FEDERAL COURT OF AUSTRALIA

Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 11) [2011] FCA 1061

THE COURT ORDERS THAT:

1.    Save to the extent that it requires production of the documents referred to in paragraph 1 of the schedule to the subpoena, the subpoena directed to GMK Partners Pty Ltd is set aside.

2.    The applicants pay half of the taxed costs of the first, second and third respondents of and incidental to the application to set aside the subpoena.

3.    Liberty to appeal is granted to each party in relation to the fixing of trial dates earlier than those currently fixed in March 2012.

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

REASONS FOR JUDGMENT

1    A controversy has emerged in relation to a subpoena which has been issued by the Court at the request of the Sunland parties, directed to GMK Partners Pty Ltd (GMK). An application has been made by the first, second, and third respondents, ie Prudentia Investments Pty Ltd (Prudentia), Hanley Investments Pty ltd (Hanley), and Mr Reed, for that subpoena to be set aside.

2    To understand the background to that application, it is necessary to read these reasons for judgment in conjunction with two earlier interlocutory judgments delivered by me in this case, namely, Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 4) [2010] FCA 863 (number 4 judgment) and Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 8) [2011] FCA 221 (number 8 judgment).

3    Materially for present purposes, one of the controversies addressed in those earlier interlocutory judgments concerned the extent to which, if at all, there ought to have been disclosure by Prudentia, Hanley and Mr Reed of documents which underpinned a report by GMK Centric Chartered Accountants of 23 December 2009 and an addendum to that report of 1 April 2010; see, in particular, para 40 to para 42 of the number 4 judgment and order 3 of the orders made on 19 August 2010. In the number 8 judgment at para 15 and para 16, I stated:

15    The respondents did not gainsay the Sunland parties’ submission as to the intent of Order 3. Rather, they drew attention to the terms of that order and to the issue on the pleadings to which it related. Their submission was that the flaw in the Sunland parties’ position was that it treated Order 3 as a requirement to discover the documents which underpinned the GMK report, rather than to discover documents falling within the terms of that order. In that submission they were not mistaken.

16    Order 3 does not, in terms, require the discovery of documents which underpin the GMK report. To treat it as if it did is, truly, to engage in a form of forensic “mission creep”. That report provided occasion under O 15 r 8 for the making of Order 3 but the result of that was not to order discovery of the documents upon which its authors had relied in making that report but of “any documents within their possession, custody or control which show the payment of any part of the AED 44,105,780 to, or at the direction (directly or indirectly) of Mr Reed or Mr Joyce at any time after the receipt of that sum by Clyde & Co and the reasons for any such payment”. Of course it is possible that documents falling within these classes may very well have underpinned the GMK report but equally that may not be so.

4    The subpoena directed to GMK seeks the production of four categories of documents, namely:

1.    copies of all documents relating to any instruction given to GMK, including but not limited to instructions provided by representatives of Freehills, Prudentia Investments Pty Ltd, Hanley Investments Pte Ltd and, or alternatively Angus Reed, in respect of the Reports;

2.    copies of all documents provided to GMK by any person, including but not limited to documents provided by representatives of Freehills, Prudentia Investments Pty Ltd, Hanley Investments Pte Ltd and, or alternatively, Angus Reed so that GMK could prepare the Reports;

3.    copies of all drafts or working copies of the Reports;

4.    copies of any documents recording any communication between representatives of GMK, Freehills, Prudentia Investments Pty Ltd, Hanley Investments Pte Ltd and, or alternatively, Angus Reed, dated after 23 December 2009 relating to the matters referred to in the Reports.

5    The submission made on behalf of Prudentia, Hanley and Mr Reed was, in effect, that the subpoena was an abuse of process, subversive of the outcomes at earlier interlocutory stages in respect of the limits of the discovery obligations of Prudentia, Hanley and Mr Reed, and subversive also of the conclusiveness of the affidavits verifying the lists of documents by those parties. Reference was made in support of that submission to the paragraphs of the earlier judgments to which I have already made reference.

6    On behalf of the Sunland parties, the submission was made that earlier controversies in respect of discovery had concerned whether or not occasion had been shown to go behind the conclusiveness of affidavits verifying lists of documents, and further, that the focus of the controversies concerning discovery had been on whether particular classes of document could be regarded as directly relevant to issues on the pleadings. The submission was that, in contrast, the question in respect of a subpoena was one of adjectival relevance.

7    In Kizon v Palmer (1997) 75 FCR 261 at 271, Beaumont J stated:

If it be accepted, as it must, that the Full Court has decided at least that discovery is prohibited, it must follow, in my view, that any indirect attempt to obtain discovery by another route, namely, through the issue of a subpoena, should not be permitted in this Court. It is a principle of general application that it is not permissible to do indirectly what is prohibited directly, (see for example Caltex Oil (Australia) Pty Ltd v Best (1990) 170 CLR 516 at 522-523).

In the present procedural area, there is much to be said for the view that symmetry and consistency should be achieved in the control by the Court of all aspects of its procedures, so that, even if the prohibition (in this case, on discovery) does not extend originally, or directly, to the other process (that is, the subpoena), the prohibition should be viewed, nonetheless, as intended to apply derivatively to the subpoena process as well (see Trade Practices Commission v Port Adelaide Wool Company (1996) 60 FCR 366 and Telstra Corporation v Australis Media Holdings (No 1) (1997) 4 NSWLR 277).

8    In a later case, Cooper J observed in Australian Competition and Consumer Commission v Shell Co of Australia Ltd (1999) 161 ALR 686 at [50]:

The rationale for this principle is, in my view, that where a particular method has been prescribed by the rules for the achievement of the particular objective, such as the obtaining of further discovery conformably with the rules relating to discovery of documents espoused in Mulley v Manifold (1959) 103 CLR 341, it is impermissible to attempt to achieve that objective through the subpoena process.

9    No objection was taken on behalf of the Sunland parties to the standing of Prudentia, Hanley, and Mr Reed to seek to have the subpoena directed to GMK set aside. That was an appropriate stance to take, having regard to an authority to which I was helpfully referred by counsel for Prudentia, Hanley, and Mr Reed, namely, Something Fast Pty Ltd v Patinack Farm Pty Ltd [2011] NSWSC 409. In that case, Ball J, referring to an earlier judgment in that court, namely, Street v Luna Park Sydney Pty Ltd [2006] NSWSC 95 at [6], per Brereton J, remarked at para 8 that the standing that a party to proceedings had to set aside a subpoena addressed to a third party:

… arises from the fact that a party to proceedings has an interest in ensuring that steps taken in those proceedings do not amount to an abuse of process.

10    His Honour further observed that it was nonetheless relevant in determining whether a subpoena was an abuse of process:

… to consider by whom the allegation of abuse is made and the nature of the abuse that is said to exist.

11    Yet further his Honour observed:

… if the documents concern the affairs of a party to the proceedings, and the objection is that the documents are not relevant to the issues in the case and have no other forensic purpose, it is very difficult to see why the court should treat an application by that party to set aside the subpoena any differently from an application made by the party to whom the subpoena is addressed.

12    I respectfully agree with those observations.

13    There is merit in the Sunland parties’ submission that the focus for the controversy concerning the subpoena is not in complete conformity with the earlier discovery controversy. They rightly highlight that adjectival relevance, rather than direct relevance, is the relevant consideration in relation to whether there is a legitimate forensic purpose in the subpoena.

14    In Australian Gaslight Company v Australian Competition and Consumer Commission [2003] FCA 1101 at [8], French J, as the Chief Justice then was, stated the following matters as relevant to the question of whether to grant leave to issue a subpoena:

It is not appropriate to be overly prescriptive in setting out criteria for the grant of leave to issue a subpoena. Plainly, the documents sought must have at least some apparent potential relevance to the matters in issue in the litigation. The assistance that the requesting party may derive from the production of such documents must be taken into account. Case management considerations are also relevant. A wide-ranging subpoena, seeking documents of doubtful relevance at great inconvenience to, or that risk compromising the commercial privacy of, a third party, may not readily attract the grant of leave. Where the issue of such a subpoena is likely to delay progress to trial because of the legitimate interests of a party in resisting its issue, that may also be a practical factor to be weighed.

15    I accept the submission made on behalf of the Sunland parties that the relative proximity at the time of the issuing of the subpoena of the then-apprehended trial dates does not, as it might otherwise at an earlier stage of proceedings, mean that the subpoena should be regarded as an abuse of process on the basis that third-party discovery ought to have been sought. In fairness, though, that particular basis upon which, on occasion, subpoenas have been regarded as an abuse of process was not central to the case brought by Prudentia, Hanley and Mr Reed. When I look at the case which they did bring and the classes of documents sought in the schedule to the subpoena, it does seem to me that some of the classes of documents sought do have about them the vice of seeking to achieve by another process, namely, subpoena, that which was forbidden as a result of the resolution of the earlier controversies in relation to discovery.

16    Paragraphs 15 and 16 of the number 8 judgment highlight a particular concern which I had in relation to the GMK report, which was truly an ex post facto rather than a contemporaneous transactional record, that there was a distraction emerging as to the foundation for that report. It seems to me that the class of documents referred to in para 2 of the schedule to the subpoena does fairly admit of the description of being subversive of the outcomes of earlier discovery controversies.

17    As far as the other classes of document sought in the subpoena are concerned, it is common ground that the author of the GMK report is not a proposed witness in the proceedings. That being so, it is difficult, even adjectivally, to see any legitimate forensic purpose in the seeking of production of drafts or working copies of the reports. Such a category of document is not infrequently sought by subpoena for the purpose of cross-examining the author of an expert report. For that purpose, there is a ready and legitimate forensic end which can be discerned in earlier drafts or working copies being produced for the utility that may provide in the cross-examination of the author of the report in relation to views finally expressed when compared and contrasted with those in earlier drafts or working copies. That is not present in this case. Instead, there is something of a speculative element that the drafts or working copies might reveal oral instructions, or the prospect of oral instructions, given by two persons whose statements in evidence have been filed, namely, Mr Reed and another director of Prudentia, Mr Roysmith. That seems to me to extend the realm of the adjectival into what truly is to be regarded as fishing. Further, it also admits of a vice which I sought to address in terms of what I described as “mission creep” in the number 8 judgment and which I sought to address in that judgment. It bears repeating that the GMK report and its addendum are not transactional records.

18    Of more concern to me are classes 1 and 4 in the schedule to the subpoena. Insofar as the documents in those classes contained admissions as to a transaction in 2007, I would have thought that those documents were directly relevant and hence governed by a disclosure obligation. Further, each class would seem to be within the possession, custody or control of Prudentia, Hanley and Mr Reed. Proceeding on that basis would yield the result that the subpoena is really seeking that which is already the subject of discovery and is subversive of the outcomes that have been achieved via discovery made by the parties. That, though, is to speculate about the nature of the instructions that have been given. Viewing matters prospectively and adjectivally, it is not impossible to see how there may be a forensic use of the instructions given in respect of the GMK report in relation to the cross-examination of Mr Reed or, as the case may be, Mr Roysmith.

19    It is harder to make such a connection in relation to category 4 with respect to communications relating to matters referred to in the reports. That truly seems to me to have a fishing quality about it.

20    The end result, then, is one which perhaps yields a great deal to the concept of adjectival relevance, but nonetheless does not seem to me to be subversive of the earlier discovery outcomes. It is possible to envisage a class of document which falls within class 1 of the schedule to the subpoena directed to GMK which was not directly relevant, and hence not already the subject of concluded interlocutory controversies concerning discovery, and yet is adjectivally relevant. The end result, then, is that, save to the extent that it seeks documents referred to in para 1 of the schedule to the subpoena, the subpoena is set aside.

21    As to costs, there has certainly been mixed forensic success. It is not always possible in advance to anticipate the degree of forensic success. There are matters of impression that intrude in terms of the extent to which the subpoena should be regarded as an illegitimate endeavour to subvert earlier discovery outcomes. For all that, Mr Reed, Prudentia and Hanley have enjoyed forensic success on that subject, albeit they overreached themselves in terms of not conceding the extent to which the embrace by adjectival relevance of a subpoena might be wider than that which is directly relevant.

22    I do not consider that it would do justice between the parties just to let the costs lie where they fall. That is because Mr Reed, Prudentia and Hanley have been vindicated, in my view, in the position which they took in relation to para 2 of the schedule to the subpoena. It is a concern to me that the Sunland parties procured the issuing of a subpoena which extended to that category or class of document without informing the registrar on the application of the outcomes of the discovery controversies as revealed by the number 4 and number 8 judgments. That said, the forensic success which Mr Reed, Prudentia and Hanley have enjoyed is not complete. To do other than robustly to allocate a proportion of costs in their favour would, I think, impose an impossible burden on a registrar conducting a taxation of costs, if matters come to that. For that reason, I propose to order in favour of Mr Reed, Prudentia and Hanley a proportion of costs which recognises the particular principal position which they took, as well as the extent to which they overreached themselves. The order that I make is that the Sunland parties pay half of the taxed costs of Mr Reed, Prudentia and Hanley of an incidental to the application to set aside the subpoena.

Associate:

Dated:    13 September 2011