Barkley v Barkley-Brown

Ainsworth v Hanrahan (1991) 25 NSWLR 155 Anderson v Hassett [2007] NSWSC 1310 Athens v Randwick City Council (2005) 64 NSWLR 58 Australian Consolidated Press Limited v Morgan (1965) 112 CLR 483 Australasian Meat Industries Employees' Union v Mudginberri Station Pty Limited (1986) 161 CLR 98 Barkley v Barkley-Brown [2010] NSWSC 747 Harris v Harris [2001] 2 FLR 895, 922-3 CASES CITED : J-Corp Pty Ltd v Australian Builders Labourers Union of Workers [1993] FCA 42 Lane v Registrar of Supreme Court of NSW (1981) 148 CLR 245 Re Bauhaus Pyrmont Pty Ltd (In Liq) [2006] NSWSC 879 Re Mileage Conference Group of the Tyre Manufacturers' Conference Ltd's Agreement [1966] 1 WLR 1137 Registrar of the Court of Appeal v Maniam (No 2) (1992) 26 NSWLR 98 Rochfort v Trade Practices Commission (1982) 153 CLR 134 Stancomb v Trowbridge Urban District Council [1910] 2 Ch 190 Witham v Holloway (1995) 183 CLR 525

Paul Barkley (First Plaintiff) John Hawkins (Second Plaintiff) PARTIES : Vicki Barkley-Brown (Defendant/Applicant) Lawrence Nelson (First Respondent) Paul Henshaw (Second Respondent)

Ms E Cohen (Defendant/Applicant) COUNSEL : Ms E Picker (Defendant//Applicant) Mr V Gray (Respondents)

SOLICITORS : Peter Dawson & Associates (Defendant/Applicant) Marsdens (Respondents)

• 12 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2007/257461 PAUL BARKLEY & ANOR v VICKI BARKLEY-BROWN JUDGMENT 1 This judgment should be read together with the judgment I delivered on 6 July 2010 - Barkley v Barkley-Brown [2010] NSWSC 747. Background 2 On 25 November 2009, the defendant in these proceedings filed a motion for contempt against Mr Lawrence Nelson and Mr John Henshaw. Mr Nelson had acted as the accountant for Mrs Rhonda Brenda Farrell (the deceased), who died in December 2005. Mr Henshaw originally acted as the solicitor for the plaintiffs who, on behalf of the deceased's estate, brought a claim against the defendant alleging that she had misappropriated funds belonging to the deceased. That claim succeeded before Ward J. The alleged contempts relate to what is said to have been the failure by Mr Nelson and Mr Henshaw to comply with subpoenas served on them to produce documents relating to the affairs of the deceased. 3 The application came before me on 5 July 2010. On that day, the applicant sought to file an amended charge and later on that day sought to amend the notice of motion to claim, in addition or in the alternative to the relief originally sought, an order pursuant to s 98 of the Civil Procedure Act 2005 that Mr Nelson pay costs which were incurred by the defendant between 28 November 2008 and 10 September 2009, or which consist of costs that the defendant is required to pay the plaintiffs in the proceedings, and which are said to have been incurred as a consequence of Mr Nelson's failure to comply with the subpoenas served on him. 4 I granted leave to the applicant to file the amended charge and to amend the notice of motion in the way sought. 5 By the amended charge, the applicant abandoned her claim against Mr Henshaw. It follows that the motion, so far as it concerns him, should be dismissed. The only outstanding question is whether the applicant should pay Mr Henshaw's costs of the motion on an indemnity basis. 6 As a result of the amendments I allowed, two questions now arise in relation to Mr Nelson. The first is whether he is guilty of contempt by disobeying two subpoenas that were served on him without a reasonable excuse. The second is whether he should be ordered to pay the costs incurred by the defendant (either directly or as a consequence of a costs order made against her in favour of the plaintiffs) as a consequence of Mr Nelson's failure to produce documents in answer to those subpoenas. 7 As I explained in my judgment delivered on 6 July 2010, two subpoenas are involved. The first was addressed to Mr Nelson and was filed on 14 November 2008. That subpoena was served on 24 November 2008. The subpoena sought: "All bank records and statements from 1 January 1999 until 31 December 2006 of Rhonda Brenda Farrell including but not limited to all passbook accounts, statement accounts, credit card accounts, cheque accounts, savings accounts, deposit accounts, loan accounts, share and term deposit accounts."

In response to that subpoena, Mr Nelson wrote to the court stating that "I hold no documents referred to in schedule 1 of the subpoena". 8 The second subpoena was also addressed to Mr Nelson and was issued on 13 August 2009. That subpoena was served on 16 August 2009. It sought all documents relating to the deceased. On 17 August 2009, Mr Nelson wrote to the court saying "I hold in my possession no documents or records relating to Rhonda Brenda Farrell deceased". However, on 20 August 2009, Mr Nelson's son, Mr Paul Nelson, on the letterhead of a business called "Nelson's Business Consultants", wrote a letter to the solicitors for the applicant saying: "Mr Lawrence Nelson recently received a subpoena to produce documents in relation to Mrs Rhonda Brenda Farrell. Mr Nelson retired early in the year and therefore does not have in his possession any records. Our firm is in possession of Mr Nelson's files and will be more than happy to provide them to the Court." 9 It appears from the evidence that Mr Nelson was aware that his son intended to and did in fact write that letter. Shortly after that letter was sent to the solicitors for the applicant, a further subpoena was served on Mr Paul Nelson. A substantial number of documents were produced in response to that subpoena. 10 Mr (Lawrence) Nelson gave evidence following an unsuccessful application (dealt with in my earlier judgment) to dismiss the motion insofar as it sought an order punishing him for contempt. His evidence in chief was given by way of affidavit. In that affidavit, Mr Nelson said that, on or about 22 October 2006, he received a direction and authority requiring him to hand over to Vincent Love & Co, the solicitors acting for the executors of the estate, all documents, folders and share purchase information in relation to the deceased. In response to that request, Mr Nelson says that he separated from the files he had all relevant current accounting records including bank records and gave those documents to the solicitors in accordance with the direction. As a consequence, when he received the subpoena issued on 14 November 2008, he took the view that he had no documents to produce and whatever documents he had had were in the hands of Vincent Love & Co. 11 So far as the subpoena issued on 13 August 2009 is concerned, he says that, by the time that subpoena had been served, he had retired from his accounting firm and that that firm had been taken over by his son. The view that he took, apparently after discussing the matter with the solicitors acting for the plaintiffs, was that any documents belonging to Mrs Farrell were in the hands of the firm and the firm ought to be responsible for producing them. The applicant was advised of the position by Mr Nelson's son, she issued a further subpoena and a substantial number of documents were produced. Was there a contempt? 12 There are a number of legal principles which are relevant to the determination of this application.

13 First, although this is an application that Mr Nelson be punished for civil contempt, not criminal contempt, it is clear that the charge must be proved beyond reasonable doubt: Witham v Holloway (1995) 183 CLR 525. Consequently, the applicant must prove beyond reasonable doubt that the respondent had in his possession or control documents which fell within the scope of the subpoena: Lane v Registrar of Supreme Court of NSW (1981) 148 CLR 245 at 260-1.

14 Second, documents are in the possession or control of a person for the purposes of answering a subpoena if the person can in fact produce the documents in response to the subpoena, either because the person has possession of the documents or because the person is able to obtain possession of them: Rochfort v Trade Practices Commission (1982) 153 CLR 134. An exception exists, in some cases, where it is more appropriate for the documents to be produced by someone else. For example, it would normally be appropriate to subpoena documents belonging to an employer from the employer rather than an employee: Rochfort, ibid. I say something more about this principle later.

15 Third, in order to attract the imposition of a penalty, disobedience of a court order must be wilful and not merely "casual, accidental or unintentional": Australasian Meat Industries Employees' Union v Mudginberri Station Pty Limited (1986) 161 CLR 98. This requirement raises three issues. The first is whether wilfulness is an essential element of the charge of contempt. The second is what is meant by "wilful and not merely casual, accidental or unintentional". The third is whether there are any circumstances in which a wilful and not merely casual, accidental or unintentional breach of a court order will nonetheless not amount to a contempt.

16 So far as the first issue is concerned, in Registrar of the Court of Appeal v Maniam (No 2) (1992) 26 NSWLR 309 at 314, Kirby P drew a distinction between various types of contempt. He referred specifically to three: those that are technical, those that are wilful and those that are contumacious. His Honour gave as an example of the first type Ainsworth v Hanrahan (1991) 25 NSWLR 155, where counsel had breached the implied undertaking by inadvertently cross-examining a witness on answers to interrogatories in other proceedings. His Honour said that, in cases of that type, the court "will usually accept an apology from the contemnor" but that "[i]t may order the contemnor pay the costs of the proceedings brought to uphold the authority of the courts of law" (at 314). It is not entirely clear how these comments sit with the High Court's decision in Mudginberri. One possibility is that all Kirby P was intending to say is that some conduct may amount to a contempt but that it is so minor that no punishment should be imposed. That is so even if the conduct could be described as wilful. For example, the conduct of the barrister in Ainsworth v Hanrahan (1991) 25 NSWLR 155 could be described as wilful, since the barrister intended to cross-examine the witness by reference to the answers to interrogatories. The contempt, however, was minor and for that reason could be regarded as technical. Whatever the correct position, in my opinion it follows from what the High Court said in Mudginberri that the applicant must prove (beyond reasonable doubt) that Mr Nelson's failure to comply with the subpoena was wilful. 17 As to the second issue (the meaning of "wilful" etc), conduct is generally wilful unless it can be described as not merely casual, accidental or unintentional. So, for example, a relevant act will be wilful even if, in a case where the breach was constituted by an act of a servant or agent, the act of the servant or agent was through carelessness, neglect or dereliction of duty: Mudginberri (1986) 161 CLR 98 at 112 quoting Stancomb v Trowbridge Urban District Council [1910] 2 Ch 190 at 194. In addition, what must be wilful is the conduct giving rise to the contempt, not the consequences of that conduct. So, for example, it is not necessary for the applicant to prove that the contemnor intended to breach an order of the court: see Anderson v Hassett [2007] NSWSC 1310; Australasian Meat Industries Employees' Union v Mudginberri [1986] 161 CLR 98 at 111. It is sufficient for the applicant to prove that the contemnor engaged in wilful conduct that had that consequence.

18 As to the third issue (whether wilful conduct is sufficient), there is a question whether wilful conduct which is not merely casual, accidental or unintentional but which is reasonable amounts to a contempt. In general, the answer to that question is that it does. So, for example, in Re Mileage Conference Group of the Tyre Manufacturers' Conference Ltd's Agreement [1966] 1 WLR 1137, cited with approval by the High Court in Mudginberri (1986) 161 CLR 98 at 112, the court imposed substantial fines in respect of breaches of undertakings given by the contemnor, even though the contemnor acted reasonably in obtaining legal advice on the scope of the undertakings. See also Anderson v Hassett [2007] NSWSC 1310 at [7]. The position, of course, is different where the order (or undertaking) is genuinely ambiguous so that it cannot be said definitely that the contemnor's conduct was a breach of it: Australian Consolidated Press Limited v Morgan (1965) 112 CLR 483; Harris v Harris [2001] 2 FLR 895, 922-3; Athens v Randwick City Council (2005) 64 NSWLR 58.

19 In my opinion, however, the principle of the previous paragraph needs to be qualified or explained in a number of respects, at least in the context of subpoenas. First, wilful conduct will not amount to a contempt where the conduct occurs with the consent of the party issuing the subpoena. That consent may result from an agreement but it may also be implied from the conduct of the parties. For example, I do not think that it would be a contempt if a subpoenaed party indicated to the party on whose behalf the subpoena was issued the interpretation that the subpoenaed party was taking to the subpoena and the party issuing the subpoena took no objection to that interpretation. That is so even if the interpretation adopted by the subpoenaed party was incorrect. Second, I do not think that a subpoenaed party would be in contempt because the party failed to produce responsive documents in the party's possession because those documents were not located following a reasonable search: cf UCPR r 21.4(2) in relation to discovery. Similarly, I do not think that a party would be in contempt if the subpoenaed party believed reasonably that the party had no documents in response to the subpoena and answered the subpoena on the basis of that belief, even if the belief turned out to be mistaken. Whether this qualification should be seen as a qualification on the obligation imposed by the subpoena or a qualification on the circumstances in which the court will punish someone for contempt does not matter in this context. Finally, I do not think that it would be a contempt if there is a more appropriate person to answer the subpoena, that person is identified and that person is willing or able to produce the documents. Although in one sense that conduct could be described as wilful, I do not think that it amounts to a wilful failure to produce the documents. Rather, it involves the conclusion that the documents are better produced by another: see Rochfort v Trade Practices Commission (1982) 153 CLR 134. 20 There is a question in my mind whether the amended charge in this case is defective. The charge in respect of the first subpoena records the terms of the subpoena, that it was served and that Mr Nelson wrote to the court in the terms that he did. It then asserts that "The First Respondent did have documents in his possession or power referred to in Schedule 1 of the subpoena". It then goes on to assert, irrelevantly in my view, that Mr Paul Nelson produced documents in answer to the subpoena served on him. The charge in respect of the second subpoena adopts the same structure. However, neither charge identifies the documents which were in the possession of Mr Nelson at the time the subpoena was served, which fell within the scope of that subpoena and which were not produced. In my opinion, the charges ought to have done so. 21 In any event, in my opinion, the applicant has failed in relation to both subpoenas to prove that Mr Nelson has committed a contempt. 22 As to the first subpoena, I do not think that the applicant has proved, let alone to the requisite standard, that Mr Nelson had documents in his possession or power that fell within the scope of the subpoena. The applicant says that the court should conclude that Mr Nelson had control of documents responsive to the subpoena or had possession of those documents. In support of the first contention, the applicant says that Mr Nelson could have called for the documents that he had provided to Vincent Love & Co. In support of the second, the applicant says that I should infer that Mr Nelson was in the possession of some documents falling within the scope of the subpoena because those documents were later produced in response to the subpoena served on his son. 23 I am not prepared to accept either of these arguments. It is not at all clear to me that Mr Nelson had power to call for the return of the documents. On Mrs Farrell's death, the documents became the property of the estate. The solicitors for the estate provided Mr Nelson with an authority requiring him to produce the documents to them. That is what he did. In my opinion, he had no right to request their return. The documents belonged to the estate, not to him. The applicant has not proved beyond reasonable doubt that the documents would have been returned to Mr Nelson if he had asked for them. 24 Without more evidence, I am not prepared to infer that some documents were in Mr Nelson's possession at the time the first subpoena was served on him because some documents within the scope of that subpoena were produced subsequently by his son. In order to make out that claim, the applicant would need to identify the precise documents that fell within the scope of the first subpoena which were produced later. She would also need to produce sufficient evidence to rule out the possibility that those documents were returned to the accounting firm some time after the return date of the subpoena served on Mr Nelson. The applicant did not do either of those things. 25 In any event, I do not think any conduct engaged in by Mr Nelson could be described as "wilful". He thought that he had given the relevant documents to the solicitors for the executors. He gave a reasonable explanation for the basis of his belief. It was reasonable of him to assume that those documents were no longer within his control. For those reasons, the charge of contempt in relation to the first subpoena fails. 26 In my opinion, the charge in relation to the second subpoena must also fail. I accept that Mr Nelson was physically able to produce the documents having regard to his relationship with his son and his connection with his son's accounting firm. However, I also accept that, in the circumstances, it was more appropriate for the documents to be produced by the firm. The documents were in the possession of the firm, not Mr Nelson personally. Mr Nelson was no longer a principal of that firm. Moreover, it was the firm and not Mr Nelson who owed professional obligations to the client on whose behalf the documents were held. Although Mr Nelson did not himself advise the applicant that the documents were held by the firm, it is clear from his evidence that he knew that his son would be writing to the applicant's solicitors pointing out that he (the son) had the documents and indicating that he was willing to produce them. That is what happened. I do not think that that conduct could be described as a wilful failure by Mr Nelson to produce the documents. Costs 27 Section 98(1) of the Civil Procedure Act 2005, provides: "Subject to rules of court and to this or any other act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom, and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis." 28 It is clear that s 98 confers a power on the court to award costs against non-parties and that that power includes a power to award costs against a subpoenaed party: see Re Bauhaus Pyrmont Pty Ltd (In Liq) [2006] NSWSC 879. Until recently, that power was limited by UCPR r 42.3. That rule, however, was repealed on 7 May 2010. Consequently, there is no reason in principle why an order for costs should not be made against a person who has failed to comply with a subpoena, although there may be a question of precisely in what circumstances the court should be prepared to do so. 29 Whatever those circumstances are, I do not think that they include the circumstances of this case. 30 In this case a considerable amount of time and costs were spent in relation to the production of documents. It may well be that a substantial amount of those costs were wasted. However, I do not think that that waste can be laid at the feet of Mr Nelson. 31 So far as the first subpoena was concerned, Mr Nelson took the view that he did not have possession of the documents and that he was not obliged to seek their return from the solicitors for the estate. In my opinion, that was a reasonable position for him to take. I do not think that the onus was on him to explain what had happened to the documents; and there was no evidence before me to suggest that he had been asked for an explanation at about the time he wrote to the court stating that he had no documents to produce and that he had failed to supply one. 32 So far as the second subpoena is concerned, again I think the position taken by Mr Nelson was reasonable. He took the view that he did not have possession or control of the documents the subject of the subpoena, but it is clear that he arranged for the person who he thought had possession to offer to produce them or he at least was aware that that offer would be made; and, as I have said, that is what happened. 33 In those circumstances, the application against Mr Nelson should be dismissed with costs. 34 That leaves the question whether I should order indemnity costs in favour of Mr Henshaw. One of the circumstances in which a court will order that costs be payable on an indemnity basis is where the proceedings or the application in respect of which the costs are sought was bound to fail: see J-Corp Pty Ltd v Australian Builders Labourers Union of Workers [1993] FCA 42 per French J. However, I do not think that it can be inferred from the fact that the application against Mr Henshaw was withdrawn, that it was bound to fail. No material was been put before which would justify that conclusion. In those circumstances, I decline to order that Mr Henshaw's costs be paid on an indemnity basis.

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