a+ \O: IN THE FEDERAL COURT OF AUSTRALIA } ) VICTORIA DISTRICT REGISTRY ) V. No. G 109 of 1983 ) ) GENERAL DIVISION BETWEEN : JET CORPORATION OF AUSTRALTA PITY. LIMITED (in its capacity as Trustee of the JET CORPOPATION AUSTRALIA TRUST) Applicant and PETRES PTY. LIMITED (in its own fight and in its capacity as Trustee of the Schutt Unit Trust) — and OTHERS "Respondents if \ om ~ COURT: NORTHROP J. i Q: 714 AUS ie DATE: 12 AUGUST 1985 ( Be US Fa5 2 PLACE: MELBOURNE S J REASONS FOR JUDGMENT This is a further act in the saga involving Jet Corporation of Australia Pty. Limited ("Jet Corporation") and the legal proceedings commenced in June 1983 by it and two other applicants, Electrum Acceptance Pty. Ltd. and Electrum Finance Pty. Ltd. At the present time, Jet Corporation is the only surviving applicant. On 27 June 1983, the then three applicants, pursuant to Order 27 rule 2 of the Rules of Court, caused a subpoena for production of documents to be issued directed to Mr. Roger Randle, a partner in Messrs. Touche Ross & Co., a firm of accountants. The documents td required to be produce: were described in three paragraphs, (a), (b) and (c) 1n the Schedule to the subpoena. By order made on 23 May 1985, the Court as presently constituted, ordered that paragraph (c) in Ehe Schedule to the subpoena be set aside. As a result of that order, the documents to be produced pursuant to the subpoena are: "(a) the Accounting Records and books of each of the three Applicants; (b) the audit working papers and related file of correspondence and other documents of the firm relative to the three Applicants for all their vrespective accounting periods TOGETHER WITH documents handed into the possession of the firm in connection with the professional work conducted by it for the three Applicants and each of them;" . It must be remembered that after the subpoena was served, but before the order was made, Jet Corporation had become' the sole applicant in these proceedings. On 23 May 19385 the order was made and the Court published its reasons for judgment in relation to the motions then before the Court. Those reasons should be read for an understanding of the motions presently before the Courk. On 5 July 1985, the Court constituted by Woodward J., refused leave to Mr. Randle and Messrs. Touche Ross & Co. to appeal from the order made On 16 July 1985, Jat Corporation gave notice that at would move the Court for leave to inspect and take copies of the documents produced to the Court by Mr. Randle pursuant to the subpoena. On the same day, Mr. Randle gave notice that he would move the Court that his obligation to comply with the subsoena be stayed. On 22 July 1985, the Court as presently constituted, ordered fhat the hearing of the two motions be adjourned to 29 July 1985 and that the return date for the production of the documents referred to in paragraphs (a) and (b) in the Schedule to the subpoena be fixed at 16.15 a.m. on 29 July 19385. On 29 July 1985, Mr. Randle was present in Court. He had with him the documents referred to in paragraphs (a) and (b) in the Schedule to the subpoena. He was represented by senior counsel. He objected to the production of the documents. He relied upon an affidavit filed in support of his motion. He was cross-examined. In submissions, reference was made to James v. Cowan (1929) 42 C.L.R. 305. After consultation with his legal advisers, Mr. Randle agreed to answer the subpoena but limited the production to documents of and relating to Jet Corporation. Counsel for Jet Corporation did not object to that course. Further, certain documents being daily and fortnightly timesheets relating to work done by members of staff of Messrs. Touche Ross & Co. on account of Jet Corporation and other clients which were reduced each month to timesheets for each client were not produced. The documents produced by Mr. Randle were the monthly timesheets relating to Jet Corporation. This course was not objected to. If necessary, this matter can be raised later. Further, some of the files produced contained material relevant to other clients of Messrs. Touche Ross & Co. and are not relevant to Jet Corporation. Again, subject to reference to the Court in case of dispute, the parties agreed that the relevant parts of those files could be treated as being produced. fubject to the matters already mentioned, Mr. Randle produced into the custody of the Court, the documents described in paragraphs (a) and (b) in the Schedule to the subpoena. Jet Corporation proceeded with ats motion which was opposed by counsel for Mr. Randle. The main basis for the opposition to the motion was a claim that Messrs. Touche Ross & Co. had a lien over the documents produced and that until det Corporation paid the amount owing to Messrs. Touche Ross & Co. for professional services provided, Jet Corporation should not be given leave to inspect the documents produced to the Court. In reply, senior counsel for Jet Corporation gave certain undertakings to the Court. At the conclusion of the hearing of the argument, I said: "I propose to give leave to inspect the documents generally. Tf have already indicated that IT am not satisfied that any lien has been established over the documents produced. I propose to give mv reasons for those two matters at a later stage but in the meantime, having regard to the undertakings offered on behalf of the applicant and on behalf of the receivers and managers of the applicant, Mr. Hunter and Mr. Allen, I propose to permit the general inspection to be conducted on the following conditions: Upon the undertaking given by counsel on behalf of Mr. Hunter and Mr. Allen to pay the costs of Mr. Randle in relation to the compliance with the subpoena, and upon the sum of $1500 being paid into court by 10 am tomorrow, 39 July 1985; upon che further condition that the inspection of documents shall be limited to the following persons, namely, Mr. Milne, one of Her Majesty's Counsel, the unstructing solicitor for the applicant, Mr. Hunter, one of the receivers and managers of the applicant, and Mr. Brown, a solicitor of the Supreme Court of Victoria and an accountant employed by Messrs. Arthur Anderson and Company, accountants, acting on behalf of the receivers and Managers; and upon the further condition that any document which is desired to be copied shall before copying be marked and notice given to Mr. Randle or his solicitors of the documents desired to be copied and to enable those solicitors to raise the maLter before me in relation to whether copies should De made or not of those documents. I further order that the applicant is to pay the cost of Mr. Randle of complying with the subpoena, the amount of those costs to be taxed. These orders, the undertakings and payment made in pursuance of them, can be complied with at any time after 10 am tomorrow. An inspection is to take place in a room within this court building and I shall publish my reasons on the main issues at a later stage." Senior counsel for Mr. Randle announced that his client may wish to seek leave to appeal from the orders made. Toa enable consideration to be given to that question and in Order to maintain the status quo, the Court, pursuant to Order 52 rule 17, gave a stay of the orders made until the reasons for judgment for the orders are published. The Court now publishes those reasons. In support of its motion, Jet Corporation relied upon material contained in an affidavit sworn on 16 July 1985 by Laurence Brian Hunter, one of the Receivers and Managers of Jet Corporation. Together with Peter Bernard Allen, he was so appointed a Receiver and Manager on 28 October 1982 by Citicorp Australia Ltd. ("Citicorp") pursuant toa Deed of Debenture dated 21 December 1981. On 8 December 1982, Mr. Hunter and Mr. Allen were appointed by Citicorp as Managers and Receivers of the assets and undertakings of the Jet Corporation Australia Trust ("the JCA Trust"). In October 1981, Messrs. Touche Ross & Co. made submissions to Jet Corporation regarding an application for appointment as auditors of Jet Cnrporation and the JCA Trust. On 25 November 1981, Jet Corporation appointed Messrs. Touche Ross & Co. auditor of Jet Corporation and the JCA Trust. That appointment continued for about one year. From the affidavit by Mr. Hunter, I am satisfied that Messrs. Touche Ross & Co. have in their possession documents coming within the description of the documents referred to in paragraphs (a) and (b) in the Schedule to the subpoena and that Jet Corporation will not be in a position to have a full understanding of the facts which relate to its proceedings as a whole until it has been able to inspect and take copies of those documents. In his affidavit, Mr. Randle states that his firm carried out audit work and accounting services for Jat Corporation between December 1981 and October 1982. He claims that the charges for the professional services so provided amount to approximately $28,000, which amount has mot been paid. He says "if permissable to do so by law, my firm will not produce the documents that it holds on behalf of the applicant until its fee of $28,260 has been paid." Mr. Randle referred also to the expenses involved of complying with the subpoena and estimates those expenses will be "in excess of $1,500." That amount related to the documents relating to the other two former applicants as well as Jet Corporation. Mr. Randle relied also upon an affidavit cworn by his solicitor, Anthony Elder. In that affidavit, Mr. Elder refers to a claim made by Mr. Hunter and Mr. Allen relating to possible negligence proceedings in the Supreme Court of Victoria against Messrs. Touche Ross & Co. arising out of their activities as auditors to Jet Corporation and the JCA Trust, but that those nyroceedings could not be instituted until the Receivers and Managers had vecovered or had access to documents in the nossession of Messrs. Touche Ross & Co. In giving oral evidence, Mr. Randle said that he did not know what documents were in the possession of Messrs. Touche Ross & Co. or in what circumstances they had come into the possession of the firm. He did not know if the documents had come into the possession of the firm for the purpose of carrying out the accounting oar auditing work. He claimed a lien over all the documents on the basis that thev are documents of the firm and that the firm had either done work or prepared documents or papers and the firm had not been paid for the work done. He did not know if all or any of the documents or any of them were documents of Jet Corporation given by it to the firm or by some other person given to the firm as agent for Jet Corporation for the purpose of producing work on those documents. Many of the documents were working papers of the firm. The doctuments produced did not contain an index of documents relating to Jet Corporation. On 3 May 1985, the Court, as presently constituted, in these proceedings gave leave to Jet Corporation to inspect and take copies of documents produced to the Court by Mr. Athol Lidgett of Messrs. Simon Lidgett Collingwood & Co., Stockbrokers, pursuant to a subpoena dated 27 June 1983. Counsel for Mr. Lidgett had opposed leave being granted on three main grounds, including the relevance of the documents at that stage of the proceedings, the possibility of Supreme mn Court proceedings between Jet Corporation and that firm and that the inspection was premature. The reasons then given for giving leave to inspect and copy the documents produced have equal application to the present motion. I see no reason to depart from those reasons and apply them to the facts of the present motion. Prima facie, therefore, there should be leave given to Jet Corporation to inspect the documents produced and make copies of them. In opposing the motion, the senior counsel for Mr. Randle relied on the matters dealt with by me and rejected in the reasons already referred to. In addition, counsel relied upon the existence of the lien as a reason why leave should not be given to Jet Corporation to inspect the documents so produced. In support of the submissions on this matter, counsel for Mr. Randle relied upon a number of authorities, including Kemp v. King (1917%' 3 Moody & Robinson 347: E.R. 342; Re Hawkes £18983 2 Ch. 1; Re Hill (1848) L.J.Bey. 21 and Woodworth v. Conway [19763 1 9.B. 384. respect to the last case, counsel relied in particular what was said by Lawton L.J. at pp.899-90: "The first matter to be decided is whether in law the defendants as accountants could have any kind of lien over the plaintiffs' papers and tax files. Surprisingly, the researches of counsel, which have been extensive, have revealed no case in which any court has adjudged that accountants have a lien. As long ago as 1848, Knight-Bruce V.-C. expressed a firm opinion that they had ina case which raised the question; but no judgment was given, an order being made by consent for the return of the books in dispute to the accountants "without prejudice to any question": see In re Hill, Ex parte Southall (1848) 17 L.d.Becy. 21. I can see no reason whatsoever why accountants should not have a lien of some kind. Books of account and other documents are entrusted to them by their clients for work to be done upon, and in connection, with them, often by entering up ledgers and almost always by analysis. Work in connection with books of account often involves corresponding with third parties and making compilations of various kinds. The kind of work they do may he very different from that of a craftsman who is Making or repairing a chattel (the kind of work which gave cise to the common law concept of particular liens); but since the beginning of the 19th century arbitrators, architects, conveyancers and parliamentary agents have been adjudged capable ef having particular liens: see Halsbury's Laws of England, 3rd ed., vol. 24 (1958), p. 154, para. 284; solicitors, bankers, factors, stockbrokers and insurance-brokers have long enjoyed the right to general liens: op. cit., para. 271. I would adjudge that accountants in the course of doing their ordinary professional work of producing and auditing accounts, advising on financial problems, and carrying on negotiations with the Inland Revenue in relation to both taxation and rating have at least a particular lien over any books of account, files and papers which their clients delivered to them and also over any documents which have come into their vossession in the course of acting as the1r clients' agents in the course of their ordinary peofessional work. Accountants may enjoy a wider lien than this; but I find it unnecessary for the purposes of this appeal to say more than JT have." With on In that case, the Court of Appeal gave leave Eto the plaintie€f to inspect the documents over which the defendant claimed a lien. Counsel referred also to In ce Gleebs Pty. Ltd. (in liquidation) £19332 V.L.R. 293 where Mann A.C.J. expressed a much narrower view of the nature of the lien that could be claimed by an accountant. Normally, it would appear that any lien would he limited to documents of the client of the accountant upon which the accountant had performed work. In the present case however, it is mot necessary for me to determine this question. On the application of the views expressed by Lawton L.J., in my opinion Mr. Randle has not established a lien over any of the documents produced. Mr. Randle is claiming the lien. He does not know which, 1f any, of the documents produced are documents owned by Jet Corporation. The working papers, quite clearly, are not the property of Jet Corporation and thus cannot be the subject of any lien. There is no evidence to prove the existence of a Lien over any of the documents produced. Tt is for these reasons that the Court made the I certify that this and the Nine (9) preceding pages are a true copy of the Reasons for Judgment herein of the Honourable Mr. Justice Northrop. Sans hoy Associate Date: 12 August 1985