Australia: Examination of an officer as to the sufficiency of a company's compliance with a subpoena

Last Updated: 27 July 2011
Article by Karen Ingram

In a recent dispute concerning a company's compliance with a subpoena, the Supreme Court of NSW considered the operation of the seldom used section 68 of the Civil Procedure Act 2005. Relevantly, section 68 provides, "Subject to rules of court, the court may, by subpoena or otherwise, order any person to do either or both of the following: (a) to attend court to be examined as a witness...".

The parties' contentions

The plaintiff (who was the subpoenaing party) requested the Court to exercise its discretion, pursuant to section 68, to order that the subpoenaed party's CEO be required to give oral evidence as to the sufficiency of the company's compliance with the subpoena. The plaintiff argued that the small volume of documents produced under subpoena, combined with the fact that possibly relevant documents had not been retained (despite there being no legal obligation for the subpoenaed party to do so), evidenced that the subpoenaed party did not understand its obligations under the subpoena and had therefore failed to comply with the terms of the subpoena. The plaintiff argued that the subpoenaed party's CEO was the proper officer to be examined in respect of the company's compliance because he was the officer with the most knowledge of the issues in dispute in the principal proceedings.

The subpoenaed party provided evidence of the steps it took to comply with the subpoena, including evidence of its corporate document retention policy which was in place well before the issues in dispute in the principal proceedings arose. The subpoenaed party contended that the plaintiff's real complaint was not that the subpoenaed party did not understand its obligations under the subpoena but, rather, because of the paucity of material provided it has not complied with the subpoena. It was also contended that, in the event an examination was warranted, the appropriate officer to be examined was not the CEO, but the officer who coordinated the identification and production of documents under the subpoena.

What is the purpose of section 68

The Court held that an order under section 68 is not available to be used as a means of interrogation regarding whether or not any other documents exist that may be caught by the subpoena and, if not, why not. Rather, an order under section 68 will be made only for the purposes of examining whether the subpoenaed party understood its obligations in respect of the subpoena (see Hexiva Pty Ltd v Lederer [2006] NSWSC 561).

Testing section 68

The Court applied the following two-step test to determine whether an order under section 68 should be granted:

1. Does the plaintiff have reasonable cause to test the sufficiency of the subpoenaed party's compliance?

2. If yes, who is the appropriate officer that the examination order should be made against?

What was the decision?

The Court declined to make the order sought by the plaintiff, finding that it did not have reasonable cause to test the sufficiency of the subpoenaed party's compliance in circumstances where:

(a) the evidence did not demonstrate a lack of understanding by the subpoenaed party as to its obligations under the subpoena (i.e. correspondence between the parties' lawyers showed that questions were raised and answered in relation to the categories of documents in the subpoena, which clearly indicated that careful consideration was given to the scope of the subpoena's demand); and

(b) the subpoenaed party received legal advice as to the scope and nature of its obligations under the subpoena.

Although not required to consider the second element of the test under section 68, the Court held that, if an examination order was made, the subpoenaed party's CEO would not be the proper officer to be examined. Rather, it would be the officer who coordinated the identification and production of documents under the subpoena. This was because the relevant person to attend court to be examined as a witness, irrespective of his/her position in the company, is the person who has sufficient knowledge of the company's affairs and its compliance with the subpoena (see Iacullo v Remly Pty Ltd [2010] NSWSC 980). In this case, the CEO clearly did not possess such knowledge.

What's the importance of this decision

The Court's decision highlights that company officers may be called upon to give oral evidence of the sufficiency of a company's compliance with a subpoena. However, any such examination will be limited to determining whether the subpoenaed party understood its obligations in respect of the subpoena, not whether certain documents are or were in existence. Further, when answering a subpoena, companies should be careful to ensure that an appropriate person (i.e. one who has sufficient knowledge of the company's affairs and, in a worst case scenario, could stand up to the rigours of being examined in court) coordinates production of the subpoenaed documents and correspondence with external lawyers.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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