Self Care Corporation Pty Ltd v Green Forest International Pty Ltd (No 10)
[2022] FedCFamC2G 78
Federal Circuit and Family Court of Australia
(DIVISION 2)
Self Care Corporation Pty Ltd v Green Forest International Pty Ltd (No 10) [2022] FedCFamC2G 78
File number(s): SYG 2771 of 2019 Judgment of: JUDGE BAIRD Date of judgment: 8 March 2022 Catchwords: PRACTICE AND PROCEDURE – application to set aside notice to produce – proceeding part heard – apparent relevance – abuse of process – timing - contrary to overarching obligations in ss 190 and 191 of the Federal Circuit and Family Court of Australia Act 2021 - notice set aside in part – documents sought lack apparent relevance Legislation: Australian Consumer Law (Sch 2 to the Competition and Consumer Act 2010 (Cth))
Evidence Act 1995 (Cth) s 140
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 190, 191
Federal Circuit Court and Family Court Australia (Division 2) (General Federal Law) Rules 2021 rr 1.04, 16.16
Federal Court of Australia Act 1976 (Cth) s 37M
Cases cited: Allergan Australia Pty Ltd and Another v Self Care IP Holdings Pty Ltd and Another (2021) 162 IPR 52; [2021] FCAFC 16
Allergan Australia Pty Ltd and Another v Self Care IP Holdings Pty Ltd (No 2) [2021] FCAFC 180
Allergan Australia Pty Ltd and Another v Self Care IP Holdings Pty Ltd and Another (2020) 156 IPR 413 [2020] FCA 1530
Australian Competition and Consumer Commission v BlueScope Steel Limited (No 4), [2021] FCA 1162
Batistatos v Roads and Traffic Authority of New South Wales (2006) 227 ALR 425; [2006] HCA 27
Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd (No 3) [2012] FCA 61
Hamilton v Oades (1989) 85 ALR 1
In the matter of Petrolink Pty Ltd; Smith v Boné [2014] FCA 1024
Lowery v Insurance Australia Ltd [2015] NSWCA 303
McHugh v Australian Jockey Club Ltd (No 2) [2011] FCA 724
Secretary of the Department of Planning, Industry and Environment v Blacktown City Council [2021] NSWCA 145
Self Care Corporation Pty Ltd v Green Forest International Pty Ltd (No 3) [2021] FCCA 1277
Self Care Corporation Pty Ltd v Green Forest International Pty Ltd (No 8) [2021] FCCA 1668
Trade Practices Commission v Arnotts Ltd (No.2) (1989) 21 FCR 306; (1989) 88 ALR 90
Williams v Spautz (1991-1992) 174 CLR 509
Wong v Sklavos (2014) 319 ALR 378; [2014] FCAFC 120
Wong v Sklavos (2014) 225 FCR 405; [2014] FCA 679
Division: Division 2 General Federal Law Number of paragraphs: 123 Date of last submission/s: 11 February 2022 Date of hearing: 31 January 2022 and 11 February 2022 Place: Sydney Counsel for the Applicants: Mr J Hennessy SC Solicitor for the Applicants: Gilbert + Tobin Solicitor for the Sixth Respondent: Taylor David Lawyers Counsel for the Sixth Respondent: Mr B Le Plastrier ORDERS
SYG 2771 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: SELF CARE CORPORATION PTY LTD ACN 132 213 113
First Applicant
SELF CARE IP HOLDINGS PTY LTD ACN 134 308 151
Second Applicant
AND: GREEN FOREST INTERNATIONAL PTY LTD ACN 607 602 988
First Respondent (and others named in the Schedule)
order made by:
JUDGE BAIRD
DATE OF ORDER:
8 March 2022
THE COURT:
1.ORDERS the notice to produce issued by the sixth respondent on the first and second applicants on 6 October 2021, as amended on 11 February 2022 is set aside save as to:
(a)in respect of paragraph [1], the “income tax return of the first applicant for the financial year ended 30 June 2013”; and
(b)in respect of paragraph [3], the “detailed financial statements prepared by external accountants prepared for the first applicant for the financial years ended 30 June 2013 to 30 June 2018”.
2.DIRECTS within 14 days the parties each inform the Chambers of Judge Baird and each other whether or not they are content for the Court to determine the issue of costs on the papers, and if a party wishes to be heard on the costs of the application in a proceeding dated 7 December 2021, file and serve and provide to Chambers, short submissions together with a draft of their proposed order.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE BAIRD
The applicants, Self Care Corporation Pty Ltd and Self Care IP Holdings Pty Ltd (SCIPH), by application in a proceeding filed 7 December 2021, apply to set aside a Notice to produce issued on 6 October 2021 by the sixth respondent, Mr Pascal Skelin. The Notice has since been amended. As amended it seeks the production of certain financial documents of Self Care.
Further to directions of the Court the applicants and Mr Skelin provided outlines of submissions, and counsel appeared before me on the hearing of the application on 31 January 2022 and 11 February 2022. Mr Skelin read a number of paragraphs of affidavit dated 7 December 2021 sworn by his employed solicitor, Mr Gregory Alberto Grunert (Grunert 1), affidavit dated 21 January 2022 sworn by Mr Grunert on 28 January 2022 (Grunert 2), and affidavit dated 4 November 2021 sworn by Mr Elia Lytras (Lytras 2), Mr Skelin’s proposed expert forensic accountant. The applicants read affidavit dated 7 December 2021 sworn by their solicitor, Mr Michael John Williams and tendered Exhibit MJW‑44 (Williams 34). Other material tendered or relied on is referred to in these reasons where appropriate. Counsel made extensive oral submissions.
Introduction
This is the 10th interlocutory judgment of the Court in this proceeding. The background to the proceeding is described in earlier judgments. Generally, terms used in this judgment are those defined in Self Care Corporation Pty Ltd v Green Forest International Pty Ltd (No 3) [2021] FCCA 1277 (21 May 2021), and Self Care Corporation Pty Ltd v Green Forest International Pty Ltd (No 8) [2021] FCCA 1668 (23 July 2021).
The substantive proceeding is part-heard. The final hearing on liability commenced before me by MS Teams on 3 August 2021, and continued over 11 days in the period to 20 August 2021 (August hearing), when the matter adjourned part heard. After liaison between Chambers and the participating parties as to suitable dates for the continuance of the hearing, I have listed the hearing to continue on 24 and 25 March 2022, 27 April 2022, 14 to 28 June 2022, and reserving 5 to 7 September 2022 for closing submissions. These dates include days specifically set aside for the hearing of particular evidentiary issues arising in the course of the final hearing on liability of which the Court was made aware as at the time of listing. The present application is not one of those issues.
Forensic accounting experts and reports
Concurrently with the August hearing, and pursuant to orders I foreshadowed at earlier case management hearings, and made by consent on 3 August 2021, Registrar O’Connor of the Court facilitated an expert conference on 9 August 2021 between the forensic accountant experts who had served reports in the proceeding, namely Mr Andrew Ross, retained by the applicants to act as an independent forensic accounting expert (Ross Report dated 6 February 2021), and Mr Phillip Rundle, retained to act as an independent forensic accounting expert by the Green Forest parties and by AVP (being the first, second, fifteenth and seventeenth respondents, and the sixteenth respondent respectively) (Rundle Report dated 27 July 2021). Mr Ross and Mr Rundle subsequently produced a joint report dated 17 August 2021. Below in these reasons I refer to Mr Ross and Mr Rundle together simply as the Experts save where it is necessary to distinguish between them. The Experts have yet to give oral evidence.
At the hearing of this application Mr le Plastrier, counsel for Mr Skelin, drew my attention to passages in the Ross Report he relied on in support of the Notice. The applicants provided an aide memoire listing those passages, the source of the information and the use to which it was put. I have had regard to the Experts Reports guided by counsel’s submissions for the limited purpose of this application.
Ms Amoroso and the applicants’ financial and accounting information
Ms Sonia Amoroso is the Chief Executive Officer of Self Care, and sole director and secretary of the applicants. The applicants are 100% owned by Ms Amoroso’s family trust. The applicants’ financial and accounting information made available to Mr Ross for the purposes of the Ross Report (and listed in his report) is identified in the sixth affidavit of Ms Amoroso sworn 17 November 2020 (Amoroso 6), and in the eighth affidavit of Ms Amoroso sworn 5 February 2021 (Amoroso 8).
The evidence of Ms Amoroso read in the August hearing (relevantly in Amoroso 6) is that Self Care began selling freezeframe products in China in 2014 as the brand became known there as a result of “daigou” activity in 2014, essentially being people and entities who purchase goods in Australia and send them to end customers in China. The first sales in China occurred “essentially without Self Care’s knowledge, by daigou sellers selling freezeframe Products in China”.
In early 2016, Self Care undertook a trade sale process for the freezeframe business. In around March and April 2016 Self Care received a number of confidential non-binding offers to purchase the business. No sale eventuated. Mr Ross bases his calculations of the indicative value of the freezeframe business as at 2016 on the offers, related information memorandum exhibited to Amoroso 6, and Self Care’s actual results for the financial year ending 30 June 2017.
At the August hearing, Ms Amoroso was cross‑examined over 3 days. She has been excused. Mr Skelin’s counsel did not cross examine Ms Amoroso. She was not asked any questions in cross‑examination concerning the applicants’ financial and accounting information, or the Ross Report. Ms Amoroso is the applicants’ only witness of fact put forward in relation to the applicants’ financial or accounting information or the Self Care business (I except those witnesses who are put forward in relation to the obtaining and examining of alleged counterfeits, product and packaging comparisons, and the like).
Service of Ross Report, provided and referenced documents
A redacted copy of the Ross Report was served on, inter alia, Mr Skelin’s legal representatives by 22 February 2021, and served in unredacted form by 26 March 2021. All of the documents provided to Mr Ross (including those claimed confidential) are listed in appendix C, attachment B to the Ross Report. Non‑exhaustively, as described the documents provided to Mr Ross include monthly management reports for January 2014 – September 2020, Self Care annual company tax returns for 2015 to 2019, Self Care balance sheets for financial year 2014/5 to financial year 2020/2021, Self Care budgets for 2014 to 2020, various Self Care forecast documents for 2014 to 2019, and a number of spreadsheets including of Self Care’s profit margins per freezeframe product, and all freezeframe sales by item from 2014 to September 2020.
All of the documents provided to Mr Ross were made available to, inter alia, Mr Skelin’s legal representatives electronically by 26 March 2021 pursuant to orders made 23 March 2021. This material was downloaded by Mr Skelin’s legal representative on 30 March 2021. The applicants’ financial information relied on by Mr Ross for the purposes of the Ross Report is identified in his report. Relevant to the present application, the appendices to the Ross Report (each of which I refer to as a Ross appendix) include the following appendices in native format (excel):
·Ross appendix D (Loss Models, comprising calculations of loss for various of the applicants’ claims),
·Ross appendix E (Average price per unit analysis),
·Ross appendix Q (Reconciliation of NetSuite Data to Management Accounts), and
·Ross appendix R (Profit and Loss – Self Care and freezeframe).
Each of these Ross appendices was created by Mr Ross or under his direction for the purposes of the Ross Report.
Mr Skelin and expert forensic accounting evidence
Pursuant to orders made 15 March 2021, the participating legally represented respondents (including Mr Skelin) were ordered to file and serve their expert evidence in answer by 21 May 2021. In Self Care (No 3) at [105]-[120] I set out some of the chronology then known to the Court of Mr Skelin’s position on the preparation and service of any expert forensic accounting evidence in answer to the Ross Report. It suffices to incorporate by reference that chronology.
Mr Skelin retained Mr Lytras to act as an independent expert on his behalf by 7 May 2021. Mr Lytras provided a written confidentiality undertaking to the Court and the parties on 11 May 2021. At the case management hearing before me on 31 May 2021 (May CMC), Mr le Plastrier informed the Court that Mr Lytras had been engaged, and whilst it was unclear when Mr Lytras’ report might be produced, it was “looking like August [2021]”. Mr le Plastrier informed me he was instructed that Mr Lytras had been told that the Court anticipated an expert conclave would take place during the August hearing, on 10-11 August 2021. However, no expert report has been served on behalf of Mr Skelin, either in compliance with the timetabling orders of the Court, or at any other time.
Mr Lytras did not participate in the expert conclave. At no time during the August hearing did Mr Skelin (by reference to whom I include his solicitors and counsel) make any reference to the possibility of, or express any desire for, any participation of any expert forensic accountant – be it Mr Lytras, or any other person - in the expert conclave ordered by the Court, or otherwise in the hearing. The Court was not appraised during the August hearing if Mr Skelin, albeit outside the time for compliance with the orders for filing and service of expert evidence in answer, proposed to, or would seek leave to, file, serve and rely on expert forensic accounting evidence.
In short, until now Mr Skelin has been silent on the subject of whether he intends to file and serve any expert forensic accounting evidence. Mr Hennessy SC, senior counsel for the applicants, submits that Mr Skelin by his actions and his inaction has elected not to file and serve any expert report, is bound by that election, and that it is simply too late in the proceeding to now do so. Mr le Plastrier stresses, in my view correctly, that Mr Skelin is under no obligation to provide any expert report.
The Notice, amended Notice and categories of documents sought
As issued on 6 October 2021, the Notice required production of 15 categories (paragraphs) of documents: see annexure A to these reasons. I refer to this form of the Notice as Notice (A).
Notice (A) sought “All Documents …”, and included within that term “Communications”, both of which are defined in broad terms. Describing Notice (A) in general terms, it required production of all Documents of the applicants “which constitute” or “record” variously financial, management, accounting and taxation documents and information for the 9¼ year period from 1 July 2012 to 30 September 2021, annually and month by month, and in some instances documents organised by product category, stock keeping units (sku) by dollar value, unit volume, sales by customer by brand channel and sales data.
By 31 January 2022, when the application was first before me, it appeared agreed that the 15 categories of Notice (A) were now not pressed in their entirety. By reference to a Schedule of the parties’ positions then provided to the Court by the applicants, to which I return below at [118], the Court understood that further to some recent inter partes communications, and some earlier production, some categories of Notice (A) were not pressed at all, and a number of other categories had been variously amended, including in respect of 4 categories by deleting the request to produce “All Documents”. What was in fact then pressed or had been earlier produced however, was not unambiguously clear.
Just before the resumed hearing of the application, 11 February 2022, an amended version of Notice (A) was emailed to the Court by Mr Skelin’s solicitors. The Notice (as amended) now seeks production from the applicants of documents in 10 categories: see annexure B (the amended Notice retains the corresponding paragraph numbers of the formulation of the categories set out in annexure A). In the balance of these reasons, unless I say otherwise, when I refer to the Notice I mean the Notice as amended having the categories as set out in annexure B.
In these reasons I refer to the documents sought by the Notice (and earlier by Notice (A)) simply as financial documents, save where it is necessary to do otherwise.
The Notice seeks three groups of financial documents
Counsel for Mr Skelin identifies the financial documents sought by the 10 categories of the Notice as falling into 3 groups or classes of documents:
(1)“pre-2016” documents – financial documents for each of the financial years ended 30 June 2013 (FY2013) to 30 June 2016 (FY2016). This group comprises documents within categories [1], [3], [9], [10];
(2)“post-2019” documents – financial documents for periods after 31 December 2019, initially up to 30 September 2021, and in Court on 11 February 2022 by the Notice now extended up to 31 December 2021. This group comprises documents within all 10 categories (that is, categories [1], [3], [5], [7], [9], [10], [12], [13], [14], [15]); and
(3)monthly financial documents from 1 July 2012 to 31 December 2021, being detailed profit and loss by month for Self Care, and separately by month for the freezeframe product category, accounting and/or management information reports which record by month (i) sales by dollar value, and/or (ii) sales by unit volume for each sku. This group comprises documents within categories [9], [10], [12], [13], and in requiring six months data, possibly also [14], and [15].
It is apparent that there is overlap among the 3 groups. The third group (3) of financial documents encompasses the time periods of the first and second groups. As well as by reference to time periods, the second group (2) encompasses some of the categories of documents sought within the group (3). As to the first group (1) above, whilst counsel informs me that the periods in issue are principally 2013 and 2014, which I understand to be FY2013 and the financial year ending 30 June 2014 (FY2014), only category [1] of the Notice is so limited: seeking Self Care’s income tax return for FY2013.
Both group (1) (pre-2016), and group (2) (post-2019) categories of the Notice fall outside the period considered by Mr Ross (which he defines as the Loss Period, see below). As I expand upon below, in brief overview Mr Skelin submits that the financial documents sought for these earlier and later periods have apparent relevance/ have a legitimate forensic purpose, and the Notice should stand, whilst the applicants submit Notice seeks financial documents for a materially different enquiry to that the Experts have undertaken, the documents sought are out of scope of the Ross Report, and so irrelevant, because of these matters and the above chronology, and its timing, the Notice is an abuse of process and should be set aside.
Issues of compliance with the GFL Rules
It is appropriate here to raise a number of issues of compliance with the Federal Circuit Court and Family Court Australia (Division 2) (General Federal Law) Rules 2021 (GFL Rules).
Notice must be limited to specified documents
Rule 16.16(1) of the GFL Rules states that a party may, by notice in writing, require another party to produce at the hearing of the proceeding “a specified document that is in the possession, custody or control of the other party”.
Contrary to r 16.16(1), Notice (A) was not limited to specified documents. Certain criticisms of the categories of Notice (A) made by the applicants in correspondence and in written submissions as to the breadth of the categories– e.g., the term “All Documents” that “constitute” or “record” various subject matter – have been addressed in the amended Notice by removing those words. Whilst the Notice is addressed to both applicants, defined terms refer to each applicant, and production is sought of both applicants (as was the case with Notice (A)), on its face the 10 remaining categories of the Notice now appear directed to the production of financial documents relating to Self Care, and no longer also documents relating to SCIPH.
Mr Skelin now invites the Court to treat the Notice (annexure B) as the relevant notice to produce before the Court that he calls upon and that the applicants seek to set aside, and not to require the matter be agitated afresh subsequent upon serving a fresh notice to produce, and so requiring an amended application, or the filing of a further application in a proceeding. There is practical merit approaching the matter this way, and subject to what I say in the succeeding paragraphs, I propose to do so. The Court does not by adopting this course, however, give its approval to the approach to the non‑compliance with the GFL Rules evident in Notice (A) and its agitation before amendment. The Notice in the form in annexure A did not comply with the GFL Rules, including r 1.04 overarching purpose.
I have noted that the Notice excises 5 categories of Notice (A). Of the categories now pressed, the Notice seeks production of financial documents with a greater specificity than Notice (A) as to some of the categories, but for a further period than previously sought for all 3 groups – from 1 July 2012 and now extending beyond the previous end date of 30 September 2021 up to 31 December 2021.
In the course of writing these reasons it has become apparent from the correspondence annexed to Grunert 2 that by the Notice Mr Skelin continues to press for categories ([9] and [10]), documents and periods that Mr Skelin’s solicitors have stated in inter partes correspondence they no longer pressed, or would not press if certain confirmation was given, and that Grunert 2 establishes that the requested confirmation was given.
In reaching my conclusions on the Notice and the categories I have undertaken a reconciliation of the categories and the evidence of the parties’ stated positions on production, compliance and agreement, whilst bearing in mind that it is not the function of the Court to redraft the terms of a subpoena or notice to produce: see Lowery v Insurance Australia Ltd [2015] NSWCA 303, per Basten JA at [25]. At this point in the reasons it suffices to refer to the categories as set out in the Notice.
Documents specified in a notice to produce must be extant
As well as stating with specificity the document or documents required to be produced if in the party’s possession, power or control, a notice to produce can only seek documents that then exist. The term ‘document’ is defined broadly in the Notice and by reference to the Evidence Act 1995 (Cth), and I consider it reasonable to understand the categories of the Notice by reference to those definitions. However, a notice that requires a party to bring into existence documents not then existing does not comply with r 16.16(1). It is not for the party served with a notice to produce to create a specified document.
Certain categories of the Notice require documents to be created
Categories [9], [10], [12], [13], [14] and [15] of the Notice on their face each require production using a particular software program (the Microsoft Office application MS Excel, a commonly used spreadsheet program used to save and analyse numerical data) of particular information, which is required by those categories of the Notice to be presented in a particular type of document in a particular format, see e.g., category [9] “detailed profit and loss, by month … (in Excel and the same format as the ‘Self Care’ annual worksheets disclosed at electronic Appendix R of the Ross report)”. On their face, and by reference to Lytras 2 (see further below) these categories impermissibly require the creation of documents that do not presently exist, although the underlying data and information for certain periods may be located in documents already available to Mr Skelin. I return to this aspect of the Notice below in the context of my consideration of the categories and Lytras 2.
Overview of the applicants’ claimed loss and the Experts’ Reports
In order to appreciate the categories sought by the Notice, and the applicants’ and Mr Skelin’s submissions as to the apparent relevance of the categories, and the applicants’ submissions that the Notice should be set aside as an abuse of process, in addition to the above chronology for the limited purpose of determining this application it is appropriate to briefly refer to the Experts’ Reports. As I have said above, I do so guided by the parties’ submissions for the purpose of casting light on and clarifying the issues, cognisant that the substantive proceeding is part heard, the Expert Reports are yet to be read, and the Experts have yet to give oral evidence.
Mr Ross states that in the two years to 30 June 2016, Self Care reported very substantial increases in sales revenue and profits. Since 30 June 2016, Self Care’s sales have more than halved, and its profits significantly reduced. By 31 December 2019, Self Care reported its first loss since 2013.
The applicants claim that the alleged conduct of the EPAQ Parties (which Mr Ross defines to include Mr Skelin), the Green Forest parties and AVP caused it to suffer loss and damage (which Mr Ross defines as Self Care’s Loss). Mr Ross was instructed to estimate Self Care’s Loss. In doing so, Mr Ross addresses separately (Ross Report at [2.6.1], emphasis and definitions in the Report):
(a)Self Care’s Loss relating to the supply of freezeframe Product;
(b)Self Care’s Loss relating to the supply of Alleged Counterfeits;
(c)The damage caused to the value of Self Care’s business (and its underlying brands);
(d)Self Care’s Loss arising from the breach of Confidence Claim;
(e)Self Care’s Loss arising from the Breach of Fiduciary Duties Claim;
(f)Self Care’s Loss arising from the Margin Reimbursement Claim.
In estimating each of the above losses Mr Ross considers the period commencing 1 July 2016, and concluding on 31 December 2019 (which he defines as the Loss Period). Mr Ross does so because 1 July 2016 is the beginning of the first financial year in which Self Care supplied freezeframe Products to the EPAQ parties. Mr Ross did not consider the effects of the Covid‑19 pandemic on his analysis. Mr Ross states at Ross Report [2.6.2]:
[2.6.2]In preparing my estimates of these Losses, I consider the period from 1 July 2016 (being the beginning of the first financial year in which Self Care supplied freezeframe Products to the EPAQ Group) and 31 December 2019. I do not consider the period after 31 December 2019 as, in my opinion, Self Care's results in that period are likely to be negatively impacted by the effects of the COVID19 virus on Self Care's market (and it would be difficult to isolate that impact from any ongoing impact of the EPAQ Group's alleged actions). On my analysis, Self Care's Losses did not end on 31 December 2019. Rather, the difficulty in quantifying those ongoing Losses means that my calculations will understate Self Care's total Losses.
Mr Ross reiterates that he confines his analysis to the Loss Period for each of the above claims. He identifies Self Care’s actual financial position from its financial records. He opines of the impact of the actions of the EPAQ Group after the Loss Period, including at Rundle Report [8.2.5]-[8.2.6] as follows:
[8.2.5]On this basis, in my opinion the impact on Self Care's business of the actions of the EPAQ Group likely continues to the present time. However, with the emergence of COVID19 in early (calendar) 2020, Self Care's business has also been significantly and negatively impacted, and may well be so for some time.
[8.2.6]I have not been able to determine how much of the change in Self Care's sales and profits in and after early (calendar) 2020 was caused by the emergence of COVID19, and how much reflects the ongoing effect of the EPAQ Group's actions. As a result, in estimating Self Care's Loss, I have confined my analysis to the three years to 30 June 2019 and the six months to 31 December 2019 ('Loss Period').
Mr Rundle was requested to provide his opinion, relevantly to the present application, question 2: Self Care’s claimed losses as referred to in paragraph 6.2 of the Ross Report (set out above), and question 5: the $100 million valuation of loss of value of the goodwill of the business/ trade marks of Self Care in the Ross Report (see Rundle Report [6]).
Mr Rundle expressly accepted the period considered by Mr Ross. Mr Rundle states at [158]‑[159] of the Rundle Report:
[158] In preparing his estimates of [Self Care’s losses at Ross Report [6.2]], Mr Ross has considered the period from 1 July 2016 (…) and 31 December 2019. Mr Ross did not consider the effects of the Covid‑19 pandemic on his analysis.
[159] I have accepted the periods considered by Mr Ross. As 31 December 2019 is the end of the assessed period, I agree the effect of Covid 19 is not relevant for this assessment. Therefore I have adopted Mr Ross’ assessment period, i.e. 1 July 2016 to 31 December 2019 (Assessment Period), in addressing Question 2.
Mr Rundle provided his opinion in relation to question 2. In so doing he provided his opinion on the accuracy of Mr Ross’ calculations. For the reasons he gave Mr Rundle did not consider the damage to the value of Self Care’s business and its intellectual property) is appropriate to be considered in this matter (Rundle Report [40]).
In the joint report, the Experts did not change their view on the appropriateness of the Loss Period /Assessment Period.
At the conclusion of the joint report the Experts make the following disclosures:
Court guidelines
[230]The Experts have read the Practice Note and the Code, and agree to be bound by them.
[231] The Experts have made all the inquiries which they believe are desirable and appropriate. No matters of significance that they regard as relevant have, to their knowledge, been withheld from the Court.
[232] As expert witnesses, the Experts have the following general duties to the Court:
a. The Experts have a paramount duty to the Court which overrides any duty to any party to the proceedings including their clients;
b. The Experts have an overriding duty to assist the Court on matters relevant to their area of expertise in an objective and unbiased manner;
c. The Experts have a duty not to be an advocate to any party to the proceedings including their clients; and
d. The Experts have a duty to make it clear to the Court when a particular question or issue falls outside their area of expertise.
Professional guidelines
[233] The Experts have complied with the requirements of APES 215 – Forensic Accounting Services and APES-225 – Valuation Services the professional codes of practice of CPA Australia and Chartered Accountants Australia and New Zealand.
[234] In accordance with APES 215, and in consideration of their instructions, the Experts have conducted this assignment, and prepared this report as an Expert Witness Service engagement. APES 215 defines an Expert Witness Service as “a Professional Service provided in the context of Proceedings to give expert evidence in a Report or, in certain circumstances, orally”.
Ross report and 2013 – 2015 financial information
In oral submissions counsel for Mr Skelin identifies sections of the Ross Report in which financial information for periods from 2013 and following years are mentioned, including graphically, being Self Care’s reported annual revenue, its reported annual gross profits, its actual financial results (total sales, total COGS, total rebates and total other expenses), in each case across 7 years to 30 June 2019 (i.e., FY2013 to FY2019), and its total operating expenses between 2013 and 2019.
As I have noted, Mr Ross expressly states that his analysis is confined to the Loss Period. The periods before the Loss Period are mentioned and graphically represented in the sections to which counsel referred. Mr Ross illustrates flat sales and gross profit in 2013 and 2014, and then more than seven-fold growth in 2015, and further growth in 2016, before dropping in 2017. On the face of his report, however, the references to pre‑2016 financial information – in particular contrasting the period before calendar year 2014, are presented by way of background, before Self Care started selling product through the daigou channel and into China, and before Ms Amoroso was introduced to Mr Skelin in about September 2016, and for the purposes of this application, I so conclude.
Ross Report and post-2019 period
As to the period after 2019, Mr Skelin submits that Mr Ross is saying by his confirmation at [8.2.6] of his methodology at Ross Report [2.6.2] that Mr Ross cannot tell [the applicants] what the loss was like after 31 December 2019, but were it not for that difficulty, loss would have been assessed up to the date of judgment. As counsel put the submission on 31 January 2022: “what he seems to be saying is, if I didn’t have the difficulty of disaggregating conduct then I would have been able to do more. I would have been able to tell you what your loss was like beyond December 2019 based on real data.”
Mr Ross did not attempt to estimate any amount of loss for the period beyond 2019. As I have referred to above, he expressly confined his analysis, and in his report he said why he did so. I accept that his explanations may be tested in cross‑examination. I observe that in this regard, based on his experience and expertise, Mr Ross states that his estimates of loss are conservative, and he considers they under estimate the applicants’ loss. Bearing in mind that I am reviewing the Ross Report for the limited purpose of determination of the present application, on the face of his Report, I do not read Mr Ross’ explanations expansively as Mr Skelin seeks to characterise them.
Except as I qualify in the following paragraph, in this proceeding the applicants rely on Mr Ross’ estimates and have limited their quantum claims based on the Loss Period. The applicants’ opening submissions for the August hearing are so limited. The Particulars of Quantum identified in the applicants’ opening submissions and earlier served in respect of each of the Green Forest parties, AVP and Mr Skelin, in each case for each claim cross reference particular sections of the Ross Report where the respective loss calculation for that claim is set out, and are limited to the end date of the Loss Period.
The applicants’ claim to the respondents’ profits derived by the respondents’ conduct is not so limited in the Particulars of Quantum. Self‑evidently, the respondents’ profits are calculated by reference to the relevant respondents’ purchases and sales information. The joint report identifies some of these respondents’ sales after the Loss Period. In addition, the above limitation to the Loss Period does not apply for example in respect of the applicants’ claims for exemplary / additional damages arising from the alleged flagrancy of the respondents’ conduct. These are matters for the Court. I consider that it is reasonable also to proceed on the basis that any interest may not be limited to the Loss Period.
The evidence on the present application confirms that the applicants have limited the quantum they claim by reference to the Loss Period, and to Mr Ross’ calculations of their losses: Mr Williams states on oath that the Loss Period is the period relied on in the Ross Report to calculate Self Care’s losses: Williams 34, [21]. In inter partes correspondence the applicants’ solicitors reiterate that the applicants’ claimed period of loss is limited to 31 December 2019: see most recently, correspondence annexed to Grunert 2 - Gilbert + Tobin letter dated 25 January 2022 (emphasis added) “other documents sought are out of scope of the Ross Report and go beyond the damages claim brought by Self Care”.
Evidence on the present application
I have referred to the evidence relied on by the parties in the present application at [2] above. In overview, Mr Lytras attests to the categories of Notice (A), his and Mr Skelin’s purposes for seeking the financial documents, and some brief chronology regarding an expert opinion. In Grunert 1 and Grunert 2 Mr Grunert gives some explanation of the purposes of the Notice, his conversation with Mr Lytras in November 2021 after Notice (A) had been served, refers to the May CMC, and annexes documents. In Williams 34 Mr Williams provides a chronology of Mr Skelin’s actions in relation to the expert evidence, contrasts the chronology with Mr Rundle’s confidentiality undertaking, and provision of the Rundle Report, identifies the purposes of the Notice, the timing, the extreme prejudice to the applicants and other parties arising from the Notice, and attests to the applicants’ instructions, concerns, costs and expense incurred in the expert conclave and preparation of the joint report, and exhibits documents. I set out the parties’ evidence in greater detail in the following paragraphs.
Mr Lytras
In Lytras 2, Mr Lytras attests that:
(a)as at 4 November 2021 he has made significant progress to completing an opinion in response to the Ross Report, and says that the work is 50% complete;
(b)he has received and read the Rundle Report and the joint report;
(c)he has formed a preliminary view that there are issues with each report “[which] relate to insufficient investigations and the identification of factors and contingencies affecting the loss assessments undertaken”. He “intends to address these issues” in his report;
(d)he is of the opinion that “examination, and highlighting, of these issues will assist the Court in accurately assessing the quantum of loss suffered by the applicants”;
(e)on 1 October 2021, “taking into account the passage of time and with the objective of providing an opinion that would best assist the Court in assessing the applicants’ loss and damages as at the date of trial”, he emailed Mr Skelin’s solicitors a list of further information that he recommended be requested, and obtained from the applicants. (this list is replicated in Notice (A));
(f)he has prepared a table (Mr Lytras’ table) which details for the categories in Notice (A):
(i)why the information is relevant and requested; and
(ii)how in his opinion, “and prospectively the Court’s ability to accurately assess the applicants’ loss and damage will be affected if the requested material is not produced”.
He believes that the requested material is “highly relevant to the opinion which [he has] been briefed to provide in this proceeding”;
(g)in his experience:
(i)categories [1] to [4] [that is, of Notice (A)] should be already prepared, readily available and should take the applicants “no more than five minutes to retrieve and produce”;
(ii)categories [5] to [8] “will be readily obtainable from the applicants’ management information system and should take an accountant employed by the applicants no more than ten minutes to retrieve and produce”;
(iii)categories [9] to [15] “will be obtainable from the applicants’ management information system and should take an accountant employed by the applicants no more than 1 to 2 hours to produce – noting that some report customisation will likely be required but also that five of the seven requested items [categories] are effectively greater detail, and / or extended timeframes given the passage of time, of reports that have already been produced for Mr Ross”;
(h)once he receives the requested materials, he will be able to complete his opinion within 4 weeks;
(i)on 4 November 2021, Mr Grunert informed him and he believes that the requested documents do not form part of any of the documents disclosed by the applicants in the proceeding; and in the event that the Court does not accept his opinion into evidence, Mr Grunert will instruct him to act as a shadow expert, to assist in the cross‑examination of Mr Ross and Mr Rundle. Mr Lytras will require the documents to assist Mr Skelin’s lawyers in their cross‑examination;
(j)he also considers that after having produced his opinion (see subpara (a) above) it would be beneficial for the Court if he were to participate in an expert’s conclave with the Experts.
Mr Lytras does not say when he was instructed by Mr Skelin to produce an opinion, nor what his instructions are in respect of that opinion. No letter of instructions is before me. Correspondence annexed to Williams 34 suggests that as at 20 October 2021, Mr Lytras was instructed to “prepare an independent expert report”.
In reply, the applicants’ tendered letter dated 18 May 2021 from Mr Lytras to Mr Skelin’s solicitors (that is, written several months before the August hearing, and the expert conclave) (Lytras Letter). In the Lytras Letter Mr Lytras stated he writes the letter to support an impending application to extend time to enable Mr Skelin to properly respond to the Ross Report (see Self Care (No 3) regarding Mr Skelin’s application to transfer the proceeding). Mr Lytras then estimated he would require 12 to 15 weeks to prepare a responsive report, assuming a full responsive report examining the reasonableness of Mr Ross’ numerous conclusions and findings, and catering for the likelihood that further information will be requested from the parties and Mr Skelin may require alternative loss scenarios presented to the Court. Mr Lytras noted that a letter of instructions was still to be issued.
Mr Lytras stated that his initial investigation of the Ross Report indicates that further information and investigation will be necessary to achieve this outcome. In this regard he identifies the following as being needed:
(i)explanation and further information from the EPAQ parties [2.12];
(ii)further information on the daigou / China channel [2.13];
(iii)forward order data, customer order, production data, budgets and strategic plans from the applicants, which will assist the Court in understanding the environment in which the applicants operated or intended to operate [2.15]. I note that this information is all forward looking and does not include tax returns, or external financial statements.
Mr Lytras set out matters he believed as at May 2021 may be subject to further investigation, including “the impact of Covid‑19 upon the demand for the applicants’ products and its claimed losses”.
Mr Grunert
In that part of Grunert 1 read, Mr Grunert recites part of the transcript of hearing of the May CMC, and annexes some of the correspondence between the parties and to Chambers concerning listing the matter to call upon the Notice before amendment. (I note earlier correspondence is exhibited to Williams 34). Mr Grunert attests to Mr Skelin’s instructions for his counsel to cross‑examine Mr Ross, and that counsel will require Mr Lytras’ assistance. He refers to Mr Lytras preparing a “dirty” report. Mr Grunert attests to Mr Lytras’ availability to complete a report, and Mr Lytras’ estimate (at the time of the affidavit), that it should only take between 3-4 weeks. Mr Grunert records Mr Lytras explaining that “I want to use the material [by which I understand items sought by Notice (A)] to reconstruct Self Care’s monthly trading which could take 1 week”.
Grunert 2 annexes correspondence between the parties in the period 20–28 January 2022 concerning the Notice.
Mr Williams
In Williams 34, Mr Williams identifies the two purposes of the issue of the Notice – for Mr Lytras to provide a late expert report, outside the time for compliance, and to be a shadow expert to assist in the cross‑examination of the Experts. He adverts to the desire of Mr Lytras to respond to the joint report, and to engage in a future expert conclave.
Mr Williams provides a chronology as known to the applicants’ of Mr Skelin’s engagement of Mr Lytras, a comparison with the chronology of Mr Rundle’s engagement and production of the Rundle Report (spanning May to July 2021), and attests to the expert conclave.
Mr Williams attests that the applicants’ costs of the process of the expert conclave and the production of the joint report were substantial, and that KordaMentha’s fees (that is, Mr Ross’ firm) were over $200,000.
Mr Williams attests at Williams 34 [23] and [24]:
[23] The Second Lytras Affidavit and correspondence from Taylor David in respect of the NTP indicate to me that Mr Skelin now seeks to set up a fresh expert forensic accounting enquiry into Self Care's financial position prior to and following the period relating to the claims pleaded in the Further Amended Statement of Claim. That enquiry is materially different to the enquiry that Mr Ross and Mr Rundle have already undertaken in August 2021, at significant expense to the parties. Mr Skelin elected not to instruct Mr Lytras to participate in that enquiry when it took place in accordance with the Court's timetable in August 2021.
[24] In my view, based on my experience, neither Mr Ross nor Mr Rundle will be in a position to answer cross-examination on the material sought by Mr Skelin in the NTP unless it is provided to them by Self Care for further consideration ahead of the resumption of the trial on dates to be set down by the Court. That additional enquiry, if permitted, will cause Self Care and the Green Forest Parties and AVP to incur further substantial costs and cause a waste of costs already incurred.
The applicants’ resist Mr Skelin’s attempt to reopen the expert forensic enquiry. If Mr Skelin is permitted to reopen it, Mr Williams is instructed to seek Self Care’s costs of and associated with that exercise (including of compliance with the Notice) payable forthwith. Mr Williams is also instructed to engage Mr Ross to expand the time period covered by Self Care’s damages claim if any of the expanded period covered by the Notice is relied on by Mr Lytras.
Mr Williams points to issues with the utility of the Notice (as at 7 December 2021), which covers irrelevant periods, documents that do not exist, and could reasonably be understood from the Ross Report not to exist.
Applicable Principles
The parties largely agree that the principles as to when a notice to produce may be set aside are the same in substance as those applicable to setting aside a subpoena. The parties, however, place emphasis on different aspects of those principles.
Counsel for Mr Skelin, Mr le Plastrier, accepts that it is for the issuing party to establish the ‘apparent relevance’ or ‘legitimate forensic purpose’ of the categories of the Notice.
Counsel for the applicants, Mr Hennessy SC, accepts that it is for his clients, as the parties seeking to set aside the Notice, to establish that it ought to be set aside, including as an abuse of process.
Apparent relevance
The documents sought by the notice to produce must have what has been described in the authorities as ‘apparent relevance’ or a ‘legitimate forensic purpose’ in relation to an issue in the proceeding. This was described by the Full Court of the Federal Court of Australia in Wong v Sklavos (2014) 319 ALR 378; [2014] FCAFC 120 at [12] as follows, referring to earlier authority (most citations omitted, emphasis added):
[12]Although the parties referred to several authorities concerning the requirement for subpoenaed documents to have apparent relevance to an issue in a proceeding, in our opinion, the applicable principles are well-established. The party issuing a subpoena bears the onus of demonstrating that the subpoena has a legitimate forensic purpose in relation to the issues in the proceedings. A subpoena may be set aside if it requires the production of documents which do not have apparent relevance to the issues arising on the pleadings: Trade Practices Commission v Arnotts (No 2) (1989 21 FCR 306; 88 ALR 90 [TPC v Arnotts]. Other cases have used different terminology, but with essentially the same effect, for example, by requiring that, viewed realistically, the documents sought have a bearing on an issue which is not unreal, fanciful or speculative, or that the material sought is reasonably likely to add in some way to the relevant evidence in the case, or that it be “on the cards” that the documents sought will materially assist the party at whose request the subpoena has been issued.
The Full Court’s reference to TPC v Arnotts is to the oft cited formulation of Beaumont J in Trade Practices Commission v Arnotts Ltd (No 2) (1989) 21 FCR 306; (1989) 88 ALR 90. In TPC v Arnotts, Beaumont J said at 88 ALR 90 pp102‑103:
The general test for present purposes is well settled. The issue of a subpoena will be an abuse of process if it is not used for a legitimate forensic purpose: see Botany Bay Instrumentation & Control Pty Ltd v Stewart [1984] 3 NSWLR 98 at 100-1. But, as Deane and Gaudron JJ observed in Hamilton v Oades (1989) 85 ALR 1 at 11, the court’s general powers in this area have a dual aspect: “The inherent power of a court to control and supervise proceedings includes the power to take appropriate action to prevent injustice... [This] power...is not restricted to defined and closed categories... In this context injustice is not simply a question of the purpose or motive for which the relevant proceedings were instituted but includes a consideration of the consequences of the proceedings for the person invoking the power. The terms ‘oppressive’ and ‘vexatious’ are often used to signify those considerations which justify the exercise of the power to control proceedings to prevent injustice, those terms respectively conveying, in appropriate context, the meaning that the proceedings are ‘seriously and unfairly burdensome, prejudicial or damaging’ and ‘productive of serious and unjustified trouble and harassment’: Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 62 ALJR 389 per Deane J at 411; 79 ALR 9 at 45.”
In other words, the present inquiry is not limited to an analysis of the true purpose of Arnotts [the issuing party] in procuring the issue of the subpoena. It is also material to look at the impact of the subpoena upon Mattingly [the subpoenaed third party].
Without restricting this inquiry, it is convenient to address the present application in the first instance by reference to two questions:
(1)Does the material sought have an apparent relevance to the issues in the principal proceedings, i.e., is adjectival, as distinct from substantive, relevance established? Does the subpoena have a legitimate forensic purpose to this extent? This involves a consideration of the matter from the standpoint of Arnotts.
(2)Is the subpoena seriously and unfairly burdensome or prejudicial? This is to look at the matter from the point of view of Mattingly.
In TPC v Arnotts, his Honour considered each of the sub-paragraphs (parts) of the subpoena sought to be set aside. Dealing with the first of the parts of the subpoena, he identified the first question above, and stated that the “test of adjectival relevance is satisfied if the material has apparent relevance. In my opinion, the documentation called for here could possibly throw light on the issues in the main case”. He concluded of that part of the subpoena that adjectival relevance was established.
As to the second question posed above his Honour identified, the vice in relation to the part of the subpoena was said by Mattingly (the subpoenaed third party) to be the apparent objective of the issuing party extracting from the subpoenaed party material which could be used to incriminate it if proceedings for contempt of court were brought against it for alleged interference with the due administration of justice by causing [documents] to be removed from the jurisdiction. Beaumont J considered that that part of the subpoena did not necessarily involve any abrogation of the privilege against incrimination, and refused to set the part aside on that basis. However, that refusal was on express terms that it was without prejudice to any claim for privilege which may be made as an objection to production.
His Honour observed that no other grounds for setting aside the subpoena were put on behalf of the subpoenaed party. He set aside certain parts of the impugned subpoena, in some instances on the ground that adjectival relevance was not established – the material sought being too remote (see at p105), and otherwise refused the application.
Recently, in Secretary of the Department of Planning, Industry and Environment v Blacktown City Council [2021] NSWCA 145 (Blacktown CC), a decision of Bell P (as his Honour then was), Brereton and McCallum JJA, the Court of Appeal (Bell P commencing at [45], [47]-[49], Brereton JA at [89(fn 14)], McCallum JA at [98]) considered Beaumont J’s formulation in TPC v Arnotts of legitimate forensic purpose and the approach to apparent relevance. Relevantly, the principal issue on the appeal was whether a legitimate forensic purpose may be established if it can be shown that it is likely that the documentation to be produced on subpoena will (or on a reasonable basis beyond speculation is likely to) materially assist on an identified issue, even if it cannot be shown that the documents subpoenaed will be likely to assist the case of the party issuing the subpoena. The Secretary had contended that the relevant test whether or not a subpoena should be set aside was whether or not the documents sought would materially assist the case of the party which issued the subpoena. The Court of Appeal rejected this approach.
Noting that the Court cautioned against using the language of “tests” for the setting aside of subpoenas ([60] Bell P, [88] Brereton JA, [98] McCallum JA), some general principles emerge from their Honours’ reasons:
(a)it is sufficient to observe that subpoenas will and should be set aside when they can be seen to involve or amount to an abuse of process as part of the Court’s general power to regulate and protect its own processes. Such a power is not to be restricted to defined and closed categories ([60] Bell P). The power to set aside a subpoena in whole or in part is but an instance of its power to regulate and protect its own processes and, in particular, to intervene in a case of abuse of its process ([88] Brereton JA);
(b)““the notion of “legitimate forensic purpose” being the converse of “abuse of process”, a subpoena will self‑evidently be an abuse of process if it is not issued for a legitimate forensic purpose, of which it is an instance if it has not been issued bona fide for the purpose of obtaining apparently relevant evidence” ([88] per Brereton JA);
(c)it is sufficient to justify a subpoena as having been issued for a legitimate forensic purpose if the documents sought are “apparently relevant”, or, … it can be seen that the documents sought … will materially assist on an identified issue or there is a reasonable basis beyond speculation that it is likely the documents subpoenaed will so assist ([65] Bell P);
(d)the word “apparent” admits of the possibility that the documents sought may not ultimately turn out to be relevant. Their apparent relevance however should be able to be ascertained by an examination of the description or identification of the document or documents sought [in the subpoena] “in light of the issues in the case, as they present themselves on the pleadings, in particulars and/or in affidavits or witness statements if they have been filed or served at the time of the issue of the subpoena” ([68], [72] Bell P);
(e)it will generally be sufficient and prima facie evidence of a legitimate forensic purpose if the documents sought to be produced on subpoena have an apparent relevance to the issues in the case and or bear upon the cross‑examination of witnesses (including testing the credit of witnesses including expert witnesses), notwithstanding that they are inadmissible ([61], [70], [80] Bell P; [89] Brereton JA);
(f)it remains the case that if it can be demonstrated that the party issuing the subpoena has done so for some improper, illegitimate or ulterior purpose foreign to the litigation, the Court may in the exercise of its discretion set aside the subpoena as an abuse of process or refuse access to subpoenaed documents in spite of their apparent relevance (Bell P [70]);
(g)the absence of any apparent relevance of the documents sought to be subpoenaed to the issues in the case may warrant a conclusion of a lack of legitimate forensic purpose, and be a sufficient ground to set aside a subpoena or part of a subpoena. That is because, if the documents subpoenaed do not meet the relatively low threshold of apparent relevance, it may readily be inferred that the documents are being sought for some purpose foreign to the litigation. That may not have been the issuing party’s motivation ([71] Bell P; [88] Brereton JA; McCallum JA).
Abuse of the court’s process
As succinctly stated by Farrell J in Wong v Sklavos (2014) 225 FCR 405; [2014] FCA 679 at [24], in the context of an application to grant leave to appeal to the Full Court an interlocutory decision refusing to set aside a subpoena (citations omitted):
[24] A subpoena will be set aside to prevent an abuse of the court’s process. The power to control and supervise the court’s process is directed to preventing injustice. In this context, injustice is not simply a question of the true purpose for which the issue of the subpoena was procured, but also the effect or impact of the subpoena on the person to whom it was issued.
Mr Skelin drew attention to Wigney J’s decision in In the matter of Petrolink Pty Ltd; Smith v Boné [2014] FCA 1024, at [11]-[17], and urged the Court to accept that the concept of abuse of process is limited to where a proceeding is brought for a collateral purpose to the action. In Petrolink Wigney J had before him for determination a summary dismissal application brought by a liquidator on the basis that an interlocutory application brought by Mr Boné in winding up proceedings be dismissed as an abuse of process because Mr Boné’s predominant purpose in commencing and carrying on the proceedings was said to be to intimidate or improperly influence the liquidator from properly performing his duties and responsibilities as liquidator, specifically, it appears to cause him to discontinue certain proceedings against Mr Boné and another.
In this particular context, his Honour said of abuse of process at [11]-[13] (citations omitted):
[11]Irrespective of rule 26.01, the Court has an implied incidental power to prevent abuse of its processes. That power extends to prevent misuse by litigants of the Court’s processes to the detriment of others and to the protection of its own processes from interference.
[12]The relevant principles in relation to abuse of process are not in dispute between the parties. There is an abuse of process when the predominant purpose of bringing proceedings is not to prosecute them to a conclusion, but to use them as a means of obtaining some advantage for which they are not designed, or some collateral advantage beyond that which the law offers.
[13]The onus of satisfying the Court that a proceeding is an abuse of process is a “heavy one” and the power to grant relief which would prevent a court from exercising its jurisdiction is one to be exercised only in the most exceptional cases.
His Honour observed at [16] that an allegation of abuse of process is a serious allegation, noted that the standard of proof is the civil standard of balance of probabilities, drew attention to s 140(2) of the Evidence Act 1995 (Cth), and observed that the Court must accordingly be “mindful of the forensic context” in forming an opinion as to its satisfaction about matters in evidence, ordinarily the more serious the allegations or consequences, the more the Court will require clear, cogent or strict proof, referring to the Briginshaw standard.
I do not read Wigney J’s observations in Petrolink as limiting what may constitute an abuse of process in the context of an application to set aside a subpoena or a notice to produce, nor do Blacktown CC, or the Full Court in Wong, or the other authorities to which I was taken support such a construction. As Beaumont J stated in TPC v Arnotts, citing Deane and Gaudron JJs’ observations in Hamilton v Oades (see above [69]), the power to take appropriate action … is not restricted to defined and closed categories. The Court of Appeal in Blacktown CC did not limit what constitute an abuse of process to collateral action, whilst embracing that a purpose foreign to the litigation is an instance of an abuse of process. See also the reasons of the majority of the High Court in Batistatos v Roads and Traffic Authority of New South Wales (2006) 227 ALR 425; [2006] HCA 27, incl at [9]-[15].
In Australian Competition and Consumer Commission v BlueScope Steel Limited (No 4), [2021] FCA 1162, O’Bryan J stated at [21], after observing that similar principles are applicable to a notice to produce and to a subpoena, and identifying that the grounds on which a subpoena or notice to produce may be set aside include (relevantly to the matter before him) where it is an abuse of process, in that it is being used for the purpose of discovery, where it is oppressive, and where the documents sought do not have apparent relevance to the issues in the proceeding:
[20] The above principles are reinforced by s 37M of the Federal Court of Australia Act 1976 (Cth) which requires that the Federal Court Rules must be interpreted and applied, and any power conferred by those rules must be exercised, in the way that best promotes the overarching purpose which is to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible.
(in this Court, see ss 190 and 191 of the Federal Circuit and Family Court of Australia Act 2021 (Cth), and r 1.04 GFL Rules). His Honour found that the notice to produce should be set aside on each of the grounds to which he referred.
In McHugh v Australian Jockey Club Ltd (No 2) [2011] FCA 724, in the context of a motion to set aside a subpoena on the basis of the relevance of the material to the substantive proceeding, Robertson J observed that another consideration is the statement of principle in s 37M in the Federal Court of Australia Act 1976 (Cth), stating at [10] “Relevantly, in my view, s 37M discourages the use of the Court’s procedures in relation to material of peripheral relevance, even where, as here, the relevance is adjectival relevance”.
So, too, and consistent with case management principles, the timing of the issue and service of a notice to produce is a relevant factor in respect of any application to set aside the notice: see, e.g., Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd (No 3) [2012] FCA 61, Collier J at [6]-[8].
The parties referred me to other authorities which they provided, and which I have considered, including authorities discussed in the authorities I have referred to above.
Parties’ submissions
I have touched upon the parties’ positions on the Notice already in these reasons, and have had regard to them in my discussion of the authorities.
The applicants
For the applicants Mr Hennessy SC submits that there is a broader issue of which the Notice is in effect a manifestation. The primary issue is at this time in the proceeding, when Mr Skelin has not served any expert evidence, and in the context where discovery has occurred, the matter is part heard, Ms Amoroso, through whom the applicants’ financial and accounting information has been adduced into evidence, has been cross‑examined (and Mr Skelin did not ask any questions), and the Experts have participated in the expert conclave and produced the joint report, whether Mr Skelin ought be permitted to rely on a report by a forensic accountant who has been retained since May 2021. The applicants submit he should not be permitted to do so.
Mr Hennessy SC submits that it is apparent from the Lytras Letter, from the May CMC and from the chronology I have set out above, that Mr Skelin understood the timing and importance of serving an expert report in a timely manner, and before the expert conclave, and of participation in that conclave. The issues have been filtered, narrowed right down to assist the Court.
The Notice, and the suggestion more generally that Mr Lytras will be preparing a report (as was suggested to the Court last May), will subvert the expert conclave, and joint report, completed at great cost to the applicants, the Green Forest parties, and AVP, by:
(a)inserting Mr Lytras into the expert conclave process, long after it has been completed;
(b)introducing new time periods with respect to loss which are not the subject of Self Care’s claim (see above), and have not been considered by the Experts, and
(c)otherwise have Mr Lytras acting as a ‘dirty expert’ to advise on cross‑examination in respect of issues not addressed by the Experts.
Further, the Notice should be set aside, as neither of the Experts will be in a position to answer cross‑examination on the material sought by Mr Skelin, and will have to be provided it for further consideration ahead of the resumption of the hearing. This additional enquiry will cause the applicants, Green Forest parties and AVP further substantial costs and cause a waste of the costs already incurred. Additionally, Mr Skelin remains an undischarged bankrupt, in no position to meet those costs.
The applicants emphasise that there is simply no explanation why Mr Skelin did not seek the financial documents at any time before October 2021. Mr Lytras had been engaged by mid‑May 2021, he had executed a confidentiality undertaking, and received and reviewed the Ross Report. The Lytras Letter demonstrates that from May 2021 Mr Skelin had the opportunity to seek the financial documents sought in the Notice, certainly he could have done so well before the August hearing. Given that Mr Rundle was able to produce the Rundle Report, Mr Lytras could have been instructed to do likewise, and produced a report in the same timeframe. Mr Skelin could have requested that Mr Lytras participate in the expert conclave. There is simply no explanation for the delay or omission. Mr Skelin is bound by his election to remain silent.
Mr Skelin’s conduct is contrary to the overarching purpose set out in ss 190 and 191 of the Act. The paucity of Mr Skelin’s written submissions in this application, the last minute provision of authorities, counsel’s very different oral submissions, demonstrate conduct completely at odds with the overarching purpose applying in this Court.
Further, at the time the Notice was issued – 6 October 2021, the purpose of the Notice was to obtain the documents sought in order to complete an expert report responsive to the Ross Report. There was one purpose. This is clear from Mr Lytras’ correspondence. Mr Grunert’s subsequent conversation cannot alter that earlier extant purpose. The legal representatives’ later pivot to a different purpose for the Notice – that documents possibly may be relevant to cross‑examination of the Experts, is not capable of being an operative purpose. The legitimate forensic purpose / apparent relevance must be established in respect of the Notice when issued. Subsequent purposes cannot be manufactured to satisfy the onus. I interpose here that I do not read the authorities as so temporally limited, provided the reasons proffered are bona fide.
Mr Skelin
Mr le Plastrier for Mr Skelin submits that each of the 3 groups of the Notice have apparent relevance, or a legitimate forensic purpose - whether for use by Mr Lytras to prepare an expert report, or possibly in assisting in cross‑examination of Mr Ross, including as to his credit. He relies on the reasons stated in Mr Lytras’ table.
As to the first group (1), ‘pre-2016’ documents sought have apparent relevance/ a legitimate forensic purpose because the Ross Report has multiple examples where consideration is given to what Self Care’s financial position looked like in 2013, 2014, 2015 and 2016 – one tells what was going to happen by the trajectory it was on before 2016; all that the Court needs to see is that those years are considered in the Report.
As to the second group (2), ‘post-2019’ documents, I have set out Mr le Plastrier’s interpretation of Mr Ross’s confinement of the Loss Period above.
As to the third group (3) – the monthly financial documents, these are relevant because the annual reports are the sum of their parts, and documents organised by month would enable trend analysis. As to the externally prepared accounting documents and tax returns, because all the documents used by Mr Ross were internal records, the externally prepared documents are relevant to test what Mr Ross did.
In response to the applicants’ submissions, Mr le Plastrier submits that the applicants’ objections are premature, and are beyond the present enquiry before the Court, which is directed to oppression in relation to compliance. Mr le Plastrier submits the applicants’ submissions are directed to a future matter, what is done with the documents (or which they fear will be done with the documents), which is a possibility subsequent to production that may never eventuate. As to the question of what constitutes oppression, the question is confined to whether compliance with the notice is onerous. The applicants do not point to any difficulties with compliance. The question of what may be done with the documents when produced does not engage with the principles of oppression as understood in the context of notice to produce cases.
Prejudice is not enough to establish abuse of process; what must be established is a collateral advantage to the proceeding, an improper purpose outside the scope of the remedy available in the proceeding, referring inter alia, to Williams v Spautz (1991-1992) 174 CLR 509, to Petrolink, and Batistatos.
Allergan decisions
On the second day of hearing of the application, Mr le Plastrier raised a further argument in support of the apparent relevance of the Notice (group (3) documents) arising from the Full Court decisions in Allergan Australia Pty Ltd and Another v Self Care IP Holdings Pty Ltd and Another (2021) 162 IPR 52; [2021] FCAFC 163 (7 September 2021), and Allergan Australia Pty Ltd and Another v Self Care IP Holdings Pty Ltd (No 2) [2021] FCAFC 180 (13 October 2021), and the first instance decision Allergan Australia Pty Ltd and Another v Self Care IP Holdings Pty Ltd and Another (2020) 156 IPR 413 [2020] FCA 1530 (together the Allergan decisions).
In substance, in Allergan (No 2), the Full Court made declarations that the applicants before me, by the use of the mark PROTOX on or in relation to their Protox Product, and by the use of the mark “instant Botox alternative” on or in relation to their Inhibox Product (each as identified in the Full Court’s orders), infringed Australian Trade Mark Number 1578426 for “BOTOX”, and by certain identified conduct in the sale or promotion of the Inhibox Product contravened the Australian Consumer Law (Sch 2 to the Competition and Consumer Act 2010 (Cth)) (ACL). The Full Court granted injunctions restraining infringement of the BOTOX trade mark, and conduct contravening the ACL.
Mr le Plastrier submits that in the light of the declarations and injunctions made by the Full Court in Allergan and Allergan (No 2), and the remittal to the primary judge for determination of quantum issues of damages or an account of profit, and additional damages, Mr Ross’ assumptions, calculations and conclusions in the Ross Report, the applicants’ claimed damage and loss, and the applicants’ financial information, must now be critiqued and products excluded. He says that the Allergan decisions provide further support for the apparent relevance of the Notice. Mr le Plastrier says that he overlooked drawing the Court’s attention to these decisions before appearing in Court on 11 February 2022.
In response, Mr Hennessy SC informed the Court that Mr Skelin’s solicitors are in possession of the applicants’ records the subject of the Allergan decisions for the period 1 July 2012 to 30 June 2020; those records go to individual products and sales, and comprise Ross appendices E and Q. I accept that it follows from the existing availability of the information that there is no legitimate forensic purpose of the group (3) categories. This assurance is consistent with the inter partes correspondence annexed to Grunert 2 (although there not mentioning the Allergan decisions).
Consideration and determination
I turn first to consider apparent relevance and legitimate forensic purpose of the 3 groups of the Notice, including as necessary, by category.
Some observations on Mr Lytras’ table
Mr Lytras’ list of requested documents annexed to Lytras 2 is replicated in Notice (A). Mr Lytras’ table addresses Notice (A). Although purporting to propound ‘relevance’, and the ‘limitation if not disclosed’ I consider that Mr Lytras’ table in large part merely announces what the documents are or will do, and not why they have apparent relevance in the sense discussed in Wong and Blacktown CC.
For example, as to group (1) and group (2), category [1] (FY2013, FY2020 and FY2021 tax returns), Mr Lytras explains that the requested documents “ensure missing documents either side of the alleged actions are disclosed and also bring [Self Care’s] declared position as to its financial position as to its financial performance up to date as near as possible to the date of trial”…, with the limitation if not disclosed that “Self Care’s declared position as to its financial performance will be incomplete and not current as at the date of trial”. He further states that “complete cross‑check of management accounts financial performance data extracts to the declared financial performance position will not be possible”. Mr Lytras does not explain how that might be relevant, leaving the Court to assume that the relevance may be verification, at most.
Reasons and limitations to similar effect apply to each of the group (2) “post-2019” documents.
It is apparent from Lytras 2, viewing his list and explanations of each of the categories that fall within group (3) (specific monthly financial reports), beneficially, that he had either not been provided, or had not considered in detail, all of the documents provided to Mr Ross and the Ross appendices. Correspondence attached to Grunert 2 discloses that Mr Grunert’s instructions to Mr Lytras on 4 November 2021 were incorrect at least in respect of a number of documents comprising information within categories [1], [9], [10], [12], [13] of Notice (A).
Because the categories of the Notice now pressed are those set out in annexure B, and because of the matters I set out in the succeeding two paragraphs, Mr Lytras’ table is not directly applicable to the categories in their current form (and also noting that correspondence has established that there are no documents corresponding to categories not pressed in any form). This limits its currency and usefulness. The table must be understood taking into account the above developments and limitations.
Apparent relevance / legitimate forensic purpose – group (1)
I have concluded above that the pre‑2016 financial information presented in the Ross Report is presented by way of background. It does not form the basis of Mr Ross’ consideration of the Loss Period to calculate Self Care’s loss.
Nonetheless, I accept that the pre-2016 background may, as I infer from Mr Lytras’ explanation in Mr Lytras’ table in relation to category [1], be relevant for verification purposes, or, as he explains for category [3], that external accounting documents may disclose independent accounting input and oversight, which I apprehend may provide a comparison relevant to that background for the purpose of critiquing the Ross Report.
On these bases, on balance I am of the view that documents in category [1], and [3] of the Notice, subject to my determination of group (2), may have some possibly apparent relevance to an issue in the proceeding.
Group (1) category [9] and [10] documents also come within group (3), and I deal with them below.
Apparent relevance of group (2) ‘post 2019’ documents
Although as Mr Lytras says in Lytras 2 (and relies on as the basis of relevance in Mr Lytras’ table), it may be that damages claims are to be assessed up to the date of trial (and to judgment), an applicant may choose to limit their claim to an earlier period. The applicants have done so in this proceeding, as I have explained above. The issues in the proceeding are refined by the Particulars of Quantum: see Blacktown CC, above.
It follows, having regard to the authorities, Mr Lytras’ reasons for requesting documents after the Loss Period for an expert report (whether filed or possibly to be used as a dirty report) or to assist in cross‑examination, are misconceived.
Having regard to the applicants’ limitations on their claims, and the resultant limits on the issues in the proceeding, and applying the principles I have discussed above, accepting the low threshold of apparent relevance and that a legitimate forensic purpose may include possible use in cross‑examination of the Experts, including as to credit, Mr Skelin’s submissions as to apparent relevance or a legitimate forensic purpose of the group (3) categories of the Notice (post-2019 financial documents) must be rejected. Self Care’s post‑2019 financial documents cannot relate to a fact in issue in the case. Self Care’s financial documents for the period after the Loss Period have no apparent relevance to an issue arising on the pleadings as confined by the particulars and the applicants’ opening, merely fancy, and speculation. The documents sought by group (3) lack any legitimate forensic purpose.
It follows that categories [1], [3], [5], [7], [13], [14] and [15], and to the extent that they seek ‘post‑2019’ documents also categories [9], [10], and [12], of the Notice are set aside.
Additionally, because they seek documents that have to be created, as I explain above at [32] and [33], and as Mr Lytras explains in Lytras 2, as I have set out at [52(g)] above, categories [9] to [15] of the Notice do not comply with r 16.16(1) GFL Rules. It follows categories [9] to [15] must be set aside on this additional ground.
Apparent relevance of group (3) ‘monthly financial records’
Group (3) comprises categories [9] to [13], and possibly [14] and [15], and overlaps in part with groups (1) and (2). For the same reasons I have concluded in relation to group (2), in relation to post‑2019 group documents, the category is set aside. In addition, for all the group (3) categories, as I have said in the preceding paragraph, these categories also seek documents that have to be created, as Mr Lytras explains. It follows that the Notice does not comply with r 16.16(1) GFL Rules, and the group (3) categories must be set aside.
The position reached inter partes
For completeness, I have considered the parties requests for clarification and explanations of the material already available to Mr Skelin, and its relevance to the Notice. As I have referred to above, the applicants’ provided a Schedule to the Court at the hearing on 31 January 2022, updating that annexed to their written submissions with a summary of Mr Skelin’s solicitors’ response on 28 January 2022, and the applicants’ solicitors response thereafter.
Having regard to the Schedule and correspondence annexed to Grunert 2, it is now clear that by 29 January 2022, Mr Skelin’s solicitors no longer pressed all periods for categories [9], [10] and [12], that in fact they, and Mr Lytras, already had available to them either documents answering the categories for interim periods or which comprised the data and information sought for those periods, and that the submissions made to the Court on 31 January 2022, and on 11 February 2022 did not fully take into account the actual positions that the parties’ solicitors had reached by the evening of 28 January 2022, as reflected in the Schedule.
The Notice (annexure B, handed up on 11 February 2022) however does not fully take into account these matters. Specifically, by reference to the Schedule, and supplemented by the correspondence annexed to Grunert 2 (including Taylor David letter 28 January 2022 (2:12pm), and Gilbert + Tobin email 28 January 2022 (5:09pm)), I am satisfied that the following now pertains in respect of categories [9], and [10] of the Notice. I refer, below, to [12] and [13] as they are included in the correspondence:
[9]Mr Skelin’s solicitors acknowledge documents for the period 1 January 2014 to 30 September 2020 have already been provided (the existence and location of these documents having been clarified), and do not press for their production.
Mr Skelin presses period 1 July 2012 to 31 December 2013, and October 2020 to 30 September 2021 (extended to 31 December 2021). I have proceeded on the basis that these are the periods pressed inter partes.
In the Notice, category [9] extends for the entire period from 1 July 2012. I have ruled on it above, and for the reasons there set out, category [9] is set aside;
[10]the applicants’ solicitors confirmed that these documents have been provided to Mr Ross for the period 1 July 2012 to 31 December 2019 and appear in Ross appendix R.
Mr Skelin had pressed for the period 1 July 2012 to 31 December 2013, and continues to press for “financial years October 2020 to 30 September 2021” (subsequently extended to 31 December 2021). Inter partes Mr Skelin presses for production of documents for FY2020, FY2021, and to 31 December 2021.
In the Notice, category [10] extends for the entire period from 1 July 2012. I have proceeded on this basis, and ruled on it above. For the reasons there set out, category [10] is set aside;
[12] and [13]
the applicants’ solicitors confirmed on 28 January 2022 that information for the period 1 July 2012 to 30 June 2020 has already been provided in Ross appendices E and Q: the columns labelled “Item Description” record unique product identifiers or skus.[1]
In relation to these categories, the Notice has been amended to seek documents for the period 1 July 2020 and 31 December 2021. I have ruled on them above, and for the reasons there set out, categories [12] and [13] are set aside.
[1] The Schedule stated 30 June 2022. By reference to those appendices and to the correspondence I am satisfied that the intended date is 30 June 2020.
Abuse of process – extreme prejudice is the oppression
I consider that there is considerable merit in the applicants’ submissions. However, I am not persuaded, that limited to the two categories I have allowed in part, category [1] seeking the production of the FY2013 tax return, and category [2] to the extent it seeks detailed financial statements prepared by external accountants (if any) for the financial years ended 30 June 2013 to 30 June 2018 (that is, financial year periods illustrated by Mr Ross including 3 years in the Loss Period), the prejudice at this time rises to an abuse of process. The position may be otherwise, however, if Mr Skelin seeks to file or rely on an expert report, or depending upon any use of the documents sought to be made in cross‑examination. By reason of the limited extent I have not set aside those two categories, I accept Mr Skelin’s submission that the present application is not such an application.
Disposition
I have concluded that the Notice should be set aside save for the limited respects I have described in the previous paragraph. I will make orders accordingly.
On the matter of costs, my preliminary view is that Mr Skelin should pay the costs of and incidental to Notice (A) up to 31 January 2022, for the reasons I set out concerning non‑compliance of Notice (A) with the r 16.16(1) of the GFL Rules, and that the parties should otherwise bear their own costs of the application. If either party contends a different costs order should apply, they should submit a short note to Chambers within 14 days, with a draft of their proposed order, and indicate whether or not they are content for the Court to determine the issue of costs on the papers.
I certify that the preceding one hundred and twenty-three (123) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Baird. Associate:
Dated: 8 March 2022
SCHEDULE OF PARTIES
SYG 2771 of 2019 Second Respondent
YAOAN (ERIC) CHEN
Third Respondent
YILIN TRADING PTY LTD
ACN 626 244 479Fourth Respondent:
FREEZEFRAME CHINA CO PTY LTD ACN 621 016 975
Fifth Respondent:
KEFEI (EMILIO) WANG
Sixth Respondent:
PASCAL SKELIN
Seventh Respondent:
EPAQ INTERNATIONAL PTY LTD ACN 608 870 588
Eighth Respondent:
QUANJIAN PTY LTD
Ninth Respondent:
YIPING YANG
Tenth Respondent:
TAOYU PAN
Eleventh Respondent:
KEFEI (IVAN) WANG
Twelfth Respondent:
ZUREN INTERNATIONAL PTY LTD
Thirteenth Respondent:
SIQI HUO
Fourteenth Respondent:
MR YULIN WANG
Fifteenth Respondent:
E-GO CHANNEL PTY LTD
Sixteenth Respondent:
AUSTRALIAN VITAMIN PLUS PTY LTD
Seventeenth Respondent:
YAN (CYNTHIA) LI
ANNEXURE A – paragraphs of the notice to produce issued by the sixth respondent to the first and second applicants on 6 October 2021
ANNEXURE B – paragraphs of the notice to produce issued by the sixth respondent on the first and second applicant on 6 October 2021 as amended on 11 February 2022
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