Nguyen v Hwang

1. [1]

   This judgment concerns a review of the Registrar’s decision to set aside sixteen subpoenas to produce in accordance with r 49.19 of the Uniform Civil Procedure Rules 2005 (NSW) (‘UCPR’). On 9 December 2022, the defendants sought to replace the Registrar’s order pursuant to r 33.4 of the UCPR.

2. [2]

   The plaintiff is Vo Vien Phuong Nguyen. The first defendant is Chiao Ling Hwang. The second defendant is Vaissade Pty Ltd. The second defendant owned the premises on which the pharmacy was operating. S. Baronlevi appeared for the plaintiff. S. Zhao appeared for the defendants. The parties relied upon a joint court book marked Exhibit 1 (‘Ex 1’).

Background

1. [3]

   The plaintiff and the first defendant are both pharmacists. The first defendant was the previous owner of the pharmacy (‘the Pharmacy’) which operated on the premises owned by the second defendant. Before selling the Pharmacy to the plaintiff in 2015. The second defendant is subject to a lease with the plaintiff.

2. [4]

   On 25 May 2015, the plaintiff and the first defendant entered a contract for the sale of business (‘the Contract’). Prior to the execution of this contract, the first defendant and/or her agents provided the plaintiff with Dispensing Activity Reports for the 2012, 2013 and 2014 financial years (‘Dispensing Activity Reports’). The Dispensing Activity Reports included the number and breakdown of prescriptions dispensed by the business for those financial years.

3. [5]

   On 13 December 2019, the plaintiff commenced proceedings on based on allegations that the Dispensing Activity Report provided by the plaintiff in 2014 was untrue, without bases or reasonable bases and either recklessly fraudulent or negligently fraudulent. The first defendant denies these allegations.

4. [6]

   In 2020, the plaintiff, in her amended statement of claim (‘ASC’), joined the second defendant in order to seek relief in relation to rent paid to it.

5. [7]

   Paragraph [11] of the plaintiff’s ASC pleads that the Dispensing Activity Reports for the financials years of 2012, 2013 and 2014 show a total of 28, 696; 31,237; and 32,000 prescriptions dispensed respectively.

6. [8]

   The Dispensing Activity Reports were generated by the first defendant using the Pharmacy's dispensing software at the time, Aquarius (‘the Old Software’).

7. [9]

   In or around July 2015 and after the sale of the pharmacy, the plaintiff caused the pharmacy's dispensing software to change to Z Dispense Software (‘the New Software’).

8. [10]

   Per the paragraph [9] of ASC, the plaintiff pleads that prior to the execution of the contract, the first defendant made representations to the plaintiff that the number and breakdown of scripts dispensed by the business for the 2012, 2013 and 2014 financial years were as set out in the Dispensing Activity Reports (‘the Representation’). That much is common ground, however, the first defendant disputes the accuracy of the data that is now available on the basis that it is not the same as the original data produced prior to the sale of the Pharmacy. The plaintiff pleads that the Representation was: untrue; made without a reasonable basis; and made fraudulently or recklessly or alternatively negligently.

9. [11]

   The second defendant does not admit the Representation in paragraph [11] as it relates to the claim made against the first defendant.

10. [12]

    On 13 December 2019, the plaintiff commenced proceedings against the first defendant. On or around 19 June 2020, the plaintiff filed and served her first round of evidence-in-chief. On or around 17 December 2020, the plaintiff filed an amended statement of claim that joined the second defendant. On or around 4 May 2021, the plaintiff served her second round of evidence-in-chief. On 25 June 2021, the plaintiff served her third round of evidence-in-chief. On 18 March 2022, the defendants filed their evidence in response. The plaintiff is now in the midst of preparing her evidence in reply.

11. [13]

    On 26 April 2021, the plaintiff issued three subpoenas to produce to Dr Dunlop, Dr Chung and Dr Babu, requesting copies of prescriptions they prescribed. The three subpoenas issued are substantially similar and the defendants did not object to the producing parties' providing copies of the prescriptions.

12. [14]

    The defendants filed a notice of motion in May 2022 seeking to set aside subpoenas issued by the plaintiff to sixteen medical practitioners. Between May 2022 to November 2022, the parties were engaged in settlement discussions. The discussions were not completely unsuccessful, albeit they have not managed to resolve the matter as at the time of these submissions.

13. [15]

    While there are sixteen subpoenas issued to different medical practitioners, they all seek the same type of information as the two reproduced schedules below. I have anonymised the patients’ names. They are:

14. [16]

    On 9 December 2022, the defendants’ notice of motion seeking to set aside the sixteen subpoenas was dismissed by the Registrar.

15. [17]

    As to whether the schedules seek documents that are relevant to an identified issue in the proceedings, the plaintiff has made prior inquiries into some of the medical practitioners prior to issuing subpoenas to them. I have set out some examples of the inquiries that were made. The inquiries made of Dr Babu were asserted in the plaintiff’s affidavit of 1 February 2021 (‘the plaintiff’s affidavit’) at [33] to [56], which read:

16. [18]

    The plaintiff’s conversation with Dr Dunlop is set out at [76]-[77] of the plaintiff’s affidavit which read:

17. [19]

    To date, Dr Dunlop has not contacted the plaintiff.

The law

1. [20]

   Rule 33.4 of the UCPR provides as follows:

2. [21]

   Both parties acknowledge the recent decision in Secretary of the Department of Planning, Industry and Environment v Blacktown City Council [2021] NSWCA 145, where the Court of Appeal determined that in order to demonstrate a legitimate forensic purpose for the issue of a subpoena in civil proceedings, the issuing party needs to demonstrate that the subpoena will materially assist on an identified issue in the proceedings and that the issuing party is not required to show that the subpoenaed documents will materially assist their case.

3. [22]

   Rule 49.19 of the UCPR provides:

4. [23]

   In relation to legitimate forensic purpose, both parties agreed that the principles applicable in relation to the exercise of the power of the Court to review a registrar’s decision were articulated by Preston CJ in Groeneveld v Wollongong City Council (2009) 168 LGERA 260; [2009] NSWLEC 149 at [12]-[13];

The review of the Registrar’s decision

1. [24]

   I have carefully read the documents that were before the Registrar. Each party relied on one further affidavit at the hearing of the review before me: the affidavit of Shuonan Zhao, solicitor for the first and second defendants dated 3 May 2023 (‘the Zhao Affidavit’). The parties consented to the fresh evidence being admitted. I have taken the evidence into account and set some of it out. Mr Zhao deposes that he issued a subpoena to Simple Retail Pty Ltd, the operator of the Aquarius dispensing software. On 6 March 2023, Mr Zhao received an email from Jerry Perkins that states:

2. [25]

   The plaintiff also relies upon the affidavit of Andy Nguyen, the implementation manager in the employ of Z Software Pty Ltd (provider of the New Software) dated 25 May 2023. He was given a USB flash drive containing four Microsoft Excel spreadsheets with data extracted from Z Software system. He explained in his affidavit:

The Registrar’s decision dated 9 December 2022

1. [26]

   The relevant portions of the Registrar’s decision are as follows:

The defendants’ submissions

1. [27]

   The defendants seek to set aside the orders of the Registrar and set aside the sixteen subpoenas on the following grounds: firstly, a lack of relevance to the proceedings, secondly, a lack of legitimate forensic purpose and thirdly, the issuance of the subpoenas are a fishing expedition. As these grounds of review are interrelated, I shall deal with them together.

2. [28]

   The defendants’ contention is that, even on a generous approach to the issue of forensic value, the plaintiff has failed, and the Registrar had erred in determining otherwise, to cross the requisite threshold on the basis that the sixteen subpoenas issued by the plaintiff are incapable of having any forensic. The reasons are as follows for the defendants’ contentions are as follows.

3. [29]

   The defendants refer to the following uncontested facts: first, the plaintiff had commenced proceedings on the basis of the New Software’s data in December 2019; second, the plaintiff sought to remedy this forensic oversight she realised in hindsight from the defendants’ various notices to produce by attempting to generate a set data using the Old Software in 2021, some 7 years after the fact; third, the Old Software’s data generated by the plaintiff is factually inconsistent with what was provided by the first defendant to the plaintiff in 2014, a fact the the plaintiff concedes.

4. [30]

   It is now a proven fact that the plaintiff’s Old Software data is different from the Dispensing Activity Reports. The business records which the first defendant had provided to the plaintiff in 2014, which are also the basis of these proceedings, were not generated by the plaintiff’s Old Software data and the business records which the first defendant had provided to the plaintiff in 2014, which are also the basis of these proceedings, could no longer be found.

5. [31]

   In the circumstances, the plaintiff, on her own evidence, has conceded to the that the plaintiff’s Old Software data, in its current form, has been forensically severed from the business records that were provided by the first defendant in 2014. The defendants submitted that the detachment of the plaintiff’s Old Software data from the business records and the fact that the first defendant’s business records could no longer be found, means that it is no longer open to the plaintiff to make any forensic allegations on the basis of the plaintiff’s Old Software data.

6. [32]

   For those reasons, the defendant submitted that the plaintiff’s Old Software data cannot possibly form the basis of any forensic allegations. Therefore, the defendants submit that the sixteen subpoenas are issued without any bases.

7. [33]

   As briefly mentioned above, the plaintiff, when commencing the proceedings in December 2019, had based the proceedings on the data she had observed in the New Software. This is made clear in light of the plaintiff’s pleadings, where paragraph [16] mentioned that the plaintiff became aware that the patient history reports used to prepare the profit and loss statements were overinflated.

8. [34]

   The plaintiff’s case at the time was, as the defendant submitted, was misconceived. Patient history reports could only be generated by the New Software. At the time the profit and loss statements were prepared by the first defendant and the Pharmacy was using the Old Software, not the New Software. Thus, the profit and loss statement was prepared using reports generated by the Old Software.

9. [35]

   After the defendant had begun requesting for the disclosure of the Old Software’s data and issuing numerous notices to produce, it then became apparent that the plaintiff had realised the defect in her original case and attempted to remedy this forensic oversight by adopting a shift in the direction in which her evidence was prepared.

10. [36]

    Specifically, the plaintiff’s second and third rounds of evidence-in-chief had begun abandoning references to data and reports from the New Software. Rather, the plaintiff first shifted her focus to emphasise that the data from the New Software was migrated from the Old Software and later she began focusing solely on the data from the Old Software.

11. [37]

    Hence, it is submitted the only inference the Court is capable of drawing in the circumstances is that these subpoenas were issued at random, were guesses, and were without bases, and that the plaintiff had likely hoped that the information produced under these subpoenas could somehow assist her case, although she does not at present know exactly how they could, or if they could assist her case at all. The defendants submitted this was the very definition of a fishing expedition and that Registrar Jones had erred her decision.

12. [38]

    The defendants argued that if the Court is to permit these sixteen subpoenas without any clarification, reasons, or bases from the plaintiff, the Court is directly permitting, in principle, the plaintiff to issue 111,127 subpoenas in accordance with the plaintiffs Old Software data without restraints or caveats. The defendants argued this must not be correct and necessitates the Court’s intervention in the interest of justice to set aside the subpoenas.

13. [39]

    To view the matter from another angle, the defendants asserted that the production of the information sought by the subpoenas, which also happen to be highly sensitive medical information belonging to third-party patients, does not forensically influence the plaintiff’s case in anyway. This is because, until the plaintiff has remedied the inherent defects with the plaintiff’s Old Software data (which the defendants say is no longer possible), the information sought by the subpoenas have no value.

14. [40]

    To put it simply, the defendants claimed that even if the plaintiff is to subpoena all 111,127 scripts issued by the Pharmacy during the period of 2012 to 2015 as recorded in the plaintiff’s Old Software Data, the plaintiff’s case is not enhanced, nor diminished, in any way because the data did not come from the first defendant, and has nothing to do with the business records that were given to the plaintiff by the first defendant in 2014.

15. [41]

    Therefore, the defendants contend that the sixteen subpoenas are fishing expeditions to assist the plaintiff in determining if she has a case at all, instead of obtaining documents to support her existing case: see Commissioner for Railways v Small (1938) 38 SR (NSW) 564.

16. [42]

    Notwithstanding the fact that these proceedings have been on foot since December 2019, the defendants contend that the plaintiff has, in effect, abandoned her old case, and adopted a new case after she had served her second and third rounds of evidence-in-chief.

The plaintiff’s submissions

1. [43]

   The first defendant has admitted the quantity of the prescriptions dispensed in the Dispensing Activity Reports and both defendants deny paragraph [15B] of the ASC, namely that the representation was untrue, made without any basis or reasonable basis; and made fraudulently or recklessly or alternatively negligently.

2. [44]

   As a consequence of denying the pleading in paragraph [15B] of the ASC, the plaintiff was obliged to obtain evidence that the prescriptions included in the Dispensing Activity Reports were not prescribed, therefore supporting the plaintiff's pleading that the representation was untrue.

3. [45]

   The plaintiff submitted that the subject matter of the subpoenas speaks directly to a fact in issue in the proceedings and the materials called for production will add, in one way or another, to the relevant evidence by either supporting the plaintiff's claim or the defendant's defence.

4. [46]

   In relation to paragraph [13] of the Zhao Affidavit, Ms Wong, a colleague of Mr Zhao, wrote to the plaintiff’s office, Gartree Thomson Lawyers, as it was then known, requesting details as to the forensic value and the relevance of the subpoena. A copy of this email is annexed at pages 11 and 12 of the Zhao Affidavit.

5. [47]

   On 17 May 2022, Ms Aoude of the Gartree Thomson Lawyers responded to Ms Wong, noting:

6. [48]

   It is the plaintiff's position that Ms Aoude's response on 17 May 2022 adequately articulated the relevance of the subpoenas, and the plaintiff rejects the assertion in paragraph [14] of the Zhao Affidavit that the plaintiff's representatives have failed to adequately respond to the queries of the defendants' solicitors.

7. [49]

   The defendants contended that the data generated by the plaintiff from the Old Software terminal is factually inconsistent with the Dispensing Activity Reports. The plaintiff asserted that while there are slight variations to the data, due to the quantity of information in the data, it is uncommercial at this stage of the proceedings to review every line item of the data. Nearly all of the data is consistent with the total number of prescriptions dispensed with the Dispensing Activity Reports.

8. [50]

   It is the plaintiff's position that it is not a proven fact that the data is different from the Dispensing Activity Reports, and the data from the Old Software terminal would have been used by the defendant when the Old Software generated the Dispensing Activity Reports.

9. [51]

   In the interest of evidentiary completeness, the plaintiff issued the subpoenas for the remaining prescriptions identified in annexures VVPN35-D, WPN35-E and VVPN35-F of Ex 1. These prescriptions are the subject matter of the subpoenas, and the plaintiff is requesting production of these prescriptions to determine whether the data is valid and the prescriptions were prescribed.

10. [52]

    Since the Registrar made her decision, the plaintiff has been provided with data on a USB stick.

11. [53]

    In the plaintiff’s affidavit of 4 May 2021, she annexed a copy of the data as maintained in the Old Software terminal in a readable excel .cvs file (‘the Data’). The data contained over 111,000 entries and when reviewing the entries, the plaintiff due to her knowledge of dispensing medication suspected that some of the prescriptions shown in the data were inflated in quantity and price; did not exist; or were otherwise inaccurate. The plaintiff annexed summaries of the suspected data to her affidavit.

12. [54]

    As stated previously, the defendants are alleging that the data is inaccurate as the plaintiff generated it from a terminal that held the Old Software. The defendants objected to the data on the basis that it is inaccurate when compared with the Dispensing Activity Reports. Additionally, the defendants contended that data from the New Software varies from the Dispensing Activity Reports. Given the volume of information in the data, the plaintiff submitted that the variations alleged by the defendants are negligible.

13. [55]

    The defendants have alleged that data in the New Software may be altered, however, the defendants have not raised any evidence that the data has been tampered with. The plaintiff submitted that there is an original copy of the data, as maintained in the Aquarius terminal, that is, the original terminal, in existence. It was this original data that was handed over by the first defendant to the plaintiff when the plaintiff purchased the system.

14. [56]

    While there are only slight discrepancies in the dispensing records of the first defendant, there are large discrepancies in the second valuation prepared by Mr Williams as set out in his second valuation. When the plaintiff owned the business, the Pharmacy had a reduced annual sales value of approximately $530,000 annually.

15. [57]

    The defendants contended that the plaintiff by issuing the subpoenas is engaging in a fishing expedition. However, the plaintiff submitted that she issued the subpoenas to support her claim that the Dispensing Activity Reports, as representations, are untrue, made without a reasonable basis and made fraudulently or recklessly.

16. [58]

    It is the plaintiff’s case that the subpoenas are not an exercise in fishing. The plaintiff supported this contention by arguing that the producing parties will be unable to produce the prescriptions, furthers the case that the Dispensing Activity Reports were an inaccurate representation made by the defendants to the plaintiff.

17. [59]

    The plaintiff contended that the purpose of issuing the subpoenas is to demonstrate that the Dispensing Activity Reports are inaccurate, and it is not a true representation of the financial health of the pharmacy at the time the plaintiff purchased the business.

Resolution

1. [60]

   It is my view that the defendants’ submissions are misconceived. The Registrar referred to the inquiries the plaintiff made to doctors concerning the issue of prescriptions to patients. I have set these two examples in detail earlier in this judgment. There are examples of a number of scripts appearing in the old data which were not prescribed by them to various named patients. The underlying data may be viewed through a different viewing platform, through the Z software viewing platform, but it is the same data. As to whether or not the data has been corrupted, the parties can obtain and rely on IT experts to give their views on the reliability of the old and new data (T16.25-29).

2. [61]

   The Registrar referred to the plaintiff’s evidence of reconciliation conducted with the data and found the scripts did not exist. It is my view that the plaintiff has demonstrated that these subpoenas would materially assist the identified issue of whether the representations were untrue, made without any basis or reasonable basis or made fraudulently, recklessly or alternatively, negligently. It cannot be said that the sixteen subpoenas issued to the medical practitioners are incapable of having any forensic value at all. This ground of review fails.

3. [62]

   I am of the view that there is a clear connection between the documents sought in the schedules and the subpoenas issued to the sixteen medical practitioners, as set out earlier, to test the accuracy of the first defendant’s representations made to the plaintiff. The plaintiff pleaded the business records provided to her before contracts were exchanged, were untrue, without reasonable basis, and fraudulent, recklessly fraudulent or negligently fraudulent. The plaintiff has already made telephone inquiries of some medical practitioners subpoenaed and ascertained that the script recorded in the business records were never issued by those medical practitioners. The subpoenas are issued for a legitimate forensic purpose in relation to an identified issue in the proceedings as they would materially assist the plaintiff. That is the heart of the plaintiff’s case. The subpoenas are not issued for the purposes of a fishing expedition. Finally, it is in the interests of justice that the plaintiff be permitted to issue subpoenas in the form she has. For these reasons, I have come to the conclusion that the Registrar’s decision is correct. The Registrar’s order dated 23 November 2022 is affirmed. The defendants’ notice of motion is dismissed.

Costs

1. [63]

   Costs are discretionary. Costs usually follow the event. The defendants are to pay the plaintiff’s costs.

   1. (1)

      The defendants’ notice of motion filed 9 December 2022 is dismissed.

   2. (2)

      The defendants are to pay the plaintiff’s costs.