Walker Nominees Pty Ltd (in liquidation) v Branir Pty Ltd & Anor [2004] NTSC 25

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Walker Nominees Pty Ltd (in liquidation) v Branir Pty Ltd & Anor [2004] NTSC 25








FILE NO: 153 of 2003 (20320300)

DELIVERED: 14 May 2004

HEARING DATE: 29 April 2004



Plaintiff: D McConnell
Defendants: C Ford

Plaintiff: Morgan Buckley
Defendants: Cridlands

Judgment category classification: C
Judgment ID Number: Bai04004
Number of pages: 8


Walker Nominees Pty Ltd (in liquidation) v Branir Pty Ltd & Anor [2004] NTSC 25
No. 153 of 2003 (20320300)




First Defendant


Second Defendant



(Delivered 14 May 2004)

[1] The liquidator of the plaintiff is a partner of Deloitte Touche Tohmatsu ("Deloittes") who were the accountants, advisers and auditors of the defendants ("Tipperary") for a period of 5 years ending around August 2003.
[2] In around September 2003, the liquidator commenced action against Tipperary for breach of contract (or in the alternative, unjust enrichment) arising out of an alleged failure of Tipperary to pick, pack and transport mangoes. The liquidator seeks judgment against Tipperary for around $375,000.
[3] Tipperary applied to stay the proceedings on the basis that the liquidator (through Deloittes) is in possession of confidential information of Tipperary. In February 2004, the Master granted a temporary stay of the proceedings pending resolution of Tipperary's stay application.
[4] On 23 February 2004, Tipperary filed a subpoena addressed to two partners of Deloittes seeking, in effect, all documents relating to Deloittes' work as Tipperary's accountants, tax accountants, auditors and financial accountants, including but not limited to those documents relating to the liquidator's claim against Tipperary for its alleged failure to pick, pack and transport mangoes.
[5] On behalf of Deloittes, Mr McConnell applied to set aside the subpoena on the basis that the subpoena is too broad and amounts to a "fishing expedition". Mr McConnell also made reference to the subpoena defeating an alleged lien held by Deloittes, but this submission was not pressed with any vigour.
[6] In support of his submission that the subpoena is too broad, Mr McConnell referred me to the House of Lords' case of Prince Jefri Bolkiah v KPMG [1999] 2 AC 222 at p 235, where Lord Millett observed:
"Accordingly, it is incumbent on a plaintiff who seeks to restrain his former solicitor from acting in a matter for another client to establish (i) that the solicitor is in possession of information which is confidential to him and to the disclosure of which he has not consented and (ii) that the information is or may be relevant to the new matter in which the interest of the other client is or may be adverse to his own."
[7] Significantly in the present context, however, Lord Millett continued:
"Although the burden of proof is on the plaintiff, it is not a heavy one. The former may readily be inferred; the latter will often be obvious. I do not think that it is necessary to introduce any presumptions, rebuttable or otherwise, in relation to these two matters. But given the basis on which the jurisdiction is exercised, there is no cause to impute or attribute the knowledge of one partner to his fellow partners. Whether a particular individual is in possession of confidential information is a question of fact which must be proved or inferred from the circumstances of the case."
[8] The essence of Bolkiah's case is summarised in the headnote at p 223:
"Held, allowing the appeal, that where it was established that solicitors, or accountants providing litigation services such as those provided by the defendants, were in possession of information confidential to a former client which might be relevant to a matter in which they were instructed by a subsequent client the court should intervene to prevent the information from coming into the hands of anyone with an adverse interest unless it was satisfied that there was no real risk of disclosure; that since it had been established that the defendants were in possession of confidential information the burden was on them to show that there was no risk that the information would come into the possession of those acting for the other party; that although there was no rule of law that 'Chinese walls' or other similar arrangements were insufficient to eliminate the risk, unless special measures were taken information moved within a firm and the court would restrain the defendants from acting for a new client unless it was satisfied on clear and convincing evidence that effective measures had been taken to ensure that no disclosure would occur; that in order to be effective arrangements had to be an established part of the organisational structure of the firm and the ad hoc arrangements made by the defendants were inadequate in the circumstances to prevent the risk of inadvertent disclosure; and that, accordingly, since the defendants had not discharged the burden of showing there was no real risk that information confidential to the plaintiff might unwittingly or inadvertently come into the possession of those working on the agency investigation, the injunction would be granted."
[9] In support of the proposition that the subpoena amounted to a fishing expedition, Mr McConnell referred me to Finnie v Dalglish [1982] 1 NSWLR 400 at 405 per Rath J:
"It will be noticed that a subpoena used for the purpose of discovery will be set aside, whether it is addressed to a stranger or a party. In either case the ground for setting the subpoena aside is oppressiveness, but the oppression arises in different ways. The courts have shown themselves concerned to protect the interests of a stranger, and to ensure that he is not unduly burdened with a time consuming and perhaps expensive search among his papers. With regard to a party there is a settled procedure for discovery of documents, and neither a party nor the court is to be subjected to the inconvenience of an irregular procedure."
[10] Rath J also observed at p 407:
"The central question is whether these subpoenas are oppressive in the sense that they place on the persons to whom they are addressed an obligation to form a judgment as to which of their documents relate to issues between the parties. In substance each subpoena requires the person to whom it is addressed to form a judgment as to the relevance of his papers to a subject matter. The subject matter is not stated in terms of an issue between the parties, and indeed there are presently no issues joined between the parties except in the broadest and most imprecise terms. On the authorities I think it is apparent that a subpoena is oppressive as requiring discovery when it requires the person to whom it is addressed to produce documents described as relating to a matter of fact that is capable of being an issue in the proceedings. A subpoena requiring such production is as oppressive upon the person to whom it is addressed, whether a stranger or a party, as a subpoena which describes the documents in terms of a defined issue in the proceedings".
[And see also The Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at 576.]
[11] It is apparent that in such cases as Finnie v Dalglish and Commissioner for Railways v Small, improper attempts were made to use subpoenas for fishing expeditions. In the Northern Territory, BF Martin CJ considered this practice in Mamone v Gagliardi [2002] NTSC 95, unreported, delivered 30 November 2000. His Honour held on the facts of that case:
"The production of the documents was secured not for evidence, but for the purpose of inspection to ascertain if they revealed any evidence. On their face, the subpoenas are not limited to documents which are relevant to any issue in the action (Waind v Hill [1978] 1 NSWLR 372)."
[12] The case before B F Martin CJ may be compared and contrasted with Giblin v Beach [2001] NTSC 67, unreported, delivered 9 August 2001, Bailey J. In that case, at para [20] I held:
"It is apparent that in Mamone, the defendants were improperly seeking to use subpoenas for a "fishing expedition" while avoiding the safeguards and opportunities for objection available to parties and non-parties provided for by O.32. I agree with the submissions of Mr Southwood that that is a very different situation from the present case. Here, there is no issue as to whether the four persons to whom the subpoenas were addressed are in possession of relevant medical records relating to the plaintiff."
[13] I also held (at para [24]) that there had been "… no attempt to circumvent O.32 (providing for non-party discovery). The subpoenas sought to be issued by the defendant are directed to securing evidence relevant to the … pleadings."
[14] The present case presents a somewhat different situation. Here the defendants are seeking evidence to tender upon their application to stay proceedings on the basis that the liquidator is in possession of relevant confidential information. In my view, based on the history of a five year professional relationship between Deloittes and Tipperary, the only reasonable and rational inference is that Deloittes is in possession of specific (ie relevant to the proceedings) and general confidential information of the defendants. There is no evidence as to the extent of any safeguards designed to stop such information coming to the notice of the liquidator.
[15] The distinction between the proper use of a subpoena and non-party discovery is summarised by Moffitt P in Waind v Hill and National Employers' Mutual General Association Ltd [1978] 1 NSWLR 372 at 381:
"As Jordan CJ pointed out in Small's case (1938) 38 SR (NSW) 564 at 574 and, as appears in Burchard's case [1891] 2 QB 241 at 247 there are at least two steps in the procedure of having a third party bring documents to court, and in their use thereafter. Indeed, on a correct view, there are three steps. The first is obeying the subpoena, by the witness bringing the documents to the court and handing them to the judge. This step involves the determination of any objections of the witness to the subpoena, or to the production of the documents to the court pursuant to the subpoena. The second step is the decision of the judge concerning the preliminary use of the documents, which includes whether or not permission should be given to a party or parties to inspect the documents. The third step is the admission into evidence of the document in whole or in part; or the use of it in the process of evidence being put before the court by cross-examination or otherwise. It is the third step which alone provides material upon which ultimate decision in the case rests. In these three steps the stranger and the parties have different rights, and the function of the judge differs.
Upon the first step the person to whom the subpoena is addressed may seek to, and have, the subpoena set aside on the ground that it was improperly issued and an abuse of the power to compel the production of documents in any one of a number of ways. Such a case 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, supra at 247 and Small's case, supra at 574 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 is 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. It does not follow, however, that because the party who issues a subpoena is unaware of the precise description of a particular document, or whether a particular document or documents is in the possession of the witness, or even whether it exists, or is unaware of its contents, that the subpoena, or even a subpoena in general terms, amounts to the use of the subpoena for the purpose of 'discovery'. To state it does involve a misconception of the different functions of discovery and of a subpoena for production. Of course, it may be that the terms of a subpoena are so wide that it is oppressive, but this is not because it is used for 'discovery' in the sense used in Small's case, supra at 564 and Burchard's case, but because it imposes an onerous task on a stranger to collect and produce documents many of which can have no relevance to the litigation. To require the branch of a bank to produce all cheques received by it in a particular year in order to find, if it exists, a cheque of the opponent in a false name would be oppressive, whereas, to require a hospital to produce its file in respect of the medical treatment of the opposing party would not. It is a misuse of terms to say the person who inspects the latter is using it for the purposes of discovery, because he is unaware of the contents of the documents or some of them. It is not in point to seek to define the excessive use of the subpoena."
[16] In the present case, I am satisfied that the defendants are not attempting to circumvent O.32 of the Supreme Court Rules and nor are the defendants engaged on some fishing expedition. The subpoena is necessarily drawn in wide terms because only Deloittes is in a position to know what information is in their possession concerning Tipperary.
I refuse the application to set aside the subpoena. I will hear the parties as to any restrictions on production of documents in accordance with the subpoena to protect the interests of Deloittes.