Judgment
1This is an application by the Defendants/Cross-Claimants that they not be required to produce documents sought in 2 categories of a Notice to Produce served by the Cross-Defendants.
[2]
The proceedings
2The Plaintiffs, BT Securities Limited and Westpac Banking Corporation have sued Jeffrey and Lisa Moss claiming 2 amounts totalling approximately $7.8 million together with interest by reason of guarantees provided for 2 finance facilities to a company called Gilmoss International Pty Ltd in its capacity as trustee for the Moss Krukziener Family Trust.
3The guarantees given by the Defendants were actually signed by someone at the Bank pursuant to a Power of Attorney which was provided as part of the facility arrangement. One of the principal defences of the Defendants is that, while the guarantees were purportedly executed as a deed by an officer of the Plaintiff, for the guarantees to be effective it was necessary that the appointment of the attorney under the Power of Attorney also be by deed, and it was not. The proceedings were also defended in reliance on the Contracts Review Act 1980.
4The Defendants filed a cross-claim against Everest Capital Limited and Jeremy Reid who was said to have been Everest's Chief Executive Officer in the relevant period. The Defendants/Cross-Claimants claim an indemnity from the Cross-Defendants in respect of any liability they might be found to have to the Plaintiffs in the proceedings. That is said to be because of representations made by the Cross-Defendants which induced the Defendants to enter into the facilities with the Plaintiffs. It is alleged that the representations were misleading and deceptive, that the Cross-Defendants owed the Defendants a duty of care in acting for them to arrange the facilities and that they breached that duty of care.
[3]
The Notice to Produce
5It is common ground that the Notice to Produce is chiefly or wholly directed to the issue of security for costs and is not directed to documents in relation to the substantive matters between the Cross-Claimants and the Cross-Defendants.
6It might be thought unusual that where no motion for security for costs has been filed such a Notice to Produce would be appropriate. However, in Directions given by the Registrar on 24 June 2011 the Cross-Defendants were directed to serve any Notice to Produce despite there being no such Motion for security for costs. I was informed by Mr Knowles of counsel who appeared for the Cross-Defendants that at the Directions hearing, where those orders were made, the Cross-Claimants had argued for orders which required the filing of the Motion for security for costs together with any such Notice to Produce. The form of the Short Minutes that the Cross-Claimants submitted to the Registrar was put into evidence on the present application before me. No review of the Registrar's decision in that regard was sought by the Cross-Claimants. In admitting it into evidence I said that I did not feel constrained by the approach of the Registrar when deciding whether or not the categories sought in the Notice to Produce were appropriate in the circumstances.
7Mr Baird of counsel for the Cross-Claimants said that his principal objection to the Notice to Produce was the absence of any Motion for security for costs and that it was a fishing expedition. In that regard he drew my attention to Pt 21.10 UCPR which provides:
(1) Party A may, by notice served on party B, require party B to produce for inspection by party A:
(a) any document or thing that is referred to in any originating process, pleading, affidavit or witness statement filed or served by party B, and
(b) any other specific document or thing that is clearly identified in the notice and is relevant to a fact in issue.
(2) A notice to produce may specify a time for production of all or any of the documents or things required to be produced.
8He correctly pointed out that the documents in the disputed categories were not contained in the pleadings or affidavits or statements nor were they relevant to a fact in issue in the proceedings.
9Mr Knowles drew my attention to Pt 34.1 UCPR, another provision of the Rules which provides for Notices to Produce. That Rule provides:
(1) A party may, by notice served on another party, require the other party to produce to the court, or to any examiner:
(a) at any hearing in the proceedings or before any such examiner, or
(a1) at any time fixed by the court for the return of subpoenas, or
(b) by leave of the court, at some other specified time,
any specified document or thing.
(2) The other party must comply with a notice to produce:
(a) by producing the notice or a copy of it, and the document or thing, to the court, or to the examiner authorised to take evidence in the proceeding as permitted by the court, at the date, time and place specified for production, or
(b) by delivering or sending the notice or a copy of it, and the document or thing, to the registrar at the address specified for the purpose in the notice, so that they are received not less than 2 clear days before the date specified in the notice for production.
10Mr Knowles submitted that the effect of the two Rules was the same with the result that the same considerations applied to both Rules. I am not so sure that this is so because Pt 34.1 enables a Notice to Produce to require the production of "any specified document or thing". Nevertheless, relevance would obviously be a key consideration with regard to documents required to be produced under Pt 34.1, but that would require "fact in issue" referred to in Pt 21.10 being understood in the same way as it is understood in s 55(1) Evidence Act 1995, particularly having regard to s 55(2). It is not necessary to say anything further about this in the light of the Plaintiff's concession that the two Rules are to be seen as operating in the same way.
[4]
Should the documents be produced?
11Strictly speaking, when there is no Notice of Motion filed by the Cross-Defendants for security for costs, the documents required to be produced cannot be said to be relevant to any fact in issue in the case. As I have noted, it is accepted that they are not documents relevant to the facts in issue in the substantive case, and it is clear from the correspondence which passed between the parties prior to the issue of the Notice to Produce that the documents are directed to the question of security for costs.
12I do not consider it is appropriate that the Cross-Claimants should succeed on the Notice of Motion to be relieved from producing the documents simply because no Notice of Motion for security for costs has been filed in all the circumstances. There are 2 particular reasons for this. The first concerns the orders made by the Registrar on 23 June 2011. The second derives from the correspondence between the parties both before and after the filing of the Motion.
13It is not necessary to have any regard to the form of the Short Minutes of Order submitted to the Registrar by the Cross-Claimants on that day. Regardless of whether there was any argument about what orders should be made, the end result was that the Registrar saw fit to allow the Cross-Defendants to serve a Notice to Produce although no Notice of Motion for security for costs had then been filed. It is evident, as will be seen from an examination of the correspondence, that what was permitted to be served by the Registrar was a Notice to Produce that related to a potential security for costs issue.
14Before examining the correspondence the following should be noted from the pleadings. First, the Statement of Claim asserted that the Defendants lived at 21 Hunter Street, Dover Heights. In his affidavit verifying the Defence the Defendant Jeffrey Moss also disclosed his address as 21 Hunter Street, Dover Heights. The affidavit of Lisa Moss contained no address but the affidavit verifying was sworn in Auckland, New Zealand. The address shown on the affidavits verifying the Amended Defence for both of the Defendants was 29 Arney Road, Remuera, Auckland. However, Jeffrey Moss's affidavit was sworn in Sydney and Lisa Moss's affidavit was sworn in Auckland. When the cross-claim was filed the affidavits of the Cross-Claimants showed their address as 1 Dumaresq Road, Rose Bay.
15I turn now to consider the correspondence. A letter from the Cross-Defendants' solicitors of 2 June 2011 pointed out that the address on the Amended Defence was the Remuera address and the address on the Cross-Claim was the Dumaresq Road address. The solicitors asked for confirmation of the Cross-Claimants' address.
16The letter in reply said this:
We refer to your letter of 2 June, 2011. We assume that you are enquiring about the address in relation to consideration of whether an application for security for costs might be made.
We are instructed by Mr Moss that he and his wife Lisa are ordinarily resident at 1 Dumaresq Road, Rose Bay. The writer attended upon them at that address to witness the verification of the cross-claim. When the writer spoke to Mr Moss on 6 June to enquire about their residence the writer was informed by Mr Moss that he was speaking from the property at Rose Bay.
We are instructed by Mr Moss that the only house that either of Mr or Mrs Moss owns is the house at 21 Hunter St, Dover Heights where they resided before their move to Melbourne. On account of that move that property at Hunter St was rented out. The lease expires on or about 20 July 2012. For this reason, upon their return to Sydney from Melbourne, they have not yet been able to resume residence at their former home at Dover Heights and instead reside at the Rose Bay home.
We are instructed that although they are ordinarily resident in Sydney they spend time in New Zealand to be close to Lisa's family. When in New Zealand they are based at the property at Remuera, which is where they were located when the defences were verified.
17On 16 June 2011 the solicitors for the Cross-Defendants wrote again querying a number of statements made in the letter from the Cross-Claimants' solicitors. The letter went on to say:
In light of the above matters, our clients have serious concerns regarding your assertion that your clients are "ordinarily resident" at the Rose Bay Property or are "ordinarily resident" in Sydney. It also appears that the address given in your clients' Cross-Claim may have been misstated and that their address may have changed after the commencement of the proceedings with a view to avoiding the consequences of it. Our clients also have serious concerns regarding your clients' ability to pay the costs of our clients if ordered to so .
Accordingly, your clients are invited to:
confirm how long they have resided at, and intend to continue to reside at, the Rose Bay Property, and provide evidence regarding the basis upon which they reside at the property (for example, a copy of their lease agreement);
provide evidence of any real property owned by your clients within and outside New South Wales, including any recently purchased properties in respect of which settlement has not yet occurred;
indicate with precision the length of time they have spent in New Zealand in the last 12 months and provide evidence regarding this (for example, by providing copies of their airline tickets);
provide details of future travel plans between Australia and New Zealand, or any other travel plans to jurisdictions outside New South Wales;
provide copies of any visas held by your clients enabling them to live and work outside Australia;
provide details and evidence of their occupations, the jurisdictions in which their respective employees are based, and their duration of employment with their current employees;
provide details and evidence of bank accounts held by your clients within Australia;
provide evidence of the country of which they are residents for tax purposes;
confirm whether they are enrolled to vote in any state or territory in Australia;
provide evidence of their earnings for the last two financial years by way of income tax returns or payslips; and
provide any other evidence of their ability to pay the costs of our clients if ordered to do so. (emphasis added)
18It is not then necessary to detail all of the correspondence that ensued, but on 23 June 2011 the solicitors for the Cross-Defendants wrote and (relevantly) said this:
In addition, we have written to you on numerous occasions regarding your clients' ordinary residence. We refer in this regard to our letters dated 16 June 2011 and 22 June 2011. You have now declined to provide the documents requested in our letter dated 16 June 2011. In our view, those documents are relevant to establishing the jurisdiction in which your clients are ordinarily resident and other matters going to whether your clients should give security for our clients' costs. Given your refusal to provide the documents we requested we intend to issue a Notice to Produce (Notice) seeking production of the documents so that our clients are in a position to decide whether to bring an application for security for costs against your clients.
Given the facts outlined above, and to give your clients sufficient time to comply with the Notice, we propose the following orders be made at tomorrow's hearing in relation to the cross-claim:
The cross-defendants to serve any notice to produce on the cross-claimants by 27 June 2011;
Any notice to produce served on the cross-claimants by the cross-defendants be returnable on 11 July 2011;
The cross-defendants to file and serve any notice of motion in relation to the cross-claim by 18 July 2011; and
[5]
Conclusion
30I make the following orders:
(1) The Cross-Claimants are not required to produce the documents sought in categories numbered 8 and 12 of the Notice to Produce dated 27 June 2011.
(2) The Cross-Defendants are to pay the Cross-Claimants' costs of the Motion.
[6]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 28 July 2011
The cross-claim be listed for further directions on 20 July 2011.
Those were the Directions made by the Registrar.
19On 27 June 2011 the Notice to Produce was forwarded to the Cross-Claimants' solicitors. In response thereto the Cross-Claimants' solicitors wrote the following letter on 12 July 2011:
We refer to your Notice to Produce dated 27 June 2011 addressed to our clients, Jeffrey Moss and Lisa Krukziener Moss. We note the Notice to Produce has been stood over until Wednesday 13 July 2011.
The basis upon which it was put on behalf of your client that an order for security for costs might be appropriate was that our clients might reside outside the jurisdiction and/or that their address may have recently changed.
Our clients object to producing documents under two of the categories for production being:
Category 8 - any statements for any bank account held by either of the cross-claimants (individually or jointly) dated in the period 27 June 2010 to 27 June 2011 (inclusive); and
Category 12 - any income tax return for each of the cross-claimants for the financial years ending 30 June 2009 and 30 June 2010.
Our clients' position is that documents under these categories are not relevant to the issues of residence or address.
Our clients will at least partially produce under the Notice to Produce on Wednesday 13 July 2011. The documents which will be produced to the Court on that day will be copies and not originals.
In relation to the categories of documents enumerated in the Notice to Produce, our clients instruct us to make the following comments:
Our clients hold a letter from Sandra Moss in relation to the arrangement under which they reside at 1 Dumaresq Road, Rose Bay.
Our clients hold lease, licence or other agreements in relation to:
a. 31 Stonington Place, Toorak: 12/3/10 - 11/03/11;
b. Appt 402, 152 Campbell Pde, Bondi Beach: 17/12/10-27/01/11; and
c. 29 Arney Road, Remuera New Zealand: 01/01/11 - 01/01/13.
The only such property is 21 Hunter Street, Dover Heights. That property is mortgaged and our clients do not hold the certificate of title.
Our clients do hold passports which contain entries pertaining to visits to New Zealand during the period.
Our clients do not, so far as they are aware, hold any hard copy airline tickets relating to travel by them to New Zealand during the period. They may have eTickets.
Our clients do not hold documents evidencing visas held by either of them enabling them to live or reside in Australia or New Zealand.
Our clients do not have any documents recording the terms of any current employment during the period.
As indicated above, our clients will resist the production of bank statements. Our clients have bank accounts in both Australia and New Zealand .
Our clients are Australian residents for tax purposes.
So far as our clients are aware they do not hold any correspondence with the ATO or the New Zealand Inland Revenue Department concerning residency in either jurisdiction for tax purposes.
Our clients do not hold any such documents.
As indicated above, our clients will resist the production of tax returns. Our clients file tax returns in Australia. Their most recently filed tax returns are for the 2009 tax year. Neither of our clients has filed a fax return in New Zealand in the last 10 years .
Unless your client agrees that production under categories 8 and 12 is not pressed, our clients instruct us to move the Court for those categories to be excised from the Notice to Produce.
We have no objection to the timetable being extended as proposed by Ms Goddard in her email to the writer yesterday at 2:27 pm. (emphasis added)
20The solicitors for the Cross-Defendants responded on 12 July 2011 by saying this in relation to categories 8 and 12:
We do not agree that the documents falling within categories 8 and 12 are irrelevant to assessing your clients' ordinary residence. For the following reasons, our clients will press for production of documents answering the categories.
As regards category 8, the jurisdiction in which a plaintiff holds bank accounts is a relevant consideration pointing in favour of the plaintiffs residence in that jurisdiction (see, for example, Corbett v Nguyen & Ors [2008] NSWSC 1265).
To date, you have provided only an unsubstantiated assertion that your clients hold bank accounts in both New Zealand and Australia. We intend to press category 8 of the Notice accordingly.
The provision of bank statements will also go to establishing:
· the pattern of withdrawals from each account by your clients, which may provide an indication of the time spent by your clients in Australia and New Zealand; and
· your clients' financial position, which may also be relevant in the event that our clients make a security for costs application against your clients .
As regards category 12, you have also provided unsubstantiated assurances that your clients are residents of Australia for tax purposes. The production of tax returns in answer to category 12 of the Notice may be relevant to your clients' assertions in this regard. The provision of tax returns may also show the source of your clients' income, which is a further consideration relevant to assessing the jurisdiction in which they are ordinarily resident. (emphasis added)
21Three things emerge from this correspondence. First, the issue of security for costs based on the residence of the Cross-Claimants was raised as early as 2 June 2011. Secondly, the Notice to Produce that the Cross-Defendants' solicitors said that they intended to serve, when the Registrar made orders to that effect, was a Notice to Produce in relation to the security for costs issue. Thirdly, and significantly in answer to the fishing expedition submission, the solicitors for the Cross-Claimants were content (for laudable reasons) to provide information (not on a "without prejudice" basis as was suggested) answering all of the categories in the Notice to Produce whilst stating that they would resist production of the documents in categories 8 and 12. Having done that, it seems a highly technical objection for the Cross-Claimants now to contend that the documents do not go to any fact in issue, and that the Notice to Produce is a fishing expedition, on the basis that no Motion for security has been filed.
22That, however, does not itself determine whether what is required to be produced in categories 8 and 12 is appropriate or not. What is required in those particular categories may amount to a fishing expedition, not because there is no Motion for security on foot, but because they require production of documents beyond that which is necessary for a consideration of the issue of security for costs.
23The Cross-Defendants submit that both categories seek appropriate documents for the issue of security for costs. They point to a number of decisions which they say consider the relevance of bank accounts and tax returns to the issue of determining ordinary residency. In Corbett v Nguyen and Ors [2008] NSWSC 1265 White J had regard to the fact that the Plaintiff in that case had a bank account in Vietnam as well as company bank accounts in Australia - see at [16] and [24]. Again, White J in Corbett at [22] and Schmidt J in Sigalla v Nationwide News Pty Limited [2010] NSWSC 1419 at [17] considered where tax was paid was also relevant. Of course, those 2 matters are 2 of many factors that must be considered. They are not, in themselves, determinative.
24In my opinion, there are 3 reasons that together suggest the documents required by categories 8 and 12 amount either to a fishing expedition and/or require production for an improper purpose.
25First, in the letter of 12 July 2011 the solicitors for the Cross-Claimants have admitted that their clients have bank accounts in both Australia and New Zealand. The Cross-Defendants say, however, that having production of bank statements would tend to show where the Cross-Claimants spent most of their time. I am not sure that that is necessarily so. Whilst transactions from ATMs might disclose where the transactions took place, deposits or withdrawals by cheques or electronic transfer may not identify the location of the transaction.
26Further, the letter of 12 July 2011 provided the information in relation to category 12 that the Cross-Claimants had not filed a tax return in New Zealand in the last 10 years and had filed tax returns in Australia up to and including the 2009 tax year. In the face of that material it is not clear what further legitimate purpose the provision of bank statements or tax returns could provide.
27Mr Knowles submitted that little reliance should be placed on that information because the letter from the Cross-Claimants' solicitors of 10 June 2011 spoke of the Cross-Claimants' house at Dover Heights when by that time the Cross-Claimants had already entered into a contract of sale to sell that property. The somewhat veiled suggestion was that the Cross-Claimants' credit was called into question because the statement about the Dover Heights house was untrue. Although the reference in the solicitor's letter of 10 June 2011 was not correct I cannot be satisfied on any material I have that the incorrect information came about other than by a mistake or misunderstanding between the Cross-Claimants and their solicitors.
28Secondly, the letter of 12 July 2011 from the Cross-Defendants' solicitors says that the bank statements are needed for a purpose other than establishing the ordinary residence of the Defendants. The second reason for requiring the statements is said to be the financial position of the Cross-Claimants. The matters appearing in bold in the letter of 16 June 2011 from the solicitors for the Cross-Defendants suggest also that it is the financial position of the Cross-Claimants that the Cross-Defendants desire to ascertain. It is a rare case indeed where security for costs will be ordered on the basis that natural persons are impoverished: Pearson v Naydler [1977] 1 WLR 899 at 902l; Sigalla at [25].
29Thirdly, the periods specified in categories 8 and 12 are so narrow (a year in each case) that is difficult to see how they could throw much light on where the Defendants are ordinarily resident. Moreover, the first and last dates of the periods do not appear to relate to any procedural event in the proceedings - for example, the Defence (where the matter of a New Zealand address was first raised) was filed on 19 March 2010, and the cross-claim was filed on 18 May 2011.