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Suzlon Energy Ltd v Bangad

Suzlon Energy Ltd v Bangad

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FEDERAL COURT OF AUSTRALIA
Suzlon Energy Ltd v Bangad [2011] FCA 1152

Citation: Suzlon Energy Ltd v Bangad [2011] FCA 1152

Parties: SUZLON ENERGY LTD AND OTHERS NAMED IN THE SCHEDULE v SANJEEV BANGAD AND OTHERS NAMED IN THE SCHEDULE

File number: NSD 1670 of 2008

Judge: RARES J

Date of judgment: 7 October 2011

Catchwords:
PRIVATE INTERNATIONAL LAW – notice to produce served on foreign bank challenging service on it out of the jurisdiction under r 10.43 of Federal Court Rules 2011 (Cth) – whether foreigner should be subject to compulsory process of the Court – principle of restraint in permitting use of court process against foreigner challenging service out of jurisdiction from being required to produce evidence supporting that extraterritorial service – whether notice to produce should be set aside or compliance not be required in the circumstances

INTERNATIONAL LAW – documents sought in notice to produce related to financial transactions between foreign bank and customer – production of documents likely to involve foreign bank in a contravention of Swiss banking secrecy and criminal laws – principles in respect of attempts to use court processes to obtain documents from international banks so as to avoid the risk of jurisdictional conflicts – whether notice to produce should be set aside or compliance not be required the circumstances

PRACTICE AND PROCEDURE – notice to produce – application by foreign bank to set aside or excuse obligation to comply with notice to produce under r 30.28 of Federal Court Rules 2011 (Cth) – notice to produce has same coercive effect as subpoena – whether notice to produce can be served on a foreigner contesting jurisdiction

Legislation: Admiralty Act 1988 (Cth) s 19(b)
Admiralty Rules 1988 (Cth) r 23(2)
Convention on the Taking of Evidence Abroad in Civil or Commercial Matters Art 9
Federal Court Rules 1979 (Cth) O 1 r 8, O 8A r 3, O 33 r 12
Federal Court Rules 2011 (Cth) rr 1.32, 1.34, 5.22, 5.23, 10.43, 16.21(e) and (f), 30.28
Federal Court of Australia Act 1976 (Cth) ss 37M, 37P
Supreme Court Rules 1970 (NSW) Pt 36, r 16(1),
Uniform Civil Procedure Rules 2005 (NSW) rr 21.10(1)(a), 21.11(1)

Cases cited: Adsteam Building Industries Pty Ltd v Queensland Cement and Lime Company Ltd (No 4) [1985] 1 Qd R 127 referred to
Armacel Pty Ltd v Smurfit Stone Container Corporation (2007) 164 FCR 123 followed
Australian Competition and Consumer Commission v Prysmian Cavi E Sistemi Energia SRL [2011] FCA 938 distinguished
Australian Securities Commission v Bank Leumi Le-Israel (Switzerland) (1996) 69 FCR 531 followed
Bank of Valletta plc v National Crime Authority (1999) 164 ALR 45 followed
Bank of Valletta plc v National Crime Authority (1999) 90 FCR 565 followed
Barach v University of New South Wales [2011] NSWSC 185 distinguished
Barnes v Addy (1874) LR 9 Ch App 244 referred to
Beluga Shipping GmbH & Co KS “Beluga Fantastic” v Suzlon Energy Ltd (No 5) (2011) 278 ALR 56 referred to
Caltex Oil (Australia) Pty Ltd v…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2011] FCA 1152
Decision Date: 7 October 2011

CaseChat Overview and Summary

Suzlon Energy Ltd and others sought to enforce notices to produce against three foreign banks in relation to financial transactions that were relevant to an ongoing dispute. The banks challenged the enforceability of the notices on the basis that compliance would require them to produce documents that would breach Swiss banking secrecy and criminal laws. The primary issue before the court was whether the notices to produce could be enforced against the foreign banks despite the potential breach of foreign law. The court considered the principles of private international law and the balance between the coercive power of the court and the respect for foreign jurisdictions.

The court found that there were substantial grounds to believe that enforcing the notices to produce against the banks would require them to breach Swiss law, which would result in criminal liability. The court noted that while Swiss law did not absolutely prohibit the disclosure of the requested documents, there were significant risks and penalties for the banks if they were to comply with the notices. The court also considered the principle of restraint in using compulsory court processes against foreigners who challenge the jurisdiction of the court. The court concluded that it was not appropriate to require the banks to produce the documents at that time, given the significant risk of them contravening Swiss law. The court ordered that the banks were not required to produce the documents in answer to the notices to produce until further order.

The court also considered the potential forensic consequences of an order relieving the banks of any obligation to produce documents by reason of Swiss banking secrecy laws. The court noted that this question had not been addressed by the parties and that it might need to be reconsidered depending on the outcome of other interlocutory applications and proceedings. The court ordered that the second cross claimants pay the costs of the banks’ interlocutory applications to set aside, or excuse compliance with, the notices to produce.

Orders

Orders of the court

1. The thirteenth second cross defendant not be obliged to produce the documents referred to in the notice to produce dated 9 September 2011 served by the second cross claimants until further order.

2. The fourteenth second cross defendant not be obliged to produce the documents referred to in the notice to produce dated 8 September 2011 served by the second cross claimants until further order.

3. The fifteenth second cross defendant not be obliged to produce the documents referred to in the notice to produce dated 9 September 2011 served by the second cross claimants until further order.

4. The second cross claimants pay the costs of the thirteenth, fourteenth and fifteenth second cross defendants of their respective interlocutory applications filed on 14 September 2011.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

That argument fails because, on the evidence, there are only three exceptions to the prohibitions against disclosure in Art 47 and Art 273. To the extent that the Suzlon parties already have copies of documents caught by the notices to produce, it is not presently necessary to require the Banks to produce further copies in circumstances where there is still a substantial risk that they and their employees would commit criminal offences in Switzerland by doing so. To the extent that the notices seek other documents to which the Suzlon parties have not yet had access, there is no basis to infer that they have ceased to be confidential or protected by Swiss banking secrecy laws. Mr Sridhar is in jail in India and I would not infer his silence in these proceedings as signifying his consent to any lifting of whatever protection or benefit he may have by reason of Swiss banking secrecy. CONCLUSION It follows from what I have said above that I am satisfied that, on the present evidence, I should not require the notices to produce to be answered for the moment. It may be necessary to reconsider this depending on how the hearing of the interlocutory applications challenging service, the appropriateness of Australia as a forum and the pleading of the second cross claim proceeds. While I am satisfied that the Banks would be at risk of contravening Swiss law if they were ordered to produce the documents called for, the parties have not addressed the question of what, if any, forensic consequences would flow from an order relieving the Banks of any obligation to produce documents by reason of Swiss banking secrecy laws should it become appropriate for the Suzlon parties to call again on the notices during the hearing of the interlocutory applications or they remain parties to active proceedings in this Court after those applications have been determined: cf Bank of Valletta 90 FCR at 566-567 [9]-[10], 569 [17]. It may be that the Suzlon parties will contend that the Banks be treated, although excused from production, as if they had not answered the notices to produce for the purposes of r 30.28(2). Accordingly, I will order that the Banks need not produce documents in answer to the notices to produce until further order: cf Lenfest 40 NSWLR at 262-263. The Suzlon parties should pay the Banks’ costs of the interlocutory applications to set aside, or excuse compliance with, the notices to produce.

Ratio Decidendi

Legal Principle Established

The Suzlon parties argued that Swiss law did not prevent the Banks answering the notices to produce. (I will deal with the relevant content of Swiss Law later in these reasons.) They contended that a number of United States cases showed that Swiss banks had complied with court orders for discovery and that, despite Swiss Government disquiet, there was no evidence that anyone had been prosecuted for obeying the United States courts’ orders. The Suzlon parties argued that because the notices to produce had the coercive effect of a subpoena under r 30.28(3), the Banks were placed in a state of necessity within the meaning of Arts 17 and 18 of the Swiss Criminal Code and were thus able to answer them without contravening Swiss banking secrecy laws. They also argued that the documents sought in these notices to produce were capable of supporting the prima facie case requirement in respect of the extraterritorial service on LB Swiss and Merrill Lynch as well as in demonstrating that Australia was not a clearly inappropriate forum.CONSIDERATION(a) Power to permit service of a notice to produce on a foreigner contesting extraterritorial service I am satisfied that r 30.28 enables a party to serve a notice to produce on a foreigner in respect of an application to confirm or set aside service of process on the foreigner outside the jurisdiction. A party who has obtained an ex parte order for service out of the jurisdiction is entitled, in an appropriate case, to use a subpoena served within Australia to seek production of further documents tending to show that it has a prima facie case in support of the confirmation of, or to counter opposition to, service out of the jurisdiction after such service has occurred: WSGAL Pty Ltd v Trade Practices Commission (1992) 39 FCR 472 at 474 per Morling J, with whom Beaumont J at 475-476 and Hill J at 476 agreed. In principle, that reasoning is equally apposite to a notice to produce and Giles CJ Comm D arrived at this conclusion in respect of a notice to produce served under analogous rules of court in News Corporation Ltd v Lenfest Communications Inc (1996) 40 NSWLR 250 at 258A-C, 259G-260B. A notice to produce is not an exact equivalent to a subpoena as his Honour noted in Lenfest 40 NSWLR at 256B-E. Importantly, however, as r 30.28(3) provides, a party served with a notice to produce sufficiently in advance of its return date, as was the case here, must comply with the notice by producing the documents (or things) in accordance with its requirement. That utilises the Court’s powers of compulsion to make those documents (or things) available for inspection and, if need be, use in evidence. Relevantly, as Giles CJ Comm D observed in Lenfest 40 NSWLR at 260C, Pt 36 r 16(1) of the Supreme Court Rules 1970 (NSW) required the party to be served with a notice to produce to produce the document or thing in accordance with the notice “unless the Court otherwise orders”. The old Rules contained a similar qualification in O 33 r 12(1) which provided:“(1)Where a party to any proceedings serves on another party notice, in accordance with Form 45, requiring the party served to produce at any trial or hearing in the proceedings, … any document or thing for the purpose of evidence and the document or thing is in the possession, custody or power of the party served, the party served shall, unless the Court otherwise orders, produce the document or thing in accordance with the notice, without the need for any subpoena for production.” (emphasis added)

Citation:		Suzlon Energy Ltd v Bangad [2011] FCA 1152
Parties:		SUZLON ENERGY LTD AND OTHERS NAMED IN THE SCHEDULE v SANJEEV BANGAD AND OTHERS NAMED IN THE SCHEDULE
File number:		NSD 1670 of 2008
Judge:		RARES J
Date of judgment:		7 October 2011
Catchwords:		PRIVATE INTERNATIONAL LAW – notice to produce served on foreign bank challenging service on it out of the jurisdiction under r 10.43 of Federal Court Rules 2011 (Cth) – whether foreigner should be subject to compulsory process of the Court – principle of restraint in permitting use of court process against foreigner challenging service out of jurisdiction from being required to produce evidence supporting that extraterritorial service – whether notice to produce should be set aside or compliance not be required in the circumstances INTERNATIONAL LAW – documents sought in notice to produce related to financial transactions between foreign bank and customer – production of documents likely to involve foreign bank in a contravention of Swiss banking secrecy and criminal laws – principles in respect of attempts to use court processes to obtain documents from international banks so as to avoid the risk of jurisdictional conflicts – whether notice to produce should be set aside or compliance not be required the circumstances PRACTICE AND PROCEDURE – notice to produce – application by foreign bank to set aside or excuse obligation to comply with notice to produce under r 30.28 of Federal Court Rules 2011 (Cth) – notice to produce has same coercive effect as subpoena – whether notice to produce can be served on a foreigner contesting jurisdiction
Legislation:		Admiralty Act 1988 (Cth) s 19(b) Admiralty Rules 1988 (Cth) r 23(2) Convention on the Taking of Evidence Abroad in Civil or Commercial Matters Art 9 Federal Court Rules 1979 (Cth) O 1 r 8, O 8A r 3, O 33 r 12 Federal Court Rules 2011 (Cth) rr 1.32, 1.34, 5.22, 5.23, 10.43, 16.21(e) and (f), 30.28 Federal Court of Australia Act 1976 (Cth) ss 37M, 37P Supreme Court Rules 1970 (NSW) Pt 36, r 16(1), Uniform Civil Procedure Rules 2005 (NSW) rr 21.10(1)(a), 21.11(1)
Cases cited:		Adsteam Building Industries Pty Ltd v Queensland Cement and Lime Company Ltd (No 4) [1985] 1 Qd R 127 referred to Armacel Pty Ltd v Smurfit Stone Container Corporation (2007) 164 FCR 123 followed Australian Competition and Consumer Commission v Prysmian Cavi E Sistemi Energia SRL [2011] FCA 938 distinguished Australian Securities Commission v Bank Leumi Le-Israel (Switzerland) (1996) 69 FCR 531 followed Bank of Valletta plc v National Crime Authority (1999) 164 ALR 45 followed Bank of Valletta plc v National Crime Authority (1999) 90 FCR 565 followed Barach v University of New South Wales [2011] NSWSC 185 distinguished Barnes v Addy (1874) LR 9 Ch App 244 referred to Beluga Shipping GmbH & Co KS “Beluga Fantastic” v Suzlon Energy Ltd (No 5) (2011) 278 ALR 56 referred to Caltex Oil (Australia) Pty Ltd v…