Coshott v Prentice, in the matter of Coshott

Background 2 The respondent in these proceedings, Maxwell William Prentice, procured the issue of separate bankruptcy notices against each of the applicants, James Coshott and Ljiljana Coshott, on 30 October 2015 and 23 December 2015 respectively. The bankruptcy notices were issued on the basis of certain unmet costs orders in the respondent's favour. On 23 February 2016, James Coshott filed an application to have the bankruptcy notice against him set aside. On 6 April 2016, Ljiljana Coshott filed an application to have the bankruptcy notice against her set aside. 3 Each application was supported by an affidavit of Robert Gilbert Coshott, in which it was asserted that the applicant had a counter-claim, set-off, or cross demand exceeding the amount claimed in the bankruptcy notice: see ss 40(1)(g) and 41(7) of the Bankruptcy Act 1966 (Cth); r 3.02 of the Federal Court (Bankruptcy Rules) 2005 (Cth) until 31 March 2016; and r 3.02 of the Federal Court (Bankruptcy Rules) 2016 (Cth) from 1 April 2016. In support of that assertion, those two affidavits and a third affidavit also of Robert Coshott annexed copies of two deeds of assignment, dated 30 December 2015 and 23 March 2016. 4 The first deed, on its face assigned to the applicants and to Ronald Michael Coshott jointly the benefit of costs orders made against the respondent in other proceedings in this Court and in the Federal Circuit Court. The second deed, on its face, assigned to the applicants and to Ronald Michael Coshott jointly and severally the benefit of the same costs orders made against the respondent. For present purposes it suffices to say that by reason of these deeds, and a subsequent third deed referred to below, the applicants claim that what they are owed by the respondent as a result of the assignment in favour of each exceeds what they owe him.

Requests made under section 167, Evidence Act 1995 (Cth) 5 The respondent's solicitors wrote to the applicant's solicitors on 19 April 2016 in respect of Ljiljana Coshott, and in separate letters on 5 May 2016 in respect of both applicants, as follows: (a) the 19 April 2016 letter requested that Ljiljana Coshott be made available for cross-examination, referring to ss 156, 166 and 167 of the Evidence Act; and (b) the 5 May 2016 letters each made specific reference to a request, under ss 166 and 167 of the Evidence Act, that the applicants be made available for cross-examination: … upon each of the documents purporting to be a Deed of Assignment, [signed by him/apparently signed by her], sought to be relied upon by [him/her] and/or the quantum of [his/her] offsetting claim. 6 The above three letters were annexed to an affidavit of Christie Lonnon sworn 6 May 2016, and are a part of the respondent's evidence on the applications to set aside the bankruptcy notices. Counsel for the respondent, in written submissions dated 22 April 2016 in respect of James Coshott and dated 6 May 2016 in respect of Ljiljana Coshott, took issue with the effectiveness of the second deed in achieving the applicant's desired purpose of neutralising the debts upon which the bankruptcy notices depend. This included reliance on the prior operation of the first deed, on its face, and an asserted lack of mutuality as at the date of filing of the application to set aside the bankruptcy notices, both of which preceded the date of the second deed. The submissions dated 6 May 2016 also made specific reference to the request made to call Ljiljana Coshott as a witness under ss 166 and 167 of the Evidence Act. 7 After an initial hiccup, the two applications were listed for hearing before me on Monday, 9 May 2016. On the preceding Friday, 6 May 2016, a further affidavit was sworn by Robert Coshott, annexing a third deed of assignment, also dated 6 May 2016. The recitals to the third deed refer to the applicants and Ronald Coshott being advised that the second deed may not have been effective to change the benefit of the assignment in their favour from joint to joint and several, and was therefore directed to addressing that possible defect. 8 At the hearing on 9 May 2016, counsel for the respondent enlarged the written request for the applicants to be made available for cross-examination to include the third deed. The hearing was unable to be concluded on that day and is resuming on Friday 17 June 2016. 9 Neither applicant attended the hearing on 9 May 2016. It is therefore quite apparent that there was no intention to comply with the request made by the respondent to call both of them. That conclusion was reinforced by senior counsel for each applicant arguing against either of their clients being compelled to be called to give evidence. 10 No issue was taken by either applicant as to the necessary trigger being present for the respondent making the application under s 169(b) of the Evidence Act for the applicants to be called as witnesses in both applications. However, for completeness, I indicate that I regard the absence in court of both applicants and the arguments as to why they should not be required to give evidence to constitute at least a constructive failure or refusal to comply with the request made by the respondent of the kind contemplated by s 169(1) of the Evidence Act, which I reproduce in full below. 11 No issue has been taken by the applicants with the form of the request or the timing of it, save as to the legal arguments considered below. Had such a point been taken I would not have acceded to it, given the very late introduction of the third deed only the previous Friday, which counsel for the respondent said, and I accept, was only received by him on the day of the hearing. 12 The relevant provisions of the Evidence Act are as follows: 166 Definition of Request In this Division: request means a request that a party (the requesting party) makes to another party to do one or more of the following: … (c) to call as a witness a specified person believed to be concerned in production or maintenance of a specified document or thing; … 167 Requests may be made about certain matters A party may make a reasonable request to another party for the purpose of determining a question that relates to: (a) a previous representation; or (b) evidence of a conviction of a person for an offence; or (c) the authenticity, identity or admissibility of a document or thing. 169 Failure or refusal to comply with requests [emphasis added to the following text] (1) If the party has, without reasonable cause, failed or refused to comply with a request, the court may, on application, make one or more of the following orders: (a) an order directing the party to comply with the request; (b) an order that the party produce a specified document or thing, or call as a witness a specified person, as mentioned in section 166; (c) an order that the evidence in relation to which the request was made is not to be admitted in evidence; (d) such order with respect to adjournment or costs as is just. (2) If the party had, within a reasonable time after receiving the request, informed the other party that it refuses to comply with the request, any application under subsection (1) by the other party must be made within a reasonable time after being so informed. (3) The court may, on application, direct that evidence in relation to which a request was made is not to be admitted in evidence if an order made by it under paragraph (1)(a) or (b) is not complied with. (4) Without limiting the circumstances that may constitute reasonable cause for a party to fail to comply with a request, it is reasonable cause to fail to comply with a request if: (a) the document or thing to be produced is not available to the party; or (b) the existence and contents of the document are not in issue in the proceeding in which evidence of the document is proposed to be adduced; or (c) the person to be called as a witness is not available. (5) Without limiting the matters that the court may take into account in relation to the exercise of a power under subsection (1), it is to take into account: (a) the importance in the proceeding of the evidence in relation to which the request was made; and (b) whether there is likely to be a dispute about the matter to which the evidence relates; and (c) whether there is a reasonable doubt as to the authenticity or accuracy of the evidence that is, or the document the contents of which are, sought to be proved; and (d) whether there is a reasonable doubt as to the authenticity of the document or thing that is sought to be tendered; and (e) if the request relates to evidence of a previous representation - whether there is a reasonable doubt as to the accuracy of the representation or of the evidence on which it was based; and (f) in the case of a request referred to in paragraph (g) of the definition of request in section 166 - whether another person is available to give evidence about the conviction or the facts that were in issue in the proceeding in which the conviction was obtained; and (g) whether compliance with the request would involve undue expense or delay or would not be reasonably practicable; and (h) the nature of the proceeding. Note: Clause 5 of Part 2 of the Dictionary is about the availability of documents and things, and clause 4 of Part 2 of the Dictionary is about the availability of persons.

The issues to be determined 13 In light of the above provisions, the questions for me to resolve on the respondent's s 169(1)(b) applications for orders that the applicants each call both of them at the hearing of their respective applications on 17 June 2016 are: (a) whether the requests made by the respondent were reasonable (s 167); and if so; (b) whether the failure or refusal to comply with each request was without reasonable cause (s 169(1)); and if both questions above are resolved in the respondent's favour, (c) whether the orders sought by the respondent should be made, having particular regard to the mandatory considerations in s 169(5) and anything else considered relevant.

Whether the requests made were "reasonable requests" (s 167) 14 As to the first issue, whether the requests made by the respondent were "reasonable requests" under s 167, the affidavits of Robert Coshott by which the applicants seek to prove the three deeds do nothing more than annex each of them. No further information is provided as to any aspect of the creation or execution of the deeds. No attempt is made to prove formally the identity of the persons who signed the deeds. Robert Coshott is not a party to any of the three deeds. He is not one of the assignors and he is not one of the assignees. On the face of the deeds, his name appears as the witness to all of the signatures for the first deed, as a witness to the signatures on behalf of the assignors and also Ronald Coshott as assignee for the second deed, and as a witness to all of the signatures for the third deed. 15 A witness to a document may be able to give non-hearsay evidence as to the truth pertaining to some details about the circumstances concerning the document they have witnessed or its creation, or about the parties to the document, but even that is necessarily limited in most cases. Robert Coshott has chosen to do none of those things. Presumably that was a deliberate forensic decision made by each of the applicants. Any cross-examination of Robert Coshott will necessarily be of limited scope and conducted almost entirely blind as to what he might say. It was fairly acknowledged by senior counsel for James Coshott that Robert Coshott's evidence would be limited to evidence of the circumstances of the preparation and execution of the deeds. No different position was advanced by senior counsel for Ljiljana Coshott. 16 The respondent is confronted with three purported deeds, one or more of which may defeat the bankruptcy notices he has caused to be issued. In my opinion it is clear that the requests made were, in all the circumstances outlined above, reasonable. It is reasonably apparent that there are live issues in the proceedings as to the authenticity and admissibility of the deeds and, related to that, as to what legal relations have been created by the respective deeds at different points in time. Those issues about the creation of legal relations, and when, are quite separate from the nature of the legal relations created: see Toll (FGCT) Pty Limited v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 (Toll v Alphapharm), especially at 177 [35] and following. 17 In those circumstances the respondent is entitled to seek to have the applicants as parties to, and beneficiaries of, the deeds called as witnesses in order to explore the "authenticity, identity, or admissibility" of each of the three deeds and also to establish any facts that may legitimately go to the question of whether the deeds have in fact created legal relations that operate to achieve their stated purpose. 18 It is a separate question as to whether the making of a reasonable request should result in an order of this Court to achieve the purpose of the request if, as here, the request is not acceded to. That said, the positive determination of the question of whether the requests made by the respondent for the applicants both to be called as witnesses on both applications were reasonable is relevant not only to the statutory test in s 167, but also for the questions for determination that follow.

Whether failure/refusal to comply with each request was "without reasonable cause" (s 169(1)) 19 Senior counsel for James Coshott initially said that his client had not sworn an affidavit and therefore could not be required to attend to give evidence. He then suggested that Robert Coshott had sworn an affidavit and could give evidence about the deeds. He sought to draw counsel for the respondent to state, beyond the written request as enlarged, whether it was authenticity that was in issue. This invitation to provide greater specificity was declined. He then sought to suggest that his client could not be called for cross-examination whereas ss 166, 167 and 169 of the Evidence Act do not suggest any such restriction. To the contrary, an obligation on a party to call a witness has the inevitable consequence that they would ordinarily be available for cross-examination by the opposing party. 20 Senior counsel for Ljiljana Coshott supported the submissions made by senior counsel for James Coshott. Additionally, he said that assuming the deeds are what they say they are (that is that they are what they purport to be) the only bases upon which they could be challenged is as to some other aspect of authenticity or on the basis of some form of sham. He suggested that the authorities were quite clear that an allegation of fraud would need to be pleaded, but accepted that these s 169(1)(b) applications did not entail a pleading issue. However, he suggested that the respondent was required to raise any such allegation explicitly and allege a fraud or sham. No authority was cited in support of such a sweeping proposition. There is nothing in the text of ss 166, 167 or 169 of the Evidence Act or elsewhere in that Act to encourage a departure from the terms of those provisions. While there are general limitations on the evidence that may be adduced as to the legal effect of an agreement, such as those clearly stated by the High Court in Toll v Alphapharm cited above, I see no warrant to introduce other limitations of the kind urged upon me. 21 As I endeavoured to point out at the hearing on 9 May 2016, the scope of s 167(c) does not merely go directly to authenticity, but expressly may extend to matters that "relate to" authenticity. The same express extended operation applies to identity and admissibility, such that questions may be asked that "relate to" identity and admissibility in a suitable case. The connection between the question to be asked and the document itself need not be direct and immediate and need not be to determine, for example, authenticity per se, but merely go to a question that "relates to" the authenticity of a document: see Trimcoll Pty v Deputy Commissioner of Taxation [2007] NSWCA 307 at [26]. 22 This wider view of the combined effect of ss 166, 167 and 169(1)(b) of the Evidence Act is enough to enable questions such as capacity to enter into legal relations to be tested, because that is a matter that relates to authenticity as well as to what legal relations were in fact entered into and when. 23 A further issue that may arise is the fact that the applicants' case is that the third deed assumes that the second deed is ineffective for the purposes for which it was created. Effectiveness of the deeds in creating legal relations (and when) is a live issue in all the circumstances. 24 Overall, once due regard is had to the limitations in Toll v Alphapharm and like authorities, the failure or refusal of the applicants to call each of them in their case as requested appears to be "without reasonable cause".

Whether an order should be made to call the applicants (s 169(1)(b)) 25 I now turn to the consideration of s 169(5) required to be applied in deciding whether or not to make an order under s 169(1)(b), and any other considerations not already addressed above.

Section 169(5)(a) - the importance in the proceedings of the evidence in relation to which the request was made 26 The deeds are of vital importance to both sides. If the combination of the second and third deeds creates the legal relations suggested on their face, and if those deeds take effect in these proceedings according to their terms, they will materially assist the applicants in their case for the bankruptcy notices to be set aside. Conversely, if the respondent is able to prove a different state of affairs, the opposite may be true.

Section 169(5)(b) - whether there is likely to be a dispute about the matter to which the evidence relates 27 There is no doubt that the legal relations the deeds create and, as a separate exercise, their legal effect, is hotly disputed.

Section 169(5)(c) - whether there is a reasonable doubt as to the authenticity … of … the documents the contents of which are … sought to be proved

Section 169(5)(d) - whether there is a reasonable doubt as to the authenticity of the document or thing that is sought to be tendered 28 A serious question about the authenticity of the deeds has been raised as an issue by the respondent, at least in the sense of whether and when the deeds create effective legal relations according to their terms. The terms, timing and content of the deeds, and the way in which they have been sought to be introduced into evidence, means that there is a sufficient doubt about this to favour ordering the applicants to be called to give evidence.

Section 169(5)(e) - if the request relates to evidence of a previous representation - whether there is a reasonable doubt as to the accuracy of the representation or of the evidence on which it was based

Section 169(5)(f) - in the case of a request referred to in paragraph (g) of the definition of "request" in section 166 - whether another person is available to give evidence about the conviction or the facts that were in issue in the proceeding in which the conviction was obtained 29 Not applicable.

Section 169(5)(g) - whether compliance with the request would involve undue expense or delay or would not be reasonably practicable 30 No issue has been raised that compliance with the requests would involve undue expense or delay or be impracticable, and none is apparent.

Section 169(5)(h) - the nature of the proceedings 31 There is nothing about the nature of the proceedings which would of itself have a particular bearing on whether or not the applications should be acceded to. However, bankruptcy is a serious matter for both creditors and debtors.

Other considerations 32 In all the circumstances, I consider that it is in the interests of justice and a matter of fairness to the respondent that he be given an opportunity to question the applicants about the deeds within the proper limits of the law.

Conclusion 33 The respondent should succeed in his applications. The orders of the Court will be as follows: (a) The application by the respondent under s 169(1)(b) of the Evidence Act 1995 (Cth) is allowed in both proceedings. (b) In matter NSD 258 of 2016, James Coshott v Maxwell William Prentice, pursuant to s 169(1)(b) of the Evidence Act 1995 (Cth), the applicant is ordered to call himself, James Coshott, and to call Ljiljana Coshott, as witnesses at the resumed hearing on 17 June 2016 of his application to set aside the bankruptcy notice issued against him. (c) In matter NSD 473 of 2016, Ljiljana Coshott v Maxwell William Prentice, pursuant to s 169(1)(b) of the Evidence Act 1995 (Cth), the applicant is ordered to call herself, Ljiljana Coshott, and to call James Coshott, as witnesses at the resumed hearing on 17 June 2016 of her application to set aside the bankruptcy notice issued against her. (d) The costs in both proceedings be reserved. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bromwich.