Allotz.com Limited (in liquidation) v Galbally [2025] FCA 546

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

1. These reasons for judgment concern an application by the first and second respondents to set aside a notice to produce served on them by the applicants.
2. For the reasons set out below, the notice to produce should be set aside.

1. The applicants commenced this proceeding on 23 December 2024, by the filing of an originating application, supported by an affidavit of Mr Thomas Taggart sworn on 20 December 2024.
2. The first, second and fourth respondents have appeared in the proceeding. The third respondent has not.
3. On or about 14 March 2025, the applicants served a notice to produce on the first and second respondents.
4. On 1 May 2025, the applicants filed a statement of claim (SOC). At the risk of oversimplification, the applicants make the following allegations relevant to the present application:

(1) in or about April 2020, the first applicant and the second respondent entered into:

(a) a Secured Convertible Note Deed;

(b) a General Security Agreement (GSA), pursuant to which the first applicant granted a security interest in its property to the second respondent, including with respect to moneys owed under the Secured Convertible Note Deed (SOC [16], [25] and [26]);

(2) in March 2021, and purportedly in reliance upon the GSA, the second respondent appointed a receiver and manager to the property of the first applicant, which property included an Australian patent and three patents issued by the US Patents Office (US patents) (SOC [52] and [53]);

(3) the receiver was wrongly appointed in that the first applicant was not in default under the GSA (SOC [54] to [66]);

(4) during August 2021, and at the direction of the second respondent, the receiver caused the first applicant to transfer the US patents to the second respondent for no consideration (SOC [70]);

(5) during September 2021, the first or second respondent (or both) caused the third respondent (a United States company) to be incorporated with the second respondent as its sole member (SOC [72]);

(6) during October 2021 and December 2021, the second respondent assigned the US patents and the Australian patent respectively to the third respondent for no, or inadequate, consideration (SOC [77] and [81]);

(7) on or about 29 February 2024, the third respondent entered into an agreement with the fourth respondent transferring the Australian patent and the US patents to the fourth respondent (SOC [94]);

(8) the fourth respondent took an assignment of those patents in circumstances where it knew or ought to have known of the first applicant's interest, including its equity of redemption, in those patents (SOC [96] and [134]); and

(9) the first applicant's equity of redemption in the patents has priority over the fourth respondent's interest therein (SOC [134]).

1. The applicants contend that the matters set out in the previous paragraph give rise to various causes of action and forms of relief.

1. The notice to produce, as served, contained 15 categories. Only two of those categories were pressed on this application, namely:
   1. Any Correspondence between [the first respondent] and [the fourth respondent] and/or between [the first respondent] and any representative of [the fourth respondent].

...

1. Any Documents referring to the transfer and/or assignment of assets from [the third respondent] to [the fourth respondent].

1. The documents sought are said to be primarily relevant to proof of the allegation that the fourth respondent had the contended knowledge of the applicants' interest in the patents when it took an assignment of them.
2. Counsel for the first and second respondents advanced, and counsel for the applicants resisted, a series of arguments as to why the notice to produce should be set aside.
3. It is unnecessary to deal with all of those arguments. The following matters provide sufficient reason to set the notice to produce aside.
4. First, a central consideration is the overarching purpose of facilitating the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible: s 37M of the Federal Court of Australia Act 1976 (Cth).
5. Secondly, it is likely to be more efficient and less expensive for the first and second respondents to provide disclosure of documents only once. As counsel for the applicants fairly acknowledged, the applicants will seek discovery of documents at a later stage in the proceeding. Requiring the first and second respondents to undertake searches for documents to answer the notice to produce and again later, so as to provide discovery, is likely to be duplicative, inefficient and involve the incurrence of unnecessary expense.
6. Thirdly, and relatedly, the need for production of the documents sought may evaporate (or be considerably reduced in scope) after defences (and in particular the defence of the fourth respondent) have been filed and the issues truly in dispute have been identified. For example, it may be that the fourth respondent admits the allegation that it had knowledge, at the time it took an assignment of the patents, of the first applicant's interest therein, in which case the search for documents required by the notice to produce may be unnecessary.
7. Finally, no reason was advanced as to any urgency in obtaining access to the documents sought.
8. Nothing I have said above ought be taken as an endorsement of the width of paragraphs 5 and 12, or of the likely relevance of documents caught by those paragraphs to the issues in the proceeding.

1. The notice to produce should be set aside. Costs should follow the event.

I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Goodman.

SURGETECH M, LLC (A COMPANY REGISTERED IN DELAWARE, USA WITH FILE NUMBER 2973866)