relevance of documents to which access sought through discovery and subpoena process
Legislation Cited: Uniform Civil Procedure Rule 5.3
Civil Procedure Act 2005 s.3
Source
Original judgment source is linked above.
Catchwords
Preliminary discoverycircumstances in which availablerelevance of documents to which access sought through discovery and subpoena process
Legislation Cited: Uniform Civil Procedure Rule 5.3
Civil Procedure Act 2005 s.3
Judgment (2 paragraphs)
[1]
Judgment
There were two interlocutory applications before the Court in this matter. The first in time was that filed by the plaintiff on 17 May 2018, seeking to have subpoenas issued by the defendant against various parties set aside. The second was that filed by the defendant on 23 May 2015, amended on 31 August 2018, for preliminary discovery.
The subpoena and discovery processes were initiated by the defendant in an effort to secure access to documents, mostly of a financial nature, of the plaintiff and its sole director, Mr Bresnahan.
The evidence relied on was contained in affidavit of Mr Tiernan for the plaintiff of 17 May 2018; affidavits of Mr Geng for the defendant of 23 May 2018, 15 June 2018 and 26 June 2018 and the affidavit of Mr Plit for the defendant on 6 September 2018.
The applications initially came before Her Honour Judge Balla on 27 July 2018 when, after discussion concerning the extent to which material sought to be relied on by the defendant could be disclosed to the plaintiff, they were adjourned to allow for clarification. The parties agreed that Her Honour Judge Balla, should not be regarded as part-heard in the matter. They also agreed that evidence relating to one application should be accepted as evidence in respect of the other.
The dispute between the parties involved their business relationship in which they traded raw and processed meat products. In essence, the defendant was the supplier of meat products, some raw, some partially processed, to the plaintiff. The plaintiff processed these products and sold some of these processed products to the defendant.
The plaintiff commenced proceedings claiming $207,075.99 represented in invoices issued between 2 February 2017 and 10 March 2017. In its defence the defendant made qualified admissions that it received products from the plaintiff for which it had not paid. It claimed a set off pursuant to s 21 of the Civil Procedure Act 2005 against a claimed debt owed to it by the plaintiff of $1,521,299. This claim was based on a tax invoice issued on 11 May 2017 for meat products received by the plaintiff from the defendant for which no invoice had previously been issued. In the current application before the Court the defendant sought leave to file an amended defence in which the amount of the debt creating the right of set off was claimed to be $2,549,709.47.
In its reply the plaintiff denied any indebtedness to the defendant.
Those were the claims in the substantive proceedings. The interlocutory applications concerned the circumstances in which the defendant discovered that products of substantial value had left its premises but had not been the subject of tax invoices and therefore had not been paid for.
The defendant submitted that it required access to documents in the possession of the plaintiff and Mr Bresnahan, and the parties to whom the subpoenas were issued in order to give consideration to a cross claim. Of particular concern were the issues of whether the plaintiff and Mr Bresnahan were appropriate defendants, the extent to which the value of the goods previously not the subject of an invoice might be recovered from them and whether it would be in the defendant's commercial interest to pursue such a claim.
The plaintiff's primary position was that the avenue of preliminary discovery was not available to the defendant.
Preliminary discovery is provided for in Uniform Civil Procedure Rule 5.3 in the following terms:
(1) If it appears to the court that:
(a) the applicant may be entitled to make a claim for relief from the court against a person ( "the prospective defendant" ) but, having made reasonable inquiries, is unable to obtain sufficient information to decide whether or not to commence proceedings against the prospective defendant, and
(b) the prospective defendant may have or have had possession of a document or thing that can assist in determining whether or not the applicant is entitled to make such a claim for relief, and
(c) inspection of such a document would assist the applicant to make the decision concerned,
the court may order that the prospective defendant must give discovery to the applicant of all documents that are or have been in the person's possession and that relate to the question of whether or not the applicant is entitled to make a claim for relief.
(2) An order under this rule with respect to any document held by a corporation may be addressed to any officer or former officer of the corporation.
(3) Unless the court orders otherwise, an application for an order under this rule:
(a) must be supported by an affidavit stating the facts on which the applicant relies and specifying the kinds of documents in respect of which the order is sought, and
(b) must, together with a copy of the supporting affidavit, be served personally on the person to whom it is addressed.
(4) This rule applies, with any necessary modification, where the applicant, being a party to proceedings, wishes to decide whether or not to claim or cross-claim against a person who is not a party to the proceedings.
There was no dispute that the defendant had under consideration a claim for relief as defined in s 3 of the Civil Procedure Act 2005.
In O'Connor v O'Connor [2018] NSWCA 214 at [21] Justice Simpson set out the following list of the matters required to be in place to allow an order for preliminary discovery to be made:
(i) that the applicant may be entitled to make a claim for relief against the prospective defendant;
(ii) that the applicant has made reasonable enquiries to obtain sufficient information to decide whether or not to commence proceedings;
(iii) that, having made those enquiries, the applicant is unable to obtain sufficient information to make that decision;
(iv) that the prospective defendant may have or have had possession of a document or thing that could assist in determining whether the applicant is entitled to make a claim for relief;
(vi) that inspection of such a document would assist the applicant to make the decision (that is, the decision whether or not to commence proceedings).
In its opposition to the application the plaintiff relied upon the reasons of White J. in Ian Edward Morton & 5 Ors v Nylex Ltd & 1 Or [2007] NSWSC 562 where he said at [33], after listing the requirements of the rule in substantially the same terms as those listed above:
Preliminary discovery cannot be used to build up a case which an applicant has already decided, or could decide, to bring (Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd (Lindgren J, Federal Court of Australia, 24 May 1996, unreported); St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360; (2004) 211 ALR 147 at 154 [26]; Glencore International AG v Selwyn Mines Ltd (recs and mgrs apptd) [2005] FCA 801; (2005) 223 ALR 238 at 241 [15]; Matrix Film Investment One Pty Ltd v Alameda Films LLC [2006] FCA 591 at [15]- [19], [25]).
The proposition relied on by the plaintiff was that preliminary discovery was not available to the defendant because it was clear from the set off claimed in its defence that the defendant was well aware of the nature of its causes of action, namely those of goods had and received and conversion. It should therefore commence its action by way of cross claim and deal with the issue of access to documents through the normal discovery process.
I did not accept the plaintiff's proposition that the fact that a cause of action might be relatively clearly defined disqualified a defendant from the right to relief provided for in rule 5.3. I did not understand Justice White to be suggesting that, if the cause of action was known, preliminary discovery was not available to deal with other aspects involved in commencing proceedings. As was made clear by Giles JA at [20] in Garth Barnett Interior Design Pty Ltd v Ellis [2009] NSWA 193, the central question to be determined was:
…whether, having made reasonable inquiries, the respondents were unable to obtain sufficient information to decide whether or not to commence proceedings against the applicant. That was not limited to sufficient information to decide whether or not they were "entitled to make a claim for relief", being the words earlier found in rule 5.3.
The plaintiff's remaining propositions were circular in nature. On the one hand it claimed that the defendant had not provided sufficient information upon which to base any claim against it and on the other that, because of this deficiency in information, the defendant ought not to be allowed access to documents that might settle the issue. Propositions of this nature lead to the question of where the line is to be drawn between the illegitimate forensic purpose of demanding production of documents in anticipation that they might throw up material that would assist in establishing a cause of action or proving an assertion and, alternatively, requiring production of documents that will determine one way or another that there exists a cause of action, the extent to which a party may be liable or the likely quantum of that party's liability.
The affidavit of Mr Plit, read without objection, provided comprehensive evidence of the substantial level of inquiry made by the defendant to date.
It was apparent that the defendant was already aware of the nature of one cause of action that might be available to it. It was also apparent that parties other than the plaintiff and Mr Bresnahan might be implicated to some extent in underhand transactions involving the defendant's products. The uncertainty that remained related to the extent, if any, to which the plaintiff and Mr Bresnahan benefitted from those transactions and therefore the extent of their liability. It was the underhand nature of the transactions that placed the defendant in its uncertain position.
Having regard to the requirements of r 5.3, as listed by Justice Simpson, I was satisfied that:
1. the defendant might be entitled to claim relief against the plaintiff and Mr Bresnahan;
2. the defendant made reasonable enquiries to obtain sufficient information to decide whether or not to commence proceedings;
3. having made reasonable and extensive inquiries, the results of which are set out in Mr Plit's affidavit, there remained information that the defendant was unable obtain;
4. the plaintiff and Mr Bresnahan might have or have had possession of documents that could assist in determining whether the applicant was entitled to make a claim for relief;
5. inspection of those documents would assist the defendant to make the decision whether or not to commence proceedings.
The subpoenas that the plaintiff sought to set aside were issued to the Commonwealth Bank of Australia Limited, Westpac Bank Corporation, National Australia Bank Limited and Australia and New Zealand Banking Group Limited and to the accounting firm, Maher Partners.
The grounds relied upon for setting aside the subpoenas related to the width of compass and relevance of the documents called for, it being said that these reached the point where the forensic purpose behind the issue of the subpoenas was illegitimate.
Having heard submissions and read the evidence of both parties I was satisfied that the material sought by the subpoenas was of sufficient relevance and that it was therefore not appropriate to set them aside.
In dealing with both the documents sought both in the application for preliminary discovery and through the subpoenas, I concluded that to some extent the requests were too extensive and unnecessarily burdensome. I have therefore prepared orders that will constrain the compass of the defendant's requests for production. In addition, I noted the concession of the defendant that, to the extent that documents have been produced pursuant to the subpoenas, they should be treated as having been discovered pursuant to the orders for preliminary discovery.
In this respect by reference to the Amended Notice of Motion filed on 31 August 2018, the orders that I propose will:
1. limit the production of documents required in proposed orders 1(a), (d), (e), (f), (g) and (k) to the period 1 July 2014 to date;
2. limit the production of emails by Mr Bresnahan to those related directly or indirectly to the business and trading affairs of the plaintiff and to those related directly or indirectly to his relationship, personal or otherwise, with Mr Matthew Walden and Mr Lavulavu Aberahama.
3. limit the production of documents by Mr Bresnahan as required in proposed order 3 to the period 1 July 2014 to date;
4. limit access to documents produced under subpoena by the Banks and Maher Partners to the period 1 July 2014 to date.
Three issues remain outstanding, those of leave to file the proposed Amended Defence, access to the subpoenaed material and costs. It will therefore be necessary to fix a date to deal with those matters. The parties are invited to agree on the final form of the orders for preliminary discovery so that all outstanding issues are able to be finalised at the same time.
[2]
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Decision last updated: 13 April 2022