ING USA Annuity and Life Insurance Co v J P Morgan Securities Inc
[2009] WASC 157 (S)
•4 JUNE 2009
ING USA ANNUITY AND LIFE INSURANCE CO -v- J P MORGAN SECURITIES INC [2009] WASC 157 (S)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2009] WASC 157 (S) | |
| 04/06/2009 | |||
| Case No: | CIV:1670/2009 | 18 MAY 2009 | |
| Coram: | McKECHNIE J | 18/05/09 | |
| 4/06/09 | |||
| 9 | Judgment Part: | 1 of 1 | |
| Result: | Application granted Defendants to pay plaintiffs' costs | ||
| B | |||
| PDF Version |
| Parties: | ING USA ANNUITY AND LIFE INSURANCE CO ING INVESTMENT MANAGEMENT LLC J P MORGAN SECURITIES INC DAMIAN BERRY |
Catchwords: | Practice and procedure Issue of subpoena Letter of Request Whether a party can unilaterally cancel a subpoena |
Legislation: | Nil |
Case References: | Nil |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
DECISION : 4 JUNE 2009 FILE NO/S : CIV 1670 of 2009
- CIV 1674 of 2009
- ING INVESTMENT MANAGEMENT LLC
Plaintiffs
AND
J P MORGAN SECURITIES INC
DAMIAN BERRY
Defendants
(Page 2)
Catchwords:
Practice and procedure - Issue of subpoena - Letter of Request - Whether a party can unilaterally cancel a subpoena
Legislation:
Nil
Result:
Application granted
Defendants to pay plaintiffs' costs
Category: B
Representation:
Counsel:
Plaintiffs : Mr P Mendelow
Defendants : Mr S K Dharmananda
Solicitors:
Plaintiffs : Jackson McDonald
Defendants : Allens Arthur Robinson
Case(s) referred to in judgment(s):
Nil
(Page 3)
1 McKECHNIE J: The plaintiffs and defendants in this action are plaintiffs and defendants in the United States Superior Court of Fulton County in the State of Georgia in Civil Action File No. 2007CV134590. That action arises out of the plaintiffs' purchase of $32 million in debt securities in January 2002 issued by the Sons of Gwalia Ltd that were marked by the defendants. The plaintiffs assert that the notes subsequently lost most or all of their value when the Sons of Gwalia Ltd entered into administration in Australia in August 2004 and the plaintiffs assert causes of actions as violations of the Georgia Securities Act 1973, for negligent misrepresentation, and violations of the Georgia Racketeering, Influence and Corrupt Organisation Act.
2 Although the parties are fundamentally opposed in their contentions, because the testimony of witnesses in Australia is important, each party cooperated in seeking letters of request from the Superior Court of Fulton County, Georgia, pursuant to the Hague Conventionof 18 March 1970 on the Taking of Evidence Abroad in Civil or Commercial Matters. They arranged for an examiner and for evidence to be taken from various witnesses that one or both had an interest in securing. So it was that the plaintiffs brought action CIV 1670 of 2009 seeking orders pursuant to the letters of request and the defendants brought similar proceedings CIV 1674 of 2009.
3 In action CIV 1674 of 2009 (the defendants' application) I made orders on 23 April 2009, inter alia, that Stephen Thomas Pearce attend for examination on 11 May 2009. The letter of request set out details concerning Mr Pearce before concluding:
Based on the foregoing this court finds there is just cause for the Defendants to seek to preserve the testimony of Mr Pearce for trial in this case. Specifically, this court requests the Defendants and Plaintiffs be permitted to question Mr Pearce regarding the topics set forth in Section 7 below.
4 There follows a series of topics relating to Mr Pearce's education, work history, operations of Sons of Gwalia and the senior note offerings in 2000 and 2001 including:
7. Questions to be Put to the Person to be Examined [Convention Art. 3(f)]:
This Court requests that Defendants and Plaintiffs be permitted to question Mr Pearce regarding the following topics:
1. Background and Experience
- 1.1 Mr Pearce's education
1.2 Mr Pearce's work history at Gwalia
- 2. Gwalia's Operations Generally
2.1 Gwalia's senior management during the 2000 to 2002 time period
2.2 Gwalia's business strategy during the 2000 to 2002 time period
2.3 Gwalia's hedging strategy during the 2000 to 2002 time period
3. Gwalia Senior Note Offerings in 2000 an 2001
3.1 The role of Gwalia and its personnel in Gwalia's 2000 Note Offering
3.2 The role of Chase and its personnel in Gwalia's 2000 Note Offering
3.3 The role of the US investors in Gwalia's 2000 Note Offering
3.4 Pearce's interactions with US investors during Gwalia's 2000 Note Offering
3.5 Whether Pearce provided US investors in Gwalia's 2000 Note Offering with information on trading by Ross-Adjie, Gwalia's internal controls, Gwalia's hedging activities, Gwalia's indexed put options, and Gwalia's profits, and whether he would have provided information on these topics to US investors if requested
3.6 The role of Gwalia and its personnel in Gwalia's 2001 Note Offering
3.7 The role of J P Morgan and its personnel in Gwalia's 2001 Note Offering
3.8 The role of the US investors in Gwalia's 2001 Note Offering
3.9 Pearce's interactions with US investors during Gwalia's 2001 Note Offering
3.10 Whether Pearce provided US investors in Gwalia's 2001 Note Offering with information on
- trading by Ross-Adjie, Gwalia's internal controls, Gwalia's hedging activities, Gwalia's indexed put options, Gwalia's acquisition of PacMin, and Gwalia's profits, and whether he would have provided information on these topics to US investors if requested
- 4. Reasons for Gwalia's Financial Collapse
4.1 The role that the sudden deterioration of Gwalia's gold reserves played in contributing to Gwalia's financial collapse
4.2 The role that the decline in Gwalia's level of reserves and resources playing in contributing to Gwalia's financial collapse
4.3 The role that Gwalia's gold exploration program played in contributing to Gwalia's financial collapse
4.4 The role that Gwalia's write-down of 992,000 ounces from the gold reserves at Gwalia's underground and the Marvel Loch underground played in contributing to the Gwalia's financial collapse
4.5 The role that Gwalia's high-costs and short life mining operations played in contributing to Gwalia's financial collapse
4.6 The role that the Tarmoola pit wall failure played in contributing to Gwalia's financial collapse
4.7 The role that Gwalia's investment in IGPOs played in contributing to Gwalia's financial collapse
4.8 The role that unauthorized trading by Gwalia's director of finance (and the subsequent restructure of those trades) played in contributing to Gwalia's financial collapse
4.9 The accounting entries by Gwalia in connection with the losses sustained as a result of Mr Ross-Adjie's unauthorized trading
(Page 6)
6 Arrangements between the parties and the witness were made so that Mr Pearce was due to give evidence at 8.30 am on 19 May 2009. The subpoena was issued to him.
7 It appears that on Sunday, 17 May the defendants decided that they no longer wished to call Mr Pearce. The solicitors for the defendants voice mailed and emailed the examiner advising he would not be required for 19 May 2009:
This email confirms the voicemail that I left for you earlier this morning. JPMorgan has decided not to enforce the subpoena for Mr Stephen Pearce, and Mr Pearce will not be called as a witness. Accordingly, there is currently no deposition scheduled for tomorrow (19 May 2009), and depositions will resume on Wednesday with Mr Ross-Adjie.
I also have informed the witness's counsel, ING's counsel, and the reporter/videographer of the schedule change. Please do not hesitate to contact me or Jenny Thornton (08 9488 3805) if you have any questions.
8 The examiner responded:
Thank you Kyle. I did receive your voice message. Thank you all for your consideration.
9 This was apparently done without immediate notification to the plaintiffs' solicitors. They also advised Mr Pearce. Mr Pearce was contacted by the solicitors for the plaintiffs on 18 May 2009. When asked the question: 'Will you attend tomorrow then? I have to ask you for the purposes of the application [to the court]' responded: 'I will speak to my lawyer and get advice but if you're following through with having me attend, then I would rather attend and get it over with'.
10 When the application by the plaintiffs came before me the defendants were represented by Mr Dharmananda of counsel who, while pointing out that they did not object to the application, considered it appropriate to bring to the court's attention certain matters going to the court's jurisdiction. He also submitted that although the defendants were not raising any objection: 'we're bringing this matter to the attention of the court as duty bound we feel we have to'. The effect of the points raised by Mr Dharmananda if successful would have meant that no order in favour of the plaintiffs would be made and Mr Pearce would not be compelled to give evidence. He said that the importance of this issue is that once J P Morgan or those advising it took the view that Mr Pearce was not to be called as their witness, then as a matter of US law it’s a matter of some importance that that not occur (ts 20).
(Page 7)
11 The position is simple enough. The application for a letter of request was made to Judge Bonner by each party who cooperated in the hearing. It was reasonable for each party to assume that the other would nevertheless cooperate in the conduct of the hearing (notwithstanding that they were adversaries in the main action). The plaintiffs might have sought a specific request from Judge Bonner on behalf of Mr Pearce but did not do so. They did do so because the defendants had requested that his evidence be taken and the letter of request made it plain that the plaintiffs would be questioning Mr Pearce too.
12 The defendants seem to have demonstrated a casual view as to the effect of this court's order. A subpoena or witness summons is issued by a court reactively; that is, on the application of a party. However, once issued, it becomes a command by the court, to be enforced if necessary under penalty - hence the term 'subpoena' - and cannot be set aside by a party. A party might indicate to a witness that it would not take enforcement proceedings but that is a different matter. Here the court, albeit with the cooperation of the parties, had made orders, inter alia, requiring the attendance of Mr Pearce at the examination. Leaving aside the courtesy of advising the other side of their proposed action, unilaterally contacting the examiner and advising Mr Pearce that he was no longer required, there is no power in the defendants to purport to release Mr Pearce from his requirement.
13 Mr Dharmananda argued that the examiner had in effect released Mr Pearce as part of his power to conduct the examination and pointed to the exchange of emails quoted above.
14 I have no doubt that an examiner might, pursuant to that power, release a witness upon being satisfied that no other party then required the witness or for other good cause. Had the matter been presented to the examiner with submissions by both parties, there may have been little cause for complaint had he so ruled, the ruling being within the general delegation of power under the order to conduct the proceedings as appropriate. Another witness had been released by agreement between both parties. No doubt the examiner thought the same process had been followed. The examiner's acknowledgement, which includes the words 'thank you all for your consideration' suggests he assumed the plaintiffs had agreed.
15 In any event, his acknowledgement cannot be construed as an order releasing the witness.
(Page 8)
16 Mr Dharmananda also submitted that there would be prejudicial consequences to the defendant if the witness was now to be called. However, counsel was unable to give much detail of the effect of US law, or more correctly Georgia law, on the topic beyond the obvious point that the party calling a witness may not ask leading questions. That seemed to me to be no great hurdle and could be well handed by the examiner. In any event, given that the defendants no longer wanted to call Mr Pearce it comes as a bit of a surprise that the possibility of any questions - leading or otherwise - was exercising counsel's mind at all.
17 The simple position is that once an order of the court is made that order stands until properly set aside. All that one party can do is indicate it would not seek to enforce the order if it was breached. The original order for Mr Pearce's attendance and the subpoena issued in consequence remains in force.
18 Moreover, the failure to take the evidence of Mr Pearce while the opportunity was available with an examiner already appointed and the attendance of US attorneys for both parties would lead to much more cost and inconvenience to all parties, including Mr Pearce, for little good purpose.
19 For these reasons, somewhat expanded from the brief oral reasons given late in the afternoon, I had no hesitation in making the orders sought.
20 This application came on after I had concluded the day's hearing of another matter and took sometime to argue. The plaintiffs applied for the defendants to pay the costs of the application. I decided to reflect on the issue in light of the defendants' stance that it was making no formal objection but merely wished to bring matters to the court's attention as its duty.
21 After reflection, and reading the transcript of the hearing and the affidavit material, I am satisfied that notwithstanding the apparent helpfulness of the defendants in seeking to avoid the judge falling into error, in substance the plaintiffs' application was opposed for reasons that would advance the defendants' position. Their stance was not neutral. The defendants lost. The defendants might have avoided these proceedings if they had consulted the plaintiffs before purporting to dispense with Mr Pearce as a witness or by raising no obstacle to Mr Pearce giving evidence the day following. They must pay the
(Page 9)
- plaintiffs' costs of and incidental to the application to be taxed if not agreed.
0
1
1