Verduci v Macquarie Bank Limited [2003] VSC 77

5. In the course of its application for an asset preservation order[1], the first defendant served a notice to produce dated 3 March 2003 on the respondent plaintiffs. By a Summons dated 6 March 2003, the plaintiffs sought an order that the notice to produce be set aside.

8. After hearing argument from both parties on 7 March 2003, I ruled that the application to set aside the notice to produce would be dismissed. In order not to delay further the uncompleted hearing of the application for an asset preservation order, I indicated that I would publish my reasons for dismissing the plaintiffs' application at a later date. Those reasons follow.

11. The notice to produce listed eight documents or categories of documents. Mr Cawthorn of counsel, who appeared for the first defendant, referred me to r.35.08(1) of the Supreme Court (General Civil Procedure) Rules 1996 ("the Supreme Court Rules"), which permits a notice to produce to be served requiring documents to be produced "on any application in ... the proceeding" and to r.35.08(2) which provides that "unless the court otherwise orders" or a party claims privilege, "the party on whom the notice is served shall produce on the application ... such of the documents mentioned in the notice as are in his possession, custody or power ..." Mr Cawthorn said that he also relied on r.29.10 of the Supreme Court Rules, because reference was expressly or impliedly made, in various affidavits sworn by Mr Verduci, to all of the categories of documents. The first five categories were linked in the notice to produce itself to particular paragraphs of the affidavit of Mr Verduci sworn on 27 February 2003 ("Mr Verduci's first affidavit"). The sixth category was linked in the notice to produce to a particular paragraph of the affidavit of Mr Verduci sworn on 28 February 2003 ("Mr Verduci's second affidavit"). Mr Cawthorn submitted that the last two categories were expressly or impliedly referred to in Mr Verduci's first and second affidavits and in his affidavit sworn on 6 March 2002 ("Mr Verduci's third affidavit").

14. Mr Bick QC, who appeared with Mr Hanak of counsel for the plaintiffs, submitted that the notice to produce should be set aside on the grounds that:

(i) the notice was not limited to documents of the plaintiffs, but was clearly intended to elicit documents belonging to third parties, including companies and trusts associated with the Verduci family;

(ii) the whole, or some parts, of the notice were too wide and oppressive;

(iii) the notice was fishing in that it sought to find out what, if any, connection the plaintiffs had with the assets owned by companies and trusts not respondents to the application; and

(iv) the documents were sought to test the evidence of the plaintiffs.

20. Mr Bick also submitted that the notice to produce was not directed to the threshold question of whether or not the Court should make an asset preservation order, but was seeking to provide a mechanism for policing such an order which the Court might be persuaded to make after hearing the argument on the substantive application.

23. I shall consider in turn each of the eight categories of documents set out in the notice to produce. The first category is:

"Advice regarding the structure of the family business and financial and legal affairs referred to in paragraph 10 of the affidavit of Rocco Verduci sworn 27 February 2003 ('27/2 affidavit')."

27. I set out in full paragraph 10 of Mr Verduci's first affidavit:

"10. I estimate that since 1982, I have purchased between 70 and 80 properties and sold between 67 and 77 properties purchased in my name or in the name of Rocco and/or Genina Verduci. I recall that in or around 1997, approximately 44 properties were held in my name or in the name of Rocco and/or Genina Verduci. However, in or around the early 1998, after receiving advice regarding the structure of my family business and my family's financial and legal affairs and its heavy debt level, I commenced selling properties in my name or in the name of Rocco and/or Genina Verduci. The purchase of properties since then has occurred mainly in the name of Jinari Pty Ltd ('Jinari'). Initially, a few properties were transferred directly to Jinari from my name or from Genina's and my names. Most, however, were simply sold as part of the business plan formulated with my advisers in early 1998."

31. Mr Bick submitted that this category of document should not have to be produced because it was not relevant to the question of whether or not an asset preservation order should be made. The first defendant was seeking this document, he said, simply "to test" Mr Verduci's evidence. I must say that I did not really follow this argument. In my opinion, Mr Verduci's evidence that the current disposal of properties by him and his wife was pursuant to advice received some years earlier was relevant to the question of whether or not an asset preservation order should be made, and the existence of such advice, was an important point in considering his assertion. I see no reason why his evidence cannot be "tested" in this way in the application for an asset preservation order. In my opinion, paragraph 1 of the notice to produce should therefore stand.

34. The second category of documents in the notice to produce is:

"Business plan referred to in paragraph 10 of the 27/2 affidavit."

38. Mr Bick submitted that this category was "far too wide" because the business plan referred to was not limited to a plan for the plaintiffs. I disagree. If there is a document in which Mr Verduci's advisers formulated a business plan for him and his wife, it should be produced for the same reasons I have given in respect of category one above. It is irrelevant, in my opinion, if the business plan went beyond advising about Mr and Mrs Verduci's personal affairs and included discussion about the affairs of other entities. Paragraph 2 of the notice to produce therefore stands.

"Contracts of Sale and transfer of properties owned in the name of R & G Verduci and sold or disposed of since 1998: paragraph 10 of the 27/2 affidavit."

45. Mr Bick again submitted that this category was simply seeking to "test" Mr Verduci's statements in paragraph 10 of his first affidavit. He also submitted that it was oppressive to have to produce the 67 to 77 contracts of sale and transfers referred to in that paragraph. In fact, the reference to this number of sales was in respect of the period since 1982, whereas the notice to produce was limited to sales since 1998. Thus, the number of sales in question would be about 35, but this figure is approximate because it was not clear to me how many properties had been sold or disposed of in this period. Mr Cawthorn submitted that there was no material in support of the submission that it was oppressive. In any event, in the circumstances, I do not consider it to be oppressive to be required to produce all of the relevant contracts of sale and transfers in the plaintiffs' possession, custody or power. As I have previously rejected the submission based on the objection to having Mr Verduci's statements "tested", paragraph 3 of the notice to produce stands.

48. The fourth category of documents in the notice to produce is:

"Sale authorities relating to properties listed for sale: paragraph 21(a)(iii) of the 27/2 affidavit."

52. Mr Bick again submitted that this was impermissible "testing" of Mr Verduci's evidence. He also submitted that this was an example of the first defendant fishing. Paragraph 21(a)(iii) of Mr Verduci's first affidavit stated that ten of the remaining eleven properties had been listed for sale. Mr Bick argued that the first defendant's case depended on the fact that properties were currently listed for sale and that it was therefore unnecessary to produce documents establishing that fact. He further submitted that, as Mr Verduci said in the next sub-paragraph that contracts of sale had been executed before 13 November 2002 in respect of eight of the eleven properties, this was a further reason for regarding the sale authorities as irrelevant (at least in respect of the eight properties where contracts of sale had been executed).

55. Mr Cawthorn submitted that it was relevant to the first defendant's case for the making of an asset preservation order to know when these properties were listed for sale with real estate agents. Was this done before or after the demand for payment by the first defendant? This made all of sale authorities relevant. Mr Cawthorn also rejected the accusation of fishing. He submitted that the first defendant was seeking the documents to support its already established case, not to find out whether it could make out a case.[2]

58. In my opinion, the sale authorities relating to the ten properties referred to in paragraph 21(a)(iii) of Mr Verduci's affidavit should be produced by the plaintiffs. Paragraph 4 of the notice to produce is neither impermissible "testing" of the evidence, nor fishing.

"Documents relating to re-financing of the mortgage registered over 20 Kramer Drive, Berwick: paragraph 27 of the 27/2 affidavit."

65. The property in question was the plaintiff's home. Mr Bick's submissions were similar to the preceding paragraph - impermissible "testing" and fishing. He emphasised that the first defendant's case depended, in this respect, on the fact the plaintiffs were dealing with the equity in their home by the remortgaging. However, for the reasons set out above, I consider that the documents relating to the re-financing of the mortgage over the matrimonial home are relevant and that the plaintiffs should be required to produce them.

68. The sixth category of documents in the notice to produce is:

"Documents evidencing or relating to consultations with: * estate agents * property advisers between 4 September 2002 and the date referred to in paragraph 3 of affidavit of Rocco Verduci sworn 28 February 2003."

72. In paragraph 3 of Mr Verduci's second affidavit he deposed that "the decision to sell or buy each property is a business judgment, usually made by or in consultation with me and estate agents and property advisers I deal with on a regular basis". It is documents evidencing or relating to those consultations which were sought by the notice to produce.

75. Mr Bick submitted that such documents, if they existed, were irrelevant to an application for an asset preservation order. The fact that there had been sales was relied on by the first defendant. However, in my opinion, it is not fishing to require the opposing party to produce documents which it is hoped will support the allegation that properties are being sold to put assets out of the reach of the other party to the litigation. Documents relating to consultations between Mr Verduci and his estate agents and property advisers since 4 September 2002 are relevant, in my opinion, to that allegation. Paragraph 6 of the notice to produce therefore stands.

78. The seventh category of documents in the notice to produce is:

"Tax returns, income statements and accounts evidencing or recording capital and income distribution from: (a) the Verduci Discretionary Trust; (b) the GRV Investment Trust; (c) the Verduci Trading Trust; (d) the R & G Verduci Family Trust; (e) the Acceleration Business Class Trust; (f) the Jinari Trust; (g) the Konoton Trust; (h) the R & G Verduci Superannuation Fund."

"Trust Deeds for the trusts referred to in paragraph 7 above."

85. Although it is not expressly stated, the list of trusts set out in paragraph 7 of the notice to produce clearly has been taken from paragraph 13 of Mr Verduci's first affidavit. Mr Bick submitted that simply because these trusts were referred to by Mr Verduci that did not make their tax returns and financial statements or Trust Deeds relevant to an application for an asset preservation order against the plaintiffs. He submitted that these documents were sought to find out exactly what connection the plaintiffs had with the assets owned by these other entities. This had nothing to do with the question of whether or not an asset preservation order should be made. Mr Bick submitted that if the plaintiffs did have some form of interest in these trusts, and an unqualified asset preservation order was made against the plaintiffs, then these interests would be caught by the order. But the existence of such interests, he submitted, was not relevant to the threshold question.

88. Mr Cawthorn submitted that these documents were relevant to the question of whether or not an asset preservation order should be made because one discretionary issue was "the totality" of the plaintiffs' assets. These trust documents would enable a further picture to be obtained of the plaintiffs' assets. I agree with that submission. Further, it seems to me that the possible existence of various sources of income is certainly relevant to a consideration of what, if any, amounts should be left free for the plaintiffs to draw upon to meet their ongoing expenses. Indeed, Mr Verduci went into evidence on this very point when he deposed in his third affidavit that his current expenses of over $18,000 per month exceeded his and his wife's current monthly income of about $5,400. Normally, Mr Verduci said, he would be receiving approximately $3,000 per week instead of $3,000 per month from the market gardening business of Verduci Trading Pty Ltd, but the time involved in preparing this litigation and associated damaging publicity had caused cash flow problems for Verduci Trading Pty Ltd.

91. I reject the argument that these categories of documents are aimed at documents "belonging to third parties". If the documents are not in the possession, custody or power of the plaintiffs, then they cannot be required to produce them. But if they are in the possession, custody or power of the plaintiffs the documents should be produced because they are relevant, in my opinion, to the question of whether or not an asset preservation order should be made in this case. Therefore, categories 7 and 8 of the notice to produce also stand.

94. As stated at the conclusion of the argument, I consider that the application to set aside the notice to produce should be dismissed.

[1] The origin of this terminology for a Mareva type injunction or order is to be found in Cardile v Led Builders Pty Ltd (1999) 198 CLR 380 at 393 per Gaudron, McHugh, Gummow and Callinan JJ and at 411-2 per Kirby J and Pelechowski v The Registrar, Court of Appeal (NSW) [1999] HCA 19; (1999) 198 CLR 435.

[2] See the distinction drawn by Jordan CJ in Commission for Railways v Small (1938) 38 SR (NSW) 564 at 575.