Portal Software v Bodsworth

Judgment 1HIS HONOUR: By originating process filed on 22 October 2012, the plaintiff/respondent Council of the City of Sydney seeks an order terminating a deed of company arrangement made between the first defendant/applicant Streetscape Projects (Australia) Limited and the second defendants/applicants Ozam Kassim and Robert Kyte as joint and several administrators of the deed of company arrangement made between Streetscape and them, and alternatively an order declaring the deed of company arrangement void. Other relief, impugning a resolution requiring the first defendant/applicant to execute the deed, and consequential relief, is also sought. 2Essentially, the Council alleges that the majority at the second creditors' meeting in favour of the resolution that the company execute the DOCA was procured in circumstances that involved the exercise of the administrators' casting vote, because while the majority of creditors in number were of one view, the majority by value was of the opposite view. As I understand it, it is alleged that that situation would not have obtained, but for votes in favour of the deed being procured, in the first case, by promises to two creditors (Mary Kitt and Coster Enterprises) that, if they voted for the deed, their debts would be paid in full outside the deed; and in the case of another two creditors (namely Mr Sassein and Colin Biggers & Paisley) that because of ongoing commercial arrangements with associates of the company, they reasonably expected to have their debts paid in full outside the DOCA as a result of their continuing to act for those associates; and that those circumstances were not disclosed to the administrators, whose casting vote might have been exercised differently had they been so disclosed. 3So far as concerns the first two creditors, Mary Kitt and Coster Enterprises, the points of claim allege that on or about 8 August 2012, each of those creditors was promised full payment of its debt by a person or entity having connections with associates of Streetscape, to be paid after the second creditors' meeting, in exchange for the provision of a special proxy in favour of a resolution supporting the proposed DOCA. The particulars of that allegation refer to a telephone call between one Belinda Burcham and Mary Kitt in the first case, and a meeting at a newsagency on or about 8 August 2012 between Ms Burcham and Maria Coster in the second case. 4The present application pertains to six subpoenas issued at the request of the plaintiff/respondent for production of. By application filed on 17 December 2012 and amended today, the defendants/applicants move to have those subpoenas set aside. The application is made, as it undoubtedly may be, by the defendants/applicants and not by any of the recipients of the subpoenas. The significance of that circumstance is not one of standing, but confirms that the complaint is one of relevance, rather than oppression. In other words, there is no complaint on the part of the recipients of the subpoenas that the subpoenas are oppressive; nor do the defendants/applicants advance, directly or indirectly, any such complaint. 5This has the additional significance that, in a case where the objection taken to a subpoena is one of relevance, there is a relationship between the test of relevance and that of oppression, in the sense that a wider scope may be permitted in terms of relevance if the subpoena is, in its terms, not extensive. On the other hand, a stricter view may be taken of relevance where the subpoena would call for documents in very broad terms. The test of relevance in this context is an undemanding one: it is often said that the test is that it appears to be "on the cards" that the documents sought will advance the case of the issuing party, but this means no more than that the documents produced "could possibly throw light on the issues in the main case": TPC v Arnotts Limited (1989) 21 FCR 306 (Beaumont J); Portal Software v Bodsworth [2005] NSWSC 1179, [24]. In other words, it suffices to pass the test of relevance that there be a rational possibility that the documents production of which is sought could illuminate the issues in the main case. 6As Mr Coleman of counsel for the applicants explained, the critical relevant dates are that voluntary administrators were appointed on 21 June 2012, the second creditors' meeting was concluded on 9 August 2012, and the DOCA was executed on 28 August 2012. 7Perhaps the foremost objection in the applicants' argument was that the period covered by the subpoenas - which was typically between 20 June 2012 and 19 October 2012 - was having regard to the particularised conversations of 8 August 2012, so long that documents far removed from 8 August 2012 could not be relevant. 8However, I do not agree. From the moment that voluntary administrators were appointed, until some time after the deed was executed, it is quite conceivable that relevant conversations may have taken place which increase or diminish the possibility or prospect that the conversations particularised in the points of claim themselves took place, or similarly that relevant transactions or payments may have taken place which illuminate the possibility of the central conversations having taken place. All that is pleaded in a statement of claim, or at least all that should be pleaded, is the material facts, and not the evidence by which they will be proved. The material facts may well be the conversations alleged to have taken place on 8 August. But other conversations before and after that, and other acts and transactions before and after that, may very well illuminate whether the material transactions and conversations took place. 9There was an associated objection that the paragraph - which was paragraph 1 of many of the subpoenas - was too broad, in calling for documents which concerned "the voting, the giving of a proxy or the lodgement of a proof of debt" for the relevant creditors. It seems to me that from the time of the appointment of the voluntary administrators, discussions between the persons identified, and in particular the creditors in question, associates of the company and persons interested in it, and a proxy who voted on behalf of one of the creditors at the meeting, on the topics of how they would vote at the meeting or whether a proxy would be given or in connection with a proof of debt and for how much the proof of debt might be admitted or voted, for example, have the potential to illuminate whether the central and critical conversations took place. 10Documents which might reveal whether what might be called a special payment was made to one or other of the creditors - a conclusion which could be reached by comparing payments made or invoices rendered before the alleged promise with those made afterwards, and by examining the amount of payments - might well illuminate whether any such promise was made. Such payments made not only to the creditors themselves, but to associates such as husbands, directors or employees of the creditors, might also illuminate that fact. 11I was concerned that paragraph 2 of the subpoena to Mr McLeod exceeded the bounds of relevance, but Mr Sullivan QC for the plaintiff/ respondents, has conceded that matter. As to the subpoena addressed to Colin Biggers & Paisley, I was initially concerned that paragraph 1 was too wide and must necessarily catch irrelevant material. However, on closer examination of the definitions of the terms "the proceedings", "the appeal", "the judgment", "the administration", and "the matters" referred to in it, it seems clear that the time frame of each of those matters is not far removed from the time in question, and a comparison of terms of retainer before the administration with terms of retainer after the administration, might cast light on whether Colin Biggers & Paisley had an expectation of being paid or recovering the debt in one way or the other in any event. 12So far as "the matters" themselves are concerned, that is clear from, for example, the possibility that the liability of the company to pay the lawyers' costs might have been guaranteed by associates, in which case the solicitors could have anticipated being paid regardless. So far as "the administration" and "these proceedings" are concerned, they post-date the onset of the administration and might tend to show the terms on which the solicitors were prepared to continue to act - which might be contrasted with the terms on which they acted in the proceedings, the appeal and the enforcement. Amendments to their retainers in the earlier matters might also illuminate the issue. 13The objection to paragraph 4(a) was not pressed. 14It seems to me that paragraph 4(c) is relevant for exactly the same reasons. 15Paragraph 4(b) is relevant as the plaintiff/ respondent hopes to show that there were communications disclosing Colin Biggers & Paisley's alleged expectation and, as the pleadings stand at the moment, paragraph 4(e) is relevant to the allegation concerning reduction of the proof of debt and remains relevant, even if the true position is that it was effected by a decision of the administrator, at least unless and until so much is admitted. 16It is conceded that paragraph 5 should be limited to the period 19 June 2012 to 19 October 2012. 17I think what I have said in principle covers all the other substantive objections that were advanced. 18Some paragraphs of the subpoenas were, at the outset, abandoned in the sense that the plaintiff/respondent indicated by letter dated 1 March 2013 to the defendants/applicants' solicitors that they would not be pressed. The defendants/applicants submitted that in those circumstances, the subpoenas should nonetheless be set aside. In days gone past, that might have been the ordinary response of the Court, but now that the Court is authorised to set aside a subpoena "in part" as well as in whole [see UCPR r 33.4(1)], the just, quick and cheap approach is to exercise that power rather than to set aside the subpoenas in toto and require new subpoenas to be issued. 19My orders therefore, are: 1. In respect of the subpoena addressed to John Anders McLeod set aside paragraph 2 of the schedule. 2. In respect of the subpoena addressed to Mary Kitt: (a) vary paragraph 3 of the schedule by adding the words "relating to any voting, proxies or proofs of debt in the voluntary administration of the first defendant"; (b) Set aside paragraphs 4 and 5 of the schedule. 3. In respect of the subpoena to Coster Enterprises Pty Limited: (a) vary paragraph 3 by adding the words "relating to any voting, proxies or proof of debt in the voluntary administration of the first defendant "; (b) Set aside paragraphs 4, 5 and 6 of the schedule. 4. In respect of the subpoena to SJS Business Services Pty Limited, set aside paragraph 2 of the schedule. 5. In respect of the subpoena addressed to Colin Biggers & Paisley: (a) set aside paras 2 and 3 of the schedule; (b) vary paragraph 5 of the schedule by substituting for 1 January 2012, the matter 19 June 2012. (c) Set aside paragraph 6 of the schedule. 6. In respect of the subpoena addressed to Belinda Burcham, set aside paragraph 3 of the schedule. 7. In respect of the subpoena to Mary Coster: (a) vary paragraph 3 of the schedule by adding the words "relating to any voting, proxies or proof of debt in relation to the voluntary administration of the first defendant"; (b). Set aside paragraph 4 of the schedule. 20In respect of the subpoena to St George Bank Limited, no relief is pressed. 21By concession or otherwise, the defendants/applicants obtained a significant measure of success prior to the hearing, but that on the issues argued at the hearing, the plaintiff/respondent has substantially succeeded. In those circumstances, I am inclined to the view there should be no order as to the costs of the motion. 22There will be no order as to costs, to the extent that each party bear its own costs. 23I direct that the plaintiff/respondent serve notice of these orders on the recipients and on the first defendant/applicant by 12 March 2013. 24I extend time for compliance with the subpoenas as so amended to 26 March 2013, and direct that they be listed in the registrar's subpoena list that day. 25I otherwise adjourn the proceedings to Monday, 8 April 2013 at 10am in the Corporation Judge Directions List.