New South Wales Supreme Court CITATION : Travel Compensation Fund v Blair & Ors [2002] NSWSC 1228 CURRENT JURISDICTION: Equity Division Commercial List FILE NUMBER(S) : SC 50175/02; 50176/02; 50177/02; 50178/02; 50179/02; 50180/02; 50181/02; 50182/02; 50183/02 HEARING DATE(S) : 5 December 2002 JUDGMENT DATE : 20 December 2002 Travel Compensation Fund (Pltf) John Harvey Blair (1D) PARTIES : George Frazis (2D) Scott David Roworth (3D) Gary Kenneth Toomey (4D) JUDGMENT OF : McClellan J R McColl SC/I Mescher (Pltf) A J Meagher SC/P R Whitford (1D) COUNSEL : S Donaldson SC/R Butler (2 & 3D) S D Rares SC/M Speakman (4D) A Vincent (ASIC) M Clifton (Air New Zealand) Minter Ellison (Pltf) SOLICITORS : Corrs Chambers Westgarth (1D) Deacons (2 & 3D) Henry Davis York (4D) CATCHWORDS : SUBPOENAE - documents held by ASIC including transcripts of interviews of directors within the Ansett Group - whether in relation to a claim under the Travel Agents Act 1986 the subpoenae should be set aside - Part 37 Rule 8 - "sufficient interest" - "fishing" - abuse of powers LEGISLATION CITED : Travel Agents Act 1986 (NSW) ss 40(3); 40(4) ASIC Act 2001 s 25 Botany Bay Instrumentation & Control Pty Ltd v Stewart [1984] 3 NSWLR 98 Compsyd Pty Limited v Streamline Travel Services Pty Limited (1987) 10 NSWLR 648 Fried & Ors v National Australia Bank (2000) 175 ALR 194 Brand v Digi-Tech (Australia) Ltd (2001) NSWSC 25 CASES CITED : The Commissioner for Railways v Small (1938) 38 SR(NSW) 564 Newcastle City Council v Kern Land Pty Ltd & Anor, unreported, NSWSC, 9 December 1996 Schutt v Queenan [2000] NSWCA 341 NSW Commissioner of Police v Tuxford & Ors [2002] NSWCA 139 Attorney General for Stuart (1994) 34 NSWLR 667 Lakatoi Universal Pty Limited & Ors v Walker, unreported, NSWSC, 31 July 1998 DECISION : See para 31 THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST McCLELLAN J FRIDAY 20 DECEMBER 2002 50175/02; 50176/02; 50177/02; 50178/02; 50179/02; 50180/02; 50181/02; 50182/02; 50183/02 - TRAVEL COMPENSATION FUND v BLAIR & ORS JUDGMENT 1 McCLELLAN J: There are presently nine proceedings before the court in which the Travel Compensation Fund ("the Fund") seeks to recover monies from the defendants pursuant to the Travel Agents Act 1986 (NSW) or its equivalent in other states. The nine proceedings have been carefully chosen as "test cases". Other proceedings were commenced before the test cases and there are potentially thousands more cases. The defendants were directors of either Ansett Australia Limited or Traveland Pty Limited which were both part of the Ansett group of companies. 2 The Ansett group failed leaving many people, who had paid monies to Ansett or Traveland, without their anticipated travel or accommodation. 3 The Fund has already compensated many persons who had booked and paid for travel and accommodation before the collapse. It has commenced proceedings in accordance with the provisions of ss 40(3) and 40(4) of the Act. Where a payment is made to a claimant under the compensation scheme by reason of an act or omission by a person carrying on business as a travel agent, the compensation scheme trustees are subrogated to the rights of the claimant in relation to the act or omission. The rights are enforceable against a body corporate and each of its directors at the time of the alleged act or omission. It is alleged that the defendants were directors of Ansett and Traveland at the relevant time. 4 The scheme of the legislation is not without significance. In 1986 the States agreed to participate in a cooperative scheme for the regulation of travel agents and the protection of their clients. An agreement, known as the Participation Agreement, was executed. A "Trust Deed" was drawn up, which provides for a "Fund" known as the "Travel Compensation Fund", and allows for the payment of compensation from the Fund to persons who suffer loss by reason of the actions of a travel agent. 5 Under the relevant legislation, if a claim is made on the Fund and met by the trustees, the Fund is subrogated to the rights of the person who has received a benefit. The Fund may pursue the directors of any travel agent company personally. Defences are available to the directors which include a lack of knowledge of relevant circumstances (s 40(5)). Lack of knowledge has been pleaded in the test cases. 6 Before the test cases were identified and commenced, the Fund issued subpoenae in the proceedings which had, by then, been commenced seeking the production of documents by the Australian Securities and Investment Commission ("ASIC"). The Schedule to the subpoenae reads as follows: "The transcript of interviews, evidence or statements made or given by each of the following persons during any Australian Securities and Investment Commission hearing or proceeding of whatever nature in connection with Traveland Pty Ltd ACN 000 240 746 ("Traveland") or any related company on or after 14 September 2001: (a) John Harvey Blair (b) Pamela Jean Catty (c) John Anthony Dell (d) George Frazis (e) Gary Robert Kingshott (f) Andrew Baxter Miller (g) Scott David Roworth (h) Gary Kenneth Toomey (i) Wayne Alan Walker (j) Sean Gould Williams Any documents put to, shown to or produced by the persons listed in paragraph 1 above in the course of the hearing or proceedings referred to in paragraph 1 above, and in particular: (a) all minutes of meetings of directors of Traveland or any related company in the period between 1 January 2000 and 14 September 2001 ("the relevant period"); and (b) all board papers and financial records of Traveland or any related company for the relevant period." 7 The subpoenae with respect to the Ansett matter is in the same terms. 8 ASIC responded to the subpoenae and produced documents to the court. The defendants indicated, at an early stage, that they would resist the Fund having access to the documents. However, the matter was deferred and left for decision when the test cases had been identified and the pleadings in relation to them closed. This has now occurred. 9 In order to provide an effective structure for the debate the Fund has issued new subpoenae in the test cases in the same terms as the originals. The defendants move to set those subpoenae aside. 10 ASIC is content to answer the subpoenae provided the confidentiality of the documents is adequately protected, and seeks to make no further submissions. Counsel appeared for Air New Zealand and sought leave to be heard on the motion. I granted that leave, Air New Zealand agreeing that it would be bound by any costs order. 11 As presently pleaded the case against the defendants appears to have the following elements: 1. It is alleged that the particular claimant(s) (being claimants on the Fund) entered into an agreement with Ansett (or Traveland as the case may be) whereby Ansett agreed to provide certain travel or travel related arrangements. 2. It is alleged that it was an express term of the agreement that Ansett would make all necessary bookings, confirmations, reservations and payments on behalf of the claimant(s), provide the claimant(s) with valid tickets or vouchers that could be used by the claimant(s) and, in relation to travel, would arrange for the appropriate conveyance to be provided to enable the claimant(s) to travel. 3. It is alleged that there were implied terms of the agreement to the effect that: if Ansett was unable to provide the travel or travel related arrangements any money received from the claimant(s) would be refunded; and, Ansett would hold money received from the claimant(s) on account for the claimant(s) and would take reasonable steps to safeguard that money. 4. It is alleged that the claimant(s) paid money to Ansett. 5. It is alleged that Ansett provided to the claimants an itinerary and vouchers. 6. It is alleged that Ansett is in breach of the agreement by failing to make all necessary bookings, confirmations etc and/or failing to safeguard the money paid by the claimant(s) to Ansett. 7. It is alleged that as a result of the breaches of the agreement the claimant(s) suffered loss and damage. 8. Relying solely upon the matters pleaded in connection with the contractual claim, it is alleged that the money paid by the claimant(s) to Ansett was money had and received by Ansett to the use of the claimant(s). 9. It is alleged that the claimant(s) made a claim on the Travel Compensation Scheme and that money has been and/or will be paid to the claimant(s) under that scheme. 10. It is alleged that the breaches of the agreement pleaded constituted an act or omission within the meaning of s 40(3) of the Travel Agents Act 1986 (NSW) (or its interstate equivalent), or otherwise led to a failure to account within the meaning of cl 15.1 of the Trust Deed. 11. In substance, the defendants deny the agreements pleaded in each proceeding, deny breaches of the agreements and deny any entitlement in the Fund to the sums claimed in each proceeding. In relation to some defendants, it is also alleged that if there was any failure to account, it did not occur at a time he was a director and occurred without his knowledge or consent. Standing 12 Part 37 Rule 8 of the Supreme Court Rules provides that the court may set aside a subpoena "of its own motion or on the motion of any person having sufficient interest". The rule has been considered on many occasions and the meaning of "sufficient interest" is attended by some controversy: see Botany Bay Instrumentation & Control Pty Ltd v Stewart [1984] 3 NSWLR 98; Compsyd Pty Limited v Streamline Travel Services Pty Limited (1987) 10 NSWLR 648; Fried & Ors v National Australia Bank (2000) 175 ALR 194; Brand v Digi-Tech (Australia) Ltd [2001] NSWSC 425. I share the views expressed by Hunter J in Brand. Any attempt to define "sufficient interest" is likely to prove difficult and, because of the overriding power of the court, of little utility. 13 In the present matter, the primary material sought in the subpoenae is comprised of the transcript of interviews conducted with the identified persons, who were at various times, directors of companies with the Ansett Group. The evidence discloses that Frazis and Roworth were interviewed following the exercise of ASIC's coercive powers. I infer that others of the Directors may have been interviewed. The other material sought in the subpoenae is of significance only because of any interview which has been conducted. 14 If it was necessary to reach a conclusion in the matter I would be satisfied that each of the defendants had a sufficient interest. The interviews were apparently conducted by ASIC using its coercive powers and presumably sought information in relation to the actions of the directors interviewed and others who were directors at the relevant time. If nothing else the directors would be legitimately concerned to maintain the confidentiality of the material. 15 In any event, for the reasons set out below, I am satisfied that this is a matter where it is appropriate for the court to intervene. The nature of the ASIC investigation and requests made by the Fund 16 Evidence has been tendered on this motion. It reveals that ASIC has been concerned to investigate only two aspects of the collapse of the Ansett group. On 14 September 2001 an investigation was commenced which was concluded by 1 March 2002. On that day ASIC issued a press release and stated: "ASIC has now reached the view that, based on the evidence currently available, there is no realistic prospect for successfully prosecuting the directors of Ansett for breach of their general duties of care under the Corporations Act or for insolvent trading. This view is confirmed by Senior Counsel." 17 The investigation of general matters being concluded ASIC apparently turned its attention to other matters. The press release went on to state: "ASIC's attention is now focused on the adequacy of disclosures made to the market by AIZ regarding its financial position in the period prior to 12 September 2001. The Commission believes that, depending on the outcome of further enquiries, the public interest may be served by the commencement of a representative action for damages against AIZ in relation to the level of its financial disclosures." 18 By March 2002 the Fund, through its lawyers, had become interested in ASIC's investigation. It asked for access to transcripts and documents pursuant to s 25 of the ASIC Act 2001. This was not given. In a letter dated 10 May 2002 ASIC indicated that it had "not conducted any compulsory interviews on the directors of either of the companies being Traveland Pty Ltd or Ansett Australia Limited". 19 It is plain from a solicitor's file note of 13 May 2002, which was tendered in evidence, that at that date the Fund had no knowledge of the persons ASIC had interviewed and, of course, no idea whether anything of relevance to the current proceedings was ever discussed. It would appear that, but for the fact that it is aware that Messrs Roworth and Frazis have been summonsed to appear, the Fund is in the same position today. Relevant principles 20 The principles to be applied in the present circumstances are well known. (The Commissioner for Railways v Small (1938) 38 SR(NSW) at 564). A subpoena may not be used by a party to litigation for the purpose of fishing ie "endeavouring not to obtain evidence to support his case, but to discover whether he has a case at all." (p 575). This principle requires careful consideration depending on the circumstances. In particular, a subpoena is less likely to be set aside if the information which it seeks is exclusive to the other party. Newcastle City Council v Kern Land Pty Ltd & Anor, NSWSC, unreported, 9 December 1996, McLelland CJ in Eq, and Schutt v Queenan [2000] NSWCA 341, Mason P para 14. 21 In NSW Commissioner of Police v Tuxford & Ors, [2002] NSWCA 139, Brownie AJA said: "… it is plain beyond argument that, if documents are produced on subpoena, and objection is taken to their being inspected, inspection should not be permitted unless and until the party who procured the issue of the subpoena identifies a legitimate forensic purpose. In that context it is said that a party is not entitled to go on a fishing expedition, nor should the court do so: Small at 575; R v Saleam (1989) 16 NSWLR 14 at 17-18; and Attorney General for New South Wales v Stuart (1994) 34 NSWLR 667 at 681. See too Air Canada v Secretary for State for Trade [1983] 2 AC 394 at 439 and 453 and Alister v The Queen (1984) 154 CLR 404 at 414. In Principal Registrar of the Supreme Court v Ali Tastan (1994) 74 A Crim R 498, Barr AJ, as he then was, said: 'It is the duty of the Court, where the issue is raised, to require the party calling on a subpoena to produce documents to identify expressly and precisely the legitimate forensic purpose for which access to documents is sought and to refuse access unless such an identification is made." p 504 22 Later his honour said: "In the language of Jordan CJ in Small at 575, the opponents were not entitled to procure the issue of the subpoena for the purpose of fishing, that is, endeavouring not to obtain evidence to support their case, but to discover whether they had a case at all, or to discover the nature of the case of the defendant. In the language of Lord Wilberforce in Air Canada at 439 there must be something beyond speculation, some common ground for belief that takes the case beyond a mere fishing expedition." 23 The party issuing the subpoena must be able to show that it is "on the cards" that the documents will bear on and have relevance to the issues in the case: Attorney General for New South Wales v Stuart (1994) 34 NSWLR 667. 24 It is submitted by the Fund that special care should be exercised when, as here, the party to whom the subpoena is addressed does not resist the documents being made available for inspection by the Fund. 25 In Lakatoi Universal Pty Limited & Ors v Walker, NSWSC, unreported, 31 July 1998, Rolfe J, his Honour said: "In so far as documents have been produced in the present case by strangers without objection or any claim for privilege, and no assertion has been made that they should not be inspected, the question arises as to why, in the exercise of my discretion, I should not allow the plaintiffs to inspect them. In having regard to the fact that the documents were produced in the manner to which I have referred and without any restriction asserted in relation to inspection, I consider it relevant to bear in mind that they were produced by parties well able to determine, or to obtain legal advice to enable them to determine, whether it was appropriate, in all the circumstances, for them to answer the subpoenas. In some cases, particularly where documents are produced at the hearing to the Court, the circumstances in which they are produced may cause a Judge to consider whether they should be made available for inspection and, from my experience, when such circumstances manifest themselves further enquiry is made of the producing party to ensure that he or she understands that if the documents are produced then, generally speaking without more, they will be made available to the parties for inspection. Provided the Court is satisfied that the subpoenaed party understands that and takes no objection to the parties to the litigation looking at his or her documents, access is usually granted. I say 'usually' because it will appear either from the face of the subpoena that the documents are clearly relevant, in the sense to which I shall refer in a moment, or, alternatively, it is inappropriate at that stage of the hearing for a Judge to be making any concluded ruling on relevance: Dubbo Base Hospital v Jones [1979] 1 NSWLR 225. It is often difficult to make that determination at the commencement or soon after the commencement of a trial, notwithstanding that at that stage, particularly in matters in the Commercial list, the Judge will have a good appreciation of the issues. It is even more difficult to do so before the commencement of the hearing when the matter is still in the interlocutory stage. In determining the question of relevance the Court must bear in mind that the parties are entitled to build up an evidentiary mosaic. Generally that cannot be done, particularly in complicated commercial litigation, by the tender of one piece of evidence or the assertion that only limited material is relevant to the issues involved. Particularly is that so when one must have regard to the desirability of as full a cross-examination as possible, assisted by the availability of documents which will aid that. Both as to issues and the issue of credit the Court should not be astute to find irrelevance at any early stage of the proceedings, especially when, as Clarke J pointed out, the production of documents pursuant to a subpoena may lead to, inter alia, legitimate amendments to the pleadings. I think it is necessary to distinguish between the utilisation of subpoenaed material to permit amendments to increase the scope of an existing sustainable action, on the one hand, and discovery before suit to determine whether there is a right of action, on the other. In my opinion, it is not correct to characterise the subpoenas here in issue as seeking discovery before suit." 26 The present case is not the usual case where the documents of a third party are subpoenaed. In the present case, as I have indicated, the documents will either have been acquired under compulsion or created pursuant to an interview conducted by ASIC exercising its statutory powers. No doubt s 25 of the ASIC Act gives an indication that material which ASIC collects, may in its discretion, be made available to others to use in legal proceedings. However, ASIC has declined to meet the request for documents under the section and accordingly the subpoena process has been pursued by the Fund. Legitimate forensic purpose 27 Senior counsel for the Fund was asked to identify the purpose for which access to the documents was sought in this case. Her response was twofold: "In these terms: that the plaintiff is entitled to have, to investigate for the purpose of preparing its case for preparation in the court, the financial circumstances in which the relevant companies collapsed and that in the course of those investigations it is entitled to have regard to the financial circumstances of companies in the corporate group of which Ansett Australia and Traveland formed part. Those financial circumstances clearly led to the failure to provide the relevant consumers with the services which they had sought to procure through either the services of Ansett Australia or Traveland, as set out in each of the individual summonses. Then there's another purpose and the other purpose is to deal with the issue of the state of knowledge of the directors of the financial circumstances of these companies, having regard particularly to the defences which have now been pleaded of lack of knowledge and we say we're entitled to look at documents which the evidence indicates we will be reasonably entitled to inspect and expect will include information concerning those directors' knowledge of the financial circumstances of the relevant companies and that's apparent from the press release and the fact ASIC investigated the issue of insolvent trading." 28 Senior counsel explained that those matters were relevant to the following issues in the proceedings: (a) dealing inappropriately with moneys paid by claimants to Ansett/Traveland; (b) not providing the travel or travel-related arrangements; (c) failing to establish a trust account; (d) failing to refund moneys; (e) dealing inappropriately with moneys by not passing them on or using the moneys on its own account; (f) failing to safeguard and preserve moneys by not maintaining sufficient funds; (g) failing to safeguard the moneys by not segregating the moneys from its own funds; (h) failing to honour vouchers and providing travel arrangements as promised. Conclusion 29 In my opinion the subpoenae should be set aside. I have not been asked to examine the documents and have not done so. However, it seems to me that whether or not the subpoenae will bring forth material of relevance to the Fund's case is entirely speculative. The following matters are relevant to this conclusion: · It is necessary to bear in mind the limited basis upon which the Fund can pursue its claims. It may only recover in relation to transactions between customers and travel agents. Any contract between a customer and Ansett, as a carrier, is not underwritten by the Fund. Furthermore, it may only recover where there has been a failure to account by the agent. · Although senior counsel for the Fund advances as the legitimate forensic purpose the investigation of "the financial circumstances in which the relevant companies collapsed," I believe this is too broad. The forensic purpose must be confined to the issues in the proceedings as identified by the Fund and to which I have referred. This does not involve an understanding of the financial circumstances in which the Ansett Group collapsed, even if that matter has been the subject of an ASIC investigation which, in a general sense, I doubt. Rather, the present proceedings are concerned with the manner in which companies in the Ansett Group, acting as a travel agent, conducted their affairs. · The defence of "lack of knowledge" is pleaded by the defendants in response only to the Fund's claim. It is truly a defence, and no part of the Fund's case: see Tuxford. · When the subpoenae were issued the solicitors for the Fund were aware that only two of the named persons – Messrs Roworth and Frazis - had been interviewed by ASIC, and that occurred after May 2001. · During the period up to May 2001 when ASIC was conducting an inquiry in relation to the directors' duties under the Corporations Act or for insolvent trading no statutory interviews were conducted. · After May ASIC's inquiries were confined to an examination of market disclosures, a matter not relevant to the present proceedings. 30 It may be, as some of the defendants accept, that subpoenae might be issued to ASIC which would withstand challenge. Whether they would bring forward any relevant documents is another matter. However, that is a matter for consideration should it ever arise. 31 The order of the court is that the subpoenae are set aside. The Fund must pay the defendants' costs of the motions. 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