Singh v Friedman [No 2]
[2016] WASC 39
•12 JANUARY 2016
SINGH -v- FRIEDMAN [No 2] [2016] WASC 39
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2016] WASC 39 | |
| Case No: | CIV:2183/2011 | 12 JANUARY 2016 | |
| Coram: | ALLANSON J | 12/01/16 | |
| 13 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| B | |||
| PDF Version |
| Parties: | SUKHWANT SINGH NEVILLE FRIEDMAN JEFFREY SOMAH LURIE |
Catchwords: | Practice and procedure Subpoena Application to set aside Whether or not a legitimate forensic purpose Turns on own facts |
Legislation: | Rules of the Supreme Court 1971 (WA), O 1 r 4B(1) |
Case References: | Areva NC (Australia) Pty Ltd v Summit Resources (Australia) Pty Ltd [2007] WASC 276 ICAP Australia v Forrest Moebes [2010] NSWSC 738 Stanley v Layne Christensen Company [2004] WASCA 50 Wookey v Quigley [No 5] [2011] WASC 275 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Consolidated by Orders dated 24 May 2012
- Plaintiff
AND
NEVILLE FRIEDMAN
First Defendant
JEFFREY SOMAH LURIE
Second Defendant
- Plaintiff
AND
NEVILLE FRIEDMAN
First Defendant
JEFFREY SOMAH LURIE
Second Defendant
Catchwords:
Practice and procedure - Subpoena - Application to set aside - Whether or not a legitimate forensic purpose - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA), O 1 r 4B(1)
Result:
Application dismissed
Category: B
Representation:
CIV 2183 of 2011
Consolidated by Orders dated 24 May 2012
Counsel:
Plaintiff : Mr M L Bennett
First Defendant : Mr S Penglis
Second Defendant : Mr S Penglis
Subpoena Recipients : Mr P Van Der Zanden
Solicitors:
Plaintiff : Bennett + Co
First Defendant : Douglas Cheveralls Lawyers
Second Defendant : Douglas Cheveralls Lawyers
Subpoena Recipients : Hotchkin Hanly Lawyers
CIV 1476 of 2012
Counsel:
Plaintiff : No appearance
First Defendant : No appearance
Second Defendant : No appearance
Solicitors:
Plaintiff : Bennett + Co
First Defendant : Hotchkin Hanly Lawyers
Second Defendant : Hotchkin Hanly Lawyers
Case(s) referred to in judgment(s):
Areva NC (Australia) Pty Ltd v Summit Resources (Australia) Pty Ltd [2007] WASC 276
ICAP Australia v Forrest Moebes [2010] NSWSC 738
Stanley v Layne Christensen Company [2004] WASCA 50
Wookey v Quigley [No 5] [2011] WASC 275
- ALLANSON J:
(This judgment was delivered orally on 12 January 2016 and has been edited from the transcript.)
1 The plaintiff and the defendants previously carried on a law practice in partnership. The partnership dissolved in 2010, with the plaintiff leaving the partnership and the two defendants continuing to carry on practice in partnership with each other.
2 By writ filed 5 July 2011, the plaintiff seeks various relief against the defendants. Relevantly, for the purpose of this application, he pleads that he has suffered loss and damage by reason of the defendants' breach of contract and breach of the Partnership Act 1895 (WA).
The plea of breach
Breach of contract
3 The plaintiff pleads that in breach of a term of the partnership agreement, between in or about 2000 to 2010, each of the defendants failed to devote time and attention to the conduct of the business of the partnership by attending to their personal investment and business during ordinary business hours, instead of performing legal work or management of the partnership: statement of claim, pars 26 - 27. The plaintiff alleges that the defendants conducted share trading, property investment and other investments through a series of 25 named entities: par 27.1. The plaintiff further pleads that the defendants spent a significant amount of time monitoring shares, property and other investment portfolios during the global financial crisis, and upon collapse of the value of their portfolios, spent a significant amount of time taking advice, negotiating and drafting an agreement with the ATO, attempting to sell their investment shares, and refinancing with banks: pars 27.2, 27.3.
4 The plaintiff pleads that by reason of the conduct pleaded in par 27 he has suffered loss and damage. In particular, he says that by reason of that breach each of the defendants failed to meet fee targets for their financial performance, and the plaintiff was obliged to attend to matters of supervision and management which otherwise would have been performed by the defendants, and which affected his ability to achieve fee targets. By reason of these matters the income of the partnership was less than it would otherwise have been, thereby diminishing his profit entitlement and capital in the partnership: par 28.
Breach of Partnership Act
5 The plaintiff also alleges breach of the Partnership Act by the defendants, without his consent, directing a partnership employee, Ms Colleen Radich, to act in respect of the defendants' personal interests namely:
30.1 at the direction of the defendants, Ms Radich drafted, managed and administered the defendants personal, insurance, superannuation funds, shares, property and other investment holdings, bank accounts, paid their bills and credit card accounts and taxation document; and
30.2 at the direction of the defendants, in relation to the 25 entities listed in paragraph 27, Ms Radich drafted, managed and administered BAS, records and ledgers, company documents, annual and corporate returns, drafted letters, email's and faxes.
6 The plaintiff pleads that by reason of that conduct the defendants caused the partnership to employ additional accounts staff to assist Ms Radich, to increase the payment of salary to Ms Radich, to pay her bonuses from time to time not related to the performance of partnership business, and caused the diversion of partnership resources to personal matters: par 31.
7 The plaintiff pleads that by reason of these matters he has suffered loss and damage, full particulars of which will be supplied: par 32.
The defence
8 The defendants do not admit the term of the partnership agreement on which the plaintiff relies for the plea of breach of contract: defence par 18. They admit they conducted share trading through (unspecified) corporate entities and monitored their portfolios from time to time, but otherwise deny each and every fact alleged in par 27 of the statement of claim: defence par 19.
9 The defendants also admit that Ms Radich assisted them from time to time with respect to matters personal to them, but otherwise deny the allegations in par 30. They deny each and every fact and matter alleged in par 31 and 32 of the statement of claim.
10 The defendants also plead, in the alternative, that the plaintiff acquiesced to their conduct and waived any breach.
The subpoenas
11 On 4 December 2015, the plaintiff issued a series of subpoenas to produce documents. Seven subpoenas were issued to companies which are among those 25 entities listed in par 27 of the statement of claim (the related companies). At least one of the defendants is a director of each of the seven recipients.
12 Two subpoenas were also issued to unrelated companies: Indian Ocean Management Group Pty Ltd and Indian Ocean Advisory Group Pty Ltd. It is not disputed that those companies provided services to the entities listed in par 27 of the statement of claim, or some of them.
13 The subpoenas to the seven related companies are in identical terms, being directed to the proper officer of each company and requiring it to produce documents or things (in the company's own capacity or in its capacity as the trustee of any trust or as the partner of any partnership) as follows:
1. All end of financial year statements for the financial years ending 30 June 2000 to 30 June 2010 (the Period).
2. All accounting ledgers maintained by or on behalf of [the company] for the period, including journal entries and audit trails.
3. All tax returns prepared by or on behalf of [the company] for the Period.
4. All bank statements for the Period for accounts held by [the company].
5. All shares or securities statements for shares or securities traded by [the company] during the Period.
6. All finance applications submitted to any finance provider during the Period by or on behalf of [the company].
14 The subpoenas to Indian Ocean Advisory Group and Indian Ocean Management Group refer to the 25 entities listed in par 27 of the statement of claim. They seek the same categories of documents referred to in the subpoenas to the seven companies, and also:
7. All letters or emails between [the recipient] and Neville Friedman, Jeffrey Lurie or Colleen Radich in respect of any of the Entities during the Period.
8. All accounts issued to the Entities for work performed by [the recipient] during the Period.
9. All invoices paid by or on behalf of the Entities for work performed by [the recipient] during the Period.
10. All work in progress reports for work performed for the Entities by [the recipient] during the Period.
The challenge to the subpoenas
15 The defendants and the seven companies associated with them which received subpoenas apply to the court to have the subpoenas set aside. The defendants also apply to have the subpoenas to the two Indian Ocean companies set aside as regards the first six categories of documents sought.
16 The challenge to the subpoenas is on two grounds: first, that the documents sought are not sufficiently relevant so that the subpoenas do not have a legitimate forensic purpose; second, even if the documents are 'of marginal indirect relevance' production ought not be required as a matter of discretion. The defendants further submit that, in considering the exercise of discretion, the court may take into account that the documents requested contain commercially confidential material of third parties.
Relevance
17 The first issue is relevance. The defendants submitted that the financial performance of the companies is not an issue in the proceedings. The plaintiff's pleaded case is based upon the defendants failing to devote time and attention to the partnership by attending to their own dealings during ordinary business hours. The financial records requested - including bank records, taxation returns, and audit trails for transactions - are not relevant or at least not directly relevant to that pleaded case. The financial performance of the various entities is not in issue in the proceedings, nor is any particular transaction. The documents sought would not identify or sufficiently identify any personal involvement by one of the defendants, when it occurred, and what time was expended.
18 The defendants further submit that the subpoena recipients are all separate legal entities, some of which are partly owned and controlled by non-parties.
19 Finally, the defendants submit that the subpoenas require the production of documents over a 10 years period, including years for which any action would now be statute barred.
20 The defendants do not submit that the subpoenas are oppressive. Nor do they submit that (other than on the question of sufficient relevance) they should be set aside as an abuse of process.
21 With respect, in my opinion, the defendants' submissions proceed from a more limited test of relevance for production on subpoena than the authorities support. In Stanley v Layne Christensen Company [2004] WASCA 50, the Court of Appeal agreed with the statement of the test at first instance by Master Sanderson in these terms (citation of authorities omitted):
(1) A legitimate forensic purpose will be established if a document gives rise to a line of enquiry which is relevant to the issues before the trier of fact, including for the purpose of meeting the opposing case by way of cross-examination …
(2) In assessing whether a legitimate forensic purpose exists in relation to documents sought on an early return of subpoena, it must be borne in mind that the necessity for having a document to fairly dispose of the issues at trial might well not become apparent before trial. It may, for example, become apparent when a document is used in cross-examination to refute unforeseen evidence-in-chief. Thus, whether a document is 'necessary' to fairly dispose of proceedings is to be understood in the broad sense of embracing any document which has value, in the sense of at least apparent relevance, and fairly disposing of proceedings, even if it might not readily be seen, at the pre-inspection stage, necessarily to be admissible in evidence … Cases will be rare in which, prior to production of documents, a subpoena will be set aside as an abuse of process on the ground the documents by description are manifestly irrelevant to the subject proceedings, or are incapable of bearing upon matters of credit pertinent to the proceedings …
(3) At least one object of the rule permitting early return of subpoenas is to appraise the parties of the strengths and weaknesses of their case at an early stage. Hence, no narrow view as to the legitimate purposes of a subpoena ought to be taken …
(4) There is no requirement that to avoid the stigma of fishing, a party must already by in possession of some evidence before issuing a subpoena. Historically the concept of fishing was not concerned with the prior possession of evidence, but rather the prior pleading of issues for which the evidence sought would be relevant … In the interests of a fair trial, litigation should be conducted on the footing that all relevant documentary evidence is available ... [9]
22 To these principles (perhaps an expansion of par (3) above) may be added that legitimate forensic purposes may include purposes relevant to management of cases prior to trial, including preparation for mediation and the encouragement of settlement: Areva NC (Australia) Pty Ltd v Summit Resources (Australia) Pty Ltd[2007] WASC 276 [22] - [23] (Martin CJ).
23 On this understanding of the relevant test for relevance, the material sought on subpoena is relevant.
24 First, as Mr Bennett submitted, the plaintiff will be required as part of his pleaded case to establish that the defendants carried on business and investments through the entities listed in par 27. The defendants admit that they conducted share trading through corporate entities, but deny that they did so through any of the entities named by the plaintiff. The subpoenaed documents are directly relevant to proving that part of the plaintiff's plea.
25 Second, while the plaintiff must establish that each of the categories of documents sought has a legitimate forensic purpose, I do not believe that each category can be looked at in isolation. For example, a debit or credit entry in the bank records may only be relevant when that entry is analysed in the context of records showing trading activity or transactions on that day.
26 Third, the plaintiff's case is not confined to the claim in breach of contract. As a separate claim, he alleges that the defendants directed Ms Radich to manage and administer their personal affairs. I accept the plaintiff's submission that the documents, collectively, may demonstrate the nature of the work completed to manage the financial performance of entities and the volume of transactions associated with them. These matters are relevant to the plaintiff's allegations regarding the extent of time and attention devoted to the management of the defendants' personal affairs, both by each defendant and by Ms Radich. The court should not take too restrictive a view of relevance at this stage, or embark on an inquiry requiring the party who has issued the subpoena to prove its relevance by evidence.
27 Fourth, the period of 10 years is not and is not alleged to be oppressively long, when the categories of documents sought are clearly stated and require no judgment by any of the subpoena recipients as to what documents are required to comply. I accept that the plaintiff has pleaded particularly by reference to activities occurring as a result of, and around the time of the Global Financial Crisis in 2007 - 2008. But activity and transactions before then may be relevant to properly assessing activity during that particular period. Again the court should not take a restrictive view.
28 Last, even on the more limited question of whether the defendants devoted time to their personal affairs to the detriment of the partnership the extent of their trading activities - for example, number of trades, trades on particular days - is a proper area for the plaintiff to consider. Again, in my opinion, it is the potential relevance of the picture that may emerge from the analysis of the whole of the financial information that justifies the scope of the subpoenas.
Discretion
29 The defendants refer to statements made by Kenneth Martin J in Wookey v Quigley [No 5] [2011] WASC 275 [36] - [37] in response to the current rules under which leave is not required to issue subpoenas for production of documents before trial. This process has attendant risks, including the risk that it will compound the problem of cost of civil litigation, and should be subject to curial supervision. In all matters in this court, the court must construe and apply the rules and conduct the processes and procedures of the court so as best to ensure the attainment of the case management objects referred to O 1 r 4B(1). The objects include ensuring the procedure applicable, and the costs of the procedure to the parties and the State, are proportionate to the value, importance and complexity of the subject matter in dispute.
30 The present case, however, is a complex matter. The plaintiff's case relies on the proof of activity by the defendants over a period of years. The facts relating to the defendants' trading activities are primarily in the knowledge of the defendants and perhaps third parties, not the plaintiff, but might be revealed by the financial records. The plaintiff should not readily be denied the opportunity to prove his case by use of a process provided in the rules.
31 No evidence has been led to enable a finding that the cost of compliance with the subpoenas is disproportionate to the value of the subject matter of the dispute, or to the potential forensic value of the documents requested. I am not in a position to make any findings on which to base an exercise of discretion to set aside a subpoena, otherwise regularly issued, because of disproportionate cost.
32 The return of subpoenas at this stage has not been shown to adversely affect the timely disposal of this matter.
33 The object of promoting just determination of the litigation, in my opinion, strongly supports requiring compliance with the subpoenas.
34 The issue of confidentiality was not relied upon as a separate ground and is not itself a ground for setting aside any of the subpoenas. Confidentiality normally arises at the stage of inspection of subpoenaed documents, although I accept it may be relevant at this stage to the exercise of discretion. A party who seeks protection additional to that given by the 'implied undertaking' - for example confidentiality undertakings - bears the onus of establishing why the court should impose that additional protection: see ICAP Australia v Forrest Moebes[2010] NSWSC 738 [8]. At present, it is apparent from the categories of documents that they include personal commercial information, but there is no evidence that any greater level of protection is needed.
35 I have some reservations about whether a subpoena that has been regularly issued could properly be set aside if it were not found to be an abuse of process. But it is unnecessary to consider that matter further. Assuming that I have discretion to set aside each subpoena, I would not do so.
The subpoenas to the Indian Ocean Companies
36 These recipients do not apply to set aside either subpoena. If the court is satisfied the subpoenas were issued for a legitimate forensic purpose (on which the recipients made no submissions) they ask only for an extension of time for compliance.
The time for compliance
37 Although the plaintiff issued the subpoenas on 4 December 2015, each recipient says it will require a further time to comply.
38 The time for compliance for Indian Ocean Advisory will be extended on the basis of evidence filed by that company about what it is required to do: see affidavit of Mark Sommers Hill, sworn 7 January 2016, and Peter William van der Zanden, sworn 6 January 2016. The plaintiff has advised the court that compliance within three weeks - the time requested by the recipient - will not interfere with preparation for the mediation in February. On that basis I will allow that extended period to 2 February 2016.
39 The other seven subpoena recipients have put on no evidence about the time they will need to comply. Having regard to the nature of many of the documents sought, the collation of them should not be a long or complex task: end of year financial statements, tax returns and bank statements should be readily obtained. The subpoenas were issued in early December, for return before Christmas 2015. Although the recipients applied to set them aside and to defer compliance until that application was determined, they should not assume that the time already passed will be disregarded. I will extend the period for compliance to Friday of next week, that is, to 22 January 2016. The recipients may be able to agree a further extension of time with the plaintiff. Otherwise, the matter will need to be brought back. I will give liberty to apply for that purpose.
40 The application by the defendants and the seven subpoena recipients to set aside the subpoenas is dismissed.
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