Kennedy Taylor (Vic) Pty Ltd v Grocon Pty Ltd [1999] VSC 242

Supreme Court of Victoria|1999-07-01|Before: Gillard J

Rule 42.10 of Rules of Court - Subpoena to produce documents to Prothonotary - Documents to assist plaintiff to plead case - Procedure under Rule 42.10 not available.

Crown Ltd, Rawlinsons (Aust) Pty Ltd, Hudson Conway Management Limited, Lincolne Scott Australia Pty Ltd, Mr Graeme Manie

Each of the recipients has objected to the production and inspection of the documents and the Prothonotary has referred their objections to the court pursuant to Rule 42.10(10).

As the proceeding is in the Building List it was referred to me as the Judge in Charge of the Building List to consider and determine the objections. At the outset I raised the question whether the procedure adopted by the plaintiff was open to it taking into account that under Order 32 of the Rules of Court a party could seek discovery from a non-party. I referred counsel to three recent cases. I adjourned the hearing of the objections to allow the parties the opportunity to consider the three cases and present argument on the question of the appropriate procedure.

The plaintiff, Kennedy Taylor (Vic) Pty Ltd, is a company which carries on business as an electrical contractor.

The defendant, Grocon Pty Ltd, is a company which carries on the business of builder and building developer.

The defendant was the builder of Crown Casino, Melbourne.

The plaintiff and the defendant entered into an agreement in August 1995 pursuant to which the plaintiff agreed to perform electrical works and provide materials and equipment for the defendant in respect of the works.

On 23 September 1998 the plaintiff commenced the proceeding in this court against the defendant, claiming orders pursuant to the Trade Practices Act 1974 and damages or payment on a quantum meruit.

On 9 April 1999 the plaintiff filed six subpoenas for production of documents to the Prothonotary pursuant to Rule 42.10 by an individual and five companies who are not parties to the litigation, namely -

(i) Rider Hunt Melbourne Pty Ltd ("Rider Hunt") - who was engaged as a consultant providing quantity surveying services to the defendant for the Casino Project;

(ii) Crown Limited ("Crown Limited") - the proprietor who engaged the defendant as the builder for the project;

(iii) Hudson Conway Management Limited ("Hudson Conway") whose involvement in the project was not stated;

(iv) Rawlinsons (Aust) Pty Ltd ("Rawlinsons") - a company engaged by the defendant providing services of quantity surveying and advice in relation to the project;

(v) Lincoln E. Scott Australia Pty Ltd ("Lincoln Scott") - a sub-contractor engaged by the defendant for the project;

(vi) Mr Graeme Manie ("Mr Manie") - a former employee of Hudson Conway who was employed as contract administrator for, inter alia, the sub-contract between the plaintiff and the defendant.

Procedure and objections

Rule 42.10 was introduced into the Supreme Court Rules by Statutory Rule No. 137 of 1997 and came into operation on 2 February 1998. It established a new procedure by which a party to the proceeding could require a non-party by subpoena to produce to the Prothonotary documents which were to be used in evidence for inspection by the party prior to the date set for the trial.

The recipient of the subpoena may object to the production of a document or its inspection and if he or she does so, is obliged to inform the Prothonotary in writing of that objection. - see Rule 42.10(8). In addition, a party to the proceeding may object to the inspection by any other party of a document identified in the subpoena and in those circumstances that party is also obliged to inform the Prothonotary in writing of the objection to inspection. - see Rule 42.10(9).

By reason of Rule 42.10(10) upon receiving any notice of objection, the Prothonotary is required to refer the subpoena to a judge or Master for the hearing and determination of the objection.

Rider Hunt objected to the production and inspection of the documents on the following grounds -

(a) That the issue of a subpoena in the circumstances was an abuse of process;

(b) Compliance with the subpoena is overly burdensome and oppressive;

(c) That the filing of the subpoena was premature.

The defendant objects to the inspection of any document identified in the subpoenas on the ground that the filing of the subpoenas was an abuse of the process of the court.

Each of the other recipients of the subpoenas object on the same grounds and further, Crown Limited objects to production of documents which are the subject of confidentiality undertakings.

Mr Manie informed the Prothonotary that he did not have any documents to produce.

Order 32 of the Rules of Court provides a means by which a party to a proceeding, can obtain discovery from a non-party.

Rule 32.07 empowers the court to order a person who is not a party to make discovery of relevant documents.

The jurisdiction to order discovery from a non-party was introduced into the Rules of Court to operate from 1 January 1987 - see Statutory Rule 99 of 1986. Formerly there was no procedure whereby a party could obtain discovery of a document from a non-party. That was the general rule. See Nathan v. MJF Constructions [1986] VicRp 8; (1986) VR 75 where Nicholson J reviewed the authorities - see pages 79-80.

It was to overcome the restriction that Rule 32.07 was introduced.

Rule 42.10 was introduced in 1997 as another means by which a party to the litigation could require the production and obtain inspection of documents in the possession of a non-party to the litigation.

In Belsart v. Man Po Holdings (Aust) Ltd an unreported judgment of Beach J delivered 31 August 1998, his Honour held that if the effect of the subpoena procedure adopted by a party under Rule 42.10 was to obtain discovery from a non-party then the use of the Rule 42.10 subpoena procedure was an abuse of the process of the court.

"Although in the present case Jameson answered the subpoena served upon him, the reality of the situation is that what the plaintiff was seeking to achieve by serving the subpoena was to have KPMG Peat Marwick give discovery. In my opinion that much is clear from the terms of the subpoena itself ...

My conclusion therefore is that the service of the subpoena was an abuse of process. ...

I order that the subpoena be set aside."

In coming to that conclusion his Honour referred to the object of Rule 42.10 and the mischief it was intended to address.

The plaintiff who caused the issue of the subpoena made application for leave to appeal to the Court of Appeal. The application was dismissed. See reasons delivered 12 November 1998.

The Court of Appeal dismissed the application on the ground that "the applicant has failed to establish that it will suffer substantial injustice if the decision is allowed to stand."

Brooking JA who delivered the judgment of the court after referring to what Beach J's decision was, namely, that the applicant had adopted the wrong procedure by causing a subpoena to be issued under Rule 42.10 instead of applying for discovery from a non-party under Rule 32.07 went on to say -

"To dispose of the matter in the way which I propose should not be taken as suggesting that a prima facie case of error on the part of Beach J has been made out. We have not heard or considered argument on the point but my present impression is that his Honour was right to set the subpoena aside."

In a recent decision of the Court of Appeal in Australian Hospital Care (Pindara) Pty Ltd & Anor v. Paul Joseph Duggan & Ors, unreported delivered 23 April 1999 Tadgell JA referred to the decision of Beach J and the view expressed by Brooking JA in relation to it and stated that the use of the Rule 42.10 subpoena procedure may not be appropriate where it is evident that discovery was sought and the legal practitioners in this State should be aware of the observations made by Brooking JA.

The relevant facts are in a small compass and can be briefly stated.

The plaintiff as a sub-contractor entered into an agreement with the defendant as the builder for the Crown Casino project in Melbourne to perform electrical works and to provide materials and equipment in connection with the works. The works were performed. A dispute has arisen between the parties.

On 23 September 1998 the plaintiff instituted its proceeding in this court.

After service the defendant issued a summons seeking an order that the proceeding be stayed or alternatively that certain paragraphs of the statement of claim be struck out.

On 30 October 1998 I ordered that the proceeding be entered in the Building Cases List and by consent the defendant's summons dated 27 October 1998 was dismissed. However, it was made quite clear at the time that the defendant reserved its right to apply to strike out parts of the statement of claim.

I gave leave to the plaintiff to amend its statement of claim.

By the order made on 30 October 1998 the defendant was required to file and serve its defence by 19 February 1999, and on 5 February 1999 the parties agreed by consent that the time to file a defence be extended to 7 May 1999.

By a consent order made on 30 April 1999 the time for delivery of the defence has been extended to 2 July 1999.

In the meantime, the plaintiff served an amended statement of claim on 3 December 1998.

As the defendant has not delivered any defence it is at this stage impossible to say what the issues are as between the parties.

Mr Digby QC who appeared with Mr F. Tiernan of counsel for the plaintiff frankly conceded that there were difficulties in pleading paragraphs and particulars of the amended statement of claim because of lack of relevant information which it is asserted is in the possession of the non-parties who are the subject of the subpoenas. It is clear from the observations made by counsel for the defendant at various directions hearings that the defendant is of the opinion that the amended statement of claim is defective and there is the threat of an application to strike it out or some paragraphs as not disclosing a cause of action or being embarrassing.

Mr Digby QC frankly admitted that the plaintiff sought further information to enable it to properly plead its case and it sought that information from the non-parties pursuant to the subpoenas.

One thing is clear beyond doubt, there are a number of interlocutory steps before the proceeding could be ready for trial and realistically a trial date is more than 12 months away.

It is clear that the documents the subject of the various subpoenas are not sought at this stage as evidence in the trial but to enable the plaintiff to properly and fully plead its case.

Rule 42.10 procedure - appropriate or an abuse?

It is clear that the rules of this court provide for two different procedures whereby a party can obtain production and inspection of relevant documents in the possession of non-parties. Order 32 is concerned with, inter alia, discovery from a non-party. There are a number of decisions with respect to that order which set out the relevant matters which are to be taken into account on an application pursuant to Rule 32.07.

Rule 42.10 provides for a procedure whereby a subpoena is issued requiring a non-party to produce documents to the Prothonotary.

There is nothing in the rules which preclude a party pursuing either course to obtain production and inspection.

Rule 32.07 does not state any time limits with respect to an application for discovery from a non-party and accordingly the application could be made at any time during the course of the proceeding.

Equally, Rule 42.10 does not prescribe any time provisions as to when a party may file a subpoena for production of documents to the Prothonotary other than any production that has to be made "before the trial of the proceeding."

Mr Digby QC with some justification submits that there is nothing in Rule 42.10 or the Rules of Court which preclude the procedure from being employed at this early stage of the proceeding.

He referred to a number of authorities in which judges have expressed the view that the rule should be liberally construed in order to do justice and ensure a party is not shut out of the judicial system because of an inability to gain information to properly establish a case.

In Greyhound Australia Pty Ltd v. Deluxe Coaches Pty Ltd (1986) 11 FCR 592 Pincus J was concerned with a subpoena duces tecum filed pursuant to Order 27, Rule 4 of the Federal Court Rules 1979 where the subpoena was issued against a non-party for production at a procedural hearing which was some time ahead of the trial date. It was argued that the subpoena procedure was not available in those circumstances.

"The question whether the procedure just mentioned is permitted under the practice of this court does not receive as clear an answer from the authorities as one would wish."

His Honour then considered a number of Federal Court cases and concluded that even though the subpoena was in effect seeking discovery against a non-party, the subpoena was not bad on that account. And in so doing noted the Full Court of the Federal Court decision of Lucas Industries Ltd v. Hewitt (1978) 45 FLR 174 where Smithers J, with whose reasons the other judges agreed, held that "if considerations of justice and convenience require production of relevant documents at some particular time whether before or after trial, production should then be ordered."

Pincus J also referred to the unreported decision of Northorp J in Jet Corporation Australia Pty Ltd v. Petres Pty Ltd in which one of the objections to production pursuant to subpoena was the premature nature of the application. Northorp J said -

"It is said that the issues are not yet fully clarified; the hearing is still very much in the future; that this a matter that should be deferred until much closer to the time of trial.

In my opinion, that submission also should be rejected. For reasons already given, it is apparent that this is a most complex and difficult action commenced by the applicant. The applicant is facing difficulties in obtaining the necessary documentation to enable it to frame properly its claim."

It is pertinent to note that the Federal Court Rules and practice did not provide discovery from a non-party.

In Southern Pacific Hotel Services Inc v. Southern Pacific Hotel Corporation Ltd (1984) 1 NSWLR 710 Clarke J had to consider the question whether subpoenas which were issued ahead of trial against a non-party were premature. His Honour rejected the submission that the subpoenas were premature and said at p.716,

"The practice of requiring a party to make subpoenas returnable days weeks or months before the trial, as is appropriate, has been followed by judges administering the Commercial List for many years. It is a practice designed to further the ends of justice, in particular by avoiding the time wasting and distractions during the trial involved in dealing with objections, sometimes lengthy, to the production of documents. It is also designed to minimise the need for amendments of pleadings, for wasteful adjournments, and overall to enable the Commercial Court to carry out its task of providing an expeditious hearing of commercial disputes. This is an important service to the commercial community and the judges involved are ever anxious to institute appropriate procedures to ensure both an expeditious hearing and one conducted with the minimum of time wasting and consequence cost."

Again, it should be pointed out that there was no rule in New South Wales permitting discovery from a non-party.

Mr Digby QC relies on these authorities and submits that it is both just and convenient to enable his client by the issue of subpoenas to obtain relevant information to enable it to properly plead its case.

However, in this court there is the procedure available under Rule 32.07 pursuant to which discovery can be obtained from a non-party.

Although Beach J used the phrase "abuse of process" in my respectful opinion it is not a question of whether there is an abuse of process but whether the new procedure by which a party may file a subpoena to produce documents to the Prothonotary well ahead of trial is available in the present circumstances? If it is not available then to utilise the procedure may be an abuse of the process of the court.

In construing Rule 42.10 the object of the exercise is to determine the intention of the framers of the sub-rule.

The primary source of the intention is the words used interpreting them in their ordinary and natural meaning unless it can be deduced that the words have a particular meaning. Sometimes statutory instruments have a definition clause which puts a particular meaning on a word or phrase.

But the words must be considered in context and after considering the rules as a whole. In other words, the structure of the rules should not be overlooked. In construing the words the purpose of the provision is a factor also to be considered.

The intention is to be ascertained objectively. That is, the intent is deduced from the words used in context taking into account the rules as a whole and giving effect to the purpose of the particular rule in question.

The starting point must be the words used in Rule 42.10.

The rule applies in a given set of circumstances. Its application is provided for in sub-rule 1 which states -

"(1) This Rule applies where a party who has a solicitor in the proceeding seeks to require a person not a party to produce any document in writing for evidence before the trial of the proceeding."

[Emphasis added.]

The prerequisites to its application are threefold, namely, first, that a party who has a solicitor may utilise the procedure; secondly, that the person required to produce the document is not a party; and thirdly, that the document is produced "for evidence before the trial of the proceeding".

The forms which form part of the rules also make it clear that the procedure is available in circumstances where it is intended that the documents be considered as evidence at the trial. I refer to forms 42E and F which provide under the heading "FURTHER NOTES" the following:

"All documents produced in compliance with this subpoena will be available, unless earlier return, at the trial of the proceeding and, subject to the following, may be inspected in the meantime ... "

[Emphasis added.]

The terms of sub-rules (18) and (19) also make it clear that the documents are produced to the Prothonotary for the purpose of being considered for evidence in the trial.

This conclusion is supported also by the definition sub-rule which defines "subpoena for production" as "an order in writing requiring a person named to attend as directed by the order for the purpose of producing a document or thing for evidence." - see Rule 42.01. [Emphasis added.]

On a plain and literal interpretation of Rule 42.10, aided by the definition and the forms, it is inescapable that the procedure under s.42.10 is only available where the document is potentially required for evidence at the trial of a proceeding.

That is not to say that the procedure is not available if in the end result the document is not adduced into evidence but it is available to enable a party to inspect a document in order to make a decision whether or not to adduce it in evidence.

My conclusion is reinforced by a consideration of the reason why the rule was introduced.

In Belsar Pty Ltd v. Man Po Holdings (Australia) Ltd, supra, Beach J stated that the rule was introduced to overcome problems associated with the inconveniences and disadvantages which can arise from the production of documents at trial. He referred to what Sir Donald Nichols VC said in Khanna v. Lovell White Durrant (1995) 1 WLR 121 at p.123.

"The plaintiff issued the writ of subpoena in this form so as to avoid the inconveniences and disadvantages which arise from the production of documents at, and not before, the trial. For instance, the person to whom the subpoena is addressed is notified of the date of the trial and he duly attends at court on the appointed day., The trial starts, and in due course he is called to give oral evidence or to produce documents or both. Frequently the documents mentioned in the subpoena have not previously been seen by one or other, or either, of the parties. So if the documents are lengthy or numerous or of crucial importance, an adjournment is likely to become necessary to enable the parties' advisers to read the documents and obtain copies. The adjournment may be for a short while but, when the documents are voluminous, the trial may have to be adjourned for a day or longer, sometimes

a considerable period. Obviously that is very inconvenient.

There may be other reasons why production at the trial is not satisfactory. In some cases, and the present case appears to be one, a party may wish to see the documents before witness statements are prepared. Or a party may wish to see the documents before deciding whether or not to accept a payment in court, or to settle the action on particular terms. Then the absence of the documents is unsatisfactory and out of step with the modern approach. Increasingly court procedures are designed to require production of evidential material at an earlier rather than a later stage of the proceedings. The emphasis is on the parties knowing the strengths and weaknesses of each other's case as soon as possible, and not being kept in the dark until the trial, by which time increased costs will have been incurred on both sides."

The English rules did not contain a rule in terms similar to Rule 42.10 but the Vice Chancellor held that the court had a wide discretion to control the conduct of a trial and the receipt of evidence. It was appropriate in the circumstances to allow a subpoena to a non-party ahead of the trial date.

The purpose for which Rule 42.10 was enacted supports the conclusion that the subpoena should only be used to require evidence before trial and that if documents are sought for a purpose other than possible evidence at trial then R.42.10 could not be used.

Finally, a consideration of the rules as a whole supports the same conclusion. Rule 42.10 is not on its own when it comes to procedures available to obtain documents from a non-party. Rule 32.07 is a provision pursuant to which a party may obtain discovery from a non-party which means that the party can obtain production of documents well ahead of any trial date to enable it to properly plead and prepare its case. The plaintiff has that procedure available to it to gain access to relevant documents to enable it to properly plead its case.

Mr Digby QC accepted that the purpose of the exercise in filing the subpoenas was to gather information to enable the plaintiff to properly and adequately plead its case. He frankly conceded that the purpose of the exercise was not to gather evidence for the trial. Indeed, in the circumstances, Mr Digby QC was compelled to make that concession. The interlocutory steps have gone no further than the delivery of an amended statement of claim, the issues have not been defined, there are many interlocutory steps to perform and a trial date is realistically at least 12 months away.

In my opinion, the plaintiff was not entitled to file the subpoenas for the purpose of gathering information to enable it to plead its case and the subpoenas should be set aside.

Mr Digby QC submitted that the claims by the plaintiff are somewhat unusual in that there are two causes of action based upon s.52 of the Trade Practices Act. He goes on to submit that upon a proper examination of the claims it is clear that it will be impossible to properly particularise the amended statement of claim unless and until the plaintiff can obtain access to the documents requested in the various subpoenas. He also emphasises that the defendant has already attempted one strike out application even though it was not proceeded with and there is an ever present threat that it may make a further application depending upon the adequacy of the amended statement of claim and the particulars.

In my opinion, the concerns of Mr Digby QC are unfounded. No court is going to strike out a statement of claim merely because there are insufficient particulars of the facts pleaded except as a last resort and in circumstances where justice demands it. Many a party pleads it case on the basis that further and better particulars will be provided after discovery and/or interrogation.

Further, Mr Digby QC says that the plaintiff may have difficulty in proving its case at trial. The procedure under Rule 42.10 would be available to the plaintiff to obtain the production of documents which potentially could be used in evidence. Again, in my view, that is not an argument for the application of Rule 42.10 procedure at this stage.

Further, it is submitted that any application under Rule 32.07 would be unsuccessful because the plaintiff would not be able to satisfy the elements of its application as described by Kaye J in the unreported decision of Keviris Pty Ltd v. Capital Building Society and Ors, unreported delivered 9 February 1988.

Kaye J referred to, with approval, what the learned author of the Supreme Court Civil Procedure Victoria said at p.222, now p.3937.

The learned author was of the view that the court will be cautious in exercising the new jurisdiction under Rule 32.07 and that to obtain "an order for discovery from a non-party it will not be sufficient simply to establish the qualifying conditions contained in Rule 32.07." The learned author went on to say that the court "might possibly require" the party applying for the discovery to show that discovery was necessary for one or other stated reasons and examples were given.

The wording of Rule 32.07 does not support the observation that the court would be cautious in exercising the new jurisdiction and once the qualifying conditions are satisfied then in my opinion the court should exercise the discretion in favour of the applicant unless there is some good reason against or discretionary bar to, the order being made. The authorities since the observations of Kaye J set out in Williams, Civil Procedure Victoria at p.3937-8 support this approach.

Rule 32.07 is part of the armoury of the court to advance the interests of justice. I do not accept that the plaintiff would be unsuccessful if it sought to utilise the jurisdiction of the court under Rule 32.07 to gather the necessary documentary information.

Each of the parties the subject of the subpoenas, also objected to the production of documents on the grounds that the subpoenas were really an attempt to obtain discovery, were too wide, burdensome and oppressive and required some of the recipients to form a judgment as to the relevance of particular documents to the issues in the proceeding.

It is unnecessary for me to consider these grounds of objection.

I am satisfied that the procedure under Rule 42.10 is not available to the plaintiff to obtain information to enable it to properly plead its case. Accordingly, the most appropriate order to make is to set aside each of the subpoenas.

However, before concluding I wish to make clear that the profession should not be deterred from using the Rule 42.10 procedure in an appropriate case. This procedure is available provided the documents are produced for the purpose of making a decision whether they should be used in evidence. Their production may take place many months before the trial. This is made clear by Rule 42.10(16).

The procedure is an appropriate one, designed to avoid the inconvenience of producing documents at trial but equally importantly, to apprise parties of their strengths and weaknesses so that steps can be taken to settle the case before the costs mount. This is made clear by what Clarke J said in The Southern Pacific Hotel Services case, supra, and what Sir Donald Nichols VC said in the Khanna case, supra. I also refer to the comments of Lord Mackay of Clashfern in O'Sullivan v. Herdmans Ltd (1987) 3 All ER 129 at p.136.

"Further the early production of these documents may well affect the course of the litigation before the trial. It may lead the defendants to consider a settlement of the action and it certainly will enable the medical advisers and the legal advisers and defendants to appreciate the real issues in the case when they are preparing for trial. The interests of justice are, in my opinion, served by the promotion of settlements rather than the prolongation of litigation and by the possibility of early, complete preparation by both parties to a trial rather than by obliging one party to delay its full preparation until after the trial has actually started."

Indeed, as his Lordship pointed out, those who object to producing documents which are relevant to the issues in the proceeding are delaying the attainment of justice rather than promoting it.

Legal practitioners should be encouraged to utilise both procedures available under the rules. They are there to promote the attainment of justice.

Subject to the submissions of counsel I propose to make the following orders -

(i) That each of the six subpoenas filed by the plaintiff on 9 April 1999 be set aside;

(ii) That the plaintiff pay the costs of the defendant and each of the subpoenaed parties, namely, Ryder Hunt Melbourne Pty Ltd, Crown Limited, Hudson Conway Management Ltd, Rawlinsons (Aust) Pty Ltd, Lincoln E. Scott Australia Pty Ltd and Graeme Manie of the hearing and determination of their respective objections to the subpoena.

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