Supreme Court New South Wales Medium Neutral Citation: Lindsay-Owen v HWL Ebsworth Lawyers [2017] NSWSC 1692 Hearing dates: 29 November 2017 Date of orders: 29 November 2017 Decision date: 05 December 2017 Jurisdiction: Common Law Before: Rothman J Decision: (1) Subpoena discharged; (2) Costs to be costs in the cause. Catchwords: Subpoena – 3rd party subpoena issued by defendants – plaintiffs move to strike out as oppressive – not having adjectival relevance – alleged relevant basis inconsistent with pleaded case –subpoena discharged. Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: ICAP Australia Pty Ltd v BGC Partners (Australia) Pty Ltd [2009] NSWCA 307 Malec v JC Hutton Pty Ltd (1990) 169 CLR 638; [1990] HCA 20 One.Tel Ltd (in Liq) - SingTel Optus Pty Ltd v Weston [2010] NSWSC 1491 Portal Software v Bodsworth [2005] NSWSC 1115 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 Wran v The ABC [1984] 3 NSWLR 241 Category: Procedural and other rulings Parties: Gregory Hamilton Willoughby Lindsay-Owen (First Plaintiff) Dairycorp Pty Ltd (Second Plaintiff) HWL Ebsworth Lawyers (First Defendant) Martin Downing & Ors as listed in Schedule 1 to the Statement of Claim (Second to 108th Defendants) Representation: Counsel: P Afshar (Plaintiffs) C Bannan (Defendants) Solicitors: Henry Davis York (Plaintiffs) Gilchrist Connell Legal (Defendants) File Number(s): 2016/00085879 EX TEMPORE Judgment 1. HIS HONOUR: The Court must deal with an issue associated with the subpoena issued at the request of the defendants in these proceedings on a third party, being the National Australia Bank. 2. Pursuant to the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), promulgated to overcome the mischief associated with the judgment on standing in Wran v The ABC [1984] 3 NSWLR 241, a party to the substantive proceedings is entitled to move to strike out a subpoena issued by another party in a proceedings against a third person. As a consequence, the plaintiffs have moved to strike out the subpoena issued by the defendants against the third party, the National Australia Bank ("NAB"). 3. The NAB is and at all relevant times was the banker of the plaintiffs, at least in relation to the relevant transactions that are before the Court. 4. It is appropriate that I deal with the some aspects of the Amended Statement of Claim and the proceedings that are substantively before the Court. The plaintiffs were indebted to the NAB for an amount of approximately $21.5 million. They were unable to service that loan. 5. The loan was secured by a mortgage over a significant parcel of land, the value of which seems to be such that it would, without more, meet the indebtedness. I am not absolutely positive of that and of course no expert evidence is before the Court at this stage. 6. In or about 2008, or late 2008, the plaintiffs, as I said, were unable to service the debt. NAB called in the existing debt, and notice of default was served by NAB on the plaintiffs dated 17 October 2008. That fact was known to the defendants in these proceedings. 7. The defendants in these proceedings were, for relevant purposes, the legal advisors to the plaintiff in relation to relevant transactions, and the plaintiffs are suing, in essence, in negligence, or in associated matters, being a breach retainer or the like, arising from advice given for the formation of a joint venture agreement between the plaintiffs and a third party. 8. During the course of the negotiation of the joint venture agreement, the defendants advised the plaintiffs. The joint venture partner was advised by Clayton Utz Solicitors. So the defendants were not advising each proposed joint venture participant. 9. The plaintiffs' claim pleads that the plaintiffs entered into a joint venture agreement for certain objectives. One of the key objectives of entering into a joint venture arrangement, or some similar transaction, was that the debt to the National Australia Bank would be discharged "by external loan funds", and I refer in particular to the pleading paragraph 18(a) of the Amended Statement of Claim. 10. Further, "such funds were to be borrowed by any joint venture (or similar transaction) into which the plaintiffs entered". The plaintiffs allege that those objectives were expressed to the defendants on a number of occasions and purport to particularise that expression. The defendants deny such instructions. 11. The joint venture agreement that was ultimately executed between the plaintiffs and the joint venture partner provided that the plaintiffs continued to be liable for the existing debt and the joint venture entity or the partner in the joint venture agreement was not contributing to the debt. It is alleged and, as I understand it denied, that the failure of the joint venture agreement to provide that the existing debt was to be met by the joint venture partners was an alteration in the draft joint venture agreement, which alteration was not brought to the attention of the plaintiffs by the defendants, or that particular partner or staff member of the defendants responsible for the negotiation of the joint venture agreement. 12. The foregoing background is necessary in order to understand the issues in the subpoena. Further background is required. 13. The damages claimed by the plaintiffs include or are predominantly, damages in the nature of loss of profit or opportunity damages. These damages are said to arise from the inability to proceed with a proposed development and are calculated by determining the loss of profit from the venture. 14. Such a claim requires the plaintiffs to show how that opportunity would have been realised and the likelihood that it would have been realised in a manner that provided to the plaintiffs a profit after accounting for the costs of the development: Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4; Malec v JC Hutton Pty Ltd (1990) 169 CLR 638; [1990] HCA 20. 15. It should have been pointed out earlier, but was not, that the joint venture agreement was for the purpose of developing the substantial land holding in question under a proposed rezoning that was to occur and which, according to the plaintiffs, would have netted a significant profit. 16. I turn then to the issues in the subpoena. For obvious reasons, the Court does not deal with item 1 of the schedule, which merely requires, as is usual, for the recipient of the subpoena to provide a copy of the subpoena or produce it. 17. The further documents in question require copies of all documents relating to loan accounts held individually or jointly by either one or both of the plaintiffs for a period of five years from 1 January 2005 to June 2010; copies of all documents relating to loan applications and applications for extensions to any loan accounts, again, made individually or jointly by either one or both of the plaintiffs for the same period, including application forms, notifications of approval or refusal and correspondence regarding such applications or extensions; and, in the fourth paragraph of the schedule, copies of all emails and correspondence between the first plaintiff and any staff of NAB for the period 1 January 2005 to 31 December 2010. 18. The fifth category is in a slightly different position. The fifth category of documents sought from the NAB are copies of "all lending guidelines applicable to any loan granted and/or extended to either one or both of the plaintiffs for the period 1 January 2005 to June 2010." 19. The foregoing periods of time must be seen in the context of the fact that the initial loan that gave rise to the debt, to which these reasons earlier referred, was taken out on 9 December 2005 and the joint venture agreement was reached or executed in or about March 2010. 20. There are a number of aspects that are raised by the plaintiffs to seek to strike out the subpoena. I will deal firstly with the fifth category. 21. On the face of it, the fifth category deals with lending guidelines applicable to the loan that was granted on 9 December 2005, that being the only loan of which the Court is aware or which could be adjectivally relevant. That loan was provided to one or both of the plaintiffs. It does not seek guidelines applicable to any future loan that might be sought by a joint venture agreement, or a joint venture entity or the parties to a joint venture agreement. It is said by the defendants that category 5 goes to the likelihood of future funding for development. 22. I do not, at present, see how that can be so, in circumstances where the only development, which is pleaded, is a development that was contingent upon external loan funds being used to satisfy the debt to NAB and to develop the property in question. The external loan funds are loan funds external to the NAB, and/or different from the loans that had already been granted to one or other or both of the plaintiffs. 23. Likewise, categories 2, 3 and 4 go to all loan applications, all applications for extension of any loans whether relevant to the property in question or relevant to any other question, and whether relevant to or linked to, or even that which would somehow define the relationship between, the NAB, on the one hand, and the plaintiffs either jointly or either one of them. Principles 1. Her Honour Justice Ward, as her Honour then was, referred to the tests associated with the issue of subpoenas, which tests are well known and have existed for some period of time. I refer in particular to the passages in her Honour's judgment in One.Tel Ltd (in Liq) - SingTel Optus Pty Ltd v Weston [2010] NSWSC 1491 at [22] – [29] in particular, which are to the following effect: "[22] In Portal Software, his Honour described (at [24]) the test as being whether the documents sought by the notice to produce have 'a sufficient apparent connection to justify their production or inspection' (citing White v Tulloch (1995) 127 FLR 105) and said that the test of adjectival relevance (ie, as distinct from substantive relevance) will be satisfied if the material has apparent relevance and is established if the documents called for 'could possibly throw light on the issues in the main case' (at [24]), citing Trade Practices Commissioner v Arnotts Ltd [1989] FCA 248; (1989) 21 FCR 306). [23] I note that in Cosco Holdings Pty Limited v Commissioner of Taxation [1997] FCA 1504; (1997) 37 ATR 432, Spender J had earlier considered the statement of Beaumont J in Trade Practices Commission v Arnotts as to the test of adjectival relevance and had noted that the word 'possibly' was there not used in any speculative sense' and so a subpoena (as was there in issue) may be set aside if the issuing party cannot, on reasonable grounds, show that there is a reasonable possibility that the documents sought will assist in resolving a matter in dispute in the proceedings. [24] Nicholas J in ICAP Pty Limited v Moebes [2009] NSWSC 306 adopted an approach to Trade Practices Commission v Arnotts consistent with that of Spender J in Cosco. [25] In ICAP Australia Pty Ltd v BGC Partners (Australia) Pty Ltd [2009] NSWCA 307, the Court of Appeal held that the primary judge had not erred by stating that, for a notice to produce to have a legitimate forensic purpose: [I]t must be shown that it is likely the documentation will materially assist on an identified issue, or there is a reasonable basis beyond speculation that it is likely the documentation will. [26] In Nicholls v Michael Wilson and Partners Limited [2010] NSWCA 100, Young JA, to similar effect as had Brereton J in Portal Software, held that for present purposes a notice to produce is the equivalent of a subpoena and that the ordinary rules as to oppressive subpoenas can be applied (at [33]). His Honour also said that, in modern litigation, a person is entitled to issue a subpoena and have it answered if there is a legitimate forensic purpose in issuing the subpoena, that is, that he or she has a reasonable cause to believe the documents subpoenaed have the capacity to throw some light on the issues in the proceedings, at [34]. [27] Although, as I noted in McLaughlin v Dungowan Manly (unreported, 14 July 2009, NSWSC), the authorities have largely dealt with relevance in the context of 'fishing' objections (in which questions of relevance necessarily arise) and there is a significant overlap between considerations as to whether what is sought is relevant to an issue in the proceedings, whether it is oppressive and whether it constitutes impermissible 'fishing', the two grounds for objection do not completely overlap, so that a notice to produce may be set aside even if it seeks relevant documents. [28] The suggestion that mere relevance might be sufficient to establish a legitimate forensic purpose was rejected by Beazley JA in Attorney-General (NSW) v Chidgey [2008] NSWCCA 65, (there in the context of criminal proceedings). In Chidgey, her Honour did not accept that it was a legitimate forensic purpose to engage in a 'fishing expedition' to discover whether there was a case at all, referring to The Commissioner for Railways v Small [1938] NSWStRp 29; (1938) 38 SR (NSW) 564, at 573–4; [1938] NSWStRp 29; 55 WN (NSW) 215, at 575 where Jordan CJ had stated that a party was not entitled to use a subpoena for that purpose. [29] Insofar as the Optus Group also referred to the test noted by Brereton J, in Portal Software, that a notice to produce will have a legitimate forensic purpose if it appears to be 'on the cards' that the documents sought will materially assist, that formulation of the test appears more generally to be used in the context of criminal (not civil) proceedings. (His Honour had there referred to what was said in Alister v R (1984) 154 CLR 404, at 414 by Gibbs CJ and in R v Saleam (1989) 16 NSWLR 14, at 18. In Chidgey Beazley JA saw no reason to depart from the test and the language used in Alister and Saleam.)" 1. The Court of Appeal as her Honour recites in the judgment to which I have just referred, said in ICAP Australia Pty Ltd v BGC Partners (Australia) Pty Ltd [2009] NSWCA 307, that for a notice to produce, or a subpoena, to have a legitimate forensic purpose, it must be shown that "it is likely the documentation will materially assist on an identified issue or there is a reasonable basis beyond speculation that it is likely the documentation will." 2. The use of the term "likely", in the principles, does not mean more probable than not. Nor does it mean some attempt by the Court to determine the use that might be made of documents that exist or that might exist. It must have, as has been often described, an adjectival relevance, that is, it must show somehow a direct relevance to a line of enquiry or, a manner in which, the documents would seem to be relevant to the issues between the parties. As Brereton J said in Portal Software v Bodsworth [2005] NSWSC 1115 at [19] – [24]: "[19] The power of the Court to set aside a subpoena or notice to produce (in whole or in part) is but an instance of its power to regulate its processes and in particular to intervene in the case of an abuse of its process: see Botany Bay Instrumentation and Control Limited v Stewart [1984] 3 NSWLR 98, 100 (Powell J). In the categories of cases described by Powell J, no reference is made to mere irrelevance as a ground for setting aside a subpoena or notice. The closest that the various categories listed by his Honour approaches relevance in his Honour's third category, namely, where the subpoena had not been issued bona fide for the purpose of obtaining relevant evidence. [20] However, relevance - or more accurately, lack thereof - is now a sufficient ground for setting aside a subpoena. In Trade Practices Commissioner v Arnotts Ltd [1989] FCA 248; (1989) 21 FCR 306; 88 ALR 90, Beaumont J approached the setting aside of subpoenas as oppressive on a basis which reveals that absence of apparent relevance is one of two separate bases for doing so: his Honour identified that on an application to set aside a subpoena as oppressive, two questions arose: first, whether the material sought had an apparent relevance to the issues in the principal proceedings - which his Honour called 'adjectival' as distinct from 'substantive' relevance - and thus the subpoena had a legitimate forensic purpose to that extent; and secondly, whether the subpoena was seriously and unfairly burdensome or prejudicial. Failure to satisfy either requirement resulted in the subpoena being set aside. [21] In Hatton v Attorney-General of the Commonwealth of Australia & Ors [2000] FamCA 892; (2000) 158 FLR 31; (2000) 26 Fam LR 520; (2000) FLC 93-038, Finn, Kay and Dessau JJ, after an extensive review of the authorities, including Arnotts, said:- As to the proposition that lack of relevance cannot of itself be a ground for setting aside a subpoena but rather must constitute oppression or abuse of process, we would consider that whatever may have been the position at the time that Waind and Hill was decided, the present state of authorities is such that lack of apparent relevance will be a sufficient ground in itself to set aside a subpoena. [22] I proceed on the basis, therefore, that absence of apparent relevance is a sufficient ground to set aside a subpoena or a part of a subpoena. [23] It is necessary, then, to appreciate what is the test of 'relevance' in the context of a subpoena. In many of the cases, it had been described as 'apparent relevance', in the sense that the documents, production of which is sought, must bear some apparent relevance to an issue in the proceedings. In Waind and Hill, Moffitt P described the concept in these terms: Production of a document on subpoena by a stranger is only required if the document is sufficiently relevant to the action in the sense that it is likely to add in the end, in some way or other, to the relevant evidence in the case. [24] In White v Tulloch (1995) 127 FLR 105, (1995) 19 Fam LR 696, (1995) FLC 92-640, the Full Court of the Family Court referred to the test in terms of documents having 'a sufficient apparent connection to justify their production or inspection'. But perhaps the most instructive description is that of Beaumont J in Arnotts, in which his Honour said that the test of adjectival relevance was satisfied if the material had apparent relevance and was established if the documentation called for 'could possibly throw light on the issues in the main case'. In a slightly different but related context, the test has been put in terms that a subpoena has a legitimate forensic purpose if it appears to be 'on the cards' that the documents sought will materially assist the defence in a criminal proceeding [Alister v The Queen (1984) 154 CLR 404, 414 (Gibbs CJ), R v Saleam (1989) 16 NSWLR 14, 18]." 1. At the moment I can see no possible relevance for documents that go beyond the documents that relate to the particular loan. The defendants point to the possibility that these documents would show (or would with other documents show or lead to a line of enquiry relating to) the lack of probability that NAB would extend the loan or allow further borrowings. It is not pleaded by the plaintiffs that the loan would be altered or varied. Rather, the pleading is expressly that the relationship of lender and borrower between the NAB, on the one hand, and the plaintiffs, on the other, would cease by the provision of external loan funds, which would satisfy the existing debt, and thereafter the plaintiffs would continue on the course that they otherwise would have adopted with a joint venture partner. 2. I hasten to add whether the plaintiffs can prove that such "external loan" funds would become available is a nice question. Whether or not the NAB would lend or whether or not the conditions of the current loan would be such to allow for lending, are not to the point. At the moment, the pleading assumes NAB would not lend to the plaintiffs. 3. What is to the point would be the documents relating to the particular loan in question, or documents that define the capacity of the plaintiffs to borrow further money from other lenders that would move NAB to allow an extension on the repayment of the loan to facilitate the other participant in the joint venture agreement or the obtaining of external funds. 4. But the schedules in paragraphs 2, 3, 4 and 5 in the subpoena go well beyond that. They go to issues that, on their face, do not apply to issues between the parties. It is not to the point to say that they go to the capacity of the plaintiffs to obtain future funding, in circumstances where the issue that is between the parties, defined by the pleadings, is that future funding would not be obtained from the NAB. 5. I hasten to add that a subpoena, properly crafted and confined to the issues that are relevant or could be relevant to a line of enquiry, that issues to NAB would be a perfectly proper subpoena. But the current subpoena is not in that category and it is discharged. ********** Amendments 05 December 2017 - Cover sheet - File number corrected. 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: 05 December 2017