Rathner (Liquidator), in the matter of PE Capital Nominees Pty Ltd (In Liq) v Runner Investment Limited

Rathner (Liquidator), in the matter of PE Capital Nominees Pty Ltd (In Liq) v Runner Investment Limited - [2024] FCA 276 - FCA 2024 case summary — Zoe

[24]

MCEVOY J: 1 Before the court is an application filed 30 November 2023 pursuant to r 35A(5) of the Federal Court of Australia Act 1976 (Cth) for review of a decision made by a Registrar on 14 November 2023, with reasons published on 27 November 2023. The second defendant, Mt Duneed Investments Pty Ltd, applies to set aside the Registrar's orders and thereby uphold the issue of various subpoenas issued to third parties, as well as a notice to produce which it issued to the first defendant, Runner Investments Pty Ltd. These subpoenas and the notice to produce were the subject of the Registrar's orders. 2 The proceeding in which these subpoenas and the notice to produce have been issued was commenced by an originating process filed on 8 October 2021 by the liquidators of PE Capital Nominees Pty Ltd. Amongst other things, the liquidators sought declaratory relief against Runner in relation to a transfer of land situated at 623-645 Torquay Road, Mt Duneed in Victoria (the Land). The factual background to the proceeding is sufficiently set out at paragraphs [7]-[21] of the Registrar's reasons. Those paragraphs include a summary of the Court's reasons for judgment published on 5 July 2023: Rathner v Runner Investment Limited [2023] FCA 754 (McEvoy J). 3 The subpoenas which Mt Duneed has issued are said to be directed to the following legitimate forensic purposes: (a) the gathering of evidence for the prosecution of Mt Duneed's extant non-party costs application in the proceeding; and (b) the identification of further respondents to that application and the gathering of evidence against such further identified respondents. 4 Likewise, Mt Duneed maintains that the notice to produce it has issued to Runner is directed to obtaining evidence to be deployed in the non-party costs application. 5 For the reasons that follow I have determined to set aside paragraphs 1(k) and 3 of the Registrar's orders. The effect of this is that one of the subpoenas remaining in contention will be allowed, as will a greater proportion of the notice to produce.

[25]

The Applications before the Registrar 6 The Registrar considered three interlocutory applications: (a) a further amended interlocutory application dated 4 September 2023 filed by the Runner (September application); (b) an amended interlocutory application dated 10 October 2023 filed by Runner (October application); and (c) an interlocutory application dated 2 August 2023 filed by Santini Group Pty Ltd and Mr Jason Hopp (Hopp/Santini application); 7 These interlocutory applications sought to set aside eighteen subpoenas issued by Mt Duneed to various third parties, as well as the notice to produce issued by Mt Duneed to Runner. 8 In the September application Runner sought orders that the Court set aside: (a) paragraphs [3], [6], [7] and [9]-[14] of the schedule to each of the subpoenas addressed to Andrew Green and to The Partnership of SBA Law issued on 14 July 2023; (b) the subpoena addressed to the Partnership of Gadens Lawyers issued on 14 July 2023, or alternatively paragraphs [1], [3] and [6] to the schedule of that subpoena; (c) the subpoena addressed to the Partnership of SBA Law issued on 11 August 2023; (d) paragraphs [1]-[3] and [5]-[9] of the schedule to the subpoena addressed to the Proper Officer of Melbourne Centrepoint Management Pty Ltd (MCM) issued on 22 August 2023 (MCM Subpoena), or alternatively paragraphs [1]-[3] and [5]-[8] of the MCM Subpoena; (e) the subpoena addressed to the Proper Officer of Colliers International (Victoria) Pty Ltd issued on 22 August 2023 or alternatively paragraphs [2]-[4] of the schedule to that subpoena; (f) the subpoena addressed to the Proper Officer of the Department of Home Affairs (DOHA) issued on 22 August 2023 (DOHA Subpoena) or alternatively paragraph [2] of the schedule to the DOHA Subpoena; (g) the subpoena addressed to the Proper Officer of South Reeve Pty Ltd issued on 22 August 2023; (h) paragraphs [1]-[3] and [5]-[9] of the schedule to the subpoena addressed to the Proper Officer of Great Union Pty Ltd (GU) issued on 22 August 2023 (GU Subpoena) or alternatively paragraphs [1]-[3] and [5]-[8] of the schedule to the GU Subpoena; and (i) a notice to produce addressed to Runner filed on 22 August 2023 (Notice to Produce). 9 In the October application Runner sought orders that the Court set aside: (a) paragraphs [8]-[14] of the schedule to each of the subpoenas addressed to Mr Jason Hopp and Santini Group (together, the Santini Parties) each issued on 14 July 2023 (respectively, Hopp Subpoena and Santini Subpoena); (b) the subpoena addressed to Domenic Ferraro issued on 22 August 2022; (c) the subpoena addressed to John Melia issued on 23 August 2023); (d) the subpoena addressed to Salvator Pavano issued on 22 August 2023; (e) the subpoena addressed to Mark Burgio issued on 22 August 2023, alternatively paragraphs [2]-[4] of the schedule to the Burgio Subpoena; (f) the subpoena addressed to The Proper Officer of Colliers International (Ballarat & Geelong) Pty Ltd issued on 28 August 2023; (g) the subpoena addressed to The Proper Officer of The Proper Officer of Suncorp-Metway Ltd issued on 28 August 2023 (Suncorp Subpoena); (h) the subpoena addressed to The Proper Officer of Roads Corporation (VicRoads) issued on 28 August 2023; (i) the subpoena addressed to Jack Anatole Dahan issued on 4 September 2023 (Dahan Subpoena); and (j) the subpoena addressed to Grant A Robertson issued on 4 September 2023 (Robertson Subpoena). 10 The grounds on which the September and October applications are made focus primarily on the questions of whether the relevant subpoenas (or parts thereof) have a legitimate forensic purpose and whether they are oppressive, including because they are vague, imprecise, unclear or in substance seek discovery. In respect of some subpoenas the objection is made that the subpoena (or part thereof) seeks documents which by their nature are properly the subject of a claim for privilege. 11 The relief sought by the Santini Parties in the Hopp/Santini application reflects precisely the relief sought by Runner in respect of these subpoenas in the October application. 12 In addition, Mr Dahan and Mr Robertson objected to the uplift and inspection of 31 documents produced to the Court by them in response (respectively) to the Dahan Subpoena and the Robertson Subpoena on the grounds of legal professional privilege.

[26]

The Registrar's decision 13 It is worth recording that the Registrar accepted the principle that a subpoena might properly be used to identify an additional respondent whose identity is unknown but whose description is relatively clear and well understood: see Friends of Elliston-Environment & Conservation Inc v State of South Australia (No 2) [2007] SASC 325 (Bleby J); Singh v Observer Ltd [1989] 2 All ER 751. This would include to identify a party who has funded a proceeding for the purposes of a non-party costs application: see Friends of Elliston at [5]-[6] and [32]. However, the Registrar considered there to be no legitimate forensic purpose to a subpoena which sought to identify the nature or extent of the interest (if any) that anyone might have had in the Land, the mortgages or any other transactions which were the subject of the Court's reasons or judgment in Rathner. 14 A reference to the non-party costs application against the Santini Parties in the Registrar's reasons is to be understood as a reference to Mt Duneed's application for the relief set out in paragraph [7] of the amended interlocutory application dated 6 July 2023, namely that: Runner, Santini Group Pty Ltd, and Mr Jason Hopp pay Mt Duneed Investments Pty Ltd's costs of and incidental to the proceedings to date (inclusive of the costs of the dismissed Second Cross-Claim and the costs of the interlocutory application) on an indemnity basis, such costs to be taxed forthwith. 15 Since the hearing before the Registrar, however, Mt Duneed has amended this interlocutory application again, meaning that the relevant interlocutory process for present purposes is the further amended interlocutory application filed on 25 January 2024 (which amended the interlocutory application filed on 27 June 2023 and amended on 6 July 2023). A reference to the non-party costs application is now to be understood as a reference to the relief sought in paragraph [8] of the further amended interlocutory application: Each of Runner, Mr Hopp, Santini Group, Mr Chow, Blast Financial and Ms Loh pay Mt Duneed Investments Pty Ltd's costs of and incidental to the proceeding to 5 July 2023 (inclusive of the costs of the dismissed Second Cross-claim) on an indemnity basis fixed on a lump sum basis and payable forthwith. 16 In broad terms, Mt Duneed has sought the relief in the non-party costs application on the basis of an argument that Runner, Mr Hopp, Santini Group, Mr Chow, Blast Financial Pte Ltd and Ms Loh either benefitted from or were involved in the transfer of the Land from Runner (as mortgagee in possession) to South Reeve for a price of $4,820,000 (the Sale); settlement of that transaction having occurred on 9 June 2023. The Sale occurred in circumstances where the Court's judgment in the proceeding commenced on 8 October 2021 was reserved on 29 September 2022. 17 In summary, the Registrar upheld those subpoenas (or parts thereof) in respect of which she considered it was reasonable to expect that they sought evidence that might be adduced on the hearing of the non-party costs application against the Santini Parties, and which were sufficiently clear and intelligible. 18 The Registrar set aside some subpoenas (or parts thereof) that she regarded as, in substance seeking information that could only be relevant to the proceedings that are yet to be filed relating to fraud and/or abuse of process (for example, whether the lawyers involved in the Sale had sufficient knowledge to be "knowingly involved" in the relevant conduct). 19 The Registrar also set aside some subpoenas (or parts thereof) that she regarded as vague or which seemed likely to produce a preponderance of irrelevant material.

[28]

RELEVANT LAW AND PRINCIPLES 22 I observe at the outset that in broad terms I agree with the Registrar's analysis of the relevant legal principles at [29]-[51] that apply to applications to set aside subpoenas. See in particular Roberts-Smith v Fairfax Media Publications Pty Ltd (No 43) [2023] FCA 886 (Besanko J) (Roberts-Smith (No 43)). Also relevant, as Mt Duneed submits, is Seven Network (Operations) Limited v Fairfax Media Publications Pty Limited [2024] FCAFC 185 (Wheelahan, Anderson and Jackman JJ). 23 Obviously enough, however, this review is conducted in accordance with s 35A of the Act and operates as a hearing de novo. This means that new evidence or additional grounds can be relied upon: Bechara v Baates [2021] FCAFC 34 at [17] (Allsop CJ, Markovic J and Colvin JJ); see also Harris v Caladine (1991) 172 CLR 84 at 95. 24 Mt Duneed contends that the fact that this review is being heard de novo is important in the context of the decision of the Full Court in Seven Network, which affirmed the decision in Roberts-Smith (No 43). The Full Court's reasons in Seven Network were published three days after the Registrar's orders. 25 Mt Duneed submits that the decision in Seven Network is entirely determinative of this application and that it now cannot be doubted that subpoenas and notices to produce that are directed to gathering evidence for use in a non-party costs claim serve a legitimate forensic purpose: Seven Network at [39], where the Full Court observed: In our view, having regard to those principles, there was no error by the primary judge in applying the principle of whether the documents sought have an apparent relevance in the sense that they could reasonably (interpreting his Honour's use of "possibly" not in the speculative sense but in the sense of "on the cards") throw light on the issues which arise on the application for orders for the payment of costs by third parties. … (Emphasis added.) 26 Mt Duneed submits that the Full Court in Seven Network at [38] agreed with the reasoning of the New South Wales Court of Appeal in Secretary of the Department of Planning, Industry and Environment v Blacktown City Council [2021] NSWCA 145 at [65] (Bell P, with whom McCallum JA agreed at [98]), such that, as part of the jurisprudence of this Court: … it is sufficient to show that the documents sought are apparently relevant in the sense that it can be seen that the documents sought to be produced by way of subpoena will materially assist on an identified issue or that there is a reasonable basis beyond speculation that it is likely that the documents subpoenaed will so assist. (Emphasis added.) 27 Mt Duneed contends that there is a reasonable basis for determining that all the documents sought by the relevant subpoenas will materially assist in relation to an identified issue or that there is a reasonable basis beyond speculation that it is likely that the documents subpoenaed will so assist. 28 Whilst it may be accepted that the Full Court in Seven Network has endorsed the language used by Bell P in Blacktown City Council, I do not consider that it is correct to say that the decision of the Full Court in Seven Network has effected any fundamental change to the underlying legal principles or, as Mt Duneed also submits, that it is entirely determinative of the present application. As is so often the case, the devil is in the detail. The subpoenas fall to be assessed on the basis of the authorities essayed by the Registrar, further explained by the Full Court in Seven Network. 29 Against this short background I turn to consider those issues which remain to be determined on this application.

[30]

Hopp and Santini Subpoenas 34 The Hopp Subpoena and the Santini Subpoena are dated 14 July 2023. The schedule of documents in each are in identical terms and contains fourteen paragraphs. In their written submissions Mt Duneed pressed paragraphs [8]-[10], [12] and [13]. At the hearing, however, Mt Duneed conceded paragraphs [10], [12] and [13] as these paragraphs relate to the abuse of process claim. Thus paragraphs [8] and [9] are the only ones that remain in dispute. Paragraph [8] seeks documents recording the persons or entities as having a direct or indirect financial interest in Runner or Jasper, and the pre-litigation "transactions" (as defined in these subpoenas) and mortgages including the identity of the persons or entities who provided funds to Blast Financial for on-lending or provision to Runner. Category [9] seeks documents relating to the debt said to have been owed by Runner to Blast Financial. 35 As the Santini Parties submit, Mt Duneed identifies three bases for its application for non-party costs orders in its applications to issue the Hopp and Santini Group summons: (a) Runner and the third defendant (Jasper Management Ltd) are "cyphers and alter egos" of the Santini Parties; (b) the Santini Parties have a material interest in the subject-matter of the litigation; and (c) Mr Hopp provided instructions to the solicitors for Runner and Jasper in respect of the proceeding and its subject-matter. 36 In this regard Mt Duneed explains that Ms Loh, in her affidavit dated 4 August 2023, deposes that: 5. Mr Jason Hopp acted for Runner and for Jasper with their authority in providing instructions to SBA Law: (a) in relation to the acquisition of the First Mortgage and the Third Mortgage by Runner and Jasper respectively; and (b) in relation to the conduct of this proceeding after it was commenced in October 2021, and in relation to the disputes that preceded it. 6. Mr Hopp also acted for Runner with its authority in providing instructions to Gadens Lawyers in relation to the sale of the Land by Runner by a contract made on or about 4 May 2023, which settled on 9 June 2023. 37 Mt Duneed contends that in circumstances where the content of Ms Loh's affidavit is not admitted by Mr Hopp, Mt Duneed is entitled to seek the necessary evidence by way of subpoena to prove that the contents of the affidavit are true. 38 Mt Duneed says that if this can be established, there can be no doubt that a non-party costs order can be properly made against Mr Hopp personally and that the documents sought in the relevant paragraphs of these subpoenas may possibly throw light on these issues: Roberts-Smith v Fairfax media Publications Pty Limited (No 42) [2023] FCA 750 at [40] and [42]. Mt Duneed thus contends that there is a legitimate and clear forensic purpose served by these subpoenas. 39 The Santini Parties submit that the three bases identified by Mt Duneed for its non-party costs orders do not refer to a non-party cost orders against any other persons, and that paragraphs [8] and [9] are speculative, lack legitimate forensic purpose and amount to fishing or are otherwise oppressive. The Santini Parties submit that the words in paragraph [39] of Seven Network (see above at paragraph [23]) mean to throw light on the actual issues (meaning those issues that are actually identified and arise), rather than issue that might arise. 40 The Santini Parties submit that Mt Duneed has not articulated how the various categories of documents sought may throw light on the issues that actually arise. It is said that the disputed categories are framed in an unduly broad, "scattergun" way and that they are untethered to any of the three stated bases for seeking non-party costs orders against the Santini Parties. It is submitted that these categories are too broad and therefore that they are oppressive: Horizontal Falls Adventure Tours Pty Ltd v Thomas [2009] FCA 639 at [7] (Collier J). The Santini Parties also submit that they would be forced to make fine judgments regarding the relevance of particular documents or to have intimate knowledge of the underlying subject matter: see Adelaide Steamship Co Ltd v Spalvins (1997) 24 ACSR 536 at 545-546 (O'Loughlin J). 41 I accept, as senior counsel for the Santini Parties submits, that paragraphs [8] and [9] are expressed too broadly and may fairly be said to be insufficiently tethered to the issues that presently arise. Paragraph [8] would require the addressee to make complex assessments as to what may constitute a "financial interest, direct or indirect" in any or all of a series of companies, transactions and mortgages. A further factor that weighs in favour of paragraph [8] being set aside is that Mt Duneed does not demonstrate a legitimate forensic purpose for obtaining the material relating to all the pre-litigation transactions. Nor can it be said, having regard to the identified bases for the non-party costs orders, that a legitimate forensic purpose is apparent on the basis of the documents sought by paragraph [9]. 42 Paragraphs [8] and [9] of the schedule to each of the Hopp Subpoena and Santini Subpoena should thus be set aside. As Mt Duneed no longer presses paragraphs [10], [12] and [13], these will be set aside also.

[31]

Dahan Subpoena and Robertson Subpoena 43 Mt Duneed submits that it is "on the cards" that the documents sought in the Dahan Subpoena would be relevant to establishing that Mr Dahan had an interest in the outcome of the proceeding and the transfer of the Land. By way of background, Mr Dahan deposes in his affidavit sworn on 20 October 2023 (amongst other things) that: (a) he is the sole director and shareholder of a company ACN 655 595 501 Pty Ltd; (b) on or around 25 November 2021, ACN 655 was incorporated, and replaced Oratango Pty Ltd as the trustee of the of the PEC Mt Duneed SPV Trust. 44 Mt Duneed submits that there is no rational reason why Mr Dahan would have acted as he did (which, while not articulated by Mt Duneed, presumably refers to the ACN 655 replacing Oratango as the trustee of the Trust) if he did not have an interest in the outcome of the proceeding and the transfer of the Land. 45 Runner submits that the subpoenas are fishing, and that being in control of a company (ACN 655) that was contemplated as becoming a trustee of the company that owned the Land is not sufficient to give Mr Dahan an interest in the proceeding. As senior counsel for Runner explained at the hearing, Mt Duneed did not suggest that Mr Dahan was relevantly controlling the trustee that owned that land during the proceeding or how that gave him an interest in the outcome of the proceeding. Runner submits that Mt Duneed has failed adequately to articulate how the subpoena could have a genuine and realistic prospect of revealing information relating to the making of a non-party a costs order against Mr Dahan. 46 The Registrar concluded that the material before her did not identify the particular interest in the proceeding Mr Dahan may have had, how that interest might provide the basis for a claim against Mr Dahan, or how the Dahan and Robertson Subpoenas could reasonably be expected to add to the evidence in the proceeding as it currently stands in relation to the factual matters in dispute. She concluded that the subpoenas are not properly seeking to ascertain the identify of a prospective respondent but are seeking material to decide which of a group of identified persons is most likely to be made liable on grounds yet to be ascertained. There is, in my respectful view, much force in this analysis. 47 For these reasons I accept that the Dahan Subpoena lacks a sufficient forensic purpose and that it should be set aside. 48 The Robertson subpoena similarly lacks a legitimate forensic purpose as it is predicated on the Dahan Subpoena having a legitimate forensic purpose. It should be also set aside also. 49 Having regard to my conclusion in relation to these subpoenas the claims for privilege do not need to be considered.

[32]

MCM Subpoena and GU Subpoena 50 Runner, MCM and GU submit that paragraphs [1]-[3] and [5]-[9] of the MCM Subpoena and the GU Subpoena lack a forensic purpose and that their real purpose is to determine whether Mt Duneed has a case at all against MCM and GU. This is said to be speculative and illegitimate. 51 Mt Duneed submits that these documents may possibly throw light on the determination of the non-party costs orders already sought against the Santini Parties. Mt Duneed claims that there has been production by each company, demonstrating a connection with the subject matter of the proceeding, and that Runner has not contended that MCM and GU did not have an interest in the subject of the litigation. In fact there has not been production of the documents sought. MCM and GU have responded to paragraph [4] on the basis that they had no documents to produce. 52 Mt Duneed submits that during cross-examination in a proceeding in the Supreme Court of Victoria, Mr Hopp gave evidence which proves his connection with Mr Tony Chow and further demonstrates that it "is on the cards" that MCM and/or GU had an interest in the subject of the litigation. Mt Duneed submits that this demonstrates a legitimate and clear forensic purpose served by the MCM Subpoena and the GU Subpoena, referencing the Full Court's observations in Seven Network at [40]: At this point, it should be observed that the documents captured by the descriptions of categories of documents in the subpoenas may well produce documents of varying degrees of relevance. Some may be centrally relevant, others peripherally relevant, while others may appear to be of negligible relevance when considered as individual documents. In the present case the respondents accepted that many of the documents may contain only "glancing references" to the relevant subject matter. However, there may well be probative significance in the volume of such communications, even if certain individual communications might appear to be relatively trivial…. (Emphasis added.) 53 Mt Duneed submits that it follows that subpoenas that seek production of categories are not to be parsed on the basis that each category must be centrally relevant. It is said that all the categories in question with regard to these subpoenas fall within permissible degrees of relevance. 54 I do not consider that Mt Dunned has demonstrated a legitimate forensic purpose for the categories of documents sought in these subpoenas. I accept, as Runner, MGM and GU submit, that paragraphs [1]-[3] and [5]-[9] do not have any apparent relevance to (or are otherwise predicated on) the three stated bases for seeking non-party costs orders against the Santini Parties (see above at paragraph [33]). I also accept MGM and GU's submissions in relation to the vague, imprecise and overly broad language utilised in these paragraphs of the subpoenas. I consider that, rather than seeking evidence to be adduced in an extant claim, the broad language and substantive content of these subpoenas suggests that Mt Duneed is searching for material to identify whether circumstances exist that could identify a potential claim or respondent. The language is vague and imprecise and would require the addressee to interpret and make a judgment about the particular relationship and financial interests (as above with paragraph [8] of the schedule to the Hopp and Santini Subpoenas). 55 For these reasons, I consider that paragraphs [1]-[3] and [5]-[9] of the schedule of the MCM Subpoena and the GU Subpoena should be set aside.

At a glance

Court

Decision date

Before

Source

Judgment (44 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (15)