Nevro Medical Pty Ltd v McKelvie

The present application 4 Mr McKelvie applies for an order setting aside three subpoenas issued at Nevro's request to his and his wife's banks. 5 Before seeking leave to issue the subpoenas, Nevro sought access to Mr and Mrs McKelvie's bank statements directly. On 29 October 2020, Nevro's solicitors wrote to Mr McKelvie's solicitors, as follows: As you are aware, our client, with the assistance of Deloitte, has conducted an investigation into your client's expenses, dating back to 2014. Our client considers it necessary to cross-check the results of that investigation against statements (dating back two years from the termination of his employment with Nevro) related to his and Mrs McKelvie's credit cards and bank accounts, and any cards and accounts associated with any of their businesses. This will allow our client to finalise its statement of claim, prior to your client filing his defence. 6 The following day, Nevro's solicitors proposed that the parties consent to, among other things, an order in the following form: By 13 November 2020, the Respondent: a. disclose to the Applicant in writing the details of all bank accounts and credit cards held by him, Natalie McKelvie, and any of their businesses … between … 26 August 2018 to 26 August 2020; and b. provide to the Applicant complete statements associated with those bank accounts and credit cards. 7 Mr McKelvie declined to agree to such an order on 2 November 2020. His solicitors said that the proposed order was premature because: (i) "there is no 'right' to discovery in this jurisdiction without an order of the Court"; (ii) "the provision of [the documents] is likely to be time consuming and costly"; and (iii) "the filing of pleadings is yet to be completed". 8 On 13 November 2020, at Nevro's request, the court issued three subpoenas: (1) A subpoena addressed to Australia and New Zealand Banking Group Limited, which requires the addressee to produce copies of: (a) "statements, or documents recording transactions, arising from or associated with any and all bank accounts (including debit and credit cards) held with ANZ by Stuart Edward McKelvie, between 27 May 2013 and 26 August 2020"; and (b) "statements associated with any and all bank accounts and credit cards held with ANZ and credit cards held with ANZ [sic] by Natalie Maree McKelvie, between 27 May 2013 and 26 August 2020". (2) A subpoena addressed to ING Bank (Australia) Limited, which requires the addressee to produce copies of: (a) "statements, or documents recording transactions, arising from or associated with any and all bank accounts (including debit and credit cards) held with ING by Stuart Edward McKelvie, between 27 May 2013 and 26 August 2020"; and (b) "statements associated with any and all bank accounts and credit cards held with ING and credit cards held with ING [sic] by Natalie Maree McKelvie, between 27 May 2013 and 26 August 2020". (3) A subpoena addressed to Westpac Banking Corporation, which requires the addressee to produce copies of "statements, or documents recording transactions, arising from or associated with any and all bank accounts (including debit and credit cards) held with Westpac by Stuart Edward McKelvie, between 27 May 2013 and 26 August 2020". 9 On 30 November 2020, Mr McKelvie filed an interlocutory application for an order that the three subpoenas be set aside.

The parties' submissions 10 Mr McKelvie submits that the subpoenas should be set aside because they are being used by Nevro as an impermissible substitute for discovery, and as a means of conducting a fishing expedition. 11 Counsel for Mr McKelvie submitted that it was apparent the subpoenas were being used as a substitute for discovery because they were only issued after Nevro had unsuccessfully "sought discovery" of Mr and Mrs McKelvie's bank records from Mr McKelvie. (See [5]-[7] above.) 12 Counsel for Mr McKelvie submitted further that Nevro simply wishes "to pick over [his] client's financial records for the last six years and see what else they can find". He submitted that the documents sought are not relevant, because the existence of the payments to Mr McKelvie recorded in the annexure to Nevro's statement of claim is not in dispute. He also questioned the relevance of Mrs McKelvie's bank statements in circumstances where she is not a party, submitting that if Nevro wishes to explore making a claim against her, it should make an application for preliminary discovery. 13 In response, Nevro submits that the subpoenas "have a legitimate forensic purpose, in the sense that it is 'on the cards' that the documents sought will materially assist, because they will shed light on liability and the quantum of the fraud", citing Wong v Sklavos [2014] FCAFC 120; 319 ALR 378 at 382-383 [12] (Jacobson, White and Gleeson JJ). The legitimate forensic purpose is said to be that, without the bank records, it is impossible to know whether the amount Mr McKelvie claimed as an expense on any given day is equal to the amount that he actually spent. 14 Nevro submits that Mr McKelvie's complaint that the subpoenas are an impermissible substitute for discovery is misconceived. It says that the subpoenas are competent because: (i) they are issued against third parties (citing McIlwain v Ramsey Food Packaging Pty Ltd [2005] FCA 1233; 221 ALR 785 at 802 [35(f)] (Greenwood J)); (ii) they specify the documents sought with particularity and do not require anyone to ransack their records (citing P Dawson Nominees Pty Ltd v Multiplex Ltd [2007] FCA 1044; 64 ACSR 53 at 57 [24] (Heerey J) and Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at 573 (Jordan CJ)); and (iii) there is no principle of law that documents that could be obtained by discovery against a party should be obtained that way - particularly where the party from whom discovery might be sought is alleged to have forged documents. 15 Nevro submits that it requires bank records back to May 2013, even though the earliest misappropriation identified in its statement of claim occurred in May 2014. It submits that the bank records will give it a better understanding of Mr McKelvie's spending habits, and thus a better understanding of what is properly a personal expense and what is a business expense. It also submits that it is "on the cards" that the misappropriation started earlier than currently alleged. 16 As for Mrs McKelvie's bank records, Nevro submits that these have been properly subpoenaed for three reasons. First, some expenses for which reimbursement has been sought may have been incurred using Mrs McKelvie's bank account. Secondly, determining whether a purchase was made by Mr McKelvie or Mrs McKelvie may assist in determining whether the purchase was made for personal or business reasons. Thirdly, Mrs McKelvie's bank records may shed light on whether Sutton Executive Services was in fact a legitimate business that provided services to Mr McKelvie.

Consideration 17 Where, as in this case, subpoenas are issued to non-parties, the applicable considerations on an application of this type include those described by Jordan CJ in the oft-cited passages in Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at 573: 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 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. (Citations omitted.) 18 See also P Dawson Nominees Pty Ltd v Multiplex Ltd [2007] FCA 1044; 64 ACSR 53 at 57-58 [24]-[28] (Heerey J). 19 Such concerns do not arise in this case. The documents sought from the banks are clearly particularised and limited in scope. It will not take long to retrieve them. No substantial searches will be required. From the banks' perspective, the process will not resemble discovery. 20 Counsel for Mr McKelvie made much of the fact that the subpoenas were only issued after Nevro failed to obtain Mr McKelvie's consent to providing them (or a subset of them). I am unable to see why that matters. Nevro asked for the documents. Mr McKelvie declined to provide them. Nevro decided to seek them from the banks. The banks are not parties, so Nevro took the orthodox step of applying for subpoenas. See P Dawson Nominees Pty Ltd v Multiplex Ltd [2007] FCA 1044; 64 ACSR 53 at 58 [27] (Heerey J). 21 The other submission made by Mr McKelvie is that the subpoenas are being used as a means to conduct a fishing expedition. 22 In my view, however, the documents sought have "apparent" or "potential" relevance to the issues in the case. See, eg, Wong v Sklavos [2014] FCAFC 120; 319 ALR 378 at 381-382 [12] (Jacobson, White and Gleeson JJ); P Dawson Nominees Pty Ltd v Multiplex Ltd [2007] FCA 1044; 64 ACSR 53 at 59 [31] (Heerey J); Australian Gas Light Co v Australian Competition & Consumer Commission [2003] FCA 1101 (French J) at [8]. 23 Nevro seeks Mr McKelvie's bank records in order to cross-check his expense claims against his actual expenditure. Mrs McKelvie's records are also relevant, even though no claim is made against her, because, as Nevro submits, it is possible that some of the reimbursed expenses were incurred using her accounts. Further, her records may shed light on whether Sutton Executive Services was a legitimate business at the time that it issued invoices to Nevro. 24 The subpoenas seek records from May 2013, when Mr McKelvie commenced employment. That is a year earlier than the first expense claim identified in Nevro's amended statement of claim. But in the circumstances, including where the pleading leaves open the possibility that earlier transactions will be impugned ("[b]etween at least May 2014 and July 2020 [Mr McKelvie] submitted expenses for reimbursement to which he was not entitled"), the records relating to his first year of employment remain sufficiently relevant.

Disposition 25 Mr McKelvie's application to set aside the subpoenas will be dismissed, with costs. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Callaghan.