McMillan Investment Holdings Pty Ltd v Mangos

Supreme Court of NSW|2022-08-25

Judgment

HER HONOUR: By notice of motion filed on 28 March 2019 the plaintiff seeks an order that a notice to produce and five subpoenas issued by the first and second defendants be set aside, in whole or in part.
The plaintiff is McMillan Investment Holdings Pty Ltd ("McMillan Investment"). The first defendant is John Mangos. The third defendant is Christopher Wallace. The first and third defendant's were directors or Sydney Allen Manufacturing Pty Ltd (in liquidation) and Sydney Allen Printers Pty Ltd (in liquidation). The second defendant is Natalie Vivienne Mangos. J Svehla appeared for the plaintiff. A Fernon SC appeared for all the defendants except Mr Wallace (third defendant). He was not directly involved in the subject matter raised in the notice of motion but was present in Court, self-represented. The parties relied on a joint court book (Ex A).
Julie Anne McMillan and Robert Ian McMillan are husband and wife. Robert McMillan is a director of McMillan Investment.
The notice to produce and the subpoenas to which the plaintiff seeks to have set aside are as follows: 1. The Notice to Produce issued to McMillan Investments on 14 March 2019 (McMillan Investments' Notice to Produce); and 2. Five subpoenas issued to: 1. Ms Julie-Anne McMillan on 20 March 2019 (Ms McMillan Subpoena); 2. Mr Robert Ian McMillan on 20 March 2019 (Mr McMillan Subpoena); 3. DJ Advisory Pty Ltd on 20 March 2019 (DJ Advisory Subpoena); 4. Anthony Warner on 20 March 2019 (Warner Subpoena); and 5. Print Warehouse Australia Pty Ltd on 22 March 2019 (Print Warehouse Subpoena).
The grounds of objection to these subpoenas were wide ranging.
The hearing of this motion took place on 25 August 2022. On that day, the legal representatives were able to come to an agreement as to the scope of documents to be produced but that left some paragraphs in the schedule still in dispute ("the disputed paragraphs"). It is these documents which are the subject of this Judgment.

Background

In McMillan Investment Holdings Pty Ltd v Mangos [2021] NSWSC 37, Walton J dismissed Mangos' notice of motion seeking that the sum of $300,000 be paid out of it to their solicitors for payment of their legal costs.
The background facts are lengthy. I have extracted and gratefully acknowledge adopting parts of the pleadings and background facts set out by Walton J in McMillan Investment Holdings Pty Ltd v Mangos [2021] NSWSC 37.
By a third further amended statement of claim ("TFASC") filed 26 April 2019, McMillian Investments brought proceedings against John Bernard Mangos, the first defendant; Natalie Vivienne Mangos, the second defendant (collectively, "the Mangos"); and Christopher Wallace, the third defendant, in their capacity as debtors, guarantors and/or mortgagors for monies claimed to be owed under various instruments.
On 20 June 2019, the Mangos' filed an amended defence to the TFASC. There were cross-claims brought by the Mr Mangos ("the Mangos' cross-claim"), Mr Wallace ("the Wallace cross-claim") and what were described in the proceedings as "McMillan Entities" (the cross-claimants consisted of McMillan Investments, Julie-Anne McMillan and Robert McMillan ("the Third cross-claim") against Mr Fordyce's law firm PMFL and the successor law firm who took over his practice, FD Legal.
As I will explain, these proceedings involve a dispute between a lender (McMillan Investments) and guarantors (the Mangos') about loan facilities that were secured over the guarantors' property. Pursuant to consent orders entered in February 2019, McMillan Investments and the Mangos' reached an interim arrangement whereby the property was sold and funds were paid into court. In April 2019, they reached a further interim agreement reflected in consent orders whereby some of the funds were released to McMillan Investments, some funds were released to the Mangos' to allow them to purchase another property in exchange for the provision of an agreed amount of security of the new property and some funds remained in court.
In the third amended statement of claim McMillan Investments pleaded that, on about 27 March 2015, Mr Mangos and Mr Wallace, as guarantors and indemnifiers, entered into a facility agreement ("the facility agreement"), the other parties to which were McMillan Investments and Sydney Allen Manufacturing Pty Ltd (in liquidation) ("SAM") and Sydney Allen Printers Pty Ltd (in liquidation) ("SAP"), as joint and several borrowers.
Under the facility agreement that McMillan Investments agreed to advance SAM and/or SAP the "principal money" (as defined in the facility agreement), on the terms and conditions in the facility agreement, and that Mr Mangos and Mr Wallace provided a joint and several guarantee and indemnity to McMillan Investments in respect of the "principal money" and McMillan Investments costs and expenses, permitting McMillan Investments to call on them as guarantors without calling on SAM and/or SAP as the borrowers.
The obligations under the facility agreement were secured by a collateral security including a general security deed. On or about 27 March 2015, McMillan Investments, SAM, SAP, Mr Mangos and Mr Wallace, as guarantors, entered into a general security deed which granted McMillan Investments, as the secured party, a "PPSA Security Interest", "PPSA Personal Property" and a "Fixed Charge" over all other property to secure the payment of the secured money. ("PPSA" is defined in the general security deed to mean the Personal Property Securities Act 2009 (Cth)).
In the period 5 March 2015 to about 6 July 2016, McMillan Investments advanced $1,460,876.61 ("the principal money"). Interest was payable on the principal money.
McMillan Investments received payment of $1,039,564.28, at various dates between 8 September 2015 to 1 August 2017, plus an additional amount of about $300,000 (which was brought to account from a payment of $330,000 by Warehouse Australia Pty Ltd). The payments were made for payment of interest and then principal reductions (in the sum of $227,869.91).
As at 1 April 2016, default occurred under the facility agreement and, as at 7 April 2016, voluntary administrators were appointed to SAM and SAP. From 2 August 2017 to the filing of the TFASC, no payments under the facility agreement were repaid to principal or interest were made to McMillan Investments. (As at 25 February 2019, the principal and interest owed was $298,360.38).
On 27 March 2015, the Mangos', in their capacity as mortgagor, granted a mortgage in a registrable form in respect of a property in Illawong, NSW to McMillan Investments in its capacity as mortgagee (the Mangos' were the registered proprietors of the Illawong Property).
Under the registered McMillan Investments and Illawong Property Mortgage, the Mangos' promised to pay the principal amount as agreed between the Mangos' and McMillan Investments and that interest accrued daily on the principal money in the rates in the facility agreement. The registered McMillan Investments-Illawong Property Mortgage was a security granted by the Mangos' for payment to McMillan Investments for the secured money, which consisted of the principal money and all interest, and for the performance of their obligations under the mortgage and under any collateral security, which was defined as including the facility agreement and the general security deed.
On or about 27 January 2016, McMillan Investments, as lender, and the Mangos' entered into the 27 January 2016 McMillan/Mangos' $150,000 Loan Agreement ("the $150,000 Loan Agreement") whereby McMillan Investments agreed to lend Mr Mangos $150,000.
On or about 28 January 2016, pursuant to the $150,000 Loan Agreement, McMillan Investments lent $150,000 to Mr Mangos or alternatively to Mr Mangos and Mrs Mangos (Mr Mangos caused McMillan Investments/Mangos' $150,000 Loan to be paid to or to the benefit of SAP pursuant to the 27 January 2016 Mr Mangos/SAP Loan Agreement).
The $150,000 Loan: 1. constituted "principal money" within the meaning of that expression in the facility agreement and the Registered McMillan Investments-Illawong Property Mortgage. 2. constituted "secured money" within the meaning of that expression contained in the Registered McMillan Investments-Illawong Property Mortgage.
On 26 March 2019, the Mangos' owed McMillan Investments $241,077.82 in relation to the $150,000 Loan.
The Mangos' were liable to pay the $150,000 Loan and all interest calculated on it in accordance with the Facility Agreement Interest Provisions including "McMillan's costs and expenses".
On or about 21 November 2007, Westpac, as lender, and the Mangos', as borrower, entered into the 21 November 2007 Westpac/Mangos' Loan whereby Westpac agreed to lend, and lent, to the Mangos' $490,000.
The 21 November 2007 Westpac/Mangos' Loan was constituted by: 1. the Westpac/Mangos' Rocket IPL Loan Offer; and 2. the Westpac/Mangos' Booklet.
On 28 August 2015, McMillan Investments entered into a Westpac-McMillan Investments-Mangos' Debt and Securities Assignment under which McMillan Investments would pay $354,183.22 to Westpac for Westpac to assign to McMillan Investments the debt and other obligations owed by the Mangos' to Westpac under a 21 November 2018 Westpac-Mangos' Loan. On 28 August 2018, as part of and associated with the Westpac-McMillan Investments-Mangos' Debt and Securities Assignment, Westpac transferred McMillan Investments the registered first and second mortgages over the Illawong Property held by Westpac as mortgagee.
It was further pleaded: 1. From about 28 September 2015 to about 5 December 2016, the Mangos' owed payments of principal and interest to McMillan Investments in respect of the Former Westpac/Mangos' Debt, leaving a balance owing, on 5 December 2016, of $62,580.44. 2. From 6 December 2016, the Mangos' did not pay any amount to McMillan Investments, whether principal or interest, in respect of the Former Westpac/Mangos Debt to McMillan Investments pursuant to the Westpac-McMillan Investments-Mangos' Debt and Securities Assignment. 3. On 26 March 2019, a week prior to the 2 April 2019 Court Orders, the Mangos' owed McMillan Investments $74,870.11 in relation to the Former Westpac/Mangos' Debt.
Between 10 November 2016 and 27 September 2018, McMillan Investments made demands upon the Mangos' for payments of monies owing under the facility agreement, the general security deed, the McMillan Investments-Illawong Property Mortgage and other debts or loans.
It was pleaded that: 1. from 15 May 2017 until 4 December 2018, McMillan Investments incurred $94,234.64 legal costs; 2. from the latter part of November 2018 until about 11-22 March 2019, McMillan Investments incurred legal costs of $146,883.23; and 3. from 19-22 March 2019 to the present, the legal costs of $250,000 were incurred.

The facility agreement

There are a number of key terms in the facility agreement which created the asserted Mangos' liability to McMillan Investments under the facility agreement. Key terms include "principal money", "McMillan's costs and expenses", and the interest provisions.
"Principal money" was defined broadly in the facility agreement to include but not limited to, at any time all money (unless otherwise agreed in writing by McMillan Investments) which was represented as follows: (i) I owe to McMillan Investments as Plaintiff at that time for any reason and includes: (A) "McMillan's costs and expenses" and GST; (B) all interest accrued and added to the principal money; … where money which is described in each of the above paragraphs will be principal money: (iii) whether or not the money is due for payment at that time; (iv) even if the money is owing only on a contingency; (v) whether I or the other person owes the money alone or jointly, or jointly and severally or in common with any other person and whether as principal or as surety; (vi) whether the relevant transactions took place before or after I executed the Facility Agreement;". (vii) whether or not the relevant transactions took place in the course of McMillan's business. The facility agreement also defined "McMillan's costs and expenses" as: includes but is not limited to any … costs, fees and expenses which McMillan considers it, or any McMillan appointee or adviser, has incurred or will incur: (i) … (ii) in connection with … defending the title to the property which includes the Illawong Property; (iii) … (iv) as a result of exercising, trying to exercise or not exercising McMillan's rights under a law or under the facility agreement, a collateral security or any other agreement relating to the secured money; (v) … (vi) because I, that is, the borrower, namely, SAM and/or SAP, and/or the Guarantors, namely Mr Mangos and/or Mr Wallace, have breached any provision of the facility agreement, which costs and expenses include: (vii) the fees and expenses of any adviser engaged by McMillan for any purpose relating to the facility agreement, the collateral security, the property, which includes the Illawong Property, or the secured money; McMillan's legal costs on a full indemnity basis.
Interest payable under the facility agreement was 15% per annum, when it is not paid on or before the due date, on the basis of a 360-day year and actual days elapsed.
Under the facility agreement, the "principal money" outstanding from time to time, includes unpaid interest (it is then capitalised and forms part of the "principal money").

The Guarantees

McMillan Investments contended that Mr Mangos and Mr Wallace provided a joint and several guarantee and indemnity to McMillan Investments in respect of the "principal money" and "McMillan's costs and expenses", permitting McMillan Investments to call on them as guarantors without calling upon SAM and/or SAP as the borrowers.
McMillan Investments contended that Mr Mangos, as one of the guarantors under the facility agreement, was liable to pay McMillan Investments: 1. the McMillan Investments/SAM & SAP Outstanding Balance of $227,869.91; 2. McMillan Investment's legal costs and expenses; 3. interest, calculated at 15%, on both the amounts as above in subparagraphs (2) and (3) and in accordance with the facility agreement interest provisions.
Mrs Mangos was not a party to this facility agreement.

The General Security Deed

On or about 27 March 2015, McMillan Investments, SAM, SAP, Mr Mangos and Mr Wallace, as grantor, entered into the general security deed.
Under the General Security Deed, Mr Mangos, as a Grantor, granted to McMillan Investments, as the Secured Party: 1. a PPSA Security Interest over all PPSA Personal Property; and 2. a fixed charge over all other property, to secure the payment of the Secured Money.
McMillan Investments contended that the amount of $492,186.82 which had been paid into, and remains in, Court in accordance with order 3 of the 2 April 2019 Orders, is subject to McMillan Investments secured rights against Mr Mangos under the General Security Deed.

The Registered McMillan Investments-Illawong Property Mortgage

On 27 March 2015, the Mangos', in their capacity as mortgagor, granted a mortgage in a registrable form in respect of the Illawong Property (the then home of the Mangos') to McMillan Investments, in its capacity as mortgagee.
The Registered McMillan Investments-Illawong Property Mortgage was a "collateral security" within the meaning and for the purposes of the facility agreement.
Under the Registered McMillan Investments-Illawong Property Mortgage, the Mangos' promised to pay the "principal money" as agreed between them and McMillan Investments; otherwise when McMillan Investments demands it.
Interest accrued daily on the "principal money" at the rates in the facility agreement.
"Principal money" included "McMillan's costs and expenses".
As mentioned, on 28 August 2015, as part of, and associated with the Westpac- McMillan Investments-Mangos' Debt and Securities Assignment, Westpac transferred to McMillan Investments the registered first and second mortgages over the Illawong Property held by Westpac, as mortgagee.
There have been defences and amended defences filed in relation to third further amended statement of claim ("3FASC").
From 20 June 2019, the proceeding have been concerned with: 1. Defences and Amended Defences to the TFASC; 2. Cross-claims: the Mangos' cross-claim, the Wallace cross-claim and the Third cross-claim. The Mangos' cross-claim and the Wallace cross-claim added parties to the proceeding, McMillan Investments directors, Mr McMillan and Ms McMillan because of matters alleged in the Mangos' cross-claim. The Third cross-claim joined McMillan Investments former solicitors, PMFPL and FD Legal, as well as Westpac; 3. a Mangos' Amended First Cross-Claim and the defences to the three cross-claims; 4. Cross claim of the Mangos filed 22 July 2022 5. The cross-claim of Christopher Wallace (third defendant) filed 29 July 2022

The schedule in the subpoena

In all the subpoenas, the schedule at (1) contains definitions. It reads as follows: "1. In this Subpoena to Produce, "Documents" includes, but is not limited to: Correspondence, facsimiles, notes or diary notes, memoranda, board reports, minutes or draft minutes, agendas, reports or draft reports, or other written records of any kind; Electronic files, emails, computer disks or other storage devices of any kind containing electronic files or emails; Documents recording or retaining any legal advice, including any document over which privilege is claimed; and Also includes the meaning given to it by the Evidence Act 1995 (NSW), namely; "any record of information, and includes: anything on which there is writing, or anything on which there are marks, figures, symbols or perforations having a meaning for persons qualified to interpret them, or (Hi) anything from which sounds, images or writings can be reproduced with or without the aid of anything else, or (iv) a map, plan, drawing or photograph. "
The schedule at (2) "subject matter" is defined to mean any or all of the following: 1. Anthony John Warner and / or any employees of CRS Insolvency Services (the Receiver) in his capacity as Receiver and Manager of Sydney Allen Printers Pty Ltd ACN 067 638 760 (In Liquidation) (Receiver and Manager Appointed) (SAP) and / or Sydney Allen Manufacturing Ry Ltd ACN 000 860 604 (In Liquidation) (Receiver and Manager Appointed) (SAM); 2. SAP; 3. SAM: 4. The sale of the assets of SAP and / or SAM conducted by the Receiver, including the purchase price of same; 5. The distribution or remittance of payments by the Receiver to the Plaintiff from the sale of assets of SAP and/or SAM; 6. The valuation of the assets of SAP and/or SAM; 7. The agreement entered into by the Receiver to sell the assets of SAP and SAM to Print Warehouse Australia Pty Ltd ACN 113 925 349 in its own capacity and/or as trustee for Print Warehouse Australia Trust ABN 21 538 626 926 (Purchaser) following the sale campaign conducted by the Receiver: 8. The payments received by the plaintiff and/or Robert Ian McMillan and/or Julie-Anne McMillan directly from the purchaser or any party associated with the purchaser in association with, accompanying or in connection with the Purchaser's purchase of the assets of SAP and/or SAM from the Receiver.

Disputed paragraphs

The paragraphs of the schedule that remain in dispute are as follows. The subpoenas addressed to Julie McMillan and Ian McMillan, DJ Advisory and Mr Warner (the receiver) and manager of SAP and SAM are those documents requested in paragraph 1 of the schedule of the subpoena. Paragraph 1 reads: 1. All documents recording communications between 1 January 2016 and 31 December 2018 regarding the subject matter between Lucas McEntee and/or DJ Advisory Pty Ltd ACN 610 329 416 trading as iconic Advisory (on the one hand) and any one or more of the following (on the other hand): 1. Robert Ian McMillan and/or 2. Julie-Anne McMillan and/or 3. The Plaintiff and/or 4. Mark Singh aka Marie Shergill and/or Director of Print Warehouse (purchaser) 5. The Purchaser.

Print warehouse - The purchaser of SAP and SAM

Mark Singh aka Marie Shergill is the director of Print Warehouse. The subpoena addressed to Print Warehouse contains the same paragraphs [1]-[2] of the schedule. The disputed paragraphs are 3 and [5]. They read: [3] … (d) All documents recording communications between 1 April 2016 and 30 December 2016 between Manjit Singh (aka Mark Singh and Mark Shergill) and/or the purchaser (on the one hand) and any one or more of the following (on the other hand): a. Robert Ian McMillan and/or b. Julie-Anne McMillan and/or c. The Plaintiff and/or d. MGS and/or e. Lucas McEntee and/or f. DJ Advisory Pty Ltd CAN 610 329 416 trading as Iconic Advisory and/or g. Paul Fordyce and/or h. PMFPL Pty Ltd ACN 155 497 153 trading as PMF Legal Limited or PMF Legal Pty Ltd or PMFPL Pty Ltd or any of their employees, servants or agents regarding any of the subject matter [5] All documents recording or referring to the performance of the Purchase Agreement or any Side agreement.

Relevant principles

Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") 33.4 reads: 33.4 Setting aside or other relief (1) The court may, on the application of a party or any person having a sufficient interest, set aside a subpoena in whole or in part, or grant other relief in respect of it. (2) An application under subrule (1) must be made on notice to the issuing party. (3) The court may order that the applicant give notice of the application to any other party or to any other person having a sufficient interest.

The law

The issue of a subpoena will be an abuse of process if it is not used for a legitimate forensic purpose: see Botany Bay Instrumentation & Control Pty Ltd v Stewart [1984] 3 NSWLR 98 at 100-1. The documents sought need to have apparent relevance to the issues in the proceedings.
The test for assessing a legitimate forensic interest in subpoenaed documents has been reaffirmed and clarified by the Court of Appeal in Secretary of the Department of Planning, Industry and Environment v Blacktown City Council [2021] NSWCA 145 (Blacktown City Council), per Bell P, Brereton and McCallum JJA) at [65] (Bell P) and [86] and [89] (Brereton JA). The President there said: [65] It is sufficient, in my view, to justify a subpoena as having been issued for a legitimate forensic purpose if the documents sought are "apparently relevant" or, to use the words of Nicholas J in [ICAP Pty Ltd v Moebes [2009] NSWSC 306], it can be seen that the documents sought to be produced by way of subpoena will materially assist on an identified issue or there is a reasonable basis beyond speculation that it is likely the documents subpoenaed will so assist. Of course, if it can be shown that the material assistance will be to the party that issued the subpoena, the prospect of the forensic purpose of the issuing party being impugned as illegitimate will be virtually non-existent. … [69] If the documents are apparently relevant and, provided that the terms of the subpoena are not unduly vague or the ambit of the subpoena is not such that it would be oppressive to comply with it, the subpoena should not be set aside. To that extent, the statement in [Attorney-General (NSW) v Chidgey (2008) 182 A Crim R 536; [2008] NSWCCA 65] at [59] that mere relevance is "not sufficient", and a similar statement in [Carroll v The Attorney-General for New South Wales (1993) 70 A Crim R 162] at 182 that "mere relevance is not enough" may, with respect, be apt to mislead or confuse. In the latter case, Mahoney AP said at 182 that a party issuing the subpoena: "must be able to indicate that the document is relevant in the sense that it may assist his case. In the present case, that could not be claimed. Nor was it shown. At best, the claim was: 'I wish to see the document to see if it may assist my case.' That, in my opinion, is not sufficient." There is a very subtle distinction at play in this passage which, in my view, is undesirable, is inconsistent with many of the authorities referred to above, and has the potential to lead to the unwarranted setting aside of subpoenas or refusals to inspect documents. Where apparent relevance of the documents subpoenaed to the issues in the case or to the cross-examination of a witness or witnesses is established, this should not generally lead to the setting aside of a subpoena. As King CJ put it in [Carter v Hayes (1994) 61 SASR 451; (1994) 72 A Crim R 387] at 453, where a document or documents sought by subpoena by their nature have a "bearing on the issues in the case and may well have evidentiary value", a subpoena seeking such a document or documents will not amount to fishing. [70] Of course it will remain the case that, if it can be demonstrated that the party issuing the subpoena has done so for some improper, illegitimate or ulterior purpose foreign to the litigation, the Court in the exercise of its discretion may set aside the subpoena as an abuse of process or refuse access to the subpoenaed documents in spite of their apparent relevance. Provided, however, that the documents sought are apparently relevant to the issues that have or are likely to arise in the proceedings or have some evidential value (which may extend to value for the purposes of cross-examination, including testing the credit of witnesses including expert witnesses), to the extent it may be necessary to establish a legitimate forensic purpose, such a purpose may be presumed.
Brereton JA opinion is as follows: [86] […] I agree with [Bell P] that the primary judge did not err in holding that it was not necessary, in order to demonstrate a legitimate forensic purpose for the issue of a subpoena, that the documents sought would likely materially assist the case of the party that issued the subpoena, and consequently did not err in dismissing the application to set aside the subpoena. For myself, however, I am inclined to the view that her Honour also did not misread this Court's decision in ICAP Australia Pty Ltd v BGC Partners (Australia) Pty Ltd [2009] NSWCA 307. … [89] I agree with Bell P, for the reasons given by his Honour, that an issuing party is not required to show that it is "likely" (or "on the cards") that the documents sought will materially assist its case, as distinct from that it is "likely" (or "on the cards") that they will add, in some way or another, to the relevant evidence in the case, and that the essential question is whether the documents called for are apparently relevant, or capable of providing a legitimate basis for cross-examination, in which case there is a legitimate forensic purpose for the issue of the subpoena. In my view, at least in civil proceedings and in the absence of any question of public interest immunity, no more is required to support the issue of a subpoena for production than that there is a reasonable basis for supposing that the material called for will likely add, in the end, in some way or another, to the relevant evidence in the case. This reflects the notions that the documents relate to, throw light on, or are sufficiently relevant to the dispute; that they "appear relevant in the sense that they relate to the subject matter of the proceedings"; or that they could possibly throw light on the issues in the case. Moreover, documents will add "in some way" to the relevant evidence in the case if they are capable of assisting in cross-examination, or go to credit, and notwithstanding that they are inadmissible according to the rules of evidence.

The plaintiff's submission

The plaintiff submitted that the documents sought in paragraphs (a), (b), (c) and (d) are broad. They go beyond the test because there's a difference between getting an accounting of payments the lenders received to working out whether or not assets are sold at an undervalue, for example by the receiver which would bring a claim against the receiver. That's a completely new claim, not in a new party. Anything that happened in SAP or SAM is outside the context of this proceeding. There has to be a proper tying link but there is not (T22.16-24). These disputed paragraphs of the schedule are akin to discovery by subpoena and is fishing (T23.35-36).
So far as DJ Advisory is concerned there is evidence that Mr McEntee had some involvement in the sale process. On 7 April 16, SAP and SAM went into voluntary administration. On 13 April SAP and SAM went into receivership, on 4 or 5 May 2016 contracts were exchanged to sell SAP and SAM to PWA. Finally on 1 or 2 July the sale was completed.
The problem with the subpoena addressed to Print Warehouse is that it includes documents after exchange up to completion, in other words the entire sale file. That also amounts to fishing. The fact that the receiver received money from PWA and the fact that $330,000 was received by a related entity doesn't mean that every document relating to the purchase agreement is within a legitimate forensic exercise and has apparent relevance (T26.10-18).

The first defendant's submissions

Following Blacktown City Council, the principles to be applied when a party seeks to set aside a subpoena/order to produce in the civil context is settled: so long as the material sought has "an apparent relevance" to the issues in the case and/or bears upon the cross examination of witnesses expected to be called in the proceedings it will have a legitimate forensic purpose and should not be set aside.
Ultimately, the relevance of the documents produced will be a question for determination at trial. It is not appropriate for the Court to embark on a detailed preliminary enquiry involving evidence from the issuing party and the recipient of the subpoenas. In the Amirbeaggi Affidavit, at [22] he sets out by way of submissions the issues that he discerns will be tried in the proceedings. He also sets out at [8] to [21] evidence, which is relevant to the plaintiff's claim for the alleged non-payment of monies owing by the guarantors ([7] - [15]) and evidence relevant to the plaintiff's claim to recover charges with respect to payments which the guarantors allege were not for the benefit of SAM or SAP ( [17] - [21]).
Evidence at the hearing may provide some perfectly satisfactory explanation for the features of these transaction and events, nonetheless, as they currently stand, they warrant testing in cross examination. In the light of the whole of the evidence the aspects referred to above may be shown not to be unusual at all or not significant, either alone or in combination. However, before hearing all the evidence and arguments the Court cannot draw even tentative conclusions as to the use to which the documents will be put. But having regard to the issues in the case the matters described by Mr Amirbeaggi are such as to warrant the defendants paying close attention to them and forming the view that they should challenge what Mr Mangos has deposed, in particular, as set out at Amirbeaggi Affidavit at [10].
The short points to be derived from Mr Amirbeaggi's observations are: 1. Asset Realisation: the McMillans were actively excluded from the asset realisation process with no transparency to the process undertaken. Nonetheless, the first and second defendants are being pursued for the shortfall in that realisation. They wish to test the process undertaken. If they also learn of breach of section 420A of the Corporations Act 2001 (Cth), which is heightened by McMillan Investments own evidence that it received $330,000 for the assets realised into a third party company and not disclosed, this is relevant to the facts in issue being identification of the sale / realisation process. 2. Shadow Directorship: the McMillans contend that Bob and Julie-Anne McMillan were shadow/de-facto directors of SAP and SAM. It is anticipated that the records called for will identify the extent of their involvement in the conduct complained of. They appointed the voluntary administrator, the Receiver and the Liquidator. They also appointed the pre-insolvency specialist. That is an issue with which that the production of the records will elucidate / assist. 3. Professional Negligence: the McMillans contend that Paul Fordyce, solicitor, was acting for them and then was also acting for McMillan and preferred McMillan to the first and second defendants' interests. The records sought will reveal the involvement/engagement of Paul Fordyce in the undertakings of the parties and whether he was acting for McMillan at times when he was representing the first and second defendants that he was acting in their best interests.
All these matters comfortably satisfy the apparent relevance test as articulated in Blacktown City Council.

Oppression

The plaintiff raised the issue that seeking production of documents over various period of time is oppressive.
The schedule to the compulsory processes contains a standard clause that expands the meaning of "documents" to include electronic records and any document over which privilege is claimed. This is no different to the orthodox reference to "documents" as is defined in the Evidence Act 1995 (NSW). Read together these definitions of "documents" do not work to create ambiguity and are consistent and coherent.
There is no evidence of oppressive or burdensome production other than mere assertion. No effort has been made to inform the Court with evidence of the time and extent of the review required. The solicitor for McMillan Holdings in his two affidavits (Affidavits of Marc Ryckman dated 15 December 2020 and 28 July 2020) who can only properly speak, does only depose to facts on behalf of the plaintiff, has not assisted the Court with any evidence of this assertion.

Resolution

McMillan Investment's claim arises from alleged non-payment of amounts purportedly due and owing by Mr Mangos and Mrs Mangos (Mr and Mrs Mangos) and or Christopher Wallace (Mr Wallace) Mr Mangos and Mr Wallace directors of SAP and SAM. McMillan Investment appointed a receiver and liquidator of SAP and SAM.
The issue of shadow directorship is in both the Mangos defence and cross-claim. It is set out in paragraphs 7.2, 7.3 and 11.2 of the defence. These allegations concern the role that Mr And Ms McMillan had in respect of the company and their position as shadow directorships.
At [26] of the Mangos' cross‑claim it is alleged that Julie Ann McMillan and Robert Ian McMillan were a shadow directorship, which directed the employees as to priority, timing and order of payment; directing the employees as to which debtors of the company to pursue and on what basis; making decisions as to priority, timing and order of payment of creditors; directing employees to furnish them with financial information of the company, such as cash flows reports; creating and amending cash flow reports; and intervening in the operational decisions of SAP and SAM's businesses. This is a central issue raised in pleadings and will involve an assessment of the credit of the participants.
In relation to the fourth cross‑claim against Mr Fordyce it is alleged and agreed that Mr Fordyce was in a serious position of conflict. Both parties allege he had numerous conflicts of interest. In the fourth cross-claim, Mr Mangos alleges that on 16 February 2015 he swore an affidavit that was prepared by Mr Fordyce or PMFPL which stated that: (a) Mr Fordyce or PMFPL was the legal representative of SAP; (b) SAP disputed the legitimacy of the Statutory Demand; (c) SAP and Idoltest were parties to a commercial deal relating to the sale of equipment and SAP's occupation of the Premises; (d) A dispute arose between SAP and Idol test regarding the commercial deal set out in paragraph [12(c)]; and (e) Mr. McMillan and/or Mr Fordyce were in the process of negotiating a resolution to the dispute between the parties and that Idoltest would withdraw the statutory demand.
That conflict exists because it appears that Mr Fordyce acted for a number of parties from before the facility agreement was entered into in 2016 because it was Mr Fordyce who was giving advice in relation to that facility agreement. This was a facility agreement that was being provided by his other client, McMillan Investment, in respect of many expenses that were being incurred up until that time. It appears that Mr Fordyce, solicitor, was involved before the actual facility agreement came into being.
A main issue in these proceedings that McMillan Investment seek to investigate the level of Mr Fordyce's conflicts of interest. It is alleged that he was acting for McMillan Investment and the Mangos. It is also alleged that he may have also been acting for the liquidators, and potentially others. It is arguable that these are issues within the knowledge of McMillan Investment insofar as Mr Fordyce was acting for them at various times. The Fordyce subpoena also is directed to the subsequent purchaser of the Fordyce practice on the basis that it may hold some of the Fordyce practice records.

Print Warehouse and Mark Singh

At [53] of John Mangos March 2019 Affidavit he refers to a conversation between him and Manjit Singh ("Mark"), sole director of Print Warehouse Australia ("PWA") of which Mark Singh was the sole director secretary to the following effect: Mangos: "I just need your help and I need you to answer two questions I have. When you bought the assets of SAP and SAM from the Receiver, was the purchase price $1.6 million? And did you make that payment in two payments of $1.3 million and $300,000?" Mark: Yes, both of those are true. I cannot remember what the $300,000 payment was for. I wanted a tax deduction . I think Bob issued me an invoice for the $300,000 from one of his companies, and I paid $300,000 to Bob's company. I paid the $1.3 million to the Receiver."
Mangos is advised by Robert McMillanILucas McEntee (of Iconic Advisory) words to the following effect "We do the sale and then after it's been transferred we put the old companies into liquidation. We'll appoint a mate of ours John Morgan we've got him in our pocket mate, so there won't be a problem." Robert McMillan further states words to the following effect: "I'm in control of this John. You will have to do what I say. We either do it the way Lucas and I have told you, or I'll appoint a receiver over the business and over your home. It won't be pretty." (para 337 Mangos October Aff)
There is an issue as to the credibility and the authenticity of what McMillan Investment had knowledge and acted on throughout the events outlined earlier in this Judgment Mr Amirbeaggi, in his evidence outlines the involvement of Iconic Advisory and Mr Lucas McEntee. At [17] of Mr Amirbeaggi's affidavit, a conversation about the sale of assets between Mr McEntee and Mr McMillan, is deposed. It says, "We do the...won't be pretty." The evidence of Mr Mangos continues to the effect that they were going to sell the assets at nominal value. Again, a third party has been brought in by Mr McMillan in relation to the operations of SAP and SAM for the purposes of disposing of assets, in essence, as potentially part of a phoenix operation, and that those fees are apparently being charged as part of the secured debt in these proceedings. There is a real issue in relation to what was Mr McMillan, McMillan Investments, and Mr McEntee doing in relation to the affairs of this company. That's on the evidence. It goes to the credit of Mr McMillan. It goes to his role as being a shadow director.
So far as Mr Warner and/or his employees in his capacity as receiver and manager of SAP and SAM is concerned, his role was to take control of assets, sell them and pay the secured creditor. It is alleged that he sold the assets for undervalue.
It is my view that the evidence of what occurred with SAP and SAM are relevant. It is alleged that Mr and Mrs McMillan were shadow directors of McMillan Investment. The operations of SAP and SAM are relevant because it is alleged that Mr McMillan and Ms McMillan as shadow directors of McMillan Investments and the way in which they are alleged to be shadow directors is broad ranging. The communications that they have, particularly in dealing with Mr Fordyce, Mr Singh of the purchaser and Mr McEntee, give context and focus in relation to SAP and SAM, because SAP and SAM's dealings with Mr Fordyce, Mr Singh and Mr McEntee that are relevant so far as they concern those three relevant entities.
The distribution and remittance of payments received by the receiver is in issue in these proceedings. The valuation of assets, particularly in circumstances where Mr McEntee has been involved to try and sell these things, we say at nominal value, goes to issues of credit, goes to Mr McMillan's control in relation to the companies, is in issue. Another issue is whether McMillan Investment brought into account the $330,000 additional fund. Initially it appears, it was never disclosed and it was never brought into account or informed that this is what should be brought into account. The Mangos only found out about the $300,000 by making their own inquiries. The agreement entered into with the receiver to sell the assets of SAP and SAM following the sale campaign is clearly relevant. The payments received directly from the purchaser or any party associated with the purchaser again is relevant given the $330,000 odd.
So far as the five subpoenas are concerned, there is no actual evidence is before the Court that the disputed documents sought are oppressive. Hence, I do not find that the production of the disputed documents sought in the Subpoena is oppressive.

Result

For the reasons set up above, it is my view that the documents sought in the disputed paragraphs of the subpoenas are relevant to the issues in dispute and may be relevant to the cross examination of the parties as to their credibility. These disputed paragraphs should not be set aside. These documents in answer to the disputed paragraphs of the subpoena should be produced to the Court in 14 days.

Costs

Costs are discretionary. Normally costs follow the event. The plaintiff is to pay the defendant's costs of the notice of motion dated 28 March 2019.

The Court orders: 1. The notice of motion filed 28 March 2019 is dismissed. 2. The documents in answer to the disputed paragraphs of the subpoena should be produced to the Court in 14 days. The disputed paragraphs are: 1. Paragraph 1 of the schedule of the subpoenas addressed to Julie McMillan and Ian McMillan, DJ Advisory and Mr Warner (the receiver) and manager of SAP and SAM dated 20 March 2019. 2. Paragraphs 3 and [5] of the subpoena addressed to Print Warehouse dated 22 March 2019. 1. The plaintiff is to pay the defendants costs.

Amendments 19 October 2022 - Typo in first paragraph. 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: 19 October 2022

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Judgment (20 paragraphs)

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