FEDERAL COURT OF AUSTRALIA

Ceramic Fuel Cells Limited (In Liq) v McGraw-Hill Financial, Inc

[2016] FCA 401

ORDERS

Upon the undertakings given to the Court by the applicant’s solicitor and by Litigation Capital Partners LLP Pte Ltd (as annexed to these orders and marked “C”):

THE COURT ORDERS THAT:

1.    Leave be granted to the applicant pursuant to sections 23 and 33ZF of the Federal Court of Australia Act 1976 (Cth) and rule 24.01 of the Federal Court Rules 2011 (Cth) (the Rules) to cause a subpoena to be issued to the U.S. Bank National Association (US Bank), in its capacity as trustee of the Duke Funding XI, Ltd Series 2006 Class A-3E collateralised debt obligations (Duke Notes) in the form annexed to these orders and marked “A”, save that the subpoena should only include paragraph 1, not paragraph 2, in the schedule (US Bank Subpoena).

2.    Leave be granted to the applicant to serve the U.S. Bank Subpoena on the U.S. Bank in the United States of America, pursuant to rules 10.42, 10.43(3) and 10.44(2) of the Rules, by making an application pursuant to rule 10.64 of the Rules to the Registrar of this Court (in the Registrar’s capacity as a forwarding authority under the convention of 15 November 1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (the Hague Convention)) for a request for service of the U.S. Bank Subpoena in the United States of America.

3.    Subject to Order 6 below, an order pursuant to section 33X(5) of the Federal Court of Australia Act 1976 (Cth), that notice be given to Group Members of the matters referred to in the proposed notice annexed to these Orders and marked “B” (the Notice).

4.    Subject to Order 6 below, an order pursuant to section 33Y of the Federal Court of Australia Act 1976 (Cth), that the form and content of the Notice be approved.

5.    Noting the undertaking given to the Court which is annexed to these orders and marked “C”, an order pursuant to section 33Y(3) of the Federal Court of Australia Act 1976 (Cth) that the Notice be sent by the applicant’s solicitors by ordinary prepaid post and, where available, by email, to each of the persons identified as having held the Duke Notes within 7 business days after the applicant’s solicitors inspect the material produced by the U.S. Bank in answer to the U.S. Bank Subpoena.

6.    Liberty to the applicant to approach the Court for the purposes of the Court approving the:

(a)    The date by which the Notice is to be sent by the Applicant’s solicitors pursuant to order 5 above;

(b)    The date to be stipulated in Section G of the Notice for the recipients of the Notice to provide any response.

7.    The applicant is also granted leave, to the extent that leave is required, to forward the subpoena on the US Bank by way of electronic mail addressed to kenneth.sliwa@usbank.com.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

WIGNEY J:

1    Ceramic Fuel Cells Limited is the representative party in representative proceedings commenced pursuant to Pt IVA of the Federal Court of Australia Act 1976 (Cth). In 2006, Ceramic invested €2,000,000 in financial products known as mortgage-backed security collateralised debt obligations. The particular products acquired by Ceramic were issued by Duke Funding XI, Ltd and Duke Funding XI, Corp. They were described in the applicable Offering Memorandum as Class A-3E Deferrable Interest Floating Rate Notes. For the sake of brevity they will be referred to as the Duke CDOs.

2    Fortunately, for present purposes, it is unnecessary to even begin to describe exactly what the Duke CDOs were. They were financial products of extraordinary complexity and opacity. Suffice it to say that, whatever they were, the respondents, McGraw-Hill Financial, Inc and Standard & Poor’s International, LLC (who will collectively be referred to as Standard & Poor’s) assigned them an “A” credit rating. That rating suggested, amongst other things, that the capacity of the Duke CDOs to repay the principal invested at the end of their term was strong.

3    Despite their “A” credit rating, the Duke CDOs were not a good investment for Ceramic. It lost most, or all, of the funds it invested.

4    Ceramic alleges that it purchased the Duke CDOs in reliance upon Standard & Poor’s credit rating. It claims that Standard & Poor’s conduct in assigning the credit ratings to the Duke CDOs was negligent and in breach of various provisions of the Corporations Act 2001 (Cth) and the Australian Securities and Investment Commission Act 2001 (Cth). It contends that the losses it suffered as a result of its investment in the Duke CDOs were caused by Standard & Poor’s negligence and statutory contraventions. It also claims that other persons in a like position to it suffered loss and damage as a result of Standard & Poor’s conduct. It commenced the proceedings as the representative party to recover from Standard & Poor’s the losses suffered by it and those other persons.

5    The group members on whose behalf Ceramic commenced the representative proceedings are described or identified in the originating process as being persons who acquired interests in the Duke CDOs between 2006 and 2008 in reliance upon Standard & Poor’s credit rating and who suffered losses as a result. Ceramic and its lawyers do not know the identity of all of the group members. Ceramic wishes to ascertain the identity of the group members so that it can, with the Court’s leave, give them notice of and information about the representative proceedings. With that in mind, it wishes to subpoena the current trustee of the Duke CDOs to produce, amongst other things, a list of the persons or entities who acquired Duke CDOs during the relevant period.

6    The difficulty is that it appears that the current trustee has no presence in Australia. It is a company based in the United States of America called US Bank National Association. Ceramic seeks the Court’s leave to issue a subpoena to US Bank National Association. It also seeks leave to serve the subpoena in the United States.

7    Two questions are raised by Ceramic’s application for leave to issue and serve the subpoena: first, does the Court have power, in representative proceedings, to issue a subpoena to a foreign addressee and to grant leave to serve that subpoena on the foreign addressee overseas; and second, if the Court does have that power, whether it should be exercised in this case.

8    Standard & Poor’s did not oppose either the grant of leave to issue the subpoena or the grant of leave to serve the subpoena in the United States. Standard & Poor’s did, however, appear at the hearing of Ceramic’s leave application “in order to assist the Court”. It assisted the Court by advancing submissions in relation to the Court’s power to issue a subpoena to a foreign addressee and the Court’s power to grant leave to serve a subpoena outside Australia. Though Standard & Poor’s did not directly submit that the Court did not have the power to issue and serve a subpoena on a person or entity outside Australia, that was the ultimate effect of its submissions.

9    On 15 March 2016 the Court made orders, the effect of which was to grant leave to Ceramic to issue a subpoena to US Bank National Association, though not in the precise terms sought by Ceramic. Orders were also made in relation to the service of the subpoena outside Australia under Division 10.4 of the Federal Court Rules 2011 (Cth). Following are the reasons for the making of those orders.

10    At the same time, the Court also made orders pursuant to ss 33X and 33Y of the Federal Court Act that a notice, in approved terms, be sent to the group members once identified. The notice provided information to the group members concerning the representative proceedings. The orders relating to the notice were not opposed by Standard & Poor’s and were not controversial. These reasons do not address the making of those orders.

The power to issue a subpoena to a person outside Australia

11    The question whether the Court has power to grant leave to issue a subpoena to a person outside Australia is controversial and, to an extent, remains unsettled. Doubts have been expressed, both in this Court and some State Supreme Courts, about whether general rules of court that permit documents filed in or issued by a court to be served overseas extend to permit the issue and service of subpoenas addressed to persons overseas. In most cases, however, it has not been necessary to decide that question. That is because it has generally been decided that, even if the relevant rules extended that far, the court should nevertheless refuse to issue the subpoena, or grant leave to serve it overseas, in the exercise of its discretion.

12    The question of power is important in this matter. That is because, as addressed in more detail later, there are a number of significant and compelling considerations which would suggest that if the Court does have the power to do so, it should issue a subpoena to US Bank National Association and should grant leave to serve it overseas. This matter also differs, to an extent, from other cases that have considered the issue. That is because Ceramic relies primarily on s 33ZF of the Federal Court Act as the relevant source of power. Section 33ZF confers on the Court the power to make “any order the Court thinks appropriate or necessary to ensure that justice is done” in a representative proceeding commenced under Pt IVA of the Federal Court Act. The question whether that broad and general power extends to permit the Court to issue a subpoena to a foreign addressee, and to grant leave to serve the subpoena outside Australia, has not yet been determined.

Federal Court Rules – r 24.01, 24.12 and 10.44

13    The relevant rules that empower the Court to issue a subpoena are rr 24.01 and 24.12 of the Federal Court Rules. Rule 24.01(1) provides that a subpoena may only be issued with the leave of the Court. Rule 24.01(2) provides that a party may apply to the Court for leave to issue a subpoena without notice to any other party. As it happens, Ceramic gave Standard & Poor’s notice of its application for leave to issue a subpoena to US Bank National Association.

14    Rules 24.12(1) and (2) provide as follows:

(1)    The Court may, in any proceeding, by subpoena, order the addressee:

(a)    to attend to give evidence as directed by the subpoena; or

(b)    to produce the subpoena or a copy of it and any document or thing as directed by the subpoena; or

(c)    to do both of those things.

(2)    An issuing officer must not issue a subpoena:

(a)    if the Court has made an order, or there is a rule of the Court, having the effect of requiring that the proposed subpoena:

(i)    not be issued; or

(ii)    be issued only with the leave of the Court and that leave has not been given; or

(b)    requiring the production of a document or thing in the custody of the Court or another court.

15    Neither r 24.01 nor r 24.12 expressly limit the power to issue a subpoena to the case where the addressee is located in Australia. The question is whether that limitation should be read into the Federal Court Rules. Should r 24.12(1) be construed so that the word “addressee” is limited to an addressee in Australia? Should r 24.12(2) be construed so as to include an additional limitation, being that an issuing officer must not issue a subpoena if the addressee is located overseas?

16    Division 10.4 of the Federal Court Rules provides for the service of documents outside Australia pursuant to the Hague Convention (the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters done at the Hague on 15 November 1965). Rule 10.44(1) deals with the service of documents other than originating applications. It provides:

A party may apply to the Court for leave to serve a document filed in or issued by the Court, other than an originating application, on a person in a foreign country in accordance with a convention, the Hague Convention or the law of the foreign country.

17    Rule 10.44(1) does not, in terms, provide for the grant of leave, though that is implicit from the rule itself and the terms of r 10.44(3).

18    Rules 10.63 to 10.68 set out the procedure to be followed where leave has been given under, inter alia, rule 10.44(1).

19    A subpoena is, in terms, a document issued by the Court. It follows that, unless some limitation must be read into r 10.44(1), it empowers the Court to grant leave to serve a subpoena on a person in a foreign country in accordance with the Hague Convention. The question is whether any limitation or restriction is to be read into r 10.44. Should r 10.44(1) be construed so that it effectively includes the words “other than a subpoena”?

20    There are indications in previous cases dealing with different rules of court that courts should not issue subpoenas to foreign addressees, or, more commonly, should not grant leave to serve subpoenas in a foreign country. Regrettably, the reasoning in those cases has not always been clear or consistent. Most determine the issue on the basis of discretionary considerations, rather than on the basis of an absence of power. Some are unclear as to whether the refusal is because there is no power, or because of discretionary considerations.

21    The issue was relatively recently considered by two single judges of the Supreme Court of New South Wales in the context of a general rule (r 11.5 of the Uniform Civil Procedure Rules 2005) which provided that service outside Australia of a document, other than an originating process, was valid only if it was effected, relevantly, pursuant to the leave of the Supreme Court. The two judges reached different conclusions concerning the proper construction of r 11.5 insofar as it might apply to the service of a subpoena outside the jurisdiction.

22    In Caswell v Sony/ATV Music Publishing (Australia) Pty Ltd [2012] NSWSC 986 Hallen AsJ reviewed the authorities and held (at [101]) that r 11.5 empowered the Supreme Court to grant leave to serve a subpoena outside Australia. The only question was whether the court should grant leave in the exercise of its discretion. His Honour found that the court should exercise its discretion with caution where the service of the subpoena would amount to an “intrusion upon the sovereignty of the foreign state” (at [112]). His Honour declined to set aside a subpoena that had been served on a person in the United States.

23    In Gloucester (Sub-Holdings 1) Pty Ltd v Chief Commissioner of State Revenue [2013] NSWSC 1419, White J also exhaustively reviewed the authorities, including Caswell. His Honour disagreed with Hallen AsJ that the authorities established no more than that caution was required in the exercise of the discretion to give leave to serve a subpoena outside Australia. His Honour concluded that there was a “restriction” on the power in r 11.5 of the UCPR when it came to the service of a subpoena overseas. That restriction was that the Court’s power to grant leave to issue a subpoena to a person outside Australia “is to be exercised in accordance with the principle of comity that respects the sovereignty of a foreign country, unless it is shown that the foreign country does not object to the purported exercise of judicial power by this State against persons in the foreign State” (at [29]).

24    The critical consideration referred to in both Caswell and Gloucester was the “comity of nations” and the recognition that the service of a subpoena in a foreign country may amount to an invasion of the sovereignty of that country. But does that consideration mean that a general rule of court that permits service of a document overseas should be read down so as not to apply to a subpoena? Does that consideration mean that a restriction or limitation must be read into the rule so that it does not apply to subpoenas, or does it only go to the exercise of the discretion to grant leave? If it goes to power, does it provide an absolute restriction, or can a subpoena be issued and served on a person overseas in certain circumstances? If not an absolute restriction, in what circumstances can a subpoena be issued and served on a foreign entity?

25    With respect to both White J and Hallen AsJ, the authorities are difficult to reconcile and do not provide a definitive or consistent answer to those questions. They certainly do not provide a clear answer to whether rr 24.01, 24.12 and 10.44 should be construed so as not to apply to a subpoena to a foreign addressee.

26    In Ward v Interag Pty Ltd [1985] 2 Qd R 552, a rule which permitted a “summons, notice or order” to be served overseas with the leave of the Supreme Court of Queensland was found not to apply to a subpoena. That finding appears to have been based on a narrow view of the words “summons, notice or order”. The Master held that a subpoena did not fall within the expression “summons, notice or order”. That conclusion must be doubted in light of later authorities that hold that a subpoena is an order for the purposes of similar rules.

27    In Re Deposit and Investment Co Ltd (1991) 30 FCR 463, Lockhart J considered whether the Court had the power to make an order pursuant to s 597(3) of the Corporations Act requiring that a person resident abroad attend before the Court to be examined on oath in relation to matters relating to a corporation. His Honour found that a court’s jurisdiction in actions in personam depends at common law on the defendant’s presence in the geographical jurisdiction of the court. There were statutory extensions to this jurisdiction. The question was whether a rule (Order 8, r 3 of the Federal Court Rules 1979) which provided, in effect, that the Court could grant leave to serve a document other than an originating process overseas, operated to extend the Court’s jurisdiction. His Honour found that it did not. That was because the rule “must be read as a procedural provision and not as an extension of the Court’s jurisdiction” to persons residing overseas. Lockhart J considered that “[t]o invade the sovereignty of another country’s jurisdiction and interfere with its sole power over persons present within it, stronger and clearer language is needed” (at 466).

28    An examination order could be seen, at least in some respects, to be analogous to a subpoena. Lockhart J did not, however, consider any authorities that dealt with the service of subpoenas on persons overseas. His Honour’s reasoning turned mainly on a construction of rr 1, 2 and 3 of Order 8. In his Honour’s opinion rr 1 and 2, which dealt with service of an originating process outside Australia, operated to extend jurisdiction because they contained sufficient “connecting factors” to respect the sovereignty of foreign jurisdictions. In contrast, r 3 was expressed in wide terms and did not contain any connecting factors. Lockhart J reasoned that it was therefore only a procedural provision and did not extend the Court’s jurisdiction.

29    With the greatest respect to his Honour, that reasoning is somewhat questionable. Each of rr 1, 2 and 3 dealt with service overseas. It is difficult to see why rr 1 and 2 went to jurisdiction, whereas r 3 went only to procedure, simply because rr 1 and 2 required some connecting factors, whereas r 3 did not. What his Honour seemed to be saying was that the power to make an examination order under s 597 did not extend to a foreign resident unless there was a “connecting factor” similar to one of the connecting factors necessary for the service of an originating process. In that respect, his Honour appeared to equate an examination order with an originating process, despite having found that an examination order was “an order other than an originating process” for the purposes of the rules.

30    One can readily understand why Lockhart J was concerned about whether the power to make an examination order, which his Honour accepted (at 465) was an “extraordinary power”, could extend to the making of an order compelling a person who resided outside the jurisdiction to appear before a court in Australia. That question, however, turned on the proper construction of s 597, rather than on rules concerning service. No doubt as a result of the way the matter was argued before him, his Honour appeared to confuse the question whether the Court had power to make an examination order in respect of a person who is outside the jurisdiction, with the question whether the order, if made, could be served overseas.

31    Some doubt must also be cast on the applicability of Lockhart J’s reasoning to the rules in question in this matter by the recent decision of White J in Clifton (Liquidator), in the matter of Solar Shop Australia Pty Ltd (In Liquidation) [2014] FCA 891. In that case, White J made orders pursuant to r 10.44 permitting examination summonses under s 596B of the Corporations Act to be served in Germany and China in accordance with the Hague Convention. White J referred to previous decisions in which the Court had refused to issue or serve a subpoena in another country on the basis that it would amount to an infringement of the sovereignty of the other country. It is not clear whether his Honour was taken to Re Deposit and Investment. The matter was dealt with ex parte. In any event, White J said, of the concerns about sovereignty (at [12]):

The present application is for leave to serve the orders of this Court in accordance with the Hague Convention to which Australia subscribed with effect from 1 November 2010. Both Germany and China have also acceded to the Hague Convention. They can, therefore, be taken to have accepted the course of action contemplated by the present application, namely, the issue of a letter of request by the Registrar of this Court under r 10.64 to the Central Authority in their countries. Their sovereignty will not be infringed by the forwarding of the request to the Central Authority and, if that Central Authority considers that some infringement of their country’s sovereignty is involved, it may refuse to effect that service.

32    It is unnecessary to consider whether Re Deposit and Investment was correctly decided. Lockhart J did not directly deal with the question whether the court had power to issue and serve a subpoena on a foreign addressee. It may be accepted, however, that to the extent that an examination summons may in some ways be analogous to a subpoena, Lockhart J’s observations concerning the need for clear words in the rules if they are to justify the invasion of the sovereignty of another country provide some support for the view that general rules concerning the service of orders made by the court do not empower the court to issue and grant leave to serve a subpoena overseas.

33    In Aetna Pacific Securities Ltd v Hong Kong Bank of Australia Limited (unreported, Supreme Court of New South Wales, Giles J, 29 April 1993) Giles J considered whether a rule which permitted documents to be served overseas with leave authorised the grant of leave to serve a subpoena overseas. His Honour refused leave on discretionary grounds without deciding the question of power.

34    In Arhill Pty Ltd v General Terminal Company Pty Ltd (1990) 23 NSWLR 545, one of the most frequently cited cases on this topic, Rogers CJ Comm D considered whether a rule which allowed for service outside the State of a document other than an originating process with the leave of the court permitted the court to give leave to serve a subpoena outside Australia. His Honour gave detailed consideration to the principle of comity and concluded (at 553F):

Part 10, r 3 is in terms clear authority for the Court to give leave to serve a subpoena outside Australia. The fact that an order made pursuant to it could, in some instances, involve an infringement of the sovereignty of another country does not mean that it is a reason for holding the rule to be invalid. Nonetheless, the rule should be construed consistently with “the established criteria of international law with regard to comity”: cf Re Tucker (at 758; 611). Whichever way the rule is read down it will not authorise giving leave to serve a Japanese company in Japan.

35    It is, however, not clear whether this conclusion involved construction of the rule to exclude service of a subpoena overseas (no power) or refusal of leave to serve the subpoena (power but adverse exercise of discretion). The better view would appear to be that the decision was based on an adverse exercise of discretion. That was certainly the view of Giles CJ Comm D in News Corporation Ltd v Lenfest Communications Inc (1996) 40 NSWLR 250 at 259G. It is at best unclear.

36    In Gao v Zhu [2002] VSC 64, Habersberger J set aside a subpoena that was served on a branch of the Bank of China located in Victoria. It was therefore not a case concerned with the power to issue and serve a subpoena on a person overseas. Rather, it concerned the situation where a non-party bank is required by subpoena served on a local branch to produce documents located outside the jurisdiction concerning business transacted outside the jurisdiction. Habersberger J referred to and appeared to follow Mackinnon v Donaldson, Lufkin and Jenrette Securities Corporation [1986] Ch 482, where Hoffman J found that the Court should not impose such a requirement other than in “exceptional circumstances”. Habersberger J found that there were no exceptional circumstances.

37    In Stemcor (A/sia) Pty Ltd v Oceanwave Line SA [2004] FCA 391, Allsop J dealt with the question whether leave should be granted to issue a subpoena to a company located in Germany. His Honour refused leave on discretionary grounds, holding that the subpoena would amount to “such an invasion of German sovereignty as not to be contemplated except in the most exceptional circumstances”. Allsop J also noted that such a subpoena was not capable of enforcement. His Honour observed that those two matters may be seen to go to power as well as discretion, but expressly did not deal with the question of power.

38    In Sweeney v Howard [2007] NSWSC 262, Windeyer J dealt with an application to set aside an order for substituted service of a subpoena on a person who resided overseas by delivery of the subpoena to a firm of solicitors. The difficulty was that leave to serve the subpoena overseas was not applied for at the time the order for substituted service was made. His Honour proceeded on the basis that r 11.5 of the UCPR, which as indicated earlier permitted a document to be served outside Australia with leave, gave authority for a subpoena to be served outside Australia. His Honour also found, on the particular facts of that case, that there was “nothing in the comity of nations which would require the court to resist this”. Whilst this would tend to suggest that Windeyer J considered that the question of comity went to discretion rather than power, his Honour also noted that “the position has ordinarily been accepted that there is no jurisdiction to serve this type of process overseas”. His Honour set aside the order for substituted service in the exercise of his discretion.

39    In Ives v Lim [2010] WASCA 136, the Court of Appeal of the Supreme Court of Western Australia dealt with an appeal against a refusal of leave to serve a subpoena overseas. The court raised the question whether a rule which permitted documents, including an “order”, to be served overseas with leave gave the court jurisdiction to give leave to serve a subpoena outside Australia. The court did not decide that issue and proceeded on the basis that there was jurisdiction to grant leave to serve a subpoena on a person overseas. The appeal was dismissed for reasons that had nothing to do with the fact that the subpoena was served overseas.

40    In Levy Schneider v Caesarstone Australia Pty Ltd [2012] VSC 126, Davies J in the Supreme Court of Victoria held that a rule which provided that the court could allow service outside of Australia of “any summons, order or notice” gave the court power to give leave to a person to serve a subpoena outside Australia. After referring to Arhill and Stemcor, however, her Honour held that the court should be “reluctant” to give leave to serve a subpoena in circumstances where the court was unable to enforce compliance. Leave was refused.

41    In Australian Securities and Investments Commission v Geary and Flugge [2015] VSC 665 the Supreme Court of Victoria dealt with an application by ASIC for leave to serve a subpoena to give evidence on an Australian citizen who resided in Singapore pursuant to a rule that provided that the court may allow service of an order outside Australia. Importantly, ASIC conceded that the subpoena “would likely encroach” the sovereignty of Singapore. Robson J held that it would not be “appropriate” to grant leave because it would be against the comity of nations. His Honour reasoned (at [16]) that the rule in question was “enabling only” and did not extend the jurisdiction of the court. The power to allow service of a subpoena outside Australia was therefore only enlivened when the court “may otherwise issue a subpoena directed to a resident of another sovereign country”. His Honour concluded that the court should not exercise the power “if it would be contrary to the principles of comity of nations unless exceptional circumstances exist”. It would appear from this reasoning that his Honour accepted that there was power to issue a subpoena to a foreign addressee, but that the power would only be exercised in exceptional circumstances.

42    Finally, the question whether other rules of court that do not involve the issue or service of subpoenas should be read down on the basis of international comity has been considered in a number of cases. In News Corporation Ltd v Lenfest, Giles CJ Comm D declined to read down a rule that empowered service of a notice to produce on a foreign party. His Honour held that the argument for reading the rule down on “comity grounds” was not compelling and that there was appropriate control over the exercise of the power through the need for prior leave.

43    In Suzlon v Bangad (No 2) (2011) 198 FCR 1, Rares J ordered that three Swiss banks, which were parties to the proceedings, were not required to produce documents in answer to notices to produce that had been served on them. The main basis for his Honour’s finding was that there was a risk that production would result in the banks contravening Swiss secrecy laws. His Honour also made it clear that the issue could be revisited later in the proceedings.

44    In Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International NV (2007) 157 FCR 558, the Full Court found that the primary judge had erred in staying proceedings until the Russian Federation provided discovery. The primary judge found that the Russian Federation was the “real” applicant. The Full Court held (at [14]) that the primary judge did not “act with the caution that the principled exercise of the discretion requires where there is an intrusion upon the sovereignty of a foreign state”.

45    Finally in Hua Wang Bank Berhad v Commissioner of Taxation (2013) 296 ALR 479, the Full Court considered whether a first instance judge had erred in refusing to set aside a notice to produce served on the applicant, a bank based in the Independent State of Samoa. The bank contended that the primary judge had failed to articulate and apply the “exceptional circumstances” test, derived from the judgment of Hoffman J in Mackinnon. The particular circumstance relied on by the bank in support of its application to set aside the notice was that production would result in it breaching Samoan law. The Full Court held that the invocation of “exceptional circumstances” was neither necessary nor appropriate in the circumstances. The principle that was engaged was “[t]he need for caution where there is an intrusion upon the sovereignty of a foreign state, it being no light matter to enforce Australian laws in circumstances which infringe the legislative policies of other countries”: see also Australian Securities Commission v Bank Leumi Le-Israel (Switzerland) (1996) 69 FCR 531 at 552.

46    What, then, can be gleaned from these authorities concerning the issue and service of a subpoena on a person overseas? The one common point that emerges from all the cases is that questions of international law and international comity are important, if not critical, in determining whether a subpoena can or should be issued to a foreign addressee and served overseas. International law, in that context, may be taken to mean binding rules of international law that may give rise to a claim by one state against another. Comity, on the other hand, is a slightly more nebulous concept. It may be taken to mean the rules of goodwill and civility between nations, founded on the moral right of a state to receive courtesy from other states. In CSR Limited v Cigna Insurance Australia Ltd (1997) 189 CLR 345 at 396, the following explanation of “comity” given by the Supreme Court of the United States in Hilton v Guyot 159 US 113 (1895) at 163-164 was adopted by the majority of the High Court:

“Comity”, in the legal sense, is neither a matter of absolute obligation, on the one hand, nor of mere courtesy and good will, upon the other. But it is the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws.

47    What remains somewhat unclear from the authorities is whether considerations of international law and international comity give rise to a restraint or limitation on general powers in rules of court that would otherwise extend to the issue to serve a subpoena on a foreign addressee, or are merely matters that should be taken into account in the exercise of the discretion to exercise the power. To the extent that the authorities address this issue, they are difficult to reconcile.

48    There is no doubt that general rules of court that, read literally, would appear to empower the court to issue and serve a subpoena on a foreign addressee are required to be “interpreted and applied, as far as [their] language admits, as not to be inconsistent with the comity of nations or with established rules of international law”: Polites v The Commonwealth (1945) 70 CLR 60 at 68 (Latham CJ, quoting Maxwell on Interpretation of Statutes, 8th ed. (1937) at 130); cf. Gloucester at [20]. By the same token, a provision conferring a broad power on a court should not generally be read down by making implications or imposing limitations which are not found in the express words: The Owners of the Ship “Shin Kobe Maru” v Empire Shipping Company Inc (1994) 181 CLR 404 at 421; Wong v Silkfield Pty Limited (1999) 199 CLR 255 at [11]. In light of these general rules of construction, should the rules be construed as providing no power to issue or serve a subpoena on a foreign addressee in any circumstances? Or is the proper construction that there is power, but international law and comity are matters that go only to the court’s discretion?

49    The better view is that, when a court is asked, pursuant to general rules of court, to grant leave to issue a subpoena to an addressee located overseas, or to grant leave to serve a subpoena on a person overseas, considerations of international law and international comity are not merely matters that the court may have regard to in the exercise of its discretion. Rather, they are mandatory considerations that condition the exercise of the court’s powers. They condition the court’s powers because the court is required to exercise caution and restraint in circumstances where the issue or service of the subpoena might infringe international law or give rise to issues of international comity. It is no light matter to exercise a power that might involve the infringement of the sovereignty of another State.

50    There is, however, no absolute limitation or restraint on the court’s power to issue or grant leave to serve a subpoena in such circumstances. There is no warrant for reading such an absolute limitation or restriction into general rules that allow for the issue of subpoenas and leave to serve orders overseas where it is not found in the express words of the rules. The requirement to construe general rules in a way which is consistent with international law and the comity of nations is best accommodated by requiring the court to have regard to those matters, and to exercise care and restraint, when being asked to issue and grant leave to serve a subpoena overseas. Whilst the court is bound to have regard to international law and comity and exercise care and restraint, it nonetheless retains the power to issue and grant leave to serve a subpoena overseas in an appropriate case.

51    The requirement to have regard to international law and comity, and the resulting need for care and restraint may mean that, as a practical matter, a court would in most cases be unlikely to issue and grant leave to serve a subpoena on a person overseas where it is clear that international law or international comity will or may be infringed. Indeed, the authorities suggest that the court would only do so in exceptional circumstances. That does not mean, however, that the court can never issue or grant leave to serve such a subpoena, or that the court lacks the power to do so.

52    The exceptional circumstances test appears to have been picked up from the judgment of Hoffman J in Mackinnon, where his Honour said (at 493G-H):

In principle and on authority it seems to me that the court should not, save in exceptional circumstances, impose such a requirement upon a foreigner, and, in particular, upon a foreign bank. The principle is that a state should refrain from demanding obedience to its sovereign authority by foreigners in respect of their conduct outside the jurisdiction.

53    Mackinnon involved the service of a subpoena on a local branch of a bank which required production of documents held overseas in respect of the bank’s business conducted overseas. Importantly, Hoffman J did not suggest that the court lacked the power or jurisdiction to issue or enforce such a subpoena, only that it should not do so in the exercise of its discretion. Much of Hoffman J’s reasoning also involved the special position of banks, arising from the fact that their documents were concerned not only with their own business, but also with the business of their customers. Emphasis was also placed on the particular circumstance present in Mackinnon that the documents sought by the subpoena concerned business conducted outside the jurisdiction. The reasoning of Hoffman J in Mackinnon was approved in Société Eram Shipping Company Ltd v Cie Internationale de Navigation [2004] 1 AC 260: see Suzlon at [43]-[44].

54    Given that the principle referred to by Hoffman J in Mackinnon specifically involved international banks being required to produce documents relating to their business outside the jurisdiction, it is at least questionable that an exceptional circumstances test applies in all cases involving the issue and service of a subpoena on a foreign addressee. What if, for example, the subpoena to the foreign addressee compelled the production of documents concerned with events or conduct that occurred in, or were in some way connected to, the jurisdiction? The better view is that an exceptional circumstances test does not apply to all cases in which it is proposed that a subpoena be issued to and served on a foreign addressee. Whilst the need for caution and restraint may, in practical terms, mean that exceptional circumstances may need to be shown in many cases before the grant of leave to issue and serve a subpoena on a foreign addressee, no such immutable requirement should be imposed in all cases.

55    In relation to the specific rules under consideration in this matter, the questions posed earlier in relation to the proper construction of rr 24.01, 24.12 and 10.44 of the Federal Court Rules are to be answered in the negative. Those rules should not to be read down so as to exclude entirely the power to grant leave to issue and serve a subpoena on a foreign addressee. Specifically, r 24.12(2) should not be construed so as not to extend to the grant of leave to issue a subpoena to an addressee who is located overseas. No such limitation or restriction should be read into the section. Likewise, r 10.44(1) should not be read down so that it does not permit the grant of leave to serve a subpoena overseas. Rather, in exercising those powers in relation to a subpoena to a foreign addressee, the Court is required to have regard to whether the issue and service of the subpoena in the circumstances would contravene international law or international comity. It must also exercise caution and restraint. Exceptional circumstances are not always required, however the need for caution and restraint may mean that the Court would not ordinarily issue and grant leave to serve a subpoena that would involve a clear breach of international comity or international law, at least unless the circumstances of the case made it otherwise appropriate or necessary.

56    It should also not simply be assumed that any subpoena issued to and served on a person in a foreign country will necessarily result in a breach of international law. There would appear to be no such universal rule. Nor should it be assumed that such a subpoena would necessarily raise issues of comity sufficient to prevent the issue or service of the subpoena. International comity is not a matter of absolute obligation and does not create an absolute bar to the issue and service of a subpoena in a foreign country. It cannot, for example, be assumed that every country will consider a subpoena served on one of its citizens or residents within its jurisdiction to be an invasion or affront to its sovereignty, whatever the circumstances of the subpoena may be. In Sweeney v Howard, for example, Windeyer J noted (at [11]) that information made available by the Attorney-General indicated that the government of the United Kingdom would not consider service in the United Kingdom of a subpoena issued out of a foreign court to be an interference with the governance of the United Kingdom or an interference in its sovereign affairs. And in Gloucester, White J noted (at [37], referring to Blackmer v United States 284 US 421 (1932)), that in some situations in some jurisdictions a subpoena may not be regarded as coercive, but rather as having the effect of a notice.

57    Nor should it be accepted that the fact the issue and service of a subpoena issued by an Australian court to a foreign addressee might offend international comity will necessarily mean that leave to issue and serve the subpoena cannot be granted. As Giles CJ Comm D said in News Corporation Ltd v Lenfest (at 259D), resistance to the exercise of powers that might impinge on foreign sovereignty has not been universal. His Honour also suggested that the general principle referred to by Hoffman J in Mackinnon had not only been undermined by “the realities of modern trade and communications and the prevalence of the multinational conglomerate”; substantial inroads had also been made upon that principle by certain rules of court. In his Honour’s view, resort to those rules, or processes ancillary to them, should not always “be excluded by respect for the sovereignty of foreign States” (at 259F). That is not to say that the principle of comity should be given less weight, or that countries are more relaxed about comity, in cases involving international commerce: cf. Caswell at [117]; Gloucester at [31] – [39]. It may mean, however, that general concerns about comity will not always lead to the refusal of leave to issue or serve a subpoena on a foreign addressee.

58    While it may be correct, as White J pointed out in Gloucester (at [30]), that in all previous cases other than Sweeney v Howard (and, it might be added, Caswell) leave to serve a subpoena on a foreign addressee had been refused where it was considered that service would infringe the sovereignty of the foreign State, it does not follow that the court can or should never exercise its discretion in favour of issuing or serving a subpoena in such circumstances. Circumstances may arise where leave to issue and serve such a subpoena may be appropriate despite the existence of general concerns about international comity. As will be seen, this is such a case.

59    The requirement of caution and restraint in cases involving the issue and service of a subpoena on a foreign addressee will, however, mean that the facts and circumstances of each case will need to be closely considered. Those facts and circumstances will most likely include: the nature of the subpoena; the nature of the particular proceedings and (in the case of a subpoena to produce documents) the importance of the documents to the issues in those proceedings; the attitude of the subpoenaed party (if known or ascertainable); the foreign country involved; and the law in, and attitude of, the foreign country regarding foreign subpoenas and whether they impinge upon the country’s sovereignty. In some cases at least, an applicant for leave to issue and serve a subpoena on a person located overseas may need to lead evidence about some or all of those matters. With respect to White J, however, it may not be necessary to go so far as to show that that the foreign country does not object to the specific subpoena in question: cf. Gloucester at [29].

60    The authorities also indicate that another potential problem with the issue and service of a subpoena on a foreign addressee is the effective inability of the court to enforce the subpoena. In Stemcor, Allsop J said that, in issuing the subpoena in those circumstances, the Court was making “a mere request couched in imperative terms” and the Court should not be seen to “engage in such conduct”.

61    The absence of the means to enforce a subpoena served on a foreign addressee is better viewed as a discretionary reason why a subpoena should not be issued or served on a foreign addressee, rather than a reason why it should be found that the court does not have the power to issue or grant leave to serve such a subpoena. There may be cases where the fact that there is no means to enforce the subpoena is not a determinative consideration, such as where the addressee indicates a willingness to comply with the subpoena if issued and served. Any concerns arising from the inability of the court to enforce the subpoena in such a case would be more theoretical than real. It can be accepted, however, that the willingness of the addressee to comply with the subpoena may not fully address issues of comity that may otherwise arise: cf. Levy Schneider at [9].

Section 33ZF of the Federal Court Act

62    Ceramic also relied on s 33ZF of the Federal Court Act as a source of power to grant leave to issue and serve the subpoena on US Bank National Association in the United States. Subsection 33ZF(1) provides as follows:

In any proceeding (including an appeal) conducted under this Part, the Court may, of its own motion or on application by a party or a group member, make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding.

63    Section 33ZF has been described as a broad plenary power: Muswellbrook Shire Council v Royal Bank of Scotland NV [2013] FCA 616 at [22]. Contextual considerations suggest that s 33ZF was intended to give the Court a wide and general power to make orders to resolve any issues or difficulties that might arise in representative proceedings that are not otherwise covered by specific provisions in Pt IVA of the Federal Court Act: Blairgowrie Trading Ltd v Allco Finance Group Ltd (Receivers & Managers Appointed) (In Liq) [2015] FCA 811 at [97]. It should not be given a narrow construction, but should be construed as liberally as its terms and context permit: McMullin v ICI Australia Operations Pty Ltd (1998) 84 FCR 1 at 4C-4E; Courtney v Medtel Pty Ltd (2002) 122 FCR 168 at [48] – [49]. Nevertheless, the power in s 33ZF, whilst broad, is not unbounded.

64    The main issue that Ceramic wishes to resolve by issuing the subpoena to US Bank National Association involves identifying the names of group members. In Muswellbrook, Bennett J held that s 33ZF gave the Court power to issue a subpoena in similar circumstances. The respondents in that case had opposed the issue of the subpoena under r 24.12 on the basis that it had no legitimate forensic purpose relating to the evidence to be led at trial. The subpoena in Muswellbrook, was not, however, to be issued and served on an addressee overseas.

65    The question is whether s 33ZF empowers the Court to issue and give leave to serve a subpoena on a foreign addressee. Do the principles of comity and international law referred to earlier limit or constrain the otherwise broad plenary power in s 33ZF?

66    For the reasons given earlier in the context of rr 24.12 and 10.44 of the Federal Court Rules, s 33ZF of the Federal Court Act must be construed in such a way as to avoid, if possible, any breach of international law and international comity. That rule of construction can be accommodated by construing s 33ZF in such a way that, in considering whether an order is “appropriate or necessary to ensure that justice is done in the proceeding”, the Court must have regard to international law and international comity. That will require the Court, at the very least, to exercise caution and restraint in circumstances where the order may infringe or offend the sovereignty of a foreign State.

67    An order that would result in a clear breach of international law or international comity also may not, having regard to that circumstance, satisfy the condition of the exercise of power in s 33ZF that the order be appropriate or necessary to ensure that justice is done in the proceedings. If the order is not appropriate or necessary, it is beyond power and cannot be made: Blairgowrie at [101].

68    For the reasons given earlier, however, not every subpoena to be issued and served on a foreign addressee will necessarily involve a breach of international law or international comity. Nor will general concerns about comity necessarily mean that the Court will not exercise the power in s 33ZF to issue and grant leave to serve a subpoena on a foreign addressee. It is necessary to have regard to the particular circumstances of the case and the subpoena in question.

should the court issue and grant leave to serve a subpoena on US Bank national Association?

69    For the reasons already given, the question whether the Court can or should grant leave to issue a subpoena to US Bank National Association, and can or should grant leave to serve that subpoena in the United States, largely hinges on whether that would or might result in a breach of international law or international comity. Restraint and caution must be exercised in the circumstances. The Court would be unlikely to issue the subpoena if it would result in a clear breach of international law or international comity. That said, the fact that the addressee is located in the United States does not alone establish that the subpoena would breach international law or comity.

70    Can it be concluded, in all the circumstances, that the subpoena to US Bank National Association, if served in the United States, would breach international law or international comity?

71    The difficulty is that, beyond the mere fact that the subpoena is to be served on a foreign entity on a foreign jurisdiction, there is no direct evidence, one way or the other, that the subpoena would breach international law, or would be considered by the United States to impinge on or invade the sovereignty of the United States. Can or should such a breach or invasion be inferred from all the circumstances?

72    The particular subpoena Ceramic applies for leave to issue calls for the production of two categories of documents. Those two categories are different in an important respect.

73    The first category of documents required to be produced pursuant to the subpoena (paragraph 1 in the schedule to the subpoena) consists of the list of noteholders or beneficiaries who acquired the Duke CDOs. As adverted to earlier, Ceramic, as representative party, seeks a copy of this list to assist it in ascertaining the identity of the group members. It does not seek the list for use as evidence in the substantive proceedings.

74    The second category of documents required to be produced is described in paragraph 2 of the schedule to the subpoena as consisting of “[a]ny underlying transaction documents relating to the Duke CDOs which are likely to include, but are not limited to, the following documents…”. There then follows a long list of documents, described in specific terms, including, for example, “the Issue Charter”, “the Indenture” and “the Note Purchase Agreement”.

75    There are difficulties with the description of the documents covered by the second category of documents in the subpoena. The second category is drafted in extremely broad and uncertain terms. The expression “underlying transaction documents” is so broad and uncertain as to be almost meaningless. The inclusion of a list of particular documents does not assist. That is because the requirement to produce “underlying transaction documents” is expressly not limited to the specific documents so described. Ceramic submitted, in effect, that US Bank National Association would know what the “underlying transaction documents” and the specific documents in the list were. It would therefore know what needed to be produced. There was, however, no evidence to that effect. Even if there was, that would not necessarily be an answer to the objectionable description of the documents. It would, in the circumstances, be oppressive to issue a subpoena requiring production of documents from a non-party expressed in such broad and uncertain terms.

76    Putting that difficulty to one side for the moment, the second category of documents differs from the first category in an important way. Unlike the first category, the second category of documents is clearly sought for the purpose of potential use as evidence in the substantive proceedings. This difference is important because different considerations may apply in determining whether it is appropriate or necessary to grant leave to issue and serve a subpoena on a foreign person where the documents are for use in evidence.

77    For the reasons given later, it would not be appropriate to grant leave to issue and serve a subpoena on US Bank National Association which includes the second category of documents. The more difficult question is whether the Court should issue and grant leave to serve a subpoena requiring US Bank National Association to produce the first category of documents.

78    If the subpoena in question is limited to seeking production of the first category of documents, there are a number of unique and somewhat exceptional circumstances and features of the subpoena. Those circumstances or features would tend to suggest that it cannot, or at least should not, be readily inferred that the subpoena could be regarded as necessarily being in breach of international law or international comity, or as invading the sovereignty of the United States.

79    First, as already indicated, if the subpoena is limited to the first category of documents, it is not directed at obtaining evidence for use in the litigation. Rather, it is directed at ascertaining the identity of potential group members so they can be advised of their rights.

80    Section 33X of the Federal Court Act provides that notice of a number of matters must be given to group members, including the commencement of the proceeding and the right of group members to opt-out of the proceeding before a specified date. In the circumstances of this case, compliance with s 33X would be difficult if the subpoena is not issued and permitted to be served. Ceramic’s solicitors have effectively exhausted all other avenues available to them to identify the persons who acquired the Duke CDOs during the relevant period. For reasons expanded on later, it is at least doubtful that Ceramic could obtain this information by way of a letter of request. The US Bank National Association has indicated that it is the current trustee of the Duke CDOs, but that it will not consider providing information about the acquirers or current holders of the Duke CDOs unless it receives a subpoena. That is apparently “company policy”.

81    The fact that the subpoena is not directed at obtaining evidence for use in the proceedings, but rather is necessary to enable Ceramic, in its capacity as representative party, to satisfactorily comply with its statutory notice obligations, is important. So too is the fact that the notice to be sent to group members contains important information and advice concerning the nature of the representative proceeding and the rights of group members. Those considerations make the subpoena somewhat exceptional. It is highly unlikely that the United States would regard the issue by the Court and the service in the United States of such a subpoena as an invasion of its sovereignty or a breach international law or comity.

82    Second, there is at least a possibility that United States citizens or entities acquired Duke CDOs during the relevant period. The Duke CDOs were offered all around the world. The question whether Standard & Poor’s could be held liable, in representative proceedings in Australia concerning a breach of Australian law (including, for example s 1041E of the Corporations Act), to pay damages to a person who acquired financial products in the United States has not been fully explored. Nevertheless, it is at least conceivable that citizens or entities in the United States could be group members. Given that the main purpose of the subpoena is, ultimately, to enable Ceramic, through its solicitors, to advise group members of their rights, the issue and service of the subpoena may ultimately be for the benefit of some United States citizens or entities. This again suggests that the issue and service of the subpoena in question would be unlikely to be considered by the United States to be an invasion of its sovereignty or as offending comity.

83    Third, the Court has made directions so as to facilitate the mediation and early resolution of these proceedings. The parties have indicated their willingness and desire to engage in mediation. A meaningful mediation cannot realistically occur if Ceramic is unable to identify all group members. Amongst other things, if Ceramic cannot identify all group members, it is highly unlikely that it will be able to accurately calculate the potential total claim against Standard & Poor’s. That would make an early settlement difficult. The early resolution of these proceedings, by mediation or otherwise, is not only in the public interest, but also in the best interests of the parties, including Standard & Poor’s. The business of Standard & Poor’s is owned or operated by companies incorporated in the United States. It follows that the subpoena is to the potential benefit of United States companies. Again, it is difficult to see why the United States would be offended, in terms of international comity, by the service of the subpoena in those circumstances.

84    Fourth, and related to the preceding points, these proceedings have an international element. The Duke CDOs were offered to, and presumably acquired by, investors throughout the world. The companies responsible for creating, structuring, facilitating, offering and issuing these financial products were, or were associated with, United States companies. The trustee was, and currently is, a company in the United States. The Duke CDOs were rated by a company in the United States, though the ratings were communicated throughout the world.

85    In those circumstances, it is difficult to see why the Court, or for that matter, the United States, should be overly precious about possible issues of international comity arising from the fact that a subpoena issued by an Australian court requires a United States based trustee to produce records relating to the acquirers of the particular financial products. Unlike the circumstances considered in Mackinnon, the documents required to be produced by the subpoena do not relate to the business of US Bank National Association conducted entirely outside Australia. Rather, the documents ultimately concern the rights and interests of persons throughout the world, including in Australia, arising from events and conduct that also occurred throughout the world, including in Australia.

86    Fifth, communications between Ceramic’s solicitors and US Bank National Association suggest that US Bank National Association has no particular concern about being subpoenaed to produce documents by order of an Australian court. The bank appears to be willing to produce the documents if it receives a subpoena. The correspondence suggests that the request or requirement for a subpoena before the documents could be produced was largely considered to be a formality or a matter of “company policy”. There is no suggestion that production of the documents will infringe any law in the United States: cf. Suzlon; Hua Wang Bank. No issue concerning customer privacy or secrecy has been raised by US Bank National Association. There is no suggestion that US Bank National Association will resist production or fail to comply with the subpoena. The fact that there is no effective way to enforce the subpoena (cf. Stemcor at [12]) is more a theoretical than a practical consideration or concern in the circumstances of this case. The fact that the foreign addressee may be willing to comply with the subpoena may not be determinative: cf. Levy Schneider at [9]. It is, however, at the very least, a relevant consideration.

87    Sixth, if, contrary to the indications just referred to, the United States or US Bank National Association take exception to the subpoena on grounds of international law, or comity, they can always move to have the subpoena, or its service, set aside by application to the Court. If they do, evidence can then be led about the particular rules of international law or comity said to have been breached. The issues of international law or comity can then be decided on the basis of evidence, as opposed to mere generalisations or assumptions.

88    In all the circumstances, the evidence in relation to the subpoena in question, such as it is, does not indicate that the subpoena, if limited to the production of records identifying the acquirers or current holders of Duke CDOs, would be considered by the United States to invade its sovereignty or otherwise breach international comity or international law. To the extent that issues of international law or comity arise from the fact that the subpoena requires an entity in the United States to produce documents to an Australian court, those issues are not particularly compelling. In the circumstances of this case, they are outweighed by the importance of the documents to the progress of the representative proceedings. In particular, they are outweighed by the need to ensure that group members, or potential group members, are appropriately notified of their rights as required by s 33X of the Federal Court Act.

89    Leave to issue and serve the subpoena (limited to the first category of documents) is in all the circumstances both appropriate and necessary to ensure that justice is done in the proceeding for the purposes of s 33ZF of the Federal Court Act. It is necessary for Ceramic, as representative party, to ascertain the identity of group members. Amongst other things, that is necessary to enable the notice requirement in s 33X of the Federal Court Act to be satisfactorily complied with. It is also appropriate and necessary in circumstances where that information is important for the conduct of meaningful early mediation to take place. Ceramic has effectively exhausted all other avenues available to it for acquiring information in relation to the identity of group members.

90    To the extent that it may be necessary to demonstrate exceptional circumstances for the subpoena to be issued and served, exceptional circumstances have been demonstrated in this case for all the reasons just referred to.

discretionary considerations

91    Each of the factors or considerations referred to in the preceding discussion provide compelling reasons for the exercise of the discretion in favour of granting leave to issue and serve a subpoena on US Bank National Association in the United States which compels it to produce documents containing a list of noteholders or beneficiaries who acquired the Duke CDOs. There are no particularly compelling reasons why leave should not be granted. It is accepted that caution and restraint should be displayed given the potential issues of international comity involved in issuing and serving a subpoena on a person in another country. For the reasons already given, however, the possible issues of comity that do arise in the circumstances of this case do not outweigh the considerations that militate in favour of granting leave. There are exceptional circumstances.

92    It remains to briefly address whether, in all the circumstances, it would be appropriate to grant leave to issue and serve a subpoena containing the second category of documents, the “underlying transaction documents”. Most of the considerations that weigh in favour of issuing and serving the subpoena to produce the first category of documents (the list of noteholders or beneficiaries) relate to the fact that those documents are not sought for the purposes of use in evidence in the main proceedings. Rather, they are sought so as to ensure meaningful compliance with the s 33X of the Federal Court Act notice requirements and for the benefit of group members. Those considerations do not apply in the case of the category 2 documents.

93    Four additional considerations relevant to the category two documents should also be noted.

94    First, for the reasons already given, the second category of documents is drafted in terms which are overly broad and potentially oppressive. The expression “underlying transaction documents” is unclear and ambiguous and would require a third-party recipient to form judgments about whether particular documents meet that description.

95    Second, there is no evidence that Ceramic has exhausted all other avenues to obtain documents covered by the second category. It is unclear, for example, whether Ceramic has attempted to obtain the documents from Australian based entities (or their liquidators) who may have been involved in marketing, distributing, or issuing the Duke CDOs to Australian clients. It would be surprising if no person or entity other than US Bank National Association retained copies of the so-called underlying transaction documents. Indeed, given that Standard & Poor’s rated the Duke CDOs, it would be surprising indeed if it did not have access to copies of at least some of those documents.

96    Third, the forensic importance of the second category documents is unclear. It may be that the basic terms and structure of the Duke CDOs is not ultimately in issue or subject to serious contest in the proceedings. In those circumstances, it may be unnecessary for Ceramic to tender or otherwise rely on the underlying transaction documents. That is a matter that will no doubt be further explored in due course. At some stage Standard & Poor’s may be required to explain what aspect or aspects of the terms and structure of the Duke CDOs are or may be in issue.

97    Fourth, there is no indication that Ceramic has given any serious attention to whether the second category of documents could be sought from US Bank National Association by way of letter of request pursuant to s 7(1)(c) of the Foreign Evidence Act 1994 (Cth). That may be possible if the documents were considered to be ancillary to the taking of oral testimony from an officer of US Bank National Association: see BCI Finances Pty Ltd v Commissioner of Taxation [2012] FCA 855; cf. Elna Australia Pty ltd v International Computers (Aust) Pty Ltd (1987) 14 FCR 461; Novotny v Todd [2002] WASCA 79. There may well be issues or difficulties with utilising that procedure in this particular case. It should, however, at the very least, be fully explored. It may be the case that US Bank National Association would be prepared to voluntarily provide copies of the documents in question rather than having one of its officers examined before a United States Court pursuant to a letter of request. The potential availability of the letter of request procedure to obtain evidence would tend to militate against the exercise of the discretion to issue and serve a subpoena on US Bank National Association in the United States.

98    It should also be noted, in this context, that it is by no means clear that the provisions of the Foreign Evidence Act could be utilised to require production of the first category of documents. That is because those documents are not sought for the purpose of use in evidence in the proceedings. This is an issue that may need to be explored if ultimately the US Bank National Association either applies to have the subpoena set aside or fails to comply with it. It is worth noting at this stage only because it provides another reason why the issue of a subpoena requiring production of the category one documents is appropriate and necessary to ensure that justice is done in these proceedings.

Conclusion

99    The Court has both the power to issue the subpoena to US Bank National Association and the power to grant leave to Ceramic to serve the subpoena in the United States. The power is to be found in rr 24.01, 24.12 and 10.44 of the Federal Court Rules and in s 33ZF of the Federal Court Act.

100    In exercising that power in the circumstances the Court must exercise caution and restraint and must have regard to whether the issue and service of the subpoena would breach international law and international comity. The evidence does not demonstrate that the subpoena in question, if limited to the first category of documents (the list of noteholders or beneficiaries) would breach international law or comity. The circumstances of this case are somewhat unique, if not exceptional. Other discretionary circumstances weigh strongly in favour of, and do not weigh against, the exercise of the power.

101    The subpoena should accordingly issue. Service of the subpoena should be effected in accordance with the Hague Convention and pursuant to rr 10.63 to 10.68 of the Federal Court Rules.

Associate:

Dated:    21 April 2016