Supreme Court New South Wales Medium Neutral Citation: Anderson v Patersons Securities Ltd (No 2) [2019] NSWSC 853 Hearing dates: 20; 25 June 2019 Date of orders: 11 July 2019 Decision date: 11 July 2019 Jurisdiction: Equity Before: Ward CJ in Eq Decision: 1. Pursuant to r 33.4 of the Uniform Civil Procedure Rules 2005 (NSW), order that the subpoenas issued by the plaintiff on 15 May 2019 to each of Eagle Financial Pty Limited and TWF Partners be set aside and the documents produced in compliance with those subpoenas be returned to the entity that produced those documents. 2. Order the plaintiff to pay the second and third defendants' costs of the notice of motion filed 23 May 2019 seeking to set aside the said subpoenas. Catchwords: CIVIL PROCEDURE — Subpoenas — Application to set aside — Abuse of process –– subpoena issued for the production of working papers and supporting documents used to prepare tax returns of defendants –– whether a legitimate forensic purpose for production –– whether merely a fishing expedition –– whether the issuing of the subpoena subverts the operation of Practice Note SC Eq 11 Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW), r 33.4 Cases Cited: ACE Insurance Limited v Trifunovski [2013] FCAFC 3 Anderson v Patersons Securities Ltd [2019] NSWSC 852) Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Ltd (1955) 72 WN (NSW) 250 Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd [2019] NSWSC 410 Hall (Inspector of Taxes) v Lorimer [1992] 1 WLR 939 ICAP Australia Pty Ltd v BGC Partners (Australia) Pty Ltd [2009] NSWSC 307 Lopez v Deputy Commissioner for Taxation (2005) 143 FCR 574; [2005] FCAFC 157 Putland v Royans Wagga Pty Limited [2017] FCA 910 Rinehart v Rinehart [2019] NSWSC 759 Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16; [1986] HCA 1 The Owners - Strata Plan No 76902 v Roads and Maritime Services [2017] NSWSC 528 Wollongong Coal Ltd v Gujarat NRE Properties Pty Ltd (No 2) [2019] NSWSC 758 Texts Cited: Practice Note SC Eq 11 Category: Procedural and other rulings Parties: Daniela Alejandra Anderson (Plaintiff) Patersons Securities Ltd (First Defendant) Nicola Lesleigh Garrett (Second Defendant) Samuel Mark Renauf (Third Defendant) PPB Pty Ltd (Falcon Prime Pty Ltd) (Fourth Defendant) Acorn Capital Ltd (Fifth Defendant) Albany Capital Investors Pty Ltd (Sixth Defendant) Representation: Counsel: Mr P Braham SC with Mr S Keizer (Plaintiff) Mr JA Redwood and Ms E Bathurst (First Defendant) Ms M Painter SC with T Bagley (Second and Third Defendants) Mr G Ng (Fourth Defendant) Ms ND Oreb (Fifth Defendant) Ms V Chapman (Sixth Defendant) Solicitors: McLachlan Thorpe Partners (Plaintiff) Clayton Utz (First Defendant) Piper Alderman (Second and Third Defendants) Corrs Chambers Westgarth (Fourth Defendant) Moray & Agnew (Fifth Defendant) Kennedys Law (Sixth Defendant) File Number(s): 2015/00285816 Publication restriction: Nil Judgment 1. HER HONOUR: I refer to my reasons for judgment published earlier today in relation to applications by each of the defendants in these proceedings for security for their costs of the proceedings (Anderson v Patersons Securities Ltd [2019] NSWSC 852). Also before me for hearing on 20 June (but not concluded until 25 June 2019, after the hearing of the motion was adjourned to permit consideration by the plaintiff as to whether a "more targeted enquiry" than the one contemplated by the impugned subpoenas might be acceptable) was an application, by notice of motion filed 23 May 2019, by the second and third defendants (Ms Garrett and Mr Renauf), seeking to set aside various subpoenas and notices to produce that had been issued by the plaintiff (Mrs Daniela Anderson). 2. By the time of the hearing on 20 June 2019, the dispute as to the compulsory processes that had been issued by the plaintiff was narrowed to a complaint as to two subpoenas: a subpoena issued on 15 May 2019 to Eagle Financial Pty Ltd (the firm which acts as the taxation accountant for Mr Renauf) and a subpoena issued on the same date to TWF Partners (the tax agent of the second defendant, Ms Garrett). Each subpoena seeks the production of documents relating to the preparation of "[a]ll of the working papers and supporting documents used to prepare the Tax Return of [the relevant defendant] for the financial year ending 30 June 2010". I was informed that the tax returns themselves have already been produced to the plaintiff. Documents have already been produced in compliance with the subpoenas but no orders for access have yet been made. 3. The background to the underlying dispute between the parties is set out in my earlier reasons of today's date and will not here be repeated. I will here adopt the same abbreviations used in those reasons. Relevant principles 1. There was no dispute between the relevant parties as to the relevant legal principles on an application to set aside a subpoena or notice to produce. I have considered those principles recently in a number of matters (see, for example, Rinehart v Rinehart [2019] NSWSC 759; Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd [2019] NSWSC 410 (Broadway Plaza); Wollongong Coal Ltd v Gujarat NRE Properties Pty Ltd (No 2) [2019] NSWSC 758) and do not need to say more than that it is accepted here by the plaintiff that there must be a legitimate forensic purpose shown for the invocation of the compulsory processes of the Court and that mere relevance does not satisfy the test; rather it must be "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" (the onus being on the party seeking to call upon the subpoena to demonstrate that the documents have direct relevance to a line of enquiry rather than speculating on an issue more generally) (ICAP Australia Pty Ltd v BGC Partners (Australia) Pty Ltd [2009] NSWSC 307). It was also accepted that the fact that there has already been production of documents under the subpoenas does not mean that the jurisdiction of the Court to set them aside has been spent (see Broadway Plaza at [50]). 2. It is also relevant in this context to note the relevant parts of Practice Note SC Eq 11 (the Practice Note), which commenced operation in March 2012, namely: 4. The Court will not make an order for disclosure of documents (disclosure) until the parties to the proceedings have served their evidence, unless there are exceptional circumstances necessitating disclosure. 5. There will be no order for disclosure in any proceedings in the Equity Division unless it is necessary for the resolution of the real issues in dispute in the proceedings. 6. Any application for an order for disclosure, consensual or otherwise, must be supported by an affidavit setting out: the reason why disclosure is necessary for the resolution of the real issues in dispute in the proceedings; the classes of documents in respect of which disclosure is sought; and the likely cost of such disclosure. 1. It has been made clear in a number of cases (see The Owners - Strata Plan No 76902 v Roads and Maritime Services [2017] NSWSC 528 at [20] per Ball J and the authorities there cited) that a subpoena may be set aside if it involves an attempt to subvert the operation of the Practice Note by seeking what is in substance disclosure within the scope of the Practice Note in circumstances where the requirements of the Practice Note are not satisfied. Relevantly, a subpoena cannot be used as a substitute for an order for discovery which, under the Practice Note, could only be obtained in exceptional circumstances which have been properly identified and explained. 2. The complaint here made by Ms Garrett and Mr Renauf as to the impugned subpoenas is twofold: that there is no legitimate forensic purpose for the subpoenas and that they amount to an attempt to subvert the Practice Note on disclosure. Plaintiff's submissions 1. The plaintiff contends that the documents sought by the respective subpoenas are clearly relevant to an issue in the proceedings, namely, as to the capacity in which payments were received by each of Ms Garrett and Mr Renauf from Ashington Group Pty Limited (Ashington) (which includes, as wholly owned subsidiaries of Ashington, Ashington Capital Pty Limited (In Liquidation) (ACPL) and Ashington Management Pty Limited (In Liquidation) (AMPL)). 2. By letter dated 23 May 2019, the plaintiff's solicitors pointed to the allegations contained in the pleadings as to the employment by AMPL of Ms Garrett and Mr Renauf (as the Head of Funds Management and Head of Acquisitions and Planning, respectively) (see [18]-[19] of the amended statement of claim) and to the denial by Ms Garrett and Mr Renauf of those allegations (see [18]-[19] of the respective defences). It was said in the letter that there was also a live issue on Ms Garrett's evidence as to: when Ms Garrett commenced working with Ashington; when she left her previous employment (with an entity referred to as Valad, which I understand to be a reference to an entity named Valad Holdings or Valad Group Holdings); and when the "gardening leave" obligation Ms Garrett owed to Valad started and ended. It was there said that the documents sought by the subpoenas are relevant to the issue of the respective employment status of Ms Garrett and Mr Renauf with AMPL (as I understand it, the relevant issue being as to whether they worked as an employee or as a consultant). 3. In an affidavit affirmed 5 June 2019 by the plaintiff's solicitor (Ms Ng) (at [9]) the relevance of the documents sought is again put as being to the employment status of Ms Garrett and Mr Renauf and the date on which they commenced their employment with Ashington. 4. As to Ms Garrett, the plaintiff identifies the key allegations made against her in the proceedings as that she was an employee of Ashington during relevant periods during the 2009-2010 financial year, that as a result she owed fiduciary obligations to AMPL and ACPL and that she acted in breach of those obligations. It is noted that Ms Garrett has denied those allegations and, in particular, that she denies that she was an employee of Ashington during the relevant period. 5. The plaintiff says that, although Ms Garrett's tax return for the 2009-2010 financial year does not disclose any income earned with respect to the work she undertook for Ashington during that year, Ms Garrett's own evidence is that she did perform work for Ashington during that year and that she did receive payments from Ashington that were labelled "salary". The plaintiff perceives Ms Garrett's case to be that the work she performed for Ashington was in the capacity of an independent contractor, rather than as an employee. 6. The documents sought by the subpoena to TWF Partners are said to be documents that relevantly go to the question as to what payments Ms Garrett received from Ashington and in what capacity those payments were received, which the plaintiff says in turn goes to the issue as to whether or not Ms Garrett was employed by Ashington (as alleged by the plaintiff and denied by Ms Garrett). It is submitted that it could reasonably be expected that the working papers and supporting documents for Ms Garrett's tax return would provide evidence of: what payments Ms Garrett received during the financial year (including from Ashington); the capacity in which she received those payments; whether those payments constituted income and, if so, what type of income they may be. It is submitted that these are all factors that form part of the totality of the relationship that must be considered in deciding the question of employment. 7. As to Mr Renauf, again it is noted that the allegations made against him (and denied by Mr Renauf) are that he was an employee of Ashington during the 2009-2010 financial year and that, as such, he owed fiduciary obligations to Ashington. The plaintiff points to Mr Renauf's evidence that he considered himself to be "like an independent contractor" rather than an employee of Ashington, and that from April 2009 onwards he received from Ashington a monthly payment of $29,167 equivalent to the salary that was promised to him. It is noted that Mr Renauf's tax return shows salary or wages income in 2009-2010 of $22,080 and declares net personal services income of $141,940 (without indicating the source of that personal services income). 8. The plaintiff submits that it can reasonably be expected that the working papers and supporting documents sought by the subpoena to Eagle Financial Pty Ltd will evidence the source of the various items of income which Mr Renauf received and the capacity in which he received them, which in turn goes to the question of whether he received income from Ashington as salary (and, thus, as an employee) or on some other basis. 9. The plaintiff points to the breadth of the factors relevant to the multifactorial test as to whether there is a relationship of employment (referring to the decision of the High Court in Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16; [1986] HCA 1; and to the decision of Mummery J in Hall (Inspector of Taxes) v Lorimer [1992] 1 WLR 939 at 944, cited by the Full Court of the Federal Court in Lopez v Deputy Commissioner for Taxation (2005) 143 FCR 574; [2005] FCAFC 157 at [82]). 10. Thus, the plaintiff submits that there is a legitimate forensic purpose to support each of those subpoenas and that access should be granted to the documents produced in answer to those subpoenas. Submissions by Ms Garrett and Mr Renauf 1. The application by Ms Garrett and Mr Renauf to set aside the subpoenas issued to Eagle Financial Pty Ltd and TWF Partners is made, as noted above, on the basis that the subpoenas have no legitimate forensic purpose and that there has been no attempt by the plaintiff to comply with the requirements of the Practice Note. 2. Ms Garrett and Mr Renauf accept that the issue as to whether their relationship with Ashington is one that could properly be described as that of employer/employee (which they dispute) is an issue raised in the proceeding. However, they maintain that the documents sought by the subpoenas in question (namely, the documents used to prepare their respective tax returns) are irrelevant to the resolution of that issue. 3. It is submitted that the determination as to whether someone is in an employer/employee relationship requires an objective assessment of the totality of the relationship; the focus being on objective indicia (such as the amount of control of the employer, remuneration, the provision of equipment, the obligation to work, hours of work, deduction of income tax, contractual terms, and delegation of work) and that taxation arrangements are rarely given much weight in this assessment (Ms Garrett and Mr Renauf there referring to Putland v Royans Wagga Pty Limited [2017] FCA 910 at [27] (Bromwich J) and ACE Insurance Limited v Trifunovski [2013] FCAFC 3 at [37] where Buchanan J observed that it was "difficult […] to give much independent weight to arrangements about taxation" as they are "reflections of a view by one party (or both) that the relationship is, or is not, one of employment". 4. It is submitted that there is no legitimate forensic purpose for production of the documents used to prepare tax returns that are already in the possession of the plaintiff. Insofar as the plaintiff's solicitor has asserted that the plaintiff "ought to be able to test the truth of the tax returns" (see Ms Ng's affidavit at [39]), Ms Garrett and Mr Renauf argue that there is no explanation of this assertion and maintain that there is no reasonable possibility that the documents will materially assist the case in resolving a matter in dispute (and that the plaintiff is "simply fishing"). 5. As to the complaint made as to the stage in the proceedings at which the subpoenas have been issued (in advance of any orders for discovery), it is said that no exceptional circumstances have been identified by the plaintiff (as would be required for there to be an order for discovery at this stage). Ms Garrett and Mr Renauf say, in this regard, that they have not opposed earlier demands for disclosure where they accepted that the documents or classes of documents were relevant "and would likely have been required to be disclosed if ever the court made such orders" but they oppose the present subpoenas on the basis that the documents sought would not illuminate a fact in issue and constitute fishing. Determination 1. As noted above, Ms Garrett and Mr Renauf accept that there is an issue in the proceedings as to whether they were employees of Ashington (specifically of AMPL) at the relevant time (it being their position that they were working under an arrangement that was not an employment arrangement but more akin to a consultancy arrangement); but they maintain that it is not apparent how the working documents that go behind an already obtained tax return could illuminate the question as to whether or not they were employees. 2. I have referred briefly above to the information disclosed on the respective tax returns, to which I was taken to in the course of argument. The plaintiff says that she has been unable to obtain any further relevant information from the liquidator of Ashington (see T 25/6/19 at 20.12) and emphasises that she is an individual (not the putative employer and not in possession of the company records). 3. In the course of oral submissions it emerged that what (perhaps amongst other things) the plaintiff is seeking to ascertain from the tax working papers is how the company treated the payments to Ms Garrett and Mr Renauf (for example, whether it withheld tax (consistently with an employment relationship), or did not withhold tax (more consistently with a consultancy arrangement, in relation to payments made to the individuals). 4. The plaintiff has pointed to the fact that, on Mr Renauf's evidence, in the 2009-2010 financial year he was doing work for Ashington but that his tax return does not disclose any salary or wages being received from Ashington in that particular year (but does disclose a large amount of personal services income, which the plaintiff suspects relates to the remuneration he received from Ashington). It is submitted that, in the absence of issuing the subpoena, the plaintiff "will perhaps never know whether that is the case". 5. Similarly, reference was made to the declaration in Ms Garrett's tax return of salary or wages from Valad Group Holdings, with no other substantial income declared except certain dividends (including a franked amount of $12,500 from High Street Consulting Pty Limited, a company that the plaintiff understands was effectively owned by Ms Garrett and her husband at the time and through which they undertook some consulting work). The plaintiff points to Ms Garrett's own evidence that she began receiving a payment described as "salary" from Ashington in or about mid‑September 2009 and says that it is that particular payment in which the plaintiff is interested (noting that it does not appear to be declared as salary in her 2010 tax return). It is said that the plaintiff is seeking any documents that may have been provided to Ms Garrett's tax advisor or tax accountant to determine what are the payments that Ms Garrett refers to in her affidavit evidence (in what form and to whom they were paid; and to ascertain whether Ms Garrett structured her relationship with Ashington through High Street Consulting Pty Limited or not). 6. During the adjournment from 20 June 2019 to 25 June 2019, as adverted to above, there was an attempt (unsuccessfully) to reach agreement as to the narrowing of the documents sought by the plaintiff under these subpoenas. In part, the difficulty faced by the plaintiff in articulating in a more targeted way what it is seeking by way of production from the tax advisers seems to me to flow from the fact that these documents have been sought in advance of any order for discovery (which might well have produced documents from Ms Garrett and Mr Renauf that would address the very matters that the plaintiff seeks here to clarify). 7. The plaintiff accepts that it would be objectionable to issue subpoenas in an attempt to subvert the Practice Note (in other words, to use the subpoena process as a means of trying to get discovery before the party would otherwise be entitled to discovery) but says that this is not what is here being sought to do. Rather, the plaintiff's position is that she has sought at a relatively early stage of the proceedings certain documents from third parties "in order to give plenty of time for those documents to be produced and the relevant documents looked at and the relevance of them determined going forward, particularly in light of the fact that there will be or likely be some form of disclosure at a later stage". That, however, to my mind simply highlights the inappropriateness of seeking a broad brush range of documents under a subpoena of this kind in advance of the ordinary disclosure process. 8. The plaintiff says that a fishing expedition is, in essence, an attempt to interrogate third parties in order to discover whether there is a case at all; but that what she is seeking here to do is not that, but is rather to obtain particular documents relating to a particular issue, which is in issue in this particular proceeding (namely, whether Ms Garrett and Mr Renauf were employees as the plaintiff claims or independent contractors). In that regard, I consider the most useful description of a fishing expedition to be that which I have previously quoted from Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Ltd (1955) 72 WN (NSW) 250 at 254 (per Owen J): A "fishing expedition", in the sense in which the phrase has been used in the law, means, as I understand it, that a person who has no evidence that fish of a particular kind are in a pool desires to be at liberty to drag it for the purpose of finding out whether there are any there or not. 1. There seems to me to be some force to the complaint by Ms Garrett and Mr Renauf that it is mere speculation (or fishing) to suggest that there is anything in the working papers that would be likely materially to assist in the determination of an identified issue in the pleadings, at least to the extent that the plaintiff is seeking an unconfirmed set of working papers. Insofar as the plaintiff seeks the working papers of the tax agents to seek to "test" the declarations contained in the tax returns, as I understand, it what is meant is that the plaintiff wishes to see if there are any documents to shed light on what is comprised by certain of the entries or declarations contained in the tax returns. 2. It is accepted, as noted above, that the employment status of Ms Garrett and Mr Renauf is an issue (and perhaps a key issue) in the proceedings (because of the allegations that flow therefrom in terms of the relevant duties alleged to have been owed to ACPL and AMPL). What the plaintiff says it is seeking to do (by obtaining the tax agents' working papers) is to obtain what the plaintiff believes may be relevant evidence that goes to painting that accumulation of detail necessary to establish the existence of the alleged employment relationship. However, it has sought to obtain those documents by a very general description that would cover a whole raft of potential material (including documents presumably created as part of the internal working processes of the tax agents and documents that may relate to the individuals' own financial affairs quite beyond the scope of the allegations in the present proceedings). 3. Insofar as the tax agents are in possession of material supplied by Ms Garrett and Mr Renauf, that is material that one would assume could be obtained on the making of properly limited orders for disclosure in due course (and after compliance with the requirements of the Practice Note). 4. At this stage of the proceedings, I am not persuaded that it was appropriate for the plaintiff to engage in a process of seeking by way of subpoena documents that it might be thought likely could be obtained by way of discovery in the ordinary course. I note that, handed up as an aide memoire by Senior Counsel for Ms Garrett and Mr Renauf was a schedule that lists an extraordinary number of notices to produce and subpoenas apparently issued by the plaintiff to date in these proceedings (being only those of which Ms Garrett and Mr Renauf are aware), well in advance of the close of evidence and any discovery process. There is force to the complaint by Ms Garrett and Mr Renauf that, if the Practice Note as to disclosure is to have any force, it should be complied with by practitioners (and, I might add, enforced by the Court). 5. In the present case, I consider that while there may have been a legitimate forensic purpose in issuing a more targeted subpoena seeking particular documents relating to issues relevant to the employment status of Ms Garrett and Mr Renauf at the relevant time (such as records of tax withheld from payments made to them by Ashington or AMPL), the impugned subpoenas go much further than that. They operate as an intrusion into the private affairs of the individuals concerned (albeit that those individuals are parties to the proceedings) and they were issued at a time in advance of close of evidence and without any application for leave supported by material of the kind that would warrant an order for disclosure in advance of the close of evidence. 6. In the circumstances, therefore, I consider that the subpoenas should be set aside as an abuse of process and I will order the return of the documents produced in answer to those subpoenas. 7. There was no suggestion that costs orders in relation to the second and third defendants' notice of motion should not follow the event. Orders 1. For the reasons set out above, I make the following orders: 1. Pursuant to r 33.4 of the Uniform Civil Procedure Rules 2005 (NSW), order that the subpoenas issued by the plaintiff on 15 May 2019 to each of Eagle Financial Pty Limited and TWF Partners be set aside and the documents produced in compliance with those subpoenas be returned to the entity that produced those documents. 2. Order the plaintiff to pay the second and third defendants' costs of the notice of motion filed 23 May 2019 seeking to set aside the said subpoenas. ********** 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 July 2019