New South Wales Supreme Court CITATION : Hexiva Pty Ltd v Lederer [2006] NSWSC 561 HEARING DATE(S) : 1 June 2006 JURISDICTION : Equity Division JUDGMENT OF : Brereton J EX TEMPORE JUDGMENT DATE : 06/01/2006 DECISION : Order for examination made, without prejudice to claims for privilege. CATCHWORDS : EVIDENCE – PROCEDURE - Subpoenas – procedure when sufficiency of compliance questioned LEGISLATION CITED : Uniform Civil Procedure Rules, Pt 33 r 12 Civil Procedure Act 2005, s 97(1)(ii) Australian Securities & Investments Commission v Southcorp Limited (2003) 46 ACSR 438 CASES CITED : Gate Gourmet Australia Pty Limited (In Liq) v Gate Gourmet Holding AG (2004) NSWSC 768 Ryder v Frohlich [2005] NSWSC 1342 Trade Practices Commission v Arnotts Limited (No 2) (1989) 21 FCR 306 Hexiva Pty Ltd (P1) Robert Wechsler (P2) PARTIES : Katie Wechsler (P3) Hexiva Pty Ltd as Trustee Katie Wechsler Family Trust (P4) Paul Lederer, Richard Slazenger & Douglas Hamiltom as Executors & Trustees of the late Andrew Lederer (D1) MIchael Du Maurier (D2) FILE NUMBER(S) : SC 2626/2000 Robert Wechsler appearing in person (Ps) COUNSEL : Ms NL Sharp (D1) Mr CD Wood (D2) Robert Wechsler appearing in person (Ps) SOLICITORS : Landerer & Co (D1) PWCoopers (D2) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BRERETON J Thursday 1 June 2006 2626/00 Hexiva Pty Limited & 3 ors v Andrew Lederer & Anor JUDGMENT (ex tempore) Re application to examine Graham Hurwitz (see p 23 of transcript) 1 HIS HONOUR: The first defendants apply for an order that Graham Hurwitz, an accountant who is to be a witness both as to fact and of expert opinion in the plaintiffs' case, attend to be examined as to his compliance with a subpoena for production of documents which has been served upon him. 2 The proceedings have been set down for hearing commencing on 25 September this year, for three weeks. The questions of liability and damages have been severed, so that the trial will proceed at this stage only as to liability. Mr Hurwitz has sworn three affidavits, which the plaintiffs have filed and served in the proceedings in support of their claim for equitable compensation, the first on 20 June 2002, attaching a report of that date; the second on 23 December 2003, attaching a report of that date; and the third on 8 September 2005, attaching a report of that date. 3 The subpoena, which was issued on 7 October 2005, requires production by Mr Hurwitz of the following documents: 1. All documents which are or concern communications between you (or people acting at your direction, under your authority or in conjunction with you) and Hexiva Pty Limited, Robert Wechsler, Katie Wechsler or Hexiva Pty Limited acting as trustee of the Katie Wechsler Family Trust ("the plaintiffs") in relation to the quantum of damages alleged to have been suffered by Hexiva Pty Limited in Supreme Court of New South Wales proceedings no. 2626 of 2000, including without limitation: a) records or discussions; b) instructions from or on behalf of the plaintiffs to you including any supporting documentations; c) requests for instructions; and d) any document which records or constitutes any advice or opinion given by you to the plaintiffs. 2. In relation to your reports annexed to your affidavits sworn on 21 January 2002, 23 December 2003 and 8 September 2005 in proceedings no. 2626 of 2000, all documents which are: a) notes, calculations and working papers prepared in connection with those reports; and b) drafts of those reports. Where the word "documents" is used in the categories described above, it means any record of information and includes: a) a letter, facsimile, memorandum, note or email; b) anything on which there is writing; c) anything on which there are marks, symbols or perforations having a meaning to persons qualified to interpret them; d) anything from which sounds, images or writing can be responded with or without the aid of anything else; e) a plan or drawing; f) computer disks and files; g) originals, drafts and copies; h) electronic or electronically stored documents; i) any attachment or enclosures to any of the above. 4 The subpoena was first returnable on 20 October 2005. Mr Hurwitz was not in a position to comply with the subpoena at that stage and did not attend, and the subpoena was adjourned for seven days to 27 October 2005. On 27 October, documents were produced on behalf of Mr Hurwitz in three packets. Privilege was claimed in respect of one of those packets. The subpoena was adjourned to 8 November 2005, pending the provision of affidavits in support of the claim for privilege which had been made. There is now no dispute as to that claim for privilege. 5 By 8 November, the first defendants' representatives had inspected the documents so far produced, and had formed doubts as to the completeness of the production which had taken place. When the subpoena came back before the court on that day, Mr Hurwitz was in attendance in response to a request that he attend to be examined as to his compliance. Counsel for the first defendants applied to have him called and examined on that issue, but the deputy registrar apparently declined to do so, suggesting, for reasons which are not immediately apparent to me, that any such application had to be made by notice of notion. 6 The deputy registrar then purported to adjourn the subpoena until the return date of a notice of motion, which counsel foreshadowed would be, but had not yet been, filed, for the examination of Mr Hurwitz. While this "adjournment" was apparently at the request of counsel for the first defendants, it must be observed that it is doubtful that a subpoena can be adjourned in such a way, other than to a fixed date. Nonetheless, nothing turns on this, because the present application is brought by a separate notice of motion on which the order for examination can be made, whether or not the subpoena has been adjourned. 7 Also on 8 November 2005, the solicitors for the first defendants wrote to Mr Hurwitz, expressing concern that he had not fully answered the subpoena, seeking his advice as to whether he held any further documents falling within the scope of the subpoena, and foreshadowing that if he did not respond, a notice of motion seeking a direction that he attend to be examined would be filed. Mr Hurwitz responded by a letter of 14 November 2005, in which he said that files had been obtained from offsite archives and additional documents within the scope of the subpoena identified, which would be lodged in the Registry that day. Access was subsequently granted to those documents. 8 The present notice of motion was filed on 17 March 2006. It was first returnable before the court on 23 March 2006, when an aspect of it which does not concern Mr Hurwitz was dealt with. Relevantly, it claims an order as follows: Mr Graham Hurwitz appear before the Court to be examined on oath or on affirmation by the First Defendant on the extent of his compliance with a subpoena for production issued on 7 October 2005 and served upon him on 11 October 2005. 9 The motion also seeks costs. 10 The evidence establishes that the motion and the supporting affidavit of Ms Bojanac was delivered by courier to Mr Hurwitz on 22 March 2006, only one day before its return date, and it was for that reason that Ms Sharp did not endeavour to proceed on the motion as against Mr Hurwitz on 23 March, when so much of the motion as relates to Mr Hurwitz was adjourned to today, and the subpoena, to the extent that it remained before the court, was also adjourned to today. By letter dated 23 March 2006 - and I infer sent by facsimile to Mr Hurwitz that day - the solicitors for the first defendants reminded him that the subpoena had been stood over to 23 March, and that the motion had also been returnable that day, when there had been no appearance on his behalf. The letter informed Mr Hurwitz that orders had been made standing over the subpoena and the motion to 1 June 2006 at 9.30am, and concluded by seeking his confirmation whether he would be appearing on that occasion. 11 There is no evidence of any response from Mr Hurwitz. However, Dr Wechsler, who is conducting the matter on behalf of the plaintiffs, has informed the court that two evenings ago he had a conversation with Mr Hurwitz, in which Mr Hurwitz indicated that he was not aware of any requirement that he attend the court today. It is nonetheless clear that, one way or another, and probably in at least two ways - namely, the letter from Landerer & Co of 23 March and his conversation with Dr Wechsler of a couple of evenings ago - Mr Hurwitz is at least aware that the matter is before the court today. 12 Of course, failure to comply with a subpoena for production is a contempt of court and may be dealt with as such: Uniform Civil Procedure Rules 2005 (NSW), r 33.12. Independently of dealing with a non-compliance with a subpoena as a contempt, the court may compel compliance by an arrest warrant pursuant to Civil Procedure Act 2005 (NSW), s 97(1)(ii). At least at this stage, neither of those applications is made in this case. 13 Civil Procedure Act, s 68, provides that subject to rules of the court, the court may, by subpoena or otherwise, order any person to, inter alia, attend court to be examined as a witness. 14 The law relating to the procedure to be followed when a party who has issued and served a subpoena for production wishes to test the sufficiency of compliance with that subpoena was discussed by Beaumont J in Trade Practices Commission v Arnotts Limited (No 2) (1989) 21 FCR 306. His Honour referred to what had been written by Moffitt J in H H Glass, Seminars on Evidence (1970) (at 10-11). Moffitt J, in that extrajudicial writing, observed that there seemed no reason why the court should not have a discretion to ask of a person, who was required to produce documents on subpoena, questions to ascertain the sufficiency of compliance, either informally or on oath. He continued: In exercising such a discretion, the court would not infringe the privilege of a person not to incriminate himself, having regard to the fact that deliberate non compliance with a subpoena is a contempt of court with penal consequences ... Any such discretion could not extend as far as conducting a discovery process ... The precise limits of questions of a person subpoenaed to produce documents are debatable, but it seems that a judge could ask and possibly permit to be asked, questions informally or on oath to ensure that the party understood the terms of the subpoena and the documents referred to and his obligation thereunder, including his obligation regarding documents in his possession or power and relating to search ... It would seem, however, that questions could not extend to establishing proof that the person was in contempt of court, nor could they be of the search and inquiry type such as to the person's knowledge as to the location of documents not in his present possession or control, or as to the nature of other documents in his possession not within the scope of the subpoena, or as to his system of books or the like, so that this material could be used to search for other evidence or to enable a different subpoena to be framed. 15 In Arnotts, Beaumont J concluded that, an issue having arisen as to whether or not documents of the type called for by the subpoena in question existed, the appropriate method to be adopted for the determination of that adjectival issue was a matter of judicial discretion. His Honour concluded that the appropriate course in that case was that the witness who had been subpoenaed to produce documents should be sworn, not in the substantive proceedings but in the ancillary application for production of documents pursuant to the subpoena; that that witness should then be examined by counsel for the party calling on the subpoena (implicitly in chief, by non-leading questions, albeit that the witness was the proper officer of Mattingly, the opposing party in the litigation); that counsel for the party with whom the witness was aligned might then also examine the witness; and that those directions were without prejudice to any claim for privilege against self-incrimination which might be made in the course of the examination and also without prejudice to any claim of confidentiality, and on the basis that none of the evidence so given was to be evidence in the principal proceedings or in proceedings in which it might be alleged that there had been a failure to comply with the subpoena. In that way, his Honour sought to preserve a fair balance between permitting Arnotts, who had issued the subpoena, to pursue their inquiries as to the existence of the documents sought, without depriving Mattingly, on the other hand, of its rights to claim privilege in a proper case. His Honour observed that Arnotts may not be able to pursue their inquiries exhaustively, but, on the other hand, Mattingly would have to make out a proper foundation for any claim for privilege. 16 It is worth observing at this stage that Arnotts was a case in which, when a paragraph of a subpoena for production served on Mattingly was called on, Mattingly's officer proper answered that there were no documents to produce in answer to that paragraph of the subpoena. It was not a case in which there had been some production. 17 The first defendants submit that they have reasonable cause for wishing to test the sufficiency of Mr Hurwitz' compliance with the subpoena for production, for a number of reasons. 18 As a matter of context, they observe that in this case the plaintiffs are not legally represented. Without the slightest reflection adverse to Dr Wechsler, I think there is some force in that, because it simply means that the court cannot have that professional assurance which it receives from a lawyer that there has been proper performance and proper understanding of the obligations which compulsory processes such as subpoenas impose. That, the first defendants say, is reinforced by the circumstance that it is clear enough that the plaintiffs themselves, as was exposed in the proceedings on 23 March this year, misunderstood the extent of their obligation to search for and produce documents under a notice to produce, and I accept that that is so. 19 Against those matters - which are no more, really, than background - the first defendants point, first, to the absence from Mr Hurwitz' production so far of three documents which it might be expected would be in his possession, custody and power and, if so, would fall within the terms of the subpoena. Secondly, the first defendants point to the very limited material recording or evidencing communications between Mr Hurwitz and the plaintiffs when, given the extent of their relationship and the time over which it has spanned, being some six years or more from 1999 to the present, much more might be expected. Thirdly, they point to the absence of working notes and the presence of only three documents revealing calculations underlying the reports which Mr Hurwitz has produced. 20 So far as the three documents to which reference has been made are concerned, two of them are emails of 16 June 2002. I do not think that there is any doubt that they would fall within the scope of the subpoena, referring as they do to Mr Hurwitz' draft report and to schedules associated with it. On the other hand, as Dr Wechsler observes, it may well be that emails sent in June 2002 would have been deleted from the electronic record by now, and may never have been printed or placed on a hard copy file. 21 The other document is an email of 21 December 2003, which attaches two draft affidavits. At least one of those draft affidavits has been produced by Mr Hurwitz and is to be found in DX02 at section 1, tab 18; the covering email has not been produced, and it seems likely that the second draft affidavit has not. It would be somewhat surprising if no record had been kept of that communication. 22 So far as the paucity of written instructions, notes of instructions, working notes and calculations is concerned, there may be any number of explanations. It is not clear on the evidence now before me that any further explanation has been sought of Mr Hurwitz since his further production on 14 November 2005. I have not seen in the correspondence any further letter to him seeking an explanation as to why such documents are not produced. The letters of 22 March and 23 March simply serve the motion and notify the adjournment without seeking any further explanation. On the one hand, it might be said that if there were an explanation, Mr Hurwitz could offer it in answer to the motion; but it might well be said that if the issue was to be pursued, he might have been invited to give such an explanation first - particularly given that, when Mr Hurwitz was first asked to consider the sufficiency of his production, he did undertake a further search, and identified and produced further documents. 23 Two factors weigh against making the order sought. The first, which Dr Wechsler raises, is the dubious utility of exploring this subject matter at this stage of the proceedings when the questions of liability and quantum have been severed and where the subject matter of the documents sought by the subpoena goes to Mr Hurwitz' evidence as an expert on questions of quantum rather than his evidence as a witness of fact. However, I accept that the first defendants are entitled to get on with preparing their case on the question of quantum, although it has been deferred, and I accept also that there is necessarily some overlap, particularly if questions of credit arise, as to what might be found as a result of the subpoena on quantum issues and Mr Hurwitz' evidence of fact. Nonetheless, I think the issue does adopt a lesser degree of immediacy, as a result of the severance of the issue of quantum. 24 The other issue which has exercised my mind is whether the documents are potentially privileged. There is certainly an argument that any privilege to which they are prima facie entitled may have been lost as a result of service of Mr Hurwitz' report, as explained by Lindgren J in Australian Securities & Investments Commission v Southcorp Limited (2003) 46 ACSR 438, 441 442 [21]. [See also Gate Gourmet Australia Pty Limited (In Liq) v Gate Gourmet Holding AG (2004) NSWSC 768, [28]; Ryder v Frohlich [2005] NSWSC 1342, [10]]. I am not at all sure that the hurdle has yet been cleared of showing that an inference may be drawn that any of the documents in question were used in a way that could be said to influence the content of the report so as to ground an implied waiver of privilege, but I accept that that is an issue for consideration at a later stage, after the documents have been produced, when access is sought, and that a sufficient case has been made out that I should not decline as a matter of discretion to make the order sought now for that reason. 25 Although I think this is a marginal case, I have concluded that, in the interests of justice, the first defendants should have the opportunity which they seek to examine Mr Hurwitz' understanding of his obligations in respect of the subpoena, but that that opportunity should be at the first defendant's risk as to costs, as they are, in effect, seeking to call on a subpoena, I respect of which it would be their responsibility to provide conduct money and otherwise bear the costs reasonably incurred. 26 As to the limits of the examination, while ultimately that will be a matter for ruling on such objections as may be taken at the time, I will be guided by the limits proposed by Moffitt J in the article to which I have referred. For example, while it might well be legitimate for the first defendants to explore whether Mr Hurwitz understood his obligation to extend to conducting electronic computer searches, I doubt that it would be permissible for them to explore whether particular documents were or were not in existence and in the possession of Mr Hurwitz. 27 I propose to make the following orders: (1) Order that Graham Hurwitz attend before the court at 9.30am on 13 July 2006, before me, for the purpose of being examined in respect of the subpoena for production issued on 7 October 2005 and addressed to him. This order is made without prejudice to any claim for privilege against self incrimination which may be made by Mr Hurwitz and without prejudice to any claim for litigation privilege which may be made by the plaintiffs; (2) Order that none of the evidence given on such examination is to be accepted as evidence in the principal proceedings or in any proceedings for contravention or failure to comply with the subpoena; (4) Order that in the first instance, the first defendants pay Mr Hurwitz' costs of attendance and of the examination. (5) Reserve costs of this application. ********** 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. 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