Jet Corporation of Australia Pty Ltd v Petres Pty Ltd

[1985] FCA 379

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! IN THE CEOERAL COIJRT OF AUSTRALIA !

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I	VICTORIA DISTRICT REGISTRY	)	V. Nu. G 1 0 3 of 1383
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GENERAL	D I V I S I O N	)
BETWEEN :

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JET CGRPORATION OF AUSTRALIA FTP. LIMITED

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JET CORFOPATION ATJJSTR-ALIA TRTJST) App1icar.t

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and

i PETEES FTY. LIXITED

l (in its own rlght and in its capaclty as

Trustee sf t h e Schutt Unit Trust) ,*,--- -_

and OTHERS .-, Respondents

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I C0UP.T: NORTHROF J .

I	W: 12 ATJGUST 1385
l	FLACE: MELBOTJRNE

REASONS FOR JUDGMENT --

This is a further act in the saga involving Jet

Corporatlon of Australia Ptg. Limited ("Jet Corporation") and

the legal proceedings commenced in June 1383 by it and two

other applicants, Electrum Acceptance Pty. Ltd. and Electrum

Finance Pty. Ltd. At the present time, Jet Corporation is

the on ly surviving applicant. On 27 June 1983, the then

three applicants, pursuant to Order 27 rule 2 of the Rules of

Court, caused a sL:bprJ?na for production of documents to be

issued directed to Mr. Roger Randle, a partner in Messrs.

Touch? Ross & Co., a firm of accountants. The documents

required. to bp prorl t l rei l	were described in three paragraphs,
(a), (b) and (c) In the	Schrdule to the subpoena. By order

made on 2 3 May 1985, the Court as presently constltuted,

ordered that paragraph ( c ) in the Schedule to the subpoena be set aside. As a result of that order, the documents to be

produced pursuant to the subpoena r?:

“(a) the Accounting Records and books of each of

the three Applicants;

(b) the audit working papers and related file of

correspondence and other documentz of the firm

relativ5 to the three Applicants for a l l their

respective accounting periods TOGETHER W I T H

documents handed into the possession of the fit-m in connection wlth the professional work conducted by it for the three Applicants and

each of them; ‘I .

It must be remembered that after the subpoena	was served, but
before the order was made, Jet Corporation	had 3ecome the

sole applicant in these proceedings. On 73 May 13-95 the

order was made and the Court published its reasons for

judgment in relation to the motions then before the Court.

Tnose reasons should 3e read for an understanding of the

motions presently before the Court. On 5 July 1985, the

Court constituted by Hoodward J., refused leave to Mt-. Zandle

and Messrs. Touche Ross L	Co. to appeal from the order made
on 23 May l9g5.

On 16 J u l y 1985, Jet Corporation gave notice that

It wculd move the C~u1-t for leave to inspect and take copies

of the documents produced to the Court by Mr. Randle pursuant

to I:he subpoena. On the same day, Mr. Randle gave notlce

that he would move the Court that his obligation to comply

with the subpoena be stayed. On 2 2 July 1985, the Court as

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presently sonstituted, nrdered i-hat the hrarlng of the two

motions be adjourned to 29 July 1985 and that the return date

for the productlon of the documents referred to in paragraphs

(a) and (b) in the Schedule to the subpoena be fixed at 10.15

a.m. on 23 July 1385.

On 29 July 1985, Hr. Randle was present in Court. He had wlth him khe documents referred to In paragraphs (a)

and (b) in the Schedule to the subpoena. He w a s represented

by senior counsel. He objected to the production of the

documents. He relled upon an affidavit filed in support of hls motion. He was cizss-examined. In submissions,

reference was made to James v. Cowan ( 1 9 2 4 ) 42 C.L.R. 305.

After cunsultaLion with his legal advisers, Mr. Randle agreed

to answer the subpoena but limlted the production to

documents of and relsting to Jet Corporation. Counsel for

Jet Corporatlon d l d not ohject to that course. Further,

certain documents being dsily and fortnightly timesheets

relatlng to work done by members of staff of Messrs. Touche

Ross & CO. on account of Jet Corporation and otlier clients

which were reduced each month to timesheets for each client

were not produced. The documents produced by Mr. Randle were

the monthly timesheets relating to Jet Corporation. This

course vas not ob~ected to. If necessary, this matter can be

raised later-. Further, some of the files produced contalned

materlsl relevant to other clients of Messrs. Touche Ross &

Co. and are not relevant to Jet Corporation. ATain, subjsct

to reference to ths Court In case of dispute, the 2arties

agreed that th? relevant parts of those files could be

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treated as berng produced. Zubjeot to the matters already

l	mentioned, Mr. Randle produccd into the custody of the Court,
the documents described in paragraphs (a) and (b) in the
Schedule to the subpoena.
Jet Corporation proceeded with 1ts motion which was opposed by counsel for Mr. Randle. The main basls for the
opposltlon to the notion was claim that Messrs. Touche Ross
C Co. had a lien over the documents produced and that until
Jet Corporation paid the amount o w m g to Messrs. Touche Ross
Sr Co. for prnfessional services provided, Jet Corporation
should not be given leave to inspect the documents produced
to the Court. In reply, senior counsel for Je t Corporation gave certain undertaklngs to the Court. At the conclusion of
the hearing of the argument, I said:

"I propose to give leave to inspect the documents

generally. I have already indicated that I am not satisfied that any lien has been established over

t'ne documents produced. I propose to give my

reasons for those two matters at a later stage but

In t'nc meantime, having regard to the undertakings

offered on behalf of the applicant and on behalf of the receivers and manager5 of the applicant, Mr.

Hunter and Mr. Allen, I propose to permit the

general inspection to be conductsd on the following

conditions:

Upon the undertaking given by counsel on behalf of Mr. Hunter and Mr. Allen to pay the costs of Mr. Randle In relation to the compliance with the

subpoena, and upon the sum of $1500 being paid into

court by 10 am tomorrow, 30 July 1985; upon the

further condition that the inspection of documents shall be limited to t'ne following persons, namely, Mr. Milne, one of Her Majesty's Counsel, the Instructing solicitor for the applicant, Mr.

Hunter, one of the receivers and managers of the

applicant, and Mr. Brown, a solicitor of the

Su?reme Court of Victoria and an accountant employed by Messrs. Arthur Anderson and Company,

accountants, acting on behalf of the receivers and

managers; and upon the further condition that any document xhich is deslrzd t o be copied shall before

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copylng be narked d1-d notrce givcn to Mr. Randle or

his solicltors of the documents dezired to be

copied and to enable those solicitors to raise the

matter before me in relation to whether copies

should he made or not of those documents.

I further order that the applicant is to pay the

cost of Mr. Randle of complying t:ith the subpoena,

the amount of those costs to be taxed. Theie

orders, the undertakmgs and payment made in pursuance of them, can be complied with at any time after 10 am tomorrow. An lnspection is to take place in a room within this court building and I shall publish my reasons on the main issues at a

later stage. "

Senior counsel f o r Mr. Randla annsunced that his

client may a i s h to seek leave to appeal from the orders made. To enable consideration to be given to that question and in

order to maintain the status quo, the Court, pursuant to

Order 52 rule 17, gave a stay of the orders made until the

reasons for judcpment for the orders are published.	The Court
now publishes those reasnons.

In support of its motion, Jet Corporation relied

upon material contalned in an affidavit sworn on 16 July 1985

by Laurence Brian Hunter, one of the Rsceivers and Managers

of Jet Corporation. Together with Petcr Eernard Allen, he

was so appointed a Receiver and Manager on 28 October 1982 by

Citicorp Australia Ltd. ("Citlcorp") pursuant to a Deed of

Debenture dated 21 December 1381. On S December 1982, Mr.

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Hunter and Mr. Allen were appointed by Citicorp as Managers and Receivers of tke assets and undertakings of the Jet Corporation Australia Trust ("the JCA Trljst"). In October

1981, Messrs. Touche Eoss & Co. made aubmlssions to Jet

Corporation regarding an application for appointment as

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auditors of Jet Cnrporatinn and the JCA Trust. On 25

November 1981, Jet Corporation appointed Messrs. Touche Ross G Co. audltor of J?t Corporatlon and the JCA Trust. That appointment continued for about one year. From the arfldavit

by M r . Hunter, I am satisfied that Plessrs. Touche Ross & Co.

have In their possession documents coming within the

description of the documents referred to in paragraphs (a)

and (b) in the Schedule to the subpoena and that Jet

Corporation wlll not be in a position to have a full

understandlng of the facts which relate to its proceedings as

a whole until it has been able to inspect and take copies	of
those documents.

In his affidavit, Mr. Randle states that his firm

carried	out	audit	work and accounting services for Jet	!
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Corporation between December 1981 and October 1982. He i

claims that the charges for the professional services so

provided amount to approximately $28,000, which amount has

not Seen paid. He says "if permlssable to do so by law, my

firm will not produce the documents that it holds on behalf

of the applicant until its fee of $28,260 has been paid."

Mr. Randle referred also to the expenses involved of

complying with the subpoena and estimates those expenses will

be "in excess of $1,500.'' Tnat amount related to the

documents relating to the other	two former applicants as well
as Jet Corporation.

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Zandle relied also upon an aff~davit sworn by

, Anthony Elder. In that aZf ldavit, Mr. Elder

refers to a clalm made by Mr. Huntzr ar.d P!r. Allen relating

t o possible negligence proceedings in the Supreme Court oE

Victoria agalnst ?lessis. Touche Ross L Co. arising out of

their activities as audltors to Jet corporation and the JCA

Trust, but that those Froceedings could nut be institutcd

until the Receivers and Managers had recovered or had access

to documents in the 2osscssion of Messrs. Tnuche R o ~ s & Co.

I In giving ora l evidence, Mr. Randle said that he

did not know what documents were In the possession of Messrs.

Touche Ross & Co. or In what circumstances they had come into

the possession of the flrm. He did not know if the documents

had corn2 rnto the possession of the firm far the purpose of

carrying out the accounting o r auditing worlc. Fe claimed a

llen over all the documents on the basis that t'ney are

documents of the fit-m and that the firm had either &one work

or prepared documents o r papers and the firm had not been

paid for the work done. He did not know if all or any of the

documents o r any of them were documents of Jet Coiporation

given by it to the firm or by some other person glven to the

f i r m as aqent for Jet Corporation fer the purpose of

producing work on those documents. Kan7 of the documents

were working papers of the flrm. TLe dr~sttments produced did

not contain an lndex of documents relating to Jet

Corporation.

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On 3 May 19R5, the Court, as presently constituted,

in these praceedings ~JZVE leave to Jet Corporation to Inspect

and take copies of dscumenks produsrd to the Court by M r .

Athol Lidgett of Messrs. Sinon Lidgett Collingwood CO.,

Stockbrokers, pursuant to a subpoena dated 27 June 1983.

Counsel for Mr. Lidgett had opposed leave being granted on

three main grounds, including the t-elevance of the documents that the inspection T J ~ C premakure. The reasons then given for glvlng leave to inspect and copy the documents produced have equal spplication to the present motion. I see no

at that stage of the proceedings, the possibility of Supreme

reason to depart from t'nose reasons and apply them to the

facts of the present motion.

Prima facie, therefore, there should be leave given

to Jet Corporation to inspect the documents produced and make

copies of them. In opposing the motion, the senior counsel

for Mr. Randle relied on the matters dealt with by me and

relecterl in the reasoni alreaily refer-red to. In addition, counsel relied Xpon the existence of the lien as a reason why

leave should not be given to Jet Corporation t o inspect the

documents So pt-oduced.

In support of the submissions on this matter,

counsel for Mr. Randle relied upon a number of authorities,

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including Kemp v. (l? L? 3 Moody & Rnhinssn 347: 174

E.R. 342; Re Hawlces t18S83 7. C h . 1; Re Hill (1848) 17

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L.J.Bcy. 21 and h?oodWorth v. Conwav K19763 1 Q.B. 884. With

respect to the last case, counsel :-?lied in	particular on
what was said by Lawton L.J. at p?.839-90:

"The first matter to be decided is whether in

law the defendants as accountants could have any kind of lien over the plaintiffs' papers ancl tax

f lles. Surprisinqly, the researches of counsel,

whlch have been extensive, have revealed no case in

whlc3 any court has adjudged that accountants have

J. llen. 4s long ago as 1848, Knight-Bruce V.-C.

expressed a firm opinion that they had in a case

which ralsed the question; but no judgment was

given, an order belng made by consent for the

return of the books in dispute to the accountants "without prejudice to any questisn": see In re Xill, Ex parte Southall (1848) 17 L.J.Bcy. 21. I

I	can see no reason whatsoever	why accountants should	~
not have a lien of some lclnd.	Books of account and

other documents are entrusted to them by their

clients for work to be done upon, and in

connection, with them, often by entering up ledgers

and almost always by analysis. Wclrk in connection

with books of account often involves corresponding

with third parties and making compilations of

various kinds. Tile kind of work they do may be

very different from that of a craftsman who is making ot- repairing a chattel (the kind of work which gave iise to the common law concept of

particulat- liens); but since the beginninq of the

15th century ar'itrators, architects, conveyancers

and parllamentary agents have been adjudged capable

of having particular liens: see Valsburv's Laws of

England, 3rd ed., vol. 24 (1958), p. 154, pat-a.

284; solicitors, bankerz, factors, stockbrokers and

insurance-brokers have long enjoyed the right to

general liens: op. cit., para. 2 7 1 . I would

adjudge that accountants in the course of doinq

their ordinary professional work of producing and auditing accounts, advlslng on financlal problems, and carrying on negotiations wlth the Inlancl Revenue in relation to both taxation and rating

I	have at least a particular lien over any books of
account, files and papers whlch their clients
delivered to them and also over any documents which
have come into their possession in the c'mrse of
acting as thelr clients' agents in the course of
their ordinary professional work. Accountants may
enjoy a wider lien than this; but I find it
unnecessary for the purposes of thls appeal to say more than 1 have.

I n that case, the Court of A p p a l gzve leave to the plaint=€: to inspect the documents over which the defendant claimed a

lien.

Counsel re€erred also to In re Gleebs R V . L t d . (in

liquldatinn) CL933J V.L.R. 2 9 3 where k n n A . C . J . expressed a

much nat-rower view OF the nature of the lien that could be

clalmed bp an accountant.

?Iormally, it would appear that any lien would be

limlted k o documents of the client of the accountant upon

which the accountant had performed work. In the present case

however, it is not necessary for me to determine this

question. On the application of the views expressed by

Lawton L . J . , in my opinion Mr. Randle has not established a

lien over any of the documents produced.

Mr. Randle is claiming the lien. He does not k ~ o i ~

which, If any, of the documents produced are documents owned

by Jet Corporation. The working papers, quite clearly, are

not the property of Jet Corporation and thus cannot be the

subject of any lien. There is no evidence to prove the

existence of a lien over any of the documents produced.

It is for these reasons that the Court made the

~Jrdek-5 it did on 29 J u l y ??@S.

I certify that this and the Nine (9) preceding pages are a true copy of the

Reasons for Judgment herein of the

Honourable Mr. Justlce Northrop.

Associate

Date: 12 August 1985