2518/05 NEW CAP REINSURANCE CORPORATION LTD (IN LIQ) & ANOR V AZMIN FIROZ DAYA & ORS
JUDGMENT
1 HIS HONOUR: This judgment deals with an application to set aside notices to produce. The application arises in the following circumstances.
2 The second plaintiff, Mr Gibbons, is the liquidator of the first plaintiff ("New Cap"). The plaintiffs have commenced insolvent trading proceedings against the first, second and fourth defendants under ss 588G and 588M of the Corporations Act 2001 (Cth), seeking to recover from them an aggregate amount in excess of USD55 million.
3 The plaintiffs are presently considering whether to make an application under s 6(4) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) for leave to join the directors' and officers' insurers of the first plaintiff and the first, second and fourth defendants ("the D & O Insurers") as a party to the proceedings. Mr Gibbons has a copy of the company's D & O insurance policy.
4 By an amended interlocutory process filed on 18 June 2008 ("the June Application"), Mr Gibbons has sought orders under s 597A of the Corporations Act and s 68 of the Civil Procedure Act 2005 (NSW) that each of the first, second and fourth defendants
- file and serve an affidavit setting out details of their assets and liabilities; and
- produce to the Court their communications with the D & O Insurers relating to the liability of the Insurers under the D & O policy or the avoidance of the policy by the Insurers.
5 By an e-mail dated 18 July 2008, Mr Gibbons' solicitor made it specifically clear that
· para 1 is intended to be confined to information available to the deponent and within his knowledge and as to his belief; and
· para 2 is confined to documents within the defendant's possession, custody or control.
6 As s 597A(1) deals with filing an affidavit and s 68 deals (relevantly) with producing a document to the Court, I infer that the order in para 1 is sought under s 597A(1) and the order in para 2 is sought under s 68.
7 Section 597A(1) obliges the Court to require a person to file an affidavit about a corporation's examinable affairs if certain matters are established, even if the person has been summoned under s 596A or s 596B for examination about those affairs. Mr Williams was summoned under s 596A and gave evidence on 8 June 2000.
8 There may be an issue, not presently before the Court but addressed on analogous facts by Barrett J in Shepherds Producers Co-operative Ltd (recrs & mgrs apptd) (in liq) (2006) 65 NSWLR 381, as to whether the affidavit sought in para 1 is about a corporation's examinable affairs. But assuming it is, and that the other matters set out in s 597A(1) are proven, the wording of the subsection implies that the Court has no discretion to exercise and is required to make the order. In that respect s 597A is similar to s 596A, held to be mandatory in the Shepherds Producers case.
9 Section 68 says that the Court may order a person to produce any document or thing to the Court. That re-enacts a long-standing power of the Court to order production of documents in connection with investigations by the liquidators conducted under the Corporations Act (Re BPTC Ltd (in liq) (No 2) (1992) 29 NSWLR 713). Clearly s 68 confers a discretion on the Court.
10 The second defendant, Mr Williams, intends to resist the making of the orders sought in the June Application. His solicitors have said so in correspondence, though they have not stated the grounds for opposition. The Application has not yet been heard.
11 In an affidavit served in support of the June Application, Mr Gibbons said:
"8. I have been advised by my solicitors and believe that a consideration relevant to the Court's discretion under section 6 in relation to each defendant is whether there is a real possibility that the defendant has insufficient assets to satisfy any judgment against him."
Counsel for Mr Gibbons submitted that Green (as liquidator of Arimco Mining Pty Ltd (in liq)) v CGU Insurance Ltd (2005) 215 ALR 612 supports that advice. I need not decide whether that is so.
12 By a document called a "Notice to Produce for Inspection", dated 17 June 2008 ("the First Notice"), Mr Williams purported to require Mr Gibbons in his capacity as liquidator of New Cap to produce for inspection by him, by a specified date:
"(a) all documents (whether in hard copy or electronic form) created or received by you which comprise or refer to the advice referred to in paragraph 8 of the affidavit of John Raymond Gibbons sworn 6 June 2008."
13 Subsequently, by a document called an "Amended Notice to Produce for Inspection", dated 26 June 2008 ("the Second Notice"), Mr Williams purported to require Mr Gibbons in his capacity as liquidator of New Cap to produce for inspection by him, by the same specified date:
"all documents (whether in hard copy or electronic form) created or received by you which:
(a) comprise or refer to the advice referred to in paragraph 8 of the affidavit of John Raymond Gibbons sworn 6 June 2008;
(b) record or refer to the assessment of the financial position of the Second Defendant; and
(c) record or refer to the avoidance of [the D & O Policy]."
14 As counsel for Mr Gibbons submitted, the two Notices reflect a strategy on the part of Mr Williams of responding to the June Application by saying, "first show me what you've got". Mr Gibbons has responded by applying to the Court to have the First and Second Notices set aside. That application is by an amended interlocutory process filed on 7 July 2008 ("the July Application"), which is now before me for decision.
15 Counsel for Mr Williams submitted that the First and Second Notices should be considered as notices to produce issued under Part 34 rather than notices to produce for inspection issued under Part 21. I disagree with that submission, for the following reasons.
16 Both Notices were expressed to be "Form 19 (version 1) UCPR 21.10", and contained instructions on "How to Respond" as prescribed by that Form, referring to UCPR 21.11. Moreover:
· they expressly required production for inspection by ("of") Mr Williams (as authorised by rule 21.10(1)) rather than production to the Court (as authorised by rule 34.1); and
· they required production for inspection by a specified date (as permitted by rule 21.10(2)) rather than production to the Court at a hearing or a time fixed by the Court for the return of subpoenas or some other time specified with the leave of the Court (as contemplated by rule 34.1).
17 I was referred to a letter dated 24 June 2008 from Mr Williams' solicitors to Mr Gibbons' solicitors, which said:
"For the avoidance of doubt, we are relying on the Notice for the purposes of putting on our client's evidence by 9 July 2008 for the hearing of the [June Application] on 16 July 2008 pursuant to Part 34 of the Uniform Civil Procedure Rules 2005."
18 I find that sentence difficult to understand. If the intention was to assert that the First Notice to Produce was issued under Part 34 rather than Part 21, the assertion would be contrary to the facts, for the reasons I have given. But it is unlikely that this was the intention, because the Second Notice was issued after that letter and, like the First Notice, identified Form 19 and Part 21 and contained the instructions on how to respond taken from that Form. Moreover, the covering letter for the Second Notice, dated 26 June, contains a sentence substantially similar to the unclear sentence in the letter of 24 June. Whatever that sentence means, it cannot be taken to have shifted either of the Notices out of Part 21 and into Part 34.
19 In my view the First and Second Notices were expressly and plainly issued under Part 21 rather than Part 34, both in form and in substance, and therefore their validity and appropriateness are to be assessed under Part 21. It is unnecessary for me to deal with the submission by counsel for Mr Gibbons that the two Notices would be objectionable even if they had been served under Part 34.
20 Counsel for Mr Williams referred to authorities setting out the legal principles governing the setting aside of notices to produce, on such grounds as oppression, but here a different basis is advanced for setting aside the Notices, namely that they are not authorised by the rules of court.
21 Rule 21.10(1) says:
"Party A may, by notice served on party B, require party B to produce for inspection by party A:
(a) any document or thing that is referred to in any originating process, pleading, affidavit or witness statement filed or served by party B, and
(b) any other specific document or thing that is clearly identified in the notice and is relevant to a fact in issue."
22 A fact is in issue if it is in the "field of contest" between the parties (see British American Tobacco Australia Ltd v Peter Gordon [2006] NSWSC 1473 at [9], per Brereton J). The concept of relevance is explained by rule 21.9(2), which says:
"For the purposes of this Division, a document or thing is taken to be relevant to a fact in issue if it could, or contains material that could, rationally affect the assessment of the probability of the existence of that fact (otherwise than by relating solely to the credibility of a witness), regardless of whether the document or thing would be admissible in evidence."
23 It is unnecessary to consider the First Notice separately, as it is replicated in para (a) of the Second Notice. The clearest way to proceed is to consider the application of rule 21.10(1) to para (b) of the Second Notice, then to para (c) of the Notice, then to para (a) of the Notice.
Para (b) of the Second Notice - documents created or received by Mr Gibbons about Mr Williams' financial position
24 Such documents are not referred to in the originating process or any affidavit or witness statement, and there is no pleading, so rule 21.10(1)(a) has no application. The question is whether the documents are relevant to a fact in issue and therefore within rule 21.10(1)(b).
25 It was not contended that documents created or received by Mr Gibbons about the assessment of Mr Williams' financial position had any relevance to a fact in issue concerning the plaintiffs' insolvent trading case. Submissions proceeded on the basis that the only relevance might be to a fact in issue in the June Application.
26 Counsel for Mr Gibbons submitted that there are no facts in issue in the June Application, so far as it relates to the application for an order under s 597A that Mr Williams provide an affidavit as to his assets and liabilities. He submitted that "the s 597A application is simply an information gathering exercise, whereby [Mr Gibbons] is seeking information from [Mr Williams] as to his financial position …". That is correct, in my opinion.
27 There is no contest, at this stage, as to the content of the information being sought from Mr Williams. The contest is about whether the orders sought in the June Application should be made. The evidence indicates that Mr Williams opposes the orders but it does not reveal the basis of his opposition. However, in view of the mandatory language of s 597A(1), Mr Williams' opposition can only be on the ground that an affidavit of assets and liabilities by him would not fall within the words of the subsection. That, in turn, can only be because:
· such an affidavit is not about New Cap's examinable affairs, or
· Mr Gibbons is not an eligible applicant, or
· Mr Williams was not an officer of New Cap at the time specified in s 597A(1)(b).
28 Plainly documents created or received by Mr Gibbons about the assessment of Mr Williams' financial position cannot have any relevance to those three matters. Therefore para (b) of the Second Notice is not relevant to a fact in issue, and is not authorised by rule 21.10(1), and should be set aside.
29 When pressed to identify a basis of relevance, counsel for Mr Williams put forward two matters. He said that access to the documents held by Mr Gibbons about Mr Williams' financial position would be likely to show that Mr Gibbons had held the documents since the s 596A examination in the year 2000, and therefore would be relevant to showing that the s 597A application has been made far too late. He then said that access to the documents would be likely to show that Mr Gibbons already had everything Mr Williams could supply. I note in passing that if the documents held by Mr Gibbons were obtained in the year 2000, it would be most unlikely that they constituted everything that could be produced about Mr Williams' financial position in 2008. But the real point is that both of these matters would go only to the exercise of a discretion to decline to make an order notwithstanding that the statutory ingredients had been made out. As mentioned above, the Court has no such discretion under s 597A. Therefore these matters cannot be facts in issue, as regards the s 597A application.
30 I note that in their letter 30 June 2008, Mr Gibbons' solicitors signified their client's intention to challenge para (a) the Second Notice but said they would endeavour to make the balance of the documents available by a certain date. It was only on 7 July that they informed the solicitors for Mr Williams that they had received advice from counsel that there were grounds to set aside the entirety of the notice to produce, and accordingly they served an amended interlocutory process for that purpose. That evidence shows a change of heart but in my view it was open to Mr Gibbons to do so. There is no basis for suggesting, for example, that the facts gave rise to an estoppel.
Paragraph (c) of the Second Notice - documents created or received by Mr Gibbons about avoidance of the D & O policy
31 As with para (b) of the Second Notice, documents of the kind described in para (c) of the Notice are not referred to in the originating process or any affidavit or witness statement, and there is no pleading, so rule 21.10(1)(a) has no application. Once again, the question is whether the documents are relevant to a fact in issue and therefore within rule 21.10(1)(b). As with para (b), it was not contended that documents created or received by Mr Gibbons about the D & O policy had any relevance to a fact in issue concerning the plaintiffs' insolvent trading case. Submissions proceeded on the basis that the only relevance might be to a fact in issue on the June Application.
32 We know, from the evidence, that Mr Williams will oppose the application under s 68, part of the June Application, for an order directing him to produce to the Court documents relating to the liability of the D & O Insurers and avoidance of the D & O policy. We do not know the grounds for opposition. Unlike s 597A, s 68 gives the Court a discretionary power to order or decline to order production, to be exercised in accordance with the principles established by case law on the section and its predecessor, Part 36 rule 12 of the Supreme Court Rules.
33 In my opinion the considerations raised by counsel for Mr Williams, relating to alleged gross delay in bringing the June Application and the allegation that Mr Gibbons already has all the documents that Mr Williams could produce, are capable of being taken into account by the Court in the exercise of its discretion under s 68. Therefore those matters are facts in issue. Specifically, the facts in issue are whether the Court should, in the exercise of its discretion under s 68, decline to order production of documentary communications relating to liability under and avoidance of the D & O policy, on the grounds that there has been gross delay in making such an application since the time when some such documents were first obtained, and/or that the liquidator is likely to have all such documents already. Documents created or received by Mr Gibbons that record or refer to the avoidance of the D & O policy are relevant to those facts in issue.
34 My conclusion, therefore, is that para (c) of the Second Notice is authorised by rule 21.10(1)(b). No other ground for setting aside that part of the Second Notice to Produce was advanced. I do not accept the contention put on behalf of Mr Gibbons that the words "record or refer to" are too wide, because in my view the language of para 2 of the June Application (and especially the words "relating to") are at least as wide.
Paragraph (a) of the Second Notice - documents created or received by Mr Gibbons which comprise or refer to the legal advice referred to in para 8 of Mr Gibbons' affidavit
35 Para (a) of the Second Notice raises issues about the application of rule 21.10(1)(a) as well as rule 21.10(1)(b). This is because para 8 of Mr Gibbons' affidavit says he has been "advised" by his solicitors about a certain matter. Arguably the language of para 8 might be taken to refer to a document or thing for the purposes of rule 21.10(1)(a).
36 However, in my opinion para 8 does not expressly or impliedly refer to a document or thing, for the purposes of the rule. Mr Gibbons refers in his affidavit to legal advice, and then summarises the content of the advice. Legal advice can be given orally, for example in conference or over the telephone. There is no basis in the language of para 8 for inferring that the advice to which Mr Gibbons refers was given in writing. There is a strong line of English and Australian authority in support of this construction.
37 The English Court of Appeal considered the issue in Dubai Bank Ltd v Galadari (No 2) [1990] 1 WLR 731 (Slade and Mann LJJ and Sir David Croom-Johnson). That case concerned the former RSC O 24 r 10(1) of the English rules of court, which permitted a party to serve a notice for production on any other party "in whose pleadings or affidavits reference is made to any document". In substance, this is the same as rule 21.10(1)(a) of this Court. The question was whether reference had been made to various documents, the production of which was sought, in an affidavit. In delivering the judgment of the Court of Appeal, Slade LJ referred (at 738) to a "broad submission" by counsel, Mr Purle, that:
"[I]f an affidavit refers to a transaction which on the balance of probabilities will have been effected by a document, that must involve a reference to such document for the purpose of the rule. Any other construction of the rule, he suggested, would be likely to lead to 'canny' drafting of affidavits; the draftsman might simply state the effect of a document without specifically mentioning the document itself."
38 Slade LJ rejected that submission (at 738-9):
"We cannot accept the broad submission of Mr Purle summarised above. It seems to us to involve reading the phrase 'reference is made to any document' as including reference by inference . This we do not regard as the natural and ordinary meaning of the phrase. To our minds, the phrase imports the making of a direct allusion to a document or documents. If the plaintiff were correct in its broad submission, this would oblige the court to enter into a process of inference and conjecture in order to determine whether the document or class of documents in question ever existed; and indeed, the judge did so in the present case. We cannot think that this was what the makers of the rule had in mind."
39 His Lordship went on to say (at 739):
"In our judgment, a mere opinion that on the balance of probabilities, a transaction referred to in a pleading or affidavit must have been effected by a document, does not give the court jurisdiction to make an order under RSC Ord 24, r 10, unless the pleading or affidavit makes direct allusion to the document or class of documents in question."
40 In support of their Lordships' construction of the rule, Slade LJ referred to an earlier unreported decision of the Court of Appeal in Marubeni Corporation v Alafouzos [1986] CA Transcript 996, which is almost identical with the facts of the present case. In that case, an affidavit stated that the plaintiffs had obtained outside Japanese legal advice, which categorically stated certain things that were set out. Production of the advice was sought under a notice to produce. It had been conceded during argument that the legal advice "almost certainly" would have been contained in a document (contrast the present case, where there is no such concession). But notwithstanding that concession, Lawton LJ regarded it as clear that there had not been a reference to any document in the affidavit. Lloyd LJ, on the other hand, was prepared to assume that there was a reference to a document in the affidavit, though he expressed "some doubt" on the matter. In the Dubai Bank case, Slade LJ said their Lordships were "fortified" in their construction of the rule by the judgment of Lawton LJ, and it is reasonable to infer from their remarks that their Lordships regarded Lawton LJ's conclusion as correct.
41 The Dubai Bank case has been followed in Australia. King v GIO Australia Holdings Ltd [2001] FCA 1487 concerned O 15, r 10 of the Federal Court Rules, which permitted a party to serve a notice to produce in circumstances where a "pleading or affidavit filed by a party refers to a document". Moore J referred to and applied the Dubai Bank case, and also Lawton LJ's judgment in the Marubeni case, in determining whether various statements in a defence constituted references to documents, for the purposes of the notice to produce rule. He held, in particular, that references in the defence to "forecast and budgets of future revenues, expenditures and profits prepared by management of GIO Re and reviewed by PricewaterhouseCoopers Securities Pty Ltd" did not involve a reference to a document for the purposes of the notice to produce rule, even though it would "almost certainly" be the case that such information would have been contained in documents (at [18]).
42 The Dubai Bank case has also been referred to with approval in Jefferson Ford Pty Ltd v Ford Motor Co of Australia Pty Ltd [2007] VSC 450, especially at [20] (Hollingworth J), and RP Data Ltd v Property Data Solutions Pty Ltd [2006] QSC 1 (Helman J) (although in that case the rule was somewhat differently worded).
43 The Dubai Bank case was recently considered by the English Court of Appeal in Expandable Ltd v Rubin [2008] EWCA Civ 59. The Court of Appeal had before it a differently worded rule of court (CPR 31.14(1)), which spoke about a document being "mentioned" in various documents including a witness statement. The author of a witness statement said that another person whom he identified "wrote to me enclosing" various things. The question was whether the witness statement mentioned the covering letter. Rix LJ, with whom Jacob LJ and Forbes J agreed, held that it did. Just as "he telephoned" is indistinguishable from "he made a telephone call", so "he wrote" is indistinguishable from "he wrote a writing", and hence the statement mentioned the writing. His Lordship observed (at [22]) that "as often in this area, some fine distinctions may arise". However, he accepted the "direct allusion" test in the Dubai Bank case and held that the same test applied to the newly worded rule.
44 In my view the authorities strongly point to the conclusion that if an affidavit merely says that legal advice has been obtained, without any "direct allusion" that the advice was in written form, the affidavit does not refer to a document for the purposes of rule 21.10(1)(a). Nor does it refer to a "thing", because in its context the word "thing" appears to mean a physical thing, and legal advice is not necessarily a physical thing, just as it is not necessarily a document.
45 My conclusion is that para (a) the Second Notice is not authorised by rule 21.10(1)(a). Nevertheless it may be authorised if it falls within rule 21.10(1)(b). On this matter I agree with the submissions made by counsel for Mr Gibbons.
46 As counsel contended, legal advice may sometimes be relevant to a fact in issue, for example where there is a question as to the reasonableness of a belief or as to whether a person has a particular state of mind. But the legal advice mentioned by Mr Gibbons is different. The question addressed is whether, if there is a real possibility that a defendant has insufficient assets to satisfy any judgment against him, that is a consideration relevant to the Court's discretion under s 6 of the Law Reform (Miscellaneous Provisions) Act. That is a question of law. It is not relevant to any fact in issue concerning the plaintiffs' insolvent trading claim, and it is not relevant to the June Application, which (as I have said) is an application simply seeking information relating to the financial position of each defendant and relating to the D & O policy. A written legal advice, if there is one, could conceivably be used to test Mr Gibbons' credit, but credit is not an issue in a simple information gathering exercise, and in any event under rule 21.9(2), the concept of relevance to a fact in issue does not extend to matters going only to credit.
47 Consequently para (a) of the Second Notice is not authorised by rule 21.10(1) and should be set aside. Having regard to this conclusion, it is unnecessary for me to deal with Mr Gibbons' further submission that para (a) of the Second Notice is an abuse of process.
48 Nor is it necessary to consider whether para 8 of Mr Gibbons' affidavit amounts to a waiver of client legal privilege with respect to the advice. There is no source of power to require production of the advice, as Part 34 was not invoked by the Notices and the requirements of Part 21 are not satisfied, and so the question of privilege is simply not reached. Although I was given quite detailed submissions on waiver of privilege by counsel for Mr Williams, the matter was not fully canvassed at the hearing of the July application, and I shall not express an opinion.
Conclusion
49 I shall make an order setting aside the First Notice and paras (a) and (b) of the Second Notice. Since both parties have had a measure of success on the July Application, it is not appropriate to make an order for costs in favour of either party. My order for costs will be that the costs of the July Application be costs in the cause. I shall stand the proceedings and the June Application over to the Corporations List Judge for directions.
50 Therefore I propose, subject to any final submissions, to order that:
- The Notice to Produce for Inspection dated 17 June 2008 addressed to the second plaintiff is set aside.
- Paragraphs (a) and (b) of the Amended Notice to Produce for Inspection dated 26 June 2008 addressed to the second plaintiff are set aside.
- Second plaintiff to comply with the balance of the Amended Notice to Produce for Inspection on or before 1 August 2008.
- The costs of the second plaintiff and the second defendant with respect to the amended interlocutory process filed on 7 July 2008 are their costs in the cause.
- The proceedings and the application filed on 18 June 2008 are stood over to the Corporations List Judge for directions on 4 August 2008.
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