Frigger v Trenfield

1. Pursuant to rule 1.34 of the Federal Court Rules 2011 (Cth), any requirement for the first respondent to comply with the notice to produce dated 29 April 2021 is dispensed with.
2. The applicants must pay the first respondent's costs of the interlocutory application dated 6 May 2021 in any event. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

JACKSON J: 1 In this proceeding the applicant bankrupts seek declarations that certain assets are not property divisible among the creditors of their bankrupt estate, an order for the removal of the first respondent as their trustee in bankruptcy, and damages for loss which they say follows from the first respondent's allegedly unlawful conduct. 2 A trial of the proceeding took place last year and on 27 November 2020 I reserved judgment in the matter (after dismissing an application by the applicants to reopen the trial). Judgment remains reserved. 3 On 12 April 2021 the first applicant, Angela Frigger, applied for a stay of the delivery of judgment in the proceeding. The basis of the application is that the applicants have commenced a new proceeding seeking the annulment of their bankruptcy. 4 These reasons do not concern the stay application. In a proceeding which has been marked by a great deal of involuted procedural disputation, there is an interlocutory application before the court which is subsidiary to the stay application, namely an application by the first respondent to set aside a notice to produce that has been served by the applicants. 5 The applicants served the notice to produce on 29 April 2021 under r 30.28 of the Federal Court Rules 2011 (Cth). The notice requires the first respondent to produce a number of documents at the hearing of the stay application. Rule 30.28 provides as follows: 30.28 Notice to produce (1) A party may serve on another party a notice, in accordance with Form 61, requiring the party served to produce any document or thing in the party's control: (a) at any trial or hearing in the proceeding; or (b) at any hearing before a Registrar or any examiner or other person having authority to take evidence in the proceeding. (2) If the document or thing required to be produced under subrule (1) is not produced, the party serving the notice may lead secondary evidence of the contents or nature of the document or thing. (3) If a notice under subrule (1) specifies a date for production, and is served 5 days or more before that date, the party served with the notice must produce the document or thing in accordance with the notice, without the need for a subpoena for production. Note: A party who fails to comply with a notice under subrule (1) may be liable to pay any costs incurred because of the failure. 6 The rule contemplates that the notice may not be complied with, leading to the consequences found in r 30.28(2) and in the note. The basis of the first respondent's opposition to the notice served in this case is that the documents it seeks are irrelevant. If that is so, it may be that the first respondent could simply ignore the notice without needing to make this application. But there is authority for the proposition that r 30.28 and its predecessor in the Federal Court Rules 1979 (Cth) are mandatory. In Suzlon Energy Ltd v Bangad (No 2) [2011] FCA 1152; (2011) 198 FCR 1 at [13]-[14], Rares J stated the position as follows (citations removed): A notice to produce is not a subpoena. That is because a subpoena is an order of the court requiring the person to whom it is addressed to attend the court to give evidence and or to produce documents. If a person disobeys a subpoena, he or she breaches that order of the court and can be proceeded against for contempt. In contrast, a notice to produce under r 30.28 is not a court order, although it gains its forensic authority as a requirement of the court to produce a document or thing from r 30.28(3). In addition, an historical purpose for the issue of a notice to produce, still reflected in r 30.28(2), is that if the party served with it does not produce the document or thing called for, his or her opponent may lead secondary evidence of the contents or nature of the document or thing. A notice to produce served pursuant to rules of court, such as r 30.28(3), has the same coercive effect as a subpoena. The party served with a notice to produce must comply with its requirement to produce the document or thing sought, unless excused by the court. And, a party's failure to comply with a notice to produce that has been served in accordance with r 30.28(3), is a default by that party for the purposes of rr 5.22 and 5.23 and s 37P of the Federal Court Act that can attract significant forensic and procedural detriment. 7 I will proceed on the basis that if the first respondent did not wish to comply with the mandatory notice, it was necessary for her to apply to set it aside or to be excused from production. 8 Rule 30.28, however, gives the court no express power to do either of those things. Instead, as Rares J says in Suzlon at [12], the court is called on to exercise its power under r 1.34 of the Federal Court Rules 2011 to dispense with any requirement of those rules. That gives the court a wide discretion to do what justice appears to require: Dowling v Fairfax Media Publications Pty Ltd (No 2) [2010] FCAFC 28 at [61] (Logan and Flick JJ). But in the context of notices to produce under r 30.28 and its predecessor, the principles usually applied are similar to those that apply to applications to set aside a subpoena: Cheung Kong Infrastructure Holdings Ltd v BlueScope Steel Ltd [2010] FCA 739 at [29]. One ground on which compliance with a notice to produce of this kind can be dispensed with is that the documents sought in the notice are not relevant. The test is whether they are 'reasonably likely to add, in the end, in some way or other, to the relevant evidence of the case': Enagic Co., Ltd v Horizons (Asia) Pty Ltd [2020] FCA 1233 at [9] (Markovic J) applying Seven Network Limited v News Limited (No 11) [2006] FCA 174 at [6]. By analogy to the principles which apply in an application for leave to issue a subpoena, there is a balancing process involved. If a forensic purpose is established, whether the notice to produce should nevertheless be set aside would require the court to weigh up the likely importance of the forensic purpose found against the extent of the burden or prejudice likely to be created if the notice is required to be complied with: see Comcare v John Holland Rail Pty Ltd (No 5) [2011] FCA 622; (2011) 195 FCR 43 at [26]. 9 The notice to produce in this matter was prompted by an affidavit of Mrs Trenfield sworn on 28 April 2021 in opposition to the stay application. The affidavit said that Mrs Trenfield estimated that she and her staff had spent a great deal of time on the administration of the applicants' bankrupt estates and estimated that she was entitled to remuneration in excess of $700,000. A good proportion of that time has been spent dealing with this proceeding. The affidavit deposes to 'internal disbursements' in excess of $10,000 and 'external disbursements' in excess of $330,000, most of which are legal costs in this proceeding. It deposes as to assets available in the bankrupt estate, with evidence to the effect that the assets that are the subject of this proceeding may be the only ones available to satisfy creditor claims and Mrs Trenfield's costs and disbursements. It deposes to creditor claims in the estate. It refers to the position that Mrs Trenfield is likely to take in the annulment proceeding. 10 By the notice to produce, the applicants seek: 1. Time sheets for 1500 hours purportedly spent by FTI staff referred in Trenfield's affidavit @ [3] and [4]. 2. Internal disbursements invoices $10,164.18 referred in Trenfield's affidavit @ [4]. 3. Evidence of payment of internal disbursements. 4. Creditor approval referred in Trenfield's affidavit @ [4]. 5. External disbursements Invoices $335,853.88 referred in Trenfield's affidavit @ [5]. 6. Evidence of payments of external disbursements. 7. Copy of Trenfield's Professional Indemnity Insurance claim for the applicants' damages. 8. BBV Legal Pty Ltd claim referred in Trenfield's affidavit @ [15a]. 9. Kitay's amended claim referred in Trenfield's affidavit @ [16]. 11 However in oral submissions today, the first applicant indicated that the applicants no longer press four of those categories of documents, and therefore what remains are numbers 1, 2, 4, 5 and 6 in the notice to produce. 12 The first respondent submits that the documents sought are not relevant to the stay application. In the case of the documents numbered 1, 2, 5 and 6, the first respondent says that the point of referring to these matters in the affidavit was to establish that she has incurred substantial costs and disbursements. The documents would go to the precise quantum of those costs and disbursements, which is not relevant in the stay application. The first respondent submits that the remaining document still in issue in the notice of dispute, namely document number 4, is also not relevant. 13 The applicants submit in reply that the notice to produce is necessary 'as a result of incomplete and misleading evidence in Trenfield's affidavit of 28 April 2021'. Their submissions raise the following questions: (a) Which part of $700,000 of alleged 'remuneration' relates to the administration and which part relates to involvement in this proceeding? Trenfield is not entitled to her own fees and remuneration in this proceeding (b) Which alleged creditors gave approval for Trenfield's remuneration of $133,981? (c) What are 'internal disbursements' and why haven't they been paid? (d) Why has Trenfield incurred legal costs of $335,853 in this proceeding but not made a claim on professional indemnity insurance? Why has Trenfield not paid legal costs and does she have an actual liability to pay? 14 The applicants submit that the material sought in the notice to produce has apparent relevance because the first respondent 'included it' in her affidavit. They submit that the material could 'reasonably be expected to throw light on the bona fides of Trenfield's opposition to a temporary stay'. They assert that the evidence will rationally affect the determination of a fact in issue, namely the alleged prejudice to the first respondent if a stay is granted. Further, they say the evidence must be available to Mrs Trenfield, otherwise she could not have given the total amounts. They also submit that there are no creditors in the administration. 15 In the alternative to pressing the notice to produce, the applicants applied for certain paragraphs in Mrs Trenfield's affidavit of 28 April 2021 to be struck out pursuant to s 135 of the Evidence Act 1995 (Cth) on the grounds that its probative value is outweighed by the danger that the evidence is unfairly prejudicial to the applicants, is misleading and confusing, and results in undue waste of time. 16 In my view, the documents sought in the notice to produce are not reasonably likely to add to the evidence that is relevant to the stay application. Mrs Trenfield has been the trustee in bankruptcy of the applicants since August 2018. Their assets (whether divisible among creditors or not) are extensive and their affairs are complex. The administration of their estates has included this proceeding, which had a trial that ran for 11 days and has involved a large number of interlocutory applications. 17 There can be no doubt that the first respondent has incurred substantial costs and claims substantial remuneration arising out of all that. It cannot seriously be in issue. The submission of the first respondent that is based on those costs and disbursements is that she will suffer prejudice if judgment in this proceeding is delayed. Whether that submission should be accepted or not is a matter for another day. But the precise amounts of costs and disbursements as may be revealed by the remaining documents sought in the notice are not relevant to that question. Nor does it matter, for the purpose of the stay application, whether some $10,000 in 'internal disbursements' can properly be charged in the administration of the estate. The stay application will not be an occasion to adjudicate on the propriety of the trustee in bankruptcy's claimed costs and disbursements. 18 Mrs Frigger submitted that there was an issue which needed to be determined as to how much of the claimed costs and disbursements related to this proceeding, and how much related to the balance of the administration. Nevertheless the breakdown between those two matters cannot reasonably be thought to be relevant to the resolution of the stay application. Whether or not the applicants have a legitimate interest in identifying that breakdown for other purposes is not to the point. The fact that substantial costs and disbursements have been incurred cannot reasonably be doubted given the progress of the administration in this proceeding. 19 Mrs Frigger also pointed to time entries in the sum of $446 per hour, where she submitted there was a question about whether or not they could properly be charged, given that the staff involved were reasonably junior. That is an example of a level of detail of inquiry into the costs and disbursements which could, conceivably, be appropriate if and when those costs are claimed to be paid and approval for those costs is sought, but cannot possibly be material to the broader question of whether prejudice will be suffered if a stay is granted. 20 Similarly, it does not matter for the stay application whether or not creditor approval for some part of the first respondent's costs and remuneration has been provided. Plainly, further approval will need to be sought for additional costs and remuneration in any event. So document 4 in the notice to produce is not relevant. 21 Mrs Frigger also submitted that documents concerning the charging arrangements between Mrs Trenfield and the lawyers who have acted for her in this proceeding could be relevant because, for example, it may be that those lawyers are working on a contingency fee basis so that the claimed substantive costs in the proceeding have not actually been paid. However, that submission does not rise above speculation. 22 Mrs Frigger submitted, correctly, that the question is whether, viewed realistically, the documents sought in the notice are likely to have a bearing on the issues in dispute. The material sought in the notice to produce cannot be realistically viewed as bearing, one way or another, on the outcome of that stay application. For the same reasons, none of the questions which have been raised in the applicants' written submissions, as recorded above, are reasonably likely to have any bearing on the outcome of the stay application. Even if the applicants continue to insist that the very existence of any substantial remuneration or disbursements chargeable by Mrs Trenfield is in issue, it would be entirely disproportionate for the purposes of the stay application for an inquiry into that matter to be conducted. 23 For those reasons I consider that it is in the interests of justice and the fair and efficient conduct of this proceeding, and in particular, the fair and efficient conduct of the upcoming stay hearing, to dispense with any requirement on the part of the first respondent to comply with the notice to produce dated 29 April 2021. 24 As for the alternative application to have certain paragraphs of the affidavit of 28 April 2021 struck out under s 135 of the Evidence Act, it is appropriate to deal with that, if it is still pressed, at the hearing of the stay application. 25 The first respondent seeks her costs of the present interlocutory application to be paid forthwith. However judgment on the whole matter is reserved and (subject to any stay) it is preferable to deal with all costs at the end of the proceeding, depending on the result. There will be the usual order that the first respondent is entitled to her costs of the interlocutory application dated 6 May 2021 in any event. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackson.