FEDERAL COURT OF AUSTRALIA

Bailey v Beagle Management Pty Ltd [2000] FCA 1577

PRACTICE AND PROCEDURE – applications for security for costs – notices to produce in support of applications for security for costs – whether notices to produce were “fishing expeditions” – whether information sought was relevant to financial position of applicant.

Commissioner for Railways v Small (1938) 38 SR(NSW) 564  referred to

Australian Competition Consumer Commission v Shell Co of Australia Ltd [1999] FCA 212  referred to

PETER G & ORS v BEAGLE MANAGEMENT PTY LTD & ORS

V 435 of 2000

GOLDBERG J

1 NOVEMBER 2000

MELBOURNE

THE COURT ORDERS THAT:

1.                  The applications made in paragraphs 1, 2 and 3 of the applicants’ notice of motion filed on 20 October 2000 be dismissed.

2.         The application made in paragraph 4 of the said notice of motion be adjourned sine die.

3.         The further response of the applicants to the Notice to Produce dated 10 October 2000 served on the applicants by the first to fifth respondents and to the Notice to Produce dated 17 October 2000 served on the applicants by the sixth respondent be stood over pending the hearing and determination of any application by the applicants for leave to appeal against the order made in paragraph 1 of this order.

4.         The further hearing of the Notices of Motion filed on 10 October 2000 and 17 October 2000 by the first to fifth respondents and by the sixth respondent respectively be adjourned pending the hearing and determination of any application by the applicants for leave to appeal against the order made in paragraph 1 of this order.

5.         The applicants pay the respondents’ costs in relation to paragraphs 1, 2 and 3 of the applicants’ said Notice of Motion including the costs of the hearing on 1 November 2000.

6.         The costs of all parties in relation to the respondents’ said notices of motion be reserved for further consideration.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     There are before the Court two notices of motion filed on 10 October 2000 by the first to fifth respondents, and on 17 October 2000 by the sixth respondent, seeking orders that the applicants provide security for the various respondents’ costs of the proceeding.  The applications are brought under s 1335(1) of the Corporations Law or in the alternative, under s 56 of the Federal Court of Australia Act 1976 (Cth) or under O 28 r3 of the Federal Court Rules. 

2                     On 10 October 2000 the first to fifth respondents served on the applicants a notice to produce requiring them to produce the following documents at the hearing of the first to fifth respondents’ motion:

“1.       the latest balance sheet;

 2.        the latest forecast balance sheet;

 3.        the latest profit and loss forecast;

 4.        the latest consolidated profit forecast;

 5.        monthly accounts for the past 12 months;

 6.        the latest two sets of unaudited accounts;

 7.        the income tax returns for the financial years ended 30 June 1998, 30 June 1999 and 30 June 2000 (if available);

for Equuscorp Pty Limited”

3                     On 17 October 2000 the sixth respondent served on the applicants a notice to produce requiring them to produce:

“1.       All accounts, profit and loss statements, statements of assets and liabilities, annual reports and income tax returns of Equuscorp Pty Limited (ACN 006 012 344):

·                   for, or in respect of, the year ended 30 June 1999;

·                   for, or in respect of, the six months ended 30 June 1999;

·                   for, or in respect of, the six months ended 31 December 1999;

·                   for, or in respect of, the year ended 30 June 2000.”

4                     On 20 October 2000 the applicants filed and served a notice of motion seeking orders that those notices to produce be struck out as an abuse of the process of the Court.  Those orders were sought pursuant to O 10 r6 of the Federal Court Rules or the inherent jurisdiction of the Court.  Alternatively, the applicants sought an order pursuant to O 33 r12(1) that the Court otherwise order that the applicants be excused from compliance with the notices to produce.  The applicants submitted that the notices were an abuse of process because they were seeking to engage in what senior counsel for the applicants called a “fishing expedition”.  Reliance was placed upon The Commissioner for Railways v Small (1938) 38 SR(NSW) 564, where at 575 Jordan CJ said:

“In the absence of special circumstances, e.g Griebart v Morris [[1921] KB 659], a party is no more entitled to use a subpoena duces tecum than he is a summons for interrogatories for the purpose of ‘fishing’, i.e., endeavouring not to obtain evidence to support his case but to discover whether he has a case at all. 

This observation was recently cited and followed by Cooper J in Australian Competition Consumer Commission v Shell Co of Australia Ltd [1999] FCA 212, where at [67] his Honour said:

“A subpoena will be set aside as fishing if it is designed not to obtain evidence to support the case but to discover whether there is a case at all or to discover the other side's evidence.’

5                     Although on the present applications I am dealing with notices to produce I consider the principles applicable to the setting aside of subpoenae for present purposes apply equally to the notices to produce.  It was submitted by the applicants that the respondents were essentially involved in a fishing exercise because the material presently before the Court did not support the case for security for costs, and that what the respondents were trying to do was to see if they had any case at all.

6                     For present purposes it does not matter not whether the applications for security for costs are brought under s 1335 of the Corporations Law, s 56 of the Federal Court of Australia Act or O 28 r3 of the Federal Court Rules.  The determination of whether the notices to produce should be set aside will be the same under whichever head of power the application for security for costs is being considered.  The respondents submitted that the material sought was relevant and was not fishing expedition.  It was submitted that there is material presently before the Court upon which it would be open to the Court to make an order for security for costs but it was put that the respondents are seeking to obtain admissible evidence to support their case. 

7                     There is a clear distinction to be drawn between a notice to produce which involves a fishing expedition and a notice to produce which does seek to obtain evidence to support a party’s case.  I read The Commissioner for Railways v Small (supra) as being authority for the proposition that where a subpoena or notice to produce is served to obtain evidence to support a party’s case then the subpoena or the notice to produce will not be regarded as fishing or as an abuse of process or as vexatious and will not be set aside.  That will only occur where a party is in fact seeking to discover whether the party has a case at all. 

8                     I consider that under whichever head of jurisdiction this matter is considered, the documents which are sought in the notices to produce are relevant to the issues raised on the respondents’ motions.  They go to the financial position of the applicant.  The financial position of the corporate applicant, Equuscorp Pty Limited, speaking broadly, is a relevant issue on these applications for security for costs.  As senior counsel for the applicants rightly pointed out, accounts and documents of the type sought may not necessarily provide a true and proper view of the financial position of the corporation to which they relate.  Nevertheless the documents which are sought to be produced are relevant to a determination of the financial position of the corporate applicant.

9                     I recognise that there is no onus on a security for costs application, such as those before me, for any party to establish issues such as solvency, ability to pay debts, or insolvency.  If an order is made for the production of documents pursuant to a notice to produce I do not regard such an order as establishing, or being predicated upon there being, any onus upon the corporate applicant in any way. 

10                  At the present time there is only affidavit evidence before me from the respondents which will have to be addressed in due course.  Some of that evidence is challenged as being inadmissible and some of it is challenged as being of little probative value but I have to decide those issues in due course.  On the other side of the record there is no affidavit evidence from the applicants, in particular the corporate applicant, but there are written submissions which assist to define what are the relevant issues to be determined on the applications for security for costs. 

11                  I am satisfied, having regard to the material presently before me and the manner in which the issues are defined, not only by reference to that material but by reference to the submissions, that the documents which are sought are relevant to the issues which have to be determined on the applications for security for costs.  I do not regard the notices to produce as undertaking a fishing expedition to discover whether the respondents have a case at all.  I consider an appropriate characterisation of the notices to produce as being designed or calculated to obtain evidence to support their case.

12                  In the circumstances I do not regard the notices to produce as being fishing, nor do I regard them as being vexatious, oppressive or an abuse of process of the Court. I dismiss that part of the motion filed on 20 October 2000, that the notices to produce be struck out as an abuse of process of the Court or that the applicants be excused from compliance with them. 

Associate:

Dated:              6 November 2000

SCHEDULE OF APPLICANTS

PETER G BAILEY                                                                                                           First applicant

JILLIAN L BULL                                                                                                        Second applicant

MARTIN J BULL                                                                                                            Third applicant

MAUREEN G DARGAN                                                                                               Fourth applicant

MARK GHIRXI                                                                                                                Fifth applicant

MICHAEL C GRAF                                                                                                         Sixth applicant

TERRY RAYMOND HIGGINS                                                                                   Seventh applicant

L & K PUBLIC RELATIONS & MANAGEMENT CONSULTANTS PTY LTD            Eighth applicant

(ACN 004 967 337)

JOHN L LEEDS                                                                                                              Ninth applicant

CAROLYN M LEEDS                                                                                                    Tenth applicant

JOHN MUSCAT                                                                                                         Eleventh applicant

PANTERA NOMINEES PTY LTD                                                                              Twelfth applicant

(ACN 005 884 695)

POLYCOAT PTY LTD                                                                                            Thirteenth applicant

(ACN 006 245 638)

LEO PURATIC                                                                                                       Fourteenth applicant

ROY STANLEY ROSENBERG                                                                                  Fifteenth applicant

JOHN SEERY                                                                                                            Sixteenth applicant

NIKOLA STANCIC and ANN STANCIC                                                              Seventeenth applicant

RAYMOND J THOMSON                                                                                       Eighteenth applicant

ALAN THOMAS                                                                                                    Nineteenth applicant

PETER WALLIS                                                                                                       Twentieth applicant

EQUUSCORP PTY LIMITED                                                                               Twenty-first applicant

(ACN 006 012 344)