- Posted by DoylesAr
- On June 23, 2019
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New South Wales
20 May 2019
21 June 2019
Ward CJ in Eq
(1) Set aside the subpoena issued by the plaintiff on 18 October 2018 to the Proper Officer of the Commonwealth Bank of Australia.
(2) Set aside the notice to produce issued by the plaintiff on 18 October 2018 to the second defendant.
(3) Order the plaintiff to pay the costs of the respective applications by each of the first defendant and CEF Pty Ltd to set aside the subpoena addressed to the Proper Officer of the Commonwealth Bank of Australia as well as the costs of the application by the second defendant to set aside the notice to produce served on it.
- HER HONOUR: Before me for hearing on 20 May 2019 were various notices of motion going to issues that may broadly be described as disputes in relation to the production, or access to and use, of documents sought by the plaintiff (Bianca Rinehart), whether in her personal capacity or in her capacity as trustee of the Hope Margaret Hancock Trust (the HMH Trust), in advance of the hearing of an application that the plaintiff has brought (and which has been listed, together with other interlocutory motions by various of the parties, for hearing in July this year) seeking leave pursuant to s 247A of the Corporations Act 2001 (Cth) (Corporations Act) to inspect books and records of the second defendant, Hancock Prospecting Pty Ltd (HPPL).
- The present applications are but part of the ongoing litigious saga involving the first defendant (Gina Rinehart), one or more of her children and companies or entities associated with her. In these reasons I will refer to the family members, for convenience, by their first names.
- The background to the present applications is set out in an earlier decision in these proceedings (Rinehart v Rinehart  NSWSC 1102), to which I will refer as the subpoena judgment, in which I made orders setting aside (in whole or in part) a number of subpoenas that had then been issued by Bianca to third parties, relevantly including CEF Pty Ltd (CEF), the trustee of the CEF Trust. It will be necessary in due course to refer to some of the conclusions I reached on that occasion (which were scrutinised by the parties in no little measure on the hearing of the present applications). Suffice it at this stage to note that part of the defendants’ present complaint is, in effect, that the issue by Bianca (since the 2018 subpoena decision) of a subpoena to the Commonwealth Bank of Australia (CBA) (the CBA subpoena) and a notice to produce to HPPL (the HPPL notice to produce) involved an impermissible attempt by Bianca to re-litigate issues that were determined last year in the subpoena judgment. Bianca does not accept that such criticism is warranted and maintains, instead, that the basis for the issue of the CBA subpoena and HPPL notice to produce arises out of the material produced in answer to the earlier subpoenas (in the form in which they had been confined by the orders made by me in 2018). Indeed, Bianca in turn accuses the defendants of seeking to re-litigate one of the issues determined last year in the subpoena judgment, namely as to the abuse of process complaint that had been made by the defendants in relation to the issue of the subpoenas the subject of that decision, relying on the decision in Tyco Australia Pty Ltd v Leighton Contractors Pty Ltd(2005) 142 FCR 428;  FCAFC 115 (Tyco) (as to which I will say further in due course).
- Although the background to the present applications is largely as outlined in the subpoena judgment, for ease of reference I will here repeat certain of the background there set out.
- The substantive dispute between the parties to these proceedings is the claim by Bianca against her mother, Gina, and others for declaratory and other relief in relation to alleged oppressive conduct, breach of directors’ duties and breach of contract in relation to matters occurring with respect to, among other things, the payment (or non-payment) of dividends by HPPL. The proceedings were commenced by statement of claim filed on 21 March 2017 (following the receipt by Bianca of judicial advice given by Rein J in 2017 to the effect that she would be justified in so acting – see Bianca Hope Rinehart as trustee of The Hope Margaret Hancock Trust  NSWSC 282).
- In her statement of claim, Bianca makes various allegations against HPPL and its directors, including: allegations of breach of directors’ duties by Gina (see Part C of the statement of claim at -) as well as allegations that others of the individual defendants were involved, within the meaning of s 79 of the Corporations Act, in certain of the alleged contraventions by Gina (see -). In July 2019, together with other applications, Bianca’s application for leave pursuant to s 237 of the Corporations Act to bring derivative proceedings on behalf of HPPL against the directors for the alleged breaches of duty will be heard.
- Bianca alleges (at  of the statement of claim) that Gina breached her duties as a director by exercising her powers and/or duties as a director or officer of HPPL to cause HPPL to enter into contracts and to pay out its corporate funds: otherwise than in good faith in the best interests of HPPL as a whole; improperly to gain an advantage for herself; improperly to cause a detriment to HPPL; other than for a proper purpose; and without the degree of care and diligence that a reasonable person would exercise if he or she was a director or officer of HPPL in HPPL’s circumstances and held the offices and had the responsibilities that Gina had.
- The alleged conduct on which the allegation at  of the statement of claim is based is pleaded at , -, -, - and - of the statement of claim. When the matter was before me last year Counsel appearing for Gina (Mr Bova), who again appears for Gina on the present applications, emphasised that there is no allegation in the statement of claim that the HPPL directors breached their statutory or general law duties in causing HPPL to make any donations or sponsorship payments.
- As part of the relief claimed in the statement of claim (at ), an order is sought that Gina swear or affirm an affidavit setting out the matters listed at [680.6]-[680.21]. That relief is claimed by reason of the matters pleaded at [680.1]-[680.5], including: at [680.1], that Gina caused HPPL to misuse its corporate funds (as alleged at ); at [680.2], the oppressive conduct of HPPL’s affairs in relation to that misuse of funds (as alleged at -); and, at [680.4]-[680.5], that Bianca has sought information that would enable her to determine whether “such costs” (seemingly referring to the costs referred to at [680.3]) and other information as to the expenses of HPPL and has not received substantive responses to all of those requests.
- Part of the information sought to be provided on affidavit by Gina, pursuant to the relief sought at  of the statement of claim, is the following:
680.16 The identity of the entities that have received sponsorship and donations from HPPL Group companies in respect of FY 14, FY 15 and FY 16.
680.17 The basis on which GHR [Gina] considered it was in the best interests of HPPL for those amounts to be paid.
680.18 Whether GHR knew the purpose for which the sponsorship and donation funds would ultimately be directed when she decided to cause HPPL to disburse those funds.
680.19 The ultimate purpose for which the sponsorship and donation funds will be used.
680.20 The cause of HPPL’s significant increase in sponsorship and donation expenses from FY 13 to FY 16.
- In the subpoena judgment, I concluded, among other things, that the subpoena issued by Bianca on 10 April 2018 to CEF should be set aside, except insofar as it compelled the production of documents created or received between 10 July 2014 to date recording any payment or donation of money made by HPPL or any of its subsidiaries and the production of a copy of any trust deed or document establishing the CEF Trust or variation thereof, as operative or extant during the period from 10 July 2014 to 30 June 2017. I extended the time for compliance by CEF with the subpoena addressed to it (as confined by the orders I had made narrowing the scope of those subpoenas) for a period from 14 days from the date of those orders; and I made confidentiality orders in relation to the documents to be produced in compliance with those orders.
- Relevantly (not least because I was taken more than once during submissions on the present applications to what I had there said), I repeat here the following from the subpoena judgment:
126. If limited to documents that it is reasonably likely would establish the fact of what I have referred to as the making of the impugned payments (including the actual individual or entity by whom they were made and in what amounts at what times, say) the subpoenas would in my view be supported by a legitimate forensic purpose (and this was in effect conceded by Mr Bova, although he maintains that they are, in that event, not necessary as Bianca has already been provided with that information – a submission not accepted by Bianca at least in relation to some of the information she has sought). Similarly, insofar as the CEF subpoena seeks documentation recording the terms of the CEF Trust, I consider that a legitimate forensic purpose has been established in that any such documentation is likely materially to assist in determining the strength of the case for investigation of any breach of directors’ duties in the making of any such payment (and hence would go to the discretion whether to grant the relief sought).
- Pausing here, HPPL argues that if one is looking to whether or not there is a case for investigation as to a breach of directors’ duties in making the impugned payments to CEF, then one need go no further than to identify the fact of the payment(s) and the terms of the CEF Trust Deed (which clearly set out the purposes of the CEF Trust); and that it does not matter if there is or may have been a breach by CEF as trustee in the subsequent use of those funds (see T 30.7ff). In other words, HPPL argues that there is no need (and hence no legitimate forensic purpose) for Bianca now to seek documents to investigate the ultimate application of the funds donated to CEF (i.e., as to the recipient of the moneys or any terms on which the moneys were paid). There is considerable force to that submission.
- Returning to the subpoena judgment, I went on to say:
127. In contradistinction, a subpoena seeking to establish, from documents in the hands of the recipients, the purpose of the donor in making those payments seems to me to be quite another matter. It seems to me to be no more than speculation to suggest that documents in the hands of subpoena recipients (the donees or intended donee, in the case of Mr Joyce) would shed light on (or materially assist Bianca to determine) HPPL’s purpose in making the donations or payments in question. …
128. Thus, while I accept that there may be a legitimate forensic purpose in seeking some documentation in relation to the impugned payments, I consider that the ambit of the documents sought by each of the subpoenas goes well beyond that purpose. Moreover, the argument that material produced in answer to the subpoenas calling for the “purpose” or “terms” of the payments might strengthen the case for investigation into the making of the payments by HPPL and therefore go to the question of discretion (the second purpose articulated as supporting the subpoenas) is problematic in circumstances where it is mere speculation that there is any material that would be likely to do so.
- Having regard to the breadth of a number of the categories of documents that had been sought under the CEF subpoena I found it difficult not to conclude that there were aspects of the subpoena that amounted to no more than a fishing expedition (see at  and ).
- At -, I addressed a complaint by the defendants based on the decision in Tyco that the subpoenas were an abuse of process in that they were an attempt to circumvent the procedures for discovery or preliminary discovery. I was not persuaded that they were, even though I accepted that documents covering the same subject matter might be obtained under the subpoenas as might ultimately be the subject of access orders following the hearing of the s 247A application. I agreed (at ) with the observations of Darke J (in Rinehart v Rinehart  NSWSC 205 at ) that the mere fact that there is some overlap between what is sought on preliminary discovery and what is sought by subpoena does not mean that the subpoena is necessarily an abuse of process, it being necessary to look at the scope and purpose of the particular subpoena in the context in which it has been issued. Similarly, I agreed (at ) with the observation of Darke J at  that a party faced with an argument that its foreshadowed claims are merely speculative ought generally be able to make use of interlocutory procedures to assist it to satisfy the test for preliminary discovery. (That said, the circularity of the argument that there is a legitimate forensic purpose to the subpoena in that the documents will be relevant to show why the s 247A application to inspect such documents should succeed was then, and remains, to my mind, a difficult issue – see T 46.2; and on the present applications my concern as to how the use made by the trustee (CEF) of the donated funds would be relevant to the question whether there was an appropriate purpose for the making of the donation in the first place simply highlighted that difficulty as I sought to articulate in the course of oral submissions – see T 46.45.)
Motions now listed before me
- Although not all were ultimately contested (the parties for preliminary discovery being able constructively to reach accommodation on at least some aspects of their ongoing disputes), for completeness (and so that it is clear which ones out of the ever mounting list of interlocutory applications have been disposed of) I list (in no particular order) the various notices of motion that were before me for hearing on 20 May 2019, those being as follows.
- First, an amended notice of motion filed 31 October 2018 by Bianca, in her personal capacity, seeking a modification (to the extent necessary) of the so-called Harman undertaking in relation to 58 documents produced by HPPL in the 2014 proceedings (the Harman motion). The majority of the 58 documents constitute Excel spreadsheets created by HPPL’s finance department and show, inter alia, trial balances, cash flow projections, royalty payments and dividend payments of HPPL group companies, as well as distributions to or by the HMH Trust. They also include communications between HPPL and its auditor (PricewaterhouseCoopers) in relation to those matters. The Harman motion was determined by the making of consent orders at the outset of the hearing of the remaining contested motions.
- Second, a notice of motion filed 19 October 2018 by Bianca, in her capacity as trustee, seeking to set aside a notice to produce served by HPPL that called for the production of Counsel’s opinion and other documents that had been put before Rein J on the judicial advice application (the Judicial Advice motion). The Judicial Advice motion was resolved on the basis that HPPL did not press for production of the documents sought under that notice to produce in light of the position taken by Bianca (said by HPPL to amount to a concession but not conceded by Bianca to be such) that Bianca would not seek to deploy the fact of obtaining judicial advice from Rein J as a factor in favour of the grant of relief under s 247A of the Corporations Act when that application comes before me in July this year (see T 5/6; and Bianca’s written submissions in reply at -) or, indeed, in respect of the motions then to be heard which go beyond the s 247A application (T 6). Hence, the notice to produce served on Bianca by HPPL on 6 September 2018 was set aside, with costs of the notice of motion filed 19 October 2018 reserved. (For completeness, I note that HPPL also indicated an intention to rely on the manner in which this material had been deployed in due course as going to the issue of good faith, but that is not something here to be dealt with.)
- Third, an amended notice of motion filed by Gina on 8 April 2019, seeking to set aside the CBA subpoena or, in the alternative, confidentiality orders of the kind previously made so as to preserve the confidentiality of any documents required to be produced under the subpoena pending Gina’s application to stay the proceeding and refer the whole or part of the dispute to arbitration.
- Fourth, a notice of motion filed 13 November 2018 by CEF, also seeking to set aside the CBA subpoena.
- Fifth, a notice of motion filed 19 November 2018 by HPPL, seeking to set aside a notice to produce served on it by Bianca (the HPPL notice to produce).
- The last three notices of motion referred to above were those that were ultimately contested at the interlocutory hearing on 20 May 2019. As noted, confidentiality orders, in the event that access were to be granted to Bianca of the documents sought by the CBA subpoena or HPPL notice to produce, were sought (see T 12ff), reference being made in that regard to the recognition by the High Court in Rinehart v Hancock Prospecting Pty Ltd  HCA 13 at  as to the critical object of the arbitration clauses there in contention, namely that:
… a critical object of the Hope Downs Deed was the maintenance of confidentiality about the affairs of the Hancock Group, the trusts, the intra-family dispute and the provisions of the Deeds themselves. This object could not be clearer. Contrary to the submissions for the appellants, the parties were indeed agreeing to avoid public scrutiny. The fact that the claims made by Mr Hancock involve the administration of trusts does not affect the meaning persons in the parties’ position must have understood the arbitral clause to have.
- Bianca did not oppose the making of such confidentiality orders and I was satisfied that it was appropriate to do so on the basis that what HPPL and Gina are seeking to enforce (in their motions to be heard in July this year) is what is said is a contractual right (reinforced by the Commercial Arbitration Act 2010 (NSW)), that removes any discretion as to whether this dispute should be heard in open court. Accordingly, on 20 May 2019, at the outset of the hearing of the disputed applications, I made the confidentiality orders sought.
- The parties accepted that the relevant principles, when considering the question of legitimate forensic purpose of a subpoena or, by analogy, a notice to produce issued under r 34.1 of the Uniform Civil Procedure Rules 2005 (NSW), are those which were summarised in the subpoena judgment at -. In summary, for a subpoena (or, by analogy, notice to produce) to have a legitimate forensic purpose, it must be shown that it is likely that the document(s) sought will materially assist on an identified issue, or that there is a reasonable basis beyond speculation that it is likely the documentation will do so (at ); and determining whether there is a legitimate forensic purpose requires reference to the particular case, or identified issue, that the documentation sought is reasonably expected to be likely to assist (at ).
- At  of the subpoena judgment, I framed the relevant enquiry as to legitimate forensic purpose as being as to whether “there is a reasonable basis (beyond mere speculation) to believe that the subpoena recipients have in their possession documents that it is likely will materially assist … the determination of the [relevant] issue,” that issue there (as here) being as to whether the application by Bianca for access to the books of HPPL is brought in good faith and for a proper purpose and/or as to the issue as to whether, if the threshold requirement is met, the discretion to grant access should be exercised. I considered that if that were to be established then it would be sufficient to amount to a legitimate forensic purpose for the issue of the subpoenas there under consideration.
- It is also accepted by the parties that the onus of establishing a legitimate forensic purpose (and the soundness of the subpoena/notice to produce) is on the party who issued the compulsory process in question (see NSW Commissioner of Police v Tuxford  NSWCA 139 at ,  (Brownie AJA) (Spigelman CJ agreeing at , Ipp AJA agreeing at ); Kazal v Independent Commission Against Corruption NSWSC 1370 at  (Davies J)).
Applications to set aside CBA subpoena
- What is sought by the CBA subpoena is the production of “all statements created, sent or received between 6 August 2014 to date” for a specified CBA bank account in the name of CEF as trustee for the CEF Trust. It covers, therefore, over a four year period from the establishment of the CEF Trust.
- It should here be noted that in 2018, by the issue of the subpoena to CEF, Bianca had sought production of “[a]ll documents created or received between 10 July 2014 to date referring to any payment or donation of money made by or on behalf of HPPL or any HPPL Related Party to CEF or any CEF Related Party”. That subpoena was set aside, except relevantly insofar as it compelled production of documents “created or received between 10 July 2014 to date recording any payment or donation of money made by HPPL or any of its subsidiaries”. There is, therefore, an obvious overlap between the documents sought by the CEF subpoena and those sought by the CBA subpoena, although they are by no means co-extensive.
- After the subpoena judgment, CEF produced three bank statements from the CBA (one, is said, having been produced in error), those three bank statements being: a bank statement for the period 6 August 2014 to 31 August 2014, showing a credit for “Hancock Pros Donation” of $2.5m on 29 August 2014 (one of the two payments that was recorded in the schedule of donations referred to in the subpoena judgment at ); a bank statement for the period 1 August 2016 to 31 August 2016, showing a credit for “Hancock Pros Donation” of $1.5m on 2 August 2016 (the second payment recorded in the said schedule of donations); and a bank statement for the period 1 August 2017 to 31 August 2017, which does not record any payment or donation by HPPL or any of its subsidiaries (and is, thus, said to have been wrongly produced – a case of overproduction, not underproduction as emphasised by HPPL). (In that regard, Bianca refers to the production of the third bank statement both as illustrating the scope for errors of judgment in the identification of documents falling within subpoenas in general (i.e., that as a matter of common experience such errors may be made) and as pointing to deficiencies in CEF’s record-keeping –matters that Bianca says weigh against any suggestion that it is an abuse of process for her to seek the same documents from more than one source – see below at .)
Submissions in support of the setting aside of the CBA subpoena
- Each of Gina and CEF argues that the CBA subpoena should be set aside. Their submissions in support of that conclusion will be dealt with together and are summarised below.
- First, it is submitted that the CBA subpoena involves a fishing expedition, in that there is no evidence of any further payments by HPPL or its subsidiaries beyond those disclosed in the bank statements already produced by CEF (so it is said that Bianca is not at liberty “to drag [the pool] for the purpose of finding out whether there are any [fish] there or not”, to use the wording of the extract set out at  of the subpoena judgment from Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Ltd (1952) 72 WN (NSW) 250 at 254). It is, thus, submitted that there is no reasonable basis to believe that other bank statements in relation to CEF’s account will materially assist Bianca in establishing that her s 247A application is made in good faith for a proper purpose and that the Court’s discretion should be exercised in her favour in relation to that application.
- Second, and related to the first, it is submitted that the subpoena has not been issued for a legitimate forensic purpose because the subpoena is far broader than the limited category of documents described at  of the subpoena judgment (see above at ) as being supported by a legitimate forensic purpose, namely documents that it is reasonably likely would establish the fact of the making of the impugned payments, including the actual individual or entity by whom the payments were made and in what amounts at what times. (Gina emphasises in this regard that it was not until written submissions on the present application that Bianca (through her legal representatives) articulated any alleged legitimate forensic purpose for the issue of the CBA subpoena. That submission, it seems to me, can only have relevance in relation to any question of costs that arises from the making of the present applications.)
- Third, as adverted to earlier, it is submitted that the subpoena is an abuse of process in that it seeks to re-litigate matters determined by the subpoena judgment (which limited production by CEF to documentation in relation to the impugned payments made by HPPL or its subsidiaries, rather than to all payments made by any person to CEF). Reference in this regard is made to Rippon v Chilcotin Pty Ltd (2001) 53 NSWLR 198; NSWCA 142 (at -; ), applied in Howell v O ‘Brien  NSWSC 538 (at ). Gina argues that this is particularly so given that the bank account statements being sought from the CBA would be in CEF’s possession, power or control (and noting that CEF has already produced three such statements). In this regard, CEF also refers to the decision of McLelland J, as his Honour then was, in Brimaud v Honeysett Instant Print Pty Ltd (unreported, Supreme Court of NSW, 19 September 1998 at p 4) (Brimaud) and says that, while accepting that the subpoena judgment does not create a res judicata or issue estoppel, the re-litigation of matters that have already been determined (whether on an interlocutory or final basis) falls under the “rubric of vexation and abuse of process”, for the reasons expressed in Brimaud.
- CEF further argues that (at least so far as, being a stranger to the litigation, it has been able to ascertain) nothing has changed in the factual substratum of the matter since the subpoena judgment that would constitute a legitimate basis for the issue of the CEF subpoena in the face of the findings in that judgment.
- Fourth, CEF argues that the CBA subpoena is not ancillary to the relief sought by Bianca (both the final relief and the relief pursuant to s 247A) but is being used to circumvent the need for such relief (prior to the time at which entitlement to have access to the HPPL books and records has been determined) i.e., as a means of obtaining the documents which constitute the subject matter of the relief (citing Tyco). It is noted that applications for orders under s 247A of the Corporations Act have historically been treated as applications for final relief as, once inspection is given, the application is completely dealt with and the applicant’s statutory right to access documents has been disposed of (see In the matter of Combined Projects (Arncliffe) Pty Ltd  NSWSC 649 at ; Frazer v Macquarie Airports Management Ltd  NSWSC 1057 at ; and Yara Australia Pty Ltd v Burrup Holdings Limited  FCA 1273 at ). CEF argues that the documents sought by way of the CBA subpoena fall within the scope of documents or information sought by way of Bianca’s application under s 247A and says that the vice in the CBA subpoena is that, if documents were to be produced, it would render a portion of the s 247A application otiose. It is said that, by reason of the finality of the relief afforded by s 247A, permitting the subpoena to remain on foot would allow Bianca to obtain final relief by an interlocutory measure (citing Yes Family Pty Ltd v Sphere Healthcare Pty Ltd  NSWSC 393 at - ; cf Rinehart v Rinehart  NSWSC 205 at ), CEF arguing that the end to which the subpoena is directed is that which arises after the grant of an order under s 247A of the Corporations Act.
- CEF complains that the CBA subpoena constitutes an impermissible invasion of CEF’s right to keep private its documents and affairs; and points to the overriding purpose, objects of case management and the requirement that the Court seek to act in accordance with the dictates of justice dealt with in ss 56-58 of the Civil Procedure Act 2005 (NSW)). It argues that the CBA subpoena does not satisfy the “privacy versus forensic utility” balancing test. CEF calls upon the imagery deployed by Moffit P in Waind v Hill and National Employers’ Mutual General Association Ltd  1 NSWLR 372 (at 382-383) as being apposite to the present application, submitting that the scope of the CBA subpoena is akin to a call upon “a 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”. It is submitted that it is proper to expect that strangers to litigation (such as CEF is) only be required to produce documents that are relevant to the matters in issue in the proceedings; and that the subpoena process should not be treated as an opportunity to engage in a wholesale review of a third party’s business, financial and private affairs.
- CEF also points to the observation that it is not the function of the Court to re-draft subpoenas (see Lowery v Insurance Australia Limited  NSWCA 303 at ) and argues that the CBA subpoena should, therefore, be set aside in full (rather than, say, confined to a narrower class of documents).
Application to set aside HPPL notice to produce
- What is sought by the HPPL notice to produce is the following:
All documents recording communications between the second defendant (HPPL) or any HPPL Representative and CEF Pty Ltd (CEF) or any CEF Representative referring to the establishment, administration and or payment of funds from the CEF Trust created or received during the period 1 July 2014 to 31 December 2014.
- (The terms “CEF Representative” and “HPPL Representative” are defined in the subpoena but it is not necessary here to set out those definitions.)
HPPL’s submissions as to the application to set aside the HPPL notice to produce
- HPPL argues that the HPPL notice to produce lacks any legitimate forensic purpose and constitutes an abuse of process insofar as it seeks the same documents as the 247A application itself. As to the latter, it is noted that the documents sought by Bianca in the s 247A application were identified (in a letter dated 6 March 2018 from her lawyers) as including documents recording:
4.1 the payment of company funds to third-parties by way of sponsorship or donation during the years ending 30 June 2011 to 30 June 2017 and to date, including the terms on which, or pursuant to which, such funds were paid;
4.2 matters taken into account, consideration, deliberations and/or approval by the directors of the company of each payment of company funds to third-parties by way of sponsorship or donation during the years ending 30 June 2011 to 30 June 2017 and to date … .
- HPPL argues that, insofar as the HPPL notice to produce is directed, in part, towards seeking documents that identify how funds donated by HPPL were used by the CEF Trust (i.e., “all documents … referring to … the payment of funds from the CEF Trust”), Bianca has not identified any basis beyond mere speculation on which it could be concluded that documents referring to the payment of money “from the CEF Trust” are likely materially to assist in determining whether a case for investigation exists in relation to HPPL’s donations to the CEF Trust, or in determining the strength of that purported case for investigation.
- As to the balance of the documents sought by the HPPL notice to produce (relating to the establishment or administration of the CEF Trust), HPPL notes that these documents are similar to those described at pars 2-4 of the CEF subpoena and points to the observations made in the subpoena judgment to the effect: at , that the inference sought to be drawn by Bianca that the donations by HPPL to CEF were a misuse of corporate funds was “based largely on conjecture”; at , that “the argument that material produced in answer to the subpoenas calling for the ‘purpose’ or ‘terms’ of the payments might strengthen the case for investigation into the making of the payments by HPPL … is problematic in circumstances where it is mere speculation that there is any material that would be likely to do so”; and, at , that it was mere speculation that any of the documents sought by par 3 of the CEF subpoena existed and that this “appears to proceed on an assumption that sponsorship or donation payments might be impressed with some sort of condition as to the use to which the payments be put, or be part of some kind of arrangement in which terms of the payment are specified”.
- HPPL submits that the conclusions at ,  and  of the subpoena judgment apply equally to the documents sought in the HPPL notice to produce which relate to the establishment or administration of the CEF Trust and that, for the same reasons as set out in the subpoena judgment, these aspects of the HPPL notice to produce are based largely on “conjecture and mere speculation”. It is submitted that nothing about the content of the documents produced in response to the CEF subpoena leads to a departure from those conclusions or elevates Bianca’s allegations above mere speculation.
- Reliance is placed upon the observation of Hill J in Tyco (Hely and Conti JJ agreeing) (at ) that “it would be clearly an abuse of process for an applicant for pre-action discovery to issue a notice to produce the very documents sought by the application for pre-action discovery” and to the similar observation of Hely J (at ). It is submitted that in the present case there is a direct overlap between the documents sought by the HPPL notice to produce (particularly those relating to the establishment or administration of the CEF Trust) and those sought by Bianca’s s 247A application (as identified in subcategories 4.1 and 4.2 of the schedule to the letter dated 6 March 2018, extracted above); and that, therefore, the HPPL notice to produce would circumvent the process for s 247A relief and render such relief otiose (at least in relation to the documents sought by the HPPL notice to produce).
- HPPL, thus, submits that, consistent with the reasoning in Tyco, it is an abuse of process for Bianca to issue a notice to produce for the very same documents sought by the s 247A application and that the reservation expressed by Hely J in Tyco does not apply in this case because the notice to produce has been issued to the same entity (HPPL) against whom Bianca seeks s 247A relief.
Bianca’s submissions as to the applications to set aside the CBA subpoena and HPPL Notice to Produce
- At the outset, Bianca emphasises that, at the time the subpoena judgment was delivered, she was unaware of the terms of the CEF Trust and of the extent to which HPPL was involved in its establishment; and says that that lack of knowledge as to the purposes of the CEF Trust, and the circumstances in which HPPL had come to make substantial donations to the Trust (and whether HPPL had communicated with the Trust or its representatives prior to making a donation), amounted to one reason why various categories in the CEF subpoena were characterised as speculative (pointing to the subpoena judgment at -).
- Bianca says that the production by CEF under the “revised” subpoena (namely, of the trust deed (CEF Trust Deed) and three bank statements) provides materially greater insight into these matters. It is submitted that it is now “tolerably clear” that HPPL was the original benefactor of the CEF Trust and that HPPL had indicated a willingness to donate a “substantial amount of money” to the CEF Trust even before the CEF Trust’s establishment (referring to Recital B of the CEF Trust Deed and to the coincidence of timing between the date of the CEF Trust Deed and the first of the HPPL donations, before which the CEF Trust bank account showed a nil balance). It is submitted that it is also now clear that the purposes of the CEF Trust include several matters “prima facie foreign to the operations of HPPL” (there referring to some of the purposes set out in cl 5 of the CEF Trust Deed, which it is not necessary here to set out).
- It is submitted that, in the circumstances, the legitimate forensic purposes identified by Bianca at the time of the subpoena judgment support “a further targeted inquiry into the activities of the Trust and HPPL’s role as the Trust’s original benefactor”. In particular, it is submitted that “it would be curious, if not an obvious breach of duty by the directors of HPPL” for HPPL not to communicate with the settlor about the CEF Trust and its purposes prior to making a foundation donation of $2.5m.
- As to the relevance of the purposes of the CEF Trust, Bianca contends (as adverted to above) that certain of these purposes are “prima facie remote from HPPL’s business operations”. Bianca says that she intends to contend, at the hearing of the s 247A application, that the donation of substantial amounts by HPPL to a trust with such purposes is material that supports the need for an investigation into whether breaches of directors’ duties occurred in the making of the payment and thereby is supportive of the fact that the s 274A application is brought by her in good faith and for a proper purpose (and that the Court ought, in the exercise of its discretion, grant the relief sought).
- Bianca also points to cl 18.2 of the CEF Trust Deed, which imposes an obligation on the trustee to prepare certain accounting documents promptly after the close of each Accounting Period. Bianca suggests that, insofar as CEF has indicated that it does not possess any documents prepared for the purposes of cl 18.2 (see the email dated 6 August 2018 from CEF’s solicitor to Bianca’s solicitor – Exhibit A), and in circumstances where one would expect a trustee to have its accounts within its possession, custody or control, CEF, as trustee, appears to be in breach of cl 18.2 of the CEF Trust Deed “and has been in breach since its establishment”. (The relevance of that allegation, which CEF made clear it denies, to the present applications is not immediately apparent though, as noted earlier, Bianca points to the alleged deficiencies in CEF’s record-keeping as a matter relevant to refute any suggestion of abuse of process in seeking the same documents from two different sources.)
- Bianca also points to HPPL’s refusal to answer a number of questions raised at the 2018 annual general meeting of HPPL (AGM) relating to: the purpose of the CEF Trust; the directors’ understanding as to why funds were advanced to the CEF Trust; the ultimate recipient of the funds and the connections between the CEF Trust and politicians; political parties and lobby groups and whether payments to the CEF Trust were continuing (some of which were tendered over the objection of HPPL), as supporting her contention that there is a legitimate forensic purpose for the seeking of the documents that have now been sought by her. (Pausing here, I note that HPPL says that, bearing in mind that it is a proprietary limited company and not a public company, the AGM is private and that this is “classic intracompany” material. The relevance of those 300 odd questions and answers (only some of which were admitted into evidence) to the present applications is again not readily apparent.)
- As to the criticisms made of the CBA subpoena by Gina and CEF, Bianca says the following.
- First, Bianca argues that the CBA subpoena does not involve a fishing expedition and does not lack a legitimate forensic purpose (noting the observation of Lindgren J in Trade Practices Commission v CC (NSW) Pty Ltd (No 4)  FCA 1418; (1995) 58 FCR 426 at 437-8) and submitting that, properly understood, a finding of ‘fishing’ amounts to a finding that the subpoena has no legitimate forensic purpose “because the documents are sought to discover if the issuing party has a case, not to support a case that has already been articulated” (and citing Vella v Minister for Immigration and Border Protection  FCA 1177 at  per Wigney J, where a connection between the concept of “fishing” and the concept of oppression was recognised). (I interpose here to note that, while a finding of no legitimate forensic purpose makes a conclusion of “fishing” more easy to draw, I do not see the two concepts as synonymous.)
- Bianca says that, at the hearing of the challenge to the CEF subpoena last year, she articulated a legitimate forensic purpose in respect of that subpoena (namely, the determination of the issues as to whether the application by her, as trustee, under s 247A is brought in good faith and for a proper purpose and, if so, whether the discretion to grant access should be exercised) and that, having articulated that case, she now seeks to support that case by the CBA subpoena.
- Bianca argues that the CEF subpoena, as read down, was not confined to documents recording only those two impugned payments. Further, it is submitted by Bianca that (insofar as it may be implicit in Gina’s submissions that a party is only entitled to issue a subpoena to one party of a bilateral communication), it is not impermissible to seek the same documents from two parties (i.e., CEF as the recipient of the account statements and CBA as the sender of the account statements). Bianca argues that the same subpoena issued to two parties may produce quite different sets of documents (reflective of the fact that a subpoena attaches only to documents in the possession, custody or control of the recipient; and recognising that production under a subpoena is sometimes imperfect). It is submitted that, on Gina’s own case, production by CEF under the CEF subpoena was imperfect (having regard to CEF’s “supposedly” erroneous production of one of the three bank statements in answer to the CEF subpoena); and it is said that it is not unreasonable to think that CBA’s record-keeping and document production protocols will be better than (or at least different from) that of CEF.
- Bianca argues that there is no difficulty in the CBA subpoena being directed to the relevant specified account, whether or not it records a payment by HPPL, because it is not unreasonable to think that the fact that a payment was made by HPPL (or a representative of HPPL) will not appear on the face of the account; and hence that CBA, as a third party, cannot be assumed to know the identity of each payer into the account. (In this regard, Bianca says that the fact that CEF itself apparently erred in producing a bank statement on the assumption that it recorded a debit from an HPPL-owned entity is evidence of the difficulties that would attend any such task when conducted by CBA and that it would arguably be oppressive and objectionable to require CBA to make a judgment as to the identity of the payer in respect of each transaction.) Bianca maintains that the CBA subpoena is in a different position to the earlier CEF subpoena (arguing that it is reasonable to think that CEF, as the recipient of the payments, would know which account statements recorded payments that HPPL or its representatives had made to CEF).
- Bianca further submits that it is relevant to her case, as trustee, to understand not only the donations made by HPPL and its related entities to the CEF Trust but also the entities or persons to whom funds of the CEF Trust were deployed in furtherance of its purposes (pointing to the evidence at the hearing last year to the effect that the CEF Trust is not registered as a charitable body – referring to the affidavit of her solicitor, Mr Price, of 13 June 2018 at ).
- Bianca, thus, argues that it can be concluded that the CBA bank statements will materially assist in determining the strength of the case for investigation of any breach of directors’ duties in the making of payments by HPPL to the CEF Trust (and hence would go to the discretion whether to grant the relief sought).
- Second, Bianca argues that the CBA subpoena does not attempt to re-litigate matters determined by the subpoena judgment (noting that there was no determination in the subpoena judgment that a subpoena could not be issued covering records of any payments made to CEF, whether or not made by HPPL). As noted above, Bianca points out that the CEF subpoena is in different terms to the CBA subpoena, in that: the former did not cover records of transactions into the CEF account by persons other than HPPL nor did it concern records of expenditure made by CEF as trustee. It is said (and I accept) that the question whether a subpoena covering such transactions was permissible was not decided in the subpoena judgment.
- Bianca argues that it is relevant to identify the identity of payees out of the account in order better to understand the nature and activities of a trust to which HPPL has donated such a substantial amount of money. It is said that it cannot be assumed that the statements sought from CBA would be in CEF’s possession, custody or control (arguing that such an assumption would be dependent on an assumption that CEF’s record-keeping and document production “is perfect”; whereas, it is submitted, the facts that CEF does not maintain accounts as required by the CEF Trust Deed and that CEF erred in its production under the subpoena suggest that CEF’s record keeping and document production “are far from perfect”).
- Finally, as to CEF’s submission that the CBA subpoena is an abuse of process on the basis that it is a means of obtaining documents which constitute the subject-matter of final relief, Bianca argues that this is a repetition of the Tyco abuse of process argument that was rejected at  of the subpoena judgment.
- As to the criticisms made by HPPL of the HPPL notice to produce, Bianca responds as follows.
- First, it is submitted that the starting point is that it is permissible for Bianca, as trustee, to seek documents recording payments by HPPL to CEF and documents recording the terms of the CEF Trust (on the basis, it is said, that this necessarily follows from the subpoena judgment). Bianca argues that if it is permissible for her, as trustee, to seek those documents, then it must be because it is permissible for the trustee to seek to impugn payments by HPPL to CEF for the broader purpose of demonstrating that the s 247A application is brought in good faith and for a proper purpose (see the subpoena judgment at -).
- In this context, it is submitted that the legitimate forensic purposes of the HPPL notice to produce include: to establish the use(s) to which payments made by HPPL to CEF was or were put by CEF and what was known by HPPL from communications with the CEF Trust as to the uses to which payments by HPPL had been and/or would be put; to bolster Bianca’s case that, objectively, there is a case for investigating the donations and sponsorships of HPPL and whether (inter alia) they involved a breach of directors’ duties; and, ultimately, to assist in demonstrating that the s 247A application is brought in good faith and for a proper purpose and that the court’s discretion should be exercised in her favour. It is submitted that the propriety of payments by HPPL to CEF is in issue and that it is permissible for Bianca, as trustee, to bolster her case on the propriety of the payments by seeking documents evidencing the use by CEF of the HPPL moneys and what was known to HPPL on that topic.
- Bianca maintains that the forensic purpose of the HPPL notice to produce is not to seek to establish that there was some condition attaching to the use to which CEF could put the HPPL funds (noting that the notice to produce does not seek documents establishing the conditions or terms of the payments from HPPL to CEF, cf par 2 of the CEF subpoena).
- It is submitted that it is not “mere speculation” that the documents sought by the HPPL notice to produce exist; rather (as referred to already), that, as a result of production under the CEF subpoena, it may be inferred that: HPPL was centrally involved in the establishment of the CEF Trust; HPPL is at least the original benefactor of the trust, if not the sole benefactor; and HPPL engaged in at least some communications with the settlor or CEF prior to making its “substantial donation”. It is submitted that it would be most surprising had CEF not informed HPPL of matters relating to the establishment of the trust and its intended use of trust moneys (and, indeed, that there would be forensic significance in establishing that, despite HPPL being a substantial donor, HPPL had no records of communications from CEF on the topics covered by the HPPL notice to produce). Insofar as HPPL has declined to answer “basic questions” relating to the subject of the HPPL notice to produce (the AGM questions on this topic), Bianca emphasises that it has not denied the existence of the documents sought by the HPPL notice to produce.
- Second, as to the argument on abuse of process relying on the decision of Hely J in Tyco, Bianca again points to the rejection of such an argument in the subpoena judgment at . It is submitted that the documents sought by the HPPL notice to produce do not circumvent or render otiose the relief sought in the s 247A application (for the reasons advanced in the 2018 challenge to the CEF subpoena and summarised at - of the subpoena judgment) and that, even if the HPPL notice to produce had sought a “comprehensive suite of documents” relating to CEF, the relief in the s 247A application would still have utility in respect of all other sponsorships and donations by HPPL.
- At the outset, I consider that there is a very real sense in which the calling for documents as to the “establishment” or “administration” of the CEF Trust or as to payments out of the CEF Trust (as the HPPL notice to produce does and as the assertions as to the legitimate forensic purpose for the CBA subpoena, at least in part, are put), insofar as these are sought to establish the purposes for which the trust was established (or the purposes for which the impugned payments were made by HPPL), does involve the re-litigation of issues that were determined in the subpoena judgment last year (namely, as to whether, assuming for present purposes that a legitimate forensic purpose for seeking those documents were to be established, what is there involved is nevertheless a fishing expedition – see, for example, at  of the subpoena judgment).
- In other words, what was being sought by the CEF subpoena was documentation said to be likely materially to assist the investigation as to the propriety of the making of donations by HPPL to the CEF Trust and in that context it was postulated that communications in relation to the donations might disclose the purpose of the donations. What here seems to be sought by the HPPL notice to produce (covering similar, if not exactly the same, ground) are communications going to the establishment of the CEF Trust the relevance of which is (again) to the extent that they might disclose (if not a “condition” on the making of the payment, then at least) the purpose for the making of the donation and/or establishment of the CEF Trust. Similarly, the purpose of seeking the bank statements for the CEF Trust account (over an extended period) is to ascertain what use was made of the donated moneys (again, apparently, to shed light on the purpose of the making of the donation(s) in the first place).
- I accept that (as is evident from Brimaud) courts should be vigilant to prevent abuses of process by the re-litigation of matters that have already been determined, whether on an interlocutory or final basis. That said, in the present case, I also consider that there is force in the submission by Bianca that circumstances have relevantly changed since the subpoena judgment – in that Bianca now has a copy of the CEF Trust Deed (which contains not only a statement in cl 5 as to the purposes of the CEF Trust but also Recital B, which sets out the circumstances, or at least part of the circumstances, in which the CEF Trust was established). Accordingly, I do not see that the mere fact that Bianca has sought the production of documents going to the same issue as the documents previously sought (but not permitted) under the CEF subpoena necessarily amounts to an abuse of process (though one can see scope for such a finding were there to be a series of incremental applications for documents – the so-called “targeted” further enquiries – arising out of successive invocations of the compulsory processes of the Court in this regard).
- Nor, at least in relation to the CBA subpoena, do I accept that there is an abuse of process of the kind considered in Tyco involved in seeking such documents. That is because I do not accept that the seeking of bank statements in order to establish additional donations by HPPL to CEF or payments made by CEF out of those funds would afford to Bianca the very relief sought by her in the s 247A application. I take a different view in relation to the HPPL notice to produce. There, the circularity between the documents sought in the notice to produce and the relief sought in the s 247A application is more marked. HPPL seeks documents going to the establishment and administration of the CEF Trust (and payments out of the CEF Trust) for the very purpose of establishing a case for inspection of books and records of HPPL going to those very same issues. Last year, I considered that there was not a Tyco issue in the invocation of the compulsory subpoena processes of the Court in the context that Bianca was not aware of the purposes of the CEF Trust. That is now no longer the case. Rather, what Bianca seems here to be seeking to do is, in effect, to search for documents to enable the interrogation of those stated purposes in the CEF Trust Deed (and whether those purposes were complied with, whether at the direction of the donor or benefactor or otherwise). I am inclined, therefore, to see the HPPL notice to produce as an abuse of process in that sense. However, it is not necessary to determine the present application in relation to the setting aside of the HPPL notice to produce on that basis (nor does it arise, in my opinion, in relation to the CBA subpoena), because I am of the view that those compulsory processes are, in all the circumstances, a fishing expedition (notwithstanding that I accept that Bianca had a legitimate forensic purpose in invoking them).
- As to the CBA subpoena, there is nothing to suggest that any payments, other than the two impugned payments, were made by HPPL. The CEF Trust bank statements in relation to those payments have been produced. The making of any payments by any other entities to CEF as trustee of the CEF Trust does not seem to me to be relevant to any issue in the proceedings. Nor, it seems to me, is the identity of the persons or organisations to whom payments out of the funds comprising those donations were made relevant to whether there was a misuse of corporate funds in the making of the donations in the first place. I consider it to be no more than speculation to consider that any purpose for the making of payments out of the CEF Trust funds would be recorded in the bank statements themselves or that this would illuminate the purpose of the donations (just as I considered it would be mere speculation to suggest that the making of the donations was impressed with a condition as to their use, as I explained in the subpoena judgment – though, as I have noted, Bianca here disavows seeking documents as the conditions or terms of payments). Furthermore, I accept the force of CEF’s submission that it is entitled to privacy in respect of its business affairs and that intrusion into its private affairs (particularly over a four year period) should be permitted only where necessary and for a legitimate forensic purpose.
- As to the HPPL notice to produce, the CEF Trust Deed certainly records that a benefactor has expressed the wish to make a (substantial) donation to the CEF Trust but it seems to me to be mere speculation that there are any communications that go beyond this as to the establishment (or subsequent administration) of the CEF Trust itself. Similarly, I consider it to be no more than speculation that there would have been a communication at the time of the establishment of the CEF Trust as to the purpose for which donated funds were to be used (beyond, if at all, the statement of purposes recorded in the CEF Trust Deed). I am not persuaded, particularly in the context where the seeking of documents of this kind will circumvent at least to some degree the contested s 247A application for which purpose the documents are sought, that production of the documents now sought under the HPPL notice to produce should be enforced. To the extent that the documents are sought to bolster a case that can already be made out on the information at hand (as Bianca suggests – though I am here making no finding on that issue), the production of the documents is not necessary; to the extent, on the other hand, that the documents are sought to establish the case for inspection of those same (and other) documents, this highlights the scope for abuse of the Tycokind.
- Accordingly, I consider that both the CBA subpoena and the HPPL notice to produce should be set. It follows that in the ordinary course costs will follow the event and I will so order.
- For the above reasons, I order as follows:
- (1) Set aside the subpoena issued by the plaintiff on 18 October 2018 to the Proper Officer of the Commonwealth Bank of Australia.
- (2) Set aside the notice to produce issued by the plaintiff on 18 October 2018 to the second defendant.
- (3) Order the plaintiff to pay the costs of the respective applications by each of the first defendant and CEF Pty Ltd to set aside the subpoena addressed to the Proper Officer of the Commonwealth Bank of Australia as well as the costs of the application by the second defendant to set aside the notice to produce served on it.