Aaron Peter Heath in its own capacity and as trustee for Heath Family Trust v Terry David Howson in its own capacity and as trustee for Terry Howson Dolphin Trust
[2018] WASC 288
•18 SEPTEMBER 2018
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: AARON PETER HEATH in its own capacity and as trustee for HEATH FAMILY TRUST -v- TERRY DAVID HOWSON in its own capacity and as trustee for TERRY HOWSON DOLPHIN TRUST [2018] WASC 288
CORAM: MASTER SANDERSON
HEARD: 6 SEPTEMBER 2018
DELIVERED : 18 SEPTEMBER 2018
FILE NO/S: CIV 2660 of 2017
BETWEEN: AARON PETER HEATH in its own capacity and as trustee for HEATH FAMILY TRUST
Plaintiff
AND
TERRY DAVID HOWSON in its own capacity and as trustee for TERRY HOWSON DOLPHIN TRUST
Defendant
Catchwords:
Practice and procedure - Application to set aside subpoenas - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA)
Result:
Some subpoenas set aside, parts of subpoenas set aside
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr C Slater |
| Defendant | : | Mr C Williams |
Solicitors:
| Plaintiff | : | Mountains Lawyers Pty Ltd |
| Defendant | : | Solomon Brothers |
Case(s) referred to in decision(s):
Apache Northwest Pty Ltd v Western Power Corp [1998] 19 WAR 350
Boase v Access International Management Pty Ltd [No 3] 2012 WASC 498
Porter v Sundance Resources [No 2] [2015] WASC 493
RCR Energy Pty Ltd v WCE Co‑Generation Pty Ltd [2017] VSCA 50
Stanley v Layne Christensen Company [2004] WASC 50
Tobin v Ezekiel [2008] NSWCA 1108
Wookey v Quigley [No 5] [2011] WASC 275
MASTER SANDERSON:
This was the defendant's application to set aside five subpoenas issued by the plaintiff. The application was brought under O 36B r 8A of the Rules of the Supreme Court 1971 (WA) (Rules). It was the defendant's position the subpoenaed documents did not serve a legitimate forensic purpose. As an alternative, it was submitted the subpoenas were an abuse of process.
Both parties were agreed as to the applicable principles. Inspection of the subpoenaed documents will be permitted where the documents have apparent relevance to matters in issue: Boase v Axis International Management Pty Ltd [No 3] 2012 WASC 498 [19]; Apache Northwest Pty Ltd v Western Power Corp (1998) 19 WAR 350 [374]. The documents subpoenaed need to be apparently relevant to the matters in issue as disclosed by the pleadings: Wookey v Quigley [No 5] [2011] WASC 275 [8] ‑ [9]. A legitimate forensic purpose will be established if a document gives rise to a line of enquiry which is relevant to the issues before the trier of fact: Stanley v Layne Christensen Company [2004] WASCA 50 [9]. There is an abuse of process if the issues to which the subpoenas relate are peripheral to the decisive issues for trial: Tobin v Ezekiel [2008] NSWCA 1108 [39].
In conformity with the approach adopted by counsel for the defendant, it is appropriate to begin by looking at the issues as disclosed by the statement of claim filed 22 June 2018. The plaintiff and the defendant, through their respective trustee companies, each own a half interest in a number of tourism related ventures operating out of Rockingham just south of Perth. The plaintiff alleges that by a written agreement executed on or about 7 May 2015, the plaintiff and the defendant sought to preserve the benefits of the business 'by an agreed succession plan'. This was done by way of back‑to‑back Put and Call Options. In the event of one of the parties becoming totally and permanently disabled (defined as a TPD event), the party suffering the TPD event could call on the other party to buy him out. Alternatively, the party not suffering the TPD event, but the TPD event having occurred, could call for the other party's shares. It is pleaded that these options were not applicable until both the plaintiff and the defendant each had a TPD policy relating to the agreement in place. It is the plaintiff's case that the necessary policies were in place.
On or about 10 September 2016, the defendant suffered a TPD event. At the time he held an insurance policy with AIA Australia Ltd and he was paid out the sum of just over $5.2 million pursuant to the policy. The plaintiff then called for the defendant's shares. The defendant has refused to deliver the shares. Moreover, he has continued to work in the business. The plaintiff says there was an implied term in the contract that after the exercise of the option, the defendant would cease working in the business or would only work as directed by the plaintiff. The plaintiff says the defendant is in breach of this implied term and is liable to the plaintiff for damages.
The defendant denies the parties ever reached an agreement. He does acknowledge that a document which he refers to as the 'Agreement Document' came into existence and was signed by both the plaintiff and the defendant. But for reasons not presently relevant, he does not admit that the document was properly executed. The defendant further alleges no policies were taken out as required by the agreement and that as a consequence, it was not the intention of the parties to the Agreement Document to make a concluded bargain. He says that the Agreement Document was uncertain and unenforceable.
Based on the pleadings, it would seem there are three issues between the parties. First, was there a written agreement which, by its terms, was enforceable? Second, if there was, were insurance policies taken out by the defendant in fulfilment of the requirements of the written agreement? Third, were there implied terms in the contract and if there were, is the defendant in breach of those implied terms?
Central to the defendant's argument was the process by which a court determines whether parties are in a contractual relationship. In that process, the subjective intentions of the parties are irrelevant. There is no question of ambiguity in the terms of the written agreement, so any pre‑contractual facts are not relevant to explain the terms of the document. Further, the defendant says that events which occurred after the parties entered into the contract are also not relevant. They cannot explain the terms of the contract. Rather, it is a matter of looking at the document itself and its terms. It is also necessary to look at the policy of insurance taken out by the defendant. Doubtless regard can be had to its terms but it is the defendant's position that any matters which relate to the circumstances in which that policy was taken out are irrelevant.
It is against that background I now turn to the subpoenas in question.
Dave Cashman Pty Ltd t/a Cash Management
The documents sought by the subpoena are documents used to value various arms of the business. Under the agreement, as alleged by the plaintiff, once an option was exercised a valuation of the business was to be prepared. If the valuation of the business was less than the amount paid under the insurance policy, the shares would change hands for no consideration. It is common ground between the parties that no valuation has been prepared because the defendant has refused to co‑operate. It was the defendant's position that if at trial the plaintiff succeeded, the order would be to the effect that the shares be valued and then depending on that valuation, a transfer would be effected with or without consideration. In my view, that is a correct analysis of the result if the plaintiff is successful.
Counsel for the plaintiff maintained it was appropriate for the plaintiff to have, prior to trial, any valuation evidence which might be available. He made the point that the business would need to be valued as at the date the option was exercised. That is certainly correct. But the value of the business is not an issue between the parties as the pleadings stand at present. I can see no legitimate forensic purpose in the plaintiff having access to this valuation evidence. This subpoena should be set aside.
Robertson Hayles' subpoena
The documents referred to in the schedule to the subpoena are as follows:
1.All Correspondence, File Notes and Documents relating to or concerning your matter reference: 201411423 including:
A.instructions received for the drafting of a succession plan;
B.the intentions of the parties to the succession plan with regard to how the succession plan would be implemented in the event of:
(i)death of one of the parties; or
(ii)an event of total and permanent disability of one of the parties;
C.insurance policies intended or actuated in respect of giving effect to the Succession Plan.
2.All Correspondence, Documents and File Notes in relation to any instructions to replace or amend the succession plan after execution by the parties.
In passing, I would note that all or at least many of these documents would be the subject of joint professional privilege. Whether the documents the subject of the privilege ought be available for inspection is a question which will no doubt divide the parties and that is for another day. The objection taken by the defendant was two‑fold. First, it was said evidence of the facts and circumstances in which a contract wholly in writing was made are not admissible in the interpretation of the contract. Reference was made to RCR Energy Pty Ltd v WTE Co‑Generation Pty Ltd [2017] VSCA 50. It was submitted there was no pleading of any circumstances surrounding the execution of the agreement. Further, it was said that item 2 of the schedule were documents which post‑date the agreement. By reference to Porter v Sundance Resources [No 2] [2015] WASC 493, it was said that post‑contractual conduct cannot be looked at as an aid to construction or interpretation of a contract.
Both these statements of principle are correct. Nonetheless, it seems to me that there may be some relevance in the documents sought. Apart from anything else, they relate to the plaintiff's affairs and (subject to any claim for privilege) it would seem unreasonable he should be held out of them. Even if the subpoena was set aside, the plaintiff could ask the solicitors for the documents and (once again subject to claims for privilege) they would in all probability be provided to him. While it is doubtful they could assist his case as it is presently pleaded, there is no warrant for denying him access to these documents.
Southern Cross Financial
The documents specified in the schedule are as follows:
1.All Correspondences (sic) and Documents including file note, relating to or concerning:
A.A succession plan ('Succession Plan') for the principals and owners of the group of companies: …
B.How the succession plan was to be implemented in the event of:
(i)the death of one of the parties; or
(ii)an event of total and permanent disability of one of the parties.
C.Insurance policies relating to the succession plan.
D.Claims on any insurance policies relating to the succession plan.
As I understand the position, Southern Cross Financial are insurance brokers and it is through them any policies of insurance were purchased. The defendant admits that a policy of insurance was taken out by the defendant and he was paid out pursuant to that policy. It is said that there is no issue between the parties which is relevant to the documents covered by the subpoena.
In my view, there can be no question about the policies of insurance themselves. That must be relevant and should be discovered. So the documents sought in section C should be produced. A claim under a policy is admitted so the documents in section D are irrelevant. They need not be produced.
In written submissions, counsel for the plaintiff maintained the documents subpoenaed were relevant as to whether an agreement 'was concluded, certain and valid as well as whether the agreement was performed'. With respect, it is difficult to see how that can be right. On the plaintiff's case, the parties entered into a written contract and, pursuant to that written contract, took out policies of insurance. The policy was either taken out pursuant to the contract or it was not. It is difficult to see how the documents sought from Southern Cross could impact upon that decision.
Having said all of that, I am still satisfied the documents in categories A & B ought be produced. There is a dispute between the parties as to whether or not the insurance policy that was taken out related to any agreement. The plaintiff should have the opportunity to examine documents produced by Southern Cross which might be relevant to that question. It is by no means certain those documents could be tendered at trial because the trier of fact may decide they are irrelevant. But that is a question for trial. At this stage of the proceedings, I am satisfied the subpoena ought be answered and the documents ought be made available for inspection.
So documents in categories A, B and C ought be produced.
AIA Australia
The documents sought in the subpoena relate to the claim made by the defendant on the insurance policy. It is an admitted fact there was a policy of insurance and that a claim was made and paid. Any documents held by the insurer are irrelevant to any issue between the parties.
Parkview Family Practice
Essentially, what the plaintiff is seeking is the defendant's medical records. As I understand the submission, this has to do with the defendant's ability to work and whether or not there has been a breach of what the plaintiff says is an implied term of the agreement. In my view, these records are irrelevant. If the plaintiff has incurred costs as a consequence of the defendant failing to honour the agreement, then he is entitled to damages. But, however those damages are calculated, they have nothing whatever to do with the defendant's medical condition and his capacity to work. That is simply not the way the matter is pleaded.
Conclusion
Accordingly, I would set a number of these subpoenas aside and set parts of the remaining subpoenas aside. I will hear the parties as to the precise form of orders and as to costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
DG
ASSOCIATE TO MASTER SANDERSON13 SEPTEMBER 2018
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