Sydney Refractive Surgery Centre Pty Ltd & Anor v Beaumont & 2 Ors; Laser Sight Centres Australasia

Supreme Court of NSW|2003-07-24|Before: Simpson J

CITATION : Sydney Refractive Surgery Centre Pty Ltd & Anor v Beaumont & 2 Ors; Laser Sight Centres Australasia (Sydney) & Anor v Sydney Refractive Surgery Centre Pty Ltd & Anor [2003] NSWSC 688 HEARING DATE(S) : 24 July 2003 JUDGMENT DATE : 31 July 2003

JUDGMENT OF : Simpson J DECISION : (i) the subpoena served upon the first applicant on 8 April 2003 and issued at the request of the plaintiffs on 28 March 2003 is set aside; (ii) the subpoena served upon the second applicant on 9 April 2003 and issued at the request of the plaintiffs on 28 March 2003 is set aside; (iii) the plaintiffs are to pay the expenses and losses incurred by the applicants in consequence of the service of the subpoena to the extent that those expenses and losses exceed the sum of $30 in each case; (iv) the plaintiffs are to pay the applicants' costs of the notice of motion.

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION DEFAMATION LIST

20298/98 SYDNEY REFRACTIVE SURGERY CENTRE Pty Ltd & Anor v Paul BEAUMONT & 2 Ors

JUDGMENT 1 HER HONOUR: By notice of motion filed on 20 May 2003 in proceedings numbered 20298 of 1998 the applicants (Laser Sight Centres Australasia (Sydney) Pty Ltd and Laser Sight Centres Australasia (Parramatta) Pty Ltd, neither of whom is a party to the proceedings) seek orders that subpoenae duces tecum served upon them by post on, respectively, 8 and 9 April 2003, be set aside. They have advanced a variety of grounds to support their claims. 2 Some background facts should be stated. Since the court file cannot be located, it has been necessary to rely to some extent on statements made from the bar table, and some facts recounted in a previous judgment in the proceedings (Sydney Refractive Surgery Centre Pty Ltd v Beaumont [2002] NSWSC 638, unreported, 19 July 2002, per Simpson J). I do not understand the background facts that follow to be controversial.

On 21 August 1998 the plaintiffs, Sydney Refractive Surgery Centre Pty Ltd and Dr Michael Lawless, filed a statement of claim pleading against the defendants (Dr Paul Beaumont, HSV Channel 7 Pty Ltd and Amalgamated Television Services Pty Ltd), causes of action in defamation. Put briefly, the second plaintiff is a medical practitioner carrying on practice as an eye surgeon. As an employee of the first plaintiff he performs laser eye surgery. The first defendant is also a medical practitioner. On 4 May 1988 the second and third defendants telecast, in Victoria and NSW respectively, a current affairs programme concerning various aspects of the practices adopted by the plaintiffs in carrying out eye surgery. Prior to the telecast of the programme the first defendant featured in an interview relating to the same matters, and forcefully criticised the plaintiffs. The plaintiffs thereupon issued the statement of claim that commenced the proceedings. In February 2001, pursuant to s7A of the Defamation Act 1974, a jury found that a number of imputations defamatory of the plaintiffs had been conveyed. The defendants have filed defences to the statement of claim, and the matter is in the process of being prepared for trial. I understand (from what I was told from the bar table) that the plaintiffs make a substantial claim for economic loss - in the region of $10 million. It is in preparation of that aspect of the claim that the plaintiffs seek the information contained in the documents identified in the subpoenae, the subject of the notice of motion. Each subpoena was accompanied by a cheque in the sum of $30, representing conduct money. The purpose to which the plaintiffs seek to put the information they hope to obtain is to establish the size of the market for eye surgery. The applicant companies, of each of whom Dr Peter Stewart is the sole director, also conduct the profession of laser eye surgery, through Dr Stewart who is an ophthalmologist. The applicant companies were incorporated, respectively, on 15 October 1997 and 9 February 1998. 3 Subpoenae in identical terms were served by the plaintiffs' solicitors upon nine other eye-surgery practitioners at about the same time as those presently under consideration. The defendants in the proceedings have served a number of subpoenae on yet more laser eye surgery practitioners, for the same purpose, but framed differently.

the subpoenae 4 Each subpoena is in the form prescribed and contains a schedule delineating the documents of which production is sought. The schedule, in each case, commences with an interpretation paragraph in which the meaning of "document" is defined as follows: " Document means the original of any document including, but not limited to, any memorandum, file note, other note, diary, handwriting, correspondence, facsimile communication, photograph, audio-tape, video-tape, email, printout of email, electronic file note, computer disc, or any means of document storage, or, if the original is not available, a copy of the document together with all copies which may vary from the original (because of annotation, amendment or otherwise)."

The documents to be produced are identified in three categories as: "1. All documents created, sent or received during the period 1 January 1991 to date which constitute, record or refer to: (a) The number of Photorefractive Keratectomy ( PRK ) laser eye surgery procedures performed by the Laser Sight Centre and/or its employed surgeons, for each of the months between 1 January 1991 and 28 February 2003; (b) The number of Laser in Situ Keratomileusis ( LASIK ) laser eye surgery procedures performed by the Laser Sight Centre and/or its employed surgeons, for each of the months between 1 January 1995 and 28 February 2003. 2. All documents that constitute, record or relate to advertising, promotional and marketing material or PRK or LASIK procedures by the Laser Sight Centre during the period 1 January 1995 to 5 May 1998, including, but not limited to, scripts, brochures, tapes and copies. 3. All documents provided or presented to PRK and LASIK patients or prospective PRK and LASIK patients of the Laser Sight Centre during the period 1 January 1995 to 5 May 1998, including but not limited to samples of consent forms, fact sheets, information, guidelines and video material." 5 In a covering letter which accompanied each subpoena the solicitors for the plaintiffs acknowledged that the documents sought might contain sensitive information and therefore proposed that a confidentiality undertaking be entered into by the parties in order to restrict access to the materials to legal practitioners and expert witnesses only. They enclosed a draft confidentiality undertaking for the consideration of the recipients of the subpoenae. 6 Service of the subpoenae sparked a round of correspondence between the solicitors acting for the plaintiffs and the solicitors for the recipient companies (to whom I shall refer as the applicants). I propose to refer, relatively extensively, to the salient parts of that correspondence. 7 On 15 April 2003 the applicants' solicitors (Messrs Garland and Waddington) wrote to the plaintiffs' solicitors (Messrs Gilbert and Tobin) advising them that, unless the plaintiffs confirmed, by 17 April, that the applicants would be excused from compliance with the subpoenae, the applicants would apply to the court for an order that each subpoena be set aside on the grounds that the subpoenae were oppressive, burdensome and an abuse of process. They also signalled their intention to seek costs orders against the plaintiffs. They provided an explanation, in some detail, for the position they had adopted. They raised issues of: (i) relevance; (ii) lack of particularity; (iii) commercial sensitivity and doctor/patient confidentiality; (iv) oppression; (v) the expense involved in compliance. They expressly stated: "The subpoena is oppressive as our client: (i) would be required to incur very substantial expense in having a suitably qualified member of each practice review, list and collate the large number of documents, the expense of which would be out of all proportion to the sum of $30 tendered by you for the production of such documents; …" 8 On 16 April the plaintiffs' solicitors responded, rejecting each of the contentions, contending that relevance is not a proper basis for objection, and maintaining that the subpoenae were "properly drafted" and were relevant to the issues between the parties to the proceedings. They did, however, offer to reduce the period encompassed in paragraph 1 of the schedules to the subpoenae, so that, instead of requiring production of the documents encompassed from the commencement date specified (1 January 1995) to 28 February 2003, they would require only production of those documents for a period ending on 30 June 2001. 9 Further letters were exchanged on 28 and 29 April, but these did little more than restate the positions adopted. 10 On 13 May 2003 the plaintiffs' solicitors again wrote to the applicants' solicitors, pressing for compliance with the subpoenae, offering to extend the time for compliance, and asserting: "We have been reasonable in all attempts to resolve your client's concerns in respect of costs, confidentiality and the documents sought in the subpoena by our letters to Keith Matsen [the solicitor acting on behalf of the applicants] dated 16 April 2003, 17 April 2003, 2 May 2003, 6 May 2003 and 12 May 2003." 11 The solicitors volunteered their view that: "the documents sought are simple",

requiring no more than a computer printout setting out the number of LASIK and PRK procedures carried out by the applicants within a specific timeframe, and sample advertising material for a very specific timeframe. They proceeded to explain the relevance to the proceedings of the information they sought to extract from the documents being the determination of the extent of the market for eye surgery during the relevant period and contended that the documents sought in paragraphs 2 and 3 of the subpoenae "are small in number" and relate to a defence of truth (substantial truth) raised by the defendants, and issues of malice. 12 There was no direct reply to this letter. In the meantime, there was further correspondence, this time between another firm of solicitors (Messrs Freehills) who acted on behalf of another laser eye surgery company which had been the recipient of an identical subpoena. This was the Northern Laser Vision Centre Pty Ltd. Freehills contended that that subpoena was "grossly oppressive and vexatious" and amounted to "virtual discovery", from a stranger to the proceedings. The solicitors complained of "an unduly onerous obligation" cast upon their client to collect and produce the documents which, they also asserted, could "have little or no relevance whatsoever to the proceedings". They also referred to the highly confidential nature of the documents. By telephone, the solicitors embarked upon a process of negotiation with a view to reaching an accommodation of the needs of the plaintiffs with the legitimate concerns of the recipient of this subpoena. 13 Gilbert and Tobin responded to this correspondence in a manner similar to that to which they responded to correspondence in relation to the applicants. The same arguments were advanced on both sides. Some factual matters peculiar to the Northern Laser Vision Centre were raised which it is unnecessary here to mention. 14 The correspondence concerning the Northern Laser Vision Centre gave rise to a side-issue. On behalf of the plaintiffs, it was put that there had been no response to their letter of 13 May on behalf of the applicants. Reliance was therefore placed on behalf of the applicants upon the parallel correspondence with Freehills concerning the identical subpoena served upon the Northern Laser Vision Centre. This side-issue appeared to arise because the plaintiffs now argue that the applicant's solicitors inadequately specified the grounds of their objection to the subpoena. It is for that reason that Freehills (who for the purpose of this application, act as agents for Garland and Waddington and now represent the applicants) pointed to what is certainly a most comprehensive and detailed explanation of their objections in the Northern Laser Vision Centre correspondence. As I have indicated, this is little more than a diversion. The initial letters of Garland and Waddington, in my view, quite adequately explain their position. In any event, that issue is relevant only to the question of costs.

the notice of motion 15 The applicants' notice of motion was supported by the affidavit of Dr Stewart, sworn on 1 July, and a supplementary affidavit sworn on 23 July 2003 by Ms Maple-Brown, a solicitor employed by Freehills. This latter affidavit principally annexed correspondence of which no more need at present be said. 16 Dr Stewart's affidavit deals with a number of matters. He deposed that the first applicant (Laser Sight Centres Sydney) during the relevant time (that is, the time stated in the subpoena, not the reduced period subsequently mentioned on behalf of the plaintiffs) saw approximately between 5,000 and 6,000 patients each year, and, from the date of incorporation to the date specified in the schedule to the subpoena, created between 25,000 and 30,000 files; and that the second applicant (Laser Sight Centres Parramatta) saw approximately between 700 and 1,000 patients each year and created between 3,500 and 5,000 files from its incorporation to the date specified in the schedule. During the relevant period the applicants had employed a number of ophthalmologists. Dr Stewart deposed that, in order to comply with paragraph 1 to the schedule, it would be necessary for each of the patient files to be individually reviewed and analysed manually. Dr Stewart outlined the nature of the filing system operated by the applicants. The system is indexed numerically and is not date-specific. Because of shortage of storage space patient files are archived annually. The archiving system does not disclose dates showing the currency of patients' files. (Given that each applicant came into existence on a date after the starting date mentioned in the schedules, this can have no relevance to the primary consideration. The fact is that all of the applicants' documentation, as far as it otherwise comes within the schedules, will have to be produced. The relevance of the absence of date information concerns the compromise position adopted by the plaintiffs during the negotiations.) Further, Dr Stewart deposed that, on occasions, he (and other ophthalmologists) may have made handwritten notes in discussions with patients and those notes, which may contain material of the kind that would bring them within the schedule, may have been placed in the files. 17 Dr Stewart estimated that the task of reviewing and analysing each file would take not less than two to three months' full-time work for each company. He also deposed that compliance with the terms of the subpoenae (that is, to provide the original of each document), would necessitate photocopying each of the documents within the scope of the subpoenae so that a complete file could be retained by the applicants. 18 Dr Stewart also referred to confidentiality and privacy issues concerning the doctor/patient relationship. He considered that where disclosure of the documents threatened the privacy of patients, appropriate steps would have to be taken to mask the names of the patients and other private and confidential information and that this, too, would be extremely time consuming. He referred also to a need to examine documents to determine whether they contained commercially sensitive or confidential information, and, said that where that occurred, and the information was not relevant to any issue in the proceedings, steps would have to be taken to mask that information: another time-consuming exercise. 19 Dr Stewart also referred to documents the production of which is required by paragraph 2 of the schedules. Although, as I understand his affidavit, he accepted that, at face value, there is a relatively small amount of material of which production would be required, he considered it possible that some patient files may include such material. Due compliance with the subpoenae would require examination of each file for that purpose also. 20 He considered that compliance with paragraph 2 of the schedules would also require at least two to three months of full-time work by each applicant. The same considerations apply to the documents encompassed by paragraph 3 of the schedules. 21 Dr Stewart believed that, if the applicants were to comply with the subpoenae, the employment of a sufficiently skilled person dedicated to the task of reviewing all of the files would be necessitated. Each such document would then have to be reviewed by himself or another medical practitioner. 22 Dr Stewart, who lives in Maroochydore, Queensland, was not required to attend for cross-examination. Some point was made of this during argument on behalf of the applicants, it being suggested that his evidence should therefore be accepted as unchallenged. Ms Smithies, the solicitor who appeared for the plaintiffs, said (from the bar table) that this was because of the cost and inconvenience associated with requiring him to travel from Maroochydore to Sydney. This may be so, but the fact remains that Dr Stewart's evidence is unchallenged. In any event, having read the terms of the subpoenae, I have no difficulty in accepting, as a matter of common sense, that proper compliance with the subpoenae would create work of the magnitude described by him. 23 According to the affidavit evidence of a Gilbert and Tobin employed solicitor (Ms Tasha Smithies) the recipients of the other nine identical subpoenae either had complied or were in the process of complying. 24 Notwithstanding the filing of the notice of motion, Gilbert and Tobin continued to press for compliance, and to insist on putting their view that compliance with the subpoenae would not involve work of the extent described by Dr Stewart, or of an unduly onerous nature. They repeated their view that the documents encompassed by the subponae were limited in number and nature. They commented (gratuitously) on the nature of the records kept by the applicants and advised that they would be satisfied with the production of documents upon which Dr Stewart's estimation of procedure numbers were based, or an affidavit sworn by Dr Stewart to that effect. 25 Despite the continuing negotiations, the parties were unable to reach a resolution satisfactory to both sides.

the law 26 The law concerning setting aside, on the ground of oppression, of subpoenae is neither controversial nor complex - nor novel. The quintessential authority remains The Commissioner for Railways v Small (1938) 38 NSWR 564. Jordan CJ, with whom Davidson and Owen JJ concurred, observed that, whether addressed to a party to the proceedings or a stranger to the proceedings, a subpoena must specify with reasonable particularity the documents required to be produced. In relation to a subpoena addressed to a stranger, his Honour wrote: "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. A stranger to the cause ought not to be required to go to trouble and perhaps to expense in ransacking his records and endeavouring to form a judgment as to whether any of his papers throw light on a dispute which is to be litigated upon issues of which he is presumably ignorant." 27 Even where the subpoena is addressed to a party, Jordan CJ wrote, it should not be used as a substitute for discovery. 28 I do not propose to refer to the other cases cited in argument: Small has repeatedly been quoted and applied. The subsequent cases add little on the principle, or its application. 29 In written submissions provided on behalf of the plaintiffs, the particular matters raised on behalf of the applicants in the correspondence were addressed. A good deal of attention was devoted to establishing the relevance of the documents. Having regard to what I was told about the nature of the plaintiffs' claim for damages, I am prepared to accept that material establishing the size and nature of the market for laser surgery has the level of relevance necessary to justify their production on subpoena. The test at that point is a relatively low one. Relevance is not here the issue. 30 The plaintiffs' written submissions also addressed the subject of oppression. In my opinion, this is the most significant matter for determination. On behalf of the plaintiffs it was submitted that the subpoenae as drafted were neither vexatious nor oppressive. However, no elaboration of this was attempted. Instead, counsel for the plaintiffs relied upon the compromises said to have been offered on behalf of the plaintiffs during the course of correspondence. For example, they, at an early stage, expressed themselves to be willing to shorten the period applicable. The other arguments they advanced concerned the means by which the applicants might comply, not with the strict terms, but with the spirit of the subpoenae. They speculated that accounting and taxation records, machinery leasing records and individual doctors' payment records might yield the kind of information they sought. In the correspondence to which I have referred, the plaintiffs' solicitors made reasonably plain what they sought to achieve by obtaining the documentation. For example, in the letter of 13 May, they stated their view that the documents sought by the subpoenae were no more than a computer printout setting out the number of LASIK and PRK procedures of the applicants for a specific timeframe, and sample advertising material for a very specific timeframe. 31 The plaintiffs also relied upon the evidence that since other eye surgeries had answered similar subpoenae, or were in the process of doing so. This, they argued, contra-indicated oppression. 32 While it is open to the parties to reach a compromise that would relieve the applicants of the need strictly to comply with the subpoenae, once those negotiations have broken down, as here, compromise is not the issue. A suboena is a command from the court. It is not to be taken lightly. Failure properly to comply potentially exposes the recipient of the subpoena to penal sanctions. If the parties could not reach an accommodation, the subpoenae need to be dealt with in the terms in which they are expressed. Certainly, it is not for the court to redraft the schedules to the subpoenae. I have to focus upon what is specified in the schedules to the subpoenae. What is encompassed in those schedules is, even on a superficial reading of the documents, of extraordinary breadth. That impression is confirmed by the affidavit of Dr Stewart. I am satisfied that, for reasons of oppression alone, each subpoena should be set aside. 33 In a further written submission provided after the conclusion of the argument, counsel for the plaintiffs again argued that paragraph 1 of each of the schedules does not contain any category of documents that is too wide or too vague. Just one word in the schedules destroys that argument: the applicants, in order to comply with the subpoenae, must produce every document in which "reference" is made to procedure numbers. Potentially that would require examination of all documents constituting the records of the applicants. 34 Further, I am satisfied that the confidentiality claims have substance. Relatively little attention was paid to this during the hearing, although it was mentioned from time to time during the correspondence. There are two aspects to confidentiality. The first is the doctor patient confidentiality and the second concerns issues of commercial confidentiality. These are very much more difficult to determine, but, on balance, and particularly as the applicants are not parties to the proceedings, I am of the view that that issue alone would warrant setting aside the subpoenae in their present terms. 35 Counsel also addressed submissions to paragraphs 2 and 3 of the subpoenae. These, I accept, are in a different class. By paragraph 2 documents relevant to advertising, promotion and marketing are sought. As to this Dr Stewart's evidence was that, generally speaking, out of date advertising material is regularly discarded. From this it might be inferred that, as is submitted on behalf of the plaintiffs, the applicants are in possession of little documentation coming within the terms of that paragraph, and that, accordingly, compliance would not impose any undue burden upon the applicants. If the paragraph were limited to documents that "constitute" or "record" advertising, promotional or marketing material, I would be inclined to accept this submission. But the paragraph is not so limited. It requires also all documents that "relate to" such material, and goes on to specify that, while what is sought includes scripts, brochures, tapes and copies, the material sought is not limited to those categories. For those reasons, I am satisfied that paragraph 2 is, as presently framed, excessive. I am also satisfied that the paragraph could be redrafted in appropriately narrower terms. 36 Much the same applies to paragraph 3. In the correspondence that follows the service of the subpoenae, the solicitors emphasised that they would be satisfied with "sample advertising material". The difficulty with that is that providing samples is an open-ended concept and requires of the applicant a judgment as to what constitutes an appropriate or adequate sample. Again, it seems to me that an appropriately framed subpoena could be drafted.

costs 37 SCR Part 37 Rule 9(1) provides as follows: " Expense and loss

(1) Where a person named [as a recipient of a subpoena] is not a party and, in consequence of service of the subpoena, reasonably incurs expense or loss substantially exceeding any sum paid under rule 3, the Court may order that the party who requested the issue of the subpoena pay to the person named an amount in respect of the expense or loss." 38 The applicants seek an order for the payment of the costs they have incurred, including legal costs incurred in the failed negotiations, and that these costs be paid on an indemnity basis. 39 Previously rule 9 was in slightly different terms. In place of the words "in consequence of the service of the subpoena", the words "in complying with the subpoena" appeared. This is plainly a more difficult test for an applicant - particularly a successful applicant - for the setting aside of a subpoena, placed. Even so, in Danieletto v Khera (1995) 35 NSWLR 684, Bryson J ordered that a successful applicant be paid his costs associated with seeking to have the subpoena set aside. The present case, under the current framing of the rule, is plainly stronger. Further, in the correspondence which I have outlined, the applicants strenuously sought to have the plaintiffs come to a more reasonable position. They remained obdurate. Their position was, I am satisfied, quite untenable. Accordingly, I am quite satisfied that the applicants are entitled to an order that the plaintiffs pay them an amount sufficient to make good their expenses incurred in consequence of the service of the subpoenae. I will so order. 40 It is not entirely clear to me that an order under this rule comes within the assessment of costs regime but this is a matter that the parties will have to consider. 41 The orders I make are:

(i) the subpoena served upon the first applicant on 8 April 2003 and issued at the request of the plaintiffs on 28 March 2003 is set aside;

(ii) the subpoena served upon the second applicant on 9 April 2003 and issued at the request of the plaintiffs on 28 March 2003 is set aside;

(iii) the plaintiffs are to pay the expenses and losses incurred by the applicants in consequence of the service of the subpoena to the extent that those expenses and losses exceed the sum of $30 in each case;

(iv) the plaintiffs are to pay the applicants' costs of the notice of motion. **********

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Judgment (19 paragraphs)

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