Case management - Opposed inspection against documents delivered in answer to subpoena - Objection to inspection - Rules of the Supreme Court 1971 (WA) O 36B r 4(1)

Case management - Joinder of parties to counterclaim - Discretionary considerations

Case management orders as to documents produced in answer to subpoenas

Receivers and managers joined as seventh defendants to counterclaim

Bishop v Bridgelands (1990) 25 FCR 311

Hearne v Street [2008] HCA 36; (2008) 235 CLR 126

(These reasons were delivered extemporaneously on 21 April and 5 May 2011 and have been edited from the transcript.)

21 April 2011: Early return of subpoena issued by Yara to Mr Theobald: Objections to inspection

1 The first defendant and plaintiff by counterclaim, Yara Australia Pty Ltd (Yara), sought by subpoena a number of documents from Mr Theobald as joint receiver and manager under a subpoena served on Mr Theobald through his solicitors.

2 Counsel for Mr Theobald sought today to respond in answer to the subpoena. The subpoena was formally returnable at 2.30 pm in the Supreme Court on 27 April 2011, although it can be informally answered two clear days before that by production of the requested documents sought on the subpoena to the Registrar of the Court.

3 Yara, as issuing party, through counsel has indicated no objection to the answering of its document subpoena before me today. Counsel for Mr Theobald then produced to the Court a lever arch file of documents in answer to the subpoena.

4 In the usual course, issues as to inspection and access to documents produced in answer to a document subpoena made returnable before trial are dealt with in accordance with cl 4.3.7 of the Court's Consolidated Practice Directions (see pars [1] through [25] inclusive). No documents are to be removed from the Registry except on application to the Principal Registrar signed by a solicitor for a party.

5 Consolidated Practice Direction 4.3.7 [19] provides that a solicitor who signs an application under [18] and removes a document or thing from the Registry undertakes to the Court that (a) the document or thing will be kept in the personal custody of the solicitor or a barrister briefed by the solicitor in the proceedings, and (b) the document or thing will be returned to the Registry in the same condition, order and packaging in which it was removed as and when directed by the Principal Registrar. See also Rules of the Supreme Court 1971 (WA) (RSC) O 36B r 9(10).

6 It is very clear from the authorities, particularly see Hearne v Street [2008] HCA 36; (2008) 235 CLR 126 at [96], that documents produced in answer to a subpoena duces tecum, as an event which is a key part of the litigation process, are governed by the implied undertaking that is applicable to discovered documents. That will mean that any use of the documents for a purpose outside this litigation is prima facie, a contempt of court and accordingly, punishable by a contempt sanction. A regime of confidentiality protection applicable to subpoenaed documents should by now be apparent from the matters in the Rules of Court, the practice direction, and the force of the implied undertaking to which I have referred.

7 Inspection here is complicated by an expression of objections to Yara inspecting these documents, made not by the answering party but from the plaintiff and by the second defendant: see RSC O 36B r 4(1). That is, from Mrs Oswal and Mr Oswal as parties who say that the documents produced to court by Mr Theobald ought not be inspected by any party on the basis of expressed concerns about confidentiality and relevance. Mr and Mrs Oswal are seeking orders inhibiting inspection as the 'other relief' under RSC O 36B r 4(1).

8 Relevance at this time can only be broadly assessed in a hypothetical sense by reference to issues arising or potentially arising on the pleadings, or essentially going to lines of inquiry in a proper preparation for trial. Relevance assessed, at this time, obviously presents different considerations to formal admissibility issues as to relevance that will arise during a trial - when considering the admissibility into evidence of a tendered document. In short, the relevance test must be looser, as the lines for an ultimate battle at trial have not yet been finally drawn.

9 Counsel for the plaintiff and second defendant press objections against any inspection of the documents by Yara. They say that there is an index (the Index) listing 16 documents delivered in answer to the subpoena to Mr Theobald. The Index briefly describes each of the 16 documents produced.

10 This matter having arisen without notice to anyone (including me), I will allow the plaintiff and second defendant some more time until Thursday 28 April 2011 to consider their respective objection positions. They should notify the Court by then, whether they press objection against inspection.

11 If the inspection issue is to be argued that can occur at the next directions special appointment on 5 May 2011 at 2.15 pm and the parties should provide their written submissions as to their positions beforehand.

5 May 2011: Subpoenaed documents: Objections to inspection by Yara

12 What has emerged as a result of the conferral process and consideration of the Index provided with the documents is that there is no objection maintained in respect of a Sale Process Agreement (SPA) (item 10) and the termination letters (indexed item 14) being inspected. As that became clear, copies of those documents have now been made available to Yara. To the extent that other parties seek access to them, they may pursue orders to that effect in due course.

13 Furthermore, two share mortgages (items 11 and 12 respectively in the Index), dated 23 December 2009, are confirmed to be copies of the same documents as attached to Mr Theobald's affidavit of 19 April 2011 (see attachments SGT1 and SGT2). With that affidavit being openly served on all parties, there is no logic or sense in further inhibiting an inspection of items 11 and 12.

14 That leaves live the objections to inspection over a remaining 12 indexed documents.

15 The parties I think would benefit by further conferral in respect of the overall inspection position as to those remaining documents. I would indicate however that as of now, based upon what I have heard today and was able to glean from late written submissions just filed by counsel for Yara, that there appears to be (by reference to indexed item 10 (the SPA) that is now uncontentious as to its inspection), a strong, perhaps almost irresistible argument that item 13, namely, the Sale Coordination Agreement (SCA) of 1 February 2010, should be inspected as in one of the uncontentious termination letters the document is expressed to be an agreement that amends the SPA. In order for the full ramifications of the SPA in operation to be understood it would need to be read with the SCA. An inspection of the SCA would seem logically to follow.

16 Attachments SGT3 and SGT4 to Mr Theobald's affidavit of 19 April 2011, albeit not the same as the notices of appointment of receivers and managers (being items 15 and 16 in the Index), look to me prima facie to have a very close relationship to the same events (i.e. appointment of the receivers and managers). So there seems to be strong arguments they also ought not to be subject of constraints against inspection. But it seems overall that I should at this point make no more preliminary observations. Rather I will give the parties and myself the further opportunity to consider counsel for Yara's more recent written submissions upon the inspection issue, received only today.

17 There are some points which may be cleared up at least and taken off the table now. Objections raised by Mr and Mrs Oswal against inspection can be summarised as essentially fourfold.

18 The first basis of objection is that of 'oppression'. But there is a conceptual difficulty with that objection to the subpoena. Oppression could be a proper objection taken by Mr Theobald against an unduly onerous burden of gathering together the requested documents and delivering them to court in answer to the subpoena. But that was never an objection raised by Mr Theobald. If anything beyond the usual meaning of oppression (in terms of gathering and producing the documents to the Court) is raised by the objectors against inspection then that will need to be clarified.

19 Second, an alleged abuse of process is raised against Yara. However, that objection needs to be by affidavit laying down some evidentiary foundation for that argument as regards the subpoena to Mr Theobald. To date, that has not happened.

20 Third, in relation to asserted confidentiality concerns, it seems to me that such concerns, if they really exist, bearing in mind the force of the implied undertaking (see Hearne v Street), are capable of being accommodated by further undertakings or protective orders of the Court made, as is frequently seen in commercial actions, inhibiting the range of access - such as to counsel, to solicitors or to necessary persons on terms. That has not yet been fully explored.

21 The fourth basis of objection to inspection is relevance. But at this point, where the parties' pleaded cases are still unfolding, there must be a rather liberal test applied towards measuring potential relevance. Here, I am dealing first with a construction (legal interpretation of documents) case; alternatively, a rectification case; alternatively, a conventional estoppel case; alternatively, a statutory oppression case. It takes only minimal imagination to see how a subpoenaed document might possibly contain recitals or deal with a subject matter which could bear directly or indirectly upon one or more of the many issues arising in this case.

22 Having said that, I note the following. First, Yara, as I discern from the pleadings, only acquired its 30% shareholding interest in BHL on 31 March 2005. If that is correct, then it seems to me that sometime before 31 March 2005 is a logical time to begin a search, in terms of materials potentially relevant under subpoena.

23 Second, I note that the subpoena itself as issued has some self applied temporal parameters in terms of documents it was seeking under a proviso at the end of the Schedule which concluded, 'created or apparently created in the period 1 March 2007 to 24 December 2010'. However, it is not plain whether that proviso applied only to items 3 to 5 in the Schedule to the Theobald subpoena or to items 1 and 2 as well. That is another temporal consideration to bear in mind.

24 Finally, on the question of inspection, I see that there is emerging, at least at present, from the statement of claim a contested issue over vesting of the beneficiary interests in the Burrup Trust - as to when that occurred, or at least occurred as regards some assets of that Trust - in Mr and Mrs Oswal, personally. By par 10 of the amended statement of claim, it is contended that by a written resolution dated 13 March 2007, Pankaj Oswal in the capacity as trustee of the Burrup Trust exercised a power by cl 17 of the Burrup Trust Deed to cause that Trust's shareholding in BHL to be vested in Mrs Oswal and himself in equal shares (i.e. 35% each of the 70% BHL shareholding).

25 On that basis, a date at around 13 March 2007 would present as another temporal reference point in the assessment of reliance issues, at this early stage.

26 Therefore, on either 31 March 2005, when Yara took up its initial 30% shareholding, or 13 March 2007, seem to present, on the face of it, as potential temporal landmarks in terms of the ambit of relevant documents.

27 I raise these matters for the parties to consider further in terms of their ongoing conferrals about the issue of inspection of the Theobald documents. I will say nothing further, other than that access can obviously be had now to uncontentious items in the Index.

Joinder of the receivers and managers to the litigation

28 The joinder issue arises on a chamber summons filed on behalf of the receivers and managers of 19 April 2011. The application is supported by the affidavit of Simon Theobald of 19 April 2011. Mr Theobald is one of the joint receivers and managers. The application for joinder is made on the basis that the three receivers and managers have been appointed over a 30% shareholding interest in BHL held by Mr Pankaj Oswal and a 7.5% interest (of her aggregate 35% BHL interest) of the plaintiff, Mrs Radhika Oswal.

29 The same firm of solicitors that acts for these receivers and managers (and which brings this joinder application on their behalf) is on the record in the counterclaim, acting for the fifth defendant by counterclaim, namely Burrup Fertilisers Pty Ltd, receivers and managers appointed (BFPL). BFPL is a 100% wholly owned subsidiary of BHL.

30 The application for joinder of the receivers and managers is not opposed by the plaintiff and the second defendant. It is only opposed by Yara.

31 It is sought that the receivers and managers be made parties in their own right, so that they would participate in the litigation as seventh defendants by counterclaim. Yara's expressed concern against the proposed joinder is that it would, in effect, countenance the validity of the appointment of lawfully appointed receivers and managers over an aggregate 37.5% shareholding interest in BHL. It does not appear that either the plaintiff (Mrs Radhika Oswal) or the second defendant (Mr Pankaj Oswal) at present raises any challenge to the validity of the appointment of the receivers in that capacity.

32 A joinder of the receivers and managers as parties in their own right on the basis of their asserted 37.5% BHL shareholding interest does not, in my view, constitute any finding as to the validity of the appointments that binds Yara in respect of that legal issue. It would be undesirable in these proceedings to open up an unnecessary side war over the validity of such appointments. That is especially in circumstances where the appointments are not otherwise challenged.

33 It seems to me, that in terms of having a sufficient interest in these proceedings, given the pleaded issues that they traverse, namely, construction, rectification, estoppel and oppression, that manifestly persons who contend to be joint receivers and managers exercising control over a 37.5% interest in BHL in the context of its shares, demonstrate an arguable basis to be heard as parties. That is particularly so in circumstances where the relative shareholdings of BHL shareholders are used as the voting basis upon which board decisions are carried or defeated at directors' meetings (by the nominee directors of BHL). Hence, someone seeking to exercise control over a 37.5% BHL voting interest at a board meeting holds I think a real interest justifying them participating and being heard at the trial in that capacity.

34 Power of the Court to add a party to proceedings is clearly identified relevantly in the Rules of this Court, see RSC O 18 r 4(1), which refers first to the Court adding plaintiffs or defendants by leave, then going on to mention two situations expressly dealt with. The phrase in O 18 r 4(1), 'with the leave of the Court' confers essentially an unconfined discretion upon the Court to add a party as a plaintiff or a defendant where to do so is in the interests of justice. That was the view reached by Wilcox J in Bishop v Bridgelands (1990) 25 FCR 311, see his Honour's reasons between 314 and 317. There he was of course considering O 6 r 2(b) of the Federal Court Rules which contain the analogous phrase, 'where the Court gives leave to do so'.

35 Factors favouring the joinder here seem to me to be, first, the undoubted interest in the outcome of the construction and other issues that has already been identified. Second, joinder is not opposed by Mr Pankaj Oswal and by Mrs Radhika Oswal. It is only opposed by Yara. Third, this is a situation where Yara has in fact made BFPL (Receivers and Managers Appointed), BHL's 100% subsidiary corporation, its fifth defendant to Yara's counterclaim. The same receivers and managers have been appointed to BFPL. BFPL is uncontroversially participating in the litigation.

36 In my view, it is not overburdening the proceedings by extra parties, or by a wholly outside perspective to add now as parties in their own right, the very same receivers and managers as seventh defendants to Yara's counterclaim. Overburdening the existing proceedings is a key issue that Wilcox J referred to in Bishop v Bridgelands. I do not assess that as a concern here.

37 As the amended statement of claim currently stands, there is an issue (raised by Mrs Oswal) concerning alleged oppression of her position under s 232 and s 233 of the Corporations Act. She has not, on her pleaded case, been able to appoint the person she seeks to appoint as a nominee director to the board of BHL. The validity of that person's appointment (Mr Sodum) is in issue.

38 In all the pleaded circumstances, the question of the respective BHL shareholding interests presently looms large in an action which presents as more than a pure contractual construction exercise. Questions also arise concerning declaratory relief as to the validity of prior BHL board resolutions passed.

39 In these circumstances, it seems to me that hearing at trial the perspective of persons that contend a 37.5% BHL shareholding and board voting interest will be helpful and so, the Court should hear the asserted interest holder. That is not, of course, to say that the Court would accept the perspective at the end of the day. That should be obvious.

40 I also do not think in all the circumstances that there is any degree of unfairness or prejudice to Yara, that being another consideration that Wilcox J identified in Bishop v Bridgelands.

41 Therefore, by reference to all considerations, it seems to me with a trial looming to begin on 20 June 2011 that it is appropriate now to put to rest at least one of the interlocutory obstacles. I will make orders adding the three receivers and managers as seventh defendants in the counterclaim.