Gertos Holdings Pty Limited v Roads and Maritime Services; G Capital Corporation Pty Limited v Roads and Maritime Services; Marsden Developments v Roads and Maritime Services

Gertos Holdings Pty Limited v Roads and Maritime Services; G Capital Corporation Pty Limited v Roads and Maritime Services; Marsden Developments v Roads and Maritime Services - [2018] NSWLEC 172 - NSWLEC 2018 case summary — Zoe

[14]

The set aside applications

The entities associated with Mr Gertos have applied to have each of these Notices to Produce and Subpoenas set aside. Although the terms of the various Notices to Produce and Subpoenas are not necessarily in identical terms, their structures are such that the objections pressed by the Gertos' interests to them can be dealt with by grouping them. In this context, a table was produced by the RMS, to assist in understanding each element to which objection was raised and the competing submissions concerning each element. This table used the Notice to Produce addressed to Marsden Developments as the reference provision.
It is relevant to note that the grouping in the table produced by the RMS addresses the various Notices to Produce and Subpoenas by paragraph number. However, the paragraphs sharing similarities throughout the Notices to Produce and Subpoenas do not necessarily share paragraph numbers.
Although that which follows in my determinations concerning the various contested elements is not in precisely the same form as the table that was provided by the RMS, I have adopted the broad approach used in the development of that table. I have found it of assistance to group the paragraphs of the various Notices to Produce and Subpoenas by shared similarity, rather than by paragraph number.
For this purpose, I have also used the Marsden Developments Notice to Produce as a reference document. In addition, to group together the related terms of the various Notices to Produce and Subpoenas not in the Marsden Developments Notice to Produce, I have identified three further reference documents - the Subpoena to Con Savell, the Subpoena to Mario Pamboris and the Subpoena to Regency Capital Pty Ltd.
In each instance, I have reproduced the terms in the relevant paragraph and my ruling on each of the contested elements. The relevant ruling for each cited paragraph is to be applied in relation to equivalent paragraphs in other Notices to Produce or Subpoenas. I have also set out the Applicant's submissions concerning why the relevant information sought should not be permitted and the Respondent's submissions as to why the relevant information sought should be required to be provided.
For the purposes of giving my rulings, I have followed a process of giving rulings on each of the paragraphs in the Marsden Developments Notice to Produce and, where there are provisions not in the same terms as, or equivalent to, a paragraph in this Notice to Produce, I have given rulings with respect to the relevant paragraph in each of the three subpoenas noted above, at [25], as being used as subsidiary reference documents.
However, to provide an understanding (to the extent that it may be able to be obtained from that which follows), I have set out all the relevant submissions in full before moving on to give rulings with respect to each of the paragraphs in the primary reference Notice to Produce or in the relevant subsidiary Subpoenas utilised for this purpose.

[16]

Applicant's submissions

The Applicant's submissions on this paragraph were: Applicant's submissions on para 1: see Applicant's Written Submission (AWS) at [33]-[39]. In relation to the different paragraphs 1 in the Westwood and Regency Capital, the same submission are apt are the Applicant relies on them.
The written submissions referred to above are reproduced below: 33 There is nothing in the case stated by the respondent that indicates why public marketing of the properties for sale can have any apparent relevance. No allegation has been made about whether the sale was 'off market' or not. 34 It can only be inferred that the respondent wishes to use an answer of "not produced" to this paragraph to underpin an assertion, or use as a building block to make an assertion, that the contracts are fraudulent or a sham (not that such an allegation has yet been made). Given the seriousness of such an allegation, and the fact that ethical conduct of the legal profession regulates the making of such a serious allegation, a proper basis must already exist. It clearly does not. The respondent ought not be permitted to trawl fish for such documents to make a case it does not currently make. 35 Further, even if the documents did exist, the apparent relevance of what is in a real estate brochure or a listing or an advertisement, could ever be on the cards to be tendered by the respondent in its case. The applicant reasonably suspects that a "non-answer" is what the respondent is aiming to elicit. The absence of material as described in paragraph 1 sets the foundation to make some sort of submission. 36 Accordingly, this is either akin to a de facto interrogatory (asking for an answer to the question as to whether the properties were marketed for sale) or for discover (trawl fishing for categories of documents in order to rule out certain possibilities). 37 Either way, it is not a proper request in an NTP or subpoena. 38 Even if 'mere' relevance can be said to exist, it is not 'on the cards' such documents would ever be tendered (certainly that will not be the case for the applicant). This is a way for the respondent to determine whether or not the properties were listed for sale publicly (and there are other ways of proving such a point). This fits directly within the comment made by Mahoney AP in Carroll v Attorney-General for New South Wales (1993) 70 A Crim R 162 (at 182) being that "I wish to see the document to see if it may assist my case" which as his Honour said, is not sufficient. 39 This appears to be a step along the way to try and make an allegation that the contracts lack legitimacy. That is not the purpose of a subpoena or NTP to provide documents relevant to an identified issue, not to trawl through material which may or may not exist in order to procure sufficient information to then make the allegation. This is the cart before the horse.

[17]

Respondent's submissions

The Respondent's submissions were as follows: Respondent's submissions on para 1: In relation to MD1 as it applies to each of the recipients to whom MD1 has been directed, and in relation to Westwood 1, the documents called for have apparent, adjectival relevance to (and it is clearly "on the cards" that they will materially assist the Respondent's case with respect to) the issue of whether the existence and circumstances of the contracts for sale should be taken into account, which requires an examination of the circumstances in which the contracts were entered into and the relationship between the Applicants and the purchasers: see Respondent's Written Submissions at paras 2(b), 4(b), 8, 11(a) to (c), 17 to 24 (the "Arm's Length" Issue).
The written submissions referred to above are reproduced below: 2. In order to answer the separate questions, it is necessary to consider: a. … b. if the Applicants had an actual use of the acquired land, then whether the existence and circumstances of the contracts for sale should be taken into account when determining compensation for the acquisition of the Applicants' interests in the acquired land; c. … d. … 4. Even if there was an actual use of the land by the Applicants, the financial loss suffered by the Applicants would be less than the balance of the purchase price under the contracts because: a. … b. the contract purchase prices do not reflect market rates; and c. … 8. This affidavit shows that the searches undertaken indicate: a. The controlling minds of the purchaser companies and the Applicants currently or formerly had a common involvement in a number of companies. Relevantly, Mr Mario Pamboris, director of the purchaser companies, was the director of Marsden Developments Pty Ltd (Marsden Developments) from 22 October 2009 to 23 August 2013; b. The purchasers and the Applicants currently share or formerly shared the same registered office, principal place of business and company contact address. 11. The Respondent wishes to test the evidence by seeking documents that may shed light on: a. The nature of the discussions between Mr Savell and Mr Gertos regarding the sale of the Properties, and the use to which the Properties would be put once sold; b. The calculation of the sale price of the Properties; c. The source of Mr Savell's knowledge that Mr Gertos held discussions with Mario Pamboris in relation to the sale of the Properties, and why further detail was not included relating to the discussions Mr Savell had with Mr Pamboris in relation to the sale of 166-172 Parramatta Road; and d. … 17. Mr Timothy Mills has sworn an affidavit claiming that each of the Applicants (including Marsden Developments) are ultimately owned by trusts with the same beneficiaries. 18. Mr White's affidavit shows that Mr Mario Pamboris was the former director of Marsden Developments. This affidavit further shows that the purchasers and the Applicants currently share or formerly shared the same registered office, principal place of business and company contact address. 19. It is highly likely that Mr Mario Pamboris, Mr Bill Gertos and Mr Constantine Savell are known to one another. 20. It is highly likely that Mr Mario Pamboris, Mr Bill Gertos and Mr Constantine Savell have had previous dealings. 21. It is possible that at one stage, Mr Pamboris was the director of a company that was a trustee for a trust that benefited family members of Mr Gertos. 22. The Applicants have provided no evidence showing how the contract price was calculated. The contract prices exceed the market value determined by the Valuer General by more than $22 million. 23. There is currently no evidence that the Properties were put on the market or that there was any market testing before a purchase price was agreed. 24. Given the relationship between the parties, it appears likely that the transaction was not at arm's length. It is the Respondent's position that the contracts for sale did not reflect market rates. The Respondent will adduce further evidence regarding this matter in due course.

[21]

Respondent's submissions

The Respondent's submissions were as follows: Respondent's submissions on para 3: In relation to MD3 as it applies to each of the recipients to whom MD3 has been directed, the documents called for have apparent, adjectival relevance to (and it is clearly "on the cards" that they will materially assist the Respondent's case with respect to) the "Arm's Length" Issue. In relation to MD4 as it applies to each of the recipients to whom MD4 has been directed, the documents called for have apparent, adjectival relevance to (and it is clearly "on the cards" that they will materially assist the Respondent's case with respect to) the issue of whether there was an "actual use of land" by the Applicants: see Respondent's Written Submissions at paras 2(a), 15, 16 (the "Actual Use" Issue) and the "Arm's Length" Issue.
The Written Submissions referred to above are reproduced below: 2. In order to answer the separate questions, it is necessary to consider: a. the way in which the Applicants dealt with or used the acquired land (noting that the actual use must exist in fact at the time of the acquisition, and cannot be either "a future use or potential use": Blacktown Council v Fitzpatrick Investments [2001] NSWCA 259 at [26]-[27]); b. … c. … d. … 15. The Respondent wishes to test the evidence by seeking documents that may confirm: a. Whether the corporate trustees involving Mr Gertos have invested in property and developed property, and whether the Applicants are included in this category; b. The identity of the companies for which Mr Savell has prepared financial accounts, and that have owned commercial property and been involved with numerous development projects; c. Whether the Properties were held as a redevelopment opportunity, or rather as a passive investment. Issues that arise from the affidavits 16. The evidence of Mr Savell and Mr Mills purports that the Applicants were in the business of developing land, however no documents have been produced to substantiate that claim. There is no evidence of plans for the redevelopment of the Properties. The Respondent submits that the Applicants were more likely passive investors only, collecting rent from tenants for up to 18 years, according to the affidavit of Mr Savell dated 14 September 2018. Further documents relating to the Applicants' past experience in property development, and any plans for the redevelopment of the Properties have been called for under the notices to produce and are required to determine whether there was an "actual use of land" by the Applicants:

[23]

Respondent's submissions

The Respondent's submissions were as follows: Respondent's submissions on para 4: In relation to MD4 as it applies to each of the recipients to whom MD4 has been directed, and MD5 as it applies to each of the recipients to whom MD5 has been directed, the documents called for have apparent, adjectival relevance to (and it is clearly "on the cards" that they will materially assist the Respondent's case with respect to) the "Actual Use" Issue and the "Arm's Length" Issue. In relation to Pamboris 4 as it applies to each of the recipients to whom Pamboris 4 has been directed, the documents called for have apparent, adjectival relevance to (and it is clearly "on the cards" that they will materially assist the Respondent's case with respect to) the issue of whether the financial costs (which include losses) allegedly suffered by the Applicants equate to the balance of the purchase price of each contract or some other sum, which requires an exploration of whether the purchasers had the financial capacity to pay stamp duty on the contracts and whether they would have been able to complete the contracts had the compulsory acquisition not occurred: see Respondent's Written Submissions at paras 2(c), 4(a), 11(d), 22, 24, 25 (the "Settlement" Issue) and the "Arm's Length" Issue.
The Written Submissions referred to above are reproduced below: 2. In order to answer the separate questions, it is necessary to consider: a. … b. … c. if so, whether the financial costs (which include losses) allegedly suffered by the Applicants equate to the balance of the purchase price of each contract or some other sum; d. … 4. Even if there was an actual use of the land by the Applicants, the financial loss suffered by the Applicants would be less than the balance of the purchase price under the contracts because: a. the purchasers would not have been able to raise the necessary funds to pay stamp duty and complete the contracts; b. … c. … 11. The Respondent wishes to test the evidence by seeking documents that may shed light on: a. … b. … c. … d. The ability of the purchasers to pay stamp duty and complete the contracts for sale. 22. The Applicants have provided no evidence showing how the contract price was calculated. The contract prices exceed the market value determined by the Valuer General by more than $22 million. 24. Given the relationship between the parties, it appears likely that the transaction was not at arm's length. It is the Respondent's position that the contracts for sale did not reflect market rates. The Respondent will adduce further evidence regarding this matter in due course. 25. On the evidence, it is unclear whether the purchasers had the financial capacity to pay stamp duty on the contracts and whether they would have been able to complete had the compulsory acquisition not occurred. Further documents called for under the subpoenas to produce are required to resolve this issue.

[60]

The relevant legal principles

In Rinehart v Rinehart [2018] NSWSC 1102 at [43] to [54], Ward CJ in Equity set out the relevant legal principles applicable in circumstances such as these: 43) As to what is a legitimate forensic purpose for the issue of compulsory process of this kind (subpoenas or, as considered in some of the cases, notices to produce), the Court of Appeal in ICAP Australia Pty Ltd v BGC Partners (Australia) Pty Ltd [2009] NSWCA 307, held that the primary judge had not erred by stating that, for a notice to produce to have a legitimate forensic purpose: … it must be shown that it is likely the documentation will materially assist on an identified issue, or there is a reasonable basis beyond speculation that it is likely the documentation will. 44) Determining whether there is a legitimate forensic purpose requires reference to the particular case, or identified issue, that the documentation sought is reasonably expected to be likely to assist, as observed by Nicholas J in ICAP Pty Ltd v Moebes [2009] NSWSC 306 (at [33]): … the legitimate forensic purpose of a subpoena necessarily depends upon identification of the case which is likely the documentation will assist. The task in meeting the test will become difficult where the issue relied upon cannot be identified because either it has not been included in the pleadings or particulars, or the terms in which it has been expressed are obscure and imprecise. 45) In Portal Software International Pty Ltd v Bodsworth [2005] NSWSC 1115, Brereton J described the relevant test (in considering whether to set aside the notice to produce that had there been issued) as being (see at [24]) whether the documents sought have "a sufficient apparent connection to justify their production or inspection" (citing White v Tulloch (1995) 127 FLR 105; 19 Fam LR 696). His Honour said that the test of adjectival relevance (i.e., as distinct from substantive relevance) will be satisfied if the material has apparent relevance and is established if the documents called for "could possibly throw light on the issues in the main case" (at [24]), citing Trade Practices Commission v Arnotts Ltd (No 2) [1989] FCA 340; 21 FCR 306). 46) More recently, Gleeson JA, in In the matter of Force Corp Pty Ltd (Recs and Mgrs Apptd) (in liq) [2018] NSWSC 896 described the permissible scope of a subpoena for production of documents as directing attention to the apparent relevance of the documents sought (see at [22]). 47) Whether the formulation of the test in civil proceedings is best expressed as an "on the cards" test (i.e., that it is on the cards that the documents sought will materially assist on an identified issue) (see the use of that expression in criminal proceedings in Alister v R (1984) 154 CLR 404; [1984] HCA 85; R v Saleam (1989) 16 NSWLR 14, at 18; Attorney-General (NSW) v Chidgey [2008] NSWCCA 65), or that the material could "possibly throw light on" an identified issue (see Trade Practices Commission v Arnotts Ltd (No 2); or as formulated by Nicholas J in ICAP Pty Ltd v Moebes at [30] (namely, that "it must be shown that it is likely the documentation will materially assist on an identified issue, or there is a reasonable basis beyond speculation that it is likely that the documentation will [materially assist]"), what is ultimately required is an assessment as to the relevance of the documents sought by reference to the issues in the proceedings (see Cosco Holdings Pty Ltd v Federal Commissioner of Taxation (Cth) [1997] FCA 1504; 37 ATR 432 at 439-440 per Spender J; Nicholls v Michael Wilson and Partners Limited [2010] NSWCA 100 per Young JA). 48) Where there is no legitimate forensic purpose, in that sense, for the issue of a subpoena then it may readily be seen to be a fishing expedition. As to what is meant by a "fishing expedition", in Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Ltd (1952) 72 WN (NSW) 250, at 254, it was said: A "fishing expedition", in the sense in which the phrase has been used in the law, means, as I understand it, that a person who has no evidence that 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". 49) Whether a party has cause to believe that particular documents exist is a relevant factor (in conjunction with the potential relevance of the documents sought and the breadth of the subpoena) in determining whether the subpoena is oppressive and/or constitutes "fishing". 50) In Universal Press Pty Limited v Provest Limited [1989] FCA 402, Hill J stated (at [9]-[10]): Like Clark J, as his Honour then was, in Southern Pacific Hotel Inc v Southern Pacific Hotel Corporation (1984) 1 NSWLR 710 at p 717, I am of the view that there are two separate grounds for setting aside a subpoena that are often confused. The first, to which I have already referred, is the ground that the subpoena is so widely framed as to be burdensome and oppressive and therefore an abuse of process. The second, often linked with the first, is that the subpoena requires the addressee, being a third party to the litigation, to produce all documents which may afford evidence of the matters in dispute between the parties, is thus used as a way of obtaining discovery against a person not party to the litigation and so should be set aside (cf Small's case supra). Where the objection to a subpoena is that it is a misuse of the process of the Court for the purpose of discovery, what is usually meant is that it is an abuse of process to require a person not a party to litigation to form a judgment as to what is relevant to the issues joined in a proceeding to which he is not a party: National Employers' Mutual Association Ltd v Waind & Hill (1978) 1 NSWLR 372 at p 382. It does not follow that a subpoena, issued in circumstances where the person requesting its issue is uncertain whether any documents exist which fall within the description in the subpoena, that description being otherwise precise, will be bad… 51) It is well recognised that a subpoena may be set aside as an abuse of process where it is used as a substitute for discovery or discovery against a third party (see Associated Dominions Assurance; Commissioner for Railways v Small (1938) 38 SR (NSW) 564; (1938) 55 WN (NSW) 215; National Employers' Mutual General Association Ltd v Waind [1978] 1 NSWLR 372 at 382 (Moffitt P, with whom Hutley and Glass JJA agreed)). 52) In Tyco Australia Pty Ltd v Leighton Contractors Pty Ltd (2005) 142 FCR 428; [2005] FCAFC 115 (Tyco), Hill J considered (at [34]) that it would clearly be an abuse of process for an applicant for pre-action discovery to issue a notice to produce the very documents sought by the action for pre-action discovery and said (at [46]) that such an applicant "will not have given the notice to produce in good faith, but rather, will have acted in a way that is an abuse of process". In Yes Family Pty Ltd v Sphere Healthcare Pty Ltd [2016] NSWSC 393 just such a conclusion was drawn by Slattery J (see at [28]): Hill J's statement of principle in Tyco directly covers the present application. The documents being sought by the subpoenas are identical to the documents sought in the application for preliminary discovery under UCPR, r 5.3. Indeed the documents sought under the subpoenas are somewhat more extensive. The essence of the abuse of process in these circumstances is that the delivery of the documents to Yes Family in response to the subpoenas would set at nought the whole preliminary discovery application, the purpose of which is to determine whether or not Yes Family should have those documents before action. Granting the application would allow Yes Family to bypass the requirements of UCPR, r 5.3. [my emphasis]. 53) More recently, it has been said that a subpoena will be an abuse of process where it is used as a means of obtaining disclosure of documents which, in accordance with para 4 of Practice Note SC Eq 11, could only be obtained before the service of evidence in exceptional circumstances necessitating disclosure (see New Price Retail Services Pty Ltd v Hanna [2012] NSWSC 422 at [19]; considered in The Owners - Strata Plan No 76902 v Roads and Maritime Services [2017] NSWSC 528 per Ball J). 54) That said, in Tyco, Hely J said (at [54]): … at least prima facie, it would be an abuse of process for an applicant for preliminary discovery to seek to compel production of documents by notice to produce, when the production of those documents is sought under O 15A, r 6. But it does not follow, for example, that a subpoena sought to be issued by an applicant for preliminary discovery against a third party would necessarily be an abuse, depending upon the scope and purpose of the subpoena. [my emphasis]
When a paragraph amounts to no more than a fishing expedition, it is to be disallowed: Commissioner for Railways v Small (1938) 38 SR 564 at 574‑575.
As did her Honour in Rinehart after setting out the legal principles quoted above. I also now turn, with those principles in mind, to the respective submissions made by the Gertos' interests and the RMS.

[61]

Structuring of the answers to the elements requiring to be addressed

As there are a significant number of paragraphs in various Notices to Produce and Subpoenas that are the subject of these set aside applications, it is convenient to set out, now, how I have structured my responses. I have done this to provide some brevity to what might otherwise be a disproportionately lengthy judgment.
As a consequence, I have prepared three separate rulings which, between them, can provide (as noted later as relevantly applicable) a sufficient ruling on each of the paragraphs which I am required to address. To do this, I set out below each of these rulings. At the appropriate location following each of the paragraphs specifically addressed, commencing at [34] and running through to [157], I nominate which ruling is to apply.
In a limited number of instances, a differential ruling is required with respect to elements of the paragraph. Where this occurs, I have inserted an appropriate annotation. Otherwise, I have simply indicated which ruling is to apply by reference to the three rulings set out below. The terms of these rulings are: Ruling 1 I am unable to discern any legitimate forensic purpose for this paragraph for the purposes of either separate question. The documents sought by this paragraph cannot provide direct proof of any factual matter in contest in the separate question proceedings between the RMS and the Gertos' interests. Nothing in this paragraph relates to the first of the questions set down for determination in the separate question hearing. In addition, nothing in this paragraph relates to any issue arising from the Applicant's presently pleaded Points of Claim or from the second of the questions to be dealt with in the separate question hearing. There is, in my assessment, no relevance of what is sought in this paragraph to the issues in these separate question proceedings (see Rinehart v Rinehart [2018] NSWSC 1102 at [47]). It is to be observed that, should the second of the separate questions be answered adversely to the Applicant in each proceedings, the matters pressed in this paragraph might, potentially, become relevant in any subsequent proceedings pleaded on some alternative basis for compensation pursuant to the Land Acquisition Act. That, however, would necessarily await any continuation of these proceedings on some future, alternatively pleaded basis. This paragraph (and its equivalent paragraph in other notices to produce or subpoenas) is rejected. Ruling 2 I am satisfied that there is a legitimate forensic purpose in the RMS seeking the production of documents of the kind set out in the paragraph in order to permit the RMS to be able to challenge the basis upon which the Gertos' interests contended that the contracts for sale evidence an arm's-length transaction between the vendor and purchaser in each instance. There is sufficient adjectival relevance to the issue of making findings on the matters inherently engaged by either of the matters to be canvassed in the separate questions hearing. This paragraph (and its equivalent paragraph in other notices to produce or subpoenas) is permitted. Ruling 3 This paragraph amounts to no more than a fishing expedition: Commissioner for Railways v Small (1938) 38 SR 564 at 574-575. This paragraph (and its equivalent paragraph in other notices to produce or subpoenas) is rejected.

At a glance

Court

Decision date

Before

Catchwords

Source

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Judgment (101 paragraphs)

Cases Cited (23)

Cited By (3)