Liberty Financial Pty Ltd v Scott
[2004] VSC 382
•5 October 2004
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
CORPORATIONS LIST
No. 9140 of 2003
| LIBERTY FINANCIAL PTY. LTD. and SHERMAN CHING MA | First Plaintiff Second Plaintiff |
| v | |
| TREVOR WILLIAM SCOTT and BLUESTONE PTY. LTD. | First Defendant Second Defendant |
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JUDGE: | SMITH J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 21, 22 and 23 September 2004 | |
DATE OF JUDGMENT: | 5 October 2004 | |
CASE MAY BE CITED AS: | Liberty Financial Pty Ltd & Anor v Scott & Anor | |
MEDIUM NEUTRAL CITATION: | [2004] VSC 382 | |
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Practice and Procedure – Security for Costs – Subpoenas to non-parties notice to produce first plaintiff by first defendant – Scope of Rule 42.10 procedure – Whether fishing, oppressive or seeking discovery.
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APPEARANCES: | Counsel | Solicitors |
| For the First Plaintiff | Mr R. Kendall QC and Mr A. P. Rodbard-Bean | Abbott Stillman & Wilson |
| For the First Defendant | Mr A. Maryniak | Allens Arthur Robinson |
HIS HONOUR:
The proceedings
This is an appeal form a decision of Master Kings made on 2 September 2004. Master Kings dismissed the application of the first plaintiff, Liberty Financial Pty Ltd, (Liberty) to set aside subpoenas directed to non-parties and a notice to produce directed to Liberty.
The non-party subpoenas which the plaintiffs seek to have set aside are directed to;
(a)Perpetual Trustee Company Ltd.,
(b)PT Limited,
(c)Macquarie Bank Ltd., and
(d)Australia and New Zealand Banking Group Ltd.
A fifth subpoena was the subject of a challenge by the first plaintiff. It was directed to Liberty Funding Pty. Ltd., a company related to the first plaintiff, but in the course of the hearing before the Master it was indicated that that subpoena was withdrawn.
Before turning to the particular issues raised, it is necessary to outline some of the background to the proceedings and to describe the context in which the subpoenas and notice to produce were issued and the proceedings to which they relate.
Background
The first defendant, Mr Scott, was formerly employed by Liberty. He was a senior employee who had access to allegedly confidential and sensitive information. Mr Scott left the employ of Liberty and now works for the second defendant Bluestone Pty. Ltd. (“Bluestone”). That company is a competitor of Liberty. Both companies are “non-conforming” lenders – that is, they provide loan products to borrowers who do not satisfy the underwriting criteria of prime lenders or are seeking terms not generally offered by prime lenders.
On 23 December 2001, the plaintiffs commenced proceedings in the Federal Court seeking injunctions against, and damages from, Mr Scott and Bluestone. The proceedings were subsequently transferred to this Court. Liberty alleges that Mr Scott has infringed its copyright in a number of documents, breached a confidentiality agreement, and breached the terms of his employment agreement with Liberty as to confidential information and a restraint on business activity after leaving its employ. Liberty further alleges that Bluestone procured and induced the breaches of Mr Scott.
On 12 February 2004 Mr Scott raised concerns with Liberty about its ability to meet a costs award against it. On 26 April 2004 Bluestone filed a summons seeking security of $1.5 million from Liberty. In late April 2004 Mr Scott’s solicitors received a copy of a report by an accounting expert, engaged by Bluestone, Mr Gower, and an affidavit from Mr Clifton, the solicitor for Bluestone. These had been prepared in support of Bluestone’s application for security for costs. On 12 May 2004, Mr Scott, through his solicitors, again raised concerns with Liberty about its financial position and sought security for costs. On 17 May 2004 Liberty responded declining to provide any security but indicated that it would “shortly be filing expert evidence” in relation to Bluestone’s summons for security for costs. On 19 May 2004 Mr Scott again requested security for his costs referring to the Gower report and alleged that the report raised serious issues about the capacity of Liberty to meet an adverse costs order. Shortly afterwards the application between Bluestone and Liberty was settled on the basis that Liberty consented to provide security for Bluestone’s costs in the amount of $1.5 million. Consent orders were made on the express basis that Liberty’s agreement to provide security was “without prejudice and without admission of liability”. A few days later, on 27 May 2004, Mr Scott again sought security for costs and foreshadowed that he would issue a summons for security for costs and non-party subpoenas and a notice to produce if security for costs was not provided. He referred to concerns that Liberty had provided security of $1.5 million to Bluestone. On 4 June 2004, Mr Scott informed Liberty that he intended to issue a summons, there having been no response from Liberty.
On 8 June 2004, Mr Scott’s solicitors obtained a directions date for a proposed summons for security for costs. A few days later on 11 June 2004 the above-mentioned subpoenas were filed. The subpoenas purported to be issued under Rule 42.10. On 16 June 2004, Liberty Funding Pty. Ltd., (Liberty Funding) a related company of the first plaintiff, and the plaintiffs, objected to production of the documents sought on the grounds, among other things, of abuse of process and oppression. On 17 June 2004, Mr Scott filed a summons seeking security for costs from Liberty. In addition, on 17 June 2004, at a direction’s hearing, the Master ordered an objections timetable. The recipients of the subpoenas were to be informed by Mr Scott’s solicitors about the plaintiff’s objections and the proposal to have those objections dealt with and were to be advised not to conduct any work in collecting the documents pending the outcome of the objections hearing. This information was conveyed to them by letter of 21 June 2004.
On 22 June 2004, the first defendant served the above-mentioned notice to produce upon Liberty.
On 30 June 2004, the solicitors for Liberty and Liberty Funding wrote to the solicitor for Mr Scott seeking an extension of time for the filing of material from 2 July 2004 to 6 July 2004 in respect of the security for costs issue. They stated that they were experiencing difficulties finalising the affidavit material, which was “lengthy and complicated”. Liberty also indicated that it would object to the notice to produce. At the same time Liberty communicated with the associate to Harper J by fax that it had engaged a forensic expert accountant to support the argument that there was sufficient information in the public documents to conclude that Liberty was able to meet a large costs order in the proceeding. It stated that this report had not yet been finalized. The first defendant emphasizes on this appeal that Liberty did not provide and has still not provided such expert evidence.
A directions hearing took place before Harper J on 1 July 2004. Liberty did not produce the documents sought by the notice to produce and Harper, J ordered that it file any summons and supporting material to set aside the subpoenas and notice to produce by 6 July 2004. His Honour also ordered that in the event that no such summons was filed, Liberty was to produce the documents requested in the notice to produce to the Court on 21 July 2004. Liberty did not comply with the order by filing a summons and supporting material by 6 July 2004. On 8 July, however, Liberty provided an outline and an affidavit of Mr Hodges, Liberty’s general counsel, deposing to matters such as the extent to which the subpoenas and notice to produce overlapped, the cost to Liberty and Liberty Funding of responding to the notice to produce and the subpoena, respectively, and the confidentiality of the material. Mr Scott, on 12 July 2004, declined to consent to the material being used to challenge the notice to produce, the material being out of time, but indicated that he would not object to the late filing of material in relation to the challenge to the subpoenas. There had at that time been no explanation for the failure to comply with the directions. Liberty responded by filing a summons on 13 July 2004 seeking the setting aside of both the subpoenas and the notice to produce and also filed a summons seeking an extension of time.
The matter came before the Master on 21 July 2004. The Master dismissed the applications to set aside the subpoenas and the notice to produce.
I will deal with the issues raised in relation to the subpoenas and then issues raised in relation to the notice to produce. The issue that remains is one common to both and that is the issue of an alleged overlap between the subpoenas on the one hand and the notice to produce on the other hand and the question of whether the duplication that exists between them is of such an order that it would be regarded as oppressive and an abuse of process and what should be the consequences of such a finding.
The subpoenas
The non-parties have not themselves objected to the subpoenas. This is not surprising to some extent in that they were informed that Liberty was and would be objecting and they were advised not to do any work in response until the objections were determined. The fact remains, however, that they have not raised any objections in their own right.
Subpoena – Standing
The first issue to consider is the challenge by Mr Scott to the standing of Liberty to seek to set aside the non-party subpoenas. Counsel for Mr Scott submitted that having regard to the language of Rule 42.10, a party does not have standing to object to the production of a document pursuant to the subpoenas. Emphasis was placed on the specific provisions as to the right to challenge in Rule 42.10. In particular under Rule 42.10(8)(a), the person named in the subpoena can notify the Prothonotary of any objection to production before the day specified for delivery of the documents in the subpoena. Under Rule 42.10(8)(b) a person, other than a party, who has a “sufficient interest” can also object in the same way. On the other hand Rule 42.10(9) simply states that if a party has any objection to inspection by another party of a document, it should notify the Prothonotary before the date specified in the subpoena. There is nothing in the Rules stating that the party who is the opponent of the party seeking the subpoenaed non-party documents can object to their production or challenge the subpoena itself. Counsel also relied upon the authority of Re ACI International[1] where it was held that an objection to production of subpoenaed documents on the grounds that the contents are confidential is not a ground for having a subpoena set aside.
[1](1986) 11 A.C.L.R. 240 per Beach, J. at 241-2 and 243.
If the issue were simply one of “standing”, it might be said that, in our adversary system, any party has an obvious interest in denying access to subpoenaed documents which may be relevant and used against it. In the present case the documents plainly concern the affairs of the first plaintiff and related companies. On the other hand, the provisions of Rule 42.10 are detailed and on their face appear to be intended to define with precision the precise rights of the parties and subpoenaed persons. The provisions do not give a party itself the right to object to production. The issue is also complicated by the fact, as noted above, that Mr Scott agreed to the procedure being followed of advising the person subpoenaed that the plaintiff was objecting and that those objections would be dealt with. In those circumstances Mr Scott may well be estopped from arguing a lack of standing.
In light, however, of the conclusions I have reached on the substantive issues, it is not necessary to resolve the standing issue and it is better left to another occasion.
The subpoenas – Rule 42.10
A major issue raised by Liberty is whether the subpoenas were properly issued under Rule 42.10. Rule 42.10(1) states:
“This Rule applies where a party who has a solicitor in the proceeding seeks to require a person not a party to produce any document for evidence before the trial of the proceeding.”
Counsel for Liberty submitted that the material sought under the subpoenas did not relate to any issue that would arise at the trial of the principal proceeding. The justification for the subpoenas was the seeking of evidence for use in a proposed security for costs application. Counsel relied in particular on the analysis of the Rule and its application by Gillard, J. in Kennedy Taylor (Vic.) Pty. Ltd. v. Grocon Pty. Ltd.[2]. His Honour commented[3] that the Rules provide two different procedures by which a party can obtain production and inspection of relevant documents from non-parties. He referred to Rule 32.07 which permits discovery from a non-party and Rule 42.10 which provided for the issuing of subpoenas which require a non-party to produce documents to the Prothonotary. His Honour noted that there was nothing in the Rules which precluded a party pursuing either course to obtain production and inspection. While noting that Rule 32.07 did not state a time limit, he also noted that under Rule 42.10, the subpoenas permitted subpoenas requiring production “before the trial of the proceeding”. In some concluding remarks as to the operation of Rule 42.10 his Honour stated:
“On a plain and literal interpretation of Rule 42.10, aided by the definition and reforms, it is inescapable that the procedure under Rule 42.10 is only available where the document is potentially required for evidence at the trial of the proceeding.”[4]
[2][1999] VSC 242.
[3]At paragraph 44 and following.
[4]Para 71. Note: - His Honour held that the procedure was not available to enable a party to obtain information needed for its pleadings – para 91.
Counsel for Liberty submitted that his Honour was here stating that the operation of Rule 42.10 was confined to documents relevant to the trial of the substantive proceeding and that that interpretation is the correct interpretation. As a result, Rule 42.10 subpoenas could not be used to obtain evidence relevant to an interlocutory application such as an application for security for costs.
The critical issue is the construction of the phrase “to produce any document for evidence before the trial of the proceeding”. Should this be construed as referring to evidence relevant to the issues raised in the trial of the substantive proceeding or does it refer to evidence relevant to the trial of a particular proceeding, such as an interlocutory proceeding? Support for the latter proposition may be found in a later decision of Gillard, J. in Pico Holdings Inc. v. Voss[5] where his Honour upheld in part a subpoena issued pursuant to Rule 42.10 seeking documents to be used for evidence in the hearing of a contempt application within the main proceeding brought for alleged breach of an interlocutory injunction. True it is that a contempt proceeding is a very different proceeding to an application for security for costs. Nonetheless the contempt proceeding in Pico Holdings was not the trial of the substantive proceeding. The decision, therefore, lends support to the view that the phrase “trial of the proceeding” refers to the trial of the proceeding for which the evidence is sought by subpoena. The definition in the Rules of “proceedings” supports that construction. The definition is as follows:
“’proceeding’ means any matter in the Court by writ or originating motion or otherwise provided by or under any Act or these Rules.”
[5][2002] VSC 269.
Counsel for Liberty also relied on the comparison with the content of Rule 35.08 dealing with notices to produce which as well as using the language “at the trial of the proceeding” also includes a reference to “any application in [a proceeding]” suggesting a distinction in the Rules between the trial of the proceeding and an application in the proceeding.
I agree with the view that a practical and non-pedantic approach should be taken to the construction of the Rules.[6] It may be that Rule 42.10 came into existence primarily to facilitate the trial of actions but that does not mean that it was not intended to apply to all proceedings. Regard should be had to the policy behind Rule 42.10 which is to avoid the inconvenience of producing documents at the hearing of the proceeding which can result in delay and sometimes adjournment. Further, it enables the parties to assess their strengths and weaknesses and so facilitates settlement.[7] Those considerations apply whether it is the final hearing of the dispute in the principal proceeding or the hearing of interlocutory matters particularly major matters like security for costs applications. The present case provides an example. Assuming that the subpoenas are satisfactory in form and that the contents are sufficiently specific to overcome the attacks to which I will refer, the hearing of the application for security for costs would, using the other subpoena provisions, have to be delayed while all parties considered the documents subpoenaed. They would, under those procedures, also be deprived of the opportunity to assess the strengths and weaknesses of their cases in advance of the hearing of the proceeding.
[6]I note that Gillard J has stated that in giving effect to the purpose of Rule 42.10 the “Court should be astute to avoid upholding pedantic and technical arguments – Pico Holdings, above [26].
[7]Kennedy Taylor (Vic.) Pty. Ltd. v. Grocon Pty. Ltd. at para.93, per Gillard, J., and the cases there cited.
Counsel for Liberty also submitted that to allow Rule 42.10 to operate in any interlocutory application would open the floodgates. In my view this fear is unfounded. In many interlocutory applications it would not be to anyone’s advantage to subpoena documents from non-parties and costs concerns would discourage their use. In any event, the “flood gate” is already present – non-party documents can be subpoenaed in any event under Rule 42.02. All that Rule 42.10 does is enable them to be produced in advance of the hearing of the relevant application. From a case management point of view it makes sense, I suggest, to have this alternative available where subpoenaed documents are relevant to interlocutory proceedings. It may be said to open the gate a little earlier but only for access to that which is relevant.
I should acknowledge that my first impression on reading Rule 42.10 for the purpose of this application was that Liberty’s construction was the correct one. Having regard to the above considerations, however, I have come to the conclusion that the Rule 42.10 procedure is available to Mr Scott in his security for costs application. If this view be incorrect, and I note that the Master came to a different view, then it would be appropriate in this case to adopt the course adopted by the Master of deeming the subpoenas to be issued under Rule 42.02. It would be desirable, in that event, to direct that the subpoenaed documents be filed with the Prothonotary on a date preceding the hearing of the security for costs application.
Subpoenas – Abuse of process; Fishing
Several issues were raised. Counsel for Liberty submitted that the subpoenas to non-parties should be regarded as fishing because they were issued before the trial of the actual substantive proceeding and before any summons for security, to which they were said to relate, was issued. Further, it was submitted that no evidence has been filed by the first defendant supporting the security for costs application.
All the factual propositions are correct. The question to be resolved, however, is whether seeking the documents described in the subpoenas would constitute a fishing expedition. That in turn depends upon whether the subpoenas are seeking evidence to support Mr Scott’s case or whether what is being sought is access to documents to determine whether he has a case at all. [8] In the present case, a security for costs application was foreshadowed and was in fact issued prior to the decision as to the validity of the subpoenas.
[8]Commissioner for Railways v Small (1938) 38 SR (NSW) 564; Bailey v Beagle Management Pty Ltd [2000] FCA 1577, and [2—1] FCA 60; Equuscorp Pty Ltd v Malcolm [2001] VSC 66.
In addition, there is evidence to support the case that there is reason to believe that Liberty would not be able to meet an order against it for the cost of the proceedings. While the first defendant has not yet formally filed material in support of the application for security for costs, he has caused to be filed affidavit material in relation to the subpoena and notice to produce applications of Liberty which contains in it, among other things, the report of Mr Gower. That report contains a detailed analysis of the financial position on material then available to Mr Gower. The analysis lends support to the conclusion that Liberty lacks the ability to meet a substantial costs order in the main proceeding. Mr Gower has also expressed the following opinion:
“I consider that there is reason to believe that Liberty may not be able to meet a costs order of $1.0 million made against it in the proceeding.”[9]
[9]Paragraph 16 of the report.
In addition, as noted in the above background material, Liberty in May and July this year foreshadowed expert material that would demonstrate its ability to pay a substantial costs order but it has not been produced. The reality of the situation is that the documents are sought not for the purpose of establishing whether there may be a case and whether to issue proceedings. They are sought as evidence relevant to a security for costs application which is already supported by evidence.
Subpoenas – Abuse of Process; Oppressive
Counsel for Liberty submitted that the width of the subpoenas and their uncertainty was such that they were oppressive and therefore an abuse of process. Counsel addressed submissions to each of the subpoenas and the description of the documents requested in each.
In assessing the arguments put, the approach to be taken is to assume that the recipient will read the subpoena sensibly and with reference to the circumstances known to the recipient.[10] Further, the recipient is not required to ransack its records to find something that might conceivably come within the description.[11]
[10]Pico Holdings Inc, above, para 26 and Lucas Industries Ltd v Hewitt (1978) 18 ALR 555, 571.
[11]Pico Holdings Inc, above, para 28 citing Commissioner for Railways v Small, above, at 573.
Applying these principles to the descriptions, the attack made on behalf of Liberty is not made out.
(a) The subpoena directed to the ANZ Banking Group Limited.
The description of the documents was
“all documents containing the terms and conditions of any commercial bill borrowing facility provided by the corporation to Liberty Financial Pty Ltd and for Liberty Funding Pty Ltd (Liberty) current as at the date of this subpoena.”
Counsel submitted that this description was far too wide in referring to all documents containing the terms and conditions. Read sensibly, however, it requires production only of the documents which constitute the commercial bill facility. I note that there is no time issue because the description limits the request to documents current at the time of the subpoena.
(b) Perpetual Trustee Company Ltd and PT Limited
The subpoena in this instance seeks production of various trust deeds and amendments to them. It also seeks all documents containing the terms and conditions applicable, at the date of the subpoena, of Liberty Financial Pty Ltd subordinated loans to five identified trusts. The foregoing are plainly relevant and sufficiently certain. The subpoena also requires production of:
“All monthly investor or other reports for each of the trusts detailing the financial performance of each of the trusts, including any or all of:
(a)the level of defaults on loans included within each of the trusts;
(b)any losses suffered;
(c)the status of the reserve account; and
(d)any distributions declared; in relation to each of the trusts, for the period 1 July 2001 to the date of this subpoena.”
Counsel for Liberty submitted that this sort of request is far to wide and oppressive because it is seeking monthly reports over a substantial period of time and that what is in issue is the current financial position and the annual financial statements should be sufficient.
The affidavit material shows that Liberty is engaged in highly sophisticated and substantial lending operations, operations which carry with them risks associated with “non-conforming lending”. There are complex arrangements between related companies and elaborate trust structures. It is artificial to suggest that it would be sufficient to simply have the bald annual financial statements made available. It is relevant to have material that fleshes out those statements and reflects upon the detailed performance of the trusts. As recent experiences have reminded us, the published financial statements of large corporations do not necessarily reflect the realities. The request is confined to the last three years. The actual production of the documents should not pose difficulties for the recipients of the subpoenas.
(c) Macquarie Bank Limited
In this instance, the first defendant seeks three categories of documents. The first relates to all documents
“containing the terms and conditions of any proposed or actual investment in, or provision of funding by the corporation (or any of its subsiduary)”
to Liberty and Liberty Funding for the period 1 January 2004 to the date of the subpoena. This category is criticised because it seeks documents relating to proposed investments. Again, however, such material is relevant to an assessment of the financial capacity of Liberty and its related company Liberty Funding, the financial affairs of which are interrelated. The category is confined to the period since 1 January 2004. It is not oppressive.
The second category relates to:
“Any application or request for funding or investment by the Corporation made by Liberty Financial Pty Ltd or Liberty Funding Pty Ltd and any documents provided in support of such application or request including . . . :”
The category then goes on to list a number of types of documents giving some guidance to the recipient of the subpoena. Those listed are:
“(a) financial records;
(b) agreement;
(c) undertakings by third parties;
(d) representations to the corporation or any of its subsidiaries;
(e)any encumbrances on Liberty Financial Pty Ltd, Liberty Funding Pty Ltd or any other entity.”
Again, for the same reasons, it appears to me that this material is relevant to the issues and has been confined by the drafter of the subpoena. The category is not limited by time but the documents in question are all relevant in that they provide evidence as to the realities of the business of Liberty and its dealings with MacQuarie Bank Ltd.
The same comments may be applied to the final category which is
“any documents constituting or containing financial analysis of Liberty Financial Pty Ltd or Liberty Funding Pty Ltd.”
A further point was raised in relation to that category by counsel for Liberty, namely, that these papers were internal to the bank. That may be so, but that is a matter for the bank to argue.
Counsel submitted generally that all that was relevant on the security for costs application was the published financial statements and that was all that should be considered. I disagree. It is obviously relevant to an assessment of the capacity of Liberty to meet any substantial costs order to have the bare financial statements fleshed out by reference to the documents behind them and to have other evidence available which gives insight into the reality of the business of Liberty.
Counsel also submitted that all that was relevant, and so appropriate to be the subject of subpoenas, had been identified by Mr Gower in his report where he stated:
“17.In order to express a final opinion on this matter I would require:
(a)Financial and other documents relating to each of the securitised trusts in order to determine their financial positions and capacity to meet the fees and trust distributions which Liberty is reliant on for Liberty’s ongoing funding requirements;
(b)Management accounts of Liberty, Liberty Funding and the securitised trusts for the period 1 July 2003 to 31 March 2004.”
Mr Gower, however, was not expressing an opinion as to what was relevant to a security for costs application. What he said in the quoted paragraph was that, to be able to express “a final opinion”, he required the documents listed. The question to be resolved in relation to the subpoena, however, is whether the documents sought are relevant. Relevance is a broader issue. The test is whether the document “is reasonably likely to add, in the end, in some way or other, to the relevant evidence in the case”.[12]
[12]Spencer Motors Pty Ltd v LNC Industries Ltd [1982] 2 NSWLR 921,927; Younghanns v Candoora No 19 Pty Ltd [5] 2000 VSC 505, para 13.
Subpoenas –Abuse of Process; Discovery
Counsel for Liberty also submitted that the subpoenas were an abuse of process because they were in effect seeking pre-trial discovery and the procedure for such discovery had not been followed.[13] This argument also turns on the issues raised by Liberty as to the breadth of description of the documents in question. I have already referred to the issues of the interpretation of the categories of documents requested. In my view the documents are reasonably specifically targeted and relate to the issues that will be considered in the application for security for costs. They do not, in my view, constitute an attempt at discovery from non-parties.
[13]Rule 32.07; BLSRT Pty Ltd v Manpo Holdings (Australia) Limited [1998] VSC 46 and [1998] VSCA 107.
The notice to produce
Counsel for Liberty submitted that this document also was an abuse of process because it constituted a fishing expedition. Counsel relied on the arguments advanced in relation to the subpoena about the lack of evidence filed for the security for costs application and argued that Mr Scott was in fact seeking material to decide whether he had a case for security for costs or not. I refer to and rely on my comments above on these arguments when I considered them in relation to the subpoenas.
Counsel for Liberty also submitted that the generality of the description of the categories of document was such that it went beyond that which was relevant in the sense defined above and was therefore oppressive and an abuse of process.
I do not propose to go through each category in detail. The comments I have made in relation to the subpoena categories have application to the categories of documents listed in the notice to produce which are also listed in the subpoenas. There are some additional points, however, that need to be addressed.
The third category of documents sought in the Notice to Produce related to the terms and condition applying at the date of the notice to
“Liberty’s inter-company guarantees or loans with:
(i) Liberty Funding Pty Ltd;
(ii) Liberty Financial BV; and
(iii) any other entity related to Liberty (whether recent or foreign).”
Counsel for Liberty submitted that the documents sought in relation to inter-company guarantees or loans with Liberty Financial BV was unnecessary it being a shareholder in Liberty Financial and based in the Netherlands. It seems to me, however, that in developing a complete picture of the financial capacity of Liberty, such documents are obviously relevant. The other issue raised was the potential breadth of the phrase “any other entity related to Liberty”. That certainly is wide but it is confined to inter-company guarantees or loans involving Liberty. Liberty would not have to do more than produce its inter-company guarantees or loans with other corporations that are related to it. This should not be difficult or taxing and is relevant. The related entity issue was also raised in relation to the fourth and fifth categories but the same comments apply.
Another category warranting specific comment is category 8 which is in the following terms:
“All correspondence or other documents which relate to the application to the Australian Securities and Investment Commission (ASIC) and the acceptance of that application by ASIC for an extension of time as to the provision by Liberty of its Special Purpose Annual Financial Report for the year ended 30 June 2003.”
Counsel for Liberty submitted this was not relevant. True this document is not directly relevant to the issue of the financial capacity of Liberty. It is, however, indirectly relevant to that issue and there is nothing oppressive or fishing in including it in the list of documents.
Counsel for Liberty also submitted that the notice to produce was oppressive because of the time and cost that would be involved in responding to it. The reality is that the Liberty has brought proceedings of a substantial kind against the defendants and the material filed by Mr Scott, that is also relevant to the security for costs application, has not been responded to by Liberty. No doubt a substantial number of hours will be required from the staff of Liberty and Liberty Funding and their legal advisers. I am satisfied, however that the photocopying costs figures are greatly exaggerated. If Liberty is as substantial as it claims to be, it should be able to cope without being unduly oppressed by the notice to produce.
The subpoenas and notice to produce overlap and therefore constitute an abuse of process
The parties have made detailed submissions identifying the extent to which there is a duplication in the documents sought under the subpoenas and the documents sought by the notice to produce. It may fairly be said that most of the documents sought in the non-party subpoenas are also sought in the notice to produce and to that extent there is duplication and overlap. More documents, however, are sought in the notice to produce.
The duplication is plainly justified. First, Liberty has consistently and strenuously resisted any suggestion that it might be required to produce any documents in relation to the security for costs application. It was only somewhat late in the hearing of this appeal that it offered to produce some of the documents sought. Secondly, the substantive matter is listed for trial in early 2005. That is not far away and it is important that the parties be in a position to commence and run the trial at that time. One option is to confine production of documents to those sought by the Notice to Produce – that is, to those in Liberty’s possession or control. Having regard to Liberty’s approach to the production of documents, however, one can have no confidence that the security for costs issue would then be heard and determined prior to the scheduled date for the commencement of the trial. Further dispute is likely. It is likely that Liberty will take a narrow view of its obligation and time and costs are likely to be saved by having access to similar documents through independent third parties. Finally, it will be relevant to check the content of documents in the possession of the subpoenaed parties with documents produced by Liberty as the documents sought.
Conclusion
For the foregoing reasons the applications to set aside the subpoenas and notice to produce should be dismissed. To the extent that there are any confidentiality issues, they can be dealt with by appropriate orders or undertakings.
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