Pico Holdings Inc v Voss and NAB Ltd [2002] VSC 269

11. On 29 August 2001, the plaintiff, Pico Holdings Inc. ("the plaintiff"), issued a writ against Peter David Voss ("Mr Voss"). It is alleged that the plaintiff lent a sum of US$2M to a company, Dominion Capital Pty Ltd, which was controlled by Mr Voss. It is alleged that certain representations were made by Mr Voss concerning the security to be provided, which were false. As a result, the loans have not been repaid and the plaintiff claims damages.

14. On 5 September 2001, the plaintiff made application to the Court seeking a Mareva injunction, and on that day, Beach J ordered, inter alia -

"4. Until the final hearing and determination of this proceeding or further order, the defendant whether by himself, his servants or agents, shall be restrained from disposing of, or dealing with, any of his assets other than for normal living expenses or payment of legal fees in relation to the defence of this proceeding up to a maximum of $5,000 per week."

18. On 3 December 2001, Mr Voss swore an affidavit in a Federal Court proceeding. In the affidavit, he swore that he owned a property in North Road, Brighton, that the property was sold "some months ago" and that earlier that day, namely, 3 December 2001, he had paid the sale proceeds of over $2M to the National Australia Bank Ltd.

21. The plaintiff's solicitors wrote to the Bank seeking details of the sale and disbursement of the proceeds and on 18 December 2001, the Bank responded in writing as follows -

"The Bank was due the amounts received at settlement of the 7 North Road, Brighton property owned by Mr and Mrs Peter Voss due to the existence of an all monies mortgage executed by the owners upon acquisition of the relevant security property. The all monies mortgage secured the following facilities, which were repaid at settlement:- Home Loan PD and KM Voss $756,135.03 Home Loan PD and KM Voss $775,665.28 Overdraft Dominion Capital Pty Ltd $276,869.36 Overdraft Dominion Estates Pty Ltd $ 40,000.00 Overdraft Dominion Estates Pty Ltd $ 20,000.00 Overdraft Bio Engineering Pty Ltd $130,000.00 Overdraft A1 Financial Planners Pty Ltd $ 20,000.00 Overdraft Dominion Capital Hotels Pty Ltd $100,000.00 $2,118,669.67 Please contact us should you require additional information."

25. The letter was signed by Ken Collins, Business Banking Manager at Waverley.

28. In light of the statement made by Mr Voss in his affidavit in the Federal Court proceeding, on 27 December 2001, the plaintiff filed a summons in the proceeding seeking an order that pursuant to Rule 75.06(2), Mr Voss be punished for contempt of court.

31. The basis for the alleged contempt charge was expressed in the summons as follows -

"You are summoned to attend before the Court on the hearing of an application by the plaintiff that in breach of paragraph 4 of the order of the Hon. Justice Beach of the Supreme Court of Victoria dated 5 September 2001, the defendant on or about 3 December 2001 paid an amount of $2,118,669.67 to the National Australia Bank Limited."

35. On 24 May 2002, the plaintiff filed a subpoena in the Court calling upon the Bank to produce documents to the Prothonotary pursuant to Rule 42.10 of the Rules of Court.

38. Both the Bank and Mr Voss objected to the production of the documents and their objections were referred by the Prothonotary to Master Kings for determination.

41. The Bank forwarded a letter to the Prothonotary dated 6 June 2002, in which it stated that the Bank responded to the subpoena by producing documents which were then listed. One category of documents was described as -

* "sealed envelope containing material which the Bank maintains is subject to legal professional privilege."

This letter was taken as a notice of objection and was referred to the Master. At the hearing before the Master, counsel appearing for the Bank advanced an argument with respect to the alleged privilege, and also with respect to the width, irrelevancy and oppressiveness of the subpoena.

46. In my opinion, the recipient of a subpoena should state in its notice, pursuant to Rule 42.10(8), that it is objecting to the production of the document. I accept Mr Pearce's argument that the procedure laid down by the Rules was not followed by the Bank. However, in light of the fact that the Bank argued before the Master various grounds of objection to production of the documents, in my view, it is too late to complain of the procedure that was followed. In any event, Mr Pearce did not allege any prejudice was suffered by the plaintiff by the failure of the Bank to state its objection to production of the documents.

49. The solicitors acting for Mr Voss sent a letter on 30 May 2002 to the Prothonotary, stating that pursuant to Rule 42.10(9) of the Rules, Mr Voss objected to the inspection of documents by the plaintiff. No grounds were specified in that letter. I queried with Mr Styring of Counsel for Mr Voss that compliance with the Rules would require the basis of the objection to be stated in the notice. Mr Styring submitted that there was no requirement in Rule 42.10 to state the basis of the objection. I disagree. It is implicit in Rule 42.10(9) that the ground of objection should be stated.

52. Again, nothing appears to turn on that matter in this appeal, because the arguments that were put to me were basically the arguments that were put to the Master.

55. In substance, counsel for Mr Voss and also for the Bank contend that the subpoena is far too wide, requires documents which are not relevant to the charge of contempt, that the subpoena is oppressive, and in reality, is seeking discovery from a non-party.

58. It is well recognised that the procedure under Rule 42.10 cannot be used if, in fact, the subpoena is, in effect, an attempt to obtain discovery from a non-party. See Belsart v Manpo Holdings (Australia) Ltd, unreported decision of Beach J delivered 31 August 1998 and also see McColl v Lehmann [1987] VicRp 46; (1987) VR 503 at 510 et seq.

61. Mr Pearce of Counsel who appeared for the plaintiff complained that the procedure laid down by the Rules requiring proper notice had not been complied with and he emphasised that the Bank had in fact complied with the subpoena by producing some of the documents. Further, it did not initially object to production of the documents, save for the documents in the sealed envelope.

64. Mr Pearce did not advance any argument that the plaintiff was prejudiced by the course taken and, whilst I note his justifiable complaints, I heard the appeal and gave all parties a full opportunity to advance all relevant submissions.

67. I note that the Bank has in fact complied but that does not, in my view, mean that Mr Voss cannot properly object, nor do I think the Bank is shut out from raising any other objections to the production of the documents other than privilege.

70. Rule 42.10 established a new procedure by which a party to a proceeding could require a non-party to produce, pursuant to a subpoena, to the Prothonotary, documents which were to be used in evidence, for inspection by the party prior to the date set for the trial. The sub-Rule set out the procedure that was to be applied. The sub-Rule came into operation on 2 February 1998.

73. The prime object of the Rule is to avoid time being wasted at the trial pursuing objections to subpoenas and the production of documents. It is a procedure which should be encouraged. In addition to avoiding the inconvenience of producing documents at trial and time spent on any objections, there is another reason for the procedure and that is to apprise parties of their strengths and weaknesses at an early stage so that steps can be taken to compromise a proceeding before the costs mount. See Southern Pacific Hotel Services Inc. v Southern Pacific Hotel Corporation Ltd (1984) 1 NSWLR 710 at 716, Khanna v Lovell White Durant (1995) 1 WLR 121 at 123, and O'Sullivan v Herdmans Ltd (1987) 3 All ER 129 at 136.

76. The procedure is designed to require the production of documents which may be used in evidence in the proceeding, and it is not available for obtaining discovery of relevant documents in the hands of a third party. The latter procedure is dealt with by Order 32 of the Rules of Court.

79. If the Court is of the view that the real purpose of the subpoena is to obtain documents which are in the nature of discovery, then the application should be refused. See Kennedy Taylor (Vic) Pty Ltd v Grocon Pty Ltd [1999] VSC 242, unreported decision of Gillard J.

82. In order to give effect to the purpose of the sub-Rule, the questions of whether it is a proper subpoena and whether it does require documents to be produced in evidence or is in reality a means of discovery by a non-party, should not be weighed in nice scales. The Court should be astute to avoid upholding pedantic and technical arguments. See Lucas Industries Ltd v Hewitt (1978) 18 ALR 555 at 570. Smithers J, at p.571 in that case, expressed the opinion that a person to whom a subpoena is directed is required to read it sensibly and with reference to the circumstances known to him.

85. The point is aptly described by Kaye J in McColl v Lehmann [1987] VicRp 46; (1987) VR 503, where his Honour, at p.513, said this -

"I would adopt the opinion of Smithers J expressed in Lucas Industries v Hewitt (1978) 18 ALR 555. In my opinion, it reflects a realistic approach to a situation presented when the addressee of a subpoena duces tecum because of all the relevant circumstances, ought reasonably to recognise the documents described by reference to a particular subject matter. To reject as oppressive or as an abuse of process a subpoena because it directs production of documents by reference to those relating to a specific subject matter within the recipient's knowledge, suggests an excessive indulgence in legalism. Determination of whether the description of documents by that mode satisfies the required test of specification by reasonable particularity ought to be made by taking into account the facts and circumstances within the knowledge of the party to whom the subpoena is addressed. It ought to be expected of the addressee, being mindful of the facts about the subject matter known to him, that he will read the subpoena sensibly." (Emphases added.)

89. Having said that, the subpoena should specify with some reasonable particularity the documents required to be produced. The recipient is not required to go the trouble and expense of ransacking his records and endeavouring to find something which may be relevant. See observations of Jordan CJ in The Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at 573.

92. Mr Pearce of Counsel who appeared for the plaintiff emphasised the necessity of approaching the objections on a sensible and reasonable basis and that the Court should place itself in the shoes of the Bank to determine whether the subpoena was sufficiently precise. He emphasised that the Bank had in fact responded to the subpoena and appeared to have no difficulty in determining what was to be produced in accordance with it.

95. Mr Styring of Counsel for Mr Voss submitted that the subpoena was far too wide, required the production of documents which were not relevant and which were confidential, and that the subpoena was oppressive.

98. The starting point in his argument was the charge of contempt. He submitted that only documents which were relevant to the charge could be subpoenaed for production in evidence. I agree.

101. It is alleged against Mr Voss that with knowledge of the Mareva injunction, he permitted the sale of the North Road property to be settled and the monies paid to the Bank. Documents relevant to the issues in the contempt charge can be subpoenaed and produced. Mr Styring submitted that the Bank was required to produce documents which were not relevant to the charge.

104. Mr Pearce submitted that a heavy onus rested upon the plaintiff in a contempt proceeding and that the plaintiff would have to exclude any reasonable hypothesis consistent with innocence. He submitted that a contempt proceeding is a quasi- criminal matter and the burden of proof which rests upon the plaintiff is to establish the case, beyond reasonable doubt. Hence the necessity of casting the net widely to gather the evidence. In the course of submissions, it became apparent to me that Mr Pearce was seeking to look at the documents to ascertain whether Mr Voss had any defence, namely, that the sale had been effected before the date of the Mareva injunction, and the payment of the funds to the Bank was not as a result of anything done by Mr Voss.

107. The subpoena is a very long, wordy document, taking into account the relatively few and simple issues in the contempt proceeding.

110. The description of the documents is set out in the schedule and is divided into four categories. Paragraph 1 refers to the files held by the Bank and referred to in the letter dated 18 December 2001 set out above.

113. Mr Pearce submitted that the appropriate starting point to consider the relevance of the documents was paragraph 4 of the subpoena. It requires production of -

"4. All documents including any files, diary notes and emails, in the power, custody or possession of the corporation referring to or concerning the following payments made by the Defendant to the corporation, referred to in the affidavit of Peter David Voss sworn 3 December 2001 (the Voss Affidavit) in Federal Court proceeding no. V3063 of 2001, which appears at Exhibit GEH-2 to the affidavit of Georgina Elspeth Hayden sworn 22 December 2001 in this proceeding:

(a) $1,531,800.31 pursuant to the two "all monies" mortgages held by the National Australia Bank concerning the Property, referred to in paragraph 16(b) of the Voss Affidavit; and

(b) $586,869.36 in part satisfaction of $1,600,000 owed to the National Australia Bank, secured by way of a fixed and floating charge over the assets of Dominion Capital Pty Ltd, referred to in paragraph 16(a) of the Voss Affidavit."

120. A subpoena has to make sense to the recipient. The recipient is not obligated to seek and gather information to enable it to understand the subpoena. If the information is already in the possession of the recipient and upon reading the subpoena sensibly, it would appreciate what is being required, then it may be appropriate to seek documents described by reference to other documents. Mr Pearce submitted that the Bank would be under no misunderstanding because the sub-paragraphs of the Voss affidavit had already been sent to the Bank. He referred to an exhibit to an affidavit.

123. In fact, the letter sent by the plaintiff's solicitors set out paragraph 16(c) of the affidavit and not paragraphs 16 (a) and 16 (b). The fact was that no objection was taken by the Bank with respect to this request and it appears to have responded to it. As the Bank made no objection to production of the documents and more importantly, produced the documents, the complaint made by Mr Styring on behalf of Mr Voss lacks substance.

126. In my view, the description of the documents in the paragraph was appropriate and the documents appear relevant to the issues in the contempt proceeding.

129. The next paragraph is paragraph 3 and it seeks various documents relating to the sale of the property located at 7 North Road, Brighton. In my view, the documents would be relevant in the contempt proceeding and paragraph 3 properly describes the documents. The Bank has made no complaint as to the description, nor has the Bank refused to produce the documents.

132. Paragraph 2, in my view, is in a different position. Paragraph 2 provides -

"2. All documents including any files, diary notes and emails, in the power, custody or possession of the corporation referring to or concerning any payments made by the Defendant in relation to any of the Facilities, including, without limitation: (a) the basis on which the corporation insisted or required the payment of monies in relation any (sic) or all of the Facilities; (b) the arrangements that were made between the Defendant and the corporation for payments, including part payments, of any or all of the Facilities; and (c) the terms of any payments, including part payments made in relation to any or all of the Facilities."

136. It is noted that the description does not involve any limit on the period covered by the requirement. It follows that the Bank would be required to produce all documents going back to the inception of the facilities, which may be many years prior to the alleged contempt. These documents would be confidential. Whilst that is not a basis for objecting to the production of relevant documents, the fact is that it is a matter to be taken into account where a request is made for documents which, prima facie, appear to be irrelevant. Mr Pearce, in the end, could not argue against the submission that paragraph 2 is far too wide and would require documents which would not be relevant to the proceeding and indeed, could require the production of many irrelevant documents.

139. In considering the objection to inspection made by Mr Voss, it is appropriate to consider the position as if the documents had been produced at the trial. Mr Voss would have been entitled to object to any person seeing documents which were not relevant to the issues in the proceeding. In my view, the request made in paragraph 2 is far too wide and involves the production of documents which could be irrelevant and hence, is not a proper request.

142. Finally, paragraph 1 refers to all files and documents concerning the facilities which are set out and referred to in the letter of 18 December 2001 set out above. In my view, paragraph 1 also suffers from the same problem, namely, that there are no time limits stated and this would require production of documents which would be irrelevant to issues in the proceeding.

145. Mr Pearce, when faced with the submission that the description of documents in paragraphs 1 and 2 was too wide and may involve irrelevant documents, then sought to preserve paragraphs 3 and 4 of the subpoena and referred to Rule 42.07 of the Rules of Court. It provides -

"The Court may set aside a subpoena either wholly or in part."

Whether or not a Court would exercise that power is a matter of discretion and no doubt should be exercised in a practical manner, to save time and money.

150. The contempt proceeding has been fixed for 25 July 2002 and time is now of the essence. In my opinion, the Court should exercise the power under Rule 42.07 and set the subpoena aside in relation to paragraphs 1 and 2 of the Schedule, but preserve the balance.

153. That brings me to the objection raised by the Bank. It produced a sealed envelope containing documents and claimed legal professional privilege. There is no affidavit material to support the objection. In my opinion, if a party is objecting to the production of documents pursuant to Rule 42.10 on the ground of legal professional privilege, it should file an affidavit setting out the nature of the objection and the grounds for it.

156. In order to save time, I put to the parties that the most practical way out was for me to inspect the documents and make a decision based on the inspection. None of the parties objected to that course.

159. A document is protected from disclosure and production on the ground of legal professional privilege, if the document was prepared for the dominant purpose of a lawyer providing legal advice or legal services. See Esso Australia Resources v FCT [1999] HCA 67; (1999) 201 CLR 49.

162. Gleeson CJ, Gaudron and Gummow JJ in that case, at p.64, stated the principle -

"Legal professional privilege (or client legal privilege) protects the confidentiality of certain communications made in connection with giving or obtaining legal advice or the provision of legal services including representation and proceedings in a court".

The privilege also applies in circumstances where the lawyer is employed by the client. See Australian Hospital Care (Pindara) Pty Ltd & Another v Duggan & Others [1999] VSC 131.

167. The Bank has not placed any evidence before the Court in respect to any of the documents in the sealed envelope and accordingly, it is necessary for me to make a judgment of the documents on their contents, drawing legitimate inferences and not speculating or guessing as to whether advice was being sought and, in particular, whether any lawyer was involved.

170. I have read the documents and they are grouped in three bundles, although the reasoning behind the grouping is not immediately obvious.

173. The first bundle, which I have marked "A", comprises two separate bundles of documents. The first concerns instructions relating to complying with the subpoena and, in my view, is not protected by legal professional privilege. The second bundle concerns the provision of legal services by a request from a manager within the Bank to the corporate lawyer. In my view, that document is privileged.

176. The second bundle, which I have called "B", contains a number of e-mails concerning the progress of some litigation involving Turf Club property and Mr Voss. The e-mails appear to be between employees of the Bank. It would appear that one of the persons involved in the correspondence is a lawyer, but there is nothing on the face of the documents to suggest he was being retained to provide legal services. None of the documents, on their face, appear to be communications made for giving or obtaining legal advice or the provision of legal services. In addition, there are draft letters apparently between Ferrier Hodson and the official liquidator of Dominion Capital, and none of these appear to be protected by legal professional privilege. There are other e-mails and also letters passing between Mr Voss's solicitors and a senior executive of the Bank.

179. In my view, none of the documents in bundle B are protected by legal professional privilege and accordingly, they should be produced.

182. The third bundle, which I have marked "C", are documents passing between the senior corporate lawyer employed by the Bank and various employees of the Bank, and clearly relate to the provision of legal services and the giving and obtaining of legal advice. In my view, the whole bundle is protected by legal professional privilege.

185. Subject to submissions by Counsel, I propose to make the following orders -

(i) that the appeal from the orders made by Master Kings on 14 June 2002 be allowed; (ii) that in lieu of the said orders -

(a) that paragraphs 1 and 2 of the subpoena filed by the plaintiff on 24 May 2002 be set aside;

(b) that there be no order for costs of the proceeding before the Master.

(iii) that the defendant and the National Australia Bank Limited each pay one quarter of the costs of the plaintiff of its appeal.

192. The documents which are not privileged have been placed in an envelope. Those that are privileged have been placed in another envelope marked "privileged" and will be returned to the Bank.