Collins v Campbell

Judgment 1The First and Second Defendants, acting for themselves, issued three subpoenas addressed to the Plaintiffs on 29 April 2014. The first two Plaintiffs are the trustees of the First and Second Defendants' bankrupt estates. The Third Plaintiff is the mortgagee of the First and Second Defendants' properties at Norah Head and Noraville. 2The subpoenas to the First and Second Plaintiffs are in identical terms and require production of the following documents: 1. All correspondence, emails and file notes between yourself as trustee of Gregory William Campbell and Jennifer Ivy Campbell Bankrupt estate and Bankwest and Commonwealth Bank from August 2011 and 28th April 2014 in relation to the properties at 15 Mitchell Street Norah Head NSW and 34 Clark road Noraville. 2. A copy of minutes of creditors meetings between March 2009 and 28th April 2014. 3. A copy of all correspondence and emails to CREDITORS between March 2009 and 28 April 2014. 3The third subpoena is addressed to the Bank and seeks the following documents: All correspondence, emails and file notes for the Bankwest employment record for Mr. Mark Atherton from January 2005 to December 2009. All correspondence, emails and file notes relating to the cessation of employment for Mr Mark Atherton with Bankwest between January 2005 and December 2009. Details of Code of Conduct and or Rules of conduct for Bankwest employees in relation to the Bankwest guidelines and due diligence responsibilities by Bankwest Staff to their clients in the processing and completion of loan applications and the signing by guarantors for loan applications from June 2007 to December 2009. Any and all updates to be included between this period. Copy of Commission paid or unpaid to Mr Mark Atherton during his employment with Bankwest for the loan approvals for PMD Pty Ltd trading as Coastwide Real estate between June 2007 and December 2009. 4The Plaintiffs now move, by Motion filed 17 July 2014, to set aside those subpoenas pursuant to Rule 33.4 Uniform Civil Procedure Rules 2005 (NSW). At the present time, there is some dispute about the status of the last Defence that has been filed by the First and Second Defendants on 28 April 2014. The previous Defence was filed 19 September 2013. That Defence admits a large number of paragraphs in the amended statement of claim including, in particular, paragraphs dealing with the guarantees that were signed by the First and Second Defendants. 5The Defence contains, in paragraph 9, a defence in reliance on the Contracts Review Act 1980 (NSW) where the First and Second Defendants say that they understood that the guarantees they entered into secured only part of the indebtedness of PMD, the principal debtor. 6The particulars of unjustness refer, first of all, to the fact that Ryan Campbell, who is a defendant in the related proceedings, made a number of representations to the First and Second Defendants that led to the First and Second Defendants entering into the guarantees and mortgages. The particulars of unjustness then go on to say: (iii) that the third Plaintiff took no steps or no sufficient steps to ensure that the First and Second Defendants understood (a), the nature and effect of the liabilities they were incurring; (b), the real risk involved in the incurring of those liabilities. 7Particular (iv) simply asserts that any liability of the First and Second Defendants in excess of $300,000 was unjust. 8Because the First and Second Defendants are acting for themselves, they should not have been allowed to issue the subpoenas without leave of the court by reason of Rule 7.3 UCPR. That, in itself, would justify the setting aside of the subpoenas however, I do not think that that is an appropriate course to follow. Rather, the substance of the subpoenas ought to be dealt with, particularly because the hearing of both matters is fixed for 13 October 2014. 9Counsel for the Plaintiffs draws attention to the fact that it is established practice that subpoenas and notices to produce should not be used as a substitute for discovery in proceedings, and to the fact that subpoenas were inappropriate because they were issued to parties to the proceedings. However, he is content to have the matter dealt with on the basis of the documents that are sought by the subpoenas rather than on procedural grounds. Where there are litigants in person, that is a commendable approach. 10I deal first with the subpoenas to the Trustees. The First and Second Defendants raised no issue in the Defence to which I have referred nor, for that matter, in the later disputed Defence filed in answer to the Further Amended Statement of Claim, about the behaviour or otherwise of the First and Second Plaintiffs. Those Plaintiffs are Plaintiffs in the proceedings simply because they became the registered proprietors of land formerly owned by the First and Second Defendants as a result of the sequestration orders made. They are, as trustees of the Bankrupt estates of the First and Second Defendants, entitled to possession of the land. However, in the present case that entitlement to possession is subject to the rights of the Bank as first mortgagee. It has been the Bank that has been the moving party in these proceedings. 11Issues involving any behaviour or wrongdoing of the trustees in relation to the Bankrupt estate are not appropriate matters to be dealt with, either in this Court or in the present possession proceedings. 12The First Defendant, who appears for himself and his wife, asserts that the Bank and the Trustees are working together in a way that is improper. He referred to the payment of a sum of money in that regard. There is no evidence about any of these matters at all. He made reference to the fact that the Trustees had earlier indicated that they did not intend to take any action in relation to the properties. Now, he suggests, the Bank is working with the Trustees so that the Bank can double dip. I understood that to mean that, if the Bank was unsuccessful in its claim, it would receive a benefit as a creditor when the Trustees take possession of the land. 13This seems to me to be a misunderstanding. If the Bank is unsuccessful in establishing a liability in the First and Second Defendants as guarantors and mortgagors in its claim, it will not be a creditor who will be entitled to any distribution from a sale of the land by the Trustees. The trustees are perfectly entitled, as they appear to have done, to take a back seat in the proceedings, to allow the Bank, who has first priority, to enforce its right to possession. If the Bank is unsuccessful, in whole or in part, it will be open to the first and second Plaintiffs to pursue their right to the possession of the property. 14There is no evidence of any collusion or wrongdoing between the Trustees and the Bank. Nor, as I have said, will there be any double-dipping by the Bank. 15It seems to me that the documents that are sought in the subpoenas to each of the first and second Plaintiffs constitute a fishing expedition only, to enable the First and Second Defendants to air their grievances about the Trustees. Minutes of creditors' meetings or correspondence with creditors from March 2009 to the present time, as sought, cannot possibly be relevant to the issues in the present proceedings. Those subpoenas should therefore be set aside. 16The claim that the Bank makes is that the guarantees and mortgages were provided to the First and Second Defendants by those documents having been forwarded to them or to Ryan Campbell - the matter is a little unclear - for execution by the First and Second Defendants. The Bank does not claim that Mr Atherton had any part in advising the First and Second Defendants in relation to the transactions into which they were entering. There is no issue between the parties in that regard. 17The affidavits filed on behalf of the First and Second Defendants make it clear that they did not have dealings with Mr Atherton before they executed the documents. Their dealings were with Ryan Campbell. That is the basis of the defence that has been pleaded, that there has been a failure on the part of the Bank to explain the nature and effect of the documents and the risks that were involved. Mr Dowdy of counsel for the Plaintiffs makes it clear that the Bank lives or dies on the basis of that case, namely, that the documents were forwarded by mail to the First and Second Defendants for their execution. It is not claimed by the Bank that any advice was given. If the Bank is unsuccessful because it did not advise the First and Second Defendants about the documents, the Bank will be unsuccessful in the proceedings. 18The First and Second Defendants do not, in their pleadings or affidavits, identify or allege any wrongdoing on the part of Mr Atherton. Mr Campbell, in his submissions, said that it is very suspicious that Mr Atherton's employment with the Bank ceased a short time after the transactions were entered into by the First and Second Defendants. He is suspicious that Mr Atherton has been disciplined and possibly dismissed by the Bank for the way he has acted when in its employment, either generally or as a result of the particular transactions concerned. There is no evidence of this whatever and Mr Campbell agrees that he does not have evidence of it. Rather, he says he wants to look at the documents that he has sought by subpoena to see if that is the case. That is a classic example of documents being sought for the purposes of a fishing expedition. 19The test for determining whether a party is required to produce documents pursuant to a subpoena has been reaffirmed in Attorney General (NSW) v Chidgey [2008] NSWCCA 65 at [64] and [65]. The Court there stressed that the party who seeks access to the documents must identify a legitimate forensic purpose for which access is sought and establish that it is "on the cards" that the documents will materially assist his case. 20In my opinion, the First and Second Defendants fail at both stages of that test. There is no legitimate forensic purpose and it is not on the cards, by any evidence in the proceedings, that the documents sought will assist the First and Second Defendants' case. 21Accordingly, the three subpoenas are set aside. 22The Plaintiffs seek costs. Mr Campbell says that he has no money to pay costs. The Plaintiffs have been entirely successful on the Motions. The subpoenas should not have been issued, not for technical reasons under the Rules but because the documents in them should never have been sought on the basis of the pleadings and evidence filed. In those circumstances, the First and Second Defendants should pay the Plaintiffs' costs of the Motion. 23The Defence filed on 28 April 2014 impermissibly purports to withdraw admissions made to a large number of paragraphs in the Further Amended Statement of Claim. I raised this matter with Mr Campbell on 23 May 2014 and explained to him what had to be done if he wished to withdraw those admissions. He has not done anything about the matter. 24In those circumstances I will strike out the Defence of the First and Second Defendants to the Further Amended Statement of Claim filed 28 April 2014 and give leave to those Defendants to file a further Defence to that Further Amended Statement of Claim. That is to be done by Thursday 14 August. 25Liberty to apply to the List Judge on two days' notice.