National Mutual Holdings Pty Ltd v Sentry Corporation

[1990] FCA 243

JUDGMENT No. ........ ...... ........ ..- 2'+3 / 90-r.

IN THE FEDERAL COURT OF AUSTRALIA )

1

VICTORIA DISTRICT REGISTRY	1	V. NO. G.173 of 1987
1
GENERAL DIVISION	1
BETWEEN:

NATIONAL MUTUAL HOLDINGS PTY LIMITED AND ORS.

Applicants

and

SENTRY CORPORATION AND ANOR.

Respondents

COURT	:	NORTHROP J.
-	DATE :	21 MAY 1990

PLACE :  MELBOURNE

EX-TEMPORE REASONS FOR JUDGMENT

Presently before the Court are two motions, or, I should say, six motions raising two main issues. The first issue arises on a motion to set aside subpoenas addressed to four persons, Mr Goodsall, Mr Bartlett, Mr Kirkwood and Nr Ferris, and each of those persons also is moving the Court on notice to have their subpoena set aslde. Alternatively certain paragraphs of the subpoenas are sought to be set aside. Other orders are being sought excusing each of those four persons from producing documents because of legal professional privilege. The sixth motion seeks an order

amending certain orders made by the Court on 20 April 1990.

In many respects it is unfortunate that the motions and the submissions have had to be taken and made in the way they have. These lssues form part of a very long and complex dispute betwen the applicants, the National Mutual group, and the two respondents, Sentry Corporation, the first respondents, and Peat Marwick Mitchell and Co., the second respondent. The matter has been proceeding slnce 1987 and there have been numerous motions of an interlocutory nature and appeals from orders made and the matter has now been set down for hearing in October. The matters in dispute are very, very complex and cover a wide area despite the claim by the applicant that the real issue is relatively simple. As part of the preparation for the hearing, the parties agreed to orders being made for the exchange of reports by experts as to certaln aspects of the business activities and representations made in relation to the acquisition by National Mutual of the interests of Sentry in insurance businesses and also in relation to reports by auditors being the second respondents, Peat Marwlck, in relation to the

businesses being carrled on by Sentry Corporation. Pursuant	to those arrangements orders were made by the Court for the
exchange of expertsr reports on those matters and at least the filing of some of those reports in Court. Pursuant to those orders, a report was exchanged and also filed on behalf of the applicants and a report has been flled on behalf of Peat Marwick. The orders also require a report in reply to the report by Peat Marwick to be given by the applicants. The present motions arise out of the reports exchanged on
behalf of Peat Marwick, those reports being given by Mr Bartlett of Arthur Young, chartered accountants, Mr Ferris of Arthur Young, chartered accountants, Mr Goodsall of William M. Mercer Campbell Cook and Knight Pty Llmited, consulting actuaries, and Mr Kirkwood. Each of those four persons, apparently, reside in New South Wales. The reports contained references to other documents, many of them, apparently, being documents which have been discovered by Peat Marwick in the course of the proceedings.
It is fair to say that the subpoenas, which have been served, in the sense that they were accepted by the solicitors for Peat Marwick for the person to be served, are in a form which on their face are very wlde and have all the hallmarks of being oppressive in the sense of requiring the persons served, being the persons who made the reports, to produce to the Court a very large and wide ranglng range of documents apparently used by them in preparing the reports and, essentially, referred to in the reports themselves. unfortunately, fromthe correspondence between the applicants
and Peat Marwick it did appear that the matters could be resolved by consensus between the solicltors as to the
production of documents used by the four persons subpoenaed to enable the experts retained by the applicants to prepare their expert's report in reply. Unfortunately, it appears that the steps taken to resolve the matter by the agreement of the solicitors failed.
On 20 April 1990 the Court made a series of orders relatlng to questions arislng where privilege was claimed in relation to documents produced pursuant to the subpoenas directed to experts and used by them in relation to the making of reports. By that order the applicants were given leave to serve subpoenas on a number of persons, including the four persons the sublect of the present motions, and Peat marwick was glven leave to subpoena the experts who had prepared the report for the applicants. The orders then set out in detailed form a method by which privllege could be claimed and how the issues of privllege could be determined, a procedure which has been used in a similar form in other cases and is based upon the parties claiming privilege to list the documents for whlch privllege is clalmed so that in due course, if agreement cannot be reached between the parties, the issue of privllege can be determined by the Court. This is a procedure which is to be commended and is similar to procedures which have been adopted in many areas of the law, including cases where, pursuant to search warrants, searches have been made of solicitors offices and documents seized and in which the claim for privilege is
made. In those circumstances, a form of agreement has been
worked out between appropriate bodies including the Law Council of Australia and the Director of Public Prosectulons as to how the issue of privilege is to be determined, see Watson and Watson, Australian Crlminal Law, Federal Offences, para 609A commencing at p.787. It is in regard to the wide powers of search and seizure conferred, a very practical way of resolving the problem of privilege has been worked out.
In the present case there is a variation from the orders in that instead of complying with the implied procedures inherent in the orders made by consent on 20 April 1990, Peat Marwick and the persons served with the subpoena have moved the Court to have those subpoenas set aside and in so doing have raised the two issues both of legal professional privilege and oppression arislng from the width of the subpoenas and the need and obligation placed upon the persons on whom the subpoenas were served to engage in detailed work in order to ascertain what documents are the subject of the subpoena. There is evidence given in the affidavit of Mr Arthur sworn on 16 May 1990 which illustrates the large amount of work and the great amount of expense required to be expended by the four persons subpoenaed in complying with the requirements of the subpoena.
There are many authorities dealing with the problems relating to subpoenas to witnesses, and they range from the well-known cases of The Commissioner for Railways v Small (1938) 38 S.R. (N.S.W.) 564 to Waind v Hill (1978)
N.S.W.L.R. 372. The need to ensure that subpoenas are not oppressive both as to the width of the claims made for

documents to be produced and the time within which they are to be produced is well recognized. There is a very expressive extract from the judgment of Sir Frederick Jordan at p.573 in Small's Case of that report which has formed the basis of many subsequent cases. I read the passage commencing at that page:-

"A writ of subpoena duces tecum may be addressed to a stranger to the cause or to a party. If it be addressed to a stranger, it must specify with reasonable particularity the documents whlch are required to be produced. A subpoena duces tecum ought not to be issued to such a person requiring him to search for and produce all such documents as he may have in h ~ s possession or power relating to a particular subject matter. It is not legitimate to use a subpoena for the purpose of endeavouring to obtain what would be in effect discovery of documents against a person who, being a stranger, is not llable to make discovery. A stranger to the cause ought not to be required to go to trouble and perhaps to expense in ransacking his records and endeavouring to form a judgment as to whether any of his papers throw light on a dispute which is to be litigated upon issues of which he is presumably ignorant: Lee v. Angus L.R. 2 Eq. 59; Burchard v. Macfarlane [l8911 2 Q.B. 241 at 247; A-G. v. Wilson 9 Sim. 526; Newland v. Steer 13 L.T. 111; 13 W.R. 1014. And if a subpoena duces tecum is issued to such a person in an objectionable form, the witness may apply to the Court to have it set aside."

The method of working out the problems of subpoenas are discussed in some detall in the judgment of Moffitt J. in Waind v. Hill but I do not need to refer to that in detail. It is sufficient to say that as a matter of practice, on the return of a subpoena the person subpoenaed is required to attend and either to object to the subpoena and seek to have

Once they are produced they are produced into the custody of it set aslde on various grounds or to produce documents.	the Court and in those circumstances a party may then seek
the leave of the Court to inspect those documents. It is at that stage questions of privilege can be raised as an objection to the giving of leave to inspect documents.
The issue of privilege is simllar, in a way, to the issue arising at a trial when a document is sought to be tendered and is objected to on the ground of privilege. The Court must decide that issue at that time. I know of no case where a subpoena has been set aside because it is seeking to have produced documents which are claimed to be privileged. Having regard to the history of the dispute between the parties in this case I think it would be unwise for this Court to attempt to determine any question of privilege at this stage on a procedure which is not in compliance with the normal practice and procedure of the Court in circumstances where the need for these motions before the Court arise in the unfortunate circumstances referred to earlier in these reasons.
The law on the question of privilege is fairly well settled, and for present purposes it is sufflclent to refer to what has been sald in cases such as Attorney-General for the Northern Territory v. Maurice (1986) 161 CLR 475, United States Surgical Corp. v. Hospital Products International Pty. Ltd. 13 October 1981, McLelland J. and Bond Media Limited v. John Fairfax Group Pty Limlted, a judgment of Mr Justice
Giles in the Supreme Court of New South Wales given durlng the course of a hearing on 7 December 1988 and Trade Practies
Commission v. Sterling (1978) 36 F.L.R. 244. I think that is all I need to refer to.
That does not deal with the remaining issue, which is probably the more important issue, namely the question of oppression. The question of oppression has been discussed in
Lane v. Registrar of the Supreme Court of N.S.W. (1981) 148
C.L.R. 245, Lucas Industries Ltd. v. Hewitt (1977) 18 A.L.R.
555 and Bank of New South Wales v. Withers (1981) 52 F.L.R.
207 by Sheppard J. They flow, in reality, from what was said by Sir Frederick Jordan in Small's case.
The argument put in support of the motions is that the width of the material sought is so wide that the subpoenas in substance are seeklng discovery as well as cross-examination of the persons to whom the subpoena has been directed, that this, of itself causes oppression, and therefore the subpoena should be set aside. As I said earlier, a consideration of the subpoenas does give an impression of them being oppressive in that sense, particularly when the subpoenas are read in the light of the evidence of Mr Arthur as to the difficulties and time involved and expense in obtaining and llsting and bringing those documents to Courts.
Having regard to the special features of the litigation before the Court and to the fact that the
subpoenas are directed to persons who had prepared the
reports, much of the strength of the arguments based upon
oppression is lost. In Lucas Industries it 1s true that there were affidavits to be filed by the experts and not reports to be exchanged, and that in that case the affidavits were to be part of the evidence which was to be given at the hearing of the trial. In the present case, the reports may or may not be used at the trial. The mere fact that they have been directed to be filed does not make them evidence
and they may never be tendered as evidence, either by the person making the reports or in some other way. But in any event, the issues between the parties have been defined by pleadings and other documents and the existence of the reports and expert evidence is of importance to the parties at the hearing of this case. In addition, it will be necessary for the parties to understand the basis upon which the reports of the opposing side are made and, when a report in reply is to be given by the applicants, particularly in the preparation of that report. It seems to me that in order to prepare the reports for Peat Marwick, the persons doing them would have made use of documents, some of which were given to them by Peat Marwick, many of them, if not most of them, being documents which are common to the parties because of discovery or other means, and there may be other documents as well. But in order to enable the report to have its full force and effect and also to enable the applicants to prepare their reply, it is important, in my opinion, that any document relied upon by the person subpoenaed should be disclosed by them pursuant to the subpoena and produced to
questions of privilege can be determined. the Court. Then and in those circumstances is the time when
This is not a case where a person subpoenaed is in the position of a person subpoenaed as referred to in Small's case and the passage referred to earlier. Here the persons are in the nature of expert witnesses relying upon their expertise to give opinion evidence based on, maybe, assumed facts put to them by their client, maybe, based upon other
documents of which the applicants have no knowledge at all but which may form a vital part in the whole resolution of the case in due course. It is in this respect that I have formed the view that the subpoenas, although expressed in wlde form, are not oppressive and should not be set aside on the basis of the arguments made on the width of the subpoenas and on the detalls of the documents sought to be discovered.
The motions also seek that if the subpoena are not set aslde altogether, certain paragraphs should be set aside.
A number of those paragraphs should be set aslde it is said
on the grounds of legal professional privilege, but in the
circumstances of thls case, I thlnk it is inappropriate to
try and differentiate between the different paragraphs on the material presently before the Court.
The other Issues raised by the motions are based upon 0.27 of the Federal Court Rules. Rule 3 of 0.27 provides for the giving of conduct money to a person subpoenaed, and in this case I am satisfied, on the material
before me, that the conduct money given was completely insufficient to enable the persons on whom the subpoena were
served to attend at Court on the return date. But again, having regard to the way in which the litigation has been conducted between the parties, it seems to me that this is a technical matter which should not have a bearing on the question of the valldity of the subpoenas. This was a case where there was to be legal argument made on behalf of Peat Marwick as well as the persons served, that the subpoena
should be set aside. National Mutual also realised there would be legal argument on this aspect only, and that nobody intended or expected the persons served to be present in Court today. Further, having again regard to the way in which the matter has been conducted between the parties, one would have expected a list of documents which would come within the subpoenas to be exchanged and only those documents which were sought to be produced would have been indicated by the applicants, and those documents only would have been the ones required to have been produced. To a large extent, this has already been indicated by the correspondence between the parties, but there has been no overall indication of what documents are to be covered by the subpoena. In reality, that is the next step which should be taken by the solicitors for Peat Marwick and the four persons, and that list of documents would then form the basis of what is to be done next on this issue.
Reference is also made to 0.27 r. 4A which is a rule providing for the costs of complying with subpoenas. There
has been no real submissions made on this issue before the Court today and I propose to adlourn any further submissions
on the application, if any, of that rule to the facts of the present case.
In the result, at this stage, the only orders that will be made without hearing further argument is that the motion to strike out each of the subpoenas or parts of the subpoenas be refused. The Court declines to determine at this stage the motions relating to the issue of whether any of the documents are subject to legal professional privilege on the basis that it is inappropriate to do so.
As far as the other motion is concerned in relation to the variation of the order made on 20 April 1990, the Court refuses the orders sought. The Court has already indicated what it considers should be the next step pursuant to the subpoenas.

ATTACHMENT A

Title of Action:	National Mutual Holdings Pty. Ltd. & Others v. The Sentry Corporation and Peat Marwick Mltchell & Others
File Number:	V. No. G.173 of 1987
Date of Hearing:	21 may 1990
Judgment Delivered:	21 May 1990
Counsel for Applicants:	Mr Hayes Q.C. and Mr Scerri
counsel for 1st named	Mr J. Karkar Q.C. and
Respondents:	Mr Ryan
Counsel for 2nd named	Mr Ellicot Q.C. and
Respondents:	Mr Rares

Solicitors for App1icants:Mallesons Stephen Jaques

Solicitors for 1st named Messrs Phillips Fox

Respondents:

Solicitors for 2nd named Allen Allen & Hemsley
Respondents:	,

a l l ~%OQW

Signed ........ ........ ...

Dated:  21 May 1990