New South Wales Supreme Court CITATION : Foyster v Foyster Holdings [2002] NSWSC 959 CURRENT JURISDICTION: Equity Division Corporations List FILE NUMBER(S) : SC 2806/02 HEARING DATE(S) : 08/10/02 JUDGMENT DATE : 16 October 2002 David Lloyd Foyster - Plaintiff PARTIES : Peter William Hopkins - Fifth Defendant Hopkins Professional Services Pty Limited - Sixth Defendant JUDGMENT OF : Barrett J COUNSEL : Mr M B Evans - Plaintiff Ms K Williams - Fifth and Sixth Defendants SOLICITORS : Kings Lawyers - Plaintiff Phillips Fox - Fifth and Sixth Defendants CATCHWORDS : PROCEDURE - notice to produce - whether oppressive - whether impermissible substitute for discovery Commissioner of Police v Tuxford [2002] NSWCA 139 CASES CITED : Commissioner for Railways v Small (1938) 38 SR (NSW) 564 Foyster v Foyster Holdings Pty Ltd [2002] NSWSC 722 National Employers' Mutual General Association Ltd v Waind and Hill [1978] 1 NSWLR 372 DECISION : Notices to produce set aside - 2 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J WEDNESDAY, 16 OCTOBER 2002 2806/02 – FOYSTER v FOYSTER HOLDINGS PTY LIMITED & ORS JUDGMENT 1 By notice of motion filed on 12 June 2002, the fifth and sixth defendants seek an order that the notices to produce documents dated 24 May 2002 and served on them by the plaintiff be set aside. 2 The two notices to produce are substantially the same. Each seeks production of: "All documents, papers, computer records and other things representing communications or records of communications (being letters, file notes, facsimile transmissions, reports, emails, notes of conversations, etc) between you to the following persons, and from the following persons to you or otherwise in your possession, relating to the King Island prospect for the period 9 May 2000 to date." There follows, in each case, a list of names. The lists are the same in both notices, save that, in the case of the notice served on the sixth defendant (a company), the list includes the fifth defendant (an individual). There are 14 names in one case and 15 in the other. 3 The fifth and sixth defendants advance two basic arguments: first, that the notices are so broad and unfocussed as to be oppressive; and, second, that they represent an impermissible attempt at a substitute for discovery. 4 Under the first of these headings, the applicants point first to the undefined expression "King Island prospect" which, they say, entirely lacks meaning and therefore makes each notice unintelligible. However, it is conceded that "King Island prospect" is defined in paragraph 3 of the plaintiff's points of claim filed on 21 May 2002 and I consider that anyone reading the notices to produce in the whole of their context would conclude that they referred to subject matter so defined in the points of claim. But even then, the problem of uncertainty is not resolved; it is compounded. This is because of the way in which "King Island prospect" is defined in the points of claim. Paragraph 3 reads as follows: "In the course of these searches and enquires the plaintiff and LF identified a mineral sands deposit on King Island which was then subject to retention licences or mining tenements then held by Peko-Wallsend Operations Limited (the 'Peko tenements') together with areas offshore in Sea Elephant Bay adjacent to the Peko tenements of significant potential value hereafter referred to collectively as the 'King Island prospect' or ' KIP '. 5 The words "hereafter referred to collectively as the 'King Island prospect'" may refer to one of two things: either the "areas offshore" mentioned after "together with" or those areas plus the "mineral sands deposit" mentioned earlier. Perhaps the construction most likely to have been intended by the plaintiff in framing his points of claim as he did is the second, although even then, there is doubt, I think, as to whether the "King Island prospect" is confined to a physical location or part of the earth's surface ("mineral sands deposit on King Island" and/or "areas offshore in Sea Elephant Bay") or includes, in relation to the "mineral sands deposit on King Island" (but not, it seems, "areas offshore in Sea Elephant Bay"), legal rights consisting of or arising from the mining tenements mentioned. 6 In light of the uncertainties arising from this drafting, the applicants are, in my judgment, entitled to have the notices to produce set aside. The guiding principle, in this respect, was recently re-affirmed by the Court of Appeal in the analogous case of subpoenas in Commissioner of Police v Tuxford [2002] NSWCA 139. It is there emphasised that a party served with a subpoena should not be expected to read it down (indeed, must not) in a way he or she thinks sensible and likewise that the issuing party cannot say how it is to be interpreted. It must speak clearly for itself: "In the ordinary course of events, a subpoena is a peremptory order of a court, to be obeyed unless the court makes an order to the contrary. It should be framed in terms of sufficient precision and certainty, to enable the recipient to know what he or she must produce, and to enable the court to give a just ruling, if there is to be a suggestion that the recipient should be punished for failing to produce all of the documents called for." 7 Given the compulsion arising from Part 36 rule 16 of the Supreme Court Rules in relation to a notice to produce, the principles thus outlined in relation to subpoenas should be applied here. 8 I nevertheless move on to the applicants' second objection which is that the documents sought do not bear any clearly discernible relationship to what are likely to be the issues in the proceedings. It is to be noted, in that respect, that the pleadings have not yet closed. So far as the applicants (fifth and sixth defendants) are concerned the originating process filed on 21 May 2002 appears to raise the following issues: (a) whether they, or either of them, breached s.595 of the Corporations Act 2001 (Cth) by giving, agreeing to give or offering to give valuable consideration with a view to securing the appointment of a provisional liquidator of the first defendant; (b) whether the fifth defendant should be removed as a director of the first defendant; (c) whether certain agreements among shareholders of the fourth defendant should be declared void; (d) whether the fifth defendant breached fiduciary duties owed by him to the plaintiff; (e) whether the fifth defendant breached duties owed by him as a director of the fourth defendant. 9 It is said by the applicants that communications between, on the one hand, the fifth and sixth defendants and, on the other, the nominated other persons concerning the "King Island prospect" (according to any of its possible meanings) do not bear any obvious relevance to any of these issues. On this basis, it is said, the notices to produce are being used impermissibly as a substitute for discovery which should be undertaken in the ordinary way once the issues have been delineated. 10 The plaintiff says, in response, that on 21 May 2002, Austin J granted leave to the plaintiff to issue notices to produce to the third, fourth and fifth defendants. Such leave was among several orders made on 21 May 2002 upon the application of the plaintiff made ex parte. The fifth and sixth defendants point out that the leave was granted at a time when various interlocutory orders were sought and that the proceedings have now, as it were, settled down, with certain aspects having perhaps taken on a different complexion because of the judgment of Burchett AJ in Foyster v Foyster Holdings Pty Ltd [2002] NSWSC 722, added to which the leave granted by Austin J did not specify or sanction any form of notice to produce and cannot be taken in any sense to have authorised the forms of the notices actually served. 11 It seems to me that no particular weight should be attached to the grant of leave made ex parte when the matter first came before the court. The real issue is whether, as things stand now, the notices to produce represent an impermissible substitute for discovery. The applicable test, derived from Commissioner for Railways v Small (1938) 38 SR (NSW) 564, emerges from the following passage in the judgment of Moffitt P in National Employers' Mutual General Association Ltd v Waind and Hill [1978] 1 NSWLR 372 at 382: "Such a case [i.e., a case where a person to whom a subpoena is addressed may seek to have it set aside as an abuse of process] is where the subpoena is used for the purpose of discovery. The essential feature of discovery in this connection, as appears from Burchard's case and Small's case is that the person to whom the subpoena is addressed will have to make a judgment as to which of his documents relate to issues between the parties. It is oppressive to place upon a stranger the obligation to form a judgment as to what is relevant to the issue joined in a proceeding, to which he is not a party. Hence it is an abuse of the use of a subpoena to impose this obligation. It follows that it is an abuse to use any subpoena, i.e. even to a party to obtain discovery. This was the reasoning in Small's case. Of course, discovery as such is otherwise available to a party. It follows that a subpoena can only properly be used for the production of documents described in particular or general terms which does not involve the making of such a judgment. " 12 In the present context, I consider that each notice to produce does involve for the defendant to whom it is addressed a task of seeking to guess, as it were, what the underlying issue may be. It is true, as the plaintiff submits, that all issues are related in some way to the affairs of the fourth defendant and that its activities are centred on mineral sands at King Island. But beyond that there does not seem to me to be anything linking the documents sought with the issues in the case. The appropriate way for the material the plaintiff wishes to have to be elicited is through discovery once the issues in the proceedings have been sufficiently defined by the pleadings. There is thus a second ground on which the notices to produce should be set aside. 13 I have not so far mentioned a letter from the plaintiff's solicitors to the solicitors for the fifth and sixth defendants dated 19 June 2002, that is, a week after the filing of the notice of motion with which I am now dealing. The letter referred to the notice of motion and continued: "We would appreciate it if you could identify the grounds upon which you are making the application. If your client takes the view that the Notices are oppressive in their operation we would appreciate it if you could identify the nature of the complaint, so that we might consider reduction of their scope, bearing in mind of course that as a party to the proceedings your client would be subject to the Supreme Court rules regarding discovery. We await your reply in relation to the above." 14 There was no written response to that letter but the plaintiff did thereafter foreshadow the possibility of seeking orders for discovery. That, to my mind, will be the appropriate course. 15 It seems to me that if the fifth and sixth defendants had taken up the invitation in the letter of 19 June 2002, there may well have emerged some agreed outcome which would have obviated the need for the present application. I therefore propose to make no order as to the costs of the application. 16 The notices to produce documents dated 24 May 2002 served on the fifth and sixth defendants by the plaintiff are set aside. ********** Last Modified: 10/17/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.