Travel Compensation Fund v John Harvey Blair & Ors

Travel Compensation Fund v John Harvey Blair & Ors - [2004] NSWSC 662 - NSWSC 2004 case summary — Zoe

[6]

NOTE: This is the edited text of the judgment delivered on 28 July 2004. It does not include material [the subject of a confidentiality regime imposed by Court order] which may not be published except in such manner and for such purposes as the Court specifies. [See note at end of Judgment] The proceedings 1 The nature of the test case proceedings presently before the court on interlocutory motions was outlined in an interlocutory judgment delivered on 7 August 2003 [2003] NSWSC 720 [Einstein J]. That judgment dealt with a miscellany of issues treating inter alia with questions of statutory construction, standing, constitutional issues, pleadings and particulars. 2 Even prior to the delivery of that judgment the proceedings had been before the court [McClellan J] on 20 December 2002 and 12 March 2003 [2003] NSWSC 184], on each occasion in relation to questions concerning the issue of subpoenas by the plaintiff[s]. [In all instances the Travel Compensation Fund is a plaintiff. In some instances there are additional individual plaintiffs. For convenience I shall use the plural.] 3 Following the August 2003 judgment the proceedings returned to the court [McDougall J] in mid-May 2004, yet again in relation to subpoena issues [2004] NSWSC 501. 4 It is unnecessary to repeat the record in terms of the reasons given for the orders made on each of those occasions. Those judgments are taken as part of the adjectival information concerning the matters to be dealt with in this present judgment. The notices of motion 5 There are presently before the court notices of motion brought by the first defendant seeking orders: · setting aside two subpoenas each dated 7 June 2004 filed for the plaintiff and directed to Australian Securities and Investment Commission and to Air New Zealand Limited; · that the plaintiff provide particulars requested by the first defendant on 19 July 2004 of paragraph 49 of the further amended summons and the paradigm paragraph in proceedings 50176-50183 of 2002. The material allegation 6 The central issue concerns paragraph 49 of the relevant summonses which pleads:

[20]

[112] Nor is it beyond possibility that in this very unusual case the Court, at a later stage in the proceedings, will direct that the TCF prepare, file and serve a detailed statement of the particular facts, matters and circumstances which are to be relied upon by way of the evidence to be adduced in support of the proposition that the travel agents were aware at the material time, of the matters now sought to be pleaded in Dean [52]. This is where the Overriding Purpose Rule may very well be engaged for the reason that unless some rigid guideline directions are given, the collapse of the Ansett Group and the number of investigations into and materials relating to that collapse have the capacity of submerging the parties and the Court into a veritable sea of materials. The position seems to be almost a clarion call for mobilisation of the Overriding Purpose Rule, with the high possibility that special directions will be seen as appropriate and will be formulated by whichever judge is then dealing with the case management of the matter." [emphasis added] Requirement to plead knowledge 10 It is also appropriate to be reminded of the position qua obligations to furnish particulars where a state of mind is pleaded. It is true that the old practice was that a party who alleged a condition of mind as an ingredient to a cause of action could not be required to give particulars: Burgess v Beethoven Electric Equipment Ltd [1943] KB 96 at 100 per Lord Greene MR, Lyons v Kern Konstructions (Townsville) Pty Ltd (1983) 70 FLR 135 at 146 per Fitzgerald J. 11 Part 16, Order 3, Rule (1) of the Supreme Court Rules provides that a party pleading any condition of mind shall give particulars of the facts on which he relies and while Order (2) provides that knowledge is not such a 'condition of mind,' to my mind, this is not to be interpreted as providing that particulars of mere knowledge may never be required to be given. 12 The overriding question must be always be whether the particulars are 'necessary' within the meaning of Part 16, Order 1, Rule (1). The issue requires a close examination of the pleadings under consideration in specific proceedings. As will already be apparent the issue here concerns the appropriate case management parameter. The plaintiffs difficulties 13 Part of the difficulties which the plaintiffs have encountered in terms of preparation of their cases relates to the difficulties briefly referred to by McClellan J in the March 2003 judgment (at [11]) where reference was made to the need for subpoenas to be issued to retrieve particular documents. Clearly enough it has been appropriate for a stepped issue of subpoenas. The history of the proceedings discloses that production of such materials has albeit slowly led to an incremental production of relevant materials. McDougall J referred to this matter inter alia in the May 2004 judgment (at [45]). Case management issues 14 The case management of the proceedings has required to tread a sensitive line as between the recognition of principles each of which have their place but from time to time require to accommodate one another, namely: · the entitlement of the defendants to know the nature of the very serious case made against them in order to be in a position to properly prepare a defensive case; · the pragmatic realisation that allegations of awareness at a particular time of particular matters concerning the knowledge of corporations or individuals [dealing with the likelihood that Ansett was or would soon become insolvent and/or of other parameters of the financial arrangements needed but unlikely to be made to support the cash needs of Ansett] are difficult to prove and particularly so where the scale of the exercise involved such an enormous group; · the principle that plaintiffs are required only to furnish the best particulars known to them; · the reticence of the commercial list to approach the case management of interlocutory procedures by ordering particulars and the well-known endeavours of that list to circumvent this form of requirement by other means where practicable. No appeal 15 There was no application for leave to appeal from the holding in the August 2003 judgment (at [109]) or from the case management approach laid out (at [110]-[112]). 16 Indeed the defendants went ahead and filed and served defences and the plaintiffs have now filed replies. The first defendants approach to the motion 17 The approach of the first defendant to the hearing of the present motions also requires to be taken into account. 18 This was not a circumstance in which the first defendant moved to strike out paragraph 49 of the present version of the summonses. All that was fixed to be heard was the application by the first defendant to strike out the above described subpoenas. The motion being returnable on 24 June 2004, what occurred was that the matters were in my own list a few days earlier for the purpose of giving pre-motion directions, on which occasion there was mooted the possibility that the first defendant may or may not determine to also move for the provision of particulars. 19 At the Court's indication that difficulties may be encountered unless there was proper communication between the parties of what was to be before the Court on 24 June 2004, leave was given to the first defendant to move on the return date for leave to file any motion for particulars which may be intended to be pressed. An indication was given that the question of whether or not that motion could be heard would have to be the subject of submissions on the day. A thirty paragraph letter purporting to seek 'particulars' but seeking in each case provision of "the facts, matters and circumstances upon which the plaintiff relies for the allegation that…" was then sent to the plaintiff's solicitors only three working days before the date fixed for the hearing of the subpoena motion. 20 When the matter was called the first defendant sought leave to file the motion seeking particulars and this placed the plaintiffs camp in difficulties because they had not had sufficient time in which to deal with the request for particulars and saw particular problems with presently being required to furnish what could only be interim particulars. When the first defendant sought leave to file the notice of motion seeking particulars, the proposition which came forward [both in address and supported by evidence] from the plaintiffs was that it would be expensive and simply inefficient at the present stage to furnish interim particulars only. 21 Whilst the first defendant adopted the above described forensic stance seeking to buttress its claim that the subpoenas under attack were in truth no more than a fishing expedition, it is quite plain from the chronology [Exhibit R 5] and from the Court file that this was the first occasion since the delivery of the August 2003 judgment when any suggestion of immediacy in terms of a requirement for the provision of these 'so-called' particulars had come forward from the first defendant, which must be assumed to have accepted the case management approach identified in paragraphs [109] - [112] of the August 2003 judgment. The plaintiff's evidence 22 It is convenient at the same time to shortly examine the evidence which came forward from the plaintiffs who called Mr O'Meara a solicitor whom together with a partner and another solicitor, has the carriage of the conduct of the proceedings for the plaintiffs. 23 Mr O'Meara gave evidence that: · following the making of the orders permitting the unmasking of versions of particular documents produced by ASIC and Air New Zealand, he had inspected unmasked versions of those documents; · this was followed by the application to extend the access regime to experts retained by the plaintiffs, the subject of the hearing before Justice McDougall; · subsequent to the extension of that access to experts retained by the plaintiff the documents were supplied to such experts by the plaintiffs. 24 Mr O'Meara's evidence was that he had formed the view as a result of his inspection of the initial documents, that it was appropriate to issue further subpoenas. These were then settled by counsel, being the subpoenas presently sought to be set aside. 25 The subpoenas the subject of the present motion were served in early June. A letter of 9 June 2004 from Corrs Chambers Westgarth had asked in respect of each subpoena, what was the forensic purpose to which each of the documents or classes therein referred to was said to relate. That letter was responded by the plaintiff's solicitors by letter of 15 June 2004. This letter was inter alia in the following terms:

[38]

Finally, in light of the fact that the ASIC subpoena and the Air New Zealand subpoena are each returnable on 17 June 2004, we think that the practical course is to stand them over until Monday 21 June 2004. If none of the defendants have filed any motion in relation to the subpoenas by 18 June 2004, we will seek access on behalf of the TCF to any documents produced in answer to the subpoenas…" 26 Mr O'Meara gave evidence that certain particulars of portions of the further amended summonses in the Dean [and I infer the other summonses] had been requested by certain of the defendants. It is however common ground that no particulars have ever been furnished in relation to the allegations made in paragraph 49 (a) and (e) of the present version of the summons [sub-paragraphs (b) - (d) having already been held to suffice as particulars] . 27 In relation to the request, said to be a request for particulars, in the letter of 19 July 2004, Mr O'Meara gave evidence that as to the first relevant question: "What are the facts, matters and circumstances upon which the plaintiff relies for the allegation that Ansett was insolvent as at 16 August 2001", although an interim answer could be provided, this could not be a final answer because the plaintiffs had not completed their investigations nor obtained all of the material. If it was necessary for an interim answer to be provided he would wish to have it settled by counsel. Up to this point the approach of the plaintiff had been to collect as much of the material as possible, to review it with experts, to distil that material and to do that prior to having counsel review all of the material. Further the cost of preparation of an interim answer would be considerable. 28 Mr O'Meara gave evidence that the documents which had been received on the first round of subpoenas comprised one folder of documents obtained from ASIC and he believed five folders of documents obtained from Air New Zealand. His evidence was that he would wish to have input from the experts retained in terms of his estimate of the time which would be required to produce an interim response to the letter of particulars, if that was to be ordered. 29 Returning to the two motions presently before the court, for reasons to be given below, the proper exercise of the court's discretion is to presently stand over the motion seeking particulars and to deal only with the substantive issue raised by the motion to set aside the subpoenas. Turning to the subpoena issue The defendants submissions 30 The central proposition put by the first defendant relies is that the subpoenas comprise a fishing expedition; that is to say an attempt not to obtain evidence to support the plaintiff's case but to discover whether or not the plaintiff has a case at all. 31 As to this claim it suffices for present purposes to accept in its entirety the statements of principle set out in the 20 December 2002 judgment by McClellan J. 32 The essential burden of the defendants' submissions is that the present, round of subpoenas go a step even further than the previous rounds in "fishing" for evidence or material which might assist the plaintiff. This is said to be particularly so for the subpoena to ASIC. 33 That subpoena seeks, among other documents, the transcript of interviews between ASIC officers and the following persons:

[40]

[ ] [ [ [ 34 The first defendant's proposition is that unlike the third round of subpoenas dealt with by McDougall J, none of these people are defendants and anything that they may have said cannot be used as an admission against the named defendants. The submission is that whether they said anything to ASIC which could be used to prove a case on insolvency is nothing more than complete speculation. The proposition is that there is no evidence from the plaintiff making it likely that any or all of these people made statements to ASIC useful to the plaintiff's case. 35 The first defendant contends that there are a number of matters that confirm the speculative nature of this exercise: · first, the period in which insolvency or imminent insolvency is alleged extends back at least nine months before the collapse of the Ansett group. It is said to be neither inevitable nor even probable that the company would have been insolvent some nine months prior to being placed in administration; · secondly, ASIC conducted a formal investigation into the collapse of the Ansett group. On 1 March 2002 ASIC announced that there was "no realistic prospect for successfully prosecuting the directors of Ansett for breach of their general duties of care under the Corporations Act for insolvent trading". That finding it is said, reinforces the inherent improbability that Ansett or Traveland were, or should have been, aware that they were insolvent, or imminently insolvent, as far back as December 2000; · the main proceedings were commenced on 18 March 2002. Those proceedings did not contain an allegation of insolvency. Neither was an allegation of insolvency made when the nine separate summonses were first filed. Such an allegation first emerged in the further amended summonses filed on 9 September 2003; · Mr Ulman, solicitor for the plaintiff, has given a s. 198L certificate. Taken at face value, the plaintiff asserts that it currently has sufficient material to allege insolvency, however, the first defendant makes the point that no evidence has yet been served or filed which supports that allegation. The contention is that unless and until there is such evidence filed and served so as to support the allegation which is put as otherwise implausible and unparticularized, the subpoenas are mere "fishing". 36 Some of the documents which were tendered during the hearing of the motions are confidential and the Court was closed to hear submissions in relation to these documents. The sole issue 37 The real and only issue which is raised is whether or not the plaintiff can be said to have issued the subpoenas endeavouring not to obtain evidence to support their case, but to discover whether they have a case at all. Finding 38 As the plaintiff has submitted, the documents sought in the ASIC subpoena are restricted to documents obtained by ASIC during the period 14 September 2001 - 1 March 2002. 39 It was apparently during this period that ASIC conducted the first stage of its investigation into the collapse of the Ansett Group - namely, whether there had been breaches of directors' duties by directors of Ansett, Traveland or Air NZ, whether there was compliance with the insolvent trading provisions of the Corporations Act by directors of Ansett, Traveland or Air NZ, and whether Air NZ (the ultimate parent company of Ansett and Traveland) may have any liability in relation to such matters: ASIC press release dated 14 September 2001. 40 A relevant issue in the proceedings is the circumstances in which the Ansett group collapsed and the knowledge of Ansett (or Traveland as the case may be) as to its solvency. The Ansett group apparently comprised Air NZ. The plaintiff claims that financial affairs of the whole of the Ansett group leading to the administration of Ansett and Traveland cannot be dissected. The plaintiff seeks to make a case that the solvency of Ansett and Traveland was linked to accounts controlled by Air NZ (as the parent company of Ansett and Traveland): see paragraphs 49(b)-(d) of the Dean FAS. 41 Clearly the solvency of the Ansett Group and the financial relationship of the parent, Air NZ, with its subsidiaries (including the reason for the collapse of the Ansett Group) raise pleaded issues. 42 I have already adverted to the history of the proceedings leading to the incremental production of relevant materials. That history including the materials now be found within Exhibit R1 entitled "Subpoenas chain of inquiry" has been examined in terms of the determination of the motions presently before the Court. These materials are confidential ] [Confidential section of judgment. Not to be disclosed - see Court Order 28 July 2004 ]

[42]

[ 47 There had been no objection by the first defendant nor by ASIC to production under that earlier subpoenas on the basis of lack of a legitimate forensic purpose [the final position in this regard was that on 13 May 2004 before McDougall J, Air NZ only objected to production and access to the documents produced under the earlier ASIC subpoena on the basis of commercial confidence. Subject to the imposition of restricted regime for access to these documents, McDougall J dismissed Air NZ's motion with costs] 48 McDougall J did, based upon his limited inspection of the documents which he has summarised, find that that inspection "made it clear that the documents may also, or alternatively, suggest a further process of inquiry" (at [45]. 49 It is unnecessary to treat with the detail of the Air New Zealand Board Meeting Minutes of 12 September 2001, save to observe that the document may prove to be one of the parts of the evidentiary mosaic which the plaintiffs are entitled to build. 50 It is necessary to do no more than to note the terms of the last paragraph of the document which became Exhibit A1. 51 As to the subpoena addressed to Air New Zealand I am satisfied that likewise the subpoena has been issued in an endeavour to obtain evidence to support the plaintiffs case as opposed to an endeavour to ascertain whether they have one at all. Dealing with the motion for particulars and general case management 52 During the course of the hearing of the motions I made clear to the parties that as it seemed to me, in the event that the plaintiffs were to succeed in successfully resisting the application to strike out the subpoenas and subject to an appropriate confidentiality regime, were to be given access to the materials sought to be provided by ASIC and Air New Zealand, an appropriate case management direction would likely be an order that by a particular date to be fixed by the court the plaintiffs provide proper particulars. The time for the provision of the particulars stipulated by the order may be extended by application depending upon the circumstances but they would have to be special circumstances. The reason is that the allegations pursued by the plaintiffs are grave and if proved could have extremely adverse consequences for a number of individuals. The defendants for that reason alone cannot be expected to abide the plaintiffs private timetable. 53 Having given that matter some further consideration it seems to me that precisely such an order should be made and that the date by which the particulars will require to be furnished should be 31 January 2005. 54 The motion for particulars presently before the court should be stood over generally, to be restored not before one week after 31 January 2005. 55 It only remains to make plain that the short minutes of order which are to be brought in to effect the above reasons will require to deal with questions of commercial confidentiality and/or legal professional privilege. In that regard insofar as questions of the proper approach to be taken by the court [where legal professional privilege or commercial confidentiality requires to be dealt with in a case management context], it suffices for present purposes to adopt in its entirety the statement of principle set out by McDougall J in the 14 May 2004 judgment [cf in particular [26], [27], [29-36], [38] and [40]].

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