UDP HOLDINGS PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT)(RECEIVERS AND MANAGERS APPOINTED) (ACN 167 100 692) (Applicant)
ESPOSITO HOLDINGS PTY LTD (ACN 079 763 303) (First Respondent)
WILLIAM YAN SUI HUI (Second Respondent)
5 STAR FOODS PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT)(RECEIVERS AND MANAGERS APPOINTED) (ACN 005 714 16) (Third Respondent)
ANTONIO PATRICK ESPOSITO (Fourth Respondent)
JUDGE: Croft J
DATE OF HEARING: 12 June 2018
DATE OF JUDGMENT: 15 June 2018
ARBITRATION – PRACTICE AND PROCEDURE – Application for issue of subpoenas for examination of a person not party to the arbitration agreement – Alinta Sales Pty Ltd v Woodside Energy Ltd  WASC 304 – Aurecon Australasia Pty Ltd v BMD Constructions Pty Ltd (2017) 52 VR 267 – International Arbitration Act 1974 ss 22A, 23.
- This is an application under s 23 of the International Arbitration Act 1974 (Cth) (“the Act”) for the issue of subpoenas to two persons requiring them to attend for examination for the purpose of an arbitration between Esposito Holdings Pty Ltd as claimant and UDP Holdings Pty Ltd, William Yan Sui Hui, and 5 Star Foods Pty Ltd, as respondents, and Antonio Patrick Esposito as the second respondent by counterclaim (“the Arbitration”).
- The arbitral tribunal is the Honourable Mr Stephen Charles AO QC, as sole arbitrator, and the final hearing is to commence on 6 July 2018.
- This Court has previously issued subpoenas to produce documents in this arbitration: Esposito Holdings Pty Ltd v UDP Holdings Pty Ltd  VSC 183.
- The Originating Application and supporting material was filed on 12 June 2018, returnable a week later, with an affidavit in support having been provided to the Court in draft form on 8 June 2018. The Respondents were informed that any submissions were to be provided to the Court by 5:00pm on 15 June. As no such submissions have been received, and, for the reasons which follow, I am satisfied that the subpoenas ought to be issued as sought under s 23 of the Act, the application has been determined on the papers.
- The arbitration concerns disputes arising from the sale of a business. The seller Esposito Holdings Pty Ltd (“the First Respondent” on this application) has obtained a partial award for outstanding sums due under the sale contract, but subject to set-offs claimed by the buyer UDP Holdings Pty Ltd and company 5 Star Foods Pty Ltd (“the Applicant” and “the Third Respondent” on this application, respectively) and to counterclaims made by the Applicant and the Third Respondent. The set-offs and the counterclaims concern alleged breaches of warranties by the First Respondent. The substantial factual issue to be determined at the final hearing is whether the business had been overcharging one of its largest customers.
- The persons to be summonsed to attend are:
(a) Paula Deanne Barry (“Ms Barry”), a former employee of United Dairy Power Pty Ltd, a wholly owned subsidiary of the Third Respondent; and
(b) Murray Jeffrey (“Mr Jeffrey”), an employee of the customer who is said to have been overcharged.
Both of these people have previously given evidence about the alleged overcharging at a compulsory examination before the Supreme Court and their attendance at the arbitration is sought to facilitate their cross-examination in respect of that testimony.
- The present application relies upon the provisions of s 23 of the Act, which is in the following terms:
23 Parties may obtain subpoenas
(1) A party to arbitral proceedings commenced in reliance on an arbitration agreement may apply to a court to issue a subpoena under subsection (3).
(2) However, this may only be done with the permission of the arbitral tribunal conducting the arbitral proceedings.
(3) The court may, for the purposes of the arbitral proceedings, issue a subpoena requiring a person to do either or both of the following:
(a) to attend for examination before the arbitral tribunal;
(b) to produce to the arbitral tribunal the documents specified in the subpoena.
(4) A person must not be compelled under a subpoena issued under subsection (3) to answer any question or produce any document which that person could not be compelled to answer or produce in a proceeding before that court.
(5) The court must not issue a subpoena under subsection (3) to a person who is not a party to the arbitral proceedings unless the court is satisfied that it is reasonable in all the circumstances to issue it to the person.
(6) Nothing in this section limits Article 27 of the Model Law.
These provisions are reflected in substantially similar terms in the provisions of ss 27A and 27B of the Victorian Commercial Arbitration Act 2011, which applies to domestic, Australian, arbitral proceedings. Sub-sections 23(1) to (4) and sub-s 23(5) of the International Arbitration Act 1974 (Cth) are reflected in ss 27A and 27B(5) of the Commercial Arbitration Act 2011respectively.
- For completeness, it is appropriate to note that this Court has jurisdiction to issue the subpoenas sought. Section 22A of the Act provides that “court” means, for the purposes of Division 3 of Part III of the Act (which includes s 23) “in relation to arbitral proceedings that are, or are to be, conducted in a State—the Supreme Court of that State”. As the arbitration is to be conducted in Victoria, it is unnecessary to consider whether this Court would be a court within the meaning of Division 3 of Part III of the Act in relation to arbitral proceedings being conducted overseas.
- It is clear from the wording of s 23 of the Act that before the Court issues a subpoena to attend for examination before the arbitral tribunal, the applicant must establish that:
(a) the application is made with the permission of the arbitral tribunal; and
(b) the issue of each subpoena is reasonable in all the circumstances.
While sub-s 23(4) of the Act prevents an addressee of a subpoena from being compelled to answer questions which they may not be compelled to answer in this Court, such matters do not appear to arise in the present circumstances. In any event, in order for sub-s 23(4) of the Act to be given practical operation, it must be construed as limiting the effect of a subpoena issued under s 23 of the Act, rather than requiring the Court to be satisfied that a proposed subpoena would not be in violation of sub-s 23(4) of the Act.
Permission of arbitral tribunal
- In contrast to Esposito Holdings Pty Ltd v UDP Holdings Pty Ltd, where the arbitral tribunal conducted an “informed evaluation” of the prospects of the Court issuing the subpoenas sought before granting permission, the arbitral tribunal here—now differently constituted—gave unconditional permission for the present application to be made on the basis that no party to the arbitration objected to that course. It is not for this Court to comment on the various approaches taken by arbitral tribunals to the grant of permission in accordance with s 23 of the Act. Rather, it is sufficient to observe that the Act requires parties to obtain permission from the tribunal before applying for the issue of subpoenas, and that such permission has been obtained for the present application.
Reasonableness of issue of subpoenas
- It is clear that the Court ought not to act as a mere rubber stamp upon the grant of permission by the arbitral tribunal for a party to apply for the issue of a subpoena. The principled basis for this position was set out in Aurecon Australasia Pty Ltd v BMD Constructions Pty Ltd in the context of granting an application under the Commercial Arbitration Act 2011 for the issue of a subpoena to attend to give evidence against a person who was not a party to the arbitration:
The policy underlying the Court’s abstention from enquiry into the merits of arbitral decisions is that the parties have by consent subjected themselves to the jurisdiction of the arbitrator by their conclusion of an arbitration agreement. The same policy considerations do not, however, justify an exercise of the Court’s coercive powers against non-parties without enquiry into the reasonableness of the use of such powers. Non-parties are strangers to the arbitration agreement, and they should be no more exposed to answering subpoenas in arbitration than they are in litigation, especially since arbitral examination is not under the immediate supervision of the Court.
- Of course, while the Court must be cautious against allowing the imposition of an unwarranted burden on strangers to the arbitration, this does not detract from the supportive role of the Court apropos the arbitral process. As I said in Esposito Holdings Pty Ltd v UDP Holdings Pty Ltd:
The approach the Court should adopt under the corresponding provisions of the domestic commercial arbitration legislation—an approach, given the international provenance of the domestic legislation, which is equally applicable to the international legislation—was an issue in ASADA v 34 Players and One Support Person, where I said:
Having regard to the international provenance of the Act, particularly the provisions of the Model Law, it is, in my view, clearly inappropriate for the Court, in an application under s 27A of the … [Commercial Arbitration Act 2011] by a party to obtain subpoenas, to embark upon a process which would, in effect, “second guess” the arbitral tribunal which has already given permission for the application to obtain a subpoena under these provisions. It is quite clear from the provenance of this legislation, internationally and domestically, that the emphasis sought to be achieved by the legislature is court assistance and support for arbitral processes, and not “heavy handed” intervention or, in effect, duplication of the functions of the arbitral tribunal. Long gone are the evils of the case stated procedure under the Victorian Arbitration Act 1958 and its equivalents in other jurisdictions. Since the Commercial Arbitration Act 1984 in Victoria, the trend in legislative developments and court decisions has been to constrain merits appeals and the consequent cost and delay that flows from duplication of the proceedings in this process. This is not to say, however, that a provision such as s 27A of the … [Commercial Arbitration Act 2011] is to be treated lightly by the courts. The sanctions for a breach of a court issued subpoena are potentially very serious indeed. Consequently, the basis upon which these powers are sought to be invoked must be established to the satisfaction of the court. Nevertheless, this process should, naturally, occur as expeditiously and cost effectively as possible; but it must be balanced against the seriousness associated with subpoenas and their possible breach. A fundamental prerequisite to invocation of powers such as those conferred by s 27A is, patently, that there must be an arbitration, an arbitral tribunal, in support of which any subpoena is issued under these provisions.
In expressing these views with respect to the principles relevant to applications of this kind, I was also assisted significantly by the statement of principles relevant to the grant of a subpoena by the court under relevantly similar provisions contained in the Commercial Arbitration Act 1985 (WA) by Beech J in Alinta Sales Pty Ltd v Woodside Energy Ltd…
- Against this background, I turn now to consider whether it is reasonable to issue the subpoenas to each of the addressees in the present circumstances.
- Ms Barry was formerly employed as a financial controller and chief financial officer for United Dairy Power Pty Ltd. She was publicly examined in relation to the affairs of the Third Respondent and other companies on 26 October 2015 before this Court. Ms Barry was summonsed to appear at the examination and gave evidence about the overcharging. Mr Jeffrey is director of agricultural procurement for National Foods Australia Pty Ltd, being the customer which is said to have been overcharged and was publicly examined in relation to the affairs of the Third Respondent and other companies on 6 November 2015 before this Court. Mr Jeffrey was summonsed to appear at the examination, where he gave evidence about the overcharging.
- As part of their reply lay evidence, the Applicant and Third Respondent have filed with the arbitral tribunal statements of intended evidence from Ms Barry and Mr Jeffrey in which each witness will affirm and adopt the evidence given in the examination. Although the transcripts of the public examinations of Ms Barry and Mr Jeffrey could likely have been tendered in the arbitration without their attendance, they were not cross examined at the examination and I accept, having regard to the clear relevance of their evidence to the issues in dispute, the submission of the Applicant that their cross examination would likely be of sufficient utility to render the issuance of the subpoenas prima facie reasonable.
- The Applicant has undertaken that the addressees will be provided with conduct money of $50.00 each on or around the date of service of the Application, and that it will reimburse them for any reasonable expenses incurred by them in connection with their attendance at the arbitration.
- For the preceding reasons, the Court is satisfied that it is reasonable in all the circumstances to issue the subpoenas to Ms Barry and Mr Jeffrey. Accordingly, the Applicant has leave to issue the subpoenas as sought.