Soraya Ahmed v Osman Ahmed

The Subpoena 9The terms of the Subpoena in contest (the "challenged paragraphs") are: 1. All company tax returns, balance sheets, manufacturing and trading accounts, profit and loss statements, profit and loss appropriation accounts and annual reports, register of shareholders, assessment and or amendment notices issued to the company by the Commissioner of Taxation for the company Al Saeed Investments Pty Ltd for the period April 2010 to date. 2. All bank statements, business activity statements, company accounts, company cheque books, cheque butts, deposit slips and deposit slip butt, statements of account, pass books, computer print-outs, deposit books, ledgers, certificates of deposit and other records with respect to any investment, savings, trading or loan account conducted in any bank, building society or other financial institution by Al Saeed Investments Pty Ltd and /or Al Saeed Investments Pty Ltd trading as Al Yaseen Halal Butcher for the period April 2010 to date. 3. All credit accounts, vouchers, receipts and evidence of payment for or in respect of the purchase of equipment, improvements, maintenance repairs or business loans, hire purchase agreements, mortgage repayments in respect of the Al Saeed Invetments (sic) and or Al Saeed Investments Pty Ltd trading as Yaseen Halal Butcher shop for the period April 2010 to date. ... 6. All service and agency agreements, employment contracts, pay advice slips, pay envelopes, wage advices, group certificates and all other employment records including but not limited to income tax deductions, income tax summaries, assessments and or amendments issued by the Commissioner Of Taxation.

The Decision 10The relevant parts of the Decision are: 14. It was submitted on behalf of the First Defendant that the relevant parts of the Al Saeed subpoena should be set aside because they seek production of documents that: (a) are irrelevant to the proceedings as they are documents that were created after the purchase of the butcher's shop business and have no bearing on what the agreement was in relation to the purchase of the butcher's shop business; (b) are irrelevant to any factual issue in the proceedings whatsoever; and (c) are unduly burdensome and oppressive as the paragraphs are so widely framed in that they are being used as way of obtaining discovery from an entity that is not a party to the proceedings. 15. The Plaintiff contends that the relevant paragraphs relate to the financial records of the business to which she is the beneficial owner. The documents are required to assist with determining who paid monies into the business and to determine if monies have been drawn by the business and by whom. ... 18. The authorities are well entrenched regarding the requirement for a subpoena to have apparent relevance to the proceedings. The material sought by way of subpoena must have the capacity to throw light on the issues of the main case (Trade Practices Commission v Arnotts Ltd (No 2) (1989) 88 ALR 90). 19. In ICAP Pty Ltd & Ors v Moebes & Anor [2009] NSWSC 306, Nicholas J at 32 sets out the test of relevance and the need for a legitimate forensic purpose: "32 The application of the test requires consideration of the issues in the principal proceedings. These issues are usually those identified in the pleadings and the particulars of the facts and matters relied upon in support of the pleaded allegations. They must be expressed with specificity (UCPR Pt 14, Pt 15). Interlocutory procedures of discovery and interrogatories facilitate the resolution of the issues, the scope of which is limited by relevance to them. 33 So too, is the scope of the demand upon an opponent or third party under a subpoena. Demonstration of the legitimate forensic purpose of a subpoena necessarily depends upon identification of the case for which it is likely the documentation will assist. It is, therefore, necessary that the issue be clearly identified in the pleadings or particulars as it is the point of reference by which the legitimacy of the subpoena is to be determined. The task in meeting the test will become difficult where the issue relied upon cannot be identified because either it has not been included in the pleading or particulars, or the terms in which it has been expressed are obscure and imprecise." 20. In the earlier decision of Portal Software v Bodsworth [2005] NSWSC 1115, Brereton J at 25 brought attention to where the issues in the proceedings may be located: "... it is plainly not the question at this (first) stage whether the documents, production of which is sought, will definitely advance the case of the parties issuing the subpoena, nor whether they will be admissible in evidence at the trial. It is sufficient that they could "possibly throw light" on the issues in the substantive proceedings, or that it appears to be "on the cards" that they will do so. What are the issues in the proceedings will appear from the pleadings (where there are pleadings), the affidavits, and the legal principles which govern the claims for relief in the substantive proceedings." 21. In light of the decision referred to in the preceding paragraph, I am of the view that the Plaintiff should not only be contained to the pleaded case in determining the relevance of the subpoena and that Affidavit material and surrounding factors will also be of assistance in determining this issue (especially in respect of the submissions in respect of whether the subpoena is burdensome or oppressive). 22. It is clear that the subpoenaed party is not a complete stranger to these proceedings. The First Defendant is the director of Al Saeed Pty Limited. It appears that the company was established for the purpose of being the legal entity of the butcher's shop business. The Plaintiff alleges in her pleadings that she is the beneficial owner of the business and entrusted the financial management of the business to the First Defendant (see paragraph 8 of the Statement of Claim). It is therefore not inconceivable that there is an element of adjectival relevance to the proceedings and that 1, 2, 3, 6 and 7 of the Al Saeed subpoena should not be set aside on the ground of irrelevance.

Osman's submissions 11Osman submitted: (1)The Court's review power is not an appeal and is not subject to the limitations that apply to proceedings by way of appeal. There is no onus on the plaintiff to demonstrate particular error whether it be an error of fact or as to principle in the orders made by the Registrar. (2)The challenged paragraphs are irrelevant to the issues in the proceedings. (3)The challenged paragraphs constitute an impermissible fishing exercise. (4)The challenged paragraphs are oppressive. (5)The challenged paragraphs are an impermissible attempt to obtain discovery from a third party. (6)The learned Acting Registrar had erred in finding that the challenged paragraphs had an element of "adjectival relevance"; and (7)The learned Acting Registrar had erred in not addressing the other grounds which Osman had raised before her (see paragraph [14] of the Decision set out in paragraph [10] above).

Soraya's submissions 12Soraya submitted: (1)As the Decision concerned a matter of practice and procedure this was not a case where the Court should exercise its discretion to review the Decision. (2)The material sought in the challenged paragraphs had the capacity to throw light on the issues in the proceedings. In relation to subpoenas, the bar is set relatively low in relation to relevance. (3)In this case, the pleadings made it clear that the purchase of the Shop and the management of that business by Al Saeed are important issues in the substantive proceedings. (4)What was relevant could also be determined by reference to the evidence. (5)Paragraphs 45-61 and 83-87 of Soraya's affidavit dated 24 October 2013 made it clear that the management and profitability of the Shop are relevant to facts and issues in the proceedings. Ownership of the Shop is also clearly in dispute. The documents sought in the challenged paragraphs could throw light on which entity owns the business and the structure of the business operation, including issues as to who is entitled to the lease of the premises from which the business operates and the terms of that lease.

Resolution 13For the reasons which follow I have reached the following conclusions: (1)The Decision discloses errors and the Court should therefore in the exercise of its discretion intervene to correct them. (2)The errors are: (a)Taking too broad a view of the question of relevance on the facts of this particular case. In this case questions of the management (in the sense of the results of that management as opposed to the identity and roles of the alleged managers) and profitability of the Shop are not relevant. (b)Taking too broad a view of relevance as a matter of principle. At the level of principle, insofar as the learned Acting Registrar's relied on affidavit material she failed to take into account whether that material was itself relevant in the light of the pleadings. (c)Even if the Decision was correct as to the two previous matters, there was a failure to consider whether the challenged paragraphs were objectionable as an attempt to obtain third party discovery, which they are.

The nature of a review 14I agree with Soraya's submission that the Court's power in relation to review of a Registrar's decision is as set out by the Court of Appeal in Tomko v Palasty (No 2) [2007] NSWCA 369; (2007) 71 NSWLR 61 per Hodgson JA (Ipp JA agreeing): 6 I agree that a review of a decision of a registrar is not an appeal, subject to s 75A of the Supreme Court Act; and that in such a review a court must exercise its own discretion. 7 In my opinion, this discretion extends to a discretion as to whether, and if so how, to intervene; and in my opinion, there is an onus on a person seeking to have a court set aside or vary a registrar's decision to make out a case that the court, in the interests of justice, should exercise its discretion to do so. 8 In the case of a decision on practice or procedure, this will normally require at least demonstration of an error of law, or a House v. The King error, or a material change of circumstances, or evidence satisfying the strict requirements for fresh evidence. Even then, a court may not think that the interests of justice require intervention. This could be so, for example, if the error of law is a deficiency of reasons and the result is on its face not an unreasonable one. 9 In the case of a decision which finally determines a party's rights, or which (albeit one of practice or procedure) has a decisive impact on those rights, a court may be more willing to intervene. It may permit further evidence to be led which does not satisfy the strict requirements for fresh evidence, if it is satisfied that the interests of justice require this. It may decide to substitute its own discretionary decision for that of the registrar, even though no House v. The King error is shown, again if it is satisfied that the interests of justice require this. To that extent, the review may be considered a de novo hearing. 15Although expressed in slightly different terms, the approach propounded by Basten JA in that same case at paragraphs [52]-[53] should not yield a different result to the application of the relevant principles as expressed by the majority. 16Although a decision in relation to setting aside a subpoena may be characterised as a question of practice or procedure, on the spectrum of such decisions it falls closer to decisions which determine a party's rights or have a decisive impact on those rights, namely the rights of the addressee of the Subpoena. Because a subpoena engages the Court's powers of compulsion against a non-party (even where, as here, Osman is Al Saeed's director), the proper scope of a subpoena is an important matter. Its importance is demonstrated by the fact that a subpoena is an order of the Court and the addressee can, ultimately, be charged with contempt for non-compliance. Therefore, reviewing decisions in relation to a subpoena is an example of a situation where the Court will generally be willing to intervene, in particular, but not necessarily always, where an error of law or the other circumstances referred to by Hodgson JA can be demonstrated. 17For reasons which I will next set out, the Decision contains errors of law. Given the seriousness, to which I have just referred, that attaches to a subpoena the Court should exercise its discretion to intervene and correct the errors.

Relevance 18The error in the Decision is that too broad a view was taken of what was relevant to the issues in this case. That error related both to the facts of this case and a question of principle. To some extent these are two sides of the same coin. 19I have identified the Issues, as I perceive them from the pleadings, in paragraph [8] above. Insofar as the learned Acting Registrar determined the issues by reference to the pleadings alone, then, with respect, I am unable to agree that the matters captured by the challenged paragraphs are relevant to what I have identified as the Issues. Soraya has not demonstrated that it is likely the documents caught by the challenged paragraphs will materially assist on the Issues or that there is a reasonable basis beyond speculation that the documents will do so (see paragraph [21] below). In particular, the Decision appears to accept Soraya's submission (see paragraph [15] of the Decision set out in paragraph [10] above) that "the documents are required to assist with determining who paid monies into the business and to determine if monies have been drawn by the business and by whom". However those matters are unrelated to the Issues. 20Next, insofar as it appears the categories of relevance were expanded by reference to Soraya's affidavit, then an error of legal principle has occurred. 21I accept Osman's submission that the relevant legal principles in relation to relevance and subpoenas are correctly set out by Ward J (as her Honour then was) in In the matter of One.Tel Ltd (in liq) - SingTel Optus Pty Ltd v Weston [2010] NSWSC 1491: 21 The relevant test in seeking to set aside a notice to produce was considered by Brereton J in Portal Software v Bodsworth [2005] NSWSC 1115. The Optus Group points in particular to what was said by his Honour at [24]-[26] and notes that this was applied by Hall J in GB, by his tutor, FB v Western Sydney Area Health Service [2010] NSWSC 181, at [70]. 22 In Portal Software, his Honour described (at [24]) the test as being whether the documents sought by the notice to produce have "a sufficient apparent connection to justify their production or inspection" (citing White v Tulloch (1995) 127 FLR 105) and said that the test of adjectival relevance (ie, as distinct from substantive relevance) will be satisfied if the material has apparent relevance and is established if the documents called for "could possibly throw light on the issues in the main case" (at [24]), citing Trade Practices Commissioner v Arnotts Ltd (1989) 21 FCR 306. 23 I note that in Cosco Holdings Pty Limited v Commissioner of Taxation (1997) 37 ATR 432, Spender J had earlier considered the statement of Beaumont J in Trade Practices Commission v Arnotts as to the test of adjectival relevance and had noted that the word "possibly" was there "not used in any speculative sense" and so a subpoena (as was there in issue) may be set aside if the issuing party cannot, on reasonable grounds, show that there is a reasonable possibility that the documents sought will assist in resolving a matter in dispute in the proceedings. 24 Nicholas J in ICAP Pty Limited v Moebes [2009] NSWSC 306 adopted an approach to Trade Practices Commission v Arnotts consistent with that of Spender J in Cosco. 25 In ICAP Australia Pty Ltd v BGC Partners (Australia) Pty Ltd [2009] NSWCA 307, the Court of Appeal held that the primary judge had not erred by stating that, for a notice to produce to have a legitimate forensic purpose: I]t must be shown that it is likely the documentation will materially assist on an identified issue, or there is a reasonable basis beyond speculation that it is likely the documentation will. 26 In Nicholls v Michael Wilson and Partners Limited [2010] NSWCA 100, Young JA, to similar effect as had Brereton J in Portal Software, held that for present purposes a notice to produce is the equivalent of a subpoena and that the ordinary rules as to oppressive subpoenas can be applied (at [33]). His Honour also said that, in modern litigation, a person is entitled to issue a subpoena and have it answered if there is a legitimate forensic purpose in issuing the subpoena, that is, that he or she has a reasonable cause to believe the documents subpoenaed have the capacity to throw some light on the issues in the proceedings, at [34]. 27 Although, as I noted in McLaughlin v Dungowan Manly (unreported, 14 July 2009, NSWSC), the authorities have largely dealt with relevance in the context of "fishing" objections (in which questions of relevance necessarily arise) and there is a significant overlap between considerations as to whether what is sought is relevant to an issue in the proceedings, whether it is oppressive and whether it constitutes impermissible "fishing", the two grounds for objection do not completely overlap, so that a notice to produce may be set aside even if it seeks relevant documents. 28 The suggestion that mere relevance might be sufficient to establish a legitimate forensic purpose was rejected by Beazley JA in Attorney-General (NSW) v Chidgey [2008] NSWCCA 65, (there in the context of criminal proceedings). In Chidgey, her Honour did not accept that it was a legitimate forensic purpose to engage in a "fishing expedition" to discover whether there was a case at all, referring to The Commissioner for Railways v Small (1938) 38 SR (NSW) 564, at 573-4; 55 WN (NSW) 215, at 575 where Jordan CJ had stated that a party was not entitled to use a subpoena for that purpose. 29 Insofar as the Optus Group also referred to the test noted by Brereton J, in Portal Software, that a notice to produce will have a legitimate forensic purpose if it appears to be "on the cards" that the documents sought will materially assist, that formulation of the test appears more generally to be used in the context of criminal (not civil) proceedings. (His Honour had there referred to what was said in Alister v R (1984) 154 CLR 404, at 414 by Gibbs CJ and in R v Saleam (1989) 16 NSWLR 14, at 18. In Chidgey Beazley JA saw no reason to depart from the test and the language used in Alister and Saleam.) 30 In civil proceedings, however, the "on the cards" test has not been broadly embraced. In ICAP, Nicholas J expressed caution in the application of a test which incorporates a phrase such as "on the cards" or "could possibly throw light on" when the legitimate forensic purpose of a subpoena is challenged. 31 Applying in this case the test in civil proceedings, as stated by Nicholas J in ICAP (namely that "it must be shown that it is likely the documentation will materially assist on an identified issue, or there is a reasonable basis beyond speculation that it is likely that the documentation will", at [30]) and noting that it must be reasonable to infer that the documents so sought exist, a careful consideration is required of the issues in the proceedings to which the subpoenaed documents are or may be of relevance in order to assess whether there is a legitimate forensic purpose served by the subpoena. (In that regard, it must in my view be to the issues as identified in the pleadings as they currently stand to which consideration must be given - not the issues as they might stand if an application were successfully to be made to strike out part or all of the pleadings; an issue to which I refer in due course as it was raised as a basis for objection to the Optus Notice by Mr Weston.) 22In relation to that statement of the relevant principles, I particularly and respectfully adopt what is said in paragraph [31] that it is "to the issues as identified in the pleadings as they currently stand to which consideration must be given". 23In paragraph [21] of the Decision (set out in paragraph [10] above) the learned Acting Registrar accepted Soraya's submission that the issues in the proceedings could also be identified by reference to the dictum of Brereton J in Portal Software International Pty Ltd v Bodsworth [2005] NSWSC 1115 at [25]: Thus it is plainly not the question at this (first) stage whether the documents, production of which is sought, will definitely advance the case of the parties issuing the subpoena, nor whether they will be admissible in evidence at the trial. It is sufficient that they could "possibly throw light" on the issues in the substantive proceedings, or that it appears "on the cards" that they will do so. What are the issues in the proceedings will appear from the pleadings (where there are pleadings), the affidavits, and the legal principles which govern the claims for relief in the substantive proceedings. 24I do not understand his Honour's statement, particularly in a case where there are pleadings, to establish the proposition that the affidavits that have been filed in the substantive proceedings may be referred to as a freestanding source of data to determine what are the issues in the proceedings. His Honour's reference to the affidavits, in a case where there are pleadings, must be to the affidavits insofar as they prove and elucidate the issues as defined by the pleadings. To give an extreme example, if an affidavit seeks to introduce evidence which on no view could be relevant to any of the pleaded issues (and therefore is unlikely to be admitted into evidence at any final hearing), then the mere inclusion of that material in the affidavit cannot be taken to expand the issues in a case beyond what has been pleaded for the purposes of determining whether a subpoena is asking for relevant material. 25It is not clear from the Decision the extent to which the affidavit evidence informed the result. The dispositive reasoning in paragraph [22] of the Decision refers only to the pleadings. However, the fact that the learned Acting Registrar made an express legal finding about the role of the affidavit evidence suggests it played some part in the result. That legal finding appears to approve recourse to the affidavit evidence unconstrained by the pleadings. That is an error which I infer from its inclusion in the Decision was one of the reasons supporting the Decision. 26In argument, Soraya relied on various paragraphs of her affidavit sworn 24 October 2013. Paragraphs 45-61 of that affidavit are clearly relevant to the Issues. Paragraphs 83-87 set out the argument referred to in paragraph 20 of the statement of claim in which Osman allegedly asserted that the Shop was his rather than Soraya's. Soraya's account of that argument includes a statement by Osman to the effect that the Shop was not making a profit. However, the reference to profit does not make the profitability of the Shop an issue in the proceedings. The conversation to which Soraya deposes is relevant to the issue of ownership, which is an Issue. The issue of the profitability of the Shop does not arise on the pleadings and cannot be made relevant by reference to profit in the alleged conversation. 27It was also submitted for Soraya that the challenged paragraphs would produce documents which "may throw light on which entity owns the business and the structure of the business operation". However, the parties accept that, in the legal sense, the Shop is owned by Al Saeed. The relevant Issue is ownership of the Shop as between Al Saeed and Soraya. The pleadings do not disclose an issue about "the structure of the business operation". The documents referred to in the challenged paragraphs will not materially assist on the question of who owns the Shop as between Al Saeed (which the parties accept is now the legal owner) and Soraya. 28Finally on the question of relevance, it is necessary also to consider paragraph 6 of the Subpoena in the light of the Issue about the roles Osman and Soraya played in the Shop. Loosely described, paragraph 6 calls for Al Saeed's employment records. I read paragraph 6 as though it refers to Al Saeed. Soraya accepted that paragraph had to be read that way (and sought leave to amend the Subpoena to the extent necessary), because it does not refer to whose records it was directed. 29I accept that, if they exist, paragraph 6 may produce documents which will materially assist on Osman's and Soraya's roles in the Shop. However, paragraph 6 is too widely drawn. All of Al Saeed's employment records are not relevant to any Issue.

A substitute for discovery 30Even if I am wrong on the question of relevance, Osman also argued before the learned Acting Registrar that the challenged paragraphs were impermissible as being in the nature of discovery. In my respectful view, the learned Acting Registrar should have gone on to consider that argument. The argument is correct. 31As Jordan CJ observed in an oft cited passage in The Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at 573: A subpoena duces tecum ought not to be issued to such a person requiring him to search for and produce all such documents as he may have in his possession or power relating to a particular subject matter. It is not legitimate to use a subpoena for the purpose of endeavouring to obtain what would be in effect discovery of documents against a person who, being a stranger, is not liable to make discovery. 32Al Saeed is a separate legal person and the principle expressed by the Chief Justice applies nonetheless because Osman is a director of Al Saeed. 33The challenged paragraphs, taken together and individually, in effect require Al Saeed to give discovery of what appears to be most, it not all, of its business records for a three and a half year period. For this reason alone the challenged paragraphs should be set aside.

Conclusion and orders 34Before setting out the orders which I shall make, there are two final observations which need to be made. 35First, in deciding that the challenged paragraphs are in the nature of an application for discovery, I am not to be taken as accepting Osman's alternative submission that those paragraphs are oppressive. There was no evidence before the learned Acting Registrar or before me as to the number of documents caught by the challenged paragraphs or the degree of difficulty, time and expense that would be occupied in answering the Subpoena. The absence of such evidence meant the complaint of oppression could not succeed. 36Second, I have formed no view as to whether Al Saeed may in fact have documents relevant to the Issues. My decision is not to be taken as supporting the proposition that a valid subpoena could not be issued to Al Saeed. Whether Soraya chooses to issue a further subpoena to Al Saeed which is more specifically drawn to capture documents which may assist on the Issues is a matter for her and her lawyers. 37The Court's orders are: (1)Set aside nunc pro tunc order 1(vi) of the Orders of Acting Registrar Kenna made on 13 November 2013. (2)Set aside paragraphs 1, 2, 3 and 6 of the subpoena for production issued to Al Saeed Investments Pty Limited filed on 10 October 2013. (3)The plaintiff pay the first defendant's costs of and incidental to the first defendant's motion filed 15 November 2013. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 December 2013