Allstate Life Insurance Co v ANZ Banking Group Ltd (No 26)

[1996] FCA 68

LIMITED DISTRIBUTION

CATCHWORDS

DISCOVERY AND INTERROGATORIES - relief granted to particular applicant in these proceedings from obligation to give discovery of certain class of documents in normal manner of listing documents on ground of oppression - other party later procuring issue of subpoena by United States District Court, District of California under 28 USC § 1748 for production of same or some of same documents - whether other party should be enjoined from enforcing subpoena on ground that to do so would be vexatious and oppressive - whether subpoena should be treated as addressed to "applicant" or to third party for present purposes - no question of principle.

ALLSTATE LIFE INSURANCE CO & ORS v ANZ BANKING GROUP LTD & ORS (No 26)

Nos NG 523, 622 and 635 of 1991 and NG 381 of 1994.

Lindgren J
Sydney
12 February 1996

IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY )
GENERAL DIVISION                 )
  No NG 381 of 1994

BETWEEN:

ALLSTATE LIFE INSURANCE CO and the parties listed in Annexure A to the third further amended statement of claim.
  Applicants

AND:

AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED ACN 005 357 522 and the parties listed in Annexure B to the third further amended statement of claim.
  Respondents

No NG 523 of 1991

BETWEEN:

ALLSTATE LIFE INSURANCE CO and the parties listed in Annexure A to the third further amended statement of claim.
  Applicants

AND:

AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED ACN 005 357 522 and the parties listed in Annexure B to the third further amended statement of claim.
  Respondents

No NG 622 of 1991

BETWEEN:

ALLSTATE LIFE INSURANCE CO and the parties listed in Annexure A to the third further amended statement of claim.
  Applicants

AND:

AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED ACN 005 357 522 and the parties listed in Annexure B to the third further amended statement of claim.
  Respondents

No NG 635 of 1991

BETWEEN:

ALLSTATE LIFE INSURANCE CO and the parties listed in Annexure A to the third further amended statement of claim.
  Applicants

AND:

AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED ACN 005 357 522 and the parties listed in Annexure B to the third further amended statement of claim.
  Respondents

CORAM:Lindgren J

PLACE:Sydney

DATE:12 February 1996

REASONS FOR JUDGMENT (No 26)
  (Motion by 4th and 16th applicants for injunction against
  "Skadden" in respect of subpoena to produce documents in
  California)

INTRODUCTION

There is before the Court a notice of motion which was filed on 5 February 1996 in which the 4th applicant, First Stratford Life Insurance Co ("First Stratford") and the 16th applicant, Executive Life Insurance Co ("ELIC"), seek relief against the first cross respondent, Skadden Arps Slate Meagher and Flom ("Skadden").  They seek, first, an order granting them leave to oppose the enforcement of a subpoena for production of documents issued on the application of Skadden by the United States District Court, District of California, which is returnable on 12 February 1996, California time, addressed to Commissioner Charles Quackenbush, California Department of Insurance; secondly, an order that Skadden be restrained from taking steps to enforce the subpoena; and thirdly, an order that Skadden take all necessary steps to withdraw the subpoena.  The matter has had to be dealt with urgently for obvious reasons.  It was explained that the first order was sought for more abundant precaution in view of an undertaking which the applicants had given to this Court on 13 April 1995.  I need say no more of it.

BACKGROUND

On 11 April 1991 an order was made by the Superior Court of the State of California for the County of Los Angeles appointing as Conservator of ELIC, the Insurance Commissioner of the State of California.  It is important to note that that order effected a wide vesting of property and powers in the Insurance Commissioner as Conservator.  For example, para 1 of the order included the following:

"1.The Insurance Commissioner of the State of California is, in his official capacity and pursuant to the provisions of the California Insurance Code, hereby appointed Conservator of Respondent, Executive Life Insurance Company, and he and his successors in office are hereby vested with all title, both legal and equitable to all of Respondent's assets, books, records, property, real and personal, including all property or ownership rights, choate or
inchoate, whether legal or equitable of any kind or nature, wherever situated and however held, including but not limited to all letters of credit relating to the Respondent or its business, all stocks, bonds, certificates of deposit, cash, cash equivalents, contract rights, reinsurance contracts and reinsurance recoverables, in force insurance contracts and business, deeds, mortgages, leases, book entry deposits, bank deposits, certificates of deposit, evidences of indebtedness, bank accounts, securities of any kind or nature, both tangible and intangible and, without limitation, all of the property listed in Exhibit 'A' hereto which is hereby incorporated herein.  All of the above-described items, property and assets are hereinafter collectively called the 'Property.' ..."

Paragraph 2 of the order dated 11 April 1991 stated:

"2.The Conservator is hereby authorized to take possession of or order the disposition of any of the said Property, and to conduct the business of Respondent, or so much thereof as he may deem appropriate, and to act in all ways and exercise all powers necessary or convenient for the purpose of carrying out this Order.  Further, the Conservator is authorized to appoint such agents, deputies, attorneys, accountants, actuaries or other assistants or consultants as he may deem appropriate to assist him in carrying out his duties hereunder; ..."

Paragraph 2 of the order continued by enjoining ELIC, its officers, directors, shareholders, attorneys, attorneys-at-law and others from doing a wide range of acts including the filing, commencement or prosecution of any new suits without the prior approval of the Superior Court of the State of California.
The order to which I have referred was made before the commencement of these proceedings.  I infer that the proceedings were commenced in the name of, inter alia, ELIC at the instance of the Conservator. 

According to the evidence, on 6 December 1991 an order was made for the liquidation of ELIC and the Conservator was appointed as Conservator, Rehabilitator, and Liquidator.  It will be convenient to refer to him as at times after that date as the "Rehabilitator" to distinguish his office pursuant to the order dated 6 December 1991 from his office pursuant to the earlier order dated 11 April 1991.  What matters for present purposes is that from the outset ELIC has been under the control of the Insurance Commissioner in his role as Conservator or Rehabilitator as the case may be.

On 7 July 1995, Beaumont J made certain orders in these proceedings in relation to discovery by the applicants. Order 1 on that date was that, relevantly, ELIC was to file a verified list of the documents referred to in a schedule to the order.  By paragraph 3 of his Honour's order, the operation of the order was suspended for 14 days and liberty was reserved to the applicants to apply to discharge or vary the order on three days' notice on the ground that order 1 was "oppressive".  It is para 38 of the schedule, one of the paragraphs relating to ELIC, which has proved to be relevant for present purposes.   Paragraph 38 read as follows:

"All documents (except those the subject of any proper claim for legal professional privilege) relating to any claims or actions brought by ELIC or against ELIC and/or any former officer, including any one or more of Messrs Carr, Marcian, Sacherman, Sandler and/or Adams, or any other officer or former officer of ELIC in any court in the United States of America arising out of, or in any way connected with, the investment activities in or relating to high yield bonds of ELIC; and DBL, ['DBL' referred to 'Drexel Burnham Lambert] or any officer of DBL." (Emphasis supplied.)

Pursuant to the leave reserved by his Honour on 7 July, a notice of motion was filed on 21 July on behalf of various applicants including ELIC.  Relevantly, ELIC sought an order  that order 1 of 7 July be discharged or varied as to discovery of the documents set out in the schedule to the notice of motion on the ground that the order was "oppressive".  Although the schedule to the notice of motion did not refer to para 38, it is common ground that this was an error, that a reference in that schedule to para "29" was meant to be a reference to para "38", and that the hearing of the motion proceeded on that basis.  Without more, one would have assumed that the case to be made was that it was oppressive for the Rehabilitator to discover the documents referred to in para 38.

The notice of motion was supported by an affidavit of Silva Barnard Will, sworn 20 July 1995.  Ms Will said in her affidavit that she was employed by "Executive Life Insurance Company in Rehabilitation/Liquidation" and acted as "Custodian of Records".  She said that she had been so employed since May 1991, that is to say, since a little after the making of the Conservation Order.  She gave evidence in some detail in relation to the records which would be required to be produced by order 1 dated 7 July 1995.

After referring to the fact that ELIC was placed "in conservation (a status similar to receivership)" on 11 April 1991 and was subsequently placed in liquidation on 6 December 1991, Ms Will said that ELIC had, at the time of her affidavit, a staff of approximately 30 of whom three paralegals had responsibility for ELIC's records, that she was one of the three available to work on documents relating to the matter and that she had access to one clerk for assistance.  Her affidavit was directed to showing that order 1 dated 7 July would work oppression if it were to have effect according to its terms.

She did this by dealing first, with "claims or actions brought by ELIC" and secondly with "actions or claims brought against ELIC".  In particular, she referred to an action brought by the Insurance Commissioner, then a Mr Garamendi, against one, Carr.  I should record that Mr Quackenbush, to whom the subpoena is addressed, is Mr Garamendi's successor in the office of Insurance Commissioner.

On 18 August 1995, Norton Smith and Co as solicitors for Freehill, Hollingdale & Page ("Freehills") in these proceedings wrote a letter to Sly & Weigall (then the name of the firm acting in the proceedings for the applicants including ELIC) and proposed a means of satisfying the requirement that discovery be given of the documents in category 38.  They indicated that their client would accept production in Sydney of certain documents specified in the various sets of proceedings which were listed in the letter, including Garamendi v Carr.  The letter was relevantly as follows:

"In the interests of expedition and the saving of costs, our clients are prepared to forego the cross-examination of Ms Silva Will if Executive Life and First Stratford agree that without prejudice to our clients' rights under the existing orders that:

1. ........ ........ ........ ........ ........ .....

1. In satisfaction of category 38, in the first instance, our client will accept production in Sydney of:

(a)all depositions taken and Affidavits and other sworn Statements made in the following proceedings:

Garamindi [sic] v Carr et al No BC 049566 (Cal. Super Ct, Loss [sic] Angeles County);

Cooperman et al  v Carr et al Case No C 741965 (Cal. Super Ct, Los Angeles County);

In re Executive Life Litigation, Co-ordination proceedings, Master files No 2632, 2633 and 2634 (Cal. Super Ct, Los Angeles County);

Insurance Commission of the State of California v Executive Life Insurance Co et al No B5006912 (Cal. Super Ct, Los Angeles County);

Phillips v Carr et al Case No C752399 (Cal. Super Ct, Los Angeles County);

Shaey et al v Fred Carr et al In re Executive Corp Securities Litigation No CV 89-7135 JGD (KX) (C.D. Cal);

(the 'proceedings') excluding those relating only to claims against Deloitte & Touche and against Mr Rosenthal relating to his alleged real estate dealings;

(b)all interrogatories administered in and answered in the proceedings excluding interrogatories relating to claims against Deloitte & Touche and Mr Rosenthal;

(c)all pleadings and responsive pleadings in the proceedings;

(d)all agreements or documents relating to any settlement or compromise reached in the proceedings including, but not limited to, any documents recording any receipts or payments received or made in relation to such settlement or compromise;

(e)all orders and judgments in the proceedings;

(f)all notices or request to admit and any responses thereto in the proceedings;

(g)the 42 folders of pleadings referred to in Mr Will's [sic] Affidavit (excluding any pleadings already referred to above)."

In the event, the proceedings came on for hearing before me on 8 September.  The applicants filed in Court on that date a notice of motion seeking an order that documents be discoverable "by category".  I gave in Court an indication of a modification of order 1 of 7 July which I proposed to grant in respect of para 38.  However, the formulation of the orders ultimately made was agreed by the parties following that indication of my intention.  In the result, the terms of my order made on 13 September 1995 were, relevantly, as follows:

"4.Paragraphs 26, 27, 38 and 40 of the Schedule be varied so that the 4th and 16th Applicants give discovery of those documents the existence and particular location of which the 4th and 16th Applicants have actual knowledge, provided that if the documents of which the 4th and 16th Applicants have such knowledge are of such a number that they cannot be so discovered without undue difficulty and expense, discovery may, until further order, be limited to those documents which were capable of being located without undue difficulty and expense."

...

"6.The 4th and 16th Applicants may at their election give discovery of the documents referred to (and in the manner provided) in category A or the documents referred to (and in the manner provided) in category B:

Category A

On or before 4 October 1995 file a verified Supplementary List of Documents in accordance with order 8 below recording:

(a)a sample of 100 boxes of documents selected from the index of boxes stored by FileKeepers Inc (the 'FileKeepers' Index'); and

(b)all of the documents referred to in Part 1 of the Schedule annexed hereto and marked 'A' ('Schedule A') except the documents referred to in Part 2 of Schedule A.

Category B

On or before 4 October 1995 produce for inspection (without providing any list) at one or more locations:

(a)the whole of the contents of the 297 boxes designated in the FileKeepers' Index as originating from the Investment Department; and

(b)all of the documents referred to in Part 1 of Schedule A except the documents referred to in Part 2 of Schedule A."

Part 1 of Schedule A substantially repeated what was in the Norton Smith letter.  Part 2 of Schedule A excluded certain
documents from the scope of Part 1.

The last step in this chronological account of events which needs to be noted is the issue of the subpoena the subject of the attack in the notice of motion.  I do not need to set out all of the paragraphs describing the documents of which the subpoena requires production.  Paragraph 1 describes or refers to all documents supporting or evidencing certain allegations made in the third amended complaint filed on 30 August 1994 in the Garamendi v Carr litigation.  The allegations in question are set out in subparagraphs (a) to (m).  Paragraphs 2-5 refer to documents supporting or evidencing other specified allegations made in that third amended complaint.   Paragraph 6 refers to documents evidencing certain matters in Garamendi v Weingarten No BC 070383 (Superior Court of California, LA County). 

I was informed from the Bar table by counsel for the applicants that the documents described in paragraphs 7, 8 and 9 had already been discovered and that the applicants do not seek relief in respect of paragraphs 10, 11 and 12.

REASONING

It was not in dispute on the hearing of the motion that the Court had power to grant relief to the applicants although there was no discussion of the precise basis of the jurisdiction.  I think it suffices to say that the Court has power to grant relief if it concludes that the enforcement of the subpoena would be vexatious or oppressive. 

The case for the applicants on the motion is that this Court has, in effect, previously held that it would be oppressive for ELIC to have to produce the documents referred to in para 38 and the documents sought by the subpoena are, in substance, within that paragraph.  It is true that the Court did not previously make a determination in relation to the oppressiveness, but the Court did indicate that it considered that it would be oppressive for the documents referred to in para 38 to be discovered according to the terms of that paragraph and, on that basis, the parties reached an accommodation which received expression in the order which I made on 13 September.

Several submissions have been made as to why it would not be vexatious or oppressive for the subpoena to be enforced according to its terms.  A primary submission which at first had attraction was that the subpoena is addressed to a third party, Commissioner Charles Quackenbush of the California Department of Insurance, as distinct from ELIC, the 16th applicant in these proceedings.  But I think that a reading of the terms of the original order appointing Mr Quackenbush's predecessor, Mr Garamendi, as Conservator coupled with his subsequent appointment as Conservator, Rehabilitator and Liquidator, coupled with an appreciation that throughout these proceedings and, relevantly, at the times when Ms Will made her affidavit and when I made the order of 13 September, in effect ELIC was totally under the control of the Commissioner, shows that no distinction should be recognised for present purposes between the position of the Commissioner and that of ELIC.

It is true, as Mr Sullivan QC for Skadden has submitted, that there might be a case where a public officer has a vast staff and other resources available to him whereas a particular company subject to his control does not.  But the for the reasons to which I have just referred, I think that the distinction does not apply in this case. 

Various other submissions were made.  For example, it was submitted that the terms of the subpoena are more confined than the terms of para 38 was, in that the subpoena calls for production only of documents relating to certain allegations or issues.   By its terms, the subpoena does appear to be more confined.  However, it has to be borne in mind that sometimes there is actually more work involved in identifying for the purpose of production which of voluminous documents relate to certain allegations than to produce the totality.

Taking all things into consideration, it does seem to me that a case is shown that the same oppressiveness which led to the granting of relief in respect of para 38 touches the subpoena. To put the matter differently, the relief which the Court granted, admittedly after some negotiation between the parties but nonetheless following an indication of my intention, was clearly intended to save ELIC from the obligation of giving discovery of a wide range of documents including those the subject of the subpoena.  For that reason I have come to the view that relief should be granted. 

The only basis on which the case has been argued is that of oppressiveness or lack of oppressiveness, or, more accurately, whether, in the light of the earlier order, it would be oppressive or vexatious for Skadden to enforce the subpoena.  I say nothing about any other potential basis of challenge.

The question now arises as to what form of relief should be granted.  It may be that the parties can agree upon that.  What I have in mind is that Skadden should be restrained from taking steps to enforce the subpoena in so far as it includes paras 1 to 9.  I say that on the basis that there has been discovery of the documents in paras 7, 8 and 9 and on the basis that there is no resistance to compliance with paras 10, 11 and 12.

There is one further matter to be mentioned.  It is conceivable that Skadden may be able to identify with particularity some document or documents to be produced as distinct from the sweeping descriptions in paragraphs 1 to 6 of the subpoena.  I say nothing about that.

CONCLUSION

Upon Skadden's undertaking, through its counsel, not to enforce the subpoena in the meanwhile, I stand it over until 9.30 tomorrow morning for the making of final orders disposing of the motion.

I certify that this and the preceding 15 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lindgren.

Associate:

Dated:16 February 1996

Heard:       8 February 1996

Place:       Sydney

Decision:     12 February 1996

Appearances:  Mr A J Sullivan QC with Mr S J Gageler and Dr A Bell of counsel instructed by Dibbs Crowther Osborne, solicitors, appeared for Skadden (applicant on the motion).

Mr W G Muddle with Mr D R Stack of counsel instructed by Deacons Graham & James, solicitors, appeared for the applicants (respondents on the motion).