Supreme Court New South Wales Medium Neutral Citation: Bianca Hope Rinehart v Georgina Hope Rinehart [2015] NSWSC 205 Hearing dates: 10 March 2015 Date of orders: 10 March 2015 Decision date: 10 March 2015 Jurisdiction: Equity Division Before: Darke J Decision: Subpoena not set aside as an abuse of process. Notice to Produce set aside. Catchwords: PRACTICE AND PROCEDURE – subpoena issued by applicant for preliminary discovery – some overlap between documents sought on subpoena and documents sought on preliminary discovery – whether subpoena should be set aside as an abuse of process – no abuse of process shown – Uniform Civil Procedure Rules r 5.3 PRACTICE AND PROCEDURE – notice to produce – – non-compliance with Equity Division Practice Note 11 – defects in form of notice – notice set aside Legislation Cited: Uniform Civil Procedure Rules r 5.3 Cases Cited: Glencore International AG v Selwyn Mines Ltd [2005] FCA 801; (2005) 223 ALR 238 Hatfield v TCN Channel Nine Pty Ltd [2010] NSWCA 69; (2010) 77 NSWLR 506 Ian Edward Morton & 5 Ors v Nylex Ltd & 1 Or [2007] NSWSC 562 Liu v The Age Company Ltd [2011] NSWSC 53 Telstra Corporation Limited v Minister for Communications, Information Technology and the Arts [2007] FCA 1398 The Owners Strata Plan SP 69567 v Baseline Constructions Pty Ltd [2012] NSWSC 502 Tony Hassan Noun v Margaret Pavey [2014] NSWSC 429 Tyco Australia Pty Ltd v Leighton Contractors Pty Ltd [2005] FCAFC 115; (2005) 142 FCR 428 Category: Procedural and other rulings Parties: Bianca Hope Rinehart (first plaintiff) John Langley Hancock (second plaintiff) Georgina Hope Rinehart (first defendant) Hancock Prospecting Pty Limited (second defendant) Representation: Counsel: C Withers, A Hochroth (plaintiffs) S Lawrance (first defendant) D Studdy SC, A Shearer (second defendant) Solicitors: Yeldham Price O'Brien Lusk (plaintiffs) Speed and Stracey Lawyers Pty Limited (first defendant) Corrs Chambers Westgarth (second defendant) File Number(s): 2014/353713 Publication restriction: Nil Judgment – EX TEMPORE 1. By a Summons filed 1 December 2014 the plaintiffs seek orders that the defendants provide preliminary discovery pursuant to Uniform Civil Procedure Rules r 5.3. The application is supported by affidavits sworn by the solicitor for the plaintiffs, Mr Timothy Price, on 1 December 2014 and 19 December 2014. A further affidavit sworn by Mr Price on 6 February 2015 was read today in relation to the interlocutory matters before the Court. 2. On 17 December 2014 the plaintiffs caused a subpoena to be issued, directed to a non-party, Wright Prospecting Pty Ltd ("Wright Prospecting"). On 23 December 2014 the second defendant issued a notice to produce directed to the plaintiffs. Before the Court today are notices of motion seeking the setting aside of the subpoena and the notice to produce. 3. Before dealing with the arguments raised in relation to the motions it is desirable to say something about the background to the disputes. 4. The plaintiffs are two of four beneficiaries of a trust known as the Hope Margaret Hancock Trust. Amongst the assets of the trust are certain cumulative special shares in the second defendant, Hancock Prospecting Pty Ltd. The first defendant is presently the trustee of the trust. She is also a director, and the executive chairman, of the second defendant. Under cl 3A of the constitution of the second defendant, holders of cumulative special shares have certain entitlements to dividends. The dividends are calculated as a minimum share of royalty payments received by the second defendant pursuant to specified agreements less various deductions. In simplified terms, the specified agreements are between the second defendant, Wright Prospecting, and companies in the Rio Tinto group. 5. The plaintiffs are contemplating bringing claims for relief against the defendants that would be founded, inter alia, upon an alleged underpayment of the dividends to the trust. 6. The claims under consideration include a claim brought on behalf of the trust against the second defendant to enforce the contractual right to receive the dividends, and a claim against the first defendant for inducing breach of the contract or for breach of her duties as trustee of the trust. 7. Broadly, the documents sought to be obtained by preliminary discovery order include documents that will provide information about the amount of royalties received by the second defendant that are pursuant to the agreements specified in cl 3A of its constitution, and the amount of cumulative special dividends paid by the second defendant to the trust. The subpoena 1. The subpoena issued to Wright Prospecting seeks documents including communications from Rio Tinto recording the amount of royalties paid to Wright Prospecting pursuant to the specified agreements. The plaintiffs suggest that Wright Prospecting appears to have the same entitlement to royalties as the second defendant under the specified agreements. 2. The second defendant, for whom Mr Studdy of Senior Counsel appeared with Mr Shearer of Counsel, contended that the subpoena should be set aside as an abuse of process. It was submitted that as the documents it seeks overlap with those sought by way of preliminary discovery, it subverts the preliminary discovery proceedings. This is because, it is said, it seeks to compel production in advance of documents that are themselves the subject of the application for compulsory disclosure. 3. The second defendant further submits that the plaintiffs have failed to identify a legitimate forensic purpose for the issuing of the subpoena, and that the subpoena is being used to see if the plaintiffs have any claim at all and as a substitute for discovery. 4. I was referred to the decision of the Full Court of the Federal Court in Tyco Australia Pty Ltd v Leighton Contractors Pty Ltd [2005] FCAFC 115; (2005) 142 FCR 428, in particular the judgment of Hill J (at [34]) for the proposition that it would clearly be an abuse of process for an applicant for pre-action discovery to issue a notice to produce the very documents sought by the application for pre-action discovery. I was further referred to Hill J's judgment at [46], and also the judgment of Hely J at [54] where his Honour expressed the view that: "…at least prima facie, it would be an abuse of process for an applicant for preliminary discovery to seek to compel the production of documents by notice to produce, when the production of those documents is sought under O15A, r6. But it does not follow, for example, that a subpoena sought to be issued by an applicant for preliminary discovery against a third party would necessarily be an abuse, depending upon the scope and purpose of the subpoena." 1. The reasoning of Hill J was referred to with apparent approval by McCallum J in Liu v The Age Company Ltd [2011] NSWSC 53 at [12] and [13]. Her Honour was there dealing with an application under UCPR r 5.2 which concerns preliminary discovery in defamation proceedings. Her Honour also referred to the judgment of Hely J, including the passage to which I have just referred, and at [16] of her Honour's judgment she stated: "In my view, the bare fact that the notices to produce seek documents also sought in the prayers for relief in the summons is not determinative. Ms Liu's entitlement to bring to aid ordinary interlocutory procedures in the resolution of the questions of fact raised by the application must be analysed on its merit, not as a matter of form." 1. The second defendant contends that the above reasoning must apply equally to subpoenas, and there is no relevant point of distinction as to why a notice to produce seeking the same documents sought by preliminary discovery is an abuse of process as opposed to a subpoena seeking those same documents. 2. Mr Lawrance of Counsel, who appeared for the first defendant, submitted that it was implicit in UCPR r 5.3(1) that a notice to produce or subpoena could not be issued for the purpose of obtaining documents of the type falling within para (b) of that sub-rule, else the process envisaged under the rule would be circumvented. 3. The plaintiffs, for whom Mr Withers and Mr Hochroth of Counsel appeared, submitted that in circumstances where the second defendant has maintained that the claims being considered by the plaintiffs are speculative, it is legitimate to have a subpoena issued which seeks documents that might assist it to make out their case for preliminary discovery. 4. The plaintiffs point out that in order to make out that case it must appear to the Court, amongst other things, that the plaintiffs "may be entitled to make a claim for relief" against the defendants. The plaintiffs further submit that the subpoena seeks only a subset of the documents the subject of the preliminary discovery application and does not subvert the proceedings. The plaintiffs contend that the subpoena is not being used to discover whether the plaintiffs have a case, but rather to obtain evidence to support their case for preliminary discovery. 5. For its part, Wright Prospecting has made no complaint about the subpoena, save for paragraph 3 of its schedule, which the plaintiffs no longer press. It has indicated that it is willing and able within a relatively short period to produce the balance of the documents sought, subject to an appropriate confidentiality regime being agreed. 6. It follows from the observations made by Hely J in Tyco Australia Pty Ltd v Leighton Contractors Pty Ltd (supra), referred to earlier, and from what McCallum J said in the slightly different context in Liu v The Age Company Ltd (supra), that the mere fact that there is some overlap between what is sought on preliminary discovery and what is sought by subpoena does not mean that the subpoena is necessarily an abuse of process. It is necessary to look at the scope and purpose of the particular subpoena in the context in which it has been issued. 7. I readily accept that there is scope for abuse of the preliminary discovery process through the issuing of notices to produce or subpoenas that seek documents of a type that are the subject of the discovery application. It is a matter about which the Court must be mindful. I further accept that preliminary discovery is an intrusive process insofar as the prospective defendants are concerned and that they are, subject to their general obligations under the Civil Procedure Act 2005 (NSW), entitled to require an applicant to establish all of the prerequisites to the making of an order. Nevertheless, even allowing that the test under UCPR r 5.3(1)(a) that an applicant be a person entitled to make a claim for relief is not particularly stringent, an applicant faced with an argument that its foreshadowed claims are merely speculative ought generally be able to make use of interlocutory procedures to assist it to satisfy that test. 8. In the present case the defendants clearly intend to put in issue whether the plaintiffs can be regarded as persons who may be entitled to make a claim for relief within the meaning of UCPR r 5.3(1)(a). The foreshadowed claims have been described by the second defendant in terms as speculative. 9. As explained by McColl J in Hatfield v TCN Channel Nine Pty Ltd [2010] NSWCA 69; (2010) 77 NSWLR 506, in order for it to appear to the Court that an applicant may be entitled to make a claim for relief it is not necessary for the applicant to show a prima facie or pleadable case, and while the mere assertion of a case is insufficient, it will be sufficient if there is reasonable cause to believe that the applicant may have a right of action against the respondent resting on some recognised legal ground (see at [47]-[48]). Her Honour further stated (at [49]) that: "…belief in this context requires more than mere assertion and more than suspicion or conjecture. [It] is an inclination of the mind towards assenting to, rather than rejecting a proposition. Thus it is not sufficient to point to a mere possibility. The evidence must incline the mind towards the matter or fact in question." 1. I accept that in the circumstances of this case it would be legitimate for the plaintiffs to seek the issue of a subpoena to a third party that calls for documents that might assist the plaintiffs to overcome the hurdle they face under UCPR r 5.3(1)(a). 2. The second defendant pointed to a submission made by counsel for the plaintiffs at a directions hearing on 9 February 2015 to the following effect: "What we've done through a subpoena is, we've issued a - well, we've asked the Court to issue a subpoena to a third party Rinehart [Wright] Prospecting which has some of the information which my clients say they need in order to decide whether to commence the case". It was submitted that this was indicative of an improper purpose for the issuing of the subpoena in the circumstances of a preliminary discovery application. 3. It should be pointed out, however, that on the very same occasion, Counsel for the plaintiffs said the following to the Court: "As for my client's subpoena it's quite straightforward. There is a matter in contest between my client and HPPL as to whether or not my client has adduced sufficient evidence to the Court to form the objective view that they may have a claim for relief". 4. In my opinion the plaintiffs in this case, in issuing the subpoena, have done so for the legitimate purpose of assisting their case under UCPR r 5.3(1)(a). I further accept the plaintiffs' submission that whilst there is some overlap between what is sought on preliminary discovery and what is sought by the subpoena (principally arising from paragraph 2 of the schedule to the subpoena), what is sought by the subpoena represents only one part of the information the plaintiffs say they require in order to decide whether to commence the foreshadowed proceedings. The documents will not, for example, show the amount of income tax deducted from the gross royalties received by the second defendant, or the amount of royalties paid by way of dividends to the trust on the cumulative special shares. 5. In the present case, the subpoena to Wright Prospecting undoubtedly calls for documents some of which may also fall within the documents sought on preliminary discovery from the defendants. Communications from Rio Tinto about the amount of royalties paid, such communications including communications to the partnership involving the second defendant and Wright Prospecting, offers a clear example. Moreover, the subpoena certainly calls for documents that contain information of a type that would be expected to be obtained from some of the documents sought on preliminary discovery. 6. The degree of overlap in that sense is not insignificant. However, in my view the degree of overlap is not of such a scale that the subpoena ought be seen as one that subverts the preliminary discovery process. I do not think that it is for that reason an abuse of process. The subpoena is not otherwise an abuse of process. No question of oppression to the recipient arises in circumstances where paragraph 3 of the schedule is not to be called upon. 7. For the above reasons, I decline to set the subpoena aside. Accordingly, the second defendant's notice of motion should be dismissed with costs. The notice to produce 1. The notice to produce issued by the second defendant was issued pursuant to UCPR r 34.1. The notice would require production of: 1. Documents recording any belief of the plaintiffs that they may have a claim of the kind foreshadowed in Mr Price's affidavit of 1 December 2014 "or otherwise". 2. Documents recording any consideration by the plaintiffs as to whether to commence proceedings of that kind "or otherwise". 3. Documents recording any consideration by the plaintiffs as to whether they need additional information, or what additional information they need, in order to decide whether to commence proceedings of that kind "or otherwise". 4. and (5) Documents recording the information, sources of information or "the basis for" the evidence given in certain paragraphs of Mr Price's affidavits of 1 December 2014 and 19 December 2014, including documents recording any instructions given by the plaintiffs in respect of those matters or any knowledge, understanding or belief of the plaintiffs in respect of those matters. 1. The plaintiffs complain that the notice does not seek production of "specified documents" within the meaning of r 34.1, and is in truth an attempt to obtain discovery without seeking to comply with Equity Division Practice Note 11. The plaintiffs further contend that the documents sought are not relevant to any fact in issue and are in any event privileged. 2. The second defendant emphasised that an applicant for preliminary discovery must place before the Court all of the evidence available to it relevant to the sufficiency of the information it possess to enable a decision to be made whether to commence a proceeding (see Glencore International AG v Selwyn Mines Ltd [2005] FCA 801; (2005) 223 ALR 238 at [15] per Lindgren J; cited by White J in Ian Edward Morton & 5 Ors v Nylex Ltd & 1 Or [2007] NSWSC 562 at [33]). The second defendant further submitted that it was entitled to test the evidence put forward by the plaintiffs in support of their application for preliminary discovery. In this context, reliance was placed upon the decision of Graham J in Telstra Corporation Limited v Minister for Communications, Information Technology and the Arts [2007] FCA 1398. The second defendant also took issue with the suggestion that the documents sought were irrelevant, and contended that if any claims for privilege were made, such questions should be dealt with in the ordinary course after the production of the documents. As far as the Practice Note is concerned, the second defendant submitted that the parties had served their evidence by 23 December 2014 when the notice to produce was issued and it would, in any event, be appropriate to dispense with the requirements of the Practice Note in circumstances where the Court has received detailed submissions which demonstrate why the documents sought are relevant. 3. The Court has on previous occasions warned that it will not permit the clear objective of Practice Note 11 to be thwarted by the issuing of a notice to produce rather than the making of an application in accordance with the practice note (see, for example, The Owners Strata Plan SP 69567 v Baseline Constructions Pty Ltd [2012] NSWSC 502 at [21]-[28], referred to in my own decision in Tony Hassan Noun v Margaret Pavey [2014] NSWSC 429 at [21]). I can see no good reason why the Practice Note provisions, which require an application for disclosure to be supported by an affidavit setting out why disclosure is necessary for the resolution of the real issues in the proceedings, should be sidestepped in this case. 4. In addition, there are in my view numerous problems with the form of the notice to produce. The second defendant accepted that the words "evidencing or" ought be excised from the notice. However, there are other expressions which, in my opinion, cause significant difficulty. These include the words "or otherwise" in paras 1, 2 and 3 and the words "the basis for the evidence" in paras 4 and 5. The specific seeking of documents recording instructions given by the plaintiffs to Mr Price is also problematic. 5. It may well be that the second defendant (and the first defendant) will be able to demonstrate that disclosure of documents ought be given by the plaintiffs. That should occur by the making of an application in accordance with the Practice Note. The present attempt by the second defendant to obtain disclosure is, for the reasons I have given, inappropriate. It is not necessary to deal with the arguments concerning the relevance of the material that has been sought, but I do have considerable doubt about the relevance of the documents that concern the subjective beliefs of the plaintiffs. The notice to produce issued on 23 December 2014 should be set aside. The second defendant should pay the plaintiffs' costs of the plaintiffs' notice of motion. ********** 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. Decision last updated: 11 March 2015