Katter v Melhem

REASONS FOR JUDGMENT REVISED FROM TRANSCRIPT 1 On 18 February 2014 I made orders in this matter including an order that any application for leave to issue subpoenas be made to my associate in chambers by 7 March 2014. On 11 March 2014 an affidavit of Simon Morris sworn 10 March 2014 was filed on behalf of the applicants. That affidavit was filed in support of an application by the applicants for leave to issue subpoenas to produce documents to three people: Katina Klonis, Saim Semaan and the Commissioner of Police. The proposed subpoena to the Commissioner of Police is no longer pressed. 2 Whilst applications for leave to issue subpoenas are usually dealt with ex parte on the papers in chambers, it appears that the respondent became aware of the applicant's application for leave to issue the three subpoenas. He sought and obtained leave to file submissions in opposition to the grant of leave. Those submissions were filed on 17 March 2014. In turn the applicants were given leave to file submissions in reply. Those submissions were filed on 21 March 2014. 3 On 24 March 2014 I decided that leave to issue the subpoenas should be refused. This was communicated to the parties. Thereafter the applicants sought reasons for the refusal. These are my reasons for refusing leave. 4 I should note that these reasons are deliberately and necessarily brief for two reasons. First, customarily reasons for refusal of leave to issue subpoenas are not sought or given. Nevertheless, it may reasonably be accepted that it is legitimate for the applicants in this matter to seek reasons so that they can understand the basis for the refusal. They may, of course, also seek leave to appeal the refusal. 5 Second, and more significantly the reasons are brief because the matter is listed for hearing in seven days' time. For the reasons already given it is legitimate for the applicants to obtain reasons prior to the hearing. I have, however, had very limited time in which to prepare a judgment and am therefore delivering these reasons ex tempore. 6 In McIlwain v Ramsey Food Packaging Pty Ltd (2005) 221 ALR 785 at [35] Greenwood J summarised the relevant principles concerning leave to issue subpoenas. Relevant to this matter are the following (omitting some of the cases cited by Greenwood J): (1) A request for a subpoena cannot be used to disguise an application for discovery of documents, or as an alternative to an application for further and better discovery. The subpoena process should not have the effect of discovery against a person who, as a stranger to the proceeding, is not liable to make discovery. (2) The documents for production must be identified with reasonable particularity. The category of documents must not be so wide as to be oppressive. (3) The documents must be relevant to an issue raised on the pleadings and be used to elicit documents to support the applicant's existing case. It cannot be used for the purposes of "fishing", or for the purpose of determining a preliminary question as to whether the party has a supportable case, or to investigate the character of the opposing party's evidence. (4) The test for relevance does not require that a party demonstrate direct relevance to the contest between the parties. Rather, the documents must have some potential relevance to the pleadings as they stand. In Australian Gas Light Company v Australian Competition and Consumer Commission [2003] FCA 1101, French J (as his Honour the Chief Justice then was) summarised the matters which are relevant to the grant of leave. His Honour said in part (at [8]): The assistance that the requesting party may derive from the production of documents must be taken into account. Case management considerations are also relevant. A wide-ranging subpoena, seeking documents of doubtful relevance at great inconvenience to, or that risk compromising the commercial privacy of, a third party, may not readily attract the grant of leave. Where the issue of such a subpoena is likely to delay progress to trial because of the legitimate interests of a party in resisting its issue, that may also be a practical factor to be weighed. (5) Another way of expressing the notion of relevance in the subpoena context is to say that there must be a legitimate forensic purpose for the production of the documents. (6) In Trade Practices Commission v Arnotts (No 2) (1989) 21 FCR 306, Beaumont J said that the question of whether a subpoena should go can conveniently be addressed by reference to two questions. First, does the material sought by the subpoena have an apparent relevance in a descriptive or adjectival sense rather than a substantive sense? Does a subpoena have a legitimate forensic purpose to this extent from the perspective of the party issuing the subpoena? Second, does the subpoena cast a serious and unfair burden or prejudice upon the respondent to the subpoena? (7) The relevance of the documents must not be disproportional to any benefit that their production might have for the respondent. (8) A subpoena ought not issue in circumstances where it would unduly disrupt the conduct of the trial by requiring a court to read documents which could have been obtained in the early stage in the proceedings. (9) The issue of the subpoena must not in all the circumstances be oppressive in terms of its impact on the recipient, that is, the issue of the subpoena must not be seriously unfairly burdensome, prejudicial or damaging and productive of serious and unjustified trouble and harassment. 7 The proposed subpoenas in this matter fall foul of a number of these principles. To understand why, it is necessary to first say something very briefly about the substantive proceedings. 8 The substantive proceedings are applications to have bankruptcy notices set aside by the applicants. These bankruptcy notices are founded on a judgment entered in the District Court in July 2013. Consent orders were made pursuant to terms of settlement that compromised proceedings the respondent had commenced against the applicants for recovery of monies due under a deed. The consent orders and terms of settlement provided for the entry of judgment if certain things did not occur. That is what ultimately occurred. The parties were legally represented in the District Court proceedings. The terms of settlement were entered into after settlement negotiations between the legal representatives. They were signed by the respective legal representatives. 9 As I understand it from the material filed thus far, the applicants rely on three grounds to set aside the bankruptcy notice. First, it is contended that the bankruptcy notice seeks to enforce a judgment of the District Court for $1 million in circumstances where the jurisdictional limit of the District Court is $750,000. The judgment is accordingly beyond the power of the District Court and is therefore unenforceable. Second, it is argued that the Court should go behind the judgment of the District Court because the terms of settlement and judgment were based on a claim by the respondent that he had lent monies to the applicants, but no monies were in fact lent. There was therefore no basis or no consideration for the compromise. Third, the applicant says that the Court should to go behind the judgment because it is based on terms of settlement that operate as an unlawful penalty. 10 The applicants submit that the three subpoenas are essentially directed at the second of these grounds. They are essentially directed at obtaining documentary evidence that might be relevant to their contention that they never owed money to the respondent. The applicants submit that the documents sought by the subpoena comprise evidence that they could have relied on had they contested to finality the District Court proceedings. But of course they did not contest the proceedings in the District Court to finality. Through their lawyers they negotiated a settlement. 11 It is accepted that a court does have jurisdiction to go behind a judgment to determine whether there was or is a debt owed to the petitioner. In bankruptcy proceedings the existence of a judgment is only prima facie evidence of a debt. It is not conclusive evidence. Before a court will exercise discretion to go behind a judgment, however, it must be established that there are substantial reasons for questioning whether there is in truth and reality a debt owed to the creditor. It is well established that if judgment is obtained by fraud or collusion, or there has been some miscarriage of justice, a court can inquire whether the judgment is a good debt. If a judgment has been obtained without any adjudication on the merits, for example a default judgment, the Court will more readily go behind the judgment to inquire whether there is a good debt. The position is somewhat different where there has been an adjudication on the merits or where the action is compromised on the advice of counsel. 12 In Harrison v Charalambous [1999] FCA 902 Finkelstein J considered the circumstances in which the Court can or should go behind a judgment based on a compromise. His Honour said (at [9]-[10]): However, where a judgment has been entered under a compromise the position is not so straightforward. In Corney v Brien, Fullagar J said (supra at 357) that it must be shown that there exists grounds for challenging the compromise before the judgment will be reopened. This is, no doubt, because it is the compromise and not the claim that was compromised that is the foundation of the judgment. Moreover, as his Honour pointed out, where a party challenges a judgment entered on a compromise and that party has acted on the advice of counsel, the judgment will not generally be reopened. The presumption is that in such circumstances it is difficult, although not impossible, to [impugn] the compromise. In Ex parte Banner; In re Blythe (1881) 17 ChD 480 the Court of Appeal dealt with circumstances in which a court would go behind a judgment based on a compromise. The court said that if the original claim was not bona fide, but was made for the purposes of extortion, the claimant knowing that he had no legal claim, then that would be sufficient. As Brett LJ said (at 489) if a judgment or compromise is obtained by dishonesty known to both parties it would be monstrous if the court could not go behind that judgment. 13 See also: Smith v Abbott Stillman & Wilson [2007] FCA 1256 and Re Longo; Ex parte Longo (1995) 57 FCR 523. 14 Whether the applicants can establish the grounds for going behind the compromise in this matter is a matter for the final hearing. I express no view on this matter at this stage. I should note, however, that neither of the subpoenas appear to be directed in any way to the question of the fairness of the compromise or settlement. 15 Having regard to the nature of the proceedings and the issues likely to arise, in my opinion leave to issue the two subpoenas should be refused for five reasons. First, they are excessively broad so as to be oppressive. Second, they have the effect of discovery against third parties. Third, they appear to be used for the purpose of "fishing". The applicants are essentially fishing for whether these third parties might have documents that might support their case. There is no legitimate forensic purpose. Fourth, the documents that might be caught by the subpoenas are unlikely to have any adjectival, let alone direct relevance, to the issues. Fifth, that is the case in particular because neither Ms Klonis nor Mr Semaan are giving evidence in these proceedings. It is, in these circumstances, difficult to see what, if anything, would be done with any of these third party documents if produced pursuant to the subpoenas. 16 In all the circumstances I am not satisfied that there is any legitimate forensic purpose behind the subpoenas. The briefest of summaries of the proposed subpoenas will be sufficient to illustrate the basis for the opinions I have just expressed. 17 Ms Klonis was a solicitor who had some involvement with the drafting and execution of the deed which was sued upon in the District Court. She swore an affidavit for the purposes of the District Court proceedings and was to be a witness for the respondent. Her affidavit was read in the District Court proceedings. She was to be cross-examined, however the matter settled before that occurred. It is unclear if she was subpoenaed to produce documents in the context of the District Court hearing. Paragraph 1 of the proposed subpoena to Ms Klonis effectively requires Ms Klonis to produce all her files in relation to the deed. One could perhaps see how these documents might have been relevant at the District Court stage. It is more difficult to see, however, how they are likely to be relevant to this application. In any event, the paragraph is much broader. It also requires Ms Klonis to produce all her files in relation to the estate of the late John Katter, the estate of the late Alvira Kairouz, and the deed of family arrangement between Mr Clemence Nader Katter and Joseph Katter, Susan Katter and Alna Latouf dated 10 January 2011. It is difficult to see how those documents could possibly be relevant to the issues in these proceedings. 18 Paragraph 2 of the subpoena requires Ms Klonis to produce virtually every document that Ms Klonis might have relating to communications between her and the respondent and Mr Semaan in relation to, not only the deed or deeds of loan, but again, the estate of the late John Katter, the estate of the late Alvira Kairouz, the deed of family arrangement, the subject matter of the deed of family arrangement, moneys alleged to be owing by Joseph and/or Susan Katter to Saim Semaan and/or Robert Melham, Bitar Pty Limited, the property development at 136-138 New Canterbury Road, Petersham, and attempts by Robert Melham to obtain a security interest over Bitar Pty Limited's interest in the development. 19 It is difficult to see any possible adjectival relevance or legitimate forensic purpose for producing the vast bulk of the material sought from Ms Klonis. It is demonstrative of a fishing expedition that the applicants wish to embark on. At risk of overusing the metaphor, it requires Ms Klonis to trawl through all of her records in relation to a large number of matters going well beyond the deed that was the subject of the District Court proceedings, to ascertain whether there is any possibility that she might have something that would assist the applicants' case in some way. This, coupled with the very wide scope of the subpoena, makes the subpoena oppressive. 20 The subpoena to Mr Semaan is equally broad. Again, summarising it in the briefest possible terms, paragraphs 1 to 3 of the subpoena effectively require Mr Semaan to discover virtually all documents that he might have concerning the provision of money and the deed that was the subject matter of the District Court proceedings. 21 However, as is the case with the subpoena directed to Ms Klonis, the subpoena to Mr Semaan goes well beyond that and requires Mr Semaan to effectively discover all documents that may record communications between Mr Semaan and Ms Klonis in relation to, again, the estate of the late John Katter, the estate of the late Alvira Kairouz, the deed of family arrangement earlier referred to, Bitar Pty Limited and the property development earlier referred to. 22 Mr Semaan was a witness in the District Court proceedings. Again, it is unclear whether he was subpoenaed to produce this broad range of documents for the purpose of the District Court proceedings. Whether or not he was, it is again difficult to see how most of the documents caught by this subpoena could possibly be relevant to the issues that might arise in the applicants' application to set aside the bankruptcy notice. Again, it is more appropriate to characterise the proposed subpoena to Mr Semaan as a trawling exercise to see whether there is some possibility that a document in his possession might assist the applicants' case. It is, in terms, oppressive. 23 It also appears from both subpoenas that what the applicants want to do in these proceedings is to engage in a complete re-run of the District Court proceedings that they settled on legal advice. As I said earlier, none of the documents sought from either Ms Klonis or Mr Semaan are directed to the question of the fairness or honesty of the compromise that resulted in the settlement of the proceedings that ultimately gave rise to the judgment. 24 I should add three additional matters. First, the application for leave to issue these subpoenas was late. As I indicated earlier, I ordered that any application for leave to issue subpoenas was to be made by 7 March 2014. These applications were not filed until 11 March 2014. This is in the context of what may be said to be the fairly unsatisfactory conduct of the proceedings up to this point in any event. If leave to issue these subpoenas was given, there is a significant risk of disruption of the hearing of the matter that is listed to commence in seven days' time. Second, there is a serious prospect, if leave is given, that an application might be made by the third parties to set aside the subpoenas. This undoubtedly would jeopardise the hearing date. In any event, even if no such applications were made, the production of potentially large numbers of documents in answer to these broad subpoenas may again jeopardise the hearing date. 25 Third, to the extent that there might be some parts of the subpoena that might be said to be permissible because they might have a legitimate forensic purpose, it is not a matter for the Court to redraft, or narrow the terms of the proposed subpoena so that they are acceptable. 26 For all of the reasons just given I refuse leave to issue the subpoenas to Ms Klonis and Mr Semaan. 27 The costs in relation to the application for leave to issue the subpoenas are the respondent's costs in the cause. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wigney.