Federal Court of Australia

Mountain View Productions LLC v Keri Lee Charters Pty Ltd [2022] FCA 161

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 23(3) of the International Arbitration Act 1974 (Cth), the subpoenas identified at paragraph [34] of the reasons for judgment published today be issued.

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

REASONS FOR JUDGMENT

STEWART J:

Introduction

1    This is an application by Mountain View Productions LLC (MVP), the respondent in an arbitration before a sole arbitrator, for the issue of subpoenas to produce documents under s 23(3) of the International Arbitration Act 1974 (Cth) (IAA). The respondent, Keri Lee Charters Pty Ltd, as the claimant in the arbitration alleges that in the course of the charter of a 55m luxury motor yacht, the Keri Lee III, to MVP, the vessel sustained damage. Keri Lee Charters claims monetary sums totalling approximately $12.85 million. The arbitration is listed for a three-week hearing commencing on 11 April 2022 in Brisbane.

2    In May 2021, Keri Lee Charters had its place of business at Cannon Hill, Queensland, and MVP had its place of business in North Hollywood, California, USA. At that time, the parties agreed on an amended MYBA Charter Agreement form that:

any controversy or claim arising out or related to this Agreement … will be determined and resolved by confidential arbitration conducted by the Commercial Arbitration Act (Qld) by a single arbitrator who will be a senior counsel experienced in maritime law appointed by agreement or failing agreement the president of the Queensland Barristers Association. (sic)

3    By s 1(1) of the Commercial Arbitration Act 2013 (Qld), which can be taken to be the Act referred to in the arbitration agreement, that Act applies only to “domestic commercial arbitrations”. The note to that provision notes that the IAA “covers international commercial arbitrations”. Under s 1(3) of the Queensland Act, one of the requirements for an arbitration to be a domestic arbitration is that the parties to the arbitration agreement have, at the time of the conclusion of that agreement, their places of business in Australia. Since the parties to the arbitration agreement in this case did not both have their places of business in Australia at the time of concluding the agreement, the arbitration is not a domestic arbitration to which the Queensland Act applies.

4    Moreover, by Art 1(3)(a) of the UNCITRAL Model Law on International Commercial Arbitration, which is Sch 2 to the IAA, an arbitration is “international” if the parties to the arbitration agreement have, at the time of the conclusion of that agreement, their places of business in different States (i.e., in different countries). Thus, by Art 1(1) of the Model Law and s 16(1) of the IAA, the Model Law applies to the arbitration. Further, by s 22(1) of the IAA, Div 3 of Pt III of the IAA applies to the arbitration. Section 23, on which MVP relies, is in that division. The parties did not opt-out of s 23 as they could have done under s 22(2)(a) of the IAA. Section 23 is therefore available to MVP in respect of the arbitration.

5    Section 23 of the IAA relevantly provides:

23    Parties may obtain subpoenas

(1)    A party to arbitral proceedings commenced in reliance on an arbitration agreement may apply to a court to issue a subpoena under subsection (3).

(2)    However, this may only be done with the permission of the arbitral tribunal conducting the arbitration proceedings.

(3)    The court may, for the purposes of the arbitral proceedings, issue a subpoena requiring a person to do either or both of the following:

(a)    to attend for examination before the arbitral tribunal;

(b)    to produce to the arbitral tribunal documents specified in the subpoena.

(4)    A person must not be compelled under a subpoena issued under subsection (3) to answer any question or produce any document which that person could not be compelled to answer or produce in a proceeding before that court.

(5)    The court must not issue a subpoena under subsection (3) to a person who is not a party to the arbitral proceedings unless the court is satisfied that it is reasonable in all the circumstances to issue it to the person.

6    By s 22A of the IAA, “court” in s 23 includes this Court.

7    Rule 28.46(2)(b) of the Federal Court Rules 2011 (Cth) sets out the requirements for an affidavit supporting the application for the issue of a subpoena. I am satisfied that those requirements have been met.

8    In a procedural order made on 3 February 2022, the arbitrator granted MVP permission as contemplated by s 23(2) of the IAA to apply to this Court for the issue of a subpoena to each of Blackpond Marine Consultants Pty Ltd and Australian Marine Consultants Pty Ltd (AMC) for the production of documents. The relevance of Blackpond and AMC to the dispute between MVP and Keri Lee Charters is that part of the alleged damage is said to be constituted by the difference between the condition of the vessel as recorded in an on hire survey report prepared by Mr Joe Akacich of Blackpond and surveyors from AMC and an off hire survey report prepared solely by Mr Akacich of Blackpond. Keri Lee Charters also alleges further damage that was not described in Mr Akacich’s off hire survey report.

9    It is to be observed that both Blackpond and AMC carry on business in Australia, the subpoenas are addressed to them at their places of business in Queensland, and the seat of the arbitration is in Australia. Therefore, the considerations that led to the refusal of the issue of subpoenas for production in Stemcor (A/sia) Pty Ltd v Oceanwave Line SA [2004] FCA 391, i.e., that the person to be subpoenaed was in a foreign country and had not submitted to the local proceeding, and Samsung C&T Corporation, in the matter of Samsung C&T Corporation [2017] FCA 1169, i.e., that the seat of the arbitration was in a foreign country, do not arise.

The arbitrator’s reasons

10    In considering his role in the process of issuing a subpoena, the arbitrator considered that the process under s 23 of the IAA contains four important safeguards, each of which is identified in the Revised Explanatory Memorandum, International Arbitration Amendment Bill 2010 (Cth) (at [138]). The first is the requirement of the arbitrator’s permission under sub-s (2), which permission is intended to prevent a party from drawing out arbitral proceedings or from invoking procedures which are unnecessary for the resolution of the dispute. The second is that the court must be satisfied that the subpoena is genuinely sought for the purposes of the arbitral proceedings and not for some other purpose. The third is that, under sub-s (5), the court must be satisfied that it is reasonable in all the circumstances to issue the subpoena. The fourth is that, under sub-s (4), a person must not be compelled to do anything which the person could not be compelled to do in a proceeding before the court to which the application is made.

11    The arbitrator accepted that his role was limited to the first of those safeguards. In concluding that he was satisfied that the subpoenas were not being sought for an improper purpose or that they were unnecessary, the arbitrator made the following additional observations:

(1)    The documents sought might lead to a line of enquiry as to issues in the arbitration although it was not possible to determine what might result from such enquiries. If the documents sought exist, they would have apparent relevance to the issues in the arbitration and there is a legitimate forensic purpose in MVP’s application seeking their production.

(2)    Items 3-5 of the categories of documents sought in the subpoena directed to Blackpond are not limited by time and, as such, might give rise to an argument as to reasonableness. Any such argument is, however, a matter for the Court.

The applicable principles

12    The principles applicable to the grant of a subpoena under s 23 of the IAA were considered by Croft J in Esposito Holdings Pty Ltd v UDP Holdings Pty Ltd [2015] VSC 183 and UDP Holdings Pty Ltd v Esposito Holdings Pty Ltd [2018] VSC 316. They may be summarised as follows:

(1)    Given the international provenance of the IAA, it is inappropriate for the court to embark upon a process which would in effect second guess an arbitral tribunal that has granted permission for an application to issue a subpoena to be made. The role of the court is clearly meant to be one of assistance and support for arbitral processes and not one of heavy handed intervention. Esposito at [5], quoting ASADA v 34 Players and One Support Person [2014] VSC 635 at [63].

(2)    The court should not act as a mere rubber stamp of the arbitral tribunal’s permission for a party to apply for the issue of a subpoena. That is because the issue of a subpoena constitutes an exercise of the court’s coercive powers and, especially against a non-party to the arbitration, the court must determine for itself whether issuing the subpoena is reasonable in all the circumstances. UDP at [11].

(3)    The court should only issue a subpoena to produce documents if it is satisfied that the subpoena is issued for a legitimate forensic purpose. Esposito at [6]; Alinta Sales Pty Ltd v Woodside Energy Ltd [2008] WASC 304 at [20] per Beech J.

(4)    There is a legitimate forensic purpose for the issue of a subpoena in respect of documents that are apparently relevant. Esposito at [6]; Alinta at [21].

(5)    Apparent relevance is a low threshold and it is to be assessed by reference to the issues in the arbitration, taking into account the competing contentions of the parties. It is enough to establish apparent relevance if a document or class of documents gives rise to a line of enquiry relevant to the issues before the arbitral tribunal. Esposito at [6]; Alinta at [22] and [28].

(6)    The difficulty of assessing relevance prior to hearing must be taken into account. The necessity of having a document in order to fairly dispose of the issues in dispute may not become apparent before a final hearing. Esposito at [6]; Alinta at [23].

(7)    The assistance that the party requesting the subpoena may derive from the production of documents sought must be taken into account. Esposito at [6]; Alinta at [27]; Australian Gas Light Co v ACCC [2003] FCA 1101 at [8] per French J.

13    Subject to what follows, I accept that these principles are applicable to the present application. At the same time, as cautioned by French J in Australian Gas Light at [8] (and quoted in Esposito at [6]), it is important not to be overly prescriptive in setting out the criteria for the grant of a subpoena.

14    I also add an observation in relation to the question of relevance. Under s 23(2) of the IAA, one of the requirements for the issue of a subpoena is that the arbitrator has granted permission. This is consistent with Art 27 of the Model Law which provides that with the approval of the arbitrator, a party may apply to a competent court for assistance in taking evidence. Thus, the party requires the approval of the arbitrator and the court. As between the arbitrator and the court, it is obviously the arbitrator who is best placed to make an assessment of relevance – she has the management of the proceeding and the closest familiarity with the issues in dispute and how they might be proved.

15    Therefore, in my view the relevant considerations for the arbitrator’s decision whether or not to grant permission include not only the effect that the issue of the subpoena might have on the arbitration proceeding, such as disruption or delay, but also, crucially, whether the documents that are sought are relevant in the requisite sense and that they might assist the arbitrator in the determination of the parties’ dispute; if they were not so relevant then the subpoena could hardly be said to be for a legitimate forensic purpose. Generally, the court whose authority is sought for the issue of the subpoena will not second guess the arbitrator’s assessment of relevance; the court would not contradict the arbitrator with regard to relevance save in a clear case.

16    There is a further point to bear in mind. It is that I am at this stage called upon to decide whether the issue of the subpoenas in question is reasonable without the benefit of any evidence or submissions by the addressees of the subpoenas. It may be that once they have been served with the subpoenas, they wish to challenge them on the basis that they are unreasonable and put forward evidence and submissions in support of that contention. It is just as well to bear in mind that the conclusion with regard to reasonableness is therefore necessarily a preliminary one which is open to being revisited in the event that that becomes necessary.

Consideration

The Blackpond subpoena

17    As set out in a schedule of documents, the Blackpond subpoena seeks production of the following:

1.    A copy of this subpoena.

2.    A cover letter that clarifies whether this subpoena has been fully complied with and clarifies any objections raised.

3.    All documents exchanged between you (including any representative or employee of you) and:

(i)    Keri Lee Charters Pty Ltd;

(ii)    Mr Trevor Lee;

(iii)    Mrs Keri Lee.

4.    All documents exchanged between you (including any representative or employee of you) and:

(i)    Mr Ross Kinneally of Kinneally Miley Law;

(ii)    Mr Michael Coe of of [sic] Kinneally Miley Law;

(iii)    Mr Damien Atkinson QC;

(iv)    Australian Marine Consultants Pty Ltd;

(v)    Darren Simmonds;

(vi)    MCA Projects Pty Ltd;

(vii)    The Superyacht People;

(viii)    Mr. Cameron Bray;

(ix)    any crew member of the Vessel:

in respect of or concerning the Vessel.

5.    All documents exchanged between you (including any representative or employee of you) and any other person or entity in respect of or concerning:

(i)    the repair of the Vessel; and

(ii)    the charter, hire or use of the Vessel.

Items 1 and 2

18    A question arises as to the justification for items 1 and 2, being the production of a copy of the subpoena and a “cover letter” by the addressee clarifying whether the subpoena has been fully complied with and clarifying any objections raised. By r 28.46(3)(b), Form 55B is the applicable form. That form requires the addressee “to produce this subpoena or a copy of it and the documents or things specified in the Schedule of documents”. There is therefore no need, and hence no justification for listing a copy of the subpoena as an item in the schedule. Item 1 should accordingly be deleted. MVP accepts as much.

19    Further, the documents referred to in the schedule to Form 55B are necessarily pre-existing documents; there is nothing in s 23 of the IAA or r 28.46 which contemplates the imposition on a party of the burden of having to create any new document.

20    It has however long been the position that:

A witness called on by a subpoena duces tecum may be asked, without being sworn, whether he has brought the documents, and if so, whether he produces them to the Court. If he states that he objects to produce them, he should be sworn and the grounds of his objection stated on oath so that the Court may judge of their sufficiency…

(Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at 574 per Jordan CJ, adopted in Rochfort v Trade Practices Commission [1982] HCA 66; 153 CLR 134 at 143 per Mason J.)

21    In the case of an international arbitration, Form 55B specifies that the documents must be produced to the arbitrator. Section 23A(1)(c) of the IAA provides that a party may apply to a court for an order under sub-s (3) if a person refuses or fails to produce a document that the person is required to produce under a subpoena issued under s 23(3). Subsection (3) then provides that the court may order the person to attend before the court for examination or to produce to the court the relevant document. It is on that occasion that the witness may be asked whether they have brought the documents and what grounds, if any, they rely on in objecting to production.

22    There is nothing in that process that justifies the imposition on the addressee of a subpoena an obligation to produce a letter such as contemplated by item 2. That item should accordingly be deleted. MVP accepts as much.

Items 3 to 5

23    Insofar as the remaining items are concerned, the arbitrator concluded that they are sought for a legitimate forensic purpose, and that they may be relevant in the appropriate sense. I see no reason to second guess those conclusions. As I have said, the arbitrator is in the best position to make those assessments.

24    However, because Blackpond is not a party to the arbitration, s 23(5) requires that the court be satisfied that it is in all the circumstances reasonable to issue the subpoena to it. As mentioned, the arbitrator in his procedural order raised concerns that the Court might have regarding items 3-5 of the subpoena sought. Those concerns relate to the reasonableness of there being no specified time period in respect of which the documents are sought. The applicant’s original submissions do not address this question so I called for further submissions.

25    It is to be observed that the absence of a time limitation on the category of documents is a matter going not only to the reasonableness of such a category, but also to its relevance. As mentioned, the arbitrator is in a better position than the Court to consider the question of relevance. I would accordingly have been assisted by the arbitrator having himself addressed what time period of the categories in question would be relevant to the issues in dispute in the arbitration.

26    In my view, and as foreshadowed by the arbitrator, the categories of documents sought by items 3-5 as originally drafted are unreasonable. The principal reason for that conclusion is that there is no time period for the documents in respect of which production is sought. The keel of the vessel was laid in November 1998 and it was launched in 2002. It is unreasonable to require Blackpond to produce documents concerning the vessel, assuming they exist, from over a decade prior to the events that are the subject of the dispute. Also, the production of such a wide range of documents would have no legitimate forensic purpose.

27    In respect of item 3 of the schedule, I consider that a limitation of documents brought into existence within the period commencing two years prior to the charter in issue, i.e., from two years prior to 8 May 2021, would be amply sufficient to reveal any want of independence of Blackpond as alleged by MVP. MVP accepts such a limitation.

28    Insofar as items 4 and 5 of the schedule are concerned, the vessel was most recently refurbished in 2020. Although the points of claim say that the refurbishment was “in or about late 2020 and early 2021”, the on hire survey report records that various areas of the hull paint (exterior) were newly applied in September 2020. I infer that that is likely to have occurred near the end of the refurbishment rather than at the commencement. In order to cover the refurbishment and the lead up to it, I consider that it is justified to require production of the categories of documents sought by items 4 and 5 of the schedule from 1 January 2020. MVP accepts as much.

The AMC subpoena

29    Items 1 and 2 of the schedule to the AMC subpoena are the same as the corresponding items of the schedule to the Blackpond subpoena. They therefore fall to be deleted for the same reasons as dealt with above (at [18]-[22]).

30    The remaining items of the AMC subpoena are as follows:

3.     All documents exchanged between you and any other person or entity in respect of or concerning any survey or inspection of the Vessel in or about May 2021.

4.     All notes or other documents held by you in respect of or concerning any survey or inspection of the Vessel in or about May 2021.

5.     All photographs taken by you in respect of or concerning any survey or inspection of the Vessel in or about May 2021.

6.     All documents of the type described in paragraphs 3, 4 and 5 above in respect of or concerning any survey or inspection of the Vessel undertaken by AMC or anyone else after May 2021.

31    Each of those items is appropriately limited with regard to time. There is no reason to suppose that the arbitrator is wrong in concluding that these categories are sought for a legitimate forensic purpose. In all the circumstances, I consider them to be reasonable.

The respondent’s position

32    Keri Lee Charters filed an address for service but did not appear to oppose the issue of the subpoenas. Instead, it conveyed to MVP to have conveyed to the Court that it does not oppose the subpoenas being issued provided that the scope of the subpoenas is not changed, in which case it reserves its right to change its position.

33    As is apparent, I propose to authorise the issue of subpoenas that have a different scope to the scope originally sought by MVP. However, since I am narrowing the scope and not making it in any way more onerous to comply with than it already is, I do not consider that Keri Lee Charters’ interests are in any way affected. In any event, by not appearing and making submissions on the subpoenas, Keri Lee Charters can be taken to have waived any right to do so.

Disposition

34    In the circumstances, there should be an order authorising the issue of subpoenas in the form of the subpoenas commencing at pages 11 and 17 of exhibit DSJ-1 filed in this proceeding, save that:

(1)    In each subpoena, items 1 and 2 of the schedule should be deleted;

(2)    In the subpoena addressed to Blackpond:

(a)    Item 3 of the schedule should be limited so as to apply only to documents that came into existence after 8 May 2019; and

(b)    Items 4 and 5 of the schedule should be limited so as to apply only to documents that came into existence after 1 January 2020.

Associate:

Dated:    1 March 2022