Hudson & Anor v Branir & Anor [2005] NTCA 5

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Hudson & Anor v Branir & Anor [2005] NTCA 5

PARTIES: HUDSON, Robert Ernest

and

BRUCE, Mark Baines

v

BRANIR PTY LTD

and

TOVEHEAD PTY LTD

TITLE OF COURT: COURT OF APPEAL OF THE NORTHERN TERRITORY

JURISDICTION: CIVIL APPEAL FROM THE SUPREME COURT EXERCISING TERRITORY JURISDICTION

FILE NO: AP6 of 2004 (20320300)

DELIVERED: 5 August 2005

HEARING DATES: 28 April & 27 May 2005

JUDGMENT OF: MARTIN (BR) CJ, THOMAS & RILEY JJ

CATCHWORDS:

PRACTICE AND PROCEDURE
Subpoena – appeal against decision of a judge dismissing an application to set aside a subpoena – non-party discovery – “fishing expedition” – abuse of process – whether a subpoena for documents to a non-party to a proceedings is an interlocutory order or a final order – leave required to appeal – purpose of a subpoena – whether interlocutory applications not directly related to principal action require resolution prior to principal action proceeding – definition of ‘proceeding’ in Supreme Court Act – onus of proof – application for stay of proceedings – whether the use of a subpoena to obtain documents relevant to an application for a stay is an abuse of the Court processes or inappropriate – “on the cards” test – general confidential information – “getting to know you” information – width of subpoena – subpoena cast its’ net too wide – subpoena is oppressive and an abuse of the process of court – subpoena amended – appeal upheld.

Interpretation Act (NT), s 18 and s 20
Supreme Court Act (NT) s 9(1), s 20, s 51(1), s 53 and s 86
Supreme Court Rules (NT) O 42.02(1)

Roads and Traffic Authority of New South Wales v Conolly (2003) 57 NSWLR 310 at 315, 318; Alister v The Queen (1984) 154 CLR 404, applied.
In the matter of an appeal by Luck (2003) 78 ALJR 177 at [4]; Brouwer v Titan Corporation Ltd (1997) 149 ALR 50 at 53, followed.
The Queen v Gray; ex parte Marsh (1981) 151 CLR 351 at 362; Marsh v Adamson (1985) 9 FCR 408; Finnie v Dalglish [1982] 1 NSWLR 400 at 407; Spencer Motor Pty Ltd v LNC Industries Ltd [1982] 2 NSWLR 921, considered.
Yunghans v Elfic (unreported, Victorian Supreme Court, delivered 3 July 1998) referred to.
Sent v John Fairfax Publication Pty Ltd [2002] VSC 429 at [67], distinguished.

REPRESENTATION:

Counsel:
Applicant: S Walsh QC
Respondent: J Wells QC

Solicitors:
Applicant: Morgan Buckley Lawyers
Respondent: Cridlands Lawyers

Judgment category classification: B
Judgment ID Number: Mar0513
Number of pages: 47

IN THE COURT OF APPEAL
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWIN

Hudson & Anor v Branir & Anor [2005] NTCA 5
No. AP6 of 2004 (20320300)

BETWEEN:

ROBERT ERNEST HUDSON
First Applicant

MARK BAINES BRUCE
Second Applicant

AND:

BRANIR PTY LTD
First Respondent

TOVEHEAD PTY LTD
Second Respondent

CORAM: MARTIN (BR) CJ, THOMAS & RILEY JJ

REASONS FOR JUDGMENT

(Delivered 5 August 2005)

Martin (BR) CJ:
Introduction
[1] This is an application for leave to appeal against a decision of a Judge dismissing an application to set aside a subpoena.

[2] Walker Nominees Pty Ltd (In liquidation) (Walker) is the plaintiff in an action against the respondents (“the principal action”). Walker seeks damages for breach of contract or alternatively restitution arising out of a failure to pay for work done on the land owned by the respondents and known as Tipperary Station.

[3] In 2001 partners of Deloitte Touche Tohmatsu (Deloittes), Chartered Accountants of Darwin, were appointed liquidators of Walker. The respondents contend that members of Deloittes should not act as liquidators in respect of the action against the respondents because for approximately five years until August 2003 Deloittes were retained by the respondents in a professional capacity as taxation and financial accountants. The relationship between Deloittes and the respondents ceased in August 2003, one month before Walker commenced the principal action against the respondents.

[4] By summons in the principal action dated 17 February 2004, the respondents sought an order that the proceedings be stayed while any partner or employee of Deloittes is a liquidator of Walker. The stay was sought on the basis that Deloittes, and consequently the liquidators, were in possession of confidential information relating to the respondents generally and specifically in connection with the principal action.
Subpoena – Ruling of Judge

[5] On 23 February 2004 the respondents filed a subpoena addressed to the applicants as partners of Deloittes seeking documents relating to Deloittes work as accountants for the respondents in the following terms:

“Schedule
1. All files, papers, writings, file notes, memoranda, letters, accounts, working papers, and all other documents relating to Deloitte Touche Tohmatsu, Darwin acting as the accountants, tax accountants, auditors and financial accountants of Branir Pty Ltd, Tovehead Pty Ltd, Tipperary Group of Companies, Tipperary Station and Tipperary Exports Pty Ltd, including but not limited to those documents relating to the claim by Walker Nominees Pty Ltd (“Walker”) against the defendants for the defendants’ alleged failure to pay for work done by Walker in or about October, November and December 2000 in the Northern Territory under a written agreement between the plaintiff and the defendants dated 1 September 2000 relating to the picking packing and transporting of mangoes on the land known as Tipperary Station.”

[6] The applicants applied to set aside the subpoena on the basis that it was too broad and amounted to a “fishing expedition”. After referring to relevant authorities and well settled principles governing the use of subpoenas, the learned Judge at first instance contrasted the improper use of a subpoena with the subpoena under consideration in the following terms:

“[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.”

[7] The Judge referred to a leading authority concerning the distinction between the proper use of a subpoena and non-party discovery. His Honour then expressed his conclusion as follows:

“[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.”

[8] In this Court the applicants submitted that the material before the Judge did not demonstrate that the subpoena was issued for a legitimate forensic purpose. Counsel contended that the subpoena amounted to a fishing expedition and was an abuse of process because it was not served bona fide for the purpose of obtaining evidence relevant to the principal action. In addition counsel argued that the process of a subpoena is inappropriate. The proper procedure is to take independent action against the liquidators seeking an injunction preventing the liquidators from continuing to act as the liquidators of Walker. If such proceedings were taken, a significant burden would rest upon the respondents to establish that the liquidators are in possession of relevant confidential information. If the respondents established that fact, the burden would shift to the liquidators to demonstrate that there are adequate safeguards in place to prevent misuse of that information. Counsel challenged the finding of the Judge expressed in para [14] cited earlier in these reasons and contended that there was no evidence capable of supporting the finding.

Jurisdiction – Nature of proceedings
[9] At the outset the respondents advanced a submission that this Court did not have jurisdiction to entertain an application for leave to appeal or an appeal. In substance the respondents contended that the applicants are not parties to proceedings in this Court for the purposes of the legislative provisions that confer either a right of appeal or a right to seek leave to appeal.

[10] The relevant provisions are ss 51(1) and 53 of the Supreme Court Act:

“51. Right of appeal
(1) Where the jurisdiction of the Court in a proceeding or a part of a proceeding was exercised otherwise than by the Full Court, the Master or a referee, a party to that proceeding may, subject to this Act, appeal to the Court from a judgment given in that proceeding or part, as the case may be.

53. Appeal from interlocutory judgment
A party to a proceeding may not appeal under section 51(1) from an interlocutory judgment except by leave of the Court of Appeal constituted by not less than 3 Judges.”

[11] The respondents submitted that to the extent that an application to set aside a subpoena might be viewed as a “proceeding” or “part of a proceeding”, it is not a proceeding “between parties”. The relevant proceeding between parties is the principal action between Walker and the respondents to which the applicants are not parties.

[12] “Proceeding” is defined in s 9(1) of the Supreme Court Act:

“"proceeding" means a proceeding in the Court whether between parties or not, and includes –
(a) a cause, action, suit or matter;
(b) an incidental proceeding in the course of, or in connection with, a cause, action, suit or matter;
(c) a criminal proceeding, where the context so permits; and
(d) an appeal;”

[13] The application by the applicants to set aside the subpoena is “an incidental proceeding in the course of, or in connection with” the principal action. The parties to that “incidental proceeding” are the applicants and the respondents. Either s 51(1) or s 53 applies to confer on the applicants a right of proceeding in this Court and this Court has jurisdiction to entertain the appropriate proceeding instituted by the applicants.

[14] As to the nature of the proceedings in this Court, the respondents submitted that the order of the Judge was an interlocutory order and, pursuant to s 53, leave of this Court is required. Counsel for the applicants argued that on the assumption that the subpoena was issued in connection with the application to stay the principal action, as the applicants are not party to the principal action the only cause of action between the applicants and the respondents is the application to set aside the subpoena. In connection with that cause of action between the applicants and the respondents, the order of the Judge refusing to set aside the subpoena finally determined the rights of the parties and, therefore, was a final and not an interlocutory order. Thus the applicants possess a right of appeal pursuant to s 51(1) rather than a right to seek leave of the Court pursuant to s 53.

[15] The fundamental principle is not in doubt. As McHugh ACJ, Gummow and Heydon JJ explained in a joint judgment in In the matter of an appeal by Luck (2003) 78 ALJR 177 at [4]:

“… the usual test for determining whether an order is final or interlocutory is whether the order, as made, finally determines the rights of the parties in a principal cause pending between them. That question is answered by determining whether the legal effect of the judgment is final or not [Carr v Finance Corporation of Australia Ltd [No 1] (1981) 147 CLR 246 at 248, 256]. If the legal effect of the judgment is final, it is a final order; otherwise, it is an interlocutory order.”

[16] On the assumption that the applicants are not parties to the principal action, there is a superficial attraction in the submission that the order of the Judge refusing to set aside the subpoena finally determined the rights of the applicants and the respondents in the “principal cause” between them. However, authorities stand in the way of that view.

[17] In The Queen v Gray; ex parte Marsh (1981) 157 CLR 351, the High Court was concerned with an application before the Federal Court for an enquiry into irregularities which were alleged to have occurred in connection with union elections. In the Federal Court proceedings subpoenas were issued and applications were made to set aside the subpoenas. In a judgment with which Mason, Wilson and Dean JJ agreed, Gibbs CJ rejected the proposition that the application to set aside the subpoenas was a separate proceeding which arose in proceedings commenced by the subpoenas themselves. In rejecting that proposition, Gibbs CJ said (362):
“The issue of the subpoenas and the motion to set them aside were steps in the existing proceeding for an inquiry …”

[18] The same view had been taken by the Full Court of the Federal Court: Marsh v Adamson (1985) 9 FCR 408.

[19] In Brouwer v Titan Corporation Ltd (1997) 149 ALR 50, a subpoena had been issued to a stranger in the proceedings and a Judge of the Federal Court had rejected a claim for public interest immunity in respect of documents that were the subject of the subpoena. On a purported appeal against the decision of the Judge, and after considering the decisions to which I have referred, the Full Court of the Federal Court held that the order of the Judge was an interlocutory and not a final order (53):
“It would seem to follow that, if a subpoena is issued to a stranger to existing proceedings, and, as occurred in the present case, an order is made requiring a stranger to produce documents to the court, the order does not “finally determine the rights of the parties” for the purposes of the notion of a “final” order.”

[20] Later in the judgment the Full Court observed that there are sound policy reasons to support the classification of the orders made at first instance as interlocutory in character. The Court described the issue of the subpoena as a “procedural step in the existing proceedings” and a decision in relation to the subpoena as a “paradigm case of an interlocutory judgment.”

[21] In my opinion, even if the applicants are regarded as strangers to the principal action, for the purposes of determining whether the order of the Judge was a final or interlocutory order, the application to set aside the subpoena is not the “principal cause pending between” the applicants and the respondents. It is a step in the existing proceeding, namely, the principal action.

[22] There is an additional reason why, in my view, the order of the Judge is an interlocutory order. Although the plaintiff in the principal action is Walker and not Deloittes, for all relevant purposes the liquidators of Walker are the mind and controllers of Walker. The liquidators are partners of Deloittes. The subpoena was directed to individuals in their capacity as partners of Deloittes. In substance, therefore, the action before the Judge with respect to the subpoena was an action between the respondents and the partners of Deloittes, including those partners who are liquidators of Walker.

[23] In these circumstances, in my opinion for the purposes of determining whether the order refusing to set aside the subpoena is interlocutory or final, the “principal cause” is the principal action between Walker and the respondents. As the application to set aside the subpoena is not the “principal cause”, the order of the Judge was an interlocutory order because it did not finally determine the rights of the parties in the “principal cause”. This conclusion is consistent with the policy underlying the distinction between final and interlocutory orders. Leave to appeal is required.

[24] In the particular circumstances under consideration, even if I am wrong and the applicants possess a right of appeal, as will appear later in these reasons in my opinion the outcome would not be affected.

Subpoena – Purpose
[25] The subpoena was issued in the principal action in which Walker seeks recovery of monies said to be owing by the respondents to Walker. The applicants submitted that a subpoena in such an action must seek the production of documents relevant to the issues in that principal action. There must be a legitimate forensic purpose relating to the principal action and a reasonable chance that the documents sought by the subpoena will further that purpose. Counsel emphasised that it is inappropriate to use a subpoena as a substitute for discovery.

[26] In my opinion the Judge was correct in concluding that there was no basis for a finding that the subpoena was issued by way of a fishing expedition or as a means of obtaining discovery in the principal action. The subpoena was not issued for the purpose of obtaining documents in connection with the trying of the principal action. It was issued in connection with and for the purpose of furthering the application by the respondents for a stay of the principal action. The subpoena sought documents relevant to that stay application. In essence the stay was sought on the basis that Deloittes and, therefore, the liquidators are in possession of information confidential to the respondents in relation to the principal action. The subpoena was issued for the production of documents relevant to the central question in the stay application, namely, the possession by Deloittes of such confidential information.

Subpoena – Order 42
[27] Order 42.02(1) of the Supreme Court Rules provides for the issuing of a subpoena by the court in the following terms:

“(1) In a proceeding the court may, by subpoena, order that a person named attend at the trial or at any other stage of the proceeding for the purpose of giving evidence or of providing a document or thing for evidence, or for both purposes.”

[28] The applicants submitted that O 42.02(1) authorises the issue of a subpoena only if the subpoena requires production of documents relevant to the issues in the principal action. It does not authorise the issue of a subpoena in connection with a purpose collateral to the issues in the principal action, namely, an application to stay the principal action.

[29] The interpretation for which the applicants contended would be a very narrow construction of O 42.02(1). I am unable to discern any reason why such a narrow construction should be applied. To the contrary, O 42.02(1) contemplates the use of a subpoena to require the giving of evidence or the production of documents at a stage of the proceedings other than the trial. The Rule contemplates the use of a subpoena for these purposes in connection with the numerous types of interlocutory proceedings that frequently occur as part of the pre-trial processes. Such interlocutory applications may not be directly relevant to the issues between the parties in the principal action, but may relate to incidental or collateral matters which require resolution before the principal action proceeds. For example, a party may apply for security for costs and on that collateral issue might seek the issue of a subpoena directed to a financial institution for the purposes of establishing that the opposing party is impecunious. If the applicant’s contention is correct, O 42.02(1) would not authorise the issue of a subpoena for that purpose.

[30] In addition to the considerations to which I have referred, regard must be had to the fact that O 42.02(1) authorises the issue of a subpoena in a “proceeding”. That word is not defined in the Rules, but for the reasons that follow in my view the definition of “proceeding” in the Supreme Court Act which is cited at par [12] of these reasons applies to the Supreme Court Rules.

[31] Section 20(1) of the Interpretation Act provides as follows:

“(1) Words, expressions and provisions contained in an instrument of a legislative or administrative character made, granted or issued under or in pursuance of an Act shall have the same interpretation, application and effect as in that Act.

[32] For the purposes of s 20(1), “instrument of a legislative or administrative character” is defined in s 18 of the Interpretation Act as including written rules made or issued under a power conferred by an Act. The Supreme Court Rules are made under the Supreme Court Act and pursuant to the power granted in s 86 of that Act. As a consequence of s 20 of the Interpretation Act, therefore, the word “proceeding” in the Supreme Court Rules has the same interpretation and effect as that word in the Supreme Court Act.

[33] The definition of “proceeding” found in s 9(1) of the Supreme Court Act applies to O 42.02(1). A subpoena may be issued in respect of an incidental proceeding in the course of or in connection with the principal action. The application to stay the principal action is plainly such an “incidental proceeding”.

Other Options
[34] The applicants also submitted that in the circumstances use of a subpoena in connection with the stay application is inappropriate. Counsel urged that the appropriate course for the respondents is to take separate proceedings against the liquidators seeking an injunction restraining the liquidators from continuing to act as liquidators of Walker in the principal action. In those circumstances a burden would rest upon the respondents to prove that the liquidators are in possession of relevant confidential information. Upon such proof, an evidential burden would shift to the liquidators to establish that appropriate precautions have been and are in place to prevent the conveyance of relevant confidential information from Deloittes to the liquidators. Counsel contended that the effect of the proceedings by way of subpoena is to improperly reverse the onus of proof by imposing on the liquidators the burden of establishing the appropriate grounds of objection to the subpoena.

[35] The propositions advanced by the applicants raise a number of practical issues which it is unnecessary to explore. Undoubtedly it was and is open to the respondents to proceed in the manner for which the applicants contend. However, the capacity of the respondents to seek an injunction is not a bar to the respondents choosing to adopt an alternative course of action that is properly available to the respondents. Proceeding by way of an application for a stay of the proceedings while partners of Deloittes remain as liquidators of Walker is a legitimate course open to the respondents. In that cause of action the respondents are entitled to avail themselves of the procedures of the Court applicable to that cause of action.

[36] As to the suggestion that the use of a subpoena is unfair to the applicants, it is appropriate to bear in mind that, at the outset, a burden rests upon the respondents to demonstrate a proper basis for the issue of the subpoena. Secondly, if the documents produced disclose the existence of relevant confidential information, the applicants will have the opportunity of demonstrating either that the nature of such information does not justify a stay of the principal action or that adequate procedures are in place to prevent that information from coming to the notice of the liquidators.

[37] In my opinion, there is no basis for a conclusion that the respondents have acted improperly or inappropriately in seeking a stay of the proceedings. Whether that application will prove to be well founded on the merits is not an issue for this Court. The point raised by the application is arguable. In these circumstances the use of a subpoena to obtain documents relevant to the application for a stay is not an abuse of the Court’s processes. Nor is it inappropriate. There is a legitimate forensic purpose for which the documents are sought: Roads and Traffic Authority of New South Wales v Conolly (2003) 57 NSWLR 310.


Fishing or on the cards
[38] Although there is a legitimate forensic purpose which the respondents seeks to achieve through the issue of the subpoena, namely, the production of documents relevant to the application for a stay of the principal action, it is also necessary to consider whether the subpoena is merely a fishing exercise in the hope of obtaining documents relevant to that purpose. In the context of the criminal law, reference is often made to the decision of the High Court in Alister v The Queen (1984) 154 CLR 404 and to the observation of Gibbs CJ that in contrast to the impermissible fishing expedition, it might be sufficient if it appears to be “on the cards” that the documents sought will be relevant to an issue raised by the accused.

[39] In Roads and Traffic Authority v Conolly, after discussing the New South Wales decision of R v Saleam (1989) 16 NSWLR 14 in which the Court referred to Alister, Adams J made the following observations (315):

“However, the obligation on the party calling on a subpoena to produce documents is “to identify expressly and precisely the legitimate forensic purpose for which access to the documents is sought” … . Where that is done, I do not think that it is necessary that the party needs to demonstrate more than that there is a reasonable chance that the documents in question will serve purpose so specified. In Commissioner of Police v Tuxford, Brownie A-JA (which whom the other members of the court agreed) pointed out (at [27]) that a fishing expedition is one in which a party is “endeavouring not to obtain evidence to support their case, but to discover whether they had a case at all, or to discover the nature of the case of the defendant.” If I may respectfully say so, this observation is as important as it is correct. A suspicion or belief of a party, stated from the bar table, that the documents called for would assist that party’s case where there was nothing in the pleadings or the evidence supporting such a statement is not a sufficient identification of the forensic purpose: “practically speaking, the opponents left it to us [the Court] to work out for ourselves what the document called for might show” Brownie A-JA (at [28]) and accordingly, no proper basis for access was demonstrated.” (citation omitted and my emphasis).
[40] Adams J considered a number of authorities and referred to the definition of “on the cards” in the Oxford English Dictionary, 2nd Ed (1989) Oxford, as meaning “within the range of probability”. His Honour then made the following observations (318):
“Accepting this [the Oxford definition] to be so, it seems to me that the relevant “range” is therefore between the barely probable and the highly probable. With respect, it seems to me that this area of the law is bedevilled with metaphors. I think the essential notion is that there is a reasonable chance that the material sought will assist the defence. If it is reasonable to infer that the material sought exists, and that it is relevant to an issue, though its content is unknown, it will almost invariably be logically the case (as it seems to me) that such a chance exists, even though it might be thought to be unlikely. Seeking that material therefore seems to me to be a legitimate forensic purpose, providing of course that the factual issues and the character of the material sought are precisely identified.” (my emphasis)

[41] In my view, there is considerable force in the remarks of Adams J. There may be little difference between the “on the cards” test and a test expressed as “a reasonable chance that the documents in question will serve the purpose so specified”. Excessive refinement should be avoided. The Court must apply a practical test which is sound in principle and fair to the parties. In my view, either formulation satisfies those criteria.

Evidence
[42] The only evidence upon which the respondents rely is found in the affidavit of the respondents’ solicitor, Mr Cameron Ford, and the attachments to the affidavit. In summary, the relevant facts and assertions are as follows:

(i) From about 1998 until August 2003 Deloittes were the accountants, auditors and tax accountants of the respondents.
(ii) At all material times, the respondents were in partnership with each other trading as Tipperary Group of Stations.
(iii) On about 13 June and 15 August 2003 DPC Tipperary Pty Ltd (“DPC”) purchased the shares in the respondents from the two previous shareholders. It was a term of the purchase that prior to settlement the vendors would provide DPC with the audited accounts of the respondents and other associated entities as at 31 December 2002.
(iv) For the purposes of the sale agreement, by a report dated 20 June 2003, Deloittes provided to the respondents an “independent audit report” of the respondents’ financial accounts for the financial year ended 31 December 2002.
(v) Mr John Vereker is a Director of the purchaser, DPC. He informed Mr Ford that during the course of obtaining the accounts of the respondents he spoke by telephone on a number of occasions with Mr Mark Bruce, a member of Deloittes, who informed Mr Vereker that he was the person in Deloittes principally involved in preparing the accounts and in performing accounting work for the respondents. Mr Ford asserts that at all material times Mr Bruce worked in the Darwin office of Deloittes where there are five partners, members or principals of the firm including two who are the liquidators of Walker.
(vi) The scope and process of the independent audit report is described in the report in the following terms:
“Scope
We have audited the attached financial report, being a special purpose financial report, of Tovehead Pty Limited & Branir Pty Limited [the Partnership] trading as Tipperary Group of Stations for the financial year ended 31 December 2002 as set out on pages 7 to 21. The partners are responsible for the financial report and have determined that the accounting policies used and described in Note 1 to the financial statements are appropriate to their needs. We have conducted an independent audit of the financial report in order to express an opinion on it to the partners of Tovehead Pty Limited & Branir Pty Limited [the Partnership] trading as Tipperary Group of Stations. No opinion is expressed as to whether the accounting policies used, and described in Note 1, are appropriate to the needs of the partners.
The financial report has been prepared to satisfy the partners’ information needs. We disclaim any assumption of responsibility for any reliance on this audit report or on the financial report to which it relates to any person other than the partners, or for any purpose other than that for which it was prepared.
Our audit has been conducted in accordance with Australian Auditing Standards. Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial report and the evaluation of significant accounting estimates. These procedures have been undertaken to form an opinion whether, in all material respects, the financial report is presented fairly in accordance with the accounting policies described in Note 1 to the financial statements. These policies do not require the application of all Accounting Standards and other mandatory professional reporting requirements in Australia.
The audit opinion expressed in this report has been formed on the above basis.” (my emphasis)
(vii) The notes to the financial statements include a note as to contingent liabilities in the following terms:
“14. Contingent Liabilities
A legal matter relating to transactions with a supplier is unresolved at the time of this financial report. The entity has a counterclaim against the partnership. The extent of an outflow of funds for the counterclaim is unknown and is dependable on the outcome of the legal matter. The recoverability of the amount recorded in Trade Receivables, of $63,322 is also dependent on the outcome of this legal matter.”
(viii) The “legal matter” identified as the contingent liability is the claim by Walker in the principal action.
(ix) Mr Vereker informed Mr Ford that in December 2003 he and others met with Mr Bruce and a Mr Robert Hudson, another partner, member or principal of Deloittes who worked in the Darwin office. According to the information given to Mr Ford, during the course of that meeting, and from other conversations between Mr Vereker and Mr Bruce, Mr Vereker formed the view that both Mr Bruce and Mr Hudson were very familiar with the affairs of the respondents.
(x) Mr Vereker informed Mr Ford that he is of the view that Deloittes have possession of confidential information of the respondents relating to the principal action together with information concerning the financial affairs of the respondents and as to the general attitude, approach, philosophies, and capabilities of the respondents.

[43] In the absence of evidence to the contrary, the following matters are tolerably clear:

(i) For approximately five years until August 2003 Deloittes were the accountants, auditors and financial advisers of the respondents. During that time members of Deloittes became very familiar with the financial affairs of the respondents. There is no evidence that the individual members who are now the liquidators were personally involved in the affairs of the respondents.
(ii) The written agreement upon which Walker relies in the principal action against the respondents is said to be dated 1 September 2000 and to relate to work done by Walker for the respondents in the period October to December 2000. At that time Deloittes were the accountants and advisers of the respondents.
(iii) When partners of Deloittes were appointed liquidators of Walker in 2001, it was the duty of the liquidators to become familiar with the financial circumstances of Walker. In that process the liquidators would have become aware of the monies said to be owing by the respondents to Walker being the subject matter of the principal action. In the course of managing the affairs of Walker, the liquidators would have been obliged to gather information relevant to the principal action and to its prospects of success and to have made an assessment in that regard.
(iv) While partners of Deloittes were conducting the affairs of Walker as liquidators, another partner or partners of Deloittes was providing financial services to the respondents. In particular, the existence of the claim by Walker in the principal action was known to partners of Deloittes providing financial services to the respondents prior to the sale of the shares in the respondents to DPC in mid 2003.
(v) In auditing the financial accounts of the respondents and providing the independent audit report dated 20 June 2003, it was the duty of those persons conducting the audit to identify the existence of the contingent liability and to make an assessment of it. On the assumption that a partner or partners of Deloittes conducted the audit, Deloittes owed that duty to the respondents.
(vi) The degree to which the contingent liability was assessed is uncertain, but it is a reasonable inference that by reason of their position as advisers and tax accountants for the respondents, coupled with their responsibilities in preparing the independent audit, Deloittes are likely to have been given information relating to the principal action, including information confidential to the respondents. At the least, there is a reasonable chance or it is on the cards (“a reasonable chance”) that such information was given to Deloittes.
(vii) In its report of 20 June 2003 Deloittes identified that it was required to undertake an evaluation of significant accounting estimates and to form an opinion whether, in all material respects, the financial report was presented fairly. The writ which was subsequently filed on 29 September 2003 discloses a claim by Walker for $374,011.00. It is a reasonable inference that Deloittes were aware of the size of the claim as well as the potential for the incurring of significant legal costs in connection with the claim. While there is a possibility that as auditors Deloittes merely repeated assertions by directors or managers of the respondents as to the contingent liability without seeking or being provided with any view of the prospects of the respondents in connection with that liability, given the role of Deloittes both as accountants for the respondents and as independent auditors of the financial accounts, it appears unlikely that Deloittes would not have sought and been given additional information including opinions as to the respondent’s prospects of success or otherwise with respect to the contingent liability. At the least there is a reasonable chance that such information was given. There is also a reasonable chance that such information was recorded by Deloittes.

[44] This is not a case in which Deloittes ceased acting many months before the claim in the principal action became a live issue in the affairs of the respondents. As I have said, the claim in the principal action dates back to work said to have been performed in 2000. The alleged debt would have been recorded as a debt in the financial records of Walker when the liquidators were appointed in 2001. The claim was a sufficiently live issue for the respondents in the financial year ended 31 December 2002 to be included as a note of a contingent liability in the audit report dated 20 June 2003. It was only in August 2003 that Deloittes ceased to act for the respondents and on 29 September 2003 members of Deloittes, as liquidators of Walker, issued the writ in the principal action.

[45] In my opinion this overview of the relevant facts demonstrates that the conclusion of the Judge was well justified. In my view the Judge was correct in refusing to set aside the subpoena on the grounds to which I have referred. Even if the applicants possessed a right of appeal, I would have dismissed the appeal to the extent that it is based upon those grounds.

[46] There is a further feature arising from correspondence upon which counsel for the respondents relied as demonstrating the possession by Deloittes of relevant confidential information. Following the issue of the subpoena, solicitors for the partners of Deloittes, with the exception of those partners who are the appointed liquidators of the plaintiff, wrote to solicitors for the respondents by letter dated 5 March 2004 in the following terms:

“The liquidators’ solicitors have informed us that they are unwilling or unable to defend the stay application. This is due to the fact that were the liquidators to be involved in the hearing of the stay application or in the production and inspection of the documents under subpoena, they would unavoidably become privy to any confidential information that may exist, which would oblige them to resign. In effect, they cannot participate in these interlocutory proceedings.” (my emphasis)

[47] The respondents submit that when the letter is viewed in its entirety, it represents an acknowledgement by the partners of Deloittes, other than those appointed liquidators of Walker, that the concerns expressed by the solicitors for the liquidators about the possible existence in the files of Deloittes of relevant confidential information is a valid concern. In effect it amounts to an admission by those partners that there is a reasonable chance that relevant confidential information exists within the documents sought by the subpoenas.

[48] In addition, counsel for the respondents contended that the following observations in a letter of 9 March 2004 from solicitors for the liquidators to solicitors for the remaining partners of Deloittes amounts to an admission by the liquidators that there is a reasonable chance that relevant confidential information exists in the documents sought by the subpoena:

“We are instructed that Deloitte, following the appointment of the liquidators to Walker Nominees, implemented internal procedures designed at preventing any information relating to Tipperary Station being passed from the other partners to the liquidators.
The proper defence of the stay application is likely to require an examination of the nature of any information passed from Tipperary Station to Deloitte and the bearing, if any, that information has on the claim in the Supreme Court. If the liquidator, his officers, or solicitors were to be involved in the defence of the stay application, then the information is likely to become known to them, thus circumventing the procedures referred to above.”

[49] In my view the correspondence to which I have referred demonstrates a concern held by the partners of Deloittes, including those appointed liquidator, that relevant confidential information of the respondents relating to the principal action could well exist in the documents sought by the subpoena. The existence of that concern adds weight to my conclusion that the respondents have made out a case for the issue of the subpoena.

General Confidential Information
[50] The respondents also relied upon what counsel described as the “getting to know you” features of the relationship between Deloittes and the respondents relevant to questions of strategy and tactics. Counsel referred to the observations of Gillard J in Yunghans v Elfic (unreported, Victorian Supreme Court, delivered 3 July 1998) (approved by Nettle J in Sent v John Fairfax Publication Pty Ltd [2002] VSC 429 at [67]):

“The degree of particularity of the confidential information must depend upon all the circumstances. Often, it cannot be identified for fear of disclosure. In considering this factor it must be borne in mind that a solicitor makes notes, forms views and opinions of clients and observes things that the client may have forgotten or overlooked. In some cases, the circumstances of the retainer and the nature of the legal work will be sufficient to establish the nature of the confidential information. In this regard, the relationship between solicitor and client may be such the solicitor learns a great deal about his client, his strengths, his weaknesses, his honesty or lack thereof, his reaction to crisis, pressure or tension, his attitude to litigation and settling cases and his tactics. These are factors which I would call the getting to know you factors. The overall opinion formed by a solicitor of his client as a result of his contact may in the circumstances amount to confidential information that should not be disclosed or used against the client.”

[51] The Judge appears to have reached the view that it was a reasonable and rational inference that Deloittes were in possession of “general confidential information”, as well as specific confidential information relevant to the principal action. In my opinion, however, there is a paucity of material before this Court with respect to details of the relationship between Deloittes and the respondents. For example, no evidence has been led from the former shareholders and Directors of the respondents as to whether their relationship with members of Deloittes was a formal relationship limited purely to preparation of accounts for taxation purposes or whether it extended to the giving of financial advice generally and as to particular aspects of the respondents’ business affairs. Similarly, there is no evidence as to whether Deloittes had a close relationship or otherwise with employees of the respondents such as those in charge of the financial records of the respondents. In addition, the control of the respondents shifted in August 2003 to new shareholders and directors.

[52] In these circumstances, there is no evidence upon which to base a conclusion as to whether Deloittes has learnt details of the respondents of the type discussed by Gillard J in Elfic or whether the respondents have formed an overall opinion of a type that could amount to confidential information about the respondents generally or in connection with the principal action. In my view the respondents have failed to demonstrate that the issuing of the subpoena would be justified on the basis that there is a reasonable chance that the documents contain relevant confidential information of the “getting to know you” type existing in the documents sought.

Width of Subpoena
[53] The subpoena is not limited to documents relevant to the critical issue on the stay application, namely, the possession by Deloittes of confidential information relevant to the principal action. The subpoena includes such documents, but also encompasses all documents relating to Deloittes acting as accountants, tax accountants, auditors and financial accountants of the respondents during the entire retainer of approximately five years.

[54] This is not a case in which the objection to the subpoena is based upon the terms of the subpoena requiring a stranger to form the judgment as to the relevance of the documents in the stranger’s possession thereby resulting in the subpoena being oppressive: Finnie v Dalglish [1982] 1 NSWLR 400 at 407. It does not necessarily follow that such a judgment is required or that the subpoena is otherwise oppressive merely because the subpoena requires the production of all documents “relating to” Deloittes acting for the respondents: Spencer Motor Pty Ltd v LNC Industries Ltd [1982] 2 NSWLR 921. The critical question is whether there is a sound basis for requiring the production of all documents in connection with Deloittes acting for the respondents over a period of approximately five years or whether the subpoena should be limited to those documents that relate to the principal action.

[55] If the respondents had made out their case that there is a reasonable chance that documents other than those relating to the principal action contain relevant confidential information of the “getting to know you” type, I would not have interfered with the decision of the Judge. As I have said, however, in my view the respondents have not made out that case. In these circumstances, I have reached the view that the subpoena has cast its net too wide. To the extent that the subpoena seeks the production of documents other than those relating to the principal action, the subpoena is oppressive and an abuse of the processes of the Court. On this limited basis the applicant should succeed.

[56] As to the consequences of a finding that the subpoena is oppressive and an abuse of the processes of the Court, on one view the appropriate course would be to grant leave to appeal, allow the appeal and order that the subpoena be set aside. This would require the respondent to issue a further subpoena. Alternatively, this Court could direct that the subpoena be amended in order to limit its scope to production of the documents relating to the claim that is the subject of the principal action.

[57] It appears that the Judge had in mind hearing further submissions concerning the scope of the subpoena and whether any limitation should be imposed with respect to the document sought. The substantial issue argued before the Judge and on appeal concerned the claim by the applicant that the subpoena should be set aside in its entirety. This was the claim rejected by the Judge and by this Court.

[58] In all the circumstances, in my view the appropriate course is to grant leave to appeal and allow the appeal to the limited extent of directing that the subpoena be amended by deleting the following words:
“Deloitte Touche Tohmatsu, Darwin, acting as the accountants, tax accountants, auditors and financial accounts of Branir Pty Ltd, Tovehead Pty Ltd, Tipperary Group of Companies, Tipperary Station and Tipperary Exports Pty Ltd, including but not limited to those documents relating to”.
Thomas J:

[59] This is an appeal from a decision of Bailey J delivered on 14 May 2004 refusing an application to set aside a subpoena. The decision was delivered in the course of an application to stay the proceedings in the substantive matter of Walker Nominees Pty Ltd (In Liquidation), plaintiff and Branir Pty Ltd, first defendant, Tovehead Pty

Ltd, second defendant.
[60] The background to the application for a stay of proceedings is set out in the opening paragraph of reasons for judgment delivered by Bailey J.

[61] The plaintiff in the substantive claim is Walker Nominees Pty Ltd (In Liquidation). The liquidator of the plaintiff company is a partner of Deloitte Touche Tohmatsu (“Deloittes”).

[62] Deloittes were the accountants, advisers and auditors of the defendants Branir Pty Ltd and Tovehead Pty Ltd (“Tipperary”) for a period of five years prior to approximately August 2003.

[63] In or about 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 approximately $375,000.

[64] 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 of the Supreme Court granted a temporary stay of the proceedings pending resolution of Tipperary’s stay application.

[65] On 23 February 2004, Tipperary filed a subpoena addressed to two partners of Deloittes, Robert Ernest Hudson and Mark Baines Bruce, 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.

[66] His Honour outlined the argument put forward on behalf of Deloittes, the appellants in the proceedings before this Court, as to the basis of the application to set aside the subpoena. This was essentially because the subpoena was too broad and amounted to a fishing expedition. His Honour canvassed the law relevant to the proper use of a subpoena and in particular the distinction between the proper use of a subpoena and non party discovery as summarised by Moffitt P in Waind v Hill and National Employers’ Mutual General Association Ltd (1978) 1 NSWLR 372 at 381. He noted that the defendant (Tipperary) were seeking evidence to tender upon their application to stay proceedings on the basis that the liquidator is in possession of relevant confidential information. Bailey J then went on to say:

“… 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.”

[67] His Honour then concluded by saying:

“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.”

[68] On the appeal before this Court, Mr Walsh QC appeared on behalf of the appellants. The appellants appeal against the decision delivered on 14 May 2004, on the basis that the learned trial judge erred in law, in failing to set aside the subpoena addressed to the appellants, as an abuse of process.

[69] The appellants seek an order that the subpoena addressed to the appellants be set aside and also seek an order for costs.

[70] Mr Walsh QC argued that the subpoena is an abuse of process for a number of reasons.

[71] Firstly it was submitted this is because the use of the subpoena is for a collateral purpose. It is not a purpose that relates to the issues between the plaintiff and the defendant in the principal action. It is an issue that is said to exist between the defendants to the proceeding and their accountants. The appellants’ maintain that if this were made out it would entitle the defendants to an injunction preventing the accountant from continuing to act. It is Mr Walsh’s argument that the collateral purpose in seeking the stay is to have the liquidator removed. There is no application to remove the liquidator nor is there an injunction application to stop the person from continuing to act. It is the submission for the appellant that what should be done where there is a collateral issue between the person who is representing a party to an action, whether the person be a lawyer or a liquidator, the action should be against that person, injuncting them from continuing to act.

[72] The effect of the stay of proceeding is that Walker Nominees (in Liquidation) is prevented from prosecuting its claim.

[73] It is Mr Walsh’s argument that the issuing of the subpoena is a fishing expedition and that the respondents are circumventing the burden that is upon them to show that there is confidential information by way of a direct attack on the accountants. The submission, on behalf of the appellants, is that the process should have been a direct challenge to the liquidator.

[74] It is the position of the appellants that the inference drawn by Bailey J from the affidavit material before him was not reasonably open in the context that it was in truth a burden on the person asserting the confidence to show that there was in fact a likelihood of some confidential information having been given.

[75] Reference was made to the affidavit of Cameron Ford sworn 17 February 2004 and the annexed independent audit report to the partners of the business Tovehead and Branir Pty Ltd, a partnership trading as Tipperary Group of Stations stating “We have audited the attached financial report, being a special purpose financial report of Tovehead & Branir, trading as Tipperary Group for the financial year 31 December 2002”. Mr Walsh disputes that merely because accountants prepare financial returns or alternatively provide an audit of financial return, does not necessarily mean that those accountants would have any knowledge of a particular transaction that might be referred to in the accounts.

[76] Mr Walsh QC maintained there were a number of breaches by the issuing of a subpoena: (1) an improper process, (2) fishing, (3) request for documents at large that do not relate to the primary proceedings.

[77] Mr Walsh QC pointed out that the accountants ceased to act for the defendants in about August 2003 and that at about the same time the shareholding was transferred to different shareholders. The appellant contends that the guiding mind of the defendant companies is no longer the same because of the transfer of the shareholding to different shareholders. I do not accept the submission that because the shareholding has changed that affects the fact that the guiding mind of the defendants, being the respondents to this appeal, is the liquidator, namely Deloittes.

[78] Counsel for the appellant then took the Court to some of the evidence. In a letter from Tipperary Group of Stations to Mr R.E. Hudson dated 16 January 2004 Annexure “F” to the affidavit of Mr Ford sworn 18 February 2004:

“Finally, you would (certainly Mark Brucke [sic] would be aware) the audited financial statements were finally produced prior to completion and made available for Rodney Illingworth to collect from your office so as we could satisfy ourselves as to the correctness of certain Balance Sheet items. It was upon this basis, and having consideration for other matters we settled with the Bakrie Group and with Warren Anderson/Owston Nominees No 2 Pty Ltd.”
and:
“The questions we raised at our recent meeting remain the same and we request you furnish answers to those questions without delay.
Furthermore, please do not hold our files any longer we request that they be forwarded to Laurie Cogger immediately so as we may assess our legal and taxation position.”
Copy of a letter from Morgan Buckley to Cridlands dated 14 April 2004 is Annexure “B” to the affidavit of Mr Ford sworn 15 April 2004 stating reasons to have the subpoena set aside.
“1. The subpoena is a fishing expedition. On our review of the Court documents filed to date the Defendants have not established a proper basis for the application for a stay pending resignation of the liquidator. The subpoena is plainly an attempt by the Defendants to obtain evidence for the purpose of seeing whether the Defendants have a case. Such a purpose is impermissible.”
In a letter from Minter Ellison to Morgan Buckley dated 9 March 2004, being Annexure “B” to the affidavit of Duncan Charles McConnel sworn 10 March 2004, appears the following statement:
“We are instructed that Deloitte, following the appointment of the liquidators to Walker Nominees, implemented internal procedures designed at preventing any information relating to Tipperary Station being passed from the other partners to the liquidators.
The proper defence of the stay application is likely to require an examination of the nature of any information passed from Tipperary Station to Deloitte and the bearing, if any, that information has on the claim in the Supreme Court. If the liquidator, his officers, or solicitors were to be involved in the defence of the stay application, then the information is likely to become known to them, thus circumventing the procedures referred to above”

[79] A letter from Cridlands to Morgan Buckley on 28 April 2004 being Annexure “A” to the affidavit of Mr McConnel sworn 29 April 2004:

“The present owners of the defendants are in the difficult position of not knowing exactly what Deloittes were told, what documents Deloittes were given by the previous owners or obtained from other sources, what documents Deloittes produced and what information or advice Deloittes provided.
The purpose of the subpoena is to get these documents before the court so the court can see what your clients know, not only about the dispute between the plaintiff and defendants, but also about our clients generally. The cases make it clear that it is not only the specific information about the instant dispute that is confidential, but also general information about the nature and character of the party seeking to preserve confidential information.”
paragraph 3:
“While our clients have not yet pursued a claim for misrepresentation against your clients, neither have your clients taken any action to recover the fees alleged to be owing. In any case, we suggest that the production of the documents to the court and our inspection of them would not defeat any lien claimed. It is not the purpose of the subpoena to investigate any claim associated with the fees.”

[80] Mr Walsh QC then referred to the schedule to the subpoena as produced:

“All files, papers, writings, file notes, memoranda, letters, accounts, working papers, and all other documents relating to Deloitte Touche Tohmatsu, Darwin acting as the accountants, tax accountants, auditors and financial accountants of Branir Pty Ltd, Tovehead Pty Ltd, Tipperary Group of Companies, Tipperary Station and Tipperary Exports Pty Ltd, including but not limited to those documents relating to the claim by Walker Nominees Pty Ltd (“Walker”) against the defendants for the defendants’ alleged failure to pay for work done by Walker in or about October, November and December 2000 in the Northern Territory under a written agreement between the plaintiff and the defendants dated 1 September 2000 relating to the picking, packing and transporting of mangoes on the land known as Tipperary Station.”

[81] The subpoena itself was directed to Robert Ernest Hudson and Mark Baines Bruce, two partners of Deloittes, rather than to the liquidators themselves.

[82] The appellants argue the purpose of a subpoena duces tecum is to require production of documents that are relevant to issues in the proceedings. The issue in the proceedings in this case, is the claim by the plaintiff company in liquidation against the defendants. The appellants position is that the issue of the stay is not part of the proceeding.

[83] Reference was made to Rule 42.02 of the Supreme Court Rules which provides:

“(1) In a proceeding the Court may, by subpoena, order that a person named attend at the trial or any other stage of the proceeding for the purpose of giving evidence or of producing a document or thing for evidence, or for both purposes.
(2) A subpoena shall be in Form 42A, 42B, 42C or 42D, whichever is appropriate.”

[84] It was argued on behalf of the appellant that the purpose of producing something must be for a legitimate forensic purpose in the proceeding and that Rule 42.02 was not intended when there is a collateral purpose aimed at a third party. Counsel for the appellants maintain that if there was to be a subpoena then it should be limited to those documents that relate to any conveyance of confidential information about this particular matter.

[85] Mr Walsh QC referred to Prince Jefri Bolkiah v KPMG (a firm) [1999] 2 AC 222 in support of his proposition that the burden is on the party that asserts there is confidential information imparted to demonstrate that to the Court. He went on to submit that it is not a matter for inference because they were the accountants for the defendant. It is the appellants position that there must be not just assertions of confidential information, nor implications, but a very real risk the confidential information was imparted.

[86] Mr Walsh QC further argues that even the test that “it is on the cards” has not been met. He submitted that this Court is in the same position as the learned trial judge who determined the issue because the evidence is on affidavit. Findings of fact were made based upon inferences from the affidavit material. The appellants position is that the findings made by the learned trial judge on the affidavit material were not reasonably open to him.

[87] Mr Walsh QC referred to the three steps in the procedure with respect to a third party bringing documents into court pursuant to a subpoena for production and their use thereafter. These three steps are set out in Waind v Hill & National Employers Mutual General Association Ltd (1978) 1 NSWLR 372 (tp 32-33):

“… The first is obedience to the subpoena, by the witness bringing the documents to court and handing them to the judge. The second is the decision of the judge concerning the preliminary use of the documents, including 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 a document in whole or in part; for its use, in the process of evidence being put before the court by cross-examination or otherwise. …”

[88] Mr Walsh QC states that what is occurring here is that there is an abuse of process and the subpoena is being used as a substitute for discovery from a stranger to the litigation.

[89] The argument for the appellant is that unless the person seeking to challenge the position of the solicitor or alternatively the liquidator as in this case, puts forward information that demonstrates that there was confidential information, the court is not going to infer it. On the submissions made for the appellants, the conclusions of his Honour the trial judge are not supported on the evidence.

[90] Rule 32.07 provides as follows:

“On the application of a party to a proceeding the Court may order that a person who is not a party and in respect of whom it appears that he has or is likely to have or has had or is likely to have had in his possession a document which relates to a question in the proceeding shall make discovery to the applicant of any such document.”

[91] The appellant argues that it is improper to use a subpoena for discovery purposes. It is their primary submission that the subpoena should be struck out and a different procedure employed by the defendants if they seek to have discovery of the firm. The proper procedure on the submission made for the appellants is to seek an injunction and the liquidator will then deal with the application appropriately.

[92] Mr Wells QC, on behalf of the respondents, responded that it was important to identify the nature of the proceedings.

[93] The subpoena was issued in support of an application for a stay of proceedings. The stay was sought on the basis that Deloittes and the liquidators were in possession of confidential information of the respondents’ on the principles established in Prince Jefri Bolkiah v KPMG (supra). The respondents filed a summons dated 17 February 2004 and had sought the following orders in the substantive action:

“1. This proceeding be stayed while Robert Anthony Ferguson, Geoffrey Wayne Nourse or any partner or employee of Messrs Deloitte Touche Tohmatsu, Chartered Accountants of 62 Cavenagh Street, Darwin in the Northern Territory of Australia is a liquidator of the plaintiff;
2. This proceeding be temporarily stayed until this application is heard and determined.
3. The plaintiff pay the defendants’ costs of and incidental to this application.
4. Such further or other orders as the Court sees fit.”

[94] The application sought in par 1 has been adjourned pending resolution of the subpoena issue.

[95] On 26 February 2004, the Master made an order that “the filing and serving of the Statement of Claim be stayed until the application filed 17th February 2004 is determined”.

[96] The subpoena issued on 23 February 2004 is directed to the stay application. The appellants sought to have the subpoena set aside. Their application was refused. The appeal to this Court is from the refusal of the trial judge to set aside the subpoena.

[97] Rule 42.02(1) states as follows:

“(1) In a proceeding the Court may, by subpoena, order that a person named attend at the trial or any other stage of the proceeding for the purpose of giving evidence or of producing a document or thing for evidence, or for both purposes.”

[98] I agree that this Rule allows for the issue of a subpoena in these circumstances. The Rule is wide enough to include an interlocutory application. See - Giblin v Beach (unreported) Northern Territory Supreme Court, 9 August 2001 [2001] NTSC 67; Halsbury’s Laws of Australia at [325-7410]; The Adelaide Steamship Company v Spalvins & Ors (1997) 24 ACSR 536 at 543 (44) et seq; Greyhound Australia Pty Ltd & Ors v Deluxe Coaches Pty Ltd & Ors (1986) 11 FCR 592 at 594-596.

[99] The purpose of the subpoena was found by the learned trial judge to be twofold. It was to show the information Deloittes had relating to (a) the respondents generally i.e. the extent of Deloitte’s knowledge of the respondents generally, (b) to show the specific information Deloittes possessed regarding the issues in dispute in the substantive proceeding. An example is set out in the “Notes to the Financial Statements for the financial year ended 31 December 2002 which had been prepared by Deloittes for the respondent. The following statement appears under the heading Contingent Liabilities:

“A legal matter relating to transactions with a supplier is unresolved at the time of this financial report. The entity has a counterclaim against the partnership. The extent of an outflow of funds for the counterclaim is unknown and is dependable on the outcome of the legal matter. The recoverability of the amount recorded in Trade Receivables, of $63,322 is also dependent on the outcome of this legal matter.”

[100] I am in agreement with the argument put forward on behalf of the respondent that the information sought in the document was relevant to the application to stay the proceedings and is not an abuse of process.

[101] I do not accept the submission made on behalf of the appellant that his Honour the trial judge erred in drawing an inference from the affidavit material before him that Deloittes is in possession of specific (i.e. relevant to the proceedings) and general confidential information of the respondents. I consider such an inference was reasonably open to his Honour the trial judge on the evidence.

[102] A substantial part of the argument for the appellant was based on their submission that the use of a subpoena was a fishing expedition and the correct procedure would be for the respondent to seek discovery in the course of an injunction application with respect to Deloittes. I do not accept the appellants’ submission that such a procedure is the only way the respondents would be entitled to such information as has been sought in the subpoena.

[103] I accept that a subpoena must only be issued for a legitimate forensic purpose. The subpoena is issued in the stay application. It is arguable that if, upon a consideration of all the evidence (including the evidence obtained by subpoena) the liquidators cannot be, or be seen to be, independent and impartial by reason of a real risk of conflict of duty, a stay of proceedings should be granted, at least for so long as the liquidators continue to seek to conduct the proceedings in the name of the company.

[104] The affidavit of Mr Ford sworn 17 February 2004, deposes to the fact that between about 1998 and August 2003, Deloittes were the accountants, advisers and auditors of the respondents on this appeal and the defendants in the substantive claim by Walker Nominees Pty Ltd (In Liquidation).

[105] Also contained in the affidavit of Mr Ford sworn 17 February 2004, are further details of the partnership of Deloittes. The two appointed liquidators Robert Anthony Ferguson and Geoffrey Wayne Nourse are both partners, members or principals of Deloittes. Mr Nourse was, at all material times, one of five principals in the Darwin office. Mr Mark Bruce, another principal of the firm, was at all material times at the Darwin office also, and was principally responsible for the defendants’ accounts.

[106] Mr John Vereker is a Director of the defendant companies (respondents to this appeal). Mr Vereker gave certain instructions to Mr Ford, solicitor for the defendants (respondents). Paragraph 15 of Mr Ford’s affidavit sworn 17 February 2004 provides as follows:
“In all the circumstances, John Vereker says the firm has in its possession confidential information of the defendants, namely information relating to this proceeding, information relating to the financial affairs of the defendants, and information of the general attitude, approach, philosophy, capabilities and financial situation of the defendants.”

[107] I agree with the submission made by Mr Wells QC that on the affidavit material before the Court it is arguable –

a) that Deloittes are in possession of information which is confidential to the defendants, and to the disclosure of which they have not consented; and
b) that information is or may be relevant to the new matter in which the interest of the plaintiff company is or may be adverse to the defendants – see Prince Jefri Bolkiah v KPMG (supra) at 235. Lord Millett went on to say that the burden of proof (in this case the respondents) is not a heavy one. Lord Millett concluded at 239:
“I am not satisfied on the evidence that KPMG have discharged the heavy burden of showing that there is no risk that information in their possession which is confidential to Prince Jefri and which they obtained in the course of a former client relationship may unwittingly or inadvertently come to the notice of those working on Project Gemma. It was for this reason that I was in favour of allowing the appeal and granting the injunction in the terms proposed.”

[108] As was stated by Adam J in Roads & Traffic Authority of New South Wales v Conolly and Anor (2003) 57 NSWLR 310 at 315

“… I consider that the identification of the legitimate forensic purpose together with the reasonable chance that the documents in question might support the defence, is sufficient to justify a subpoena seeking the documents. It is not necessary for a party to show that it is more probable than not either that the particular defined documents exist or that they will assist his or her case. …”
and at 315.7:
“It should be noted that, merely because the outcome of the subpoena may not be known, does not mean that it is therefore an attempt to obtain discovery.”

[109] I am satisfied that it is “on the cards” that the documents, the subject of subpoena, would materially assist the defendants in their stay application. See R v Saleam (1989) 16 NSWLR 14 at 22. A subpoena is not being used for the purpose of discovery simply because the defendants might be:
“… 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’.” (Waind v Hill and National Employers’ Mutual General Association Ltd (1978) 1 NSWLR 374 per Moffitt P at 382).”
A subpoena will not be so wide as to be oppressive or to amount to discovery, simply because it is expressed “to relate” to all documents in a particular category, as long as the subpoena specifies with reasonable particularity the documents which are required to be produced- See Southern Pacific Hotel Services Inc v Southern Pacific Hotel Corp Ltd [1984] 1 NSWLR 710, at 720-1; Lucas Industries Ltd v Hewitt & Ors (1978) 18 ALR 555 at 573; Spencer Motors Pty Ltd v LNC Industries Ltd [1982] 2 NSWLR 921 at 929.


[110] The respondents are entitled to issue the subpoena with respect to the stay application. The documents subpoenaed are relevant to the stay application. The appellants have not established that it is an abuse of process or that it creates an injustice or that the documents were subpoenaed for an ulterior purpose.

[111] Accordingly I would dismiss the appeal.

[112] Since preparing these reasons for judgment I have had the benefit of reading draft reasons for judgment prepared by Martin (BR) CJ. I agree with Martin CJ that in this matter leave to appeal is required. I would grant leave to appeal but dismiss the appeal.

[113] I am not in agreement with the order proposed by Martin CJ that the subpoena should be amended.

[114] For the reasons already stated, I dismiss the appeal from the order made by Bailey J refusing to set aside the subpoena. I consider the appropriate order to follow is that made by Bailey J which was to hear the parties as to any restrictions on the production of documents in accordance with the subpoena to protect the interest of Deloittes.
Riley J:
[115] I agree with the Chief Justice.

-------------------------------------------