Wembley Stadium in the United Kingdom continues to generate interesting court judgments, this time from Melbourne, Australia, where aggrieved investors have brought a "class action" suit against Multiplex. Last week, the Federal Court of Australia allowed the investors to subpoena several thousand documents from the Corporate Regulator at an early stage in the proceedings, over the strong objections of Multiplex.
As an entity listed on the Australian Stock Exchange, Multiplex is subject to continuous disclosure obligations. The object of those obligations is to ensure that the market (i.e. investors) have a reasonable appreciation of the value of each listed company when purchasing its stock or securities. In representative proceedings under Part IVA of the Federal Court of Australia Act 1976 (Cth) ("the Class Action"), 45 investors in Multiplex ("the Investors") allege that between 2 August 2004 and 23 February 2005 Multiplex knew or ought to have known that it was likely, or alternatively that there was a material risk, that the Wembley Stadium project would:
- substantially exceed budgeted costs;
- fall further behind construction schedule;
- make a loss; and
- substantially reduce forecasted profit earnings for the 2005 and 2006 financial years.
The Investors complain that Multiplex failed to notify the Australian Stock Exchange of these facts, in breach of its continuous disclosure obligations. The damage alleged is primarily the difference between the price paid for each security interest and the "true value" of that interest, i.e. the market value if Multiplex had disclosed relevant information about its difficulties with the Wembley Stadium project. The Investors’ suit is backed by a commercial litigation funder.
Multiplex is defending the suit on the basis that at all times it believed on reasonable grounds that any increase in the cost of the project was recoverable from a number of sub-contractors and was not likely to affect the overall profitability of the project.
The latest interlocutory judgment (of Heerey J sitting as duty judge) arose on 12 July 2007 as a result of the investors’ application for the Court to issue a subpoena to the Australian Securities and Investments Commission (ASIC).
The ASIC Investigation
ASIC is empowered by statute to conduct compulsory examinations. From February 2005 it did so into events concerning the Wembley Stadium project. During the investigation it reviewed over 3000 documents, examined 23 witnesses and obtained additional information from the United Kingdom. On 20 December 2006, Multiplex gave an enforceable undertaking under Part 3 of the Australian Securities and Investments Commission Act 2001 to ASIC, wherein Multiplex admitted failing to comply with its continuous disclosure obligations during a limited period (3-23 February 2005) and undertook to provide certain compensation to persons who acquired security investments in Multiplex during that period.
Early skirmishing in the Class Action
After pleadings were filed, Multiplex filed applications seeking orders that the matter no longer be treated as a Class Action, that it be transferred to the District Court of New South Wales, and that the Investors give security for Multiplex’s legal costs. As at 12 July 2007 these applications had been heard, but with judgment reserved. Nevertheless, the parties had agreed that the Investors must give some security for Multiplex’s costs of the proceedings, but differed as to the amount: Multiplex initially sought security of A$24.1 Million, of which A$24 Million was to cover the costs of discovery, based on Multiplex’s estimate that it would be required to review 3.5 Million documents. Multiplex later reduced this to A$6 Million based on an estimate of 266,000 documents. The Investors proffered A$1.9 Million.
Multiplex’s objections to the ASIC subpoena
It was in this context that the Investors sought issue of a subpoena to ASIC to produce documents relating to its investigation. They argued that the ASIC documents would narrow the issues between the parties, reduce the cost of discovery (and hence the quantum of security for costs), and provide documents which had already been subject to sorting into folders, thus improving accessability. ASIC did not object to the issue of the subpoena and submitted to the judgment of the court. However, Multiplex opposed the issue of the subpoena, on the following grounds:
1) That the subpoena was being used as a substitute for discovery, and would force the recipient to "go through a discovery style exercise". Multiplex relied in particular on the dictum of Jordan CJ in Commissioner for Railways v Small  38 SR (NSW) 564: "A stranger to the cause ought not to be required to go to 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."
Heerey J responded that no such burden was cast upon ASIC in this case: the documents sought were either specifically identified in the subpoena or were identified by an objective criterion within the knowledge of ASIC, i.e. they were documents which Multiplex provided to ASIC in the course of its investigation.
His Honour noted that Order 15A Rule 8 of the Federal Court Rules now allows Discovery Orders to be made against non-parties, but this is a power that the Court exercises with caution. The normal way for obtaining documents from a non-party is and remains the subpoena duces tecum. Such a consideration did not assist Multiplex.
2) That the subpoena would include irrelevant documents, because the ASIC enquiry covered a longer period (June 2004 to December 2005) than the period in which the various Investors acquired securities (2 August 2004 to 30 May 2005).
Heerey J responded that although the periods did not exactly coincide, "the ASIC investigation … was a substantial enquiry concerned with the core issues in this proceeding, namely the problems at Wembley, Multiplex’s awarenesss of them, and the extent of Multiplex’s disclosure". The present litigation could be described as "four or more major building cases inside a complex corporations case", worth potentially in excess of A$100 Million. He therefore found that there was a general utility in both parties obtaining access to the ASIC documents at this stage, so as to facilitate better understanding of strengths and weaknesses, evidence required, and prospects of settlement.
3) That the subpoena was premature, since judgment had not yet been handed down on Multiplex’s applications to have the matter transferred to the District Court of New South Wales, and for the proceedings to cease to be a class action. Further, it was possible that the litigation funder might make a commercial decision not to back the proceedings any further. Since no security had yet been provided, Multiplex should not be put to the expense involved in reviewing documents and making privilege claims.
Heerey J noted that this was a large claim, backed by a commercial litigation funder, and the undertaking obtained by ASIC indicated that it had at least arguable merit. He rejected the prematurity argument.
The judgment illustrates the manner in which the Australian courts’ prohibition against imposing discovery obligations on a third party may be circumvented by careful drafting of subpoena.
It further stands as an example of how the Federal Court of Australia will support early issue of wide-ranging subpoena, where the applicant party can demonstrate benefit to the efficient conduct of the proceedings as a whole.
* P Dawson Nominees Pty Ltd v Multiplex Limited  FCA 1044 (12 July 2007) per Heerey J
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