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[2014] FCA 403
Federal Court of Australia
2014-04-24
Mr P, Gordon J
Original judgment source is linked above.
INTRODUCTION 1 This proceeding is one of many related proceedings. The litigation has a long history. On 20 December 2013, the applicant creditors filed a creditor's petition in this proceeding. The creditor's petition was founded upon an act of bankruptcy by the failure of Mr Shaw (the Respondent) to comply with a bankruptcy notice, or to satisfy the court that he had a counter-claim, set-off, or cross demand equal to, or more than, the sum claimed in the bankruptcy notice which was served on him on 14 December 2012 (the Bankruptcy Notice). The Bankruptcy Notice was founded on a debt of just over $388,000 due to the applicant creditors. 2 A number of steps have been taken since the service of the Bankruptcy Notice. First, the Respondent applied to set aside the Bankruptcy Notice. That application was dismissed on 25 October 2013 and is currently the subject of an appeal to be heard in the May sittings of the Full Court of the Federal Court. Second, the Respondent, applied to adjourn this proceeding - the hearing of the creditor's petition for a sequestration order. That application is set for hearing on 30 May 2014.
NOTICE TO PRODUCE 3 The Respondent has now served a notice to produce dated 8 April 2014 on the Applicant Creditors (the Notice to Produce). The Notice to Produce seeks production of the following documents or things at the hearing on 30 May 2014: 1. All invoices & receipts including but not limited to statements and memoranda relating to payment by Yarranova for services rendered by [Arnold Bloch Leibler (ABL)] to Yarranova relating to costs orders & judgement (sic) debts which are the basis of bankruptcy application BN8049. 2. All financial documents, including but not limited to statements and memoranda, relating to legal costs incurred by Yarranova Pty Ltd that relate to the costs orders which form the basis for bankruptcy application BN8049. 3. All documents, letters, emails & file notes including but not limited to statements and memoranda, relating to Yarranova's belief that the [Respondent] is insolvent & instructions to ABL to make the Bankruptcy application BN8049. 4. All documents, letters, emails & file notes including but not limited to statements and memoranda, relating to payments made by Yarranova to ABL, Newquay Stage 2 Pty Ltd (Newquay) and MAB Corporation in relation to the costs orders which form the basis for bankruptcy application BN8049. 5. All documents, letters, emails & file notes including but not limited to statements and memoranda, verifying Yarranova's liability to pay Newquay and MAB Corporation Pty Ltd legal expenses incurred by Newquay and MAB Corporation Pty Ltd relating to the costs orders which form the basis for bankruptcy application BN8049. 6. All invoices & receipts including but not limited to statements and memoranda relating to payment by Newquay for services rendered by ABL to Newquay relating to costs orders & judgement (sic) debts which are the basis of bankruptcy application BN8049. 7. All financial documents, including but not limited to statements and memoranda, relating to legal costs incurred by Newquay that relate to the costs orders which form the basis for bankruptcy application BN8049. 8. All documents, letters, emails & file notes including but not limited to statements and memoranda, relating to Newquay's belief that the plaintiff is insolvent & instructions to ABL to make the Bankruptcy application BN8049. 9. All documents, letters, emails & file notes including but not limited to statements and memoranda, relating to payments made by Newquay to ABL and MAB Corporation in relation to the costs orders which form the basis for bankruptcy application BN8049. 10. All documents, letters, emails & file notes including but not limited to statements and memoranda, verifying Newquay's liability to pay MAB Corporation legal expenses incurred by MAB Corporation Pty Ltd relating to the costs orders which form the basis for bankruptcy application BN8049. The Notice to Produce was served on the solicitors for the applicant Creditors, Arnold Bloch Leibler, by email. I was informed from the bar table that the email address used by the Respondent was the same email address he has used when communicating with Arnold Bloch Leibler for a number of years. 4 The applicant creditors seek to set aside the Notice to Produce. Notice of that application was served on the Respondent using the same email address to which I have just referred. Documents which record, on their face, service on the Respondent of the application to set aside the Notice to Produce were tendered at the hearing. The Respondent did not appear.
ANALYSIS 5 For the reasons that follow, the Notice to Produce should be set aside. First, although it takes the form of a notice to produce, it is in fact an application for discovery. Second, the documents sought by way of discovery are, in my view, wide, oppressive and constitute fishing. Those conclusions require further explanation. 6 Before turning to the terms of the Notice to Produce, it is necessary to understand the bases on which the Respondent seeks to have the creditor's petition adjourned. There are two - that the applicant creditors' petition is an abuse of process and, further, that he has an off-setting claim not yet finally determined. I will deal with each in turn. 7 The first basis - that the applicant creditors' petition is an abuse of process is unparticularised. As Counsel for the applicant creditors' submitted, you are left to speculate as to what constitutes, or might constitute, the abuse. That is inappropriate. 8 In relation to the second basis - the alleged off-setting claim - that is more difficult in one sense. An aspect of the question of the alleged off-setting claim came before the Court of Appeal of the Supreme Court of Victoria in Shaw v Yarranova Pty Ltd [2014] VSCA 48. The Court of Appeal noted that "the serious nature of the allegations which the [Respondent] wishes to make mandates that his application to set aside the earlier orders be made by writ with a properly particularised and detailed statement of claim". Two matters should be noted. No proceeding has been filed in the Supreme Court dealing with those issues and, secondly, to some extent, those issues have already been the subject of proceedings in this court before Tracey J and dismissed. 9 It is against that background, that the Notice to Produce needs to be addressed. 10 Mr Fary, Counsel for the applicant creditors, divided the documents sought into two categories. I propose to adopt those categories for the sake of convenience. The first are those identified in paragraphs 1, 2, 4, 5, 6, 7, 9 and 10 of the Notice to Produce. Mr Fary submitted that those categories appeared to be an attempt to fish for evidence to be used to seek to set aside the earlier orders. That is, they were seen to be directed to issues raised by the Respondent in the past and which were the subject of the observations of the Court of Appeal: see [8] above. Whether that is an accurate description or not may be put to one side. What is self-evident is that, on the material currently before this court, none of the materials referred to in those paragraphs appear to be directly relevant to, or pertain to, issues before this court. Even taking the second basis on which the Respondent seeks to have the creditor's petition adjourned at its highest, the documents sought fall outside a proper discovery request. 11 That leaves the second category of documents sought by the Notice to Produce - those referred to in paragraphs 3 and 8: see [3] above. On their face, they appear to seek documents of the most general kind relating to the applicant creditors' belief about the insolvency of the Respondent. There are two answers to those contentions. The Respondent bears the onus of establishing that he is solvent, not insolvent. Second, the applicant creditors' belief is irrelevant. 12 For those reasons, the Notice to Produce should be set aside. Those conclusions may seem harsh. They are not. The fact that they are not harsh is borne out by statements by Jordan CJ as long ago as 1938 in Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at 574 to 575. This often repeated passage is important. It reminds us all that it is inappropriate in a case of this nature, especially in the conduct of modern litigation, for parties to seek to use procedures before the court, whether by way of notice to produce, subpoenas or the like: 1. as a substitute for an application for discovery of documents; 2. in fishing for information or materials to support a case which has not yet been formulated; and / or 3. to obtain to evidence to determine whether one exists at all. 13 As Mr Fary submitted there are proper procedures before the court for pre-application discovery. And, of course, for the purposes of proper disclosure, exchange of documents and information relevant to disputed questions of fact and law in existing proceedings remains part of the adversarial nature of litigation. However, each is subject to particular rules and other case management considerations. In the circumstances of this case, the Respondent's Notice to Produce does not satisfy those rules and is inconsistent with proper case management principles.
ORDERS 14 For those reasons, the Notice to Produce will be wholly set aside. I will also order that the Respondent pay the applicant creditors' costs of, and incidental to, the application. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon.
Yarranova Pty Ltd
Shaw
[2014] VSCA 48