Wong v Sklavos

Wong v Sklavos - [2014] FCAFC 120 - FCAFC 2014 case summary — Zoe

[19]

REASONS FOR JUDGMENT 1 On 13 May 2014, Jagot J dismissed two applications seeking the setting aside of subpoenas: Sklavos v Australasian College of Dermatologists [2014] FCA 476. The first application was by the appellant Dr Wong and nine others. The second was by the appellant Dr Satchell. 2 The appellants now appeal, with leave (Wong v Sklavos [2014] FCA 679), against these interlocutory decisions. 3 The active respondent to the appeals, Dr Sklavos, is the applicant in the proceedings at first instance, which are in the docket of Jagot J. The Australasian College of Dermatologists and the members of its Board of Directors are the other respondents. These respondents did not take any part in the interlocutory applications and did not participate in the appeals. 4 Dr Sklavos is a medical practitioner who wishes to be admitted as a Fellow of the College so as to practice as a dermatologist. He has been a trainee at the College but has not achieved the requisite qualifications. In the proceedings at first instance, Dr Sklavos claims that the College: (a) Breached its contract and its duty of care to him, as a result of which he developed a psychiatric disorder and was unable or had a reduced ability to undergo the College's Fellowship exams with the consequence that he has not been able to qualify and practice as a specialist dermatologist; (b) Breached its contract with him resulting in him being denied the opportunity to pass the Fellowship exams or otherwise to be elected as a Fellow; and (c) Contravened the Disability Discrimination Act 1992 (Cth) as a result of which he has suffered economic loss through not being admitted as a Fellow and not being able to practice as a specialist dermatologist. Dr Sklavos claims that by reason of these contraventions, he has suffered a number of detriments, including economic loss, being the difference between his earnings as a trainee and a general practitioner and the increased earnings which he could have obtained as a specialist dermatologist. 5 Dr Sklavos proposes leading evidence from a forensic accountant relating to the quantification of that loss. In order to obtain material which may be submitted to the accountant for analysis, he issued subpoenas to the 11 appellants. They are at different stages of their careers: two having been admitted as Fellows in 2013, having completed the College's training course in 2012; two having been admitted as Fellows in about 2011, having completed the College's training course in that same year; one having been admitted as a Fellow in 2010; one having been admitted as a Fellow in 2009 or 2010 shortly after completing the College's training course; one having been admitted as a Fellow in 2009; two having been admitted as Fellows for between 5 and 10 years; and two having been admitted as Fellows for over 10 years. 6 In each case, the subpoenas seek production of the following documents: 1. Copies of personal income tax returns lodged for FY 2010/11 and each subsequent financial year. 2. Copies of all Payment Summaries (also known as Group Certificates) received from any employer in respect of FY 2010/11 and each subsequent financial year. 3. Copies of any annual statement or summary or earnings received by you or by any company or other entity through which you provide dermatology services, showing earnings received from any Area Health Service, Local Health District or otherwise as a result of providing dermatology services at a public or private hospital during FY 2010/11 and each subsequent financial year. 4. In respect of each company, trust, partnership or other legal entity which has received income during the relevant financial year as a direct result of you providing dermatology services, or which operated any dermatology practice of which you were an owner (in whole or part) or partner during the relevant financial year: (a) Copies of any annual financial statement prepared for each such entity for FY 2010/11 and each subsequent financial year; and (b) Copies of income tax returns lodged for each such entity for FY 2010/11 and each subsequent financial year. 7 Jagot J accepted that the documents had apparent relevance in the proceedings, while noting that it was not possible at this stage to assess their ultimate probative value: at [8]. Her Honour recognised the confidentiality of the documents sought but considered that an appropriate regime to protect their confidentiality could be either agreed or imposed by Court order. Jagot J rejected the appellants' claims concerning oppression, the availability to Dr Sklavos of the same or sufficiently similar information from other sources, and the submission of Dr Satchell that, in his case, the subpoena was an abuse of process because of public interest immunity or because of the confidentiality regime in the taxation legislation. 8 The grounds in the two notices of appeal are identical, namely, that the subpoenas should have been set aside because the documents sought do not have apparent relevance to an issue in the proceeding and because they are oppressive. Dr Satchell did not pursue the grounds concerning public interest immunity and the confidentiality regime in the taxation legislation which he had agitated before Jagot J. 9 The decision of Jagot J refusing to set aside the subpoenas was in the nature of a discretionary judgment concerning a matter of procedure. Appellate review of discretionary judgments is limited to the circumstances stated in House v The King (1936) 55 CLR 499 at 505. This means that the appellants must show that Jagot J acted upon a wrong principle, allowed extraneous or irrelevant matters to guide or affect her decision, or did not take into account some material consideration. 10 In addition, the restraint which appellate courts exercise before interfering with judgments concerning matters of practice and procedure of the present kind is well established. In Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177, the High Court said: Nor is there any serious dispute between the parties that appellate courts exercise particular caution in reviewing decisions pertaining to practice and procedure. Counsel for Brown urged that specific cumulative bars operate to guide appellate courts in the discharge of that task. Not only must there be error of principle, but the decision appealed from must work a substantial injustice to one of the parties. The opposing view is that such criteria are to be expressed disjunctively. … For ourselves, we believe it to be unnecessary and indeed unwise to lay down rigid and exhaustive criteria. The circumstances of different cases are infinitely various. We would merely repeat, with approval, the oft-cited statement of Sir Fredrick Jordan in In re the Will of F.B. Gilbert (Dec) (1946) 46 S.R. (NSW) 318 at 323: … I am of opinion that, … there is a material difference between an exercise of discretion on a point of practice or procedure and an exercise of discretion which determines substantive rights. In the former class of case, if a tight rein were not kept upon interference with the orders of Judges at first instance, the result would be disastrous to the proper administration of justice. The disposal of cases could be delayed interminably, and costs heaped up indefinitely, if a litigant with a long purse or a litigious disposition could, at will, in effect transfer all exercises of discretion in interlocutory applications from a Judge in Chambers to a Court of Appeal. 11 Section 24(1A) of the Federal Court of Australia Act 1976 (Cth), which makes an appeal of the present kind subject to a grant of leave, is a legislative endorsement of the restraint to which the High Court referred in Adam P Brown. Examples of the restraint in relation to decisions concerning subpoenas include Brouwer v Titan Corporation Ltd (1997) 73 FCR 241 at 244 and ICAP Australia Pty Ltd v BGC Partners (Australia) Pty Ltd [2009] NSWCA 307 at [29].

[20]

Apparent Relevance 12 Although the parties referred to several authorities concerning the requirement for subpoenaed documents to have apparent relevance to an issue in a proceeding, in our opinion, the applicable principles are well established. The party issuing a subpoena bears the onus of demonstrating that the subpoena has a legitimate forensic purpose in relation to the issues in the proceedings: Santos Ltd v Pipelines Authority of South Australia (1996) 66 SASR 38 at 52. A subpoena may be set aside if it requires the production of documents which do not have apparent relevance to the issues arising on the pleadings: Trade Practice Commission v Arnotts Ltd (No 2) (1989) 88 ALR 90; Campaign Master (UK) Ltd v Forty Two International Pty Ltd (No 4) [2010] FCA 398; (2010) 269 ALR 76 at [39]-[40]; McHugh v Australian Jockey Club Limited [No 2] [2011] FCA 724 at [13]; McIlwain v Ramsey Food Packaging Pty Ltd [2005] FCA 1233; (2005) 221 ALR 785 at [35]; Dorajay Pty Ltd v Aristocrat Leisure Ltd [2005] FCA 558 at [17]. Other cases have used different terminology, but with essentially the same effect, for example, by requiring that, viewed realistically, the documents sought have a bearing on an issue which is not unreal, fanciful or speculative (R v Barton (1981) 2 NSWLR 414 at 420), or that the material sought is reasonably likely to add in some way to the relevant evidence in the case (Spencer Motors Pty Ltd v LNC Industries Ltd (1982) 2 NSWLR 921 at 927), or that it be "on the cards" that the documents sought will materially assist the party at whose request the subpoena has been issued: Allister v The Queen (1984) 154 CLR 404 at 414; Tamawood Ltd v Habitare Developments Pty Ltd [2009] FCA 364 at [13], [35]-[38]. 13 In the present case, Jagot J considered that the test of apparent relevance was satisfied because evidence of the income of dermatologists from the practice of dermatology may be relevant to the assessment of Dr Sklavos' claimed economic loss. 14 In contending that this conclusion was wrong, the appellants referred to the intention of Dr Sklavos to provide the subpoenaed materials to a forensic accountant for analysis. They contended that the material sought did not satisfy the test of apparent relevance because: There was no evidence about the identity, expertise or experience of the forensic accountant to whom the material is to be submitted; There was no evidence that the proposed expert had asked for information of the kind now sought or that he or she would find it useful in providing a report relevant to Dr Sklavos' loss of earnings; There was no evidence about the methodology which the expert would use with information derived from the material obtained under the subpoenas; It is not clear how the recipients had been selected from the population of practising dermatologists; It is not clear how a sample of 11 from that population could be statistically significant; and It is not clear how earnings of dermatologists with different backgrounds, specialisations, work ethics and competence could be probative of Dr Sklavos' future earnings. 15 In our opinion, Jagot J was correct, for the reasons which she gave at [8], in concluding that the test of apparent relevance was met in this case. Her Honour said: [8] ... The difference in income between what [Dr Sklavos] says he would have earned but for the unlawful conduct and what he will now earn if not admitted as a Fellow is an arguable category of loss. The income of other dermatologists may be relevant to that issue. I accept that I cannot now assess the ultimate probative value of the documents required to be produced. It may be that the accountant's opinions are ultimately of little weight because allowance has not or cannot be made for all of the potential differences between what would have been Dr Sklavos' position and the position of any of the 11 dermatologists who have received a subpoena. It may be that I am persuaded the sample is too small to be meaningful. None of these things can currently be known. What I do know now is that documents disclosing the income and expenditure of any dermatologist in Sydney may be relevant to Dr Sklavos' case in a manner which is not unreal, fanciful or speculative. That is sufficient to require production. It does not matter that the documents are sought for the purpose of provision to an expert. Apparent relevance does not require that the documents themselves be directly admissible. There is nothing improper in using the subpoena process for the purpose of obtaining documents relevant to expert evidence intended to be adduced in a proceeding. 16 We note, in addition, that the proof of loss of earning capacity in this case is similar to that which commonly pertains in personal injury litigation. Plaintiffs claiming economic loss as a result of an impairment of earning capacity will usually adduce evidence of the income which they could have expected to receive had their earning capacity not been compromised. If they would have exercised their earning capacity in occupations governed by industrial awards or agreements, or to which published pay scales are applicable, the evidence usually comprises the rates applicable under the relevant award, agreement or scale. But, when evidence of that kind is not available, it is common for such plaintiffs to lead evidence of the earnings of persons working in their area of occupation. 17 The decision of the Court of Appeal of NSW in Norris v Blake [No 2] (1997) 41 NSWLR 49, to which counsel for Dr Sklavos referred, provides an example. In that case, a badly injured young actor led evidence of the earnings from acting achieved by a number of his contemporaries. 18 Counsel for the appellants referred to authorities indicating that evidence of the earnings achieved by others may not always be necessary: National Instruments Pty Ltd v Gilles (1975) 49 ALJR 349; Kealley v Jones [1979] 1 NSWLR 723, and State of New South Wales v Moss [2000] NSWCA 133; (2000) 54 NSWLR 536. However, these decisions have no bearing on the question whether the material sought in the subpoenaed documents has apparent relevance to the assessment of damages for Dr Sklavos' claimed loss of earning capacity. The orthodox principles are those stated by Heydon JA in Moss: [66] There are two uncontroversial themes running through the cases relating to the assessment of damages for injury to earning capacity. One is that in general it is desirable for precise evidence to be called as to what the plaintiff would have been likely to earn but for the injury and what the plaintiff is likely to earn after it. The second is that the failure to call such evidence does not necessarily result in selection of only a nil or nominal figure as damages for impaired earning capacity. [67] Thus, in relation to the first of these themes, in Paff v Speed [1961] HCA 14; (1961) 105 CLR 549 at 559 Fullagar J said that the "usual method of proving damages under [this] head is by calling evidence to show what the plaintiff could probably have earned during the rest of his life if he had not been injured and what, if anything, he is now capable of earning". The same is true where the defendant is seeking to demonstrate that the diminution of earning capacity is only partial. … (Emphasis added) 19 In short, plaintiffs should provide evidence of the earnings which, uninjured, they could have expected to receive, but a meritorious claim will not fail altogether because of their failure to do so. 20 The decision in Gilles is an example of the second of the themes to which Heydon J referred in Moss and the decision in Kealley an example of both. In the latter, Moffitt P said at 734: [I]n quantifying loss due to diminution of earning capacity … while a Judge may look for the assistance of specific evidence on wages, there is a vast store of common knowledge that he is entitled to bring into account in assessing loss in personal injury cases. Judges of the Workers' Compensation Commission have long been accorded the right to resort to an immense fund of general knowledge concerning conditions of employment and rates of pay … Juries have long been accorded the right to use their common knowledge in relation to the employment consequences of injuries. (Emphasis added) In our opinion, the earnings of dermatologists from the practice of their speciality should not be regarded as an obvious matter of common knowledge of the kind to which Moffitt P referred in this passage. 21 It is true, as counsel for the appellants pointed out, that Moffitt P in Kealley went on to observe that sometimes, particularly in trials before a jury, evidence of claimed earnings can distract rather than assist. However, that observation does not deny the relevance of evidence of the earnings which an injured plaintiff may have expected to receive. 22 In short, it will be appropriate for Dr Sklavos to establish at trial the earnings which he might have achieved as a specialist dermatologist. The material which he seeks from the appellants has, at the least, apparent relevance to that issue as it bears on the earnings which specialist dermatologists may achieve at different stages of their careers. Evidence of the expertise of the proposed forensic accountant or of the manner in which the accountant will use the subpoenaed material was not necessary in this case to establish the apparent relevance of the documents sought. 23 It may well be that the probative value of the subpoenaed material, if tendered at trial, will be affected by other evidence including evidence, bearing on the specialised expertise, diligence, work ethic, competence and practices of Dr Sklavos, on the one hand, and each of the 11 appellants on the other. However, the circumstance that there may be evidence of differences of this kind does not deprive the material sought by Dr Sklavos of apparent relevance at this stage to an issue in the trial. 24 Counsel for the appellants referred to two cases, said to be analogous to the present, in which subpoenas had been set aside. 25 In McHugh v Australian Jockey Club Limited (No 2) [2011] FCA 724, Robertson J set aside a subpoena seeking production of documents relating to earlier proceedings in this Court between a tax payer and the Commissioner of Taxation, as well as the tax returns of the tax payer for five tax years. Robertson J considered that there was "a lack of fit" between what was sought by the subpoena and the issues in the substantive action. Plainly, that conclusion turned on the precise factual issues arising in McHugh. Robertson J did not elaborate the finding of "a lack of fit" and, accordingly, this aspect of the decision in McHugh is of little utility for present purposes. 26 The proceedings in In the matter of North Coast Transit Pty Ltd [2013] NSWSC 1912 concerned claims for relief under ss 233 and 461 of the Corporations Act (2001) (Cth). These included a claim that the shares of North Coast in the Busways Group be purchased by other shareholders in that group. Members of the Busways Group were engaged in the provision of bus services pursuant to contracts with Transport NSW. Some of the defendants, described by Black J as the "Active Defendants", issued subpoenas to Transport NSW seeking copies of four contracts into which it had entered, following tender, with other bus operators. The Active Defendants submitted that the four contracts sought were relevant to the determination of the market value of the shares in the Busways Group as that determination required, it was said, an assessment to be made of the profits which the Busways Group could reasonably be expected to make in the future, from routes which might become available to them. 27 Black J set the subpoenas aside for a number of reasons. First, his Honour considered that the market value of the Busways Group was to be assessed, in accordance with established principle, by reference to the amount which a willing but not anxious seller and a willing but not anxious purchaser would negotiate with one another. Such hypothetical persons would not have access to the contracts between Transport NSW and other bus operators: at [27]. Secondly, the Active Defendants had not provided a logical explanation for the selection of the particular contracts sought by the subpoenas. The Busways Group had never had a contract in respect of one of the regions to which the subpoenas related, and there was no evidence indicating why the contracts for the particular regions sought by the subpoena would cast greater light on the future market value of the Busways Group than would production of the contracts for any other region: at [29]. The apparent randomness of the selection undermined the prospect that the material sought could be "probative" of the market value of the Busways Group: at [29]. Thirdly, Black J considered that evidence of the terms of the four contracts could not provide any rational basis for prediction of the likelihood that a particular operator would gain or lose the contract in a different area: at [32]. Finally, Black J referred to the absence of evidence of the expertise of the expert retained by the Active Defendants to express opinions of the kind proposed by the Active Defendants: at [33]-[42]. 28 Plainly, the decision in North Coast turned on its own facts. It is not an authority, as the appellants seem to suggest, that subpoenas of the present kind will be set aside unless the selection of the particular recipients is justified by evidence that they constitute a proper representative sample, or that the expertise of the expert retained to evaluate the materials sought must be established, or that relevant similarities between the circumstances of the subpoena recipients and those of the parties seeking production of the material must be established. These matters may of course be relevant in the circumstances of a given case, but they are not conclusive or necessarily required to be established in each case. 29 For these reasons, we consider that the first ground of appeal fails.

[21]

Oppression 30 The documents sought by Dr Sklavos are undoubtedly of a confidential kind and it is very understandable that the appellants wish to protect that confidentiality. However, as is well established, confidentiality is not of itself a reason to set aside a subpoena: Hospitality Group Pty Ltd v Australian Rugby Union Ltd (2001) FCA 1040; (2001) 110 FCR 157 at [80]-[83]. King CJ observed in Alliance Petroleum Australia NL v The Australian Gaslight Company (1983) 34 SASR 215 at 239 that it is commonly the case that "the risk to the confidentiality of the information must be tolerated in the interests of the administration of justice". 31 In Apache Northwest Pty Ltd v Western Power Corporation (1998) 19 WAR 350 at 379-81, the Full Court of the Supreme Court of Western Australia referred to this observation of King CJ and said: The next issue is that relating to confidentiality. There is, no doubt, some need in this matter to balance competing interests. In the end, however, the public interest in the administration of justice should prevail … Her Honour, rightly in our view, found herself unable to ascribe any public interest to the confidentiality of the documents in question in the present case, however much it may be in the appellants' individual interests. She did, however, accept that, although, standing alone, confidentiality is not a ground for refusing to issue, or for setting aside, a subpoena, it is a factor which is to be taken into account, together with those tests for oppression which are determined by reference to the breadth of the subpoena, the definition of the documents involved and the type and degree of burden placed upon those to whom the subpoena is addressed. She also accepted that the relevance of the confidential documents being sought to the issues in the arbitration is a further factor. (Emphasis added) 32 The appellants did not claim that compliance with the subpoenas would be oppressive in the sense of being burdensome. Instead, they submitted that Jagot J had not engaged in the balancing exercise contemplated by the authorities, that is, balancing the interest of Dr Sklavos in having the documents produced against the invasion of their privacy and confidentiality. They contended that the sentence "[t]hat is sufficient to require production" in [8] of the reasons quoted above indicated that Jagot J had determined their applications by reference only to consideration of the relevance of the material, and without engaging in the requisite balancing exercise. The confidentiality of the documents had to be considered both when the Court considered whether the subpoena should be produced and when it considered who should be entitled to inspect the documents once produced: National Employers Mutual General Association v Waind & Hill [1978] 1 NSWLR 372 at 385. Jagot J had erred, it was submitted, by not considering the issue of confidentiality at the first of these stages. 33 In our opinion, this submission cannot be accepted. 34 Jagot J quoted the passage from Apache set out earlier in these reasons, as well as passages in R v Barton (1981) 2 NSWLR 414 at 419-20 in which Cantor J referred to balancing the competing interests of the party seeking the documents and the stranger to the proceedings from whom the documents are sought. Thus, it is evident that Jagot J directed herself to the appropriate principle. Having so directed herself, it is not readily to be supposed that her Honour did not adopt the requisite approach. 35 In our opinion, it is plain that Jagot J did consider whether the appellants' interests outweighed those of Dr Sklavos. Having found that the documents sought by Dr Sklavos had apparent relevance, Jagot J continued: [9] When I weigh up these conclusions with the facts that: - (i) if a suitable confidentiality regime is not agreed, it can and will be imposed by order of the court (a matter dealt with below in more detail), and (ii) the documents sought are limited in time and scope, it seems to me that consistent with authority the interest of Dr Sklavos in production of the documents must prevail over the competing interests of the 11 dermatologists to keep their private financial affairs free from any intrusion. (Emphasis added) 36 As can be seen, Jagot J referred expressly to the weighing up of the apparent relevance (and forensic purpose) of the documents sought with matters bearing on their confidentiality and concluded that, consistent with authority, the interest of Dr Sklavos in having the documents produced "must prevail over" the competing interest of the appellants. 37 In our opinion, the appellants' reliance on the sentence in [8] of the reasons of Jagot J, namely "[t]hat is sufficient to require production", did not pay proper regard to its context. In [8], Jagot J was addressing only the topic of apparent relevance. The impugned sentence was a shorthand way of expressing her conclusion that the documents sought by Dr Sklavos had that character. Having reached that conclusion, Jagot J turned immediately in the next paragraph of her reasons to the balancing exercise required by the authorities. In that exercise, it was appropriate for Jagot J to have regard to the prospect that a suitable regime could be put in place to limit the intrusion into the appellants' privacy. 38 Accordingly, Jagot J did not make the error imputed to her.

At a glance

Court

Decision date

Before

Source

Judgment (23 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (29)