Wong v Sklavos

Case [2014] FCA 679

FEDERAL COURT OF AUSTRALIA

Wong v Sklavos [2014] FCA 679

Citation: Wong v Sklavos [2014] FCA 679
Appeal from: Application for leave to appeal: Sklavos v Australasian College of Dermatologists [2014] FCA 476
Parties:

DR DAVID WONG AND OTHERS NAMED IN THE SCHEDULE v ANGELO SKLAVOS and THE AUSTRALASIAN COLLEGE OF DERMATOLOGISTS

DR ANDREW SATCHELL v ANGELO SKLAVOS and THE AUSTRALASIAN COLLEGE OF DERMATOLOGISTS
File numbers: NSD 520 of 2014
NSD 522 of 2014
Judge: FARRELL J
Date of judgment: 26 June 2014
Catchwords:

PRACTICE AND PROCEDURE – appeals – application for leave to appeal from an interlocutory judgment – application by non-party – subpoenas to produce documents issued to non-parties – subpoenas sought tax returns and income information for dermatology practices – application to set aside the subpoenas dismissed – whether “apparent relevance” established – whether primary judge’s decision attended by sufficient doubt – whether substantial injustice

PRACTICE AND PROCEDURE – subpoenas – where information confidential

Legislation: Disability Discrimination Act 1992 (Cth)
Evidence Act 1995 (Cth)
Federal Court Act 1976 (Cth)
Cases cited: Apache Northwest Pty Ltd v Western Power Corporation (1998) 19 WAR 350
Campaign Master (UK) Limited v Forty Two International PtyLtd (No 4) [2010] FCA 398
Commonwealth v Construction, Forestry, Mining and Energy Union (2000) 98 FCR 241
Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397
Dorajay Pty Ltd v Aristocrat Leisure Ltd [2005] FCA 588
Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher (2011) 281 ALR 38
Georges v Seaborn International Pty Ltd (Trustee) [2012] FCA 294
Hamilton v Oades (1989) 166 CLR 486
Johnston v Cameron (2002) 124 FCR 160
McHugh v Australian Jockey Club Limited (No 2) [2011] FCA 724
Nexus Energy Corporate Pty Ltd v Trident Australasia Pty Ltd [2010] FCA 1328
R v Barton [1981] 2 NSWLR 414
Rawson Finances Pty Ltd v Deputy Commissioner of Taxation [2010] FCAFC 139
Re North Coast Transit Pty Limited [2013] NSWSC 1912
Samsung Electronics Company Ltd v Apple Inc (2011) 217 FCR 238
Santos Ltd v Pipelines Authority of SA (1996) 66 SASR 38
Sklavos v Australasian College of Dermatologists [2014] FCA 476
Trade Practices Commission v Arnotts Ltd (No 2) (1989) 88 ALR 90
Date of hearing: 17 June 2014
Date of last submissions: 17 June 2014
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 46

In NSD 520 of 2014:

Counsel for the Applicants:

Ms M Allars SC
Solicitor for the Applicants: TressCox Lawyers

Counsel for the First Respondent:

Mr P Moorhouse

Solicitor for the First Respondent:

Petrine Costigan Lawyers

Counsel for the Second Respondent: The second respondent submitted save as to costs

In NSD 522 of 2014:

Counsel for the Applicant:

Mr RC Gration
Solicitor for the Applicant: Peter Kennedy Lawyers
Counsel for the First Respondent:

Mr P Moorhouse

Solicitor for the First Respondent:

Petrine Costigan Lawyers

Counsel for the Second Respondent: The second respondent submitted save as to costs

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

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AGLC
Wong v Sklavos [2014] FCA 679
Case
[2014] FCA 679
Decision Date

CaseChat Overview and Summary

Wong v Sklavos is a case before the Federal Court of Australia, where the central dispute involves the issuance of subpoenas to non-parties seeking tax returns and income information related to dermatology practices. The primary issue before the court was whether the subpoenas, which were issued to non-parties and sought confidential personal information, were validly issued and should be enforced. The court examined the arguments from the Doctors, who were the subjects of the subpoenas, regarding the apparent relevance of the documents, the burden of producing such documents, and the potential for substantial injustice if the subpoenas were enforced.

The court found that the Doctors had established that it was arguable the subpoenas were issued without sufficient evidence of relevance, and that the primary judge's decision was attended by sufficient doubt. The Doctors contended that the information sought was not relevant to the case as it was speculative and could not rationally affect the assessment of the probability of the existence of a fact in issue, as required by the Evidence Act 1995 (Cth). Furthermore, the Doctors argued that enforcing the subpoenas would cause them substantial injustice due to the confidential nature of the information requested and the lack of justification for targeting specific dermatologists.

In granting leave to appeal, the court noted that both limbs of the Decor test were satisfied. The decision of the primary judge was attended by sufficient doubt, and there was a real possibility of substantial injustice if the subpoenas were enforced. The court concluded that the Doctors' privacy was being intruded upon in a significant way and that the information sought was disproportionate to the benefits it would provide for resolving the issues in the case. The court also highlighted that the Doctors were strangers to the litigation and that a confidentiality regime could be imposed to mitigate some of the concerns.

The final orders of the court were to grant leave to appeal and to reserve costs. This decision allows the Doctors to challenge the validity of the subpoenas on appeal, providing them an opportunity to argue against the enforcement of the subpoenas on the grounds of relevance and potential for substantial injustice.

Orders

Orders of the court

1. Leave to appeal be granted

2. Costs are reserved.

1. Leave to appeal be granted

2. Costs are reserved.

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

Dr Wong says that on that standard a judge would not be required to apply the “unreal, fanciful or speculative” test at the time of the application to set aside a subpoena but rather at the time of trial in light of all of the evidence. The Doctors argue that the consequence of this approach would be that subpoenas would rarely, if ever, be set aside on the ground of apparent relevance. They further submit that it is inconsistent with s 55 of the Evidence Act 1995 (Cth) (Evidence Act) which determines relevance of evidence by whether, if it is accepted, it could rationally affect, directly or indirectly, the assessment of the probability of the existence of a fact in issue. I do not consider Dr Wong’s reading of the primary judge’s reasons to be fair; the primary judge’s comments reflect the reality that at the time of issuing a subpoena it is not possible to know what materials which respond to a subpoena will be admitted into evidence, or the ultimate weight evidence may have at trial. An acknowledgement that a document obtained in response to a subpoena may ultimately have little probative value at trial is not the same thing as saying that it is unlikely to have any probative value at all or that it is not adjectivally relevant. Having said that, I accept the Doctors’ submission that the party issuing the subpoena bears the forensic onus of demonstrating the relevance of those documents: see Santos Ltd v Pipelines Authority of SA (1996) 66 SASR 38 at 52. The Doctors submit that a statement in Ms Costigan’s affidavit of 30 April 2014 to the effect that the subpoenaed documents would be given to a forensic accountant is not sufficient to discharge this burden in circumstances where: ·it is not clear how the 11 dermatologists have been selected from the population of practising dermatologists; ·it is not clear how a sample of 11 from that population could be statistically significant; ·it is not clear how earnings of dermatologists with different backgrounds, specialisations, work ethics and competence could be probative of Dr Sklavos’ future earnings; and·the credentials, and even the name, of the expert have not been disclosed. The Doctors rely on the decision of Black J in Re North Coast Transit Pty Limited [2013] NSWSC 1912 (North Coast Transit) at [32] and [39]. The issue in that case was whether information about four out of eight bus contracts (the subject of a subpoena) which had been awarded in the past was relevant to the valuation of shares in an operator which might tender for contracts in the future, by reference to the operator’s prospects of success in those tenders. Justice Black did not accept that it was “on the cards” that the subpoena would produce admissible evidence where the valuation expert to whom the documents would be made available, although an experienced valuer and accountant, had not been shown to have expertise in market conditions in the bus industry in New South Wales or the price at which tenders might be made. His Honour went on to note the need to establish expertise before expert opinion would be accepted under s 79 of the Evidence Act: see North Coast Transit at [33]-[35]. Dr Sklavos argues that the circumstances of North Coast Transit should be distinguished from the present case on the basis that possible winning of future contracts was patently outside the usual expertise of a valuation expert but an opinion concerning future earnings would be within the normal expertise of a forensic accountant. I do not accept this distinction; Black J’s statements of general principle are applicable to this case.

Decision

Reasons for decision

As I am satisfied that it is arguable that the apparent relevance of the Doctors’ information is speculatively based so that the primary judge’s decision is attended by sufficient doubt for a grant of leave (subject to the second limb of Decor), it is unnecessary for me to consider further the Doctors’ arguments that compliance with the subpoenas would otherwise be oppressive or unfairly burdensome. Would substantial injustice result if leave were refused, supposing the decision to be wrong? Both limbs of Decor must be satisfied before leave to appeal is granted, but the limbs of the test should not be compartmentalised. The information required by the subpoenas appears to be limited in time and scope so that it would not be oppressive for that reason to require its production. The primary judge has indicated that orders can be made appropriately to compensate for costs incurred and the primary judge is willing to impose a confidentiality regime if the Doctors and Dr Sklavos cannot agree one. However, the Doctors are strangers to the case, and their privacy is being intruded upon in a substantial way as they are being asked to provide confidential personal information about earnings from their practices for the last three years (in most cases). The leave decision is final in relation to their claims. Although the Doctors’ names and non-dermatology related income information will be redacted, the sample group in many cases is just two Doctors and there has been no justification given for the selection of those two Doctors (among the possible candidates for selection) in that category. Although there is no evidence about how the expert would produce his report, if it is presented by category of experience it is likely that there will still be a high measure of transparency of the earnings of the Experienced Doctors’ dermatology practices, even if income is aggregated. If the information is broken down even further, for instance by reference to public or private practice, it may be that the characteristics of the information disclose its provenance, especially in relation to the Experienced Doctors. Dr Sklavos has not precluded the possibility that he will seek to tender the documents which respond to the subpoenas. The Doctors have indicated in correspondence between the legal representatives of the parties that they do not wish their earnings information to be available, even to the College. While the Doctors concede that confidentiality of documents sought by subpoena is a relevant but not determinative factor in deciding whether a subpoena should be set aside, it is also not irrelevant: Apache Northwest Pty Ltd v Western Power Corporation (1998) 19 WAR 350 at 380-381 (Apache Northwest); Dorajay Pty Ltd v Aristocrat Leisure Ltd [2005] FCA 588 (Dorajay) at [36] per Stone J. Where the relevance of the documents being sought is disproportionate to the benefits production would have for resolution of the issues in the case, a subpoena should be set aside: see Read v Chang [2010] FamCA 876 [7]-[8].

Ratio Decidendi

Legal Principle Established

The primary judge consequently dismissed the application and noted at [17] that if the parties could not agree on an appropriate confidentiality regime, one could be imposed upon them. She noted that the Doctors ought to be permitted to provide a redacted version of their tax returns excluding information not derived from the provision of dermatology services and that a limit should be imposed upon access to the material. CONSIDERATION Written submissions were provided by all parties except the College. Dr Satchell relied on the submissions of Dr Wong and the other Doctors and provided some additional submissions; for this reason I will generally not distinguish between the Doctors in the references below. When it is necessary to distinguish between the submissions, I will refer to submissions made on behalf of Dr Wong and the other Doctors in the Schedule as Dr Wong’s submissions.Test to be met for grant of leave In Commonwealth v Construction, Forestry, Mining and Energy Union (2000) 98 FCR 31 (CFMEU) at [17]-[18] the Full Court (Black CJ, Tamberlin and Sundberg JJ) acknowledged that there are numerous cases in which a witness who is dissatisfied with the outcome of an application in relation to a subpoena has appealed with leave, and that a non-party has standing to do so. They went on to say at [20] that where a non-party seeks leave to appeal from an interlocutory judgment or order, the matters to be taken into account will include those that are customarily considered on an application for leave by a party in accordance with the guidelines referred to in Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 (Decor) at 398-9. The first limb of the Decor test is ‘‘whether, in all the circumstances, the decision is attended with sufficient doubt to warrant its being reconsidered by the Full Court”. The second is “whether substantial injustice would result if leave were refused, supposing the decision to be wrong”. The limbs of the test should not be compartmentalised: “[t]hey bear upon each other, so that the degree of doubt which is sufficient in one case may be different from that required in another. Ultimately, a discretion must be exercised on what may be a fine balancing of considerations.” The two limbs of Decor are cumulative, it is not enough to satisfy just one of them: see Rawson Finances Pty Ltd v Deputy Commissioner of Taxation [2010] FCAFC 139 at [5]; Nexus Energy Corporate Pty Ltd v Trident Australasia Pty Ltd [2010] FCA 1328 per Burchett J at [17]. The Full Court (Dowsett, Foster and Yates JJ) in Samsung Electronics Company Ltd v Apple Inc (2011) 217 FCR 238 affirmed the Decor test at [26]-[28]. It went on to say at [29] that while the Decor test is appropriate for the general run of cases, it should not be applied as if it were a hard and fast rule. Each case must be considered on its merits. In Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher (2011) 281 ALR 38 (Fortress Credit) at [32] the Full Court (Emmett, Nicholas and Robertson JJ) said that “it does not require much” for a non-party to obtain leave. This is a remark on which the Doctors sought to rely. It is important to bear in mind the context in which these words were said by considering the whole of [32] and [33] and the fact that the non-party in the substantive proceedings had not participated in the proceedings from which leave to appeal was sought. At [32]-[33], the Court said:32.A person who was not a party to a cause can obtain leave to appeal from orders made in the cause. A person who, without being a party, is either bound by an order, or is aggrieved by it, or is prejudicially affected by it, or is sufficiently interested in it can appeal, but only with leave. It does not require much for such a person to obtain leave: see Re Securities Insurance Co [1894] 2 Ch 410 at 413–14. Leave to appeal is given, as a rule, if the person applying, though not a party to the proceeding, might properly have been made a party: see Cuthbertson v Hobart Corporation (1921) 30 CLR 16 at 25.33.For example, leave to appeal may be given to a person who had not been heard and who was a potential beneficiary under a will: Re Markham; Markham v Markham (1880) 16 Ch D 1. Further, the recipient of a subpoena, being subject to a court order, has standing to apply for leave to appeal against a trial judge’s refusal of a request for pseudonym orders, and such a refusal is an order against which an appeal can be brought: see Witness v Marsden (2000) 49 NSWLR 429; [2000] NSWCA 52; Campbelltown City Council v Vegan (2006) 67 NSWLR 372; 235 ALR 342; 95 ALD 681; [2006] NSWCA 284 at [62]. The witness has a direct interest in the matter sought to be challenged.