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[2012] NSWSC 422
procedural. The subpoenas were set aside. The defendant was ordered to pay the plaintiff's costs of the notice of motion. Exhibits on the application were to be handed out.
No linked legislation citations have been extracted yet.
The defendants sought broad sets of documents about receivers' work across several pharmacy businesses. The Court found that the connection between much of that material and the particular dispute about Mr Hanna's occupation and use of pharmacy property had not been adequately shown. Because the pleadings and evidence did not yet identify the issues with precision, and because the subpoenas were extremely broad, the Court set them aside. The Court also considered the possible burden of reviewing documents for privilege and said that recipients' willingness to produce documents did not decide the matter.
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McDougall J dealt with a procedural dispute about two subpoenas in related commercial proceedings. One subpoena was addressed to Hall Chadwick and Messrs McDonald and Albarran. The other was addressed to Bentleys Corporate Recovery Pty Ltd, the firm of which Ms Barnet was a principal. Both sought extensive material concerning the receivers and managers appointed over property associated with Kim Ngo and Bega Pharmaceuticals Pty Ltd.
The underlying dispute concerned API's relationship with Ms Ngo, a pharmacist who operated two pharmacies at Westfield Liverpool and another at Bega. Ms Ngo bought pharmaceutical products from API on credit and provided API with a trader's bill of sale as security. Following her default, API appointed receivers and managers. The first appointments were made on 1 November 2005. API revoked that appointment on 11 August 2009 and appointed Ms Barnet [2]-[3].
API's claims against Mr Hanna related principally to the Soul Pattinson pharmacy premises at Westfield Liverpool. API alleged either that there was an agreement to sublease the premises to Mr Hanna, or that he was estopped from denying such an agreement. It claimed reimbursement of rent, outgoings and related payments it said it had made for the period of his occupation [4]-[5]. Alternatively, API alleged unjust enrichment, on the basis that Mr Hanna conducted his business from premises at API's expense without an expectation that the occupation would be free [6]. API also advanced a claim based on the benefit and use of property mortgaged under the trader's bill of sale, including stock, fittings and goodwill. It sought the alleged agreed value of $1.1 million or a reasonable price [7].
The subpoenas did not confine the requested documents to that particular occupation or transaction. Each sought all original and copied documents concerning the recipients' duties as receiver and manager of Ms Ngo's property, including correspondence, drafts, file notes and memoranda [8]-[9]. The Court described the requests as very wide [10].
Some documents had been produced in response to the subpoena addressed to Hall Chadwick and the named individuals. Bentleys opposed production. API argued that both subpoenas should be set aside [11]. The defendants' asserted rationale included that the receivers' dealings with the other Liverpool pharmacy, the Bega pharmacy and Bega Pharmaceuticals could shed light on the particular claim involving the Soul Pattinson pharmacy [12]. The Court was not persuaded that the asserted connections justified the breadth of the requests.
The procedural setting mattered. No List Response had been filed to the amended Commercial List Statement, and no evidence had been served [17]-[18]. The Court set aside the subpoenas and ordered the defendant to pay the plaintiff's costs of the notice of motion [21]-[22].
The Court focused on whether the documents sought had a sufficiently demonstrated relationship to the issues in the proceedings. It did not decide the merits of API's claims about a sublease, estoppel, unjust enrichment or the value of mortgaged property. As paragraph 14 expressly notes, whether an email might be inconsistent with API's claim was not a dispute for resolution on the subpoena application.
The defendants relied on material said to indicate links between the receivers' activities concerning different businesses. One example was a draft sale agreement for the Soul Pattinson pharmacy which named both Ms Ngo and Bega Pharmaceuticals as vendors, each acting by receivers and managers. McDougall J considered that the draft, without context about how it was made or the transaction it was intended to document, was unhelpful [13]. This illustrates the distinction the judgment draws between pointing to a document that may suggest a connection and demonstrating why a broad category of third-party documents is needed to resolve an identified issue.
The Court also considered an email from an API employee to Mr Hanna dated 28 March 2007. On one reading, the email might suggest there was no concluded agreement concerning the Soul Pattinson pharmacy at that time, which could be in tension with API's case about an agreement or estoppel arising in August or September 2006. But the Court did not resolve that evidentiary dispute. Even accepting that the email suggested settlement had been delayed by matters relating to the Bega pharmacy, the Court said it did not follow that all records concerning the Bega receivership should be produced [14]-[15].
The Court was concerned that the subpoenas were being used to search an enormous pool of documents in the hope of finding something useful. It described that proposed use as “fishing in an enormous pool of documents” and held that it was not a legitimate use of a subpoena [16]. The judgment does not suggest that a subpoena can never cover a substantial volume of material. Its reasoning turns on the breadth of these particular requests and the lack of an adequate, issue-specific justification on the material presented.
The absence of a List Response and evidence reinforced that concern. Without a response to the amended Commercial List Statement, the Court could not know the issues beyond a broad description [17]. It referred to the practice under Practice Note SC Eq11 of ordinarily deferring discovery until the pleadings have closed and evidence has been served, except in unusual cases. The reasons included narrowing discovery requests and costs, and avoiding a party shaping its evidence in response to documents obtained from the other side [18]. The Court considered similar concerns relevant to subpoenas, stating that the precise issues for third-party production should ordinarily be demonstrable from pleadings and evidence [19].
Finally, the fact that some recipients had produced documents or apparently had no objection to inspection did not answer the challenge. The Court considered the work done and computer-generated time records, which indicated that many documents might raise privilege issues for API. API could face the expense of reviewing the material and deciding whether to maintain privilege claims. In the Court's view, recipient cooperation was not determinative where the subpoena was impossibly wide and lacked a present legitimate forensic purpose [20].
The judgment is a procedural ruling applying existing case-management considerations to subpoenas. It cites Practice Note SC Eq11, not a statute or a line of authorities. The text does not identify a prior legal test by reference to case citations, nor does it purport to establish a comprehensive test for all subpoenas.
Before the ruling, the relevant procedural context included the practice described in paragraph 18: discovery ordinarily should await the closing of pleadings and, except in unusual cases, service of evidence. The stated purposes were to confine discovery requests more closely, reduce costs and prevent evidence from being prepared with advance knowledge of documents obtained from the other side. The judgment then treats similar concerns as relevant to requests made through subpoenas [18]-[19].
After the ruling, the practical proposition available from this judgment is that the ordinary discipline of linking document requests to defined issues also informs the Court's assessment of subpoenas to third parties. A party seeking such production should, in the ordinary way, be able to identify from the pleadings and evidence the precise issues for which the documents are required [19]. The judgment also confirms, on its facts, that a broad request is not saved merely because a recipient has produced documents or is willing to permit inspection, particularly where privilege review may impose costs on another party [20].
The decision should be read narrowly. It does not state that subpoenas must always await the close of pleadings or the service of evidence. Paragraph 18 expressly recognises unusual cases in the discovery context, and paragraph 19 speaks of what should occur “in the ordinary way.” Nor does the judgment decide any substantive question about the alleged sublease, estoppel, unjust enrichment or API's interest under the trader's bill of sale. It decides whether these subpoenas should stand on the procedural record before the Court.
At paragraph 16, the Court says that Mr Hanna was using the subpoena process to search “an enormous pool of documents” in the hope of finding something potentially useful. The Court concluded: “That is not, in my view, a legitimate use of a subpoena.” In plain English, a document request needs a defined forensic purpose; a general search for material that might turn out to help is not enough.
At paragraph 19, McDougall J states that, ordinarily, a party seeking third-party documents should be able to demonstrate from the pleadings and evidence “the precise issues in respect of which production of documents is required.” Put simply, the request should explain the connection between the documents and the issues that the court will have to decide. The judgment applies this proposition to subpoenas by analogy with the procedural concerns underlying discovery.
Paragraph 18 explains why the Court regarded the procedural stage as important. Discovery was ordinarily to wait until pleadings had closed and evidence had been served, except in unusual cases. One purpose was cost control; another was to avoid a party preparing evidence after seeing documents obtained from the other side. In this case, the absence of a List Response and evidence meant the issues were not yet sufficiently defined for the wide requests to be justified [17]-[19].
At paragraph 20, the Court explains that a recipient's attitude is not decisive. Some documents had been produced, but review could require API to assess whether privilege applied and whether to maintain a privilege claim. In plain English, production by a third party does not necessarily resolve the fairness, scope or burden concerns raised by an overbroad subpoena.
The judgment is most directly relevant where a subpoena seeks wide-ranging records from a third party about activities extending beyond the particular transaction or business in dispute. Here, the defendants sought records concerning receivers' duties over Ms Ngo's property across multiple pharmacies and Bega Pharmaceuticals, while the central dispute related to the Soul Pattinson pharmacy premises [8]-[12].
It is also relevant where a party relies on a general suggestion that dealings in separate businesses may be connected, without showing how the broader records bear on specific issues. The Court accepted that an email might suggest that the Bega pharmacy had delayed settlement of affairs concerning the Soul Pattinson pharmacy, but held that this did not establish a sufficient connection to justify production of Bega receivership records [14]-[15].
The procedural stage may be important where the pleadings remain incomplete and no evidence has been served. In this case, the lack of a Commercial List Response left the issues known only broadly, while the lack of evidence made it difficult to assess the precise need for third-party material [17]-[19]. These facts do not establish an absolute bar to subpoenas before that stage. The judgment speaks in terms of ordinary practice and recognises that unusual cases may exist in relation to discovery [18].
The ruling also bears on situations where a subpoena recipient has cooperated or has not objected, but the requested material may impose review costs or engage privilege claims belonging to a party. The Court treated that burden as relevant and rejected the proposition that the recipient's attitude controlled the outcome [20].
The decision does not determine whether particular documents would be admissible at trial, whether API's privilege claims were valid, or whether Mr Hanna was liable on any substantive claim. Those questions were not resolved in this application.
The supplied judgment contains no discussion of later decisions, and no later authorities or treatment history were provided with the source text. It is therefore not possible, on the materials available here, to say whether later courts followed, distinguished, applied or limited this decision.
The judgment itself refers to Practice Note SC Eq11 at paragraph 18. It does not cite another judicial decision as authority, and its reasoning is expressed as the Court's application of procedural considerations to the unusually broad subpoenas before it. Any account of its subsequent treatment would require sources beyond the judgment supplied here.
For research purposes, the proposition that can be safely attributed to this decision is limited to what McDougall J said: ordinary third-party document requests should be tied to precise issues shown by pleadings and evidence, and a subpoena that is impossibly wide and lacks a present legitimate forensic purpose may be set aside [19]-[20]. This description does not establish the decision's later precedential status.
The judgment does not specify the point at which a subpoena becomes “impossibly wide.” It gives concrete features of the requests before it, including their coverage of all documents about receivership duties and their reach across several businesses, but it does not prescribe a numerical limit or a universal drafting standard [9]-[10], [20].
It also does not define what circumstances would qualify as an unusual case in which production before the ordinary procedural milestones might be justified. Paragraph 18 recognises unusual cases in relation to discovery, but the judgment does not identify examples or decide whether any exception would apply to subpoenas on different facts.
The Court did not determine how much evidentiary material would have been enough to establish the required connection. It explained that the asserted connection between the Bega matters and the Soul Pattinson pharmacy dispute was insufficient, but did not formulate a minimum evidentiary threshold [14]-[16]. Similarly, it did not decide whether a more narrowly framed request for specified categories of Bega-related material could have been justified.
The privilege discussion is also confined to the circumstances before the Court. The judgment notes that many documents might concern matters subject to API's privilege claim and that review would impose expense [20]. It does not decide the validity or scope of any privilege, or explain how such issues should be managed in other subpoena disputes.
Finally, the substantive claims remained unresolved. The Court did not decide whether there was an agreement to sublease, whether an estoppel arose, whether Mr Hanna was unjustly enriched, or what amount, if any, was payable for the mortgaged property [4]-[7], [14]. Those matters were outside the issue decided on the notice of motion.
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Judgment - ex tempore (revised 27 march 2012) 1HIS HONOUR: In proceedings brought between Australian Pharmaceutical Industries and Ms Katherine Elizabeth Barnet as plaintiffs and Mr David Hanna and a company apparently associated with him as defendants, there is a dispute as to two subpoenas issued at the request of the defendants. To explain that dispute, it is necessary to have some regard to the issues as they may appear from the "pleadings". 2The first plaintiff (API) had a commercial relationship with a pharmacist, Ms Kim Ngo and a company associated with her, known as Bega Pharmaceuticals Pty Ltd. Ms Ngo conducted three pharmacy businesses: two in the Westfield Shopping Centre at Liverpool and one at Bega. She bought pharmaceutical products from API on credit, and had given API a trader's bill of sale to secure her indebtedness. 3Ms Ngo made default, and API appointed receivers and managers pursuant to the trader's bill of sale. First, it appointed Messrs McDonald and Albarran of Hall Chadwick (on 1 November 2005). It revoked that appointment on 11 August 2009 and appointed Ms Barnet. It seems that the receivers were appointed in the same manner to Bega Pharmaceuticals. 4In relation to the Soul Pattinson pharmacy at the Westfield shopping centre in Liverpool, API puts its claim in various ways. It says that, having regard to various dealings and other events that are particularised at some length, there was, or should be found to have been, an agreement to sublease made between it and Mr Hanna in respect of the premises from which that pharmacy business was conducted. Alternatively, and again, with detailed particulars, it says that Mr Hanna is estopped from denying the existence of agreement to that sublease. 5On either basis, API says that it has paid substantial sums by way of rent, outgoings and the like, referable to the period when Mr Hanna has been in occupation of the pharmacy premises (either pursuant to the agreement for lease that was made, or to the agreement for lease that he is estopped from denying) and that he is obliged to recompense it for those rent, outgoings and other payments. 6In the further alternative, API says that, in those circumstances, if there were no contract either in reality, or by estoppel, Mr Hanna has been unjustly enriched at its expense because he has conducted his business from the premises at the cost of API, in circumstances where it was not expected that he would have the benefit of occupation without making any payment. 7There is then an alternative claim. Under the trader's bill of sale, Ms Ngo mortgaged, among other things, her goods, chattels, stock in trade, fittings, etc etc, and the goodwill of the business to API. API says that Mr Hanna has had the benefit and use of that mortgaged property since he went into occupation of the premises, in circumstances where it was the common understanding and expectation of the parties that the benefit would not be provided gratuitously, but, rather, that Mr Hanna would pay for it. In those circumstances, API says, Mr Hanna is required to pay either what is said to have been the agreed value of the mortgaged property ($1.1 million), or a reasonable price for it. 8Against that background, I turn to the subpoenas. There were two. One was addressed to Hall Chadwick and Messrs McDonald and Albarran. The other was addressed to the firm of which Ms Barnet is a principal, Bentleys Corporate Recovery Pty Ltd (Bentleys). 9In each case, leaving aside differences to account for the differing parties to whom the subpoeana was addressed, what is required is production of: "All original and copies of any documentation in relation to your duties as the receiver and manager of the property of Kim Ngo and all other documents, including correspondence, draft documents, file notes, and memoranda relating to, concerning or touching upon, any such duties as a receiver and manager". 10It may be possible to conceive of a subpoena drafted in wider terms, but I do not propose to take up time by attempting to meet that challenge. 11It appears that documents have been produced in answer to the subpoena addressed to Hall Chadwick and Messrs McDonald and Albarran. Bentleys have opposed the production of documents, and ask that the subpoena be set aside. API says that, in any event, both subpoenas should be set aside. There is some contest as to the attitude of Hall Chadwick, but nothing turns on that. 12There are numerous grounds advanced in justification of the subpoenas. One of them is that it will be relevant for Mr Hanna to know how the various receivers dealt, not only with the particular property that is the subject of the transactions or events in respect of which he is sued, but, also, in respect of the other pharmacy at Liverpool, the pharmacy at Bega and the business and assets of Bega Pharmaceuticals. It is suggested that, in some way, an understanding of all those dealings may throw some light on the facts relevant to the particular claim that Mr Hanna is facing. 13In this context, reliance was placed on certain documents that were said to show some connection between the various receiverships, or, more accurately, the various activities of the receivers, in relation to the different businesses. One was a draft agreement for sale prepared in relation to the Soul Pattinson Pharmacy. That was said to be relevant because it showed that both Ms Ngo and Bega Pharmaceuticals (each by receivers and managers) were the vendors. If I may say so, production of a draft document without any understanding of the context in which it was made, or the transaction that it was intended to document, is entirely unhelpful. 14Another document on which reliance was placed was an e-mail from a Mr David Wright of API, to Mr Hanna, dated 28 March 2007. That e-mail is significant because, on one reading, it could be taken to suggest that there was no concluded agreement (in relation to the Soul Pattinson pharmacy) at the time it was made. Thus, it could be taken to be somewhat inconsistent with the claim now made by API, that such an agreement was made, or emerged, or that Mr Hanna is estopped from denying such an agreement, as at August or September 2006. But that is not a dispute for present resolution. 15The suggested relevance of the e-mail is that it shows that the settlement of affairs in relation to the Soul Pattinson Pharmacy had been delayed because of matters relating to the Bega pharmacy. Accepting that this is so (and it is certainly what the e-mail, on a fair reading, may suggest), it simply does not follow that there is some such connection between the two events as to justify production of records relating to the receivership in so far as it dealt with the Bega pharmacy. 16Mr Hanna's solicitor set out a number of suggested bases of relevance for the documents, in an affidavit sworn on 15 February 2012. I do not propose to go through those suggested grounds in detail. In my mind, they do no more than confirm that Mr Hanna is using the subpoena process to go fishing in an enormous pool of documents to see if some minnow, or, for that matter, pike, may be attracted. That is not, in my view, a legitimate use of a subpoena. 17Further, it is to be noted that no List Response has been filed to the amended Commercial List Statement. Thus, there is no way of knowing what are the issues that will arise, except in a very broad sense. That, no doubt, is one of the reasons why each of the subpoenas has been drafted in so wide a form. 18Not only is there no Commercial List Response, there is no evidence. It is now the practice that discovery should await, not only the closing of the "pleadings", but, also, except in unusual cases, the serving of evidence. (See Practice Note SC Eq11). The reasons for that are several. It is intended to confine requests for discovery more closely, and thus to cut down the costs that will be incurred. It is also intended to ensure that each party put its evidence on uninstructed by knowledge of, and in an attempt to meet, what may be contained in documents obtained from the other side. 19To my mind, very similar considerations now attend the issuing of subpoenas. In the ordinary way, where documents are required from third parties, it should be possible to demonstrate, from the pleadings and from the evidence, the precise issues in respect of which production of documents is required. 20I have not overlooked that, in this case, some of the recipients of one of the subpoenas have produced documents and apparently have no objection to inspection. But a consideration of the work that they have done, and their computer-generated time costing records, makes it clear that many of the documents may involve matters that are the subject of privilege at the instance of the plaintiff. API would be required, either to forego that claim, or to be put to the expense of inspecting the documents and deciding to what extent it wished to maintain the claim. In circumstances where the subpoena is impossibly wide, and does not seem to me to be issued for what is a present legitimate forensic purpose, I do not think that the attitude of the party who produced the documents should be taken to be determinative. 21For those reasons, I make orders in accordance with paragraphs 1 and 2 of the plaintiff's notice of motion filed on 3 February 2012. 22I order the defendant to pay the plaintiff's costs of that notice of motion. 23The exhibits on that application are to be handed out.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 07 May 2012
The subpoenas were set aside. The defendant was ordered to pay the plaintiff's costs of the notice of motion. Exhibits on the application were to be handed out.