St George Bank v Feltham & Associates

Abram v National Australia Bank Limited [2001] NSWSC 916 Air Canada v Secretary of State for Trade [1983] 2 AC 394 Ali Tastan (91994) 75 A Crim R 498 Beaufort Air-Sea Equipment Pty Limited v Emhart Australia Pty Ltd (NSWSC unreported, Master Malpass, 18 December 1992) CASES CITED : Brijeski v Sunbeam Corporation Limited (NSWSC unreported, Master Greenwood, 29 January 1997) Carroll v The Attorney-General for New South Wales (1993) 70 A Crim R 162 Mariala Estates Limitd v Athanasi & Ors [2001] NSWSC 1013 Modern Woodcraft Pty Ltd v Nott (NSWSC unreported, Young J, 7 March 1997) National Employer's Mutual General Association v Waind & Hill [1978] 1 NSWLR 372 NSW Commissioner of Police v Tuxford & Ors [2002] NSWCA 139

St George Bank Limited (Plaintiff) PARTIES : K B Feltham & Associates (Defendant)

Mr B Hull (Plaintiff) COUNSEL : Mr L C Gyles (Defendant)

Henry Davis York (Plaintiff) SOLICITORS : Phillips Fox (Defendant)

LOWER COURT JURISDICTION : Supreme Court (Associate Judge)

LOWER COURT JUDICIAL OFFICER : Deputy Registrar Haggett

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

20271/2004 - ST GEORGE BANK LIMITED v K B FELTHAM & ASSOCIATES

JUDGMENT (Review decision of Registrar - set aside subpoenae)

1 HER HONOUR: By notice of motion filed 23 September 2005 the applicants, Jocali Pty Limited (Jocali), Guardian International Properties Pty Limited (Guardian) and 118 Bondi Road Pty Limited (118 Bondi Road) seek an order firstly, that the whole of the decision of Deputy Registrar Haggett, dated 22 August 2005 but delivered 30 August 2005, be set aside; and secondly, an order that the subpoenae issued to the applicants on 26 April 2005 be set aside.

2 The plaintiff is St George Bank Limited. The defendant is KB Feltham, & Associates (NSW) Pty Limited. While no affidavit evidence was relied upon before the Registrar several documents were tendered. At the hearing of this review, leave was granted to applicants to rely upon the affidavit of Stacey Louise Nadel sworn 23 September 2005. The applicants submitted that the subpoenae should be set aside on two bases, namely, the lack a legitimate forensic purpose and the width of the documents sought to be produced is oppressive.

Review 3 There are some cases that are authority on the consideration that ought to be given on review. They are Beaufort Air-Sea Equipment Pty Ltd v Emhart Australia Pty Ltd (NSWSC unreported, Master Malpass, 18 December 1992); Brijeski v Sunbeam Corporation Limited (NSWSC, unreported, Master Greenwood, 29 January 1997); Westpac Banking Corporation v Abemond Pty Ltd and Westpac Banking Corporation v Cameron (NSWSC unreported, Santow J, 3 November 1994); Modern Woodcraft Pty Ltd v Nott (NSWSC unreported, Young J, 7 March 1997); Mariala Estates Limited v Athanasi & Ors [2001] NSWSC 1013; and Abram v National Australia Bank Limited [2001] NSWSC 916. 4 From these decisions, the approach to be taken is that I should inform myself of all the material before the Registrar at the time when he made the decision, of the Registrar's decision and then make my own decision based on the material before me after having the benefit of counsel's submissions.

The nature of the dispute 5 By statement of claim filed 30 July 2004 the plaintiff sues the defendant for breach of contract and/or negligence and/or engaging in conduct which was misleading or deceptive concerning the provision of property valuations for the plaintiff whereupon the plaintiff suffered loss and damage. The defendant is a valuer. Third parties purchased properties and defaulted on their loans. The plaintiff sold the properties. Upon sale of each property there was a shortfall between the purchase price and the amount of the loan. The plaintiff seeks to recoup these losses. 6 By amended defence filed 22 February 2006 the defendant pleads firstly, that the plaintiff relied upon the valuation or representations that such reliance was wholly unreasonable in the circumstances; secondly, that the said loss (if any) was caused by the plaintiff's own negligence and ought be reduced in whole or in part accordingly; and thirdly, that the cause of the loss was not any breach on the part of the first defendant but by the conduct of third parties involved in the underlying transaction.

The Assistant Deputy Registrar's decision 7 Deputy Registrar Haggett in his decision stated: "8. In view of the submissions made by the defendant I find that there is a legitimate forensic purpose, that the documents sought are relevant and that they are likely to add to the defendant's case. For these reasons I also find that the documents sought do not constitute a fishing expedition. The applicants in correspondence with the defendant requested that they demonstrate "the relevance of each document to any issue". The defendant replied that "our client is entitled to investigate the sales of each of the properties which are the subject of these proceedings and directly relevant to the loss allegedly suffered by the plaintiff." I regard this as sufficient to rebut any presumption of "fishing"."

8 Deputy Registrar Haggett continued: "9. … There is no evidence in this regard nor is there any evidence that the subpoenas are too wide or oppressive or that there was difficulty in complying with them. The defendant has submitted that it has been specific in the categories of documents and that no objection has been raised in respect thereto. The only subpoena that would need to be limited, would be the subpoena to Jocali which is to be limited to 1 Bondi and 2 Bondi." 9 Deputy Registrar Haggett dismissed the applicants notices of motion filed 2 May 2005 and ordered that the applicants are to pay the defendant's costs of the motions. 10 In National Employer's Mutual General Association v Waind & Hill [1978] 1 NSWLR 372 three steps were outlined in respect to seeking to have a third party bring documents to court and their use. The first step is producing the documents to the court and determining objections to the subpoena including abuse of process and oppressiveness. The second step is the determination by the court concerning the use of the documents including whether permission should be given to parties to inspect the documents. The third step is admission into evidence of those documents. The onus is on the subpoenaing party to show that subpoenas have been issued for a legitimate forensic purpose. 11 In Carroll v The Attorney-General for New South Wales (1993) 70 A Crim R 162 the New South Wales Court of Appeal (per Mahoney AP) stated at 181: "There is a distinction between a subpoena which requires production of documents from a party in a proceeding and one which requires production of documents from a third party. To an extent, the court will allow to a party subpoenaing documents a somewhat broader latitude in obtaining for inspection documents from a third party which, being from a third party, could not have been obtained on discovery or otherwise in the proceeding: see Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at 573; Burchard v Macfarlane [1891] 2 QB 241 at 147-148, 251. But it is not the right of a party to litigation, merely by subpoenaing documents from a third party, to achieve inspection of them. As I have said, the court must, in general, be satisfied that the documents are relevant to an issue for decision by the court in the litigation. It is not open to a party, as on a "fishing expedition", to subpoena documents merely in order to determine whether they may be relevant and may be of assistance to his case in the proceeding." 12 There must be something beyond speculation, some common ground for belief that takes the case beyond a mere fishing expedition - see Lord Wilberforce in Air Canada v Secretary of State for Trade [1983] 2 AC 394 at 439 and 453 (quoted with approval in NSW Commissioner of Police v Tuxford & Ors [2002] NSWCA 139 [at 27]). 13 In Ali Tastan (1994) 75 A Crim R 498 Barr AJ stated (at 505-506): "A subpoena to produce documents will have a legitimate forensic purpose if it appears to be "on the cards" that the documents will materially assist the person at whose request the subpoena is used: Alister (1984) 154 CLR 404 at 414, per Gibbs CJ; A-G (NSW) v Stuart at 681; 21. On the other hand, there will be no legitimate forensic purpose if all the party is doing is trying to get hold of the documents to see whether they may assist him at all in his case: Commissioner for Railways v Small (1938) 38 SR (NSW) 564; Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Ltd (1952) 72 WN (NSW) 250." 14 The documents sought relate to only five of the nine properties referred to in the statement of claim. The subpoenae were issued to the Secretary, Jacoli, the Secretary, Guardian and the Secretary, 118 Bondi Road. 15 An examination of the alleged conduct of third parties is the issue to which the subpoenae are addressed. These third parties were firstly, the beneficiary of part of the funds provided by the plaintiff to finance the purchase of some of the properties (Guardian and Units 1 and 2, 118 Bondi Road); secondly, the purchasers and in turn the vendors of the relevant properties (Guardian in respect of 23 and 24 Hutchison Street) and they were the recipient of funds provided by the plaintiff; thirdly, the company in which shares were transferred giving effect to the transfers of the two company titled units (118 Bondi Road); fourthly, the vendors in sales financed by funds provided by the plaintiffs (Jocali); and fifthly, the party to whom a valuation was issued before it was assigned to the plaintiffs (Jocali for 1 Bondi). All these entities share a common director and shareholder, Mr Braham. Mr Braham is also a director of the real estate agent Sydney Prime Realty who requested the valuation of each of the properties. Mr Dominic Serafino was also a director of Sydney Prime Realty. 16 The original valuation report for 1 Bondi was prepared on account of Jocali. The valuation was later assigned to the plaintiff. Jocali sold shares in 118 Bondi in respect of 1 Bondi to the borrower on behalf of whom the plaintiff loaned moneys. Guardian received substantial settlement funds arising out of the sale of 1 Bondi, 2 Bondi and 11 Crown. It was the vendor of 23 Hutchinson and 24 Hutchinson. 118 Bondi was the company in which shares to 1 Bondi and 2 Bondi (company title properties) were held. As previously stated, the director of 118 Bondi was also Tony Braham. 17 The applicants counsel argued the proposition that normally a valuer is not entitled to the prior vendors private documents relating to the purchase of a property. Counsel gave the example that if a unit was purchased in Point Piper in the 1950's for £5,000 and sold in 2005 for $800,000 the valuer would not be entitled to those documents relating to the original purchase. However, if that person was purchase of a property such as Folio Identifier 23/SP64581 for $400,000 and on the same day as vendor on-sold it for $820,000, the situation, in my view is somewhat different. 18 The Deputy Registrar limited the subpoena addressed to Jocali to documents in relation to Units 1 and 2, in the 118 Bondi Road block of units. It is my view that all the subpoenas should be limited to Units 1 and 2, 118 Bondi Road. 19 The result is that I have arrived at the same decision to that of Deputy Registrar Haggett. There is a legitimate forensic purpose and the documents ought to be produced. They are not oppressive. The issue of the subpoenae are not an abuse of process. The decision of Deputy Registrar Haggett dated 22 August 2005 is affirmed. The notice of motion filed 23 September 2005 is dismissed. 20 Costs are discretionary. Costs usually follow the event. The applicants are to pay the respondent's costs of the review.

(1) The decision of Deputy Registrar Haggett dated 22 August 2005 is affirmed

(2) The notice of motion filed 23 September 2005 is dismissed.

(3) The applicants are to pay the respondent's costs of the review. **********

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