Arhill Pty Ltd & Ors v. General Terminal Co Pty Ltd

23 NSWLR 545

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(Judgment by: Rogers CJ Comm D)

Arhill Pty Ltd
v General Terminal Co Pty Ltd

Court:

Judge:
Rogers CJ Comm D

Judgment date: 19 December 1990

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Judgment by:
Rogers CJ Comm D

As at 22 June 1988, Mr and Mrs Hill owned the whole of the issued capital of G T Micro Computer Ltd (hereinafter called "GTM"). Mrs Hill and another company, related to the Hill family, owned the whole of the issued capital of General Terminal Co Pty Ltd (hereinafter called"GTC"). Mr Hill was the chief executive and managing director of both of these companies.

By a number of inter-dependant agreements, all bearing date 22 June 1988, Mitsui Computer Ltd (hereinafter called "MCL") acquired a controlling 51 per cent interest in the issued capital of both GTC and GTM. The shareholdings, thereafter to be held by MCL and the Hill interests respectively, were subject to certain pre-emptive rights. In consideration of Mr Hill entering into various agreements, MCL entered into put option agreements for the acquisition, by it, of the remaining 49 per cent of the issued share capital of GTC and GTM. The put options were to be exercised so as to require the acquisition, by MCL, of the shares, within twenty-four months after 22 June 1988.

By another agreement, made between Arhill Pty Ltd and each of GTC and GTM, Mr Hill was to continue as managing director of both companies. Under the agreement, Arhill was to be paid, essentially for Mr Hill's services, $100,000 per annum for a period of five years. The agreement could be terminated by GTC, or GTM, without notice, only if Mr Hill committed any serious and persistent breach of any of the provisions of the agreement, or was guilty of grave misconduct, or wilful neglect, in the discharge of his duties. After five years, the agreement could be terminated on one months notice.

On 21 July 1989, GTM and GTC each purported to summarily terminate the Arhill agreement. They alleged that, Arhill and Mr Hill had failed to perform a number of their obligations under the agreement. It was also claimed that, Mr Hill had breached the shareholders' agreements with MCL. On 25 August 1989, Mr and Mrs Hill gave notice of their exercise of the put option.

In the present proceedings, the Hill interests, as plaintiffs, claim that the purported termination of the Arhill agreement constituted a repudiation which they accepted. The plaintiffs denied that there were any serious breaches which would have entitled GTM and GTC to terminate the agreement. They seek damages for the loss of the advantage for the balance of the five years of the term of the agreement. Importantly, for present purposes, the plaintiffs alleged that the repudiation of the agreement was induced or procured by MCL, as the controlling shareholder in both companies.

By a cross-claim, the defendants, GTC, GTM and MCL have given details of alleged breaches of the agreements by the plaintiffs. They further allege that there had been misrepresentations by the plaintiffs concerning the financial position and of the activities of GTM and GTC, prior to the making of the agreements. These alleged misrepresentations ground claims by the cross-claimants, pursuant to the provisions of s 52 of the Trade Practices Act 1974 (Cth) (the Act). The cross-claimants seek damages for breach of contract, damages under s 82 of the Act, and s 229(7) of the Companies (New South Wales) Code. The cross-claimants assert that the option agreement is no longer on foot, because of breach of an alleged implied term that the plaintiffs would not commit any breach of the other agreements. The cross-claimants finally seek orders under s 87 of the Trade Practices Act (Cth), declaring the shareholders' agreements, service agreement and/or option agreement to be void.

The plaintiffs have issued subpoenas against Mitsui & Co (Australia) Ltd, (Australia), and Mitsui & Co (Japan) Ltd (Japan). The subpoenas, required production by Japan of, inter alia, the following documents:

"(b) All documents created since 1 July 1986 howsoever relating to any communication during the period between Mitsui Japan, or any officer/employee of Mitsui Japan, and: MCL, Mitsui Australia, GTC and GTM, or any officer or employee of those companies, if those documents relate to

(iv) MCL's computer business in Australia.

the acquisition or proposed acquisition or negotiation in relation to the acquisition or proposed acquisition by MCL of shares in either GTC or GTM or both;

the benefits or perceived benefits of any merger, takeover or other combination of the DEC (Data Electronic Corporation (Australia) Ltd) Division of MCL with the DEC business of GTC and GTM.

the performance of GTC or GTM or both at any time during the period;

the performance of Mr Hill as Managing Director of GTC and GTM at any time during the period;

any proposal made or considered at any time between 22 June 1988 and 21 July 1989 to reduce the amount payable to Arhill Pty Ltd under the Arhill agreements and/or to vary or otherwise affect the terms of put options granted by MCL to each of Mr and Mrs Hill.

(c)All documents howsoever relating to any communication since June 1986 between Mitsui Japan, or any officer/employee of Mitsui Japan, and MCL or Mitsui Australia, or any officer/employee of either of those companies; howsoever relating to any credit limits or the extent of authority for financial assistance by Mitsui Japan in connection with the acquisition or proposed acquisition by MCL of shares in either GTC or GTM or both."

The apparent width of this subpoena is further extended by a definition clause in the subpoena. For the purposes of illustration I annex, as Appendix A, a schedule from the subpoena to Japan: see at 557F.

On 2 April 1990, the solicitor for the defendants wrote to the plaintiffs' solicitors in the following terms:

"We note that when the matter was last before the Court on 23 March, you obtained a return date for subpoenas and foreshadowed an application for leave to serve a subpoena in Japan. We are instructed that in the event that that application is made, and is successful, we have instructions to accept service of any subpoena issued to Mitsui & Co (Japan) Limited. We also have instructions to accept service of any subpoena directed to Mitsui & Co (Australia) Limited." (Emphasis added.)

To me, it is clear enough that, what the solicitors were saying was simply that should leave be granted to serve a subpoena outside the jurisdiction, in Japan, then, instead of forwarding the document to Japan, the subpoena could be handed to the solicitors for the defendants. In no way did the solicitors for the defendants intend to convey that, absent the grant of such leave, service would be accepted locally.

In due course, an application was made by the solicitors for the plaintiffs, supported by the affidavit of Mr Gooch, a partner in the firm of Mallesons Stephen Jaques, and sworn on 6 June 1990. In his affidavit Mr Gooch said, inter alia, that:

"The documents called for in the subpoena are necessary and material to the plaintiffs' case in that such communications relate to the following issues:

the course of negotiations in relation to the acquisition or proposed acquisition by the third defendant of shares in either the first or second defendants or both;

(ii)

the performance of the first and second defendants; and

the performance of the second plaintiff as managing director of the first and second defendants."

Apparently, the documents filed with the application to the Deputy Registrar for an order for leave to serve a subpoena on Japan did not include a notice of motion. Mr Gooch simply moved on his affidavit and handed to the Registrar the proposed form of order, which was subsequently entered and dated 6 June 1990. In the affidavit he further said (par 4):

"I propose to serve a subpoena for production documents [sic] on Mitsui& Co (Japan) Limited, a Japanese company of which the third defendant is a subsidiary."

He set out the text of a direction which I gave on 23 March 1990, to the effect that the parties may apply for leave to serve subpoenas out of the State. He also annexed a copy of the letter from the defendants' solicitors. The Deputy Registrar made an order on 6 June 1990 that, "leave be granted to serve a subpoena for production on Mitsui & Co (Japan) Limited". He did not make an order that service may be effected out of the State in Japan. I rather think that he may have read the letter from the solicitors for the defendants, that they had instructions to accept service, in the event that an order was made granting leave to serve outside the jurisdiction, as meaning that service would be accepted without any need to consider the jurisdictional basis for such an order. There is absolutely no criticism in any of this of the Deputy Registrar. Unfortunately he was not alerted to any of the problems by the solicitors for the plaintiffs, if indeed, they were aware of them.

Thereupon the subpoena was sent to the solicitors for the defendants by way of purported service. On 26 June 1990, notices of motion were filed on behalf of both Japan and Australia, seeking orders that the subpoenas be set aside. The motions came before the Prothonotary, and very extensive evidence was given on each side. In a judgment, dated 28 September 1990, the Prothonotary declined to make the orders sought. Thereupon, an appeal was brought to me from the decision of the Prothonotary. Both before the Prothonotary and before me, substantially the same points were argued.

In relation to the subpoena addressed to Japan, it was submitted, that this Court had no power to give leave for the issue of a subpoena for service on a Japanese company in Japan. Alternatively, it was contended that in the exercise of its discretion, the Court should not allow service. With respect to both the subpoenas, it was argued that they were oppressive and an abuse of process.

The Prothonotary pointed out that, the issue of a subpoena was quite distinct from the order giving leave to serve. He pointed out that Japan made no effort to be represented on the application for leave to serve the subpoena and made no formal application to have it set aside. He concluded:

"It is my opinion that this inaction on the application for leave to serve the subpoena, and the action in accepting service in New South Wales, constitute an acceptance of the jurisdiction of the Court to issue the subpoena."

This approach was strongly supported by the plaintiffs' submissions, most particularly in a memorandum from counsel for the plaintiffs dated 17 December 1990. I take counsel's point that Japan took no objection to the making of the order for service for some months, until the argument before the Prothonotary. Furthermore, no formal application was ever made for setting aside the order of the Deputy Registrar. I was urged to accept the view that, the combination of the solicitor's letter and inaction after the making of the order, manifest a submission by Japan to service of the subpoena upon it.

With respect, I do not think that the problem is resolved quite so easily. The Court has a responsibility in making any order, to consider whether it has jurisdiction to make the order sought, and absent jurisdiction, to refuse the application even if it is made ex parte. Although procedurally it is correct to say that no specific application was made to have the order granting leave to issue the subpoena set aside, it is quite clear from the arguments advanced that, at all times, from the filing of the motions, Japan was seeking that remedy. I do not accept that the Court should readily construe ambiguous statements as submissions to obligations the Court otherwise has no power to impose.

Service of a subpoena outside Australia:

By Supreme Court Rules 1970, Pt 37, r 2, power to issue subpoenas is conferred in completely general terms. It provides as follows:

"(1) The Court may, in any proceedings, issue a subpoena to give evidence or a subpoena for production or a subpoena both to give evidence and for production in the prescribed form or in such other form as the Court may direct for the attendance or production on any trial or other occasion of or by the person named before the Court or before any Judge, officer, examiner or other person having authority to take evidence."

Service is addressed by r 7. The subrules which follow provide for matters such as handing the subpoena to the person, leaving it in the person's presence, leaving it with a solicitor. None of the subrules refer to the problem of service outside the State. That is a matter taken up by Pt 10. It deals with matters of service outside the State, but within Australia, and also outside Australia. Rule 3 provides:

"Service outside the State of a document other than originating process is valid if the service is in accordance with the prior leave of the Court or is confirmed by the Court."

Part 1, r 8 defines "document" as including "any paper or other material in which there is writing". Notwithstanding the submission of Mr Street to the contrary I see no reason why a subpoena should not be characterised as a"document". The question then is whether Pt 10, r 3 authorised service of a subpoena in Japan. Japan submitted that, the answer was in the negative. In considering this question I had the invaluable assistance of written submissions from Mr Keith Mason QC, Solicitor-General for New South Wales. In what follows I have drawn heavily on his submissions.

The submission by Japan raises difficult questions. It is at the heart of exercise of jurisdiction, by courts taking their system from England that, jurisdiction rests on presence or submission. Relevantly that is recognised in the concept that the courts of a State will exercise jurisdiction over persons upon whom service may be effected within the boundaries of the State, or those who submit. Admittedly, that concept has received some extension or enlargement. The history is referred to by Sir Wilfrid Greene MR in Attorney-General v Prossor [1938] 2 KB 531 at 537. Today, almost every sophisticated court system permits the service of process outside the territorial jurisdiction of the State, in certain specified circumstances. However, these circumstances are, in every case, most carefully defined in a manner which maintains a relationship between the action, in relation to which the process is sought to be served, and the State. Even so, the exercise of such jurisdiction has been described as "exorbitant" jurisdiction: The Siskina; Siskina (Owners of cargo lately laden on board) v Distos Compania Naviera SA [1979] AC 210 at 254 per Lord Diplock. The use of the expression in this way has been vigorously criticised by Lawrence Collins in a note,"Temporary Presence, Exorbitant Jurisdiction and the US Supreme Court" (1991) 107 LQR 10. It used to be that, under the New South Wales rules of court, leave was required to be obtained, in order to effect service of process outside the jurisdiction. Even if the applicant for such leave made out the matters required by the relevant rule, which permitted of the exercise of jurisdiction to grant leave for service outside the State, there was always a residual discretion. As recently as this year, the Privy Council reaffirmed that there is a discretion in the courts, as to whether or not to set aside service on a foreigner: cf Kuwait Asia Bank EC v National Mutual Life Nominees Ltd [1990] 3 WLR 297 at 310; [1990] 3 All ER 404 at 416. The courts have always regarded as a serious question whether a foreigner should be brought to contest his rights in this country: cf Société Générale de Paris v Dreyfus Brothers (1885) LR 29 Ch D 239 at 242.

In Johnson v Taylor Bros & Co Ltd [1920] AC 144 at 154, Lord Dunedin said:

"I think it is legitimate to begin by considering the genesis of the rule. I understand that jurisdiction according to English law is based on the act of personal service and that if is this effected the English law does not feel bound by the Roman maxim 'Actor sequitur forum rei'. It is far otherwise in other systems where service is in no sense a foundation of jurisdiction, but merely a sine qua non before effective action is allowed. Now service being the foundation of jurisdiction, it follows that that service naturally and normally would be service within the jurisdiction. But there is an exception to this normal rule, and that is service out of the jurisdiction. This however is not allowed as a right but is granted in the discretion of the judge as a privilege, and the rule in question here prescribes the limits within which that discretion should be exercised."

Another way of stating the point is, "that a foreigner, resident abroad, will not lightly be subjected to a local jurisdiction". The basis of that approach lies essentially in the respect which a State has for the sovereignty of another State. In other words, without the consent of the other State, the sovereign does not seek to exercise its rights and powers, in relation to legal proceedings, within the territory of another. It is interesting to notice the distinction drawn, between originating process and subpoenas, by the Federal Circuit Court of Appeals in Federal Trade Commission v Compagnie de Saint-Gobain-Pont-à-Mousson 636 F 2d 1300 (1980). In a comment on the decision in "Extraterritorial Service of Administrative Subpoenas: Federal Trade Commission v Compagnie de Saint-Gobain-Pont-à-Mousson", 13 Law and Policy in International Business 847 (1981) David M Simon says (at 847):

"... Although the DC Circuit's holding was limited to invalidating the extraterritorial service of subpoenas by registered mail, the court arguably implied that the only acceptable mode of extraterritorial service of subpoenas was through international judicial assistance."

Wilkey J, expressing the opinion of the majority, found (at 1323) that the FTC's purported service of a subpoena in Paris was a "plain intrusion upon French national sovereignty ... and the violation of international law which would result if the district court were to enforce the subpoena here". The majority drew attention to the difference between subpoenas and documents of originating process, such as writs and summonses. A summons may validly be served out of the jurisdiction. A summons gives a party notice of impending legal action. A subpoena is a part of a court's compulsive jurisdiction, as it compels a witness to appear or produce documents under threat of punishment for contempt. As Wilkey J put it (at 1313):

"... Given the compulsory nature of a subpoena, however, subpoena service by direct mail upon a foreign citizen on foreign soil, without warning to the officials of the local state and without initial request for or prior resort to established channels of judicial assistance, is perhaps maximally intrusive [into another state's territorial sovereignty]."

Note 69 on the same page states:

"... A nation may give general consent to service of compulsory process upon its nationals by another nation's government agencies by signing an international convention. See, eg, Multilateral Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters. ... The Hague Convention specifically recognizes, however, a signatory's right to refuse to honour any particular foreign request for service of judicial documents 'if it deems that compliance would infringe its sovereignty or security'. Id at art VIII."

Thus, this decision deems extra-territorial service of subpoenas to be a breach of international law. However, Simon makes some interesting points (at 855):

"... while there is some authority supporting the distinction made by the DC Circuit between extraterritorial service of summonses and subpoenas under international law, this distinction does not seem to arise from the coercive nature of a subpoena. Instead, it appears to be based upon an aspect of civil law jurisprudence nonexistent in common law systems. In civil law countries, courts are responsible for finding the evidence, while in common law countries this function is left to private parties. Therefore, civil law countries view the use of subpoenas to procure witnesses and evidence as a public matter and a function belonging to the court. Since judicial functions are acts of sovereignty, civil law countries believe that service of foreign subpoenas within their borders is a violation of international law. This view, however, is not uniformly held by all civil law countries. For example, while service in Switzerland of any foreign documents threatening imposition of sanctions may lead to the prosecution of the process server, Denmark will allow extraterritorial service within its borders if the process server is not a diplomatic official. Moreover, in Belgium, service by registered mail is permitted, because a document is viewed as served when it is posted. Common law countries, on the other hand, usually allow the service of any document within its borders. Many of these countries also provide mechanisms to assist service of foreign judicial documents. As a common law country, the United States also allows service of either a summons or a subpoena by a foreign official .... Thus, not only do common law countries allow service of foreign documents within their territories, civil law countries do not follow a consistent approach.

Given this divergence in the way civil law and common law countries view this issue, extraterritorial service of subpoenas does not appear to violate any generally accepted principle of international law. This conclusion was adopted by the Supreme Court in Blackmer v United States 284 US 421 (1932)."

In Re Tucker; Ex parte Tucker [1988] 2 WLR 748; [1988] 1 All ER 603, Dillon LJ delivering the judgment of the English Court of Appeal said (at 756; 609):

"I look, therefore, to see what section 25(1) is about, and I see that it is about summoning people to appear before an English court to be examined on oath and to produce documents. I note that the general practice in international law is that the courts of a country only have power to summon before them persons who accept service or are present within the territory of that country when served with the appropriate process. There are exceptions under RSC, Ord 11, but even under those rules no general power has been conferred to serve process on British subjects resident abroad. Moreover, the English court has never had any general power to serve a subpoena ad testificandum or subpoena duces tecum out of the jurisdiction on a British subject resident outside the United Kingdom, so as to compel him to come and give evidence in an English court. Against this background I would not expect section 25(1) to have empowered the English court to haul before it persons who could not be served with the necessary summons within the jurisdiction of the English court." (Emphasis added.)

Part 10, r 3 is in terms clear authority for the Court to give leave to serve a subpoena outside Australia. The fact that an order made pursuant to it could, in some instances, involve an infringement of the sovereignty of another country does not mean that it is a reason for holding the rule to be invalid. Nonetheless, the rule should be construed consistently with "the established criteria of international law with regard to comity": cf Re Tucker (at 758; 611). Whichever way the rule is read down it will not authorise giving leave to serve a Japanese company in Japan.

As well, even if an order for leave could be made under the rule, it seems that, in some circumstances, there would be a strong argument for setting aside any order for service on Japan as a matter of discretion. In Mackinnon v Donaldson, Lufkin and Jennrette Securities Corporation [1986] Ch 482, Hoffmann J discharged an order to Citibank NA requiring production of documents from its New York office. The subpoena was served on the Citibank office in London. His Lordship said (at 493):

"The content of the subpoena and order is to require the production by a non-party of documents outside the jurisdiction concerning business which it has transacted outside the jurisdiction. In principle and on authority it seems to me that the court should not, save in exceptional circumstances, impose such a requirement upon a foreigner. and, in particular, upon a foreign bank. The principle is that a state should refrain from demanding obedience to its sovereign authority by foreigners in respect of their conduct outside the jurisdiction."

In this case the Solicitor-General gave reasons why, at least in the exercise of discretion, any order giving leave to serve the subpoena in Japan ought to be set aside.

"If the company upon whom it is sought to serve the subpoena in this case is unwilling to comply with it and could neither be compelled by the Court to comply with it nor punished by the Court for its failure to do so there would probably be little utility in granting leave to serve the subpoena on the company: cf Re Tucker (at 611). In those circum stances leave should not be granted regardless of whether alternative procedures for seeking production of the document are available. Part 7 of the Evidence Act 1898 makes available (at the Court's discretion) a variety of procedures for the examination of persons overseas."Examination" includes any proceeding for the taking of evidence of a person pursuant to a letter of request to the judicial authorities of a foreign country: s 64. "Evidence taken" in an examination includes any document produced at an examination: s 65(9)(a). There is authority on the equivalent of s 65(9)(a) in the Commonwealth Act (s 27V(9)(a)) to the effect that it refers only to documents produced at a proceeding for the taking of evidence and that the production of documents to a court in compliance with a subpoena or order in the nature of a subpoena is not the taking of evidence of the person producing the documents: Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd (1987) 14 FCR 461 at 465. Part 7 is directed at the examination of witnesses who may in the course of their examination produce documents: Second Reading Speech, Parliamentary Debates, Legislative Assembly, 30 August 1988 at 784ff. The procedures available under Pt 7 could not be used to procure the issuing of a subpoena duces tecum or an order of that nature unless this was done as part of an application for an order under s 65(2) for the taking of the evidence of the person to whom the subpoena is addressed. The Court would have a discretion to include in an order for the issue of a letter of request under s 65(2)(c) a request for the foreign judicial authorities to issue a subpoena duces tecum to a person who it proposed be examined by those authorities [but it does not seem to have that discretion when the order is under s 65(2)(a) or s 65(2)(b) -- see s 65(4)]. Part 27, r 1A of the Supreme Court Rules also gives the Court a discretion to make orders for the examination of a person overseas. Semble this rule does not extend to the making of an order in the nature of a subpoena duces tecum: cf Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd at 464."

In the result, in my view, the order granting leave to serve Japan is required to be set aside. However, in all the circumstances of this case, that could bring about an intolerable situation. In the particular circumstances of this case the court may not be entirely powerless. If Japan is unwilling to accept service of a proper subpoena, necessary for the just determination of the dispute between the parties, the Court may have weapons in its armoury to ensure that Japan does produce the documents. If no agreement can be arrived at, serious consideration would have to be given to granting a stay of the cross-claim unless and until the cross- claimants procure Japan to produce relevant documents which are necessary for the fair determination of the dispute. This question was not argued and I say no more about it.

Were the subpoenas oppressive?

At the outset I should note that the defendants' counsel and solicitor appeared for the companies to whom the subpoenas issued. No one but lawyers would call Japan and Australia third parties to this litigation. Decisions such as Rochfort v Trade Practices Commission (1982) 153 CLR 134, which hold that the dispute as to whether a subpoena is oppressive does not involve the other litigating party, are only of academic interest in the factual setting of the present dispute.

The Prothonotary rejected the submission of Australia and Japan that, the subpoenas should be set aside because they were so wide as to be oppressive, and required what was tantamount to discovery from a stranger. The Prothonotary applied the classical tests in this regard, which have been usefully re-stated by Clarke J in Southern Pacific Hotel Services Inc v Southern Pacific Hotel Corporation Ltd [1984] 1 NSWLR 710 at 717 ff. As Clarke J pointed out although separate grounds the two objections overlap. For the reasons given by his Honour for rejecting the first ground of objection it should fail in the present case also. As to the second basis his Honour said (at 719-720):

"...If a court is called upon to rule that a subpoena is an abuse of process [ie oppressive] in this sense, it will need to carry out an exercise of judgment upon the particular facts in each case, including but not limited to the terms of the subpoena, bearing in mind the need to balance the reasonableness of the burden imposed upon the recipient and the invasion of his private rights with the public interest in the due administration of justice and, in particular, that all material relevant to the issues be available to the parties to enable them to advance their respective cases. There is, in every case, a clash between these competing interests and whilst the balancing exercise to which I have referred must be carried out, it is the latter interest which is predominant. If the needs of justice require or could require that a stranger be obliged to carry out a very burdensome task in the collection, transportation and production of a large number of documents, then a subpoena calling upon the stranger to produce those documents will be upheld." (My emphasis.)

There have been many changes in court procedure since his Honour's judgment was delivered, and it is necessary, and appropriate, to take another look at the factors to be taken into account in striking the balance between competing rights. In carrying out this exercise I acknowledge my debt to a learned article by Mr P Wood, "Challenging Subpoenas Duces Tecum; Is There a Third Party View?" in (1984) 10 Syd L Rev 379.

The advent of more sophisticated word processing apparatus, electronic transmissions and photocopying machines has meant that the amount of documentary material that may be relevant, applying the orthodox tests, to the resolution of the dispute, has multiplied in geometric progression. As lawyers, in proper discharge of their duty to their clients, attempt to leave no stone unturned in search of evidentiary material which may be supportive of their clients' case, discovery and inspection have become not only extremely arduous, but a prohibitively expensive interlocutory step. Judges have frequently complained that the volumes of documents that are handed up at the commencement of a case, yield very little at the end of the argument. The number of documents that may be referred to in the course of the case, constitute but a fraction of the material which had been amassed. A great deal of the material, in turn, had been quarried in the course of discovery and inspection of documents held by other parties, and by strangers to the litigation. It seems to me, that, new measures of control have to be introduced to supplement the relatively relaxed gateway which has traditionally been imposed in determining whether, or not, a subpoena is oppressive, or whether discovery should be ordered, inspection afforded, or interrogatories administered. At a time when there is much anxiety about the cost of litigation, the length of cases, delay in the courts and other problems stemming from the Rolls Royce treatment afforded to individual disputes, is it not time to draw the line at what is necessary for disposing fairly of the proceedings?

Admittedly, in Science Research Council v Nassé [1980] AC 1028, the House of Lords, and in Dolling-Baker v Merrett [1990] 1 WLR 1205, the Court of Appeal, were concerned with applications for production and inspection of documents under the English rules of court. Nonetheless, it seems to me, that there is utility in considering the approach made by the two tribunals in those cases. In Science Research Council v Nassé, the House of Lords held that relevance alone, though a necessary ingredient, did not provide an automatic test for ordering discovery. According to their Lordships, the ultimate test was, whether discovery was necessary for disposing fairly of the proceedings. I need to point out at once that, by the Rules of the Supreme Court (UK), O 24, r 13, it is specifically provided that no order for production of documents for inspection, or to a court, shall be made"unless the court is of the opinion that the order is necessary, either for disposing fairly of the cause or matter, or for saving costs". That, it seems to me, should be the criteria whereby courts should approach applications in relation to setting aside subpoenas, discovery and inspection. There should only ever be the one true guide. Obviously, if a document is not relevant, it cannot be necessary for disposing of the cause. Obviously, if the document does not open up a new line of inquiry, it cannot be necessary. But merely because it is relevant, or opens up a new line of inquiry, does not make it necessary.

Obviously, it is at times difficult to determine ahead of a trial what is "necessary" to "disposing fairly" of a cause. All lawyers have known of cases where the odd document, which might have seemed of tangential importance, made all the difference. On the other hand, more often than not, hundreds of documents will be searched for and produced that will be of absolutely no use. The question has been discussed by Judge Newman of the Second Circuit Court of Appeals in "Rethinking Fairness: Perspectives on the Litigation Process", 94 Yale LJ 1643 esp at 1652ff (1985).

Decisions on claims of oppression, relevantly for present purposes, fall into two categories. The first involves claims that the subpoena seeks discovery against a third party. The second category of claims is that the terms of the subpoena are so wide and indeterminate as to be oppressive. The rationale for the first category once again highlights the incongruity present in this case where the relationship between the defendants and the "third party" appears so close. This is a point made by Clarke J in Southern Pacific Hotel (at 712, 720). Jordan CJ explained in Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at 573 that:

"... A stranger to the cause ought not to be required to go to the trouble and perhaps to expense in ransacking his records and endeavouring to form a judgment as to whether any of his papers throw light on a dispute which is to be litigated upon issues of which he is presumably ignorant."

The "most harassing duty" of which the authorities speak, in this case, falls upon a person well able to make the necessary judgment, the solicitor for the defendants.

It is the second category of objections that is of concern. The subpoena may be so wide that the search for documents may involve the recipient in an expenditure of time and effort quite disproportionate to any benefit that the administration of justice may derive from it. It may be argued that the provisions of Pt 37, r 9, permitting the award of costs for the expense incurred in answering a subpoena, has substantially overcome this head of objection.

With respect to the Prothonotary, in my view, the subpoenas in the present case, even applying the test of relevance, are far too wide. The definition of documents leads to the result that a multiplicity of copies of the same document may need to be produced. Why are all copies, including drafts, necessary? Documents relating to the computer business of MLC in Australia which have nothing to do with any element of the dispute are encompassed by the subpoena. The same comments apply to par (b)(v) of the schedule. Clause (c) as it trawls may snag a variety of documents of no value in the resolution of the dispute.

In my view the subpoenas are too wide and should be set aside. That having been said, the issues between the parties have received much definition by the exchange of witness statements. I would now expect the parties to work out what is really required in the nature of documents, in order to allow a fair hearing of the dispute.

APPENDIX A - SCHEDULE

(a) In this Schedule, the abbreviations and words following bear the meanings setagainst them respectively:

(b) All documents howsoever relating to any communication during the period between MCJ, or any officer or employee of MCJ, and:

(i)

MCL, or any officer or employee of MCL;

(ii)

MCA, or any officer or employee of MCA;

(iii)

GT, or any officer or employee of GT;

howsoever relating to:

(iv)

MCL's computer business in Australia;

(v)

the acquisition or proposed acquisition or negotiations in relation to the acquisition or proposed acquisition by MCL of shares in either General Terminal Company Pty Limited or GT Microcomputer Pty Limited or both;

(vi)

the benefits or perceived benefits of any merger, takeover or other combination of the DEC Division of MCL with the DEC business of GT;

(vii)

the performance of General Terminal Company Pty Limited or GT Microcomputer Pty Limited or both at any time during the period;

(viii)

the performance of Robert Hamilton Hill as Managing Director of General Terminal Company Pty Limited and GT Microcomputer Pty Limited at any time during the period;

(ix)

any proposal made or considered at any time between 22 June 1988 and 21 July 1989 to reduce the amount payable to Arhill Pty Limited under Service Agreements executed between it and each of General Terminal Company Pty Limited and GT Microcomputer Pty Limited on 22 June 1988 and/or to vary or otherwise affect the terms of put options granted by MCL to each of Robert Hamilton Hill and Christine Hill, by letters dated 22 June 1988.

(c) All documents howsoever relating to any communications during the period between MCJ, or any officer or employee of MCJ, and:

(i)

MCL, or any officer or employee of MCL;

(ii)

MCA, or any officer or employee of MCA;

howsoever relating to any credit limits or the extent of authority for financial assistance by MCJ in connection with the acquisition or proposed acquisition by MCL of shares in either General Terminal Company Pty Limited or GT Micro Computer Pty Limited or both.