The High Court has recently refused a special leave application from a decision of the Full Federal Court in Jones v Treasury Wine Estates Limited.1 In that case, the Full Federal Court made it clear that litigants who wish to seek oral or documentary evidence through the US District Courts for purposes of existing Australian proceedings should first give notice and receive endorsement by the Australian Court, or risk being formally restrained for attempting to circumvent the Court’s inherent case management and supervisory powers. The case provides useful insights for litigants with critical witnesses or documentary evidence located in the United States of America.
1. Decision of the Full Federal Court
On 13 April 2016, the Full Court of the Federal Court of Australia provided injunctive relief to Treasury Wine Estates (TWE), the respondent in a class action claim brought by the applicant, Mr Jones, and the relevant class, Utah Retirement Systems (URS).
By way of anti-suit injunction, Mr Jones and URS were restrained from seeking and obtaining depositions – or compulsory oral evidence – from third parties through application under s 1782 of the Federal Rules of Civil Procedure (US) (US Code) to two US District Courts.
1.1 Relevant provision of the US Code
28 USC § 1782 of the US Code, entitled “Assistance to foreign and international tribunals and to litigants before such tribunals,” allows a person outside of the US to apply to a US District Court to obtain orders in respect of gathering information from persons within that jurisdiction that may assist in an overseas proceeding.
To be eligible to apply to a US District Court, the applicant must show the following:
- it is an "interested person" in a foreign proceeding;
- the proceeding is before a foreign "tribunal;" and
- the person from whom evidence is sought is in the district of the court before which the application has been filed.
It is at the Court’s discretion to grant the application. Upon granting an application, a US District Court may also impose its own conditions.2
Making an application under the US Code is attractive for foreign litigants as, if successful, it compels US citizens to comply with such an order. This is in contrast to other methods where the order may not be enforceable against the recipient in a foreign jurisdiction, such as serving a subpoena issued by an Australian court.
1.2 Background facts
The class action proceedings brought by Mr Jones and the URS included allegations that TWE breached its continuous disclosure obligations, and engaged in misleading and deceptive conduct, in relation to the disclosure of allegedly excessive inventory levels held by its US distributors.
In an attempt to gather further evidence for purposes of the Australian class action, URS and Jones separately filed ex parte applications in two US District Courts, pursuant to s 1782 of the US Code, for discovery by way of oral questions from current and former senior executives of TWE.
The applications were filed without giving notice or receiving endorsement from the docket judge in the Australian class action and without notice to TWE.
The US District Court of the Northern District of California made orders permitting the issue of subpoenas for the taking of depositions, while the District Court of the Southern District of New York issued a show cause notice to the third party to show why a subpoena should not be issued.
Once aware of the applications, TWE sought anti-suit injunctions to restrain Mr Jones and URS from pursuing or participating in the US deposition applications.
The Chief Justice of the Federal Court determined that the matter was of sufficient importance that it be referred directly to the Full Court for hearing.
The Full Federal Court found in favour of TWE, restraining Jones and URS from taking any further steps in furtherance or connection with the US District Courts in relation to obtaining discovery by oral depositions.
By way of summary, the Full Federal Court reasoned that:
- The importance of judge controlled litigation has increased significantly in recent yearsand should only be usurped in rare cases. The Court has exclusive control over proceedings before it, and even more so in class actions;
- URS and Jones undermined the Court’s exclusive case management and supervisory role in the proceedings by making applications directly to the US District Courts without giving notice or receiving endorsement from the docket judge, and without notice to the other party;3
- the applications were made in order to obtain the benefit of oral discovery not usually available in Australian Courts. The court noted that oral discovery of the US kind is conceptually different to that permitted in Australian Courts4 and that whilst it theoretically has the power to order oral discovery of the US kind, it should only be invoked in exceptional cases;5 and
- the applications were inconsistent with the party’s overarching obligations to resolve the dispute quickly, inexpensively and efficiently.6
On 14 October 2016, the Applicant was refused special leave to appeal the matter to the High Court.
2. Key take away points
The Court acknowledged that there may be circumstances in the future where it would be appropriate to permit evidence to be obtained under the US Code and this course may be critical in securing evidence for use in Australian proceedings that may not otherwise be available.
However, prudent litigants considering obtaining evidence through foreign processes should be guided by the following to minimise the risk of injunctive relief preventing pursuit of such evidence:
- the court and the opposing party should be notified of a litigant’s intention to apply to a US District Court. This may include requesting endorsement from the Australian court – particularly in class actions; and
- only in exceptional circumstances should an applicant be minded to seek evidence of a kind not ordinarily available under Australian court processes – such as an order for a deposition (compulsory oral evidence).