Becwell Legal Services Pty Ltd v McMaster

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FEDERAL COURT OF AUSTRALIA

Becwell Legal Services Pty Ltd, in the matter of Griffin Energy Group Pty Ltd (Subject to Deed of Company Arrangement) v McMaster [2011] FCA 1501

Citation: Becwell Legal Services Pty Ltd, in the matter of Griffin Energy Group Pty Ltd (Subject to Deed of Company Arrangement) v McMaster [2011] FCA 1501
Parties: BECWELL LEGAL SERVICES PTY LTD ACN 116 449 506 v BRIAN KEITH MCMASTER, SCOTT BRADLEY KERSHAW AND CLIFFORD STUART ROCKE EACH IN HIS CAPACITY AS DEED ADMINISTRATOR OF GRIFFIN ENERGY GROUP PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 008 681 696 and GRIFFIN ENERGY GROUP PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 008 681 696
File number(s): NSD 1966 of 2011
Judge: YATES J
Date of judgment: 23 December 2011
Catchwords: PRACTICE AND PROCEDURE – application to set aside subpoenas and notice to produce
Legislation: Corporations Act 2001 (Cth) ss 588FB, 1321(1)(ca)
Federal Court Rules 2011 r 24.15
Cases cited:

Alister v The Queen (1984) 154 CLR 404
Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Ltd (1952) 72 WN (NSW) 250
Australian Competition Consumer Commission v Shell Co of Australia Ltd (1999) 161 ALR 686
Bailey v Beagle Management Pty Ltd (2001) 105 FCR 136
Cosco Holdings Pty Ltd v Federal Commissioner of Taxation (1997) 37 ATR 432
Dorajay Pty Ltd v AristocratLeisure Limited [2005] FCA 588
Hamilton v Oades (1989) 166 CLR 486
Hennessy v Wright (No 2) (1890) 24 QBD 445
Kizon v Palmer (1997) 75 FCR 261
McIlwain v Ramsey Food Packaging Pty Ltd (2005) 221 ALR 785
Pasini v Vanstone [1999] FCA 1271
Seven Network Ltd v News Ltd (No 5) (2005) 216 ALR 147
Spencer Motors Pty Ltd v LNC Industries Ltd [1982] 2 NSWLR 921
Tamawood Limited (ACN 010 954 499) v Habitare Developments Pty Ltd (ACN 122 935 497) [2009] FCA 364
The Commissioner for Railways v Small (1938) 38 SR (NSW) 564
Trade Practices Commission v Arnotts Limited (No 2) (1989) 88 ALR 90

Treasurer of the Commonwealth of Australia v Canwest Global Communications Corp [1997] FCA 578

Date of hearing: 16 December 2011
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 49
Counsel for the Applicant: Mr J Svehla
Solicitor for the Applicant: Donald Edward Pearson of Becwell Legal Services Pty Ltd
Counsel for the Respondents: Ms K Dawson
Solicitor for the Respondents: Corrs Chambers Westgarth

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1966 of 2011


IN THE MATTER OF GRIFFIN ENERGY GROUP PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 008 681 696

BETWEEN:

BECWELL LEGAL SERVICES PTY LTD ACN 116 449 506
Plaintiff
AND:

BRIAN KEITH MCMASTER, SCOTT BRADLEY KERSHAW AND CLIFFORD STUART ROCKE EACH IN HIS CAPACITY AS DEED ADMINISTRATOR OF GRIFFIN ENERGY GROUP PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 008 681 696
First Defendants

GRIFFIN ENERGY GROUP PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 008 681…

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Details
Case
[2011] FCA 1501
Decision Date

CaseChat Overview and Summary

Becwell Legal Services Pty Ltd initiated legal proceedings against McMaster and the Deed Administrators of Griffin Energy Group Pty Limited and The Griffin Coal Mining Company Pty Limited, seeking to enforce claims for payment under retainer agreements. The defendants sought to investigate the validity and admissibility of these claims by issuing subpoenas and a notice to produce. The plaintiff objected to the scope of these documents, arguing they were irrelevant to the current issues in the case. The court examined the necessity of the documents for the defendants' investigation and whether they had a presently known basis for challenging the retainer agreements.

The court found that the defendants lacked a specific and present basis for challenging the retainer agreements, and the subpoenas and notice to produce were not appropriately tailored to the current issues. The court determined that the documents sought were largely irrelevant to the proceedings and set aside the subpoenas and notice to produce in part. The court granted leave to the defendants to reissue modified subpoenas focusing only on specific costs agreements relevant to the retainer agreements. The court also ordered the plaintiff to file a statement of claim and the defendants to file a defence, setting further directions for the proceeding.

In summary, the court partially upheld the plaintiff's objections, limited the scope of the defendants' investigation, and set a timeline for the filing of statements of claim and defences, along with a direction for further proceedings.

Orders

Orders of the court

1. The subpoenas issued on 5 December 2011 and addressed to:

(a) The Proper Officer, Devereaux Holdings Pty Ltd ACN 008 675 830 (DH);

(b) The Proper Officer, WR Carpenter Investments Pty Ltd ACN 092 213 539 (Carpenter); and

(c) The Proper Officer, Carpenter Mine Management Pty Ltd ACN 106 053 703 (CMM),

be set aside.

2. Leave be granted to the first and second defendants to issue subpoenas to:

(a) DH in the form of the subpoena issued with respect to DH on 5 December 2011;

(b) Carpenter in the form of the subpoena issued with respect to Carpenter on 5 December 2011; and

(c) CMM in the form of the subpoena issued with respect to CMM on 5 December 2011,

with the schedule to the subpoena modified in each case by:

(d) deleting paragraphs 4 and 5 thereof;

(e) inserting at the end of paragraphs 2, 3, and 6 thereof the words “pursuant to or in respect of any costs agreement(s) referred to in paragraph 1”; and

(f) making all consequential amendments as may be reasonably necessary, including the re-numbering of paragraphs.

3. The leave granted in order 2 be exercised by no later than 9 January 2012.

4. All subpoenas issued pursuant to the leave granted in order 2 be served by no later than 11 January 2012.

5. The notice to produce dated 5 December 2011 and served on the plaintiff by the defendants be read down in accordance with the annotated notice to produce on pages 81 to 83 of Exhibit DEP-A to the affidavit of Donald Edward Pearson sworn 12 December 2011 save that, subject to further or other order, “Insert 1” is to be disregarded.

6. All subpoenas issued pursuant to the leave granted in order 2, and the notice to produce, be returnable before a Deputy District Registrar at 9.30 am on 18 January 2012.

7. The first defendants pay the plaintiff’s costs of the interlocutory application dated 12 December 2011, as amended by leave granted on 16 December 2011.

8. Orders 4, 5 and 6 made on 2 December 2011 be vacated.

9. The plaintiff file and serve on or before 16 January 2012 a statement of claim identifying the precise basis on which it seeks to support the proofs of debt the subject of this proceeding.

10. The defendants file and serve on or before 3 February 2012 a defence identifying the precise basis on which they oppose the plaintiff’s claims.

11. The plaintiff file and serve on or before 10 February 2012 any reply.

12. The proceeding be listed for further directions before Yates J at 9.30 am on 13 February 2012.

13. A copy of these orders be served on DH, Carpenter and CMM by the defendants by no later than 9 January 2012.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

For the reasons which follow, I am of the view that the plaintiff’s application succeeds in part.Background On 28 February 2011 Griffin Energy Group Pty Limited (Subject to Deed of Company Arrangement) (GEG) and The Griffin Coal Mining Company Pty Limited (Subject to Deed of Company Arrangement) (GCMC) entered into separate deeds of company arrangement. GEG was a party to the GCMC deed of company arrangement. Under that deed, GEG assumed responsibility for all claims, except certain defined claims, made against GCMC. The GEG deed of company arrangement provided a regime for dealing with the claims of an Admitted Creditor, as defined. In substance, the Deed Administrators were required to admit such a claim if, had GEG been in liquidation, and had the Deed Administrators been liquidators of GEG, they would have admitted the claim for proof in the liquidation of GEG. The first defendants are the Deed Administrators under the GEG and GCMC deeds of company arrangement. On 1 October 2009 the plaintiff entered into written terms of engagement with GEG and GCMC for the provision of work relating to taxation and general commercial advice. The plaintiff is an incorporated legal practice. Its solicitor/director is Donald Edward Pearson. Mr Pearson was a director of GCMC in the period from 14 November 2003 to 28 February 2011, the date on which the GCMC deed of company arrangement was entered into. Mr Pearson was also a director of DH in the period from 14 November 2003 to 14 January 2010. DH, GEG and GCMC were part of the one group of companies. The written terms of engagement were expressed to be a “retainer agreement” under which the plaintiff agreed to make Mr Pearson’s services available to GEG and to GCMC and its subsidiary companies, “at call”, for which the plaintiff would receive each month a lump sum payment of $100,000 plus GST. GEG, GCMC and the subsidiary companies were also required to reimburse the plaintiff for expenses it incurred on their behalf. Clause 3 of the written terms of engagement relevantly provided:... the company agrees to cap the aggregate of the charges it will make, pursuant to the terms of this costs agreement and to the terms of a costs agreement of even date entered into with the directors of [CMM] and Carpenter Mine Management Holdings Pty Ltd, [DH] and [Carpenter] to an annual amount of $1,452,000 (inclusive of GST) for each year during the term of this agreement. The written terms of engagement were expressed to be “fully effective and binding until 20 October 2011”. The plaintiff says that it performed its obligations under the written terms of engagement. It says that it continued to make Mr Pearson available at call in that period, including after the appointment of the first defendants as administrators of GEG and GCMC. It says that it performed specific tasks pursuant to requests made by the first defendants and the first defendants’ legal advisers. On 24 March 2011 the plaintiff lodged a proof of debt under the GEG deed of company arrangement in its capacity as a creditor of GEG. It also lodged a proof of debt under the GEG deed of company arrangement in its capacity as a creditor of GCMC. In each case its claim was for $2.42 million.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

The plaintiff objects to production being required under paragraphs 7 and 8 of the notice to produce. Once again, its objection is that the documents sought in those paragraphs relate to matters that have no apparent relevance to the claims it makes in this proceeding.Consideration Subject to one matter to which I shall refer, I am of the view that the plaintiff’s objections are soundly based. In essence the documents sought by the subpoenas and the notice to produce, in the paragraphs to which objection has been taken or in those parts of the paragraphs in respect of which a limitation is sought, are documents which relate to matters, or if not limited will relate to matters, that do not have an apparent relevance to the issues that currently exist between the parties to this proceeding. The first defendants support the subpoenas and the notice to produce on the basis that they need to fully investigate whether the proofs of debt should be admitted. They submit that they need to investigate the circumstances in which the written terms of engagement were entered into in order to form a view whether it constitutes, for example, a voidable transaction. In this connection the first defendants instanced the possibility that the written terms of engagement might constitute an uncommercial transaction, without articulating any known and present basis for such a claim: s 588FB of the Act. In a similar fashion, the first defendants also argue that there may be other possible bases on which the written terms of engagement might be open to challenge. It is not clear to me how the paragraphs or parts of paragraphs to which objection has been taken would throw up documents that might challenge the validity of the written terms of engagement. But quite apart from this, the first defendants’ submissions expose the weakness of their position. Those submissions show that the first defendants are unable to identify a precise and presently known basis on which the terms of engagement will be challenged. They see the subpoenas and notice to produce as fulfilling the function of facilitating a process of investigation that might expose a presently unknown basis for such a challenge. This is not the proper function of a subpoena to produce documents or of a notice to produce documents; nor is it permissible to issue or serve such process for that purpose. The first defendants did raise the possibility that the documents it seeks may expose a basis on which clause 3 of the written terms of engagement might be brought into play to provide a cap on the claims advanced under the proofs of debt. However, the plaintiff raises no objection to production of the costs agreements referred to in clause 3, assuming them to exist in the case of DH and Carpenter, or, subject to the question of partial redaction, of the invoices issued by the plaintiff and records of payments in relation to costs charged under those agreements. I am unable to see how the other paragraphs of the subpoena and the notice to produce, to which the plaintiff makes objection, will throw up documents that can assist in determining whether the cap referred to in clause 3 of the written terms of engagement is operative in relation to the period from 1 October 2009 to 20 October 2011.