Mercedes Holdings Pty Ltd v Waters [2013] FCA 138 | Case summary

REASONS FOR JUDGMENT 1 This is an application for a review of orders made by Registrar Hannigan on 11 January 2013, in which she granted the first and second respondents ('the KPMG parties') and the applicants access to documents produced by ASIC on subpoena pursuant to certain terms. Those documents included a transcript of a compulsory examination conducted by an inspector, appointed by ASIC, of Ms Marilyn Anne Watts. Ms Watts was the scheme manager of the Premium Income Fund. The KPMG parties and the applicants (who I will refer to as the Mercedes parties) both now seek access to the documents produced by ASIC. Ms Watts, who is a third party to the litigation, has applied for orders which would prevent access being granted to the transcript, but does not otherwise oppose access to the other documents produced by ASIC in answer to the subpoena. 2 The subpoena in question was issued by this Court at the request of the KPMG parties, and was addressed to ASIC, which produced all of the documents sought in it without any objection being raised. The contention that access should not be granted is premised on provisions in the Australian Securities and Investments Commission Act 2001 (Cth) ('the ASIC Act'), which provide that an examination by an inspector is to be conducted in private (s 22). They closely circumscribe the circumstances in which ASIC may give a copy of the transcript to a third party (see ss 25 and 26) and that, more generally, imposes upon ASIC an obligation to take all reasonable measures to protect from unauthorised use or disclosure of protected information garnered as a result of the exercise by it or powers of investigation (see s 127). 3 As it was developed, the argument was that the Court ought not, in the exercise of its discretion, grant access to the documents, rather than any argument that the Court lacked power to do so. Thus, it was accepted, as has been repeatedly held, that production by ASIC of examination transcripts in obedience to a subpoena issued by a Court is not disclosure of such information (within the meaning of s 127) or any kind of act in contravention of ss 22, 25 or 26 (see Maronis Holdings Ltd v Nippon Credit Australia Ltd (2000) 18 ACLC 609, 613; [2000] NSWSC 138 at [16] to [20] (ACLC) per Bryson J, Shipley v Masu Financial Management Pty Ltd (2008) 68 ACSR 412, 415 at [27] to [28] per White J, and, in relation to s 127, Re Trio Capital Ltd (2010) 239 FLR 99, 105-107 at [42] to [51] per Ward J.) 4 Mr Johnson of counsel, who appears for Ms Watts, submitted that these authorities could, in most instances, be distinguished because they involved cases in which the examinee was already a party. The difficulty with that submission, at least in the first instance, is that, at least in Shipley, several of the examinees in question were not parties. In a slightly different context, this was also the case in Re Trio Capital. Ms Watts did not seek to submit, perhaps other than implicitly, that White J's judgment in Shipley was wrongly decided, but I apprehend that in substance the proposition advanced was either that it could be distinguished or that it was incorrect. 5 As the argument was ultimately developed, Mr Johnson submitted that where the examinee whose transcript was sought was not a party to the litigation, the approach to it was governed by the Full Court of the New South Wales Supreme Court decision in Commissioner of Railways v Small (1938) 38 S.R. (NSW) 564 and that this prohibited the seeking of discovery by means of a subpoena. I accept this, but I do not think that it assists Ms Watts. What was actually said in that case by Jordan CJ in the celebrated passage at 573 is in the following terms: A writ of subpoena duces tecum may be addressed to a stranger to the cause or to a party. If it be addressed to a stranger, it must specify with reasonable particularity the documents which are required to be produced. A subpoena duces tecum ought not to be issued to such a person requiring him to search for and produce all such documents as he may have in his possession or power relating to a particular subject matter. It is not legitimate to use a subpoena for the purpose of endeavouring to obtain what would be in effect discovery of documents against a person who, being a stranger, is not liable to make discovery. A stranger to the cause ought not to be required to go to the trouble and perhaps to expense in ransacking his records and endeavouring to form a judgment as to whether any of his papers throw light on a dispute which is to be litigated upon issues of which he is presumably ignorant. (references omitted) 6 The nub of Mr Johnson's submission was, I think, that the subpoena was being used as a form of pre-action discovery to determine whether KPMG should sue Ms Watts, an illegitimate use. In that sense, the use of the word 'discovery' in the submission was perhaps not quite the same as that as was being contemplated by Jordan CJ. Implicitly, the argument was that Shipley could be distinguished because this case, on its facts, was a case where such pre-action discovery was being sought and it could at least be said that was not so in Shipley. 7 I do not accept this submission, however, for factual reasons; that is, I do not accept that the subpoena is, in fact, being used as a form of pre-trial discovery. The reasons for this relate to the affidavit of Mr Drinnan, the solicitor for KPMG, who gave evidence that the reason he wished to inspect the transcript was for the purpose of pleading, in the KPMG parties' defence, a reduction of liability arising from proportionate liability legislation potentially applying to the present proceedings. Far from being a form of pre-trial discovery, that evidence establishes that the subpoena seeks a document which goes directly to an issue raised by the KPMG parties' defence. 8 The reference in the passage I have quoted above from Jordan CJ's reasons to the necessity of avoiding the imposition upon a third party of the obligation of ransacking his or her documents, of course, does not arise in the present proceeding because there is only one document with which the present argument is concerned, namely the transcript. The reasons that that transcript is relevant include the fact that Ms Watts is already a party to related Queensland Supreme Court proceedings commenced by ASIC which, to a large extent, overlaps with the transaction with which this case is concerned. 9 I infer that Ms Watts's transcript was relevant to those proceedings, and I have little doubt that it is relevant to these. A cursory examination of the transcript itself (a course mentioned in Maronis as being desirable) in no way dissuades me from that view. Whether couched in terms of apparent relevance or the more colourful 'on the cards' test, I am satisfied that the transcript is relevant. One has then the seeking of a relevant document for a legitimate purpose. Certainly, in relation to the KPMG parties, access must therefore be granted, although subject to terms to which I will return. 10 During the hearing, I was disposed to think that access by the Mercedes parties might well not be relevant to any issue and might, therefore, constitute, in substance, a species of discovery. On reflection, however, I do not think that this is so. If the transcript is relevant for the purposes of the KPMG parties, I do not see how it cannot be relevant for the purposes of the Mercedes parties, whose allegations, after all, are what the KPMG parties are responding to in their defence. 11 Finally, Mr Johnson submitted that special circumstances needed to be shown before the confidentiality regime provided for in ss 22, 25, 26 and 127 could be lifted, citing Gothard & Anor v Fell & Anor (2012) 203 FCR 236. That case was concerned with a different question of the circumstances in which a party might be relieved of the implied undertaking flowing from Hearne v Street (2008) 235 CLR 125. The decision has nothing to say in a case such as the present. 12 I do not apprehend it to be in issue that if the above matters were resolved adversely to Ms Watts that she accepted that access should be granted subject only to the question of terms. The confidentiality regime in the ASIC Act informs, without controlling, the exercise of the Court's jurisdiction. In both Maronis and Shipley a confidentiality regime was imposed by the Court which limited access to the legal representatives of the parties and, in this case below, the Registrar took a similar course, except that she permitted disclosure to the KPMG parties for the purposes of obtaining instructions. Mr Johnson indicated at the conclusion of the hearing that if I were otherwise against him on the substantive issue, Ms Watts would be content with a regime of the kind ordered by the Registrar. 13 In those circumstances, the orders I make are: (1) Ms Watts's application of 18 January 2013 be dismissed. (2) Ms Watts pay the costs as taxed or agreed of the applicants and the first and second respondents. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.

Mercedes Holdings Pty Ltd v Waters

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