Patton v Harrison [2005] NSWSC 864 | Case summary

1 HIS HONOUR: The plaintiff Ian Lawrence Struthers is the liquidator of a company called Project Management, Architecture, Construction, Interior (P.A.C.I.) Pty Limited, ACN 096 989 025. He applied for, and obtained, the issue of summonses for examination to Song Sook Lee, Bum Mo Lee, and Jong Moon Lee ("the Examinees"). He now alleges that the Examinees failed to attend before a Registrar for examination on 23 August 2005 and applies, ex parte, for the issue of warrants pursuant to Supreme Court (Corporations) Rules, r.11.10, for their arrest to have them brought before the Court for examination. 2 By originating process filed on 30 June 2005 the liquidator applied for the issue of examination summonses under Corporations Act, S.596B addressed inter alia to each of the Examinees. The Registrar issued summonses for their examination on 30 June 2005. Those summonses notified the Examinees that, "If you do not attend the examination in accordance with this summons, without reasonable cause, you may be arrested and imprisoned without further notice". 3 When issuing the examination summonses, the Registrar listed the proceedings for examination before a registrar on 21, 22, 25, 29 July, 16, 17, 22 and 23 August 2005. The summonses addressed to each of the Examinees were expressed to be returnable at 10am on 21 July 2005, "and from day to day until excused by the court". 4 The examination summons addressed to Song Sook Lee was served personally on that Examinee at 6 Golders Green Way Glenhaven on 5 July 2005, as proved by the affidavit of Kris Sabatino sworn 9 July 2005. The summons addressed to Jong Moon Lee was served on that Examinee at the same time and place, as proved by another affidavit of Kris Sabatino also sworn 9 July 2005. 5 On 11 July 2005 La Fontaine, solicitors, sent by facsimile a letter to Messrs Hunt & Hunt, the solicitors for the liquidator, in which they asserted that they acted for Mr Jong Moon Lee, Mrs Song Sook Lee and Mr Bum Mo Lee, the parents and brother of one Ed Lee. The letter asserts that: "On Thursday 7 July 2005 our clients were called upon without notice at their home by a person representing himself to be from your office and an interpreter and was served a subpoena to produce and give evidence returnable at 10.15am Thursday 21 July 2005 in the Federal Court at Queen's Square". That letter also requested: "We give you notice that no further personal, phone, or written communications are to be made with any of our clients and must be made through us". 6 Although it is conceivable that that letter refers to a different process than the examination summonses the subject of this application, it nonetheless establishes that Mr La Fontaine was acting for the Examinees and requested that further communications with any of his clients be made through him. 7 On 12 July 2005 Hunt & Hunt replied to Mr La Fontaine. The response assumed that the documents referred to by Mr La Fontaine as having been served on Mr Jong Moon Lee and Mrs Song Sook Lee were the examination summonses in these proceedings, pointing out that no subpoenas to produce and give evidence had been served in those proceedings. It noted that Mr Fontaine had said that he acted for Bum Mo Lee and requested that no further steps be taken to try to contact him directly other than through Mr La Fontaine, enclosed by way of service a summons for examination addressed to Mr Bum Mo Lee, and asked that Mr Bum Mo Lee acknowledge receipt. The examination summons addressed to Bum Mo Lee accompanied that letter. 8 The court file records that the examination summonses came before Deputy Registrar Probert on 21 July 2005 on which date they were returnable, and that there was an appearance by Mr La Fontaine. The examination of Song Sook Lee and Jong Moon Lee was stood over until 22 July at 10am, and the examination of Bum Mo Lee to 16 August. 9 The court file next records that on 22 July, again before Deputy Registrar Probert the examination of Song Sook Lee and Jong Moon Lee was stood over until 29 July. 10 On 29 July, once again before Deputy Registrar Probert, Song Sook Lee was examined. At the conclusion of her examination that day the Deputy Registrar said to Mrs Lee: "Mrs Lee, I stand your examination over until 10am on 16 August 2005. I remind you that you are not to discuss this examination that happened today with anybody other than your legal advisor for legal advice. Thank you for attending". 11 The examination of Jong Moon Lee then proceeded, at the conclusion of which the Deputy Registrar said to him: "Mr Lee, I stand your examination over until 10am on 16 August 2005. You should not speak to any other person about this examination this afternoon. In fact, you are directed not to speak to anybody unless it is for the purpose of obtaining legal advice". 12 On 21 July 2005 Hunt & Hunt wrote to La Fontaine. In that letter they recorded that shortly after they had telephoned La Fontaine's office on 21 July they received back a call from a person from his office who had said that Mr & Mrs Lee senior had been unable to obtain alternative legal representation and would not be able to do so before the next week and, further, they would like to be examined on the same day as their son, Mr Bum Mo Lee, whose examination had been adjourned to 16 August, 2005. It was, no doubt, at least partly, in the light of this that the examination did not proceed on 21 and 22 July, but was adjourned to 29 July, as I have mentioned. 13 In the Good Weekend for the weekend 6 to 7 August 2005 a short advertorial appeared recording that the property 6 Golders Green Way Glenhaven was for sale. Inquiries recently made by the liquidator's solicitor tend to confirm that it is still on the market, but this is not a matter to which I have given any weight. 14 As a result of a dispute as to whether Mr La Fontaine was affected by a conflict of interest or duty in acting for the Examinees, it appears that he ceased to act, and by 8 August 2005 Mr Paul Kwon of PSK Legal appears to have commenced acting on their behalf. 15 On 8 August 2005 Hunt & Hunt wrote to PSK Legal referring to the examinations held on 29 July, foreshadowing the issue of further orders of production to Song Sook Lee and John Moon Lee, and asking: "Please confirm if you will accept service of orders for production issued to Song Sook Lee and Jong Moon Lee. Please also confirm if you have instructions to act for Mr & Mrs Lee's eldest son, Bum Mo Lee". 16 PSK Legal replied by facsimile letter also dated 8 August 2005 and apparently transmitted that day to Hunt & Hunt as follows: "We are instructed to accept service on behalf of Song Sook Lee, Jong Moon Lee, and Bum Ho (sic) Lee". 17 It appears that there were some telephone conversations between Hunt & Hunt and PSK Legal on the evening of 10 August 2005. By facsimile letter that day Hunt & Hunt wrote to PSK Legal foreshadowing the issue of further notices to produce and mentioning a requirement for time to review the documents before resumption of the adjourned examinations of the Examinees, as had apparently been mentioned in the telephone conversations that evening. The letter sought written consent to the further adjournment of the examination of Mr & Mrs Lee to 10am on 23 August, and separately to the examination of Mr Bum Mo Lee to 2pm on 23 August, and sought a response by return fax: "… as we have a chamber appointment with the Supreme Court Registrar at 9 am tomorrow morning and would like to indicate to the Registrar whether you will consent to the adjournment or whether the application will have to be made in court on 16 August 2005". 18 From the evidence of Mr Thompson, who has the carriage of the matter at Hunt & Hunt, it appears that no formal response had been received from PSK Legal at the time of the appointment before the Registrar on 11 August. However, at 13.29 on 11 August PSK Legal returned the return date copy of Hunt & Hunt's facsimile letter of 10 August to Hunt & Hunt marked in handwriting and initialled, by Mr Kwon (as I conclude from the appearance of his signature on other documents), "We accept" at the foot of each of the requests to consent for an adjournment. 19 Following receipt of that, at 15.52 Mr Thompson sent an email to the Registrar, confirming a voice mail message that afternoon, to the effect that written consent had been received from the solicitors for the Examinees to an adjournment of the resumption of their examinations to 23 August 2005 which was already reserved for the matter, and asking that the listing for 16 August be vacated. A copy of the written consent was attached. 20 The computerised record of proceedings indicates that on 11 August 2005 the Registrar vacated the listing for 16 August. 21 At the appointment before the Registrar on 11 August, further orders for production were issued. On 19 August 2005, PSK Legal sent to Hunt & Hunt a letter which enclosed documents said to be provided in answer to the order for production addressed to Jong Moon Lee and Song Sook Lee. However, the letter concluded: "Please note that our client can not attend the hearing on 22 August 2005. They will be able to attend on early September at the earliest. Should you have any queries please contact the writer". A similar letter, including substantially the same conclusion, was sent at the same time by PSK Legal to Hunt & Hunt in respect of Bum Mo Lee. 22 On 22 August 2005 Hunt & Hunt sent to PSK Legal a letter transmitted by facsimile at 15.08 that day referring to PSK's letter of 19 August and continuing: "We note that your clients are required to attend for examination on Tuesday 23 August 2005 not 22 August 2005 as you state in your facsimile. We recall that this order as made when Mr Kwon of your office was in attendance. We note that you have given no explanation as to why your clients will not be attending. If your clients do not attend at the examination tomorrow they will be in contempt of court and we shall bring the matter to the attention of a Judge". 23 In so far as that letter might convey that the adjournment to 23 August 2005 was made in the presence of Mr Kwon, it is erroneous. What occurred in his presence was the adjournment to 16 August, which was granted on 29 July in Mr Kwon's presence. However, the correspondence of 10 and 11 August, to which I have referred, establishes that Mr Kwon was on notice of the date of 23 August 2005. 24 Still on 22 August, at 16.02, PSK Legal forwarded by facsimile to the court a copy of the letters which had earlier been sent on 19 August to Hunt & Hunt; one in respect of Song Moon Lee and Song Sook Lee and another in respect of Bum Mo Lee. 25 The covering letter in respect of Jong Moon Lee and Song Sook Lee concluded: "We are instructed that our client can not attend the court throughout September 2005. Should you have any queries please contact the writer". The letter in respect of Bum Mo Lee was in substantially the same terms. 26 The matter came before Senior Deputy Registrar Flaskas on 23 August 2005. The Registrar has issued a certificate that on the morning of 23 August 2005 Jong Moon Lee and Song Sook Lee did not attend court to answer the examination summons. Although provision was made in predecessors of the Corporation Rules for certificates to be issued by registrars in such circumstances, the current rules do not, apparently, contain any equivalent provision. However, the Registrar's certificate is evidence that Jong Moon Lee and Song Sook Lee did not attend as certified. There is ample other evidence, in any event, including conversations to which I shall come, which took place between Mr Thompson and Mr Kwon's office, and the correspondence to which I have already referred, from which I should infer that they did not attend. 27 At about 10.10am on 23 August, Mr Thompson called Mr Kwon's office and spoke to a receptionist who informed him that Mr Kwon was out of the office and provided him a mobile number to call. Mr Thompson then called that mobile number, which was diverted to an answering service permitting only the number of the caller to be left. Mr Thompson left his number. The call was not returned. 28 At 13.06 on 23 August Hunt & Hunt sent by facsimile a letter to PSK Legal referring to PSK Legal's faxes of 22 August, noting that there was no appearance by Mr & Mrs Lee that morning, referring to the telephone calls which I have mentioned, noting that no return call had been received, and continuing: "We are seeking an explanation for the non-appearance by your clients. In the absence of any explanation we have obtained a certificate of default and we are instructed to approach the duty judge this afternoon to move for the issue of bench warrants for Jong Moon Lee and Song Sook Lee. If there is no appearance by Mr Bum Mo Lee at 2pm today at the Supreme Court in answer to his summons for examination, we propose to request a certificate of default for Bum Mo Lee also and we propose to immediately apply to the duty judge for the issue of bench warrants under Rule 11.10 of the Corporations Law for all three of your clients. Please let us know by return fax whether you wish to be heard on our application for either of the second certificate of default or the bench warrants". The letter was accompanied by drafts of the certificates of default. 29 On the afternoon of 23 August 2005 Bum Mo Lee did not attend court to answer the examination summons addressed to him, as certified by the Registrar. Once again, although I take the certificate to be evidence of that non-attendance, there is ample other evidence from the course of correspondence and the course of the proceedings from which I should infer that he did not appear. 30 After the matter came before me on the afternoon of 23 August, Mr Thompson made a further telephone call to the office of PSK Legal. On this occasion he was able to speak to Mr Kwon. He told Mr Kwon that he was calling from the Supreme Court and was about to get orders for bench warrants. Mr Kwon answered that he had informed the liquidator's solicitors the clients would not be available and that in those circumstances there was not much point in him attending. He said, "I have asked the clients why and they just said that they weren't going to be available". Mr Thompson said, "Why didn't you come to court to let us know". Mr Kwon replied, "We were not there because the clients were not going to be there. So there was not much point in our being there and we informed you on Friday". Mr Thompson pressed for an explanation as to why the Examinees were not attending and Mr Kwon answered, "They had some urgent business to attend to". Mr Thompson asked Mr Kwon to confirm that the Examinees had not left the country, and Mr Kwon gave that confirmation. 31 Having certified the defaults, as I have mentioned, the Registrar referred the matter to the duty judge and it came before me in that capacity on 23 August at about 2.15pm. 32 Mr Hodgekiss of senior counsel, who with Ms Soars appears for the liquidator, sought and obtained leave to file in court a interlocutory process seeking the following relief: 1. Leave to file this interlocutory process in Court and an order that it be returnable instanter. 2. Order, pursuant to rule 11.10 of the Supreme Court (Corporations) Rules 1999 that a warrant be issued for the arrest of Song Sook Lee. 3. Order, pursuant to rule 11.10 of the Supreme Court (Corporations) Rules 1999 that a warrant be issued for the arrest of Jong Moon Lee. 4. Order, pursuant to rule 11.10 of the Supreme Court (Corporations) Rules 1999 that a warrant be issued for the arrest of Bum Mo Lee. 5. Order, pursuant to rule 11.10 of the Supreme Court (Corporations) Rules 1999 that Song Sook Lee, Jong Moon Lee and Bum Mo Lee jointly and severally pay the plaintiff's costs thrown away of the examinations scheduled to be held on 23 August 2005 on an indemnity basis, such costs to be taxed and paid forthwith. 6. Further or other orders.

37 In my opinion Supreme Court (Corporations) Rules, r.11.10 is an independent source of power to issue a warrant, not dependent upon Civil Procedure Act, s.97; but in light of the sparse authority and lack of established practice, procedures applicable under s.97 (and previously under former SCR Pt 42 r.7) provide some guidance, at least by analogy. 38 Although Uniform Civil Procedure Rules 2005, r.38.6 makes certain provision for the issue of s.97 arrest warrants, both the context in which that rule appears (being Part 38 of the rules, relating to examination of judgment debtors) and its terms (which refer in r.38(a) to, "the person in whose favour a judgment or order has been given or made", and by subrule (3) defines for the purposes of that rule "Section 97 arrest warrant" to be one issued under s.97 as a consequence of a person's failure to comply with an order for examination, persuades me that r.38.6 does not apply to an arrest warrant issued, under s.97 or otherwise, to secure the attendance at court of a witness who has failed to comply with a subpoena or a summons for examination under Corporations Law, s.596B. 39 I should also note for completeness that UCPR, r.36.9, which requires that an arrest warrant issued by order of the court be signed by a judicial officer or by a registrar, appears to be the only other provision of UCPR which deals with arrest warrants. 40 There is no doubt that each of the Examinees has been summoned by the court to attend for examination for the purposes of rule 11.10. In so far as it is implicit in the concept of a person being summoned that the summons be conveyed to or served on the examinee, I have already referred to proof of service of the summons on each of Mr & Mrs Lee; and the correspondence, to which I have referred, of Hunt & Hunt, first with Mr La Fontaine and then with PSK Legal, establishes that service was effected of the summons on a person authorised to accept service of it by Mr Bum Mo Lee. 41 Accordingly, I am satisfied of the first of the three requirements to which I have referred under r.11.10. 42 Mr Bum Mo Lee had not previously been required to answer the summons, it having been adjourned by arrangement from its original appointed return date. But for the purposes of r.11.10(1), the term "at the time and place appointed" should not be construed too narrowly. What has happened is that, by arrangement between the liquidator and the Examinee, another date was substituted for the time and place originally appointed. On that basis, Mr Bum Mo Lee failed to attend on 23 August at 2pm, being the substituted time and place appointed for the examination. Alternatively, if no date was substituted, then while he may well have had reasonable excuse in the circumstances for not attending on 16 August, he failed to attend from day to day until the conclusion of the examination thereafter. Accordingly, I am satisfied that either under r.11.10(1)(a)(i) or (ii), the second requirement is proved in respect of Mr Bum Mo Lee. 43 Mr & Mrs Lee senior did attend as required up to 29 July 2005. On that day their examination was adjourned, although initially to 16 August, ultimately as a result of the arrangements to which I have referred until 23 August. Their failure to attend on 23 August amounts to a failure to attend from day to day until the conclusion of the examination for the purposes of r.11.10(1)(a)(ii). Accordingly, I am satisfied that the second requirement is established in respect of them. 44 As to the absence of reasonable cause, I proceed on the basis that the liquidator bears the onus of negativing reasonable cause. However, since knowledge of the cause is in the possession almost exclusively of the Examinees, relatively slight evidence would be required to discharge that onus. In this case it is striking that PSK Legal's letters of 19 August and 22 August offer no explanation or cause whatsoever, beyond being "unable to attend". The liquidator's solicitors have more than once sought to elicit the cause, and have been conspicuously unsuccessful in doing so, beyond assertions that the Examinees were "not available", or at the highest "had some urgent business to attend to". It is not irrelevant that, as Mr Hodgekiss has submitted, in the course of the examinations so far, questions have arisen as to the tracing of moneys of the company into the hands of the Examinees in respect of which, prima facie, the answers of those who have been examined to date might be considered an incomplete explanation. I am, therefore, satisfied that the failure to attend in the case of each of the Examinees is without reasonable cause. 45 That is not the end of the matter, because although the conditions for issue of a warrant might be satisfied, the decision to issue a warrant remains a discretionary one. As to the exercise of this discretion, relevant considerations include (1) the prima facie entitlement of a person who has procured the issue of a subpoena or examinations summons which has not been set aside to have it complied with and, if not, enforced; (2) the importance of securing compliance with orders of the Court intended to enable relevant evidence or information to be obtained in the interests of justice; (3) the reasonableness of steps already taken to obtain the co-operative attendance of the examinee or witness and the possibility of securing attendance by less extreme means; and (4) whether the burden imposed by the subpoena or summons is prima facie oppressive. 46 Here, and usually, the first two factors to which I have referred will weigh in favour of issuing a warrant. The evidence before me establishes that with notice of the appointed date, the Examinees have determined not to attend and offer no reason for their actions. As to the third factor, I have recounted the steps taken, by letter and telephone, to warn the Examinees' solicitor of the imperative that the Examinees attend, and of the consequences should they fail to do so. I cannot see what more could reasonably have been done. As to the fourth, there is no reason for supposing that the burden to attend is any greater than in any case of an examination summons, let alone that it is oppressive, especially when the date in question was one agreed to by the Examinees, and Mr Hodgekiss has indicated that he is prepared to proceed with the examination whensoever the Examinees may be brought before the Court. In those circumstances, I would exercise the discretion in favour of issuing the warrants, to secure compliance with the examination summonses. 47 Rule 11.10 does not explicitly provide that an order under that rule may be made ex parte, without notice to the examinee. In Actwane, to which I have referred, the application was evidently made on notice to the examinee. However, Civil Procedure Act, s.97(2) does authorise the issue of an arrest warrant without notice to the person in substantially similar circumstances. Bench warrants to secure the attendance of witnesses who do not attend in response to a subpoena have traditionally been issued ex parte. The nature of the process and its purpose is such that that will often, even usually, be the appropriate course. Accordingly, I do not consider the absence of more formal notice than that which has already been given by letter and telephone to the Examinees' solicitor any obstacle to making the orders sought. 48 For a time I was troubled as to whether, at least by analogy with UCPR, r.38.6, the warrant should not issue before the expiration of 14 days after service of notice that failure to attend for examination may result in arrest, or should lie in the Registry for some time before execution. However, as I have said, I am now satisfied that r.38.6 does not apply directly. Even if it did, the form of the summons for examination itself gives such notice as is contemplated by r.38.6(2). Once again by analogy with a bench warrant in the case of a witness who fails to attend a trial in answer to a subpoena, the appropriate course would ordinarily be to secure the attendance of the examinee at court at the earliest possible date so that the examination may proceed. Accordingly, I do not consider it necessary or appropriate to defer the issue of the warrant. 49 I have also considered whether, as contemplated by the form of warrant for arrest provided in form 65 of the former Supreme Court Rules, provision should be made for the examinee to avoid being taken into custody by paying a sum of money into court as security for his or her appearance. The cases which have considered this provision relate to arrest of an alleged contemnor in aid of proceedings for contempt. Although in Patton v Harrison (No 1) (NSWCA 12 October 1989 unreported), Kirby P held that in such a case the warrant should contain a provision for the giving of security and the sum in which security should be given - a view which was followed by Hamilton J in Schnabel v Lui [2002] NSWSC 1184, [12] - Palmer J, in ASIC v Michalik (No 2) [2004] NSWSC 1260, held that even under SCR Pt 55 r.10, the court was not required in every case to deal with the question of release of an alleged contemnor upon security at the same time as it issues the arrest warrant. With respect, I agree with Palmer J, but in any event I do not consider that the same considerations which influenced Kirby P and Hamilton J apply in a case when the warrant sought is not one to bring an alleged contemnor before the court to answer a charge (which bears close resemblance to the arrest before charge of a defendant in criminal proceedings), but rather one to bring before the court to give evidence or to be examined a person who having been subpoenaed or summoned to do so fails to appear. 50 However, I will direct service of notice of the order for issue of the warrant on the Examinees' solicitor so that the Examinees may apply for discharge of the order if so advised. 51 Accordingly, I make the following orders:-

Patton v Harrison

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