and forwarded to someone else, even if the copy or the original of the document that remained in his possession, custody or power was later destroyed. It may be compliance with such an order for Mr Kiriakidis to depose to the fact that a document came into his possession, was not copied, and was destroyed; if the document, however, was copied, such an order would require him to set forth "what has become" of that copy. Compliance, it is considered, would extend to setting forth the identity of the person or persons to whom a copy was sent. Mr Kiriakidis was reluctant to do so when being cross-examined. It would only frustrate the utility of r 8 if it were to be construed as only requiring a party to state that he had forwarded it to an unnamed person. In those circumstances where a party may be at his most uncooperative, r 8, if it were to be so confined, would be found to be most lacking in any real utility. 56 Second, as a result of the cross-examination of Mr Kiriakidis it is considered that at least two fundamental conclusions should be reached, namely: (a) that there are further documents in his possession, custody or power which most probably fall within the categories of discovery previously ordered; and (b) that no inquiries have been made of persons who may be in possession of documents which should have been discovered, being documents over which Mr Kiriakidis retained control. For the purposes of the present application it has not been necessary to determine why such documents were not discovered or why such inquiries were not made. It has not been necessary for present purposes to inquire into the circumstances in which such discovery as has been provided was verified. The focus of the present application was simply to consider whether an order should be made to ensure that proper discovery is now given by the Fourth Respondent. 57 The manner in which the previous discovery obligations were discharged remains, however, a matter of grave concern. Whatever deficiencies may have occurred previously, the solicitors representing the Fourth Respondent should ensure that they are not repeated. 58 An order should be made for further discovery as against both the First and Fourth Respondents. It remains a matter for those advising Mr Kiriakidis to give such advice as is considered appropriate as to whether any claim for privilege may or should be made. 59 At the conclusion of the cross-examination on 15 July 2008 the parties were invited to draft orders identifying those documents in respect to which the parties considered that an order for further discovery should be made. Proposed orders were provided on 24 July 2008. It is considered that orders should be made substantially giving effect to that draft. It is also considered that an Affidavit should be filed by the Fourth Respondent in accordance with O 15 r 8 in respect to those documents identified in Schedule B to the orders to be made.

Orders 60 The orders of the Court are: 1. The First, Second and Fourth Respondents are to pay: (i) the costs of the Applicants up to 7 August 2007 on a party/party basis; (ii) the costs of the Applicants as from 7 August 2007 up to and including 1 April 2008 on an indemnity basis; and (iii) 1/3 of the costs of the Applicants incurred on 2 April 2008. 2. The Notice of Motion as filed by the First, Second and Fourth Respondents dated 30 June 2008 be dismissed. 3. The Notice of Motion as filed by the Fifth Respondent dated 1 July 2008 be dismissed. 4. The First and Fourth Respondents are to provide further discovery of documents in the following categories: (a) the existing categories of documents (annexed and marked "Schedule A"); and (b) the additional categories of documents (annexed and marked "Schedule B"). 5. In respect to those documents identified in Schedule B to these orders, the Fourth Respondent is to file and serve an Affidavit stating whether any document or documents there identified have been in his possession, custody or power and, if it is not now in his possession, custody or power, when he parted with it and what has become of it. 6. Liberty is reserved to the First and Fourth Respondents to vary the form of Orders 4 and 5, any such application to be made on 11 August 2008. 7. Costs of and incidental to the hearing on 14 and 15 July 2008 be reserved. I certify that the preceding sixty (60) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick.

Associate: Dated: 8 August 2008 Counsel for the Applicants: J M Hennessy

Solicitor for the Applicants: Gilbert + Tobin

Counsel for the First, Second and Fourth Respondents: M Avenell

Solicitor for the First, Second and Fourth Respondents: Jordan Djundja Lawyers

Counsel for the Fifth Respondent: M Dempsey SC with C D Wood

Solicitor for the Fifth Respondent: Simpsons Solicitors

Federal Court Rules 1979(Cth)

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