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Pesec v Consolidated Builders Ltd [2022] ACTSC 241 | Case summary | Zoe

ACTACTSC

Pesec v Consolidated Builders Ltd [2022] ACTSC 241

[2022] ACTSC 241

Supreme Court of the ACT|2022-09-06|Before: McWilliam AsJ

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At a glance

Source facts

Court

Supreme Court of the ACT

Decision date

2022-09-06

Before

McWilliam AsJ

Catchwords

PRACTICE AND PROCEDURE – SUBPOENAS – application to set
aside subpoenas – whether legitimate forensic purpose – whether
abuse of
process – whether subpoenas oppressive

Source

Original judgment source is linked above.

Catchwords

PRACTICE AND PROCEDURE – SUBPOENAS – application to setaside subpoenas – whether legitimate forensic purpose – whetherabuse ofprocess – whether subpoenas oppressive

Judgment

Source: the ACT Courts (www.courts.act.gov.au). Converted to plain text by ZoeLaw. Not the official version.

SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

Case Title: Pesec v Consolidated Builders Ltd

Citation: [2022] ACTSC 241

Hearing Date: 2 September 2022

Decision Date: 6 September 2022

Reasons Date: 7 September 2022

Before: McWilliam AsJ

Decision: (1) The subpoena issued to Hardwickes Partners Pty Ltd ACN 008 401 536 is set aside in part as follows: (a) Item 12 is struck out.

(2) The subpoena issued to BDO Services Pty Ltd ACN 134 242 434 is set aside in part as follows: (a) The words “and as at the date of this subpoena” in the schedule are struck out. (b) Item 3 is struck out.

(3) The subpoenas issued to Actgall Pty Limited t/as Raine & Horne Commercial Canberra ACN 080 502 272, Vantage Strata Pty Ltd ACN 602 359 482, and Sean McGill Pty Limited & Todd Hadley Pty Limited ABN 46 156 696 001 t/as MJD Valuers are each set aside in part as follows: (a) The words “and as at the date of this subpoena” in the schedule are struck out.

(4) The application in proceeding filed 24 August 2022 is otherwise dismissed.

(5) Costs are reserved.

(6) The matter is listed before McWilliam AsJ at 10.00am on 7 September 2022 for return of the subpoenas issued to the following recipients: (a) Hardwickes Partners Pty Ltd ACN 008 401 536 (b) BDO Services Pty Ltd ACN 134 242 434 (c) Actgall Pty Limited t/as Raine & Horne Commercial Canberra ACN 080 502 272 (d) Vantage Strata Pty Ltd ACN 602 359 482, and (e) Sean McGill Pty Limited & Todd Hadley Pty Limited ABN 46 156 696 001 t/as MJD Valuers

(7) In respect of the subpoena issued to the Commissioner for ACT Revenue, the subpoena is listed for further return before the Registrar on 19 September 2022. Catchwords: PRACTICE AND PROCEDURE – SUBPOENAS – application to set aside subpoenas – whether legitimate forensic purpose – whether abuse of process – whether subpoenas oppressive

The subpoenas were returnable before the Court on Monday 5 September 2022. The application in proceeding to set aside those subpoenas was listed for hearing on 2 September 2022 to enable the dispute to be resolved before the return date of the subpoenas.
However, when the parties came before the Court for hearing, CBL indicated that although all the evidence had been filed in support of the application, it was in fact seeking for the application to be adjourned to enable the filing of written submissions prior to hearing. To enable that to occur, the directions sought by CBL included adjourning the hearing of this application until a date after 16 September 2022.
The plaintiff submitted that it would have been in a position to proceed on the application on the date of that hearing (being 2 September 2022) and that any orders delaying the hearing of the application would have significant prejudicial consequences, due to orders that had been made by the Chief Justice on 1 July 2022, when the matter was listed for hearing.
On that occasion, a detailed timetable to prepare the matter for the specially fixed hearing was also set by the Chief Justice. Among other things, the terms of those orders require the plaintiff to serve any expert evidence on which he intends to rely by 9 September 2022. If he does not, there is a further order that he cannot, without leave, rely upon any expert evidence in chief filed after 9 September 2022 and that he must make any application for leave by 13 September 2022.
The purpose of the subpoenas was to obtain documents that were necessary for the plaintiff to comply with the orders that were recently made by the Court, and there was obvious prejudice to the plaintiff in delaying hearing a dispute about subpoenas until after the times for complying with the orders referred to above had passed.
Through correspondence annexed to an affidavit read on the application, the point was made by the solicitors for CBL that the plaintiff had in fact had sufficient opportunity to obtain the material now sought under the subpoenas issued. There had been a previous round of subpoenas issued, which were answered, discovery between the parties and an application for further discovery which was withdrawn. I agree that the position is somewhat unsatisfactory in that regard, but the other side of the argument is that the flurry of last-minute subpoenas has arisen in part due to expert witnesses requesting the information in order to finalise their reports.
The parties were each legally represented and the application was otherwise straightforward in terms of the grounds raised for setting aside or limiting each of the subpoenas, discussed below. The parties were already on fair notice of the arguments to be made on the application, by reason of the detailed correspondence sent between the solicitors for CBL and Mr Pesec during August 2022.
In those circumstances, and given the urgency with which a decision was required if the matter was to remain on the preparation track that had been set by the Court (all with a view to maintaining a specially fixed hearing date that would likely be lost if there were further delays), I determined the objectives of s 5A of the Court Procedures Act 2004 (ACT) (Court Procedures Act) would be best served by dispensing with any need for the parties to prepare written submissions and instead to simply hear from the parties as to what the issues were with each subpoena. That was the most efficient and cost proportionate course of resolving this interlocutory dispute.
Having heard the detailed arguments, I made orders on 6 September 2022 but due to time constraints with other business of the court, indicated that written reasons would follow shortly. These are the reasons.

A subpoena will be set aside if there is no legitimate forensic purpose (including a lack of relevance) or the subpoena is seriously and unfairly burdensome or prejudicial: Trade Practices Commission v Arnotts [1989] FCA 248; 88 ALR 90 (Arnotts) at 103.
When assessing what meets the threshold for relevance, a mere “fishing” expedition is impermissible. That is, an issuing party (the plaintiff here) cannot seek documents in an attempt to discover if he has a case (hence the fishing metaphor of casting a net to see what is caught). A party can only seek documents to support a case that has already been articulated: Commissioner for Railways v Small [1938] NSWStRp 29; (1938) 38 SR (NSW) 564 at 575.
The party issuing the subpoena bears at least a forensic onus of showing the relevance of the documents sought to the issues in the proceedings: see Portal Software v Bodsworth [2005] NSWSC 1115 (Portal Software) at [29] and the cases there-cited.
Determining whether there is a legitimate forensic purpose requires an assessment of whether the documents sought will assist in the resolution of the issues in the main case. It has been described as asking whether the documents would be reasonably likely to add in the end to the relevant evidence in the case, including apparent or adjectival relevance, in the sense that the documents could “possibly throw light on the issues in the main case” (being the language used by Beaumont J in Arnotts at 103).
It will be sufficient if it appears to be “on the cards” that the documents will materially assist the party: Alister v R [1984] HCA 85; 154 CLR 404 at 414. See also DPP v Warren [2015] ACTSC 111 at [22] and Elmaraazey v Capital Lawyers Pty Ltd [2016] ACTSC 54 at [44] where Mossop AsJ (as his Honour then was) cited in addition Spencer Motors Pty Ltd v LNC Industries Ltd [1982] 2 NSWLR 921 at 926– 927 and Re North Coast Transit Pty Limited [2013] NSWSC 1912 at [7]–[9].
The principle has been stated in different ways in numerous authorities, but from the above it can be seen that the threshold for relevance of the documents sought under a subpoena is low. It has been described as less stringent than that which applies in the context of admissibility of evidence at trial: Gloucester Shire Council v Fitch Ratings [2016] FCA 587 (Gloucester Shire Council) per Wigney J at [23], where his Honour stated (emphasis added):

I have emphasised those words to highlight the low threshold. Informing that principle and the low threshold is the public interest in a fair trial, which should be conducted on the footing that all relevant documentary evidence is available, subject to other public interest considerations, such as legal professional privilege: see Grant v Downs [1976] HCA 63; 135 CLR 674 at 685, cited in Gloucester Shire Council at [24].
Detailed consideration of what constitutes a legitimate forensic purpose was given in Secretary of the Department of Planning, Industry and Environment v Blacktown City Council [2021] NSWCA 145 (Dept PIE v Blacktown CC), where the NSW Court of Appeal cautioned against using the language of “tests” for the setting aside of subpoenas: see [60] per Bell P, [88] per Brereton JA, and [98] per McCallum JA.
President Bell (with whom McCallum JA, as her Honour then was, agreed) stated at [41] that care must be taken before transposing observations in Alister, a case primarily concerned with a claim for public interest immunity, to the general law relating to the setting aside of subpoenas. Through a careful discussion of the authorities at [33]- [67], it was clarified that “apparent relevance” will be established if “it can be seen that the documents sought to be produced by way of subpoena will materially assist on an identified issue or there is a reasonable basis beyond speculation that it is likely the documents subpoenaed will so assist”: Dept PIE v Blacktown CC at [65] (emphasis in original).
An issuing party is not required to show that it is “on the cards” that the documents sought will materially assist its case, as distinct from adding in some way to the relevant evidence in the case more generally: see Dept PIE v Blacktown CC at [65] per Bell P, at [89] per Brereton JA, at [98] per McCallum JA.
Recently in a decision of this Court, Wornes v Freewater Australia Pty Limited [2022] ACTSC 147, having referred to and applied Dept PIE v Blacktown CC, Kennett J stated at [16]:

The documents sought are limited to a two-year period, being the financial years ending 30 June 2014 and 30 June 2015, and include the following: Trial Balance reports for CBL and each of its subsidiaries (which are then listed). General ledger reports for CBL and its subsidiaries. Documents used to categorise CBL and its subsidiaries’ assets as either inventories, property, plant and/or equipment as defined by the Australian Accounting Standard, including documents which show the intended use of the asset. Documents submitted for any applications for any loans or facilities for CBL and its subsidiaries. Valuation documents, including any documents used to obtain insurance valuation or loans and facilities for any assets held by CBL and its subsidiaries. This includes any kerbside or desktop valuation documents. Documents obtained or prepared by Ms Barbara Hambley (or any other employee), as outlined in different specified paragraphs of her affidavit dated 11 March 2022, including: (i) Quarterly management accounts for CBL and its subsidiaries; (ii) Group management accounts for CBL and its subsidiaries; (iii) Reckon Accounting Statements for CBL and its subsidiaries; (iv) Monthly BAS returns for CBL and its subsidiaries; (v) Bank Statements for CBL and its subsidiaries; (vi) Loan statements for CBL and its subsidiaries; (vii) Invoices for relevant material costs for CBL and its subsidiaries; (viii) Copies of instructions provided by any person in the employ of or affiliated with CBL or its subsidiaries including Mr Josip Zivko with respect to the preparation of financial statements; (ix) Any file notes, meeting notes or correspondence from meetings or discussions with Mr Josip Zivko regarding any changes to CBL or its subsidiaries’ financial statements; and (x) Any correspondence, instructions, file notes, spreadsheets and/or trackers relating to any assets owned by CBL and its subsidiaries used to ascertain whether assets held by CBL or its subsidiaries were to be treated as inventories or property, plant or equipment.
The highlighted category above is Item 12 in the schedule. I will return to the difficulty with that category below.
CBL’s primary submission was that the subpoena served no forensic purpose and was really in the nature of a fishing expedition.
A second argument was that the categories of documents requested are in the nature of discovery. The documents could have been requested from CBL itself rather than the accountant and should have been requested as part of the disclosure processes that have already occurred between the parties.
Thirdly, CBL argued that if the Court were to find that the documents sought were relevant, the date range should be confined to 1 July 2014 through to 14 April 2015, as the pleading concerns a decision made by the directors on 14 April 2015.
Mr Pesec relied on the nature of the allegations contained in the amended statement of claim as supporting the relevance of the documents, but also relied upon correspondence from two experts. The first was a letter from AVG Forensic, who has been instructed to prepare an expert report in the proceeding as to the value of the shares the subject of the dispute on or around 14 April 2015. The author of that letter requests a number of categories of documents that the expert requires to complete the report. The categories set out in the subpoena to Hardwickes are clearly crafted by reference to the expert’s request.
The second item of correspondence is from Pont Associates, which also took the view that the categories of documents sought by AVG Forensic were relevant to the exercise of assisting in undertaking a valuation of CBL’s shares, including the tasks that expert had been requested to undertake.
In light of that evidence, I accept that the documents sought will assist the plaintiff in his case and that a legitimate forensic purpose has been established, save as for one category. Item 12 in the schedule refers to “invoices for relevant material costs” that were obtained by Ms Hambley. That paragraph is perhaps poorly worded, but in my view, it does (however inadvertently) seek discovery, because it refers to “relevant” material costs for CBL and its subsidiaries. It is asking a third party to form a view about what might be relevant material costs for CBL and its subsidiaries when that party has no connection with the proceeding. Item 12 in the schedule should be struck out.
I otherwise accept that it is open to Mr Pesec to seek records from CBL’s accountant that might assist the plaintiff in his case, including testing what has been produced on discovery or documents referred to in affidavit evidence. The fact that the documents could have been sought from CBL during discovery or disclosure processes does not of itself make the subpoena an abuse of process. The authorities to which I have referred above do not prevent overlap (although that may be a matter relevant to oppression and proportionality considerations outlined above).
As to whether the time period should be limited, the relevance has already been established by the expert requesting the information in order to finalise the report. It overtakes the argument that the decision of the directors was made on 14 April 2015 and therefore any documents after that date cannot be relevant to the issues in the proceedings. Even if that argument had not been overtaken, as the summary of the plaintiff’s claim demonstrates, the issues in the proceeding are broader than that single decision made by the directors.
AVG Forensic sought a greater time period than that which is the subject of the subpoena. I am not persuaded that it is oppressive (including having regard to the matters and proportionality considerations in s 5A of the Court Procedures Act) for the recipient to produce the two years of financial records that are specified in the schedule to the subpoena.

The documents sought in the subpoena to ACT Revenue may be summarised as requesting: Any valuation of five separate share transfers of CBL shares (with each share transfer listed). Any transfer or application forms and supporting documents attached to or otherwise provided to ACT Revenue with respect to the Share Transfers. Any information used to assess and value the Share Transfers. Any correspondence issued to or from any of CBL’s shareholders regarding the Share Transfers. Any correspondence issued to or from CBL, its accountants or its directors regarding the Share Transfers.
CBL argued that merely because share transfer forms were exhibited to affidavits of a number of directors does not make them a matter in issue in the proceeding. CBL argued that the share transfers in question will require production of documents extending as far back as 2002, so that they cannot be of any relevance to the decision made by the directors in April 2015. However, it is clear from the pleading, where share valuation is a key issue, that the above material will add to the relevant evidence. That is particularly the case where valuation methodology is in dispute, such as relying on historical share transfers as relevant to the value of CBL shares in 2015 that were themselves asserted to be undervalued (because of instructions Mr Zivko may have given to the accountants over the years as to how to categorise assets).
Further, the share transfer forms to which the Court was taken during argument indicate, at least on a prima facie basis, that the view ACT Revenue took of the CBL share value was at odds with what various directors paid for the shares in question.
The other arguments raised in relation to disclosure processes and discovery have been addressed above in relation to the subpoena issued to Hardwickes and the same reasoning applies here. Subpoena issued to BDO
The subpoena issued to BDO requires production of the following documents: (a) Valuations of any assets owned by CBL and its subsidiaries; (b) Book value asset valuations of CBL and its subsidiaries; (c) CBL’s share history chart used by BDO in finalising its report of 25 November 2019; and (d) Any other information used to draft the BDO report dated 25 November 2019 with respect to a valuation of CBL and its shares as well as the remuneration of Mr Zivko.
The date range specified in the subpoena was for the financial years ending 30 June 2014 and 2015 and as at the date of the subpoena. Mr Pesec has agreed to limit the terms of the subpoena to the same date period as that specified in relation to the subpoena to Hardwickes, and further, not to press for category 3 of the documents sought in the subpoena (being the share history chart).
In respect of the remaining categories, for the reasons given above, including the nature of the allegations in the pleadings and that the experts required to produce reports in the proceeding have expressly asked for the documents sought from BDO, I accept that a legitimate forensic purpose has been established.
A further argument was made by CBL that the relief sought by the plaintiff in the proceedings includes that a list of assets be provided to members of the company and that in part, what is sought by the subpoena to BDO pre-empts the relief.
However, the type of relief sought must surely be an issue in the proceedings. I do not see why seeking documents that may in part be relevant to the ultimate relief sought means that the material sought is impermissible. In this case, there are various alternative remedies available. Documents falling into that category may assist the plaintiff in determining what is the appropriate relief ultimately to seek, in the event that he is successful. Moreover, the category of documents giving rise to CBL’s argument is also relevant to BDO’s valuation of CBL. That is, the documents are not just relevant to the final relief sought.