Australia: Australian Court Stops Class Action From Obtaining US Courts' Assistance For Oral Depositions

Key Points

  • By way of anti-suit injunctions against the applicant and a class member in class action proceedings, the Federal Court has restrained parties from making formal applications pursuant to 28 USC § 1782 to gather evidence through oral discovery in US District Courts.
  • Parties to Australian proceedings should be wary of using foreign procedures to gather evidence without the Australian court's prior knowledge and consent, in particular where the court has a particular supervisory role (such as in class actions) that may be undermined by an application in a foreign jurisdiction.

Background

In Jones v Treasury Wine Estates Limited [2016] FCAFC 59, Justices Gilmour, Foster and Beach were required to rule on an interlocutory application in class action proceedings filed by the respondent, Treasury Wine Estates ("TWE"), seeking orders in the nature of anti-suit injunctions in relation to US proceedings against the applicant, Jones, and a member of the relevant class, Utah Retirement Systems ("URS").

The proceedings involved allegations of misleading or deceptive conduct and contraventions of the continuous disclosure provisions of the Corporations Act 2001 (Cth), specifically TWE's alleged failure to disclose to the market that inventory levels of wine held by its US distributors were materially excessive, which in turn affected its profitability. To gather evidence, the applicant filed proceedings in the US District Court for the Southern District of New York, and URS filed proceedings in the US District Court for the Northern District of California seeking an order pursuant to 28 USC § 1782 of the US Code titled "Assistance to foreign and international tribunals and to litigants before such tribunals" for the obtaining of oral discovery (also referred to as a "deposition") from current and former senior executives of TWE.

28 USC § 1782 provides:

The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal, including criminal investigations conducted before formal accusation. The order may be made pursuant to a letter rogatory issued, or request made, by a foreign or international tribunal or upon the application of any interested person and may direct that the testimony or statement be given, or the document or other thing be produced, before a person appointed by the court.... The order may prescribe the practice and procedure, which may be in whole or part the practice and procedure of the foreign country or the international tribunal, for taking the testimony or statement or producing the document or other thing. To the extent that the order does not prescribe otherwise, the testimony or statement shall be taken, and the document or other thing produced, in accordance with the Federal Rules of Civil Procedure. A person may not be compelled to give his testimony or statement or to produce a document or other thing in violation of any legally applicable privilege.

Specifically, URS sought orders for discovery by way of oral questions from Sandra LeDrew, the managing director of TWE's Americas Division, and Alejandro Escalante, the Vice President of Financial Planning & Analysis, Sales Division of TWE's Americas Division. Jones sought an order for discovery by way of oral questions from Stephen Brauer, a former manager of TWE's Americas Division. In response, the US District Court for the Northern District of California made orders pursuant to 28 USC § 1782 permitting the issue of subpoenas to Ms LeDrew and Mr Escalante for the taking of a deposition, and the US District Court for the Southern District of New York made an order for Mr Brauer to show cause why a similar order should not be made.

Jones and URS gave undertakings not to take further steps in or consequential upon the US proceedings until the determination of the application for an anti-suit injunction before the Federal Court of Australia.

The Judgment

Jurisdiction. In its judgment, the Court briefly commented on the nature of the jurisdiction for the grant of an anti-suit injunction as operating in personam to restrict a party from conducting proceedings in a foreign court. It has a basis both in the inherent power of the Court to protect its own processes once they have been set in motion (in this case through the commencement of class action proceedings by the applicant) and also in the equitable jurisdiction of the Court. TWE relied on both sources of power; however the Court concluded that it was sufficient to establish jurisdiction under the first ground.

Protection of the Federal Court's Processes. The Court considered in-depth the overarching purpose of the civil practice and procedure regime provided by the Federal Court of Australia Act 1976 (Cth) ("FCA Act"), the Federal Court Rules 2011 and Practice Note CM5: to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible. The judges commented on how the legislation, in particular section 37M, emphasises the importance of judge-controlled litigation, and also suggests that ancillary proceedings "may not be conducive" to these aims except in rare cases.

Their Honours stated that while they theoretically have the power to order oral discovery of the kind which was being sought in the US proceedings by virtue of the provisions of the FCA Act, the present question did not require such as order to be made, and they considered that such a power would only be exercised in a "most exceptional case". Rather, the question was whether Jones's and URS's conduct in seeking to invoke the powers of a foreign court to obtain compulsory oral discovery, without the docket judge's knowledge or approval, was permissible. In particular, the fact that this was a class action was relevant, because case management of such proceedings has a particular significance given the Court's supervisory role. However, the fact that the proceedings were being case managed did not provide a basis in itself for restraining the parties from seeking orders under 28 USC § 1782.

The Court concluded that the applications in the US District Courts were made in order to obtain the benefit of procedures that would not usually be available in the Federal Court of Australia. While there may be circumstances where it would endorse an application by a party under 28 USC § 1782, in the present case the fact that Jones's and URS's conduct in invoking the US proceedings without notice and without the Court's approval undermined the Court's case management and supervision of the class action. As such, the US proceedings were inconsistent with the overarching purpose of the civil practice and procedure regime under which the Federal Court operates.

Additionally, their Honours emphasised that "what is vital is that this Court's proceedings and its pre-trial processes are solely subject to supervision by this Court, particularly where one is dealing with a class action which invokes the Court's supervisory role".1 In any situation where an order for a deposition under 28 USC § 1782 is made, it would therefore necessarily need to be obtained with notice to the other party, and with the Court's prior knowledge and approval. The circumstances in which approval might be granted would be exceptional, and their Honours considered that it was "neither necessary nor helpful" to contemplate what scenarios might warrant such endorsement in the present judgment.

Therefore, their Honours ordered that Jones and URS:

  1. Be restrained from taking any further step in furtherance of, or in connection with, the US proceedings; and
  2. Be restrained from taking, or causing to be taken, or participating in the taking of any oral deposition of the TWE executives who were the subject of the applications under 28 USC § 1782.

Issues Raised

Scope of the Decision. It is uncertain how far the implications of this case will reach with respect to the rationale for the Court's judgment, for two reasons:

First, their Honours commented that while the Court does not, in general, exercise any control over the manner in which a party lawfully obtains the evidence which it will need to support its case, this does not give a party the right to circumvent the Court's control and supervision of the proceedings before it. However, it is unclear as to what specific actions by a party will constitute circumvention. It may be that a distinction can be made between formal processes in foreign jurisdictions where an order is sought from a foreign court, such as the present situation, and informal means of gathering evidence, which would potentially fall outside the Court's jurisdiction to intervene in the evidence-gathering process.

Secondly, their Honours did not discuss the relevance of the fact that the subject of the 28 USC § 1782 applications was a subsidiary of a party to the proceedings (TWE). There is a question of whether the Court would be willing to restrain a party from making foreign applications to gather evidence from independent third parties, which again turns on the scope of the decision. It is likely that the rationale of retaining the Federal Court as the sole supervisor of the proceedings would again serve as justification for restraining a party from gathering evidence from third parties under the foreign procedure. Moreover, the Federal Court has recently affirmed the position that documents in the possession of a subsidiary are not in the "control" of its parent for the purposes of discovery,2 which demonstrates that even where it could not itself compel the officers of the subsidiary to provide evidence it will still restrain a 28 USC § 1782 application, because such an application would still fall outside the Court's management of the case.

Use of Depositions in Australia. Their Honours stated that the Federal Court has, theoretically, the power under the FCA Act to order oral discovery of the US kind due to the broad nature of sections 23, 33ZF and 37P. However, such a power would be exercised only in "an exceptional case". This is a softening of previous judicial positions where it was said that in the Federal Court, "compulsory oral discovery is not available against either parties or non-parties".3

The Court also stated that it is unlikely that section 46 of the FCA Act could be used for oral discovery, notwithstanding its apparent width. Section 46 was specifically amended to allow the evidence on commission procedure that it embodies to be employed in relation to discovery. The Court's view may have been the result of a focus on the purpose behind the amendment, which was to give effect to recommendations made by the Australian Law Reform Commission to permit "pre-trial oral examination about discovery".4 Section 46 was meant to facilitate the locating of documents and resolution of discovery disputes.5 Oral discovery aimed at obtaining information relevant to the dispute the subject of proceedings is a broader purpose. However, the text of section 46 does not reflect the more limited purpose.

Implications

This case has demonstrated that parties to proceedings in an Australian court should be wary of making formal applications for discovery to a foreign court without the prior knowledge and consent of the Australian court, regardless of whether the discovery is of a kind that is available under the Australian court's procedures. In particular, it highlights the Federal Court's reluctance to allow actions by parties that are inconsistent with the overarching purpose of the FCA Act, especially where the Court has a particular role in the management of the case (as in class actions). At the very least, if a party wishes to gather evidence using a procedure outside those prescribed by the FCA Act (or equivalent state legislation for state matters), it should make the Australian court aware of this fact and seek supporting orders.

Footnotes

[1] Jones v Treasury Wine Estates Limited [2016] FCAFC 59 at [48].

[2] Australian Competition and Consumer Commission v Prysmian Cavi E Sistemi SRL (No 11) [2015] FCA 876.

[3] Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd [No 4] (1996) 64 FCR 61 at 67; Martin v Tasmania Development Resources [1999] FCA 71 at [1].

[4] Australian Law Reform Commission, Managing Discovery: Discovery of Documents in Federal Court, Report 115 (2011), Recommendations 10-1 and 10-2.

[5] Law Council of Australia / Federal Court of Australia, Case Management Handbook (2014) 108-109.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.