Marshall v Smith

[2013] WASC 432

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   MARSHALL -v- SMITH [2013] WASC 432

CORAM:   LE MIERE J

HEARD:   31 OCTOBER 2013

DELIVERED          :   31 OCTOBER 2013

FILE NO/S:   CIV 2982 of 2012

BETWEEN:   JOHN LLOYD CRAIG MARSHALL

First Plaintiff

BEVAN JON WARRIS
Second Plaintiff

NEIL KEVIN JOYCE
Third Plaintiff

AND

EDWARD SCOTT SMITH
Defendant

Catchwords:

Practice and procedure - Subpoena to produce - Subpoena issued before defence pleaded - Whether legitimate forensic purpose - Issue of subpoena is premature

Legislation:

Rules of the Supreme Court 1971 (WA), O 1 r 4(b)(1), O 4A r 2, O 26A, O 36B r 4(1)

Result:

Application to set aside subpoena adjourned until after defence filed

Category:    B

Representation:

Counsel:

First Plaintiff                :     Mr M L Bennett

Second Plaintiff            :     Mr M L Bennett

Third Plaintiff               :     Mr M L Bennett

Defendant:     Mr J D MacLaurin

Solicitors:

First Plaintiff                :     Bennett + Co

Second Plaintiff            :     Bennett + Co

Third Plaintiff               :     Bennett + Co

Defendant:     Tottle Partners

Case(s) referred to in judgment(s):

Bailey v Beagle Management Pty Ltd (2001) 105 FCR 136; [2001] FCA 60

Buswell v Carles [2012] WASC 509

Kingsfield Holdings Pty Ltd v Sullivan Commercial Pty Ltd [2013] WASC 347

Taranissi v British Broadcasting Corporation [2008] EWHC 2486 (QB)

Yorkshire Provident Life Assurance Company v Gilbert and Rivington (1895) QB 148

1. LE MIERE J:  (This is an edited version of the reasons for judgment delivered on 31 October 2013).

2. The defendant caused a subpoena to be issued to Empire Oil & Gas NL, a company of which the plaintiffs are directors.  The subpoena requires the proper officer of the company to produce the following documents: 

   All documents in your possession, custody or power from 1 July 2012 to today arising out of, relating to, referring to or recording:

   (a)the indemnity or indemnities provided to any Director of Empire in relation to any defamation proceedings commenced by a Director or Directors of Empire against the defendant, Edward Scott Smith;

   (b)the indemnity or indemnities provided to any Director of Empire in relation to any defamation proceeding by a Director or Directors of Empire against any shareholder of Empire other than the defendant Edward Scott Smith,

   including, without limitation to the above:

   (1)any minutes of meetings; and

   (2)any resolutions;

   of the board of directors of Empire authorising the grant of, or otherwise relating to, referring to or recording the indemnities referred to in paragraphs (a) and (b) above.

3. The plaintiffs have applied to set aside the subpoena on two related grounds.  The first is that the documents sought pursuant to the subpoena do not have any apparent potential relevance in the extended sense, the Peruvian Guano sense, to the matters in issue in the litigation.  The second is that the defendant has not filed a defence, and it is inappropriate for the defendant:

   … to have 'put nothing up' and instead 'seek to fish around for some basis to support a plea of justification'.

Defendant's intended defences

1. The defendant has not filed a defence.  Ms Sharbanee, in an affidavit sworn on 30 October 2013, says that she has the day‑to‑day conduct of the matter on behalf of the defendant and at [5] says that she is instructed by the defendant that he intends in this action to instruct her firm and counsel to plead defences of, amongst other things, justification and honest or fair comment in respect to any imputations in the present action that concern the subject matter of litigation commenced against Empire Oil & Gas NL shareholders, the use of shareholder funds for the same, or concerning the use of shareholder funds in the same or similar manner as had been done in respect to  certain pleas in proceeding CIV 2378/2012 consolidated with CIV 2347/2012 and in proceeding CIV 2534/2012.

2. Counsel for the defendant confirmed to the court that the instructions given by Mr Smith, the defendant, to his solicitors are that he intends to plead the defence of justification in this action.

Subpoenas and particulars of justification

1. In support of their application the plaintiffs referred to the judgment of Kenneth Martin J in Kingsfield Holdings Pty Ltd v Sullivan Commercial Pty Ltd [2013] WASC 347. In that case his Honour referred at [39] to a number of well-known authorities concerning particulars of justification pleas. At [40] his Honour said:

   A position of principle seen taken in these cases is that a pleaded defence of justification in a defamation action ought be pleaded by reference to existing materials, rather than on a hope of later locating some material upon which the plea might be legitimately based.  On the face of it, that represents as a completely orthodox proposition.  Obviously the application of this principle in practice, then, needs to be evaluated against the precise circumstances of every individual case.  For instance, in a scenario of an allegation as to somebody’s asserted misconduct or criminality, it could never be legitimate to plead a defence of truth in an expectation that in due course the process of discovery, or answered subpoenas, will unearth some supporting evidence of criminality or misconduct.  There must exist an underlying factual base to support the plea as it is made.  But that does not mean a provided fact base which is sufficient cannot be augmented, to be proved at a trial, after properly invoking the forensic processes of the court.  An example of this is found in Yorkshire Provident, which concerns a plea of an insurance company not meeting claims by its clients.

2. In the course of the hearing the plaintiff referred to the defendant fishing around for some basis to support a plea of justification. The concept of fishing is no longer a bar to a party obtaining information for use in litigation in all circumstances, for example, O 26A of the Rules of the Supreme Court 1971 (WA) expressly contemplates what might have once been considered fishing.

3. The defendant says that he has in his possession information that the company has given an indemnity to directors in a defamation action against certain shareholders of the company and other parties.  Ms Sharbanee annexes to her affidavit a copy of the 2013 Annual Report of Empire Oil & Gas NL where at pages 80 and 90 of the affidavit is found information to that effect. 

4. However, in the context of discovery and in relation to subpoenas, fishing is not primarily concerned with the prior possession of evidence, but rather that there was a prior pleading which raised issues for which the evidence sought by the process would be relevant.  In Bailey v Beagle Management Pty Ltd (2001) 105 FCR 136; [2001] FCA 60 in a joint judgment of Heerey, Branson and Merkel JJ, the court referred to the concept of fishing in the context of court processes requiring the production of documents. At [28] the court said:

   [h]istorically the concept of fishing was not concerned with the prior possession of evidence, but rather that there was a prior pleading which raised issues for which the evidence sought by the process would be relevant.  In Edward Bray's Principles and Practice of Discovery 1885 ‑ described by RP Meagher QC in the 1981 foreword to a reprinted edition as 'The standard Victorian [era] masterpiece on the subject' ‑ the learned author, speaking of the stage at which discovery can be required said (at p 16):

   '… the right to discovery is limited to supporting a definite case set up, and does not extend to fishing out a case from the opponent; and therefore a party cannot have discovery before he has stated his case, whether in the claim as plaintiff or the defence as defendant.'

5. In my view, similar considerations should apply and do apply to subpoenas.  As a general rule, a party should only be able to obtain by subpoena documents which are relevant, including in the extended Peruvian Guano sense, to an issue on the pleadings.  It follows that as a general rule a defendant should not be entitled to issue a subpoena before putting on his defence.

6. The defendant has drawn my attention to the judgment of McKechnie J in Buswell v Carles [2012] WASC 509. In that case the plaintiff issued proceedings in defamation and sought the production of documents relating to the publications sued upon. McKechnie J held in effect that the indorsement of claim was sufficiently specific to create a sufficient connection between the issues in the action and the documents sought to be produced. His Honour said at [18] and [19]:

   The non-party puts great store on the fact that the plaintiff has yet to plead.  Until a statement of claim is pleaded, the cause of action is not defined so it is asserted.

   However, the indorsement of claim establishes the four corners of the cause of action.  It is specific and the subpoena relates directly to the claim.

   That is, his Honour found that to be an exceptional and specific case.  Importantly the party issuing the subpoena was not seeking documents before giving particulars of a plea of justification.  A subpoena may be set aside if it is not for a legitimate forensic purpose.  As a general rule, whether or not it is for a legitimate forensic purpose will be determined by reference to the pleadings.  A party seeking to obtain documents by subpoena must be able to show some connection between the documents sought by the subpoena and the issues raised in the proceedings.  As a general rule, that cannot be demonstrated until the defendant has put on his defence.  That position is all the more so where a defendant in a defamation action seeks to obtain documents by subpoena for the purpose of putting forward a plea of justification.  Where particulars of justification have not been given, the pleadings are not complete and the defendant should not be able to obtain documents by subpoena for the purpose of drafting his particulars.

7. Counsel for the defendant submits that these principles are affected by modern-day case management principles and the rules which allow the early return of subpoenas to be issued without leave.  In my view, there is no reason to suppose that the case management rules and the rules relating to subpoenas have undermined the principle that the subpoenaed documents must be shown to have a connection with the pleaded issues:  see Taranissi v British Broadcasting Corporation [2008] EWHC 2486 (QB) [13] in relation to the position in England and Wales. In the context of the defence of justification, that principle has been established by the authorities referred to by Kenneth Martin J in Kingsfield Holdings.        In my view, there is nothing stated by his Honour in that case which is inconsistent with that principle.  In my view, that principle applies in the application of the case management rules of the court and the rules relating to subpoenas.  The principle was stated by Lindley LJ in Yorkshire Provident Life Assurance Company v Gilbert and Rivington (1895) QB 148, 152 where Lindley LJ said:

   The defendants' right, then, is to have discovery of all matters relating to the questions in issue as narrowed by the particulars.  I do not think in a libel action he is entitled to get anything more.

   And then later:

   I think it would be a very bad precedent to suggest that a person can simply by libelling another obtain access to all his books and see whether he can justify what he has said or not.  I think it would be very lamentable if we should say, when a person has libelled another and has justified and given particulars, that he is entitled to more than discovery of that which relates to those particulars.  I think in principle that is right.

Subpoena and damages

1. Counsel for the defendant submitted that the defendant seeks the documents the subject of the subpoena not only for purposes relating to a plea of justification, but also for obtaining information in relation to the damages alleged to have been suffered by the plaintiffs.  Counsel refers to extracts from the 2013 Annual Report for Empire Oil & Gas NL as follows.  At page 80 of the affidavit of Ms Sharbanee are found parts of the financial statements for the company for the year ended 30 June 2013.         Legal fees are stated to have amounted to $676,593.  A note is attached, being note 25 on pages 89 and 90 of the affidavit.  It appears that the legal fees relate to two matters; the first concerns certain joint ventures and the second is litigation.  In relation to litigation it is stated:

   The Company incurred legal costs under an indemnity provided to Directors in a defamation action against certain shareholders of the Company and other parties.  The Company has received legal advice that the allegations in the defamatory material affect the Company and the reputation of the Company's Directors and employees.  All proceeds received in relation to the litigation will be for the benefit of the Company.

   It is those matters which the defendant intends to rely upon to set up a case to the effect that the plaintiffs have suffered little or no damage as a result of the publications complained of.

2. In my view, the statement of that intention is not a sufficient reason to allow the defendant to obtain the documents by subpoena prior to putting on his defence.  As was stated in Bray's Principles and Practice of Discovery referred to in Bailey v Beagle Management, to which I have referred earlier:

   … [t]he right to discovery is limited to supporting a definite case set up, and does not extend to fishing out a case from the opponent; and therefore a party cannot have discovery before he has stated his case whether in the claim as plaintiff or the defence as defendant.

3. In relation to this argument by the defendant, as in relation to the defendant's intended plea of justification, the question is not whether the defendant has a factual base for the case he intends to put or evidence to support it, but whether or not he has set up that case in his pleading.  If the plaintiff had put on his defence and had set up the case in relation to damages outlined by his counsel, then that may be a sufficient reason to establish a legitimate forensic purpose.  However, the defendant has not yet set up that case.

Subpoena is premature

1. In my view, the issue of the subpoena is premature.  The reasons why the defendant has not put on a defence are explained in the affidavit of Ms Sharbanee.  At [7] Ms Sharbanee says:

   I confirm that the reason that the defendant has not filed a defence in this action is that there has been a dispute and conferral, upon the plaintiffs' statement of claim, and subpoenas issued by the plaintiffs in this action and the use of documents produced on those subpoenas.  This has also given rise to the prospect that the plaintiffs would amend their statement of claim, especially in relation to pleas of justification.

   I pause to say the reference to justification is an error and should refer to publication.  The affidavit continues:

   I do not in this affidavit annex all of the correspondence passing between the solicitors for the parties in this respect but do attach copies of 3 letters … confirming the plaintiffs' intent to amend their statement of claim in these proceedings.

2. It is not appropriate to finally determine whether or not the subpoena has a legitimate forensic purpose until the pleadings are resolved and disclose the issues in the action. Order 36B r 4(1) provides:

   The court may, on the application of a party or any person having a sufficient interest set aside a subpoena in whole or in part or grant other relief in respect of it.

   In my view, the power of the court to grant other relief in respect of the subpoena is wide enough for the court to order that a subpoena stand over until the pleadings have been completed. Furthermore, O 4A r 2 confers upon the court power to make any procedural directions that in the court's opinion it is just to make in a case to facilitate the attainment of the objects referred to in O 1 r 4(b)(1).

Conclusion

1. I will order that the time for compliance with the subpoena be extended by ordering that the subpoena recipient is relieved from the obligation to comply with the subpoena until further order.  The plaintiff's application to set aside the subpoena will be adjourned to a date to be fixed after the defendant has filed a defence.