Dunn v Kaz Group Limited

[2006] NSWSC 8

CITATION:	Dunn v KAZ Group Limited [2006] NSWSC 8
HEARING DATE(S):	17 January 2006
JUDGMENT DATE :	17 January 2006
JURISDICTION:	Equity
JUDGMENT OF:	Campbell J
EX TEMPORE JUDGMENT DATE:	01/17/2006
DECISION:	Subpoena and notices to produce not set aside
CATCHWORDS:	PRACTICE – subpoenas and notices to produce – when fishing – when sufficiently particular – whether subpoena objectionable because it describes documents as “relating to” a subject matter – when oppressive
CASES CITED:	Finnie v Dalglish [1982] 1 NSWLR 400 Spencer Motors Pty Ltd v LNC Industries Ltd [1982] 2 NSWLR 921
PARTIES:	Charles James Dunn - Plaintiff/Respondent KAZ Group Limited - Defendant/Applicant
FILE NUMBER(S):	SC 6193/05
COUNSEL:	R Dubler SC - Plaintiff/Respondent B L Jones - Defendant/Applicant
SOLICITORS:	Thomson Playford - Plaintiff/Respondent Mallesons Stephen Jaques - Defendant/Applicant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
EQUITY LIST

CAMPBELL J

TUESDAY 17 JANUARY 2006

6193/05 CHARLES JAMES DUNN v KAZ GROUP LTD

JUDGMENT – Ex Tempore

1 HIS HONOUR: This is a notice of motion which seeks to set aside a subpoena and two notices to produce. Each of them was issued by the plaintiff in these proceedings, and each was issued to the defendant.

2 The proceedings in which the subpoena and notices to produce have issued are ones which are brought by a man who had been the Chief Executive Officer and director of a company called EPT. EPT was in the business of selling a particular kind of software. The defendant has come, after buying the interest of ANZ bank, to be the sole shareholder. The defendant wishes to close down EPT, while the plaintiff believes it would be possible to realise some of its assets by sale to a particular United States entity.

3 The points of claim are ones which, in very broad terms, allege that three particular decisions through which the decision of the defendant to close down EPT were manifested involved a breach of representations, or alternatively of contracts, or alternatively of fiduciary obligations, which were owed to the plaintiff.

4 The matter is next in the list on 23 January 2006, when an interlocutory hearing will, if the other business of the Court permits, proceed.

5 Already, the Court has made some interim orders, which, in broad terms, restrain the defendant from interfering with negotiations which the plaintiff is conducting in attempts to realise assets of EPT.

6 The subpoena is one which was issued on 8 December 2005. It seeks:

“1. All documents evidencing or relating to the reasons for the decision of the Defendant to:
(a) reject the Plaintiff's proposal of 17 November 2005 as communicated by email by Mr Mark Stead on or about 17 November 2005;
(b) cease to fund the operations of Enhanced Processing Technologies, Inc. as communicated by Mr Mark Stead at the Board meeting on or about 30 September 2005; and
(c) decline to proceed with and/or withdraw support for the Participation Agreement in part evidenced by a draft document entitled “Participation Agreement” dated 17 October 2005.”

7 The three subparagraphs of that subpoena are the three decisions by which the decision of the defendant to cease operating EPT were manifested. The “Plaintiff’s proposal of 17 November 2005” was a proposal that the defendant should sell its shares in EPT to the plaintiff, on particular terms.

8 The notice to produce is one issued on 9 December 2005. It is in the same terms as the subpoena, save only that the documents which it seeks are ones which are authored, created or received by four particular named men. Those four men are officers of the defendant.

9 Mr Stead, an officer of the defendant who has sworn an affidavit in these proceedings, has said in that affidavit that he considers it highly unlikely that anyone else within the defendant would have documents called for by the subpoena other than three of those four men.

10 The second notice to produce seeks:

“1. All documents in your possession, which came into existence since 1 January 2005, valuing the shares in or the business conducted by Enhanced Processing Technologies Pty Limited (“EPT Pty Ltd”) and/or Enhanced Processing Technologies, Inc (“EPT Inc”), including but not limited to any such valuation prepared in connection with any proposal for KAZ Group Limited to acquire shares in EPT Pty Ltd and/or EPT Inc from the Australia and New Zealand Banking Group Limited (“ANZ”) or any corporation related to ANZ; and
2. All documents in your possession relating to any proposal, since 1 January 2005, to acquire, either directly or indirectly, the shares in or the business conducted by EPT Pty Ltd and/or EPT, Inc including but not limited to any such offer made by IBM Australia Limited (“IBMA”) or IBM Global Services Australia Limited (“IBMGSA”) or any corporation related to either IBMA or IBMGSA.”

11 Three different attacks are made upon the subpoena and the first notice to produce. The first is an allegation that the processes involve fishing. That is, in effect, an allegation of abuse of process; that the Court's processes are being used for an illegitimate purpose, namely, to find out whether documents sufficient to establish that a case exists are able to be obtained, when the party issuing the document does not know whether documents able to achieve that effect really exist.

12 In circumstances where interlocutory relief has already been granted, it follows that there is a serious question to be tried concerning the plaintiff's allegations. I am not satisfied that the allegation that the subpoena and notice to produce are fishing is made out.

13 The next attack which is made is that the subpoena and notice to produce require the recipient to form a view about whether documents relate to a particular subject matter. The fact that documents are described as “relating to” a particular subject matter or fact is not in itself sufficient to show that the subpoena or notice to produce does not describe a document with reasonable particularity: Spencer Motors Pty Ltd v LNC Industries Ltd [1982] 2 NSWLR 921 at 929.

14 I was taken to the decision in Finnie v Dalglish [1982] 1 NSWLR 400 at 407 where Rath J expressed the view that because the subpoenas he was considering required the person to whom it is addressed to form a judgment as to the relevance of his papers to a subject matter, that was every bit as oppressive as a subpoena which describes documents in terms of a defined issue in the proceedings.

15 In my view, the fundamental test which is to be applied is that a subpoena must describe with reasonable particularity the documents for which it calls. That is a judgment which must be made by reference to an individual subpoena, and in the circumstances of a particular recipient of the subpoena.

16 I do not accept that Rath J was attempting to lay down a statement of law that whenever a subpoena calls for documents which are described as being ones “relating to” a particular subject matter, that the subpoena is impermissible. Indeed, Spencer Motors Pty Ltd v LNC Industries Ltd [1982] 2 NSWLR 921 is to the contrary.

17 In my view, the subpoena and first notice to produce in the present case pass the test of reasonable particularity.

18 The applicant’s third objection is that the subpoena is excessively wide. The defendant bears the onus of making out that contention.

19 Mr Stead says that the three men he identified are the only ones who he considers would highly likely have documents relevant to the subject matter of the proceedings. He says that searching all files of the defendant would involve a very considerable undertaking. The defendant has at present approximately four thousand employees. Mr Stead does not say that in his view it would be necessary to search all files held by all employees to be confident the subpoena had been answered. He says nothing about the activities which the defendant carries out, or its organisational structure. For all I know, from his evidence, those four thousand employees could have been, in large part, engaged in activities which were completely separate from anything to do with the subject matter of this case.

20 The obligation of the recipient of a subpoena or notice to produce is to take all steps which are reasonably within their power to find documents which meet the requirements of the subpoena. That does not require them to engage in searches which are bound to be futile, of files which could not possibly contain relevant documents.

21 The sanction for failure to comply with a subpoena is a contempt sanction and whether a subpoena has been obeyed must be measured by reference to that sanction - in other words, has the Court’s order that documents of the category called for be produced been taken seriously, and has a diligent attempt been made to obey it? As I say, that does not involve the engaging in of futile exercises.

22 In the present case, I am not persuaded it is appropriate to set aside the subpoena on the grounds of oppression. However, if a limited search of files is undertaken, the defendant might deem it appropriate to file an affidavit explaining why that limited search has been undertaken. If the reason for the limitation is consistent with there being a bona fideattempt to actually find and produce the documents called for by the subpoena, then the subpoena will have been complied with. I make no directions, however, requiring the filing of any such affidavit.

23 The attack which is made on the second notice to produce is essentially one of relevance. It is submitted that the points of claim do not make any allegations about the value of the shares, and so documents which could assist in showing their value are irrelevant.

24 What the points of claim do allege is that the decisions to not proceed were ones which were made in breach of duties which the plaintiff alleges were owed to him. One of the reasons put forward in the points of claim for there being such a breach is that an offer which the plaintiff had made on 17 November 2005 to buy the shares, represented an opportunity for the defendant to sell its shares in EPT and its interest in the EPT joint venture for a consideration at or in excess of their market value. In these circumstances, documentation within the fairly narrow timeframe called for by the second notice to produce, relating to the value of the shares, seems to me to have relevance to the issues in the proceedings.

25 I decline to set aside the subpoena and decline to set aside either of the notices to produce.

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