Grey v Zaratell Pty Ltd as Trustee for C and a Family Trust

[2005] WASC 56

GREY & ORS -v- ZARATELL PTY LTD As Trustee for C AND A FAMILY TRUST & ORS [2005] WASC 56

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2005] WASC 56
Case No:	CIV:1763/2002	Heard:	10 MARCH 2005
Coram:	MASTER NEWNES	Delivered:	12/04/05
No of pages:	11	Judgment Part:	1 of 1
Result:	Inspection limited in part
Category:	B
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Parties:	BRIAN ALBERT JOHNSTON GREY OLGA THERESE ANNE GREY ELLA WHITEMAN BARNETT DOROTHY MARGARET PEAD JONELLE INVESTMENTS PTY LTD (ACN 077 269 535) MARGARET RAE SPRY ZARATELL PTY LTD As Trustee for C AND A FAMILY TRUST (ACN 009 110 407) CARMELLO FRANCESCO RACCUIA ANITA RACCUIA ZARATELL PTY LTD (ACN 009 110 407) LINA DIFRANCO JOHN ROBERT DIPERNA
Catchwords:	Practice and procedure Application by defendant to limit inspection of documents produced under subpoena issued on behalf of plaintiffs to third party Relevant principles Turns on own facts
Legislation:	Transfer of Land Act 1893 (WA), s 55
Case References:	Apache Northwest Pty Ltd & ors v Western Power Corporation (1998) 19 WAR 350 National Employers' Mutual General Association Ltd v Waind & Anor [1978] 1 NSWLR 372 Newcastle City Council v Kern Land Pty Ltd & Anor, unreported; SCt of NSW, 9 December 1996 Schutt v Queenan [2000] NSWCA 341 Layne Christensen Co v Stanley [2003] WASC 103 Stanley v Layne Christensen Co [2004] WASCA 50

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION : GREY & ORS -v- ZARATELL PTY LTD As Trustee for C AND A FAMILY TRUST & ORS [2005] WASC 56 CORAM : MASTER NEWNES HEARD : 10 MARCH 2005 DELIVERED : 12 APRIL 2005 FILE NO/S : CIV 1763 of 2002 BETWEEN : BRIAN ALBERT JOHNSTON GREY

OLGA THERESE ANNE GREY
ELLA WHITEMAN BARNETT
DOROTHY MARGARET PEAD
JONELLE INVESTMENTS PTY LTD (ACN 077 269 535)
MARGARET RAE SPRY
Plaintiffs

AND

ZARATELL PTY LTD As Trustee for C AND A FAMILY TRUST (ACN 009 110 407)
First Defendant

CARMELLO FRANCESCO RACCUIA
ANITA RACCUIA
ZARATELL PTY LTD (ACN 009 110 407)
Second Defendants

LINA DIFRANCO
Third Defendant

JOHN ROBERT DIPERNA
Fourth Defendant

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Catchwords:

Practice and procedure - Application by defendant to limit inspection of documents produced under subpoena issued on behalf of plaintiffs to third party - Relevant principles - Turns on own facts

Legislation:

Transfer of Land Act 1893 (WA), s 55

Result:

Inspection limited in part

Category: B

Representation:

Counsel:

Plaintiffs : Ms E McCloskey
First Defendant : No appearance
Second Defendants : No appearance
Third Defendant : Mr P Redding
Fourth Defendant : No appearance

Solicitors:

Plaintiffs : Tottle Partners
First Defendant : No appearance
Second Defendants : No appearance
Third Defendant : Redding & Associates
Fourth Defendant : No appearance

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Case(s) referred to in judgment(s):

Apache Northwest Pty Ltd & Ors v Western Power Corporation (1998) 19 WAR 350
National Employers' Mutual General Association Ltd v Waind & Anor [1978] 1 NSWLR 372
Newcastle City Council v Kern Land Pty Ltd & Anor, unreported; SCt of NSW, 9 December 1996
Schutt v Queenan [2000] NSWCA 341

Case(s) also cited:

Layne Christensen Co v Stanley [2003] WASC 103
Stanley v Layne Christensen Co [2004] WASCA 50


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1 MASTER NEWNES: This is an application by the third defendant for an order limiting the inspection by the plaintiffs of certain documents produced by a firm of accountants pursuant to a subpoena issued on behalf of the plaintiffs.

2 The subpoena was issued in connection with an application by the third defendant to set aside a writ of fieri facias, and a land seizure notice dated 15 October 2004 issued pursuant to it, directed to certain land described as Lot 495 on Plan 4684 and being the whole of the land in Certificate of Title 2065 Folio 695. The land is known as 16 Sultana Road, High Wycombe and has been referred to on this application as the "Sultana Road land".

3 It is unnecessary for present purposes to go into the history of the proceedings between the parties in any detail. Suffice it to say that the plaintiffs, as mortgagees, brought proceedings against the defendants to recover moneys secured under a mortgage and to recover possession of the land the subject of the mortgage. They also sought an order that the third defendant withdraw a caveat lodged against the title to the land. The trial of the action took place in May 2004 and judgment was delivered on 10 June 2004. By that judgment, among other things, the defendants were ordered to deliver up vacant possession of the land and the third defendant was ordered to withdraw the caveat. The defendants were also ordered to pay the plaintiffs' costs of the action to be taxed. Those costs were subsequently taxed and allowed in an amount of $134,559.85.

4 On 8 October 2004 a writ of fieri facias (the "writ of fi fa") was issued on behalf of the plaintiffs. The land sought to be affected by the writ of fi fa was the Sultana Road land and a property in Cosson Way, High Wycombe, both properties being registered in the name of the third defendant.

5 The third defendant applied to set aside the writ of fi fa, contending that the properties were not owned by her beneficially but had been acquired, and are held, by her as trustee of the GTC Trust (the "Trust"). The third defendant says the Trust was established, and she was appointed trustee of the Trust, pursuant to a deed of settlement dated 19 July 1999.

6 The application to set aside the writ of fi fa and land seizure notice in respect of the Cosson Way property was not opposed by the plaintiffs, following an exchange of affidavits which satisfied the plaintiffs that the third defendant's contention as to the capacity in which she held the land was made out. The Sultana Road land remains in contention. The

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plaintiffs do not accept the third defendant’s contention that she holds the land on trust and resist the application to set aside the writ of fi fa in respect of that property.

7 In an affidavit sworn on 17 December 2004 in support of her application, the third defendant says that the Sultana Road land was purchased jointly by her as trustee of the Trust and by Faramist Holdings Pty Ltd as trustee of the C Terranova Trust, as tenants in common, by a contract of sale dated 20 August 1999. A copy of the contract was annexed to the affidavit. It describes the purchaser as "Faramist Holdings Pty Ltd as trustee for the C Terranova Trust and Lina Difranco as trustee for the GTC Trust". The third defendant says the land was acquired on behalf of the trusts for the purpose of the business of C & F Contracting (WA) Pty Ltd, which conducts a concrete, grano and panel work business. The shares in C & F Contracting are held by Faramist and the third defendant as trustees of the respective trusts. The third defendant says the property was purchased with funds borrowed by C & F Contracting from BankWest and that she is a guarantor of the loan.

8 A copy of the certificate of title annexed to the third defendant's affidavit shows that the Sultana Road land is registered in the names of Faramist and third defendant. It is the subject, among other things, of a mortgage to BankWest registered on 5 October 1999, the date on which the land was registered in the names of Faramist and the third defendant. The Register does not refer to the land being held on trust by the registered proprietors, but nothing turns on that. Section 55 of the Transfer of Land Act 1893 (WA) provides that the Registrar shall not enter notice of any trusts in the Register.

9 After the third defendant's application to set aside the writ of fi fa was made, the plaintiffs' solicitors requested the third defendant, by her solicitors, to produce the financial records of the Trust which evidence that she holds the Sultana Road land as trustee. They wrote to the third defendant's solicitors on 25 January 2005 reiterating that request.

10 In a further affidavit sworn on 9 February 2005 the third defendant says that until recently she was under the impression it was not necessary for the Trust to prepare financial statements. She says that having recently learned to the contrary, she has issued instructions to the accountants for the Trust to prepare financial statements for each year the Trust has operated. The third defendant also says that as trustee of the Trust she has not "maintained any real records". She says she has instructed the accountants for the Trust to assist her in preparing such

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records. The third defendant says that for those reasons she is currently unable to produce any records or financial statements of the Trust.

11 The third defendant goes on in the affidavit to say that C & F Contracting occupies the Sultana Road property and, based on advice given by the accountants for the Trust, C & F Contracting pays no rent but instead pays the monthly amounts due under the BankWest mortgage. The third defendant says that the payment of those amounts "have been deemed to be and continue to be deemed to be" the equivalent of the rent that would ordinarily be payable by C & F Contracting. That has been the position since the property was acquired in 1999. The third defendant says that the Trust was established in 1999 for the (then) sole purpose of acquiring the Sultana Road property and was set up by "the accountants" on her instructions.

12 In a letter of 2 February 2005 from the third defendant's solicitors to the plaintiffs' solicitors, the third defendant’s solicitors said, among other things, that evidence that the Trust was initially established solely to acquire the land could be given "by the accountant who established the GTC Trust for our client." They also said that C & F Contracting uses the land "for business purposes", although there is no formal lease agreement between the parties.

13 The plaintiffs' solicitors, on the other hand, have put in evidence a photograph that appears to indicate that the Sultana Road land is undeveloped, apart from a small dwelling which they say their enquiries have revealed is occupied by an elderly gentleman named Guiseppe Difranco. A search of the telephone directory by the plaintiffs' solicitors has disclosed a telephone connection in the name of G Difranco to the address of the Sultana Road land.

14 The solicitors have had a telephone conversation with a representative of a firm of accountants, Gallucio Griggs, which indicates that Gallucio Griggs are the accountants for the Trust.

15 The plaintiffs' solicitors have caused subpoenas to be issued to BankWest and to Kernway Holdings Pty Ltd, which trades as Gallucio Griggs. The subpoena issued to Kernway Holdings seeks production of the following documents:

"1. Any and all documents, file notes, memoranda, working papers and/or other documentation, evidence in, recording or confirming the circumstances in which the

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GTC Trust came into existence and the purpose of its creation;

2. Any and all documents, file notes, memoranda, working papers and/or other documentation, evidence in, recording or confirming what property, if any is held by Lina Difranco as trustee of the GTC Trust and specifically documentation as to the capacity in which Lina Difranco holds her interest in the property commonly known as 116 Sultana Road, High Wycombe and which property is more particularly described as Lot 495 on Plan 4684 being the whole of the land in Certificate of Title Volume 2065 Folio 695; and

3. Any and all documents, file notes, memoranda, working papers, financial statements, books of account, records of receipts and expenditures, written accounting records, balance sheets, statements of income and expenditure and records and/or other documentation relating to the operation of the GTC Trust."

16 No application has been made by Kernway Holdings to set aside the subpoena and it has not objected to inspection by the plaintiffs of the documents produced under the subpoena. It is not suggested that any question of legal professional privilege arises in relation to the documents. The third defendant has applied, however, to limit inspection of the documents by the plaintiffs. I should say that it was not suggested that I should inspect the documents in question for the purpose of determining this application.

17 The third defendant submits first, that as trustee of the Trust she has a sufficient interest to object to inspection of the documents so far as they are not sought for a legitimate purpose as the documents relate to the affairs of the Trust, and secondly, that a number of the documents sought are not sought for a legitimate purpose in that they are not required for the proper determination of the application in question. The third defendant says that the only matter in contention in the substantive application is whether she holds the Sultana Road land as trustee of the Trust or in her own right.

18 The third defendant says that in light of her affidavit evidence there can be no doubt that the Trust exists and that it was created for the purpose of holding the Sultana Road land. Accordingly, par 1 of the

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subpoena is unnecessary. The third defendant says that par 2 goes further than is reasonably necessary in that it seeks documents relating to other property held by her as trustee of the Trust. The third defendant says the plaintiffs has already conceded that she holds the Cosson Road property as trustee of the Trust. Whether other land, apart from the Sultana Road land, is so held is irrelevant to the substantive application. The third defendant also contends that par 3 goes further than is reasonably necessary in that it seeks documents relating to the operation of the Trust generally, whereas the sole issue is whether the Sultana Road land is held on behalf of the Trust.

19 The third defendant argued that the documents are not, therefore, sought for any legitimate forensic purpose that has been identified or which requires determination by the Court. It was submitted that the subpoena was a "fishing" expedition, apparently directed to the plaintiffs' pending application in the Federal Court for a sequestration order in respect of the estate of the third defendant.

20 The plaintiffs says the documents are relevant to the issue of the capacity in which the third defendant holds the Sultana Road land and also to her credit. As the third defendant has deposed that the Trust was established to acquire and hold the Sultana Road land, it is legitimate to seek relevant documents in relation to that from the accountants who are said to have established the Trust, especially in circumstances where the third defendant, by her solicitors, had previously said that those accountants could give evidence as to the reasons for the establishment of the Trust.

21 As to par 3 of the subpoena, the plaintiffs says that if the property was held on trust it was reasonable to expect that there would be documents recording transactions relating to it. Moreover, the plaintiffs say that the third defendant had previously indicated that she was prepared to verify on oath the financial position of the trust. Now, apparently, not only is the third defendant not prepared to do that, she wishes to prevent the plaintiffs from having access to documents relating to the Trust's financial affairs.

22 The plaintiffs did not put in issue the third defendant's right to make the application to limit inspection of the documents produced under the subpoena. It was not contended by the plaintiffs that this application was not open to the third defendant, nor was it contended that the third defendant did not have a sufficient interest to maintain the application.

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23 The principles to be applied in the exercise of the Court's discretion to permit inspection of documents produced under subpoena were described in National Employers' Mutual General Association Ltd v Waind & Anor [1978] 1 NSWLR 372 by Moffitt P (with whom Hutley JA and Glass JA agreed) as follows (at 385):

"The crucial question in relation to the exercise of the discretion to permit inspection … is whether the documents have apparent relevance to the issues. … The judge is in some difficulty in determining whether documents are relevant prior to the presentation of the evidence or at the commencement of the case. If there is particular objection from the witness, or questions of privacy are involved, no doubt procedures can be adopted to ensure that only relevant documents are inspected. In other cases, it would appear appropriate to proceed to exercise the discretion, provided the documents are apparently relevant or are on the subject matter of the litigation. However, the limitation on the exercise of the judge's discretion to allow inspection is that the document contains information of apparent relevance to the issues. Once the judge has that opinion, inspection will normally be allowed, notwithstanding that the document is not admissible as it stands, and notwithstanding that the party seeking inspection has not given any undertaking to tender it, or use it in cross-examination."

24 In Apache Northwest Pty Ltd & Ors v Western Power Corporation (1998) 19 WAR 350, the Full Court said (at 373) that that passage was a correct statement of the law and practice in civil proceedings in this State.

25 Once apparent relevance is shown, inspection will generally be ordered as a matter of discretion, in the absence of good reason being shown to the contrary. Moreover, it is important to recognise that "relevance" is not limited to the introduction of documents into evidence. Their relevance may lie in giving rise to a line of enquiry which is relevant to the issues before the trier of fact: Apache Northwest (supra) at 374.

26 Where there are objections on reasonable grounds to inspection, inspection should only be ordered if the Court is of the opinion that the order is necessary, either for disposing fairly of the proceedings, or for saving costs. In this context, "necessary" is used in the broad sense of embracing any document which has value, at least in the sense of apparent relevance, in fairly disposing of the proceedings, even if it might not

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readily be seen, at the pre-inspection stage, necessarily to be admissible in evidence: Apache Northwest (supra) at 375-6.

27 It is also of relevance in the present case that the information sought is apparently exclusive to the third defendant: see Newcastle City Council v Kern Land Pty Ltd & Anor, unreported; SCt of NSW, 9 December 1996, McLelland CJ in Eq; Schutt v Queenan [2000] NSWCA 341 per Mason P at [14].

28 In my view, the ambit of par 1 of the subpoena does not extend beyond legitimate issues on the substantive application. The third defendant has contended that the Trust was established for the purpose of acquiring and holding the Sultana Road land and that, consistent with that, the land was acquired and is so held. The purpose for which the Trust was created was put forward by the third defendant as relevant to her contention that the land was so acquired and is so held. I consider the plaintiffs are entitled to inspect documents which are relevant to the purpose for which the Trust was established.

29 I accept that par 2 of the subpoena goes further than is warranted insofar as it is not limited to documents relating to ownership of the Sultana Road land but seeks documents relating to any property held by the third defendant as trustee of the Trust. I would not therefore allow inspection of documents that relate solely to other property of the Trust and do not touch upon the issue of whether or not the Sultana Road land is held by the third defendant as trustee of the Trust.

30 I would, however, grant liberty to the parties to apply if any difficulties arise in connection with that limitation and liberty to the plaintiffs to apply to vary or set aside the order to the extent of that limitation following inspection of the balance of the documents produced pursuant to that paragraph.

31 In relation to par 3 of the subpoena, I accept that the financial affairs generally of the Trust are not in issue. It appears, however, that the Sultana Road land is a substantial asset of the Trust and, together with the Cosson Road land, the only real property said to be held by the Trust. The third defendant has said that the original purpose of setting up the Trust was to acquire the Sultana Road land. That land, it is said by the third defendant, has been made available to C & F Contracting for the purpose of its business. The third defendant, as trustee of the Trust, holds half of the issued shares in C & F Contracting. The third defendant has not referred to any other commercial activities in which the Trust is involved

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or suggested that documents concerning activities unrelated to those I have mentioned would be caught by the subpoena. In the circumstances, I am satisfied that the documents specified in par 3 have apparent relevance to the matters in issue and I would allow inspection of them.

32 I will hear the parties on the form of orders and on costs.