BDT Holdings Pty Ltd v Piscopo

REASONS FOR JUDGMENT (REVISED FROM THE TRANSCRIPT) 1 This is an application by the respondent trustee in bankruptcy, Samuel Piscopo, to dispense with an obligation to discover documents in categories 7 and 8 described in the applicant's (BDT Holdings Pty Limited) list of categories of documents for discovery. Mr Piscopo rejected the proof of debt in the sum of $4,808,650 submitted by BDT in a decision he is alleged to have made on 3 December 2007 and in some way affirmed on 10 April 2008. BDT filed an application on 17 April 2008 seeking review of that decision. It relied on ss 104 and 178 of the Bankruptcy Act 1966 (Cth), among others. Section 104 provides that a creditor may apply to the court for review of a decision of the trustee under s 102(1) to reject a proof of debt. The Court may confirm, reverse or vary the decision of the trustee (s 104(2)). In addition, under s 178 a creditor or other person affected by an act, omission or decision of the trustee is given the right to apply to the court and for the court to make such order in the matter as it thinks just and equitable. 2 The proceedings are the latest in a long line of fiercely contested litigation between the debtor, Terry Hill, and now his trustee, on the one hand, and Mr Hill's former associates, David James and David Brooks, on the other hand. They were all formerly involved in business dealings with one another. BDT is a company associated with Mr Hill in the sense that his wife is said to be its principal. Thus, the scenario in which the present claim is made is that BDT has asserted a very large debt for which it wishes to be admitted to proof in Mr Hill's bankrupt estate. By rejecting the proof of debt, Mr Piscopo has, so BDT alleges, excluded it from the ability to participate in a meeting of creditors in which it would be able to exercise a considerable voting power. 3 The categories of discovery sought appear to bear on issues going either to the motivations or influences on Mr Piscopo and his decision making processes or to materials which BDT already has. 4 In Re D K Rogers; Ex parte CMV Parts Distributors Pty Limited (1989) 20 FCR 561 at 562-563, von Doussa J applied an earlier unreported decision of Toohey J in Payne; Ex parte Levi [1986] FCA 320 (23 September 1986), where his Honour applied earlier decisions of the court construing s 104 of the Act. Von Doussa J accepted that the function of the Court on s 104 is not to consider the correctness or otherwise of the trustee's decision in the light of the material before the trustee, but to determine in light of the material before the Court whether the applicant for review has a debt that should be admitted to proof. The Court can take into account inconsistencies in the material provided to the trustee and the evidence before the Court. 5 French J construed s 178 in Macchia v Nilant (2001) 110 FCR 101 at 114-116 [36]-[38]. He noted that it conferred on the Court a supervisory jurisdiction over the conduct of the trustee: Cummings v Claremont Petroleum NL (1996) 185 CLR 124 at 132 per Brennan CJ, Gaudron and McHugh JJ. French J held that the applicant for review must show a ground on which the trustee's administration of the affairs of the bankrupt is to be reviewed (citing: Re Wheeler: Ex parte Wheeler v Halse (1994) 54 FCR 166 at 170 per Lee J). Under s 178, the matter is in the original jurisdiction of the Court which has to determine whether it is just and equitable that the applicant for review should have the administration of the bankrupt's affairs conducted in a particular way. French J said that the applicant must show a ground on which the trustee's administration of the affairs of the bankrupt is to be reviewed, but it is not necessary to find that the trustee has done anything wrong: Macchia 110 CR at 114 [36]. For present purposes, it is not necessary to consider further the issue under s 178. 6 Category 7 seeks documents that deal with communication by Messrs James or Brooks with Mr Piscopo in regard to BDT's proof of debt and Mr Hill's bankrupt estate. It is unlimited as to time and goes to every aspect of the bankruptcy. The category does not seem to have any apparent relevance to the question whether, as a matter of fact, BDT is or is not a creditor whose debt ought be admitted to proof as sought in par 1 of the application. In my opinion, this is in the category of fishing for a case and is irrelevant to the proceedings. In Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Ltd (1952) 72 WN (NSW) 250 at 254 Owen J (with whom Street CJ and Herron J agreed) said, that "[a] fishing expedition" means: "… that a person who has no evidence that a fish of a particular kind are in a pool desires to be at liberty to drag it for the purpose of finding out whether there are any there or not. If, however, there is material before the Court pointing to the probability that a party to litigation has in his possession documents tending to destroy his case or to support the case of his opponent and that privilege from inspection of such documents has been wrongly claimed, an application by that opponent to be allowed to inspect them cannot properly be described as a mere "fishing expedition"." 7 Category 7 has no relevance to the facts in issue in the application, is fishing and is oppressive. I will order that Mr Piscopo be relieved from complying with it. 8 Category 8 seeks copies of all documents "… in regard to [Mr Piscopo's] consideration of [BDTs] proof of debt". This broad and general claim is then elaborated on to identify documents included in the category but without limiting its width. The primary criterion in the category is Mr Piscopo's consideration of the proof of debt. That matter is not relevant for the purposes of the Court determining whether or not BDT ought be admitted to proof on a review under s 104 of the Act. The four separate categories of inclusion are: · Mr Piscopo's working papers; · copies of materials that BDT alleged had been paid either by it or for or on behalf of the bankrupt; · copies of banking records evidencing payment of moneys paid by BDT to any person; and · office file notes or other records of the time spent by Mr Piscopo working on his consideration of BDT's proof of debt. 9 Mr Piscopo's working papers and his file notes as to the time he spent have no possible relevance to the issues in the application. Copies of the materials evidencing amounts alleged by BDT to have been paid by it, again, do not seem to have any real relevance to the issues. Why BDT needs to have copies of the materials it relies on, produced once again by Mr Piscopo, does not appear to be justifiable. And, likewise, copies of BDTs banking records in Mr Piscopo's possession, again, do not seem to me to have any real relevance or purpose. In my opinion, category 8 is equally a fishing expedition, oppressive and irrelevant. I will relieve Mr Piscopo from compliance with it. 10 The present discovery dispute involved a misapprehension by BDT of the function of the Court on the substance application it has made for a review under s 104 of the Act. I see no reason why BDT should not pay Mr Piscopo's costs. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.