Solicitors:
James Tuite & Associates (plaintiff)
Clinch Long Letherbarrow Pty Ltd (first, second & seventh defendants/applicant)
File Number(s): 2006/259566
[2]
Judgment (ex tempore)
HIS HONOUR: The relevant background to the present application is set out in Grace v Grace (No 8) [2014] NSWSC 409, in particular at paragraphs 2 through 6. In that judgment an application to set aside paragraph 3 of a notice to produce served by the plaintiff on the second defendant on 30 October 2013 was dismissed. That paragraph sought production of "all unredacted bank statements for all bank accounts in your name for the period 1 July 1995 to 31 December 2012 including without limitation" and there were then four specified accounts identified. That judgment was given on 10 April 2014.
Consequent upon it, the second defendant produced the outstanding documents referred to in paragraph 3, but did not produce statements in respect of credit card accounts. That issue was brought before the court for determination on 9 October 2014, when a declaration was made that upon the true construction of paragraph 3 of the notice to produce, the notice did not catch credit card statements. At that time, the plaintiff foreshadowed that if that were the result a further notice to produce in respect of credit card statements would be issued, and the court intimated that no leave to do so was required but that such a notice would be liable to be set aside if it were not appropriately targeted. Directions were made for the service of notice of surcharges, falsifications and objections by 20 November, the vouching of accounts out of court by 17 December and the listing of the matter for directions on 19 December.
As had been foreshadowed on 9 October, the plaintiff on 16 October 2014 issued a notice to produce addressed to the second defendant, seeking production of:
1. All unredacted statements for the following credit card accounts in your name for the period 1 July 1995 to 31 December 2012 (and there followed eleven specified accounts);
2. All unredacted statements for the following American Express accounts in your name for the period 1 July 1995 to 31 December 2012 (and there followed seventeen specified accounts);
3. All unredacted statements for the following Diners' Club accounts in your name for the period 1 July 1995 to 31 December 2012 (and there followed three specified Diners' Club accounts).
Concurrently with the notice to produce, subpoenae for production were issued to American Express Australia Ltd for production of "all unredacted statements for the following American Express accounts in the name of Dr Julianne Grace" (and there were then listed twelve American Express accounts), to Diners' Club Pty Ltd for "all statements for the following Diners Club accounts in the name of Dr Julianne Grace for the years 1995 through 2012" (and there followed five specified accounts), and to the Australia and New Zealand Banking Group Ltd for "all statements for the following credit card accounts in the name of Dr Julianne Grace" (and there followed eleven specified accounts).
By interlocutory process filed on 29 October 2014, the second defendant Dr Grace applies for an order setting aside the notice to produce and orders setting aside each of the three subpoenae for production. Essentially, the grounds advanced to impugn the notice and the subpoenae are that it is said to be contrary to the just, quick and cheap resolution of the proceedings to permit the plaintiff to issue such notices and subpoenae at this stage of the proceedings, and more specifically that any application for production of credit card statements should have been agitated when the previous notice to produce was before the court, that production of credit card statements is unnecessary where the bank statements have been produced, that it is contrary to the principle of finality to permit such notices and subpoenae to be issued in the light of the previous decisions concerning a previous notice to produce, that the notice and subpoenae will cause delay, and that there are particular and specific defects in the notice and subpoenae in terms of specifying accounts that are not accounts of the second defendant at all.
It was not submitted that the documents production of which is required by the notice and the subpoenae did not have sufficient potential relevance to be the subject of a subpoena, nor that the subpoenae or notice should be set aside on grounds of lack of apparent or potential relevance. I confess that at first I wondered why, as it seemed that credit card accounts, unlike bank accounts, would not potentially identify receipts by the second defendant with which she might be surcharged, and so far as expenditure was concerned they would be relevant only to the extent of the individual entries which supported expenditure already claimed. However, senior counsel for the plaintiff explained that payments had been identified for Nevilda Holdings and/or Nevilda Investments to American Express - and presumably to other credit card operators - in respect of accounts that were held in the name of the second defendant personally. The plaintiff wishes to contend that these payments by the Nevilda companies may not be proper expenses of the companies but in the nature of payments for the benefit of the second defendant personally, and thus potentially chargeable to her as dividend. The plaintiff further contends that to ascertain and prove that, it will be necessary to establish what expenses were incurred on the credit cards in question that were funded by those payments.
As relevance was not put in issue and as the plaintiff did not adduce evidence except to a very limited extent on the present application, because of the understanding that relevance was not in dispute, I should accept that although the evidence tendered showed payments only to American Express, there are also similar payments to other credit card operators. It also seems to me that once relevance is understood in that way, it is not reasonable to define by reference to individual payments the extent of the accounts that ought to be disclosed since they are no doubt running accounts and so far as the evidence goes, the payments appear to be, in some cases at least, rounded sums which might represent a partial and not a full payment.
While the notice and the subpoenae are necessarily wide in time, on that approach in the context of this case and the period with which the accounts must cover, that is probably unavoidable and the notices are not unreasonably wide in that sense, save to the extent that two of the subpoenae do not specify any time limitation at all. Nor has the second defendant, or the subpoenae recipients, adduced any evidence of oppression.
Nor can I accept the argument that the production of bank statements render the credit card statements unnecessary. First, the judgment in Grace v Grace (No 8), in referring to bank statements as "perhaps the best evidence" with which to test the defendant's account, was not intended to suggest that the bank statements would surpass the need for any other evidence. Secondly, the purpose for which these documents are sought is a rather different one. They are sought not for the purpose of testing whether there has been a full disclosure of receipts, which is the principal function of the bank statements, but rather to show whether amounts paid by the companies to American Express and other credit card operators are truly in the nature of company expenses, or ought to be charged to the second defendant.
As to the so called principle of finality, the issue of the notice to produce and subpoenae was not contrary to any rule of court or any direction made in the proceedings. There is no once and for all rule in respect of subpoenae and notices to produce. The issue of such a notice was clearly contemplated on the last occasion and there is no date for hearing yet set which would be jeopardised by their issue.
All that said, I am troubled that the notice to produce in particular may impose an unnecessary burden on the defendants, which may - depending on how the evidence emerges - prove to be unnecessary. As it seems to me, the plaintiff has available sufficient information to frame his surcharges. In particular, and resorting to the example that is illustrated by the evidence, the bundle of cheque butts evidencing payments to American Express enables the plaintiff to include in his notice of surcharges each of those payments, and to allege in the notice of surcharges that the second defendant should be charged with those sums as dividend. In order to prove the plaintiff's case, effectively all the plaintiff will have to do is to tender the cheque butt and some proof that the payment went into an account in the name of the second defendant. The second defendant may answer that by admitting that the payments were made into an account in her name but contending that they were made in proper reimbursement of charges incurred by her on behalf of and for the benefit of the company; in that case, she will have at least some evidentiary onus of showing that the funds received were applied to company expenses. If she does, then disclosure of the relevant credit card statements would be entirely appropriate to enable that to be tested, but she might also admit that the payments were made for her benefit and say that they were charged or debited to her loan account, in which case the ultimate application of the funds to corporate expenses or to the expenditure incurred on the credit card would not be relevant. It seems to me that that illustrates, conformably with the practice of the court to order discovery usually only when the evidence is closed, that in this case whether disclosure of this material is necessary will best be seen and judged after the notice of surcharges has been given and after the evidence on the surcharges has been served on each side.
That conclusion is fortified by the other aspect of the second defendant's complaint. The submissions - and in particular the table attached to the second defendant's submissions - when illuminated by reference to some of the surrounding documents, seem to demonstrate that not merely one or two of the paragraphs in the notice to produce and the subpoenae, but a very substantial number of them - for example in the notice to produce paragraphs 1(d), 1(e), 1(f), 1(g), 1(h), 1(i), 1(k), 2(g), (h), (j), (k), (m), (o), (p) and (q); in the American Express subpoena, paragraphs 1(b), (c), (e), (f), (h), (j), (k) and (l); and in the ANZ subpoena, paragraphs 1(a), (d), (e), (f), (g), (h), (i) and (k), call for production of accounts that either are not accounts of the second defendant, or are not identifiable as accounts of the second defendant (for example because they are identified by transaction reference numbers and not by amount or card numbers). In particular, the circumstance that the documents have been framed in that manner demonstrate that they have been drafted not by reference to the accounts to which the potential surcharges have been applied, but effectively by identifying every credit card, regardless of its holder, to which reference has been made in the accounts - as I have said, including accounts not in the name of the second defendant, production of documents in connection with which would not illuminate the issue to which they are said to relate.
If this defect were limited to one or two subparagraphs, then it might well be that it would have been appropriate to disregard it on the basis that, to the extent that there were no documents within the category described, there would be nothing to produce. But the extent of this apparent defect demonstrates that the approach to drafting the notice to produce and the subpoenae was not informed by seeking relevant evidence on the issue to which it is said to relate, but effectively by trawling for all credit card statements relating to any credit card referred to in the evidence, regardless of its potential relevance to an issue.
As I have said, once the issues are refined by the notice of surcharges and by the evidence on the surcharges, it may well be appropriate to require the production of credit card statements in respect of those accounts to which particularised surcharges have been applied. But, as it seems to me at present, the production sought is premature, and may involve imposing an unnecessarily excessive burden on the defendants, and is too wide in its scope.
For those reasons, I have come to the conclusion that the Notice to Produce and the subpoenae should be set aside. That is, as I have said, not to say that something somewhat more refined might not be appropriate once the issues are defined.
The Court orders that:
1. The Notice to Produce addressed to the second defendant dated 16 October 2014 be set aside;
2. The subpoena to produce to American Express Australia Limited issued on 28 October 2014 be set aside;
3. The subpoena to produce to Diners Club Limited issued 28 October 2014 be set aside.
4. The subpoena to produce to Australian New Zealand Banking Group Limited issued on 28 October 2014 be set aside.
5. The plaintiff pay the second defendant's costs of the interlocutory process.
[3]
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: 11 March 2015