McHugh v Australian Jockey Club Limited

REASONS FOR JUDGMENT 1 On 4 April 2011 a subpoena was issued to Anthony Geoffrey Hartnell, the maker of a witness statement filed by the applicant in the substantive proceedings. 2 By notice of motion filed on 12 April 2011 Mr Hartnell moved for orders that paragraphs 1, 2, 3 and 6 of the subpoena be set aside. Those paragraphs were as follows: 1. A copy of the most recent application, statement of claim, defence, reply and any affidavit sworn by you and filed or served in the Hartnell Proceedings. 2. A copy of the transcript of your oral evidence (including cross examination and any re-examination) in the Hartnell Proceedings. 3. A copy of a document or documents recording the terms of settlement of the Hartnell Proceedings. 6. A copy of your tax returns for the financial years ended 30 June 2006, 30 June 2007, 30 June 2008, 30 June 2009 and 30 June 2010. The subpoena defined "Hartnell proceedings" as follows: Hartnell proceedings means Federal Court proceedings number NSD 2527 of 2006, Anthony Geoffrey Hartnell v Commissioner of Taxation, being the proceedings referred to in the attached articles. Attached to the subpoena was a copy of an article dated 6 April 2009 apparently from the website of the Sydney Morning Herald and a copy of an article dated 16 March 2009 apparently from the website of the Brisbane Times. 3 The motion to set aside the subpoena was supported by an affidavit of Michael John Sophocles sworn on 19 April 2011. Also tendered on this interlocutory application was the witness statement of Mr Hartnell, which I have referred to above. 4 Mr Sophocles deposed that he acts as the solicitor for Mr Hartnell. The affidavit refers to correspondence between Mr Sophocles and Yeldham Price O'Brien Lusk, the solicitors for the third respondent, Australian Racing Board Limited, at whose request the subpoena was issued to Mr Hartnell. 5 Mr Sophocles stated that on 13 April 2011 certain documents were produced to the Court in response to those paragraphs of the Schedule to the subpoena which are not the subject of any challenge by Mr Hartnell. Certain documents were produced in response to paragraphs 4 and 5 of the Schedule to the subpoena. Those paragraphs being as follows: 4. A full copy (including pages 1-2 and any pages beyond page 6) of the report, part of which (pages 3-6) is annexure AGH1 to your witness statement. 5. A copy of the financial statements and reports prepared for 'AG Hartnell trading as Meringo Stud Farm' for the years ended 30 June 2006, 30 June 2007, 30 June 2008 and 30 June 2009. Thus the financial statements and the reports for 'AG Hartnell trading as Meringo Stud Farm' for the years ended 30 June 2006 to 30 June 2010 have been supplied to the third respondent. 6 Mr Sophocles deposes that paragraphs 1, 2 and 3 of the Schedule to the subpoena seek production of documents from Federal Court Proceedings NSD 2527 of 2006 and he says that he is informed by Mr Hartnell and believes that: (a) the Hartnell proceedings involved, inter alia, application of the trading stock provisions to nine broodmares … purchased by the Central Farm Joint Venture from Segenhoe Stud for $350,000; (b) none of those nine broodmares is involved in the current breeding activities referred to in Mr Hartnell's witness statement dated 7 December 2010 in these proceedings …..; and (c) the Hartnell Proceedings settled prior to judgment. 7 In the balance of his affidavit Mr Sophocles refers to a change to "non-commercial loss" rules introduced by s 35-10(2E) of the Income Tax Assessment Act 1997 (Cth) as inserted by the Tax Laws Amendment (2009 Budget Measures No 2) Act 2009 (Cth), Mr Sophocles says that the effect of the rules is that individual taxpayers with an "adjusted taxable income" of more than $250,000 per annum are now required to "quarantine" any net loss from a business activity and cannot use such a loss to offset income from other sources. This provision and s 35-10(2) was the subject of debate before me, but I do not find it necessary for present purposes to enter into that debate. 8 Order 27 r 4 of the Federal Court Rules is in the following terms: 4(1) The Court may, on the application of a party or any person having a sufficient interest, set aside a subpoena in whole or in part, or grant other relief in respect of it. 4(2) An application under subrule (1) must be made on notice to the issuing party. 4(3) The Court may order that the applicant give notice of the application to any other party or to any other person having a sufficient interest. This rule commenced on 1 March 2004. 9 One issue is whether the material sought has an apparent relevance to the issues in the principal proceedings. 10 Another consideration is the statement of principle in s 37M in the Federal Court of Australia Act 1976 (Cth). Relevantly, in my view, s 37M discourages the use of the Court's procedures in relation to material of peripheral relevance, even where, as here, the relevance is adjectival relevance. 11 A further consideration, in my view, is whether some of the contested paragraphs of the subpoena comprise documents which are in any event in the public domain in the sense that they have been the subject of proceedings in open court. 12 I also note that in the present case it cannot be and is not said that the contested paragraphs cover documents which now may not exist. There can be no doubt of the existence of documents in each of paragraphs 1, 2, 3 and 6 and, indeed, those paragraphs are in context, specific in their terms. 13 The authorities have recently been reviewed in Campaign Master (UK) Limited v Forty Two International Pty Ltd (No 4) (2010) 269 ALR 76 per Yates J. I proceed by reference to the question, posed by Beaumont J in Trade Practices Commission v Arnotts Limited (No 2) (1989) 88 ALR 90 at 103: does the material sought have an apparent relevance to the issues in the principal proceeding, ie, is adjectival, as distinct from substantive, relevance established? Does the subpoena have a legitimate forensic purpose to this extent? Apparent relevance is addressed by considering, primarily, the issues raised by the pleadings: see McIlwain v Ramsey Food Packaging Pty Ltd (2005) 221 ALR 785 at [35] per Greenwood J. 14 I now return to the disputed categories. The motion was argued by the third respondent on the basis of the relevance of the material to the substantive proceedings.

Paragraphs 1, 2 and 3 15 These paragraphs each relate to proceedings between Mr Hartnell and the Commissioner of Taxation apparently related to the tax years between 2000 and 2003. 16 I am not persuaded that material to do with particular dealings, as deposed to by Mr Sophocles, 8 to 11 years ago is sufficiently relevant to the issues in the present proceedings, assuming that Mr Hartnell's motives are or may become relevant. 17 Further and in particular, I am not persuaded that the pleadings in those proceedings have sufficient relevance. I reach the same conclusion in relation to the terms of settlement of the tax dispute. 18 Neither has the requisite relevance been established of the affidavit evidence sworn by Mr Hartnell in the Hartnell proceedings and the transcript of his oral evidence in those proceedings. 19 In each of these categories there is, in my opinion, a lack of fit between what is sought and what may be relevant in the substantive proceedings. 20 I note that the pleadings and the affidavit evidence could be the subject of an application for inspection under O 46 r 6 of the Federal Court Rules and, indeed, that some of that material has been so subject: see Hartnell v Commissioner of Taxation (2009) 254 ALR 71 per Perram J.

Paragraph 6 21 I am not persuaded that the tax returns of Mr Hartnell for the five years the subject of this paragraph are sufficiently relevant to the issues in the substantive proceedings. The financial statements and reports for the Meringo Stud Farm for those years have been made available to the third respondent. In my view the tax returns of Mr Hartnell have not been shown to be sufficiently relevant to his motive in participating in the business to which he refers in his witness statement. Further, I note that the relevance of Mr Hartnell's motive was articulated not by reference to the pleadings in the substantive case but by reference to what may be asked of him in cross-examination.

Orders 22 Without prejudice to any application for inspection under O 46 r 6, I order that paragraphs 1, 2, 3 and 6 of the subpoena to Mr Hartnell issued on 4 April 2011 be set aside. 23 The third respondent should pay Mr Hartnell's costs of the motion. Otherwise as between the applicant and the third respondent in the substantive proceedings, each of those parties should bear their own costs of the motion. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson.