Marsh Pty Ltd v Vickery
[2014] FCA 484
FEDERAL COURT OF AUSTRALIA
Marsh Pty Ltd v Vickery [2014] FCA 484
Citation: Marsh Pty Ltd v Vickery [2014] FCA 484 Parties: MARSH PTY LTD v NOEL VICKERY File number: SAD 310 of 2012 Judge: BESANKO J Date of judgment: 15 May 2014 Catchwords: PRACTICE AND PROCEDURE – application for further and better production of documents under subpoena – whether addressee had complied with subpoena – where subpoena required production of electronic properties of documents originating in electronic form – where documents produced documents in hard copy – where electronic properties not produced – application to set aside subpoena on grounds of oppression – where electronic documents within the scope of the subpoena archived on server located in United States – where compliance with subpoena will be costly and time consuming.
Held: Application for further and better production allowed. Application to set aside subpoena dismissed. Orders made for production of documents under subpoena.
Legislation: Federal Court Rules 2011 (Cth) rr 24.15, 24.17, 24.22
Sarbanes‑Oxley Act 2002 (US)Date of hearing: 9 May 2014 Place: Adelaide Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 22 Counsel for the Applicant: Ms N Charlesworth Solicitor for the Applicant: Ashurst Australia Counsel for the Respondent: The Respondent did not appear Solicitor for the Respondent: Fox Tucker Lawyers Counsel for Arthur J Gallagher (Aus) Pty Limited Mr M Douglas Solicitor for Arthur J Gallagher (Aus) Pty Limited O’Loughlins Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
SAD 310 of 2012
BETWEEN: MARSH PTY LTD
ApplicantAND: NOEL VICKERY
Respondent
JUDGE:
BESANKO J
DATE OF ORDER:
15 MAY 2014
WHERE MADE:
ADELAIDE
THE COURT ORDERS THAT:
1.Arthur J Gallagher (Aus) Pty Limited (“the Addressee”) is to produce to the Registry of the Court the following documents falling within the terms of the amended subpoena dated 5 March 2014 (“the subpoena”):
(a)electronic copies of all documents which originated in electronic form which the Addressee has previously produced to the Court by way of hard copies;
(b)electronic copies of all emails (including attachments to those emails) between [email protected] and any employee of the Addressee not yet produced by the Addressee coming into existence between 7 December 2011 and 5 March 2014 inclusive; and
(c)electronic copies of all emails not yet produced by the Addressee (including attachments to those emails) from and to Noel Vickery's email address at Arthur J Gallagher (Aus) Pty Limited, being [email protected], coming into existence between 7 December 2011 to 5 March 2014.
2.Any electronic copy of a document produced pursuant to the subpoena is to be produced in a format that preserves the original electronic properties of the document.
3.The following documents referred to in paragraph 1 are to be produced by 4.00pm on 4 June 2014:
(a) email communications coming into existence on or after 17 May 2012; and
(b)documents accessible on the AJG Hard Drive referred to in paragraph 16(b) of the affidavit of Alissa Pfitzner sworn on 29 April 2014 or any hard drive or storage device not forming a part of the US Archive referred to in paragraph 21 of that affidavit.
4.The following documents referred to in paragraph 1 are to be produced by 4.00pm on 15 July 2014:
(a) email communications coming into existence on or before 16 May 2012; and
(b)any other documents (not falling within paragraph 3 of these orders) that cannot be accessed by any employee of the Addressee other than by accessing the US Archives or any server located in the US.
5.Subject to the condition stated in paragraph 6, the Applicant has leave to uplift, copy and inspect any document returned on the subpoena (other than documents referred to in paragraph 21 of the orders of the Court made on 11 March 2014), such documents to be returned to the custody of the Court within 5 full business days of uplift.
6.Where the Addressee claims confidentiality in respect of information contained in any document produced in response to a subpoena (“claimed confidential information”):
(a)the claimant shall give written notice to the parties of the claim, specifying the confidential information and identifying each document in which it is contained;
(b)the uplifting party shall not use or disclose the claimed confidential information, except for the purpose of (and only to the extent necessary for) the preparation and conduct of the proceedings; and
(c)a party to the proceedings shall not, without first giving the claimant 14 days’ written notice:
(i)file or lodge in the Registry any affidavit or other evidentiary material containing the claimed confidential information; or
(ii)tender or adduce in open Court any evidence containing the claimed confidential information.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
SAD 310 of 2012
BETWEEN: MARSH PTY LTD
ApplicantAND: NOEL VICKERY
Respondent
JUDGE:
BESANKO J
DATE:
15 MAY 2014
PLACE:
ADELAIDE
REASONS FOR JUDGMENT
Marsh Pty Ltd is the applicant in this proceeding and it conducts an insurance brokerage business. It employed Mr Vickery, the respondent, from 20 March 2004 to 29 February 2012. On or about 7 December 2011, it gave the respondent notice that his employment would come to an end on 29 February 2012 on the ground of redundancy. The respondent commenced employment with Arthur J Gallagher (Aus) Pty Ltd, trading as Gallagher Australia (“Gallagher Australia”), on or before September 2012. The applicant has brought a proceeding against the respondent claiming that he has misappropriated information and documents obtained by him as an employee of the applicant and has been and is using that information for his own benefit or that of Gallagher Australia. The pleadings have been finalised and orders have been made with a view to fixing a date for trial. A mediation was held, but it was not successful.
As part of its preparation for trial, the applicant issued a number of subpoenas for the production of documents. It issued a subpoena directed to Gallagher Australia. Gallagher Australia is a wholly owned subsidiary of Arthur J Gallagher & Co, which carries on business in the United States of America.
The applicant served the subpoena on Gallagher Australia in early February 2014. The return of the subpoena came before a Registrar of this Court on 13 February 2014. At that time, the Registrar made an order extending the time for compliance with the subpoena to 11 March 2014. In a context in which there were a number of subpoenas, she also made a general order requiring any addressee of a subpoena to issue any application to set aside the subpoena on or before 27 February 2014.
The applicant and Gallagher Australia engaged in discussions about the scope of the subpoena and, as a result of those discussions, they agreed to vary the terms of the subpoena. A proposed form of order was agreed to by Gallagher Australia and was returned to the applicant’s solicitors on 28 February 2014. A copy of an amended subpoena was attached to the order, which was made by consent on 4 March 2014. The amended subpoena required production of the subpoena and the documents referred to in it by “31 March 2014 at 4pm in respect of any document not accessible by the Addressee in Australia and 11 March 2014 at 2.15pm in respect of all other documents”.
Ms Alissa Pfitzner is chief counsel, Asia Pacific, of Gallagher Australia, and she swore two affidavits on behalf of the company. In her first affidavit, she said that Gallagher Australia was served with the subpoena on 6 February 2014. She deposes to the fact that Gallagher Australia has produced a number of documents to the Court in answer to the subpoena. The details are as follows. A large number of hard copy files, which were held in Gallagher Australia’s Adelaide office, were copied and those copies, which comprised 53 volumes, were produced to the Court on 13 March 2014. Hard copies of other documents had been prepared and produced to the Court two days earlier on 11 March 2014. On the same day, a copy of the hard drive of the respondent’s laptop computer was produced to the Court by Gallagher Australia. That was done by Gallagher Australia in purported compliance with paragraph 7 of the amended subpoena. A paragraph of the amended subpoena (paragraph 9(b)) required Gallagher Australia to produce all documents originating from the applicant, including, but not limited to, “documents the electronic properties of which identify the author or creator of the document as ‘Marsh Inc’ or ‘Marsh Pty Ltd’ or ‘Marsh’”. Ms Pfitzner swore in her first affidavit that some 66 documents meeting that description were found on Gallagher Australia’s shared hard drive and that those documents have been produced to the Court under the terms of the amended subpoena.
I return to my narrative of events, although I will need to come back to Ms Pfitzner’s first affidavit.
The applicant became concerned about whether Gallagher Australia had properly responded to the terms of the amended subpoena. The reasons for that concern are set out in an affidavit of the applicant’s solicitor, Ms Julia Sutherland, at paragraphs 17 to 40, and there is no need for me to repeat them. It is sufficient for me to say that Gallagher Australia’s solicitor, Mr Nicholas Anderson, advised Ms Sutherland on 7 April 2014 that Gallagher Australia had identified 66,000 emails in its archives from the United States “which respond to categories of the subpoena and have reference to those clients in them”. According to Ms Sutherland, Mr Anderson also said:
Alissa (Pfitzner; who I know to be Chief Counsel, Arthur J Gallagher Australasia) has gone through documents relevant to ARA and has produced a screen shot of 2000 emails; some are unrelated to insurance issues. The screen shot is 100 pages long. If our client was to print off all the emails there would be 66,000 documents or 230 volumes of material. We assume that the court and you do not wish to trawl through these materials. So if we provide you with an index to the materials, could you let us know which ones you want our client to produce.
Mr Anderson swore an affidavit in which he deposed that Ms Sutherland’s account of the conversation was not complete. In light of the issues as argued, it is not necessary for me to set out Mr Anderson’s account.
On 10 April 2014, the applicant issued an interlocutory application seeking various orders in relation to the amended subpoena directed to Gallagher Australia. Some of the matters raised were resolved and were the subject of orders made on 22 April 2014. Of present relevance is paragraph 4 of the interlocutory application, which is in the following terms:
4.An order for further and better production by Arthur J Gallagher (Aus) Pty Limited pursuant to the amended subpoena issued by the Court on 5 March 2014 (Subpoena), including but not limited to an order that Arthur J Gallagher (Aus) Pty Limited produce to the Court by 9.00 am on 15 April 2014, or such other date ordered by the Court:
(a)electronic copies of all documents which originated in electronic form which Arthur J Gallagher (Aus) Pty Limited previously produced to the Court by way of hard copies in purported compliance with the Subpoena;
(b)electronic copies of all emails (including attachments to those emails) between [email protected] and any employee of Arthur J Gallagher (Aus) Pty Limited not yet produced by Arthur J Gallagher (Aus) Pty Limited from 7 December 2013 and 5 March 2014; and
(c)electronic copies of all emails not yet produced by Arthur J Gallagher (Aus) Pty Limited (including attachments to those emails) from and to Noel Vickery’s email address at Arthur J Gallagher (Aus) Pty Limited, being [email protected], from 7 December 2011 to 5 March 2014.
Ms Pfitzner’s first affidavit is the key to the matters raised by Gallagher Australia in defence of the application and I return to it. She deposes to the fact that Gallagher Australia has an auto archiving programme which “runs in the background of all users’ mailboxes” and which automatically archives emails that are over two years old. In paragraph 21(c) of her first affidavit she deposes as follows:
(c)AJG is a wholly owned subsidiary of a US publicly listed company, and there are strict controls on the IT systems in order to ensure that AJG meets its critical systems obligations under Sarbanes-Oxley Act of 2002 (“SOX Rules”). In particular:
i.The SOX Rules imposes various governance, accounting and reporting standards on US publicly listed companies. Our external auditors, Ernst Young, are obliged to audit our SOX compliance on an annual basis together with an evaluation of the effectiveness of our internal controls and our management’s evaluation process of how we reach our conclusions that we are SOX compliant.
ii.Internal controls over our IT systems are part of our SOX Section 404 obligations.
iii.Breaches of Section 404 can result in fines of up to US$1million and 10 years in prison for corporate officers.
iv.SOX Rules and/or internal controls over our IT systems include a requirement that access to other users’ mailboxes must be specifically approved for each user request and that access, once granted, is only for the person who made the request. That is, the log on details to the archives for other users’ mailboxes is specific to the individual who has made the access request. The sharing of the log on details for those archived records would be considered gross misconduct.
v.As a result of the SOX Rules and/or internal controls over our IT systems I was the only person granted access by Mr Tom Lucas (“Lucas”), the Senior Messaging Architect for AJG’s parent company, Arthur J. Gallagher & Co, in Itasca, Illinois US, to other users’ mailboxes and I was not able to obtain assistance from any other employee in reviewing the volume of emails that even a limited search produced.
Ms Pfitzner deposes that she is the only person authorised to access other users’ mailboxes. She describes the large volume of material involved. She estimates the time that would be involved in the searching and copying process in relation to the US archive material at in excess of 100 hours. In relation to the emails identified in paragraphs 4(b) and 4(c), she estimates a further 50 hours (and a cost in excess of $20,000) for checking the emails for confidential material and then indexing them.
There was an objection by counsel for Gallagher Australia to the admission into evidence of paragraph 21(c) of Ms Pfitzner’s affidavit on the basis that any restrictions imposed by the Sarbanes‑Oxley Act 2002 (US) could only be proved by production of the Act itself and reference to its terms. The objection was well-founded and the parties agreed that the paragraph could be received on the following basis:
That pursuant to section 135(a) of the Evidence Act 1995 (Cth) the Court receive only paragraph 21(c) of the affidavit of Alissa Pfitzner for the purpose of:
a)evidence of fact establishing Ms Pfitzner’s understanding, within the meaning of section 60 of the Act, of the operation and consequences of the SOX Rules for her company’s parent corporation;
b)for the purpose of establishing as asserted in paragraph 21(c)(v) that Ms Pfitzner was the only person granted access to electronic information.
The Respondent to the subpoena relies on that evidence in conjunction with paragraphs 22 and 23 of Ms Pfitzner’s affidavit to support the submission that the Respondent’s parent company has only agreed to permit access to electronic materials in it’s possession by Ms Pfitzner.
In relation to paragraph 4(a), Gallagher Australia submitted that it had complied with the requirements of the amended subpoena by producing hard copies of the documents and that there was no obligation on it to produce, in addition, electronic copies of the documents.
In support of its argument, Gallagher Australia referred to paragraphs (6) and (7) of r 24.17 of the Federal Court Rules 2011 (Cth) (“the Rules”) which are in the following terms:
(6)Unless a subpoena specifically requires the production of the original document, the addressee may produce a copy of any document required to be produced by the subpoena.
(7) The copy of a document may be:
(a) a photocopy; or
(b)in an electronic form that the issuing officer has indicated will be acceptable.
It also referred to the terms of the amended subpoena itself which provides:
Document includes:
(a)any record of information mentioned in the definition of document in Part 1 of the Dictionary to the Evidence Act 1995 (Cth); and
(b)any other material, data or information stored or recorded by mechanical or electronic means.
…
Production of copy instead of original
9.You may, with the consent of the issuing party, produce a copy, instead of the original, of any document that the subpoena requires you to produce.
9A. The copy of a document may be:
(a) a photocopy; or
(b)in an electronic form that the issuing party has indicated will be acceptable.
It is not necessary for me to consider these provisions because the issue in this case is not whether copies can be provided in lieu of original documents. The documents which the applicant seeks include the electronic properties of the documents. Those documents fall within the terms of the amended subpoena and have not to date been produced.
I am satisfied that the documents identified in paragraph 4(b) and 4(c) of the interlocutory application also fall within the terms of the amended subpoena. As I understand it, the applicant is seeking only those documents described in paragraphs 4(b) and 4(c) which fall within the terms of the amended subpoena.
Gallagher Australia claimed that compliance with all three paragraphs would be oppressive and that it ought not have to comply with them. In response, counsel for the applicant submitted that such a claim could only be made on application under r 24.15 of the Rules to set aside the subpoena. There was no such application and furthermore, Gallagher Australia had agreed to the terms of the amended subpoena.
On the evidence, it seems to me that, at the time Gallagher Australia agreed to the terms of the amended subpoena, it significantly underestimated the work involved in complying with the amended subpoena. Even if that was to some extent their own fault, it seemed to me appropriate to allow them the opportunity to submit that the amended subpoena was oppressive. In the circumstances, I made the following order:
2. Arthur J Gallagher (Aus) Pty Ltd have leave to make an oral application to set aside the amended subpoena to produce documents directed to it dated 20 January 2014 on the ground of oppression.
Having considered the evidence before me, I am not satisfied that the amended subpoena or paragraphs 4(a), 4(b) and 4(c) are oppressive. The nature of the applicant’s case is such that full use of the disclosure mechanisms in the Rules is, from its point of view, necessary. It is true that compliance with the amended subpoena will be costly and time consuming. However, the costs and expenses of complying can be the subject of an order under r 24.22, and the time consuming nature of the exercise can be dealt with by allowing longer than usual for compliance. In my opinion, having regard to all the circumstances, it is appropriate that I allow two months in relation to documents that can be accessed only from the US archives.
I will make the following orders:
1.Arthur J Gallagher (Aus) Pty Limited (“the Addressee”) is to produce to the Registry of the Court the following documents falling within the terms of the amended subpoena dated 5 March 2014 (“the subpoena”):
(a)electronic copies of all documents which originated in electronic form which the Addressee has previously produced to the Court by way of hard copies;
(b)electronic copies of all emails (including attachments to those emails) between [email protected] and any employee of the Addressee not yet produced by the Addressee coming into existence between 7 December 2011 and 5 March 2014 inclusive; and
(c)electronic copies of all emails not yet produced by the Addressee (including attachments to those emails) from and to Noel Vickery's email address at Arthur J Gallagher (Aus) Pty Limited, being [email protected], coming into existence between 7 December 2011 to 5 March 2014.
2.Any electronic copy of a document produced pursuant to the subpoena is to be produced in a format that preserves the original electronic properties of the document.
3.The following documents referred to in paragraph 1 are to be produced by 4.00pm on 4 June 2014:
(a) email communications coming into existence on or after 17 May 2012; and
(b)documents accessible on the AJG Hard Drive referred to in paragraph 16(b) of the affidavit of Alissa Pfitzner sworn on 29 April 2014 or any hard drive or storage device not forming a part of the US Archive referred to in paragraph 21 of that affidavit.
4.The following documents referred to in paragraph 1 are to be produced by 4.00pm on 15 July 2014:
(a)email communications coming into existence on or before 16 May 2012; and
(b)any other documents (not falling within paragraph 3 of these orders) that cannot be accessed by any employee of the Addressee other than by accessing the US Archives or any server located in the US.
5.Subject to the condition stated in paragraph 6, the Applicant has leave to uplift, copy and inspect any document returned on the subpoena (other than documents referred to in paragraph 21 of the orders of the Court made on 11 March 2014), such documents to be returned to the custody of the Court within 5 full business days of uplift.
6.Where the Addressee claims confidentiality in respect of information contained in any document produced in response to a subpoena (“claimed confidential information”):
(a)the claimant shall give written notice to the parties of the claim, specifying the confidential information and identifying each document in which it is contained;
(b)the uplifting party shall not use or disclose the claimed confidential information, except for the purpose of (and only to the extent necessary for) the preparation and conduct of the proceedings; and
(c)a party to the proceedings shall not, without first giving the claimant 14 days’ written notice:
(i)file or lodge in the Registry any affidavit or other evidentiary material containing the claimed confidential information; or
(ii)tender or adduce in open Court any evidence containing the claimed confidential information.
I will hear the parties as to whether an order under r 24.22 of the Rules should be made, costs and any other orders.
I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko. Associate:
Dated: 15 May 2014
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