National Australia Bank Ltd v Stern [2000] FCA 588 | Case summary

REASONS FOR JUDGMENT 1 Matter NG 936 of 1996 resulted in a judgment in favour of the applicant for some $8 million. The applicant then made a successful application for an examination of the first and second respondents in respect of their financial situation following upon their failure to pay the amount in question and a number of subpoenas were issued by the applicant for the production of documents. On 19 April 2000 a Registrar of the Court gave the applicant access to the produced documents but refused access to the first and second respondents. A motion has now been filed by those respondents in the proceedings seeking a review of the Registrar's decision. 2 The subpoenas were issued to some eleven different parties. The first three were parties directly related to the first and second respondents. The fourth was an accountant who had been working for the respondents. The fifth was a liquidator of a family company. The ninth were the present solicitors for the respondents and the eleventh was another firm of solicitors who had done work for a related entity. It might be anticipated therefore that before their production of any documents, the respondents have seen what they produced. 3 What is left are three banks, Westpac, ANZ and Commonwealth, and the GIO Building Society. In the motion, the first and second respondents are seeking access to the documents of those entities in advance of their examinations so that, as their affidavits reveal, they may prepare themselves thoroughly for the examinations, become aware of all the material that might be put to them, and presumably consider the answers which they might give to questions based upon the documents. 4 The examinations were ordered by Justice Tamberlin on 31 March and are to take place on 8 and 10 May, i.e. respectively in four and six days time. This case has been before his Honour over a period of time, but he is not presently available to hear the application so it has been referred to me. In substance his Honour ordered the examinations in each case on two questions - one, whether any and if so what debts are owing to the particular respondent, and two, whether the particular respondent has any and if so what other property or means of satisfying the judgment in question. 5 The Rules of this Court make provision in Order 37 rule 7, headed JUDGMENTS AND ORDERS ENFORCEMENT, for the application of the rules of the Supreme Court of the State in which the judgment is to be enforced where the Federal Court Rules make no provision. Examinations of judgment debtors are in that category. Hence the matters delineated by his Honour for the examinations came from the Rules of Supreme Court of New South Wales. The relevant rule is Part 43 rule 1 which under the heading of DISCOVERY IN AID OF ENFORCEMENT and a subheading "Order for Examination or Production", provides that the Court may, at the request of a person entitled to enforce a judgment or order, order a person bound by the judgment to attend for examination on the questions ordered by Justice Tamberlin. 6 Order 27 rule 2 provides this Court with the power to issue subpoenas, "in any proceeding". The first question therefore that arises or would arise here is whether the proposed examination is a proceeding which attracts the power of the Court to issue subpoenas. The word "proceeding" is defined in the Federal Court of Australia Act (s. 4), but not in the Rules, as being "a proceeding in a Court whether between parties or not and includes an incidental proceeding in the course of or in connexion with a proceeding and also includes an appeal". This definition has been said in several cases: Pasdale Pty Ltd v Concrete Constructions Ltd [1995] 59 FCR 446 at 448; Re Interchase Corporation Ltd [1996] 68 FCR 481 at 487; Fiorentino v Irons [1997] 79 FCR 327 at 330E-331B, to be a wide definition embracing a range of Court activity which may not ordinarily be thought of as legal proceedings between parties involving liability for particular relief. In Fiorentino, for example, it was held by Justice Foster that an examination under the Corporations Law in the course of the administration of an insolvent company is a 'proceeding' within the meaning of the statutory definition.

an incidental proceeding in the course of or in connection with a proceeding. 8 Thus in Pasdale, Justice Finn held that a motion for security for costs was a 'proceeding' presumably because it was incidental to the principal proceeding. But a matter occurring after judgment strikes me as being of a different character altogether. Subject only to an appeal, it is difficult to see that steps taken to enforce a judgment are a proceeding by themselves or are part and parcel of or incidental to the proceeding in which the judgment was obtained. There is even a difference, I think, between this type of examination and the type which resulted in the decision in Fiorentino. I should also mention that the Federal Court Rules contain a definition of "examination" but it does not include an examination of the kind referred to here. 9 However, the question whether these subpoenas should be set aside as not being authorised by Order 27 has not been argued in this case. Moreover, it is not necessary, for the purpose of deciding the case, to determine this question in any definitive way and I leave open for later consideration in another circumstance, whether these tentative views which I have formed are correct. Whatever else might be said, it seems that the rules of this Court need clarification so as to make patent whether an examination of a judgment debtor is, in fact, a 'proceeding' which attracts the power to issue subpoenas. 10 In their evidence to the Court in support of their motion, the first and second respondents say that if they are not permitted to inspect and copy the documents produced on subpoena, and in that sense that the Registrar's order is left undisturbed, they will be prejudiced and their capacity to answer questions will be restricted or impeded so that the examinations will, at least, be delayed. They point to the fact that the documents cover or probably cover events and transactions which took place over a number of years some time ago and, I imply, that there would be no chance that they could recall, unassisted by access to the documents, many of the events to which the documents refer on which they may very well be examined. 11 The evidence on the present motion also proposes that an additional reason for giving the respondents access to some at least of the documents is to enable them to ascertain whether privilege may attach to any of them. It is hard to see that any of the documents that may have been produced by the three banks and the building society would be in that category and I can only make the assumption that the documents produced by the other parties who were subpoenaed would already have been considered for claims of privilege. In any event, in the argument on the motion, counsel for the respondents made no particular point about this aspect of the affidavit evidence on the subject and the matter was not argued at all. If there are any privileged documents, then some arrangement can and should be made between the parties to protect that privilege or at least to have it properly aired before the Court. 12 I therefore deal with the matter as an issue of principle rather than dealing with any particular documents as to which there may be some special circumstance. To say, as the respondents have done, that they will be prejudiced in their ability to answer questions by being denied access to the contents of the documents is, in the context of the present litigation, quite argumentative and not probative of anything. The whole purpose of examinations of judgment debtors is to cause them prejudice in that general sense. As the Supreme Court Rules say, they are persons bound to pay money under a judgment or order of the Court. The examinations are to ascertain what assets and means they have to pay the debt. If the judgment were paid, there would be no need for any examination which only arises when a judgment is not paid. The purpose of the examination is thus to ascertain whether the persons bound to pay the judgment are withholding assets or means to pay the debt or, as was suggested may be applicable in this case, have disposed of assets they had so as to put them in a position where they cannot pay the debt. 13 For that reason, it can be seen that the examination itself is designed to cause prejudice or embarrassment of the relevant kind to the examinees. This motion can therefore not be resolved in favour of the first and second respondents on that basis. 14 The argument that denying them access to the documents may very well delay the examinations because they are not familiar with the contents of all or some of the documents in question or because some of them were last seen by the respondents many years ago, is a risk for the applicant not the respondents. If, for example, questions asked are either not fair or not possible for the respondents to answer without consideration of some of the documents in question as may assist with their recollections, then the Registrar may have to adjourn the examinations to permit the particular respondent affected time to gain a familiarity with the relevant information. This possibility does not provide a reason to permit access in advance. 15 The respondents also argue that they will have, as it is put, great difficulty in answering the questions without advance access to the subpoenaed material. All I can say to that is that many people giving evidence in witness boxes have difficulty recalling events a long time ago and tend to recall it better when contemporaneous documents are placed in their hands. No doubt the respondents will receive advice as to what they ought to do and say in the event that they have difficulty in answering questions arising out of previously unseen documents or without some time being given for the documents to be considered. Once again, any delays thus caused will operate to the detriment of the applicant rather than the first and second respondents. 16 In summary therefore, the situation is that whether or not an examination is a proceeding in the strict statutory sense, it is a very different type of court situation than a piece of ordinary adversarial litigation when the major issues have not yet been determined. Accordingly, the principles which apply, especially in this Court, for the advance presentation to one party of all the evidence upon which reliance is going to be placed by the other do not apply to an examination of a judgment debtor. An examination of that kind is a very particular type of proceeding, if it be a proceeding at all. It must be viewed against the background that a judgment has been obtained, that the examinee is the person bound by the judgment, that the examinee has not paid the judgment, that the examiner is the person for whose benefit the judgment was pronounced, and that that person seeks to enforce the judgment by investigating whether the non-payment and presumably the claimed inability to pay are properly and justifiably based. 17 If it is, then the examinee has nothing to worry about at all. In this case all that will happen is that the respondents will be questioned about their means and assets and their answers will make manifest that they cannot pay because they simply do not have the capacity to pay. If on the other hand the examinees do have assets which they have not been willing to realise to pay the judgment, or if they had assets which they have disposed of so that they cannot now be used for the payment of the debt, then the applicant is entitled to discover these facts by the examinations and thereafter take whatever steps it feels appropriate to recover its judgment or enforce it in some other way. 18 In this type of process, whatever it be properly called, it will often be appropriate that the examiner not be required to give advance notice to the examinees of the information upon which it wishes to rely to assert an entitlement or opportunity to enforce its judgment. In my view this case falls into that category. The motion for review of the Registrar's refusal to give advance access must therefore be refused. The amended motion for review filed today is dismissed with costs. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marcus Einfeld AO.

National Australia Bank Ltd v Stern

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Judgment (9 paragraphs)

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