FEDERAL COURT OF AUSTRALIA

Chapman v Luminis Pty Ltd [2001] FCA 1580

PROCEDURE – subpoenas for documents – whether leave should be granted to issue – whether “fishing” and oppressive – whether terms appropriate

Federal Court of Australia Act 1978 (Cth) s 43

Federal Court Rules O 27 r 6

Chapman v Luminis Pty Ltd (No 5) [2001] FCA 1106 cited

Chapman v Luminis Pty Ltd (1998) 86 FCR 513 cited

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

Trade Practices Commission v Arnotts Ltd & Ors (1989) 88 ALR 90 applied

cf Re Federal Commissioner of Taxation; Ex parte Swiss Aluminium Australia Limited (1986) 68 ALR 587 applied

Finnie v Dalglish [1982] 1 NSWLR 400 cited

Adelaide Steamship Company v Spalvins (1997) 24 ACSR 536 cited

Adelaide Steamship Co Ltd & Anor v Spalvins (1998) 81 FCR 360 cited

Southern Pacific Hotel Services Inc v Southern Pacific Hotel Corp Ltd (1984) 1 NSWLR 710 cited

Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (1998) ATPR 41–659 cited

Lucas Industries Limited v Hewitt & Ors (1978) 18 ALR 555 cited

Garden City Traders Association Ltd v Brisbane City Council (1972) QDR 82 cited

Associated Dominions Assurance v John Fairfax (1952) 72 WN (NSW) 250 referred to

New South Wales Commission v Hawes (19920 74 ACRIMR 199 cited

Alister v R (1984) 154 CLR 404 cited

Elder v Carter (1890) 25 QBD 194 cited

Burchard v Macfarlane [1891] 2 QB 241 cited

O’Born v Commissioner for Government Transport (1960) 77 WN (NSW) 81 cited

McAuliffe v McAuliffe (1973) 4 ACTR 9 cited

National Employers’ Mutual General Association Ltd v Waind & Hill [1978] 1 NSWLR 372 referred to

Vestris v Cashman (1998) 72 SASR 459 cited

Montague Mining Pty Ltd v Gore & Ors (trading as Clayton Utz) [2001] FCA 791 cited

Bailey & Ors v Beagle Management Pty Ltd & Ors (2001) 182 ALR 264 applied

Knight v FP Special Assets Ltd and Ors (1992) 174 CLR 178 cited

Caboolture Park Shopping Centre Pty Ltd (in liquidation) v White Industries (QLD) Pty Ltd (1993) 45 FCR 224 referred to

THOMAS LINCOLN CHAPMAN and WENDY JENNIFER CHAPMAN and BINALONG PTY LTD (Receivers and Managers appointed in liquidation) v LUMINIS PTY LTD and DEANE JOANNE FERGIE and CHERYL ANNE SAUNDERS and ROBERT EDWARD TICKNER and COMMONWEALTH OF AUSTRALIA

SG 33 of 1997

RD NICHOLSON J

8 NOVEMBER 2001

PERTH (Heard in Adelaide)

THE COURT ORDERS THAT:

1.                  Leave be given to the third, fourth and fifth respondents to issue a subpoena to the following persons, companies or entities in the form of the subpoena annexed and marked ‘A’:

Thomas Lincoln Chapman and Wendy Jennifer Chapman

Kebaro Pty Ltd as trustee for the Galle Trust

2.                  Leave be given to the third, fourth and fifth respondents to issue a subpoena in the form annexed and marked ‘B’ to:

Westpac Banking Corporation

Partnership Pacific Limited

3.                  Leave be refused to the third, fourth and fifth respondents in respect of the issue of a subpoena to:

Kebaro Pty Ltd

Kebaro Pty Ltd as trustee for the Hindmarsh Trust

Kebaro Pty Ltd as trustee for the Fraser Trust

Westover Pty Ltd

4.                  Any application on behalf of the third, fourth and fifth respondents for discovery in respect of the companies and entities referred to in Order 3 be set down expeditiously for hearing, if necessary by video-link.

5.                  Costs be reserved for submission.

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

ANNEXURE A

Note:    in this annexure “document” includes the original and any copy of a document and any document stored electronically.  The word “applicants” includes any one or more of the applicants in the within proceedings.

1.                  All accounts rendered by Lynch & Meyer for solicitor’s disbursements in relation to the investigation of causes of action, institution and conduct of the within proceedings being accounts rendered to the applicants or any other person or company.

2.                  All solicitor’s firm records recording the payment of disbursements of Lynch & Meyer in connection with the investigation of causes of action, institution and conduct of the within proceedings.

3.                  All solicitor’s trust account records recording the payment of disbursements of Lynch & Meyer in connection with the within proceedings.

4.                  [QUESTION DELETED]

5.                  All documents recording any arrangement, agreement or understanding with any person or company not a party to the proceedings whereby such non party provided an indemnity or incurred an obligation or gave an assurance to the applicants or their solicitors with respect to payment of solicitor’s costs and disbursements incurred by the applicants in the within proceedings.

6.                  All documents recording any arrangement, agreement or understanding with any other person or company not a party to the proceedings whereby such non party provided an indemnity or incurred an obligation or gave an assurance to the applicants or their solicitors with respect to the payment of costs ordered against the applicants in the within proceedings.

7.                  All letters, memoranda or records of or containing any report reporting on the within proceedings made by the applicants or their solicitors, to any creditor (other than Westpac Banking Corporation or Partnership Pacific Limited) of the applicants (including Binalong Pty Ltd (Receivers and Managers appointed) (in liquidation) being a creditor as at 23 May 1997.

8.                  All documents authorising or recording the authorisation of Thomas Lincoln Chapman or Wendy Jennifer Chapman or both of them to commence or continue the within proceedings on behalf of any other person, group of persons, for the beneficiaries of any trust, or company.

9.                  All documents wherein Thomas Lincoln Chapman and/or Wendy Jennifer Chapman were requested to bring these proceedings on behalf of another party.

10.              [QUESTION DELETED]

IN THE CASE OF THE CHAPMANS SUBPOENAS ONLY:

11.              All documents being statements made by the applicants including by their agents and solicitors, to the media in connection with the within proceeding and including, but not limited to, press releases, correspondence, diary entries and/or notes of telephone or personal attendances and excepting any documents being media documents previously discovered in the action (whether described as media folders, media releases, media materials or electronic media tapes).

ANNEXURE B

Note:    in this annexure “document” includes the original and any copy of a document and any document stored electronically.  The word “applicants” includes any one or more of the applicants in the within proceedings.

1.                  All accounts rendered by Lynch & Meyer for solicitor’s fees and disbursements in relation to the investigation of causes of action, institution and conduct of the within proceedings being accounts rendered to the applicants or any other person or company.

2.                  All solicitor’s firm records recording the payment of costs and disbursements of Lynch & Meyer in connection with the investigation of causes of action, institution and conduct of the within proceedings.

3.                  All solicitor’s trust account records recording the payment of costs and disbursements of Lynch & Meyer in connection with the within proceedings.

4.                  All documents recording any arrangement, agreement or understanding made with any person or company by the applicants or their agents, for the sharing of the proceeds of the within action.

5.                  All documents recording any arrangement, agreement or understanding with any person or company not a party to the proceedings whereby such non party provided an indemnity or incurred an obligation or gave an assurance to the applicants or their solicitors with respect to payment of solicitor’s costs and disbursements incurred by the applicants in the within proceedings.

6.                  All documents recording any arrangement, agreement or understanding with any other person or company not a party to the proceedings whereby such non party provided an indemnity or incurred an obligation or gave an assurance to the applicants or their solicitors with respect to the payment of costs ordered against the applicants in the within proceedings.

7.                  All letters, memoranda or records of or containing any report in the within proceedings made by the applicants or their solicitors, accountants or agents to any creditor of the applicants (including Binalong Pty Ltd (Receivers and Managers appointed) (in liquidation)).

8.                  All documents authorising or recording the authorisation of Thomas Lincoln Chapman and Wendy Jennifer Chapman or both of them to commence or continue the within proceedings on behalf of any other person, group of persons, for the beneficiaries of any trust, or company.

9.                  All documents wherein Thomas Lincoln Chapman and/or Wendy Jennifer Chapman were requested to bring these proceedings on behalf of another party.

10.              All documents whereby the applicants, their solicitors or agents sought authority from any other person or entity to make any offer of compromise in relation to the within proceedings.

REASONS FOR JUDGMENT

1                     Application is made on behalf of the third, fourth and fifth respondents (“the Commonwealth respondents”) for leave to issue particular subpoenas in accordance with the provisions in O 27 r 6 of the Federal Court Rules.  The subpoenas involved are directed to the following parties, persons or entities:

(1)               The firstnamed applicants, Mr and Mrs Chapman (“the Chapmans”)

(2)               Kebaro Pty Ltd (“Kebaro”)

(3)               Kebaro Pty Ltd as trustee for the Galle Trust

(4)               Kebaro Pty Ltd as trustee for the Hindmarsh Trust

(5)               Kebaro Pty Ltd as trustee for the Fraser Trust

(6)               Westover Pty Ltd (“Westover”)

(7)               Westpac Banking Corporation (“Westpac”)

(8)               Partnership Pacific Ltd (“PPL”)

2                     The usual occasion for disputing the appropriateness of the subpoena or its terms is on the return of the subpoena.  Most of the authorities arise in those circumstances.  Here, however, it has been accepted for the Chapmans that they have argued all matters relating to the appropriateness of the issue of the subpoena or their terms up to and including the date of this hearing, reserving only for further argument on the return of the subpoena any additional arguments arising from the nature of the responses to the subpoenas then becoming apparent. 

Nature of the litigation

3                     On 21 August 2001 the reasons of von Doussa J in Chapman v Luminis Pty Ltd (No 5) [2001] FCA 1106 (“the principal proceeding”) were published.  He ordered that the application against each respondent be dismissed.  The question of costs was adjourned.  It is in connection with the question of costs that the subpoenas are now sought. 

4                     The reasons in the principal proceeding are extensive, occupying 318 pages and 853 numbered paragraphs.  The reasons address the claims brought on behalf of the applicants.  The Chapmans sued as assignees of Binalong’s rights being an assignment said to have been perfected pursuant to a deed of assignment dated 22 May 1997.  Those assigned causes of action were against the first, second and third respondents.  The proceedings were commenced against them on 23 May 1997. 

5                     On 25 September 1997 Binalong assigned to the Chapmans causes of action which it alleged against the parties who became the fourth and fifth respondents.  In the Deed it was provided that in the event that the Chapmans receive any proceeds by exercising the just terms rights or bringing the Commonwealth causes of action, they must pay 50% of the net proceeds of the same to the Liquidator and in consideration of this Deed the Chapmans agree to pay a further 30% of any net proceeds recovered (a total of 50%) of the net proceeds from any cause of action referred to in the May Deed.

6                     Also on 25 September 1997 the Chapmans (and others) entered into a deed of sale with Kebaro.  The effect of the deed was that agents for PPL agreed to sell and Kebaro agreed to buy assets described as the Land and the Binalong assets.  These were assets of Binalong arising from its involvement in development of a marina at Hindmarsh Island near Goolwa. 

7                     The principal proceeding was brought by the Chapmans to seek to recover losses suffered by them as developers of the marina complex.  It was brought following the making of a declaration on 9 July 1994 by the Federal Minister for Aboriginal and Torres Strait Islander Affairs which had the effect of banning the construction of a bridge between Goolwa and Hindmarsh Island for 25 years.  The declaration was made under s 10 of the Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth). 

8                     The Chapmans owned 50 percent of the shares in Binalong and have been its Directors on different occasions.  On 4 September 1998 this Court authorised them at their own risk and expense as to costs to use the name of Binalong as a joint applicant:  see Chapman v Luminis Pty Ltd (1998) 86 FCR 513.  This step was taken in face of allegations on behalf of respondents that the purported assignments relied upon by the Chapmans in respect of the causes of action were not in law assignments and, for that reason, the Chapmans did not have standing to enforce the rights of action alleged by them against the respondents. 

9                     The proceeding alleged four main categories of claims against the respondents.  The first were based on the statutory remedies arising under the Trade Practices Act and Fair Trading Acts for misleading or deceptive conduct based on the claim that representations made in a report by the second and third respondents were not correct.  Secondly, against those respondents and the fourth respondent, negligence was alleged based on breach of common law duties of care owed to Binalong not to cause it foreseeable loss.  Thirdly, as against the third and fourth respondents it was also alleged they were guilty of breaches of statutory duty arising under the Heritage Protection Act.  Finally, against those same respondents it was alleged they were guilty of misfeasance in public office.  All claims were dismissed. 

Commonwealth respondents’ contentions

10                  The following circumstances are relied upon for the Commonwealth respondents.

Nature of Commonwealth respondents’ costs claim

11                  The Commonwealth respondents preserve their position in relation to any costs claim in respect of the Hindmarsh Island and Fraser Trusts.  The case which they make at this point is that unless the subpoenas issue and receive a response it is hard for them and ultimately for the Court to determine who was funding the principal proceeding, who was giving directions in relation to it and whether there were agreements in relation to the sharing of proceeds from it.  Consequently, it is submitted that the subpoenas are shaped so as to seek evidence on who has funded, controlled and profited in respect of the principal proceeding. 

12                  The Commonwealth respondents will claim costs on an indemnity basis against the Chapmans, Binalong and Kebaro as Trustee for the Galle Trust.  It is this which it is submitted makes the subpoenas necessary and determines their form.  As a consequence it is said it is necessary for the Commonwealth respondents to subpoena documents relevant to establishing the purposes for which the litigation was instituted and conducted and in particular whether it was instituted and conducted for improper purposes. 

13                  The improper purposes which will be contended for are that the principal proceeding was brought to stave off creditors and to exert pressure on the State Government to build the bridge.

14                  It is common ground that the costs which will be sought will be substantial.  In the case of the Commonwealth respondents the estimate is that costs will be in the order of $A2.5m.

Form of subpoenas

15                  The form of subpoenas brought to Court on behalf of Commonwealth respondents are in common form save in one respect.  That difference appears in the form of subpoena proposed to be directed to the Chapmans, which also seeks the following:

“11.     All documents being statements made by the applicants including by their agents and solicitors, to the media in connection with the within proceedings and including, but not limited to, press releases, correspondence, diary entries and/or notes of telephone or personal attendances.”

16                  Paragraphs 1 – 3 in the common form relates to accounts rendered by the applicants’ solicitors for fees and disbursements and records of them.  Paragraph 4 is directed to documents recording any arrangement, agreement or understanding concerning the sharing of proceeds of the action.  Paragraphs 5 and 6 are directed to documents recording any arrangement, agreement or understanding with persons not a party to the proceedings in respect of payment of solicitors’ costs and disbursements and in respect of any indemnity.  Paragraph 7 is directed to all letters, memoranda or records of or containing any report in the proceeding to any creditor including Binalong.  Paragraphs 8 and 9 relate to documents authorising the Chapmans to commence the proceedings or requesting them to bring the proceedings.  Paragraph 10 is directed to documents in which any authority was sought from any person to make any offer of compromise.

The Chapmans’ subpoena

17                  In a letter dated 2 October 2001 from the solicitors for the Chapmans to the solicitors for the Commonwealth respondents, it was advised that the Chapmans had funded the disbursements from their personal funds.  However, it was said they had no arrangements with any other party relating to the funding of proceedings.

The Kebaro subpoena

18                  The “linkages” upon which the Commonwealth respondents rely in respect of Kebaro are as follows.  On 2 October 1998 the second named applicant, Binalong, the Chapmans and Kebaro as trustee of the Galle Trust entered into a deed whereby the Chapmans and Kebaro jointly and severally undertook to indemnify and keep indemnified Binalong and its liquidator against any costs, charges or expenses in connection with or arising out of the principal proceeding.  This was further defined to include any liability for the costs and expenses of any of the respondents or any other person for which the liquidator may become liable.  Furthermore, the Chapmans and Kebaro undertook at their cost to cause their solicitors to provide reports in writing on the status of the proceedings to the liquidator upon his request from time to time.  Kebaro further undertook to provide security for the indemnity in the form of mortgages over all its estate, title and interest.  The mortgage secured the principal sum including all monies which Kebaro or the Chapmans may owe to Binalong pursuant to the earlier mentioned Deed. 

19                  A company search of Kebaro shows that its directors are the Chapmans.

20                  Kebaro is the entity holding interests in land relating to the Chapmans. 

The Galle Trust subpoena

21                  Kebaro is the Trustee of the Galle Trust.  The Trust Deed of the Galle Trust discloses that the main beneficiary is the mother of Mr Chapman.  Default income and capital beneficiaries includes the Chapmans and their children.  The Trust Deed was entered into 11 June 1997.

22                  In a letter dated 2 October 2001 the solicitors for the Chapmans advised that funds paid towards disbursements and totalling approximately $550,000.00 had been provided by the Chapmans out of personal funds received by them “when loans were made to them by the Galle Trust on various dates going back to 1999”.  Certain reductions in the amount of the loan were also referred to.

The Hindmarsh Trust subpoena

23                  Kebaro is also the Trustee of the Hindmarsh Trust.  The main beneficiaries are the Chapmans and the default beneficiaries both as to income and capital are the Chapmans and their children.  The Trust Deed was signed on 19 September 1997. 

24                  The financial accounts for the Trust (trading as the Marina Hindmarsh Island) for the year ended 30 June 1998 show a distribution to beneficiaries. 

25                  Cross-examination of Mr Chapman in the principal proceeding elicited evidence that the Hindmarsh Trust was where plant and equipment is held.

The Fraser Trust subpoena

26                  Kebaro is additionally the Trustee of the Fraser Trust.  The main beneficiary of that Trust is the mother of Mr Chapman.  The default beneficiaries are the Chapmans and their children.  The Trust Deed was signed on 11 June 1997. 

Identity between Galle, Hindmarsh and Fraser Trusts

27                  For the Commonwealth respondents it is submitted that the above evidence makes apparent that there is a significant identity between the Trustee, the beneficiaries and the time of creation of each of the above Trusts and that that is a further link which should be taken into account in the application for leave to issue the subpoenas against them.

The Westover subpoena

28                  Affidavit evidence brought for the Commonwealth respondents states that Westover operates the boat charter at the Goolwa Marina.  Searches of the company established that the firstnamed applicant is one of the directors and that the three applicants are shareholders. 

29                  The financial statements for Westover to 30 June 1999 show current liabilities to Kebaro. 

30                  In the course of the cross-examination of Mr Chapman in the principal proceeding, he stated that there was a considerable amount of development work going on in 1993 which is set out in the accounts of the Galle Trust, the Hindmarsh Trust and the Westover Trust.  His evidence did not extend to the Fraser Trust.

The Westpac and PPL Subpoena

31                  On 2 December 1999 Westpac and PPL were put on notice on behalf of the Commonwealth respondents that they would seek an order that Westpac and PPL be made jointly and severally liable for any costs order made against the applicants or Binalong and in favour of the respondents.  For Westpac and PPL as non-parties to the proceeding it was accepted that the subpoena should issue against them.  This acceptance was on the basis that Westpac and PPL were the only secured creditor to Binalong and that the causes of action were part of its security. 

The Lincoln Trust

32                  In an affidavit sworn by the Chapmans on 10 November 1998, they stated that the assignment of the causes of action to them had been on trust for the Lincoln Trust of which they were the sole Trustees.  In the Deed of Sale entered into on 25 September 1997, it was also recited that the assignment by Binalong was partly to the Chapmans in their capacity as Trustees of the Lincoln Trust.  In a letter of 2 October 2001 the solicitors for the Chapmans advised that the cause of action was assigned to them as Trustees for a family trust known as “the Lincoln Trust” and that this was deposed to in their affidavit filed in respect of an application for security for costs. 

33                  No application for leave to issue a subpoena in respect of the Lincoln Trust is presently brought although the Commonwealth respondents reserve their rights in that respect. 

Contentions by the Chapmans’ counsel

34                  In addition to directing attention to a variety of case law, considered below, the submissions for the Chapmans addressed the following issues:

35                  The submissions by counsel for the Chapmans were directed very substantially to the subpoenas directed to non-parties rather than to the Chapmans themselves.  The submissions are able to be organised into two broad categories.  The first addresses issues of relevance of the material sought by the proposed subpoenas.  The second addresses that relevance in the context of the nature of the improper purpose which the Commonwealth respondents seek to establish in respect of indemnity costs. 

36                  The submissions in relation to relevance have five strands.  Firstly, it is said that the case brought by the Commonwealth respondents relies only on “links” and that these are not enough to establish relevance.  Secondly, it is said that the proposed form of subpoenas fails to identify or particularise the documents being sought.  Thirdly, it is submitted that relevance could not be established in respect of any of the subpoenas in the face of responses which have been made to date on behalf of the Chapmans and the non-parties and in relation to which no information is before the Court to cast doubt on the information provided.  Fourthly, it is said that in those circumstances the Commonwealth respondents’ case is to be seen as one of speculation.  Specifically, it is contended their case speculates that if a link exists then there must have been financial assistance and control.  However, it is submitted the case is properly to be seen as a case not moving beyond evidence of links and not bringing any evidence of actual involvement by the non-parties.  Finally, in respect of par 7 of the subpoenas it is said that the form of the subpoena is too wide and consequently cannot be relevant.  These submissions were supported by reference to various authorities which are canvassed below. 

37                  The third element of these submissions needs stating in greater detail.  It relies on statements in correspondence by the Chapmans’ solicitors; statements in affidavits filed in the principal proceedings or related aspects of it and finally on two letters from the Chapmans’ solicitors to the solicitors for the Commonwealth respondents dated 2 and 31 October 2001.  These are the materials which it is said establish that there are no other documents to which the subpoenas could be addressed.

38                  In a reply for the Commonwealth respondents, attention was directed to aspects of the paragraphs of the proposed subpoenas not said to be met by the responses in those two letters.  It is necessary to canvass these briefly as follows:

·        In relation to proposed pars 1 to 3 of the subpoenas relating to the accounts rendered by the Chapmans’ solicitors it is said that the response is confined to solicitors’ fees and fails to address disbursements in a situation where they are likely to amount to more than solicitors’ costs. 

·        The responses to pars 4, 5 and 6 of the subpoenas is, by reference in the letter of 31 October 2001 to the letter of 2 October 2001 answered only with respect to “arrangement” and not with respect to “agreement or understanding”.  For the Chapmans it is said that it should be inferred that the solicitor intended “arrangement” to refer to the other issues because in the letter of 31 October 2001 a response was being formulated to the paragraphs of the proposed subpoenas in which the reference to “agreement or understanding” appears. 

·        The responses to pars 8, 9 and 10 of the subpoenas relating to issues of authority are assertions in the letter on behalf of the Chapmans dated 31 October 2001 that there are no documents of the kind sought.  It is said for the Commonwealth respondents that in the context of evidence of the involvement of the Chapmans acting on behalf of the Lincoln Trust these responses are inadequate. 

39                  The second major limb of the contentions for the Chapmans relates to contesting the relevance of the improper purposes which may be alleged in support of indemnity costs by the Commonwealth respondents.  In respect of the staving off of creditors it is said that this was not a consideration given that Westpac had asserted its rights in late 1994 and continued until the sale in late 1997.  Furthermore, it is said that the case for the Commonwealth respondents has failed to identify particular creditors which it is said the purpose was directed. 

40                  In relation to the alleged improper purpose of pressuring the State Government, it is said that although negotiations had continued from April 1998 to August 1999 with the State Government on a confidential basis seeking the building of the bridge.  They were concluded on or about 11 August 1999 with the execution by all parties of a Settlement Deed.  The consequence was that there was no need to apply pressure to the State Government after that date, if the need had existed.

41                  For the Commonwealth respondents it is said that par 11 of the subpoena directed to the Chapmans relating to media communications could hardly be said to be speculative in the circumstances in which a large number of media releases have already been discovered.  Those respondents accept that the discovered media releases should be carved out of any subpoena directed to the Chapmans in this respect.  However, it is submitted for the Chapmans that any media releases after April 1998 could not have had any impact by way of pressure on the State Government because the way had been cleared for it to proceed with the bridge building.

Applicable legal principles

42                  The starting point is the provisions of O 29 r 6 itself.  However, that rule does not address the issues argued on this application.  Those issues arise from the common law, the starting point being the oft-approved statement by Jordan CJ in The Commissioner for Railways v Small (1938) SR (NSW) 564.  It is germane in the light of the arguments here made to return to those first principles.  At 573, Jordan CJ said:

“A writ of subpoena duces tecum may be addressed to a stranger to the cause or to a party.  If it be addressed to a stranger, it must specify with reasonable particularity the documents which are required to be produced.  A subpoena duces tecum ought not to be issued to such a person requiring him to search for and produce all such documents as he may have in his possession or power relating to a particular subject matter.  It is not legitimate to use a subpoena for the purpose of endeavouring to obtain what would be in effect discovery of documents against a person who, being a stranger, is not liable to make discovery.  A stranger to the cause ought not to be required to go to trouble and perhaps to expense in ransacking his records and endeavouring to form a judgment as to whether any of his papers throw light on a dispute which is to be litigated upon issues of which he is presumably ignorant:  Lee v. Angus L.R. 2 Eq. 59; Burchard v. Macfarlane [1891] 2 Q.B. 241 at 247; A.-G v. Wilson 9 Sim. 526; Newland v. Steer 13 L.T. 111; 13 W.R. 1014.  And if a subpoena duces tecum is issued to such a person in an objectionable form, the witness may apply to the Court to have it set aside.”

At 574 he said:

“Where the subpoena is addressed to a party, it is still necessary that it should state with reasonable particularity the documents which are to be produced:  A.-G v. Wilsons 9 Sim. 526 at 529; Earl of Powis v. Negus [1923] 1 Ch. 186 at 190.  It is true that a party, unlike a stranger, can be required to give discovery; but it is not legitimate to use a writ of subpoena duces tecum as a substitute for an application for discovery of documents, or as an alternative to an application for further and better discovery.”

At 575 he stated:

“In the absence of special circumstances, e.g. Griebart v. Morris [1920] 1 K.B. 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:  Hennessy v. Wright 24 Q.B.D. 445 at 448, or to discover the nature of the other side’s evidence:  Griebart v. Morris [1920] 1 K.B. 659 at 666.  Even if the documents are specified, a subpoena to a party will be set aside as abusive if great numbers of documents are called for and it appears that they are not sufficiently relevant:  Steele v. Savory [1891] W.N. 195.

43                  On this last mentioned issue of relevance Beaumont J in Trade Practices Commission v Arnotts Ltd & Ors (1989) 88 ALR 90 at 103 drew a distinction between adjectival relevance and substantive relevance.  The former was relevant to answering the question of whether material sought in a subpoena has an apparent relevance to the issues in the principal proceedings.  Expressed by him another way, it involves the question whether the subpoena has a legitimate forensic purpose to that extent:  cf Re Federal Commissioner of Taxation; Ex parte Swiss Aluminium Australia Limited (1986) 68 ALR 587 at 590 per Beaumont J.

44                  A common contention in relation to subpoenas is that they are oppressive.  A subpoena will be oppressive “if it places on the person to whom it is addressed an obligation to form a judgment as to which of his or her documents relate to issues between the parties”:  Finnie v Dalglish [1982] 1 NSWLR 400 at 407 per Rath J; Adelaide Steamship Company v Spalvins (1997) 24 ACSR 536 at 545 – 546 per O’Loughlin J, unaffected on appeal:  see Adelaide Steamship Co Ltd & Anor v Spalvins (1998) 81 FCR 360.  Whether a subpoena is oppressive will be determined by considering whether the demand is, for relevant purposes, too wide or uncertain or whether the terms of the subpoena convey to the recipient in relatively clear language the documents or class of documents called for:  Southern Pacific Hotel Services Inc v Southern Pacific Hotel Corp Ltd [1984) 1 NSWLR 710 at 720 – 1 per Clarke J, cited by O’Loughlin J in Adelaide Steamship Co v Spalvins at first instance.

45                  The submissions for the Chapmans make further citation of authorities in relation to these principles.  On the question of “fishing” reliance was placed upon Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (1998) ATPR 41–659 at 41338 where Foster J accepted both that the class of documents sought in the subpoenas in issue were sufficiently identified in the wording of the subpoenas to prevent them being characterised as a substitute for discovery (Lucas Industries Limited v Hewitt & Ors (1978) 18 ALR 555) and that the issue of the notice to produce and the subpoenas could be seen to answer a legitimate forensic purpose.  Attention is also drawn in the submissions for Chapmans that where discovery has occurred that is a factor to take into account in considering whether the scope of the proposed subpoena is based on pure speculation:  cf Garden City Traders Association Ltd v Brisbane City Council (1972) QDR 82 at 86 – 87.  For the Commonwealth respondents the point is made that in that passage reference was made to the existence of an affidavit of discovery which had no equivalent here.  However, I accept that the scope of the discovered documents is a factor to which regard must be had.  That much was accepted for the Commonwealth respondents during the course of the hearing in accepting that there should be excepted from the scope of the proposed par 11 in the subpoena to the Chapmans those media releases and media documents made available in the course of discovery in the principal action and relating to the Chapmans.  Other authorities relied upon for the Chapmans to characterise the nature of “fishing” were Associated Dominions Assurance v John Fairfax (1952) 72 WN (NSW) 250 at 254; New South Wales Commission v Hawes (19920 74 ACRIMR 199 at 202 – 203 and Alister v R (1984) 154 CLR 404 at 414 and 438 – 439. 

46                  In relation to the issue of subpoena to a non-party the submissions for the Chapmans advance the principle that a subpoena, not being a substitute for discovery, may not be issued to a non-party not called as a witness to produce a document unless that document is itself admissible in evidence by a witness other than the person upon whom the subpoena is served.  That is a statement which appears in Butterworths Practice and Procedure High Court and Federal Court, page 53221, par 43, 485.  It is supported by reference to Elder v Carter (1890) 25 QBD 194; Burchard v Macfarlane [1891] 2 QB 241; Commissioner of Railways v Small; O’Born v Commissioner for Government Transport (1960) 77 WN (NSW) 81 and McAuliffe v McAuliffe (1973) 4 ACTR 9.  Reference to McAuliffe at p 12 shows that Blackburn J stated that principle and supported it by reference to those same authorities without citing any particular pages.  Indeed, he added “I am aware that none of these authorities is precisely in point”.  McAuliffe’s case was considered in National Employers’ Mutual General Association Ltd v Waind & Hill [1978] 1 NSWLR 372 at 381 by Moffitt P with whom Hutley and Glass JJA agreed.  He there decided that the decision in McAuliffe’s case ought not to be followed.  It was in that context that he made the following oft-cited statement:

“As Jordan C.J. pointed out in Small’s case (1938) 38 S.R. (N.S.W.) 564, at p. 574; 55 W.N. 215 and as appears in Burchard’s case [1891] 2 Q.B. 241, at pp. 247, 248 there are at least two steps in the procedure of having a third party bring documents to court, and in their use thereafter.  Indeed, on a correct view, there are three steps.  The first is obeying the subpoena, by the witness bringing the documents to the court and handing them to the judge.  This step involves the determination of any objections of the witness to the subpoena, or to the production of the documents to the court pursuant to the subpoena.  The second step is the decision of the judge concerning the preliminary use of the documents, which includes whether or not permission should be given to a party or parties to inspect the documents.  The third step is the admission into evidence of the document in whole or part; or the use of it in the process of evidence being put before the court by cross-examination or otherwise.  It is the third step which alone provides material upon which ultimate decision in the case rests.  In these three steps the stranger and the parties have different rights, and the function of the judge differs.”

It follows that the alleged principle relied upon for the Chapmans is not to be taken into account in resolution of the present issue.

47                  On the issue of relevance it is appreciated in the submission for the Chapmans that it is not for this Court on this occasion to finally determine that issue.  However, it is submitted that the Court should have in mind the principles by which relevance is determined in order to resolve the question whether the subpoenas against non-parties are to be regarded as of a speculative character and in the nature of fishing.  The first such principle is that in determining whether a costs order will be made against a non-party the mere fact that they may have benefited from the litigation or provided “the sinews of war” will not be sufficient:  Vestris v Cashman (1998) 72 SASR 459 at 457 and Montague Mining Pty Ltd v Gore & Ors (trading as Clayton Utz) [2001] FCA 791 at pars [53] and [57].  Secondly, reference is made to the principle that if no security for costs has been sought against a party, at the end of the proceedings an order for costs should not be made against a non-party because the party, against whom security was not sought, is a man of straw:  Knight at 191; Vestris at 457 – 458. 

48                  The submissions for the Commonwealth respondents directed attention to the decision of the Full Court in Bailey & Ors v Beagle Management Pty Ltd & Ors (2001) 182 ALR 264.  That was a case where respondents sought security of costs by way of motion and served a notice to produce to an applicant requiring production of financial documents.  The applicant filed a motion to set aside the notice to produce as fishing and an abuse of process.  The Full Court (Heerey, Branson and Merkel JJ) refused leave to appeal from the decision of the primary judge (Goldberg J).  In his reasons, Goldberg J accepted that Commissioner for Railways v Small was authority for the proposition that where a subpoena or a notice to produce is served to obtain evidence to support a parties’ 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.  Rather that will only occur where a party is in fact seeking to discover whether the party has a case at all.

49                  Three aspects of the reasons of the Full Court are relied upon.  The first is the statement by the Full Court rejecting any rule that for a notice not to constitute fishing the material relied upon by the respondent in support of the notice should give rise to a reasonable apprehension that the corporation may be unable to pay the costs of the respondent if successful in defence:  Bailey at 269 par [22].  The Court preferred no rigid criteria and said that the judge must be satisfied that the documents the subject of the notice are specified with reasonable particularity and are properly being sought to advance the case to be put by the applicant:  Bailey at 270 par [24].

50                  Additionally, fishing could not be found to exist where the documents sought by the notices to produce in fact exist, in that case being standard financial documents:  Bailey at 270 par [26].

51                  Thirdly, the Court had regard to substantial rethinking in the court in recent years in relation to discovery before action and the provisions of O 15A r 6.  It said these expressly contemplate that what once might have been castigated as fishing was now contemplated by the rule:  Bailey at 270 par [27].

Reasoning

52                  Having considered the above submissions and authorities I reach the following views in relation to the proposed subpoenas.

Subpoena terms

53                  Turning to terms of all the subpoenas, I consider the following to be the position.

54                  As to pars 1 – 3 concerning solicitors’ costs and disbursements, the solicitor’s advice in their letter of 31 October 2001 concerning fees is unrefuted.  In the face of that advice there is no legitimate forensic purpose in seeking to subpoena documents relating to fees rendered.  However, the solicitor’s advice does not clarify the precise position concerning the disbursements.  Therefore any subpoena which issues should not refer to “fees” in these paragraphs. 

55                  As to pars 4, 5 and 6 relating to non-party sharing payment or indemnity, I accept that the answer in the solicitor’s letter of 31 October 2001 picked up the answer of 2 October 2001 as responsive to the question in relation to arrangements, agreements and understandings.  The issue in par 4 concerning sharing of proceeds is answered by the letter.  However, the letter answers questions 5 and 6 only with reference to “any other party” and not with reference to “any person or company”.

56                  As to par 7, it has a legitimate forensic purpose relating to the proposed contention of improper purpose derivative from the staving off creditors.  However, it should be limited to documents of the stated type “reporting on” the principal proceeding; the obligation should be limited to the applicants or their solicitors; Westpac and PPL should be excluded from the creditors to whom it is directed (because subpoenas will issue to them) and the creditors should be restricted to the creditors of the applicants as at the date of the institution of the principal proceeding.

57                  In relation to pars 8 and 9 there is an apparent conflict between the responses in the Chapmans’ solicitors’ letter of 31 October 2001 and the matters set out above under the heading “The Lincoln Trust”.  A legitimate forensic purpose would therefore be served by these paragraphs of the subpoena issuing so that the apparent conflict can be resolved.

58                  Paragraph 10 of the subpoena gives the uncontroverted answer that there are no documents of the type sought by this paragraph.  No legitimate forensic purpose would be served by the issue of the paragraph as part of a subpoena.

59                  Paragraph 11 in the Chapmans subpoena should be amended by the addition of the following words:  “and excepting any documents being media documents previously discovered in the action” (whether described as media folders, media releases, media materials or electronic media tapes).

60                  I am satisfied the subpoenas for which leave is granted as amended in accordance with the above reasons, sufficiently particularise the documents sought.

Subpoena recipients

61                  Turning to the proposed recipients of the subpoenas, I consider the following to be the position, subject to what has been said above concerning the terms of the subpoena. 

62                  The subpoena to the Chapmans should issue.  That proposition was not seriously contested.  The Galle subpoena should issue because of the contractual involvement of the trust though its trustee Kebaro in the issue of costs and disbursements in the proceedings.

63                  In relation to the subpoenas directed to Kebaro in its own right and as trustee of the Hindmarsh and Fraser trusts and Westover, I conclude that these subpoenas would be a ‘fishing expedition’.  They would be issued in circumstances where the Commonwealth respondents do not have evidence that fish of a particular kind are in a pool and desire “to be at liberty to drag it for the purpose of finding out whether there are any there or not”:  Associated Dominions Society at 254.

64                  However, I accept the submission for the Commonwealth respondents that, as stated by the Full Court in Bailey at 270 par [27], O 15A of the Federal Court Rules changes the scope of “fishing” in relation to discovery.  The Commonwealth respondents should have the opportunity to bring an application if desired for discovery from the non-parties referred to in the previous paragraph.

65                  In relation to Westpac and PPL subpoenas there is acceptance on behalf of those two parties that as non-parties they are real litigants by reason of their interest in the subject matter of the litigation:  Federal Court of Australia Act 1978 (Cth) s 43 and Knight v FP Special Assets Ltd and Ors (1992) 174 CLR 178; Caboolture Park Shopping Centre Pty Ltd (in liquidation) v White Industries (QLD) Pty Ltd (1993) 45 FCR 224.  Leave will therefore be granted for the issue of subpoenas against Westpac and PPL.  As the acceptance relates to the subpoena unamended as a consequence of these reasons, the subpoena should issue in the form originally sought by the Commonwealth respondents.

Conclusion

66                  For the above reasons leave should be granted or refused in terms of the draft orders.

Associate:

Dated:              8 November 2001