Kaboko Mining Limited v Van Heerden

THE FOURTH DEFENDANT'S APPLICATION TO SET ASIDE THE SUBPOENA 8 The fourth defendant is a party to the proceeding and thus has standing to make the application. 9 The fourth defendant seeks that the subpoena be set aside and opposes inspection of the subpoenaed documents for the following reasons, which are dealt with below: (a) the subpoena was issued prematurely (issue 1); (b) the subpoena was not sufficiently precise (issue 2); (c) the basis of assessing relevance is misconceived and constitutes a fishing exercise (issue 3); and (d) the documents are irrelevant (issue 4).

APPLICABLE LEGAL PRINCIPLES 10 The Court has an overarching jurisdiction to determine whether to permit inspection of documents produced on subpoena and if so, the terms on which inspection is to be allowed: r 24.20(3) of the Federal Court Rules 2011 (Cth) (FCR) provides that a person may inspect a document only if the Court has granted leave and the inspection is in accordance with the leave. By r 24.15(1) of the FCR, a party or any person having a sufficient interest, may apply to the Court to set aside a subpoena in whole or in part, or seek alternative relief in relation to it. The Court's power to set aside a subpoena is an incident of its inherent power to regulate the use of its processes by parties to the litigation: Mandic v Phillis (2005) 225 ALR 760 (at [38]). 11 In National Employers' Mutual General Insurance Association Ltd v Waind [1978] 1 NSWLR 372, the Court of Appeal set out the law and practice relating to the production and inspection of subpoenas (at 381): (a) There are three steps in having a third party bring documents to court and their use thereafter: (i) step 1 - obeying the subpoena, by the witness bringing the document to the court and handing them to the judge; (ii) step 2 - the decision of the judge concerning the preliminary use of the documents, which includes whether or not permission should be given to a party or parties to inspect the documents; and (iii) step 3 - admission into the evidence of the document in whole or in part; or the use of it in the process of evidencing being put before the court by cross-examination or otherwise. (b) In these three steps the stranger and the parties have different rights, and the function of the judge differs. The three steps in the procedure of having a third party bring documents to court, and in their use thereafter, have been confirmed in a number of subsequent cases, including Anderson Formrite Pty Ltd v Hornibrook Pty Ltd (No 3) [2009] FCA 273 (at [3]) and Apache Northwest Pty Ltd v Western Power Corporation (1998) 19 WAR 350 (at 371). 12 It was said for Mr Brewer that there were numerous grounds on which a subpoena will be set aside, including if the scope of the subpoena is unreasonably wide (citing Horizontal Falls Adventure Tours Pty Ltd v Thomas [2009] FCA 639) and if the subpoena requires the addressee to make fine judgments as to whether or not documents fall within the subpoena (citing Southern Pacific Hotel Services Inc v Southern Pacific Hotel Corporation Ltd [1984] 1 NSWLR 710 (at 720-721)). It must be said that these principles in most part inform the grant of leave by the Court to issue subpoenas or the discretion of the Court to set aside a subpoena that is yet to be complied with. 13 In this instance, as the subpoena has been complied with, the relevant question is whether the subpoena has a legitimate forensic purpose by reference to the test of 'apparent relevance', as summarised by Wigney J in Gloucester Shire Council v Fitch Ratings Inc [2016] FCA 587 (at [22]): "... The test for whether a subpoena has a legitimate forensic purpose has been put in terms of whether the material caught by the subpoena appears to have relevance in the sense of "throw[ing] light" on at least some of the issues in the principal proceedings ... It has also been said that it must be "on the cards" that the documents sought will materially assist the party at whose request the subpoena has been issued ... Slightly more prosaic statements of the test include that the documents must have some "apparent" or "adjectival" relevance, or would be reasonably likely to add, in the end, in some way or another, to the relevant evidence in the case ... See also Apache (at [41]). 14 Further, in circumstances where a subpoena is issued at an early stage in proceedings where the issues have not clearly been defined, the Court must approach the question of relevance more flexibly. As Wigney J explained in Fitch (at [23]): The common theme of these various statements of the applicable test of relevance in the context of subpoenas or notices to produce is that it is less stringent than the test of relevance that applies in the context of the admissibility of evidence. And where, as here, the proceeding is at a very early stage and the issues have not been clearly defined, the question whether documents sought by a subpoena have apparent relevance should not be approached too narrowly or rigidly. In such circumstances, the court should be wary of too readily excluding the possibility that a document or class of documents might at the end of the day be relevant to a fact in issue in the litigation. The court should not lose sight of the fact that the public interest requires that in the interests of a fair trial litigation should be conducted on the footing that all relevant documentary evidence is available ... This was also the subject of explanation by the Court of Appeal in Apache (at [46]): … In our view the expression "necessary" as used by Rogers CJ needs to be understood, at least in the present case, in the broad sense of embracing any document which has value, in the sense of at least apparent relevance, in "fairly disposing of the proceedings", even if it might not readily be seen, at the pre-inspection stage, necessarily to be admissible in evidence. 15 A subpoena may also be set aside where it is used for an impermissible purpose such as a fishing expedition. As Wigney J also explained in Fitch (at [24]): … A finding of "fishing" amounts to a finding that the subpoena has no legitimate forensic purpose because the documents are sought to discover if the issuing party has a case, not to support a case that has already been articulated: Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at 575. A finding of "fishing" also appears to involve a question of oppression. A subpoena will be more readily set aside if great numbers of documents are required to be produced in circumstances where it cannot be demonstrated that they are likely to be sufficiently relevant: Dorajay at [34].

Issue 1: The subpoena was issued prematurely 16 Mr Brewer contends that Kaboko has issued the subpoena at a very early and unusual stage of the proceeding. For example, defences have not been filed and so the issues in the proceeding have not crystallised. Accordingly, it is not possible to ascertain what issues will be in dispute in the proceeding. 17 Mr Brewer says Kaboko must be taken to have accepted that in issuing the subpoena so early, it would be incumbent on it to establish that it has a legitimate and forensic purpose in issuing the subpoena. It has failed to discharge that onus in that it has not established that the documents sought and then produced pursuant to the subpoena are relevant, even in an indirect way, to the issues in the proceeding, according to Mr Brewer.

Issue 2: The subpoena is not sufficiently precise 18 Mr Brewer draws attention to the principle that, if, at the time when the subpoena is served, the issues between the parties have not crystallised, the burden on the issuing party to precisely identify documents is greater: Adelaide Steamship Co v Spalvins (1997) 24 ACSR 536 per O'Loughlin J (at 546). 19 Mr Brewer says that the requirement that Mr Carbone produce documents in relation to the 'affairs' of Kaboko is too wide. Further, Kaboko has not discharged the burden to be precise in its identification of relevant documents even applying the usual standards, and, therefore, falls well short of the higher threshold of specificity identified by O'Loughlin J in Adelaide Steamship.

Issue 3: The basis of assessing relevance is misconceived and the subpoena constitutes a fishing exercise 20 Mr Brewer points to the fact that Mr Carbone's assessment as to whether documents in his custody evidence mismanagement of Kaboko is irrelevant. The question for determination is whether the documents responsive to the subpoena are relevant to the issues arising in this proceeding. 21 Even if Mr Carbone's assessment as to the relevance of the documents was a factor to be taken into account, Mr Brewer contends that Mr Carbone cannot possibly have made a properly informed assessment as to whether he held relevant documents because, for reasons unknown, Kaboko refused Mr Carbone's request that a solicitor for Kaboko explain what the proceeding is about. Mr Brewer says that an inference should be drawn that it suited Kaboko to keep Mr Carbone uninformed so as to allow Kaboko to cast its net as widely as possible, as there is no reason why Kaboko could not tell Mr Carbone what the case was about and no evidence has been led that would explain why Mr Carbone's request was declined. 22 Mr Brewer submits that the Court would have no difficulty finding that the subpoena amounts to a fishing expedition on the bases of the vague and wide manner in which the subpoena has been cast.

Issue 4: The documents called for and produced are irrelevant 23 Mr Brewer suggests that documents in relation to Mr Carbone's shareholding in Kaboko are plainly irrelevant. Each of the documents produced in response to the subpoena is an email sent or received by a shareholder of Kaboko who has no involvement in the management of the company. 24 Mr Brewer stresses that, given that Mr Carbone has already produced documents to the Court, the categories of documents that are called for in the subpoena and, in consequence, the documents actually produced by Mr Carbone, are simply not relevant. 25 Accordingly, Mr Brewer says that these emails are plainly not relevant to the exercise of proving or disproving the issues arising in the statement of claim nor could documents falling within the scope of the subpoena ever result in the production of documents that are relevant.

Issue 1: The subpoena was issued prematurely 26 The submission that the subpoena was issued at a very early and unusual stage of the proceeding cannot be maintained in light of the fourth defendant's own statement (in the context of the fourth defendant's request for $150,000 security for costs up to discovery) that: As you would be aware, claims of the type made by Kaboko necessitate a large-scale document review at an early stage of proceedings. For all the usual reasons and because of the front-loaded nature of the work to be undertaken by us, we say that the substantive proceeding should not proceed against our client unless and until your client has given appropriate security. 27 The subpoena has been issued and complied with. The considerations regarding inspection of documents already produced to the Court are different from the considerations relevant to whether a subpoena should be set aside, as discussed further below.

Issue 2: The subpoena is not sufficiently precise 28 Once complied with, questions of the breadth of a subpoena are irrelevant. In City of Sydney v Streetscape Projects (Australia) Pty Ltd [2011] NSWSC 364, Einstein J held (at [23] and [29]): 23 In respect of Mr Collins first argument in JDC-2 concerning the ambiguity and broadness of paragraph 3, it was submitted that since the Commonwealth Bank did not object on this basis and actually produced the relevant documents, the argument is clearly wrong. ... 29 As for the subsidiary objections relating to the broadness of the subpoena and confidentiality, I accept Mr Bova 's submissions. The Commonwealth Bank has complied with the subpoena and therefore the broadness argument is no longer a live issue. ... 29 The fourth defendant relies upon Adelaide Steamship, which concerned an application to set aside a subpoena. In contrast, in the present case, the subpoena has already been complied with. 30 The only potential harm from inspection is that Kaboko incurs the time and cost of inspecting 11 bundles of emails.

Issues 3 and 4: Relevance 31 Kaboko agrees that Mr Carbone's assessment of relevance is irrelevant. 32 The assertion that the subpoena constitutes a fishing expedition overlooks the unusual circumstance in this case, being that Mr Carbone initially approached the solicitors that issued the subpoena. 33 The issues in this action concern the management of Kaboko by its officers, divided into four broad claims that are described by Kaboko as the: (a) permitted use schedule claim; (b) books and records claim; (c) mining licences claim; and (d) third party sales claim. 34 The emails are at least 'apparently relevant' for reasons including: (a) the action concerns matters from 2011 onwards, and the emails are in the period 2011 to 2015; (b) the emails are between Mr Carbone and Kaboko officers, including the first and fourth Defendants; and (c) Mr Carbone has indicated that the emails concern the management of Kaboko, including mismanagement of money. Mr Carbone has also referenced matters pertaining to the third party sales claim. These relate to the claims set out above. 35 I am satisfied that the documents produced in response to the subpoena have at least 'apparent relevance' to the issues in dispute.

CONCLUSION 36 As the subpoena had been complied with and the subpoenaed documents were apparently relevant, inspection was granted. I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.

SCHEDULE OF PARTIES WAD 403 of 2016 Defendants Fourth Defendant: JASON PAUL BREWER