SONG -v- SOUTH BEACH MANAGEMENT PTY LTD [2020] WASC 402 (9 November 2020)

1. On 13 August 2020, the plaintiffs sought leave to issue a subpoena to the firm Chew + Matthews for the production of:

All correspondence, emails, documents or other copy or digital records:

(a) of instructions to Chew + Matthews provided by an officer of South Beach Management Pty Ltd as trustee for the South Beach Two Development Trust in respect of deeds of variation to the South Beach Two Development Trust (SBM) constituted by deed dated 20 May 2011, between 20 May 2011 and 30 September 2014 (Period);

(b) of advice from Chew + Matthews to SBM or an officer of SBM in relation to the matters referred to in paragraph (a) above; and

(c) all draft deeds prepared by Chew + Matthews in respect of the matters referred to in paragraph (a) during the Period.

1. On 14 August 2020, I adjourned the application. The other orders made on that occasion were that the defendants were to either file an application for leave to bring an application for summary judgment and strike out by 4 September 2020, or file a defence by that date. It was not then certain that the defendants would not file a defence so that a subpoena to produce before the pleadings had closed would be required. The defendants having now applied for summary judgment, the plaintiffs renewed their application for leave.
2. The procedure for having a third party produce documents to the court on subpoena was formerly described as having three steps: first, obeying the subpoena by the witness bringing the documents to the court, which may require the court to determine any objections to the subpoena or the production of the documents; second, the decision of the judge concerning the preliminary use of the documents, which includes whether or not permission should be given to a party or parties to inspect the documents; and third, the admission of a document into evidence or its use in the process of evidence (for example, in cross‑examination).[1]
3. That procedure must now be considered in the light of O 36B. Subpoenas to produce regularly issue requiring the production of a document or thing to the court otherwise than at trial. Order 36B r 2(2B) introduces another, preliminary, step in requiring that, in specified circumstances, a subpoena may only issue by leave of the court.
4. Under O 36B r 2(2B)(b)(ii), an officer of the court empowered to issue a subpoena to produce documents in a proceeding in which a defence is required to be filed must not do so unless the defence has been filed, or the court has given leave for the subpoena to be issued. By O 36B r 2(2D) the court must not give leave unless satisfied that there are exceptional circumstances.
5. An application for leave may be made ex parte. The issue arising on an application for leave is whether there are exceptional circumstances that justify the issue of a subpoena before the defence has been filed.
6. It is settled that legitimate forensic purpose for the issue of a subpoena for a particular document will be established if the document gives rise to a line of enquiry which is relevant to the issues before the trier of fact.[2]
7. In Sandy v Yindjibarndi Aboriginal Corp RNTBC, Le Miere J said:

The words 'exceptional circumstances' have their ordinary meaning. 'Exceptional' means 'out of the ordinary' or 'unusual', rather than 'unique'. The party requesting the issue of a subpoena should be able to demonstrate the precise issues in respect of which the documents are required. In general, when the applicant seeks the production of documents for the purposes of an interlocutory hearing, the applicant should be able to demonstrate that the documents are necessary to fairly prepare and present its case at the interlocutory hearing.[3]

1. While Le Miere J referred to the documents being necessary for the applicant to fairly prepare and present its case, I do not understand that his Honour intended to state an exhaustive rule. Where the court is satisfied that there is a legitimate forensic purpose for a party to seek production of specified documents before the defence is filed, the question is whether there are circumstances which are out of the ordinary which justify the court exercising its discretion to grant leave.

1. The plaintiffs invested in a proposed development at south Fremantle. They did so by purchasing units in the South Beach Two Development Trust (the Trust).
2. The Trust was established by a Deed of Settlement made on 20 May 2011 (Trust Deed).[4] The Trust was established as a unit trust and initially all units were of one class, of equal value, and ranked equally with all other trust units.[5]
3. Relevantly, by cl 14.6 of the Trust Deed, unitholders had the power, by special majority consent, to remove any trustee and engage any replacement trustee. Special majority consent is achieved by a resolution passed by unitholders separately or collectively holding more than 75% of the votes held by unitholders present and having the right to vote at any general meeting of unitholders.[6]
4. By a Deed of Variation dated 20 May 2011, the Trustee purported to amend the Trust Deed by establishing four classes of units in the Trust, including two classes of 'special rights' units.[7]
5. On 20 May 2011, the Trustee issued an Information Memorandum to raise money from potential investors to purchase a property in South Fremantle.[8] The Information Memorandum included terms relating to the Constitution of the Trust as set out in the Trust Deed.[9]
6. By a further Deed of Amendment dated 27 May 2011 - the date of which is now subject to enquiry by the plaintiffs - the Trustee purported to amend the Trust Deed to enable the Trustee to issue different classes of units, to provide that the Trustee could only be removed by unanimous resolution of unitholders, and to empower the Trustee to make any amendment to the Trust Deed 'in its absolute discretion on such terms as it sees fit'. The Trust Deed previously limited the power of the Trustee to amend it.[10]
7. The plaintiffs allege that the Trustee and the other defendants were under a duty to disclose to them the amendments made to the Trust Deed by the Deed of Variation and the Deed of Amendment before 24 July 2012, but failed to do so.[11] The plaintiffs allege the failure to disclose the variations constituted both a breach of duty as Trustee and misleading and deceptive conduct.[12]
8. The plaintiffs further allege misleading or deceptive conduct by the issue of a Second Information Memorandum on 1 February 2013, in which the Trustee represented, in effect, that amendment of the Constitution or removal of the Trustee could be implemented by a special resolution of 75% of unitholders, by value.[13]
9. The plaintiffs allege other failures by the Trustee to provide information.
10. By par 44, the plaintiffs plead:

On the same day, 6 August 2014, and without informing Song or Xue, and without their knowledge or approval, SBM as Trustee executed a deed poll (Deed Poll), signed by Barr and Clark, in reliance on the powers conferred by the Deed of Amendment dated 27 May 2011:

(a) which recited that the Trustee had determined to issue 3,500,000 preferred units in the Trust, to be known as 'Class P Units'.

(b) by which it amended Schedule 3 of the Trust Deed by substituting the text in Annexure A to the Deed Poll.

(c) which provided by the new Schedule 3 that all of the rights of Ordinary unit holders under the Trust Deed (except their rights to receive notices of meetings and certain voting rights) were suspended while Class P units were in issue.

(d) which would give holders of Class P units a prior and preferred income of 12% pa compounding monthly (or 15% pa compounding monthly if redeemed more than 24 months after their issue), to be paid before any holders of Ordinary units could participate in any distribution of revenue or any return of income or capital.

1. On or about 15 March 2015, the Trustee purported to issue further Class P units to a related company.[14]
2. The plaintiffs allege that the Trustee and the second and third defendants, failed to disclose to them the amendments to the Trust Deed made by the Deed of Amendment and concealed matters in relation to the issue of Class P units.[15]
3. They further allege that the Trustee sacrificed the interests of holders of ordinary units, including by concealing that it had amended the Constitution of the Trust to enable the issue of Class P units and by the issue of those units.[16]

1. In his affidavit in support of the summary judgment application, Mr Barr refers to the incorporation of the Trustee on 20 May 2011, as a special purpose vehicle to act as the Trustee of the Trust.[17] The Trust was created for the specific purpose of facilitating investment to develop a property in North Coogee.[18]
2. Mr Barr deposes that on 20 May 2011, the Trustee executed a Deed of Variation to the Trust and issued an Information Memorandum seeking to raise $4 million through the issue of four million ordinary units in the Trust.[19] He deposes that the Deed of Amendment for the Trust was executed on 27 May 2011.[20]
3. Mr Barr deposes that at the time he provided a copy of the Trust Deed to Ms Shu Wu,[21] but through oversight he did not realise that the variations had not been forwarded to her.[22]

1. The plaintiffs submitted that the purpose of the subpoena 'is to establish when the Deed of Amendment was prepared as there are discrepancies that suggest that the true date of the Deed of Amendment may not be 27 May 2011'.[23] They point to the terms of the Second Information Memorandum of 1 February 2013, which referred to the terms of the Constitution as they were before any changes effected by the Deed of Amendment.
2. The plaintiffs referred to the following documents relevant to the Trust:

(d) the Deed Poll of Amendment dated 6 August 2014.

1. The plaintiffs submitted that the Deed of Amendment is 'critical' to their rights, specifically in respect of the matters pleaded in pars 12, 13, 30, 33 and 56 of the further amended statement of claim. They submitted that the date the document was prepared is relevant to whether they are time barred from pursuing their claims for relief.
2. The Trust Deed bears the logo of Gadens Lawyers, and Mercia Taxation and Accounting. The Deed of Variation bears the name and address of Quick Companies Pty Ltd, with an address in Victoria. The Deed of Amendment has nothing on its face indicating who prepared it. The Deed Poll of Amendment is prepared by the proposed subpoena recipient, Chew + Matthews.
3. Describing the Deed of Amendment as 'critical', may overstate the case. But, on the pleaded case, I am satisfied that the plaintiffs have a legitimate forensic interest in determining when it was executed. The proposed subpoena is directed to that question.
4. The defendants have not yet articulated the basis on which they seek summary judgment, but they have said that it is likely to include limitation issues. In the affidavit of Mr Barr filed in support of the application, Mr Barr deposes that the Trust Deed and the Deeds of Variation and Amendment were executed on the dates they bear.
5. In the circumstances I am satisfied that this case is out of the ordinary. The plaintiffs should have leave to issue the subpoena so that they might have access to the documents before the hearing of the summary judgment application.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

[1] National Employees' Mutual General Association Ltd v Waind & Hill [1978] 1 NSWLR 372, 381; and see Apache Northwest Pty Ltd v Western Power Corp [1998] WASCA 127; (1998) 19 WAR 350.

[2] Stanley v Layne Christensen Co [2004] WASCA 50 [9].

[3] Sandy v Yindjibarndi Aboriginal Corp RNTBC [2019] WASC 322 [4].

[17] Mr Barr's affidavit [46] ‑ [48].

[21] Ms Wu is pleaded to have been the representative of a migration services firm in the People's Republic of China, Shinyway. The plaintiffs plead Ms Wu's presence at various meetings and that she had some, not clearly defined, role in the investment.

[23] Plaintiffs' written submission [4].