HRF Nominees Pty Ltd (In Liq) & Others v Man Civil Constructions Pty Ltd & Others (No.2)

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT
CORPORATIONS LIST

S CI 2012 03303

HRF NOMINEES PTY LTD (ACN 139 212 678) (In Liquidation) ATF HRF CONSTRUCTIONS UNIT TRUST	First Plaintiff
- and -
PAVJO PTY LIMITED (ACN 109 516 289)	Second Plaintiff
v
MAN CIVIL CONSTRUCTIONS PTY LTD (ACN 154 144 322) (and others according to the Schedule attached hereto)	Defendants

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JUDGE:	Derham AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	13 May 2014
DATE OF JUDGMENT:	8 December 2014
CASE MAY BE CITED AS:	HRF Nominees Pty Ltd (In Liq) & Others v Man Civil Constructions Pty Ltd & Others (No.2)
MEDIUM NEUTRAL CITATION:	[2014] VSC 613

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PRACTICE AND PROCEDURE – Subpoena to non-party before trial – Production to Prothonotary under special procedure – Requirement that production be sought ‘For evidence’ – Application to set aside subpoena – Whether legitimate forensic purpose – Order 42A.01.

PRACTICE AND PROCEDURE – Privilege against self-incrimination or self-exposure to a penalty – Proceeding against a director of first plaintiff for breach of fiduciary duties and director’s duties under ss 180, 181 and 182 of the Corporations Act 2001 (Cth) – First plaintiff’s business alleged to have been ‘phoenixed’ into the first defendant – Objection to inspection of subpoenaed documents on grounds of the privileges – Evidence Act 2008 (Vic) s 130.

PRACTICE AND PROCEDURE – Subpoena – Client legal privilege.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr R. L. Moore	Logie-Smith Lanyon
For the First, Second, Third, Sixth and Seventh Defendants	Mr H. Herskope	Irlicht & Broberg
No appearance for the Fourth and Fifth Defendants

TABLE OF CONTENTS

Introduction......................................................................................................................................... 2

Background......................................................................................................................................... 4

The Summons..................................................................................................................................... 8

Application to Set Aside Subpoena to Sinclair Wilson............................................................ 16

Defendants’ Submissions............................................................................................................... 23

Plaintiffs’ Submissions................................................................................................................... 24

Consideration – Application to Set Aside Sinclair Wilson Subpoena.................................. 25

The Power to Set Aside.............................................................................................................. 25
Too Wide, Oppressive and Fishing......................................................................................... 27
Are the Documents ‘For Evidence’........................................................................................... 31
The Subpoenas to SME’s R Us and Mark O’Neill.................................................................. 31

Client Legal Privilege...................................................................................................................... 32

Plaintiffs’ Submissions............................................................................................................... 33
Has Client Legal Privilege been established?........................................................................ 33

The Iniquity Exception................................................................................................................... 39

Do the Privileges against Self-incrimination or self-exposure to a penalty apply?............. 44

Conclusion......................................................................................................................................... 48

SCHEDULE A................................................................................................................................... 50

SCHEDULE B................................................................................................................................... 51

HIS HONOUR:

Introduction

On 14 March 2014 I handed down reasons for judgment in an application made by the third defendant (‘Mr Nicholls’) for orders, amongst others, that he be granted leave to rely upon the privilege against self-incrimination or self-exposure to a penalty in relation to the disclosure and production of documents contained in a confidential exhibit to an affidavit sworn by his solicitor, Jonathan Bowers-Taylor: see HRF Nominees Pty Ltd (In Liq) & Ors v Man Civil Constructions Pty Ltd & Ors [2014] VSC 93.

Subsequently to the handing down of those reasons, on 19 March 2014 orders were made:

(a) Limiting the inspection by the plaintiffs’ of documents discovered by the third defendant to those already revealed by the affidavit of the plaintiffs’ solicitor, on the basis of the privileges against self-incrimination or self-exposure to a penalty, being orders consequent on the reasons delivered on 14 March 2014;

(b) Permitting the solicitors for the first, second, third, sixth and seventh defendants (‘Defendants’) to uplift various documents subpoenaed by the plaintiffs for the purpose of inspecting them and identifying any documents that are, or might be, the subject of claims to client legal privilege or any other privilege;

(c) Giving leave to the Defendants to issue a summons to set aside the subpoenas or claim privilege in respect of documents the subject of the subpoenas.

There were three subpoenas issued under 42A of the Supreme Court (General Civil Procedure) Rules 2005 (‘Rules’) directed to:

(a) SME’S R Us Pty Ltd (‘SME’S R Us’) filed 14 May 2013;

(b) Steve Marks (AKA Steven Mark O’Neill) (‘Steve Marks’) filed 14 May 2013; and

(c) Sinclair Wilson filed 29 November 2013.

In consequence by summons filed on 9 April 2014, the Defendants sought orders setting aside the subpoena to Sinclair Wilson as an abuse of process or orders that would restrict inspection of specified bundles of the subpoenaed documents on grounds of client legal privilege or the privilege against self-incrimination or exposure to a penalty.

For the reasons which follow I have concluded that:

(a) The application to set aside the subpoena to Sinclair Wilson should be refused;

(b) The documents in exhibit RJB-5 (copies and originals) to the Broberg affidavit, are the subject of client legal privilege;

(c) The documents in exhibit RJB-6 (copies and originals) to the Broberg affidavit, are in some cases subject to client legal privilege (documents 2-6, 8-14, 21, 24-36, 39, 40, 43 and 44) and some documents fall within the exception to that privilege arising under s 125 of the Evidence Act 2008 (41, 42 and 45). The other documents (1, 7, 15, 17, 18, 19, 20, 22, 23, 37 and 38) are not the subject of any privilege;

(d) The documents in exhibit RJB-7 (copies and originals) to the Broberg affidavit, are not privileged from inspection;

(e) The documents in exhibit RJB-8 (copies and originals) to the Broberg affidavit, are subject to client legal privilege; and

(f) The documents in exhibit RJB-9 (copies and originals) to the Broberg affidavit, are not privileged from inspection.

Background

In my earlier decision, HRF Nominees Pty Ltd (In Liq) & Others v Man Civil Constructions Pty Ltd & Others[1] I set out a brief statement of the factual background (which I adopt here), as follows:
[1][2014] VSC 93, [3]–[10] and [11]–[26].

3.The second plaintiff, Pavjo Pty Ltd (Pavjo) became a unit holder in the HRF Unit Trust (the Unit Trust) on or about 27 July 2009, having purchased 40 units for $400,000.00.[2] The Unit Trust was a trading trust, essentially operating a construction business known as HRF Constructions (the Business).
[2]The units are held by Pavjo as Trustee of two Trusts, the Coleiro J Super Fund and the Coliero Family Trust: see the affidavit of Jeanmariepaul (John) Coleiro sworn 6 June 2012 at [17].
4.The initial trustee of the Unit Trust was HRF Constructions Pty Ltd. On 1 January 2010 HRF Constructions Pty Ltd retired as trustee and the first plaintiff, HRF Nominees Pty Ltd (in liquidation) (HRF Nominees) was appointed in its stead. Nicholls was the sole director of HRF Nominees. HRF Nominees went into liquidation on 22 February 2012.
5.Pavjo is also a creditor of HRF Nominees in the sum of $370,005.57.
6.HRF Nominees owned the Unit Trust’s Plant & Equipment referred to in schedule “A” to the Statement of Claim (the Unit Trust Assets).
7.Since the liquidation of HRF Nominees, the plaintiffs have discovered that:
(a)By a purported Asset Sale Agreement dated 16 August 2011 made between HRF Nominees as vendor and Nicholls as trustee of the JSG Trust, Nicholls acquired all of the Unit Trust Assets;[3]
(b)by a purported lease made on or about 8 November 2011 between Nicholls, as trustee of the JSG Trust, and the First Defendant, MAN Civil Constructions Pty Ltd (MAN Civil), Nicholls leased certain Unit Trust Assets to MAN Civil for $19,640.00 per month. MAN Civil was incorporated on or about 8 November 2011 with the second defendant, Justine Sarah Greer (Mr Nicholls’ de facto spouse)[4] (Greer), as the sole director, secretary and shareholder;[5] and
(c)On 8 November 2011, Nicholls retired as trustee of the JSG Trust and JSG Nominees was appointed in its stead. Nicholls is the sole director and shareholder of JSG Nominees.

8.The plaintiffs contend that Nicholls is in breach of trust, has breached his fiduciary duty owed to HRF Nominees and has breached his duties as a director of HRF Nominees. Barnes v Addy[6] claims are made against Nicholls, Greer, MAN Civil and JSG Nominees.
9.The underlying contention of the Plaintiffs is that Nicholls has “phoenixed” MAN Civil and JSG Nominees to take over the Unit Trust Assets and operate the business of HRF Nominees, to the detriment of Pavjo and other creditors of HRF Nominees. Further, there is a prima facie case to suggest that the arrangements to transfer the Unit Trust Assets into the new corporate structure were done after the date of the purported Asset Sale Agreement.
10.In support of that contention, the plaintiffs refer to the exhibits to Michael Nurse’s affidavit sworn 9 May 2013, in particular exhibits MAN-4, MAN-6, MAN-7, MAN-8, MAN-10, MAN-12 and MAN-14.

[3]Affidavit of Mark Andrew Nicholls sworn 16 June 2012 (Nicholls’ Affidavit).

[4]Affidavit of Jeanmariepaul (John) Coleiro sworn 6 June 2012 at [39].

[5]Nicholls’ Affidavit and affidavit of Justine Sarah Greer sworn 17 June 2012.

[6](1874) LR 9 Ch App 244.

In my earlier reasons I was careful to avoid disclosing the subject of the documents said to be the subject of the privilege against self-incrimination or exposure to a penalty, and particularly those documents which the plaintiffs already have in the documents I described as the Disputed Documents, which were the documents revealed in exhibits MAN-4, MAN-5, MAN-6, MAN-7, MAN-8, MAN-9, MAN-10, MAN-11, MAN-12 and MAN-14 to the affidavit of Michael Andrew Nurse sworn 9 May 2013 (‘Nurse Affidavit’). I did not reveal the substance of the material in those exhibits so that the third defendant, Mr Nicholls, would not be prejudiced in the event that the conclusion I reached as to those exhibits was overturned on appeal.

The time for appeal from that judgment is well passed, and the Defendants have apparently accepted the correctness of the conclusions arrived at in my earlier reasons, or will not be challenging them. It is in these circumstance appropriate to set out the gist of one of the emails that was in contention so that other emails subpoenaed from SME’s R Us and Steve Marks (aka Steven Mark O’Neill) to which I later refer have a context, and so as to make clearer the role that SME’s R Us and Steve Marks played in the alleged ‘phoenixing’ of the business conducted by HRF Nominees.

In an email dated 25 October 2011 from Steve Marks to Mr Nicholls (in exhibit MAN-4 to the Nurse Affidavit) it is said:

Hi Mark,
I have mapped out your job and am confident we can assist you.
There are a number of things that need to be done to ensure a smooth transition into your new structure.
You will require a new Company and Trust to purchase the business from the existing entity and continue trading.
You will require a new Company and Trust to purchase the Assets of the existing structure and protect them moving forward.
You will also require a new Company and Trust to take an assignment of your arrangement with TTM.
The equipment currently owned will need to be valued by a proper Valuer to ensure a proper price is paid for the equipment to ensure the Liquidator does not question the transaction.
There will also need to be a sale agreement for the existing business, and transactions for this and the sale of the equipment arranged and managed.
Any ongoing debtors at the time of liquidation will need to be moved over into the new entity, and any creditors that you wish to pay will also need moving over into the new entity.
The above is a broad indication of what needs to be done, but does not go in to the minutia [sic] of every single transaction, but will result in your current two companies being put in to Liquidation with our preferred Liquidator, and the set up of three new structures as above.
It is estimated that this will save you approx $400,000 in Tax, $300,000 approx will be owed by the end of October, and we expect to be able to run the existing structure for a further 2-3 months quite comfortably at which time a further $90,000 approx will be owing in Tax.
There is also approx $100,000 owing in Superannuation with a further $10-20,000 owing by the time of Liquidation. This combined with other Tax savings should produce an overall benefit of approx $500,000.
Although indicating a fee of $60,000 to $75,000 at our meeting on Monday, having spoken with the Liquidator and the Valuers, we have calculated our fee at $85,000 (+GST) which is to be paid over the next 2-3 months from the savings being made, basically the funds that would normally be allocated to the ATO will be allocated to us.
We will take over managing any correspondence with the ATO and covered in our fee is the costs of the Liquidator, Valuer, Company and Trusts to be set up, all contracts and management of the transactions, all advice and instructions to accountants and or other parties including Solicitors if required. Any costs levied by Solicitors are not included in our fees.
To commence we would require an upfront payment of $20,000 and a weekly or bi weekly payment thereafter with all fees being payable prior to the Liquidation of both Entities.
Also enclosed is our ongoing advice in relation to the dispute with Pavjo and the transfer and realisation of Lots 4 & 5 in the Subdivision for TTM.
We trust the above is acceptable and look forward to working with you on these matters.
Regards,
Steve Marks
SME’s R Us P/L …

It can be seen immediately that the process which SME’s R US was engaged to undertake commenced no earlier than 25 October 2011. It is also clear from the other documents in the possession of the plaintiffs that the process continued through to the end of 2011 and into 2012.

In this context it must be recalled that the Asset Sale Agreement (’ASA’)was purportedly dated 16 August 2011. Another email in the exhibits to the Nurse Affidavit tends to indicate that the ASA was backdated. It is an email from Steve Marks of SME’s R US to Stephen Southwood and Mr Nicholls of HRF Nominees dated 15 November 2011[7] and it as follows:
[7]Exhibit MAN-9 to the Nurse Affidavit.

Hi Stephen,
Susie is sending you up all the Vic Roads forms that will need to be signed by Mark and Justine.
Please do not date the forms until you have obtained the Roadworthies for the vehicles in question. If you have a friendly Roadworthy guy that can assist you with this it will help and save you doing a lot of work on the vehicles to Roadworthy them.
We are obtaining the values at the moment and will keep these as low as possible for Stamp Duty purposes.
Regards,
Steve Marks
SME’s R Us P/L

It is a reasonable inference that the values referred to in that email are the values to be attributed to the equipment the subject of the ASA as the schedule to that agreement places a value against each piece of equipment.

The Summons

In further detail, the Summons of 9 April 2014 sought the following orders:

(a) Mr Nicholls has applied to set aside the Sinclair Wilson subpoena as an abuse of process;

(b) The Defendants have applied for leave to make objection out of time to the inspection by the plaintiffs of the documents produced pursuant to the Sinclair Wilson subpoena;

(c) The Defendants applied to exclude from inspection by any other party the documents produced by Sinclair Wilson that are contained in confidential exhibit RJB-5 to the affidavit of Robin John Broberg, on grounds of client legal privilege;

(d) The Defendants applied to exclude from inspection by any other party the documents produced by Sinclair Wilson included in Exhibit RJB-6 to the affidavit of Robin John Broberg on the grounds of client legal privilege and privilege against self-exposure to a penalty;

(e) The Defendants have leave to make objection out of time to the SME'S R US subpoenaed documents;

(f) The Defendants apply to exclude any other party from inspecting documents produced by SME'S R US and contained in confidential exhibits RJB-7, RJB-8 and RJB-9 to the affidavit of Robin John Broberg on the grounds of client legal privilege and privilege against self-exposure to a penalty;

(g) The Defendants have leave to make objection out of time to the inspection of the Steve Marks subpoenaed documents;

(h) The Defendants apply to exclude any other party from inspecting the Steve Marks subpoenaed documents contained in confidential exhibits RJB-7, RJB-8 and RJB-9 to the affidavit of Robin John Broberg; and

(i) Pursuant to ss 131A and 133 of the Evidence Act 2008, the Court determine the claims to client legal privilege and privilege against self-exposure to a penalty.

The summons is supported by the affidavit of Robin John Broberg sworn 9 April 2014 (‘Broberg affidavit’). In that affidavit Mr Broberg deposes, so far as presently relevant:

(a) Sinclair Wilson are a firm of accountants and financial advisors who provide accounting services and advice to the Defendants. They were served with a subpoena in Form 42AA in early December 2013;

(b) On about 6 December 2013 he received an email from Sinclair Wilson to which was attached a copy of the Sinclair Wilson subpoena;

(c) On about 30 January 2014 he was contacted by the solicitor for the plaintiffs. He informed that solicitor that he had not been served with a copy of the Sinclair Wilson subpoena, although he had been informed of its existence;

(d) Also on 30 January 2014, he received a facsimile from the plaintiffs’ solicitors purporting to enclose by way of service a copy of the Sinclair Wilson subpoena. At that time he noted the date for production of documents pursuant to the subpoena had expired on 16 December 2013;

(e) From about 30 January 2014 to the date of swearing his affidavit on 9 April 2014, he had corresponded with the plaintiffs’ solicitors in relation to the Sinclair Wilson subpoena. He produced a bundle of that correspondence. That bundle included a letter to the plaintiffs’ solicitors dated 11 March 2014. In that letter the solicitors for the Defendants proposed a regime to allow limited inspection of the Sinclair Wilson subpoenaed documents. It involved an acceptance by the plaintiffs of the claims for client legal privilege in respect of the bundle sealed by Sinclair Wilson and an extra bundle identified by them. The object was to avoid the costs of the Defendants’ proposed application to set aside the subpoena. He had not received a response to that letter;

(f) On 5 March 2014, he attended the Supreme Court and inspected the four boxes of documents produced by Sinclair Wilson in response to the subpoena. In the fourth box were the following:

(i) A bundle of documents (‘the First Bundle’) in a sealed envelope to which was attached a letter from Sinclair Wilson dated 13 December 2013 and addressed to the Prothonotary. He produces a copy of that letter (‘RJB-3’). In it Sinclair Wilson objects to inspection of the documents on the basis of client legal privilege;

(ii) A bundle of documents (‘the Sinclair Wilson Production, Privilege Claimed Documents’) in respect of which the Defendants object to inspection on the basis that the documents are either the subject of client legal privilege or privilege against self-exposure to a penalty. He produces a letter addressed to the Prothonotary that sets out the basis for the claims of privilege in respect of those documents (‘RJB-4’).

(g) He produced a confidential exhibit containing the documents in the First Bundle (‘RJB-5’);

(h) He also produced as a confidential exhibit copies of the documents contained in the Sinclair Wilson Production, Privilege Claimed Documents Bundle (‘RJB-6’);

(i) On 24 March 2014, he attended the Supreme Court and uplifted the documents produced by Sinclair Wilson, SME'S R Us and Steve Marks pursuant to the order made on 19 March 2014. He inspected those documents. He produced as individual exhibits bundles of documents in sealed envelopes which he has inspected and in relation to which a claim for privilege is made, as follows:

(i) A bundle in a sealed envelope marked 'Part B(1) Do not open' (‘RJB-7’);

(ii) A bundle in a sealed envelope marked 'Part B(2) Do not open' (‘RJB-8’);

(iii) A bundle in a sealed envelope marked 'Part B(3) Privileged Claimed' (‘RJB-9’);

(j) He had considered the documents contained in exhibits RJB-5, RJB-6, RJB-7, RJB-8, RJB-9 and was of the opinion in relation to the documents either that:

(i) They consist of correspondence and documents passing between Sinclair Wilson, SME'S R US, Steve Marks and solicitors and accountants including JBT Lawyers, Irlicht & Broberg, Ian Jackson and Moore Stevens, acting and advising at various times on behalf of the Defendants both during the course of and for the purpose of matters relating to the present proceeding or in contemplation of that proceeding;

(ii) They consist of communications and documents which may render the third defendant liable either to a civil penalty or a criminal offence or offences, if they are produced for inspection;

(k) He was informed by Mr Nicholls, and believes, that insofar as Sinclair Wilson are in possession of documents which are required by them for the purposes of providing accounting services to him (Mr Nicholls) or the other Defendants, those documents emanated from Mr Nicholls, or were provided by his servants or agents at his direction. They consist of documents which may render Mr Nicholls liable either to a civil penalty or a criminal offence; and

(l) At the time of the issue of the subpoena to Sinclair Wilson:

(i) there was no application before the Court (other than an application that was reserved and resulted in the decision reported as HRF Nominees Pty Ltd (In Liq) & Ors v Man Civil Constructions Pty Ltd & Ors [2014] VSC 93;

(ii) The plaintiffs had not suggested in any correspondence to him before the issue of the Sinclair Wilson subpoena that as a result of inadequacies of the discovery provided by the Defendants the only way they could rectify the deficiencies was by service of the Sinclair Wilson subpoena; and

(iii) At the time of swearing his affidavit, there had been no pre-trial directions made or sought by the plaintiffs, and no application was made by the plaintiffs seeking leave to issue the Sinclair Wilson subpoena.

In my earlier reasons I referred only generally to the pleaded case of the plaintiffs and the defences of the Defendants. It is necessary to go further in this application.

The material allegations in the plaintiffs’ statement of claim, and the Defendants defences, are, after introductory allegations of incorporation of the various companies and the fact that Mr Nicholls was the sole director of HRF Nominees, the sole director and shareholder of MAN Civil Constructions Pty Ltd, the sole director of HRF Constructions, and the Trustee of the JSG Trust (all of which Nicholls admits),[8] the allegations are in substance as follows:
[8]See paragraph 5 of the statement of claim filed 4 October 2012 and paragraph 5 of Nicholls’ defence filed 31 January 2013.

(a) Prior to July 2009 Nicholls had been operating a construction business known as HRF Constructions through his family trust, MAN Constructions Trust. Mr Nicholls admits this (paragraph 9);

(b) In about June 2009 Nicholls and Coleiro, the sole director and shareholder of Pavjo, discussed the possibility of Coleiro investing in the Business. Nicholls admits this allegation (paragraph 10);

(c) On about 22 June 2009 Coleiro received from Nicholls, or at his direction, a copy of a draft business and subdivision valuation, being a valuation in writing addressed to Mr Nicholls from a Mr Tim Clarke of Sinclair Wilson, Accountants. The valuation was stated to be a business valuation for HRF Constructions and valued the Plant and Equipment and the good will of the Business. Mr Nicholls admits that Coleiro received an unsigned draft document dated 23 June 2009 which contained as an appendix an express disclaimer to the accuracy of the information therein and otherwise denied this allegation (paragraph 11);

(d) Within the valuation was a list of the Plant and Equipment of the Business which included the Trust Plant and Equipment referred to in a schedule attached to the statement of claim. Mr Nicholls does not admit this allegation (paragraph 12);

(e) The valuation was provided to Coleiro in order to assist him in deciding whether to make an investment in the Business. Mr Nicholls does not admit this allegation (paragraph 13);

(f) Relying on the valuation, Pavjo purchased an interest in the Business. Mr Nicholls does not admit this allegation (paragraph 14);

(g) For the purpose of facilitating Pavjo’s interest in the Business, on or about 27 July 2009 HRF Constructions Pty Ltd was incorporated, Pavjo and Mr Nicholls received shares in it, the HRF Construction Unit Trust was established, HRF Constructions Pty Ltd became the initial trustee of that Trust, MAN Constructions as trustee of the MAN Constructions Family Trust became the holder of units in the Unit Trust, as did Pavjo as trustee of the Coleiro J Super Fund. Nicholls admits these allegations (paragraph 15);

(h) From about 27 July 2009 to 31 December 2009 HRF Constructions Pty Ltd, as trustee of the HRF Unit Trust, operated the business and owned the assets beneficially held by the HRF Unit Trust, including the Trust Plant and Equipment referred to in the schedule to the statement of claim. Mr Nicholls admitted the operation of the business by HRF Constructions Pty Ltd as trustee of the HRF Unit Trust, but says that all or most of the assets of the HRF Unit Trust were subject to equipment lease or hire purchase agreements. He otherwise does not admit the allegations (paragraph 16);

(i) On or about 1 January 2010, HRF Constructions Pty Ltd retired as trustee of the HRF Unit Trust and HRF Nominees was appointed in its stead. Nicholls admits this allegation (paragraph 17);

(j) From on or about 1 January 2010 to about 8 November 2011 HRF Nominees as trustee of the HRF Unit Trust operated the Business with the Trust Assets. Mr Nicholls admits that HRF Nominees operated the Business from about 1 January 2010 until the ASA dated 16 August 2011 under which HRF Nominees sold certain assets to Mr Nicholls as Trustee of the JSG Trust. Those assets are identified in schedule 1 to the Asset Sale Agreement. He otherwise denies the allegations (paragraph 18);

(k) As at 30 June 2011 HRF Nominees had net assets of $670,728.12 and total trust funds in the same amount, had Trust Plant and Equipment valued in its books at $569,084.00 and owed Pavjo various amounts of money. Mr Nicholls denies these allegations and makes positive allegations in response to the effect that the figures come from a draft financial report which could not be relied upon. He asserts the true figures to be different and that the Trust, Plant and Equipment was mostly leased or under hire purchase agreements (paragraph 19);

(l) By an ASA dated 16 August 2011 (made between HRF Nominees, as vendor, and Nicholls as trustee of the JSG Trust, as purchaser) Mr Nicholls purportedly purchased all of the assets including the Trust Plant and Equipment. To this Nicholls responds that as trustee of the HRF Unit Trust, HRF Nominees was entitled to deal with the assets of the trust. He otherwise denies the allegations (paragraph 20);

(m)The trust assets the subject of the ASA included, in effect, all of the assets of the Business and the Trust Plant and Equipment. Mr Nicholls responds by saying that the assets the subject of the sale are described in schedule 1 to the Asset Sale Agreement. He otherwise denies the allegations (paragraph 21);

(n) The ASA valued the assets at $400,000. Mr Nicholls admits this allegation (paragraph 22);

(o) The consideration for the purchase of the Trust Assets was the sum of $5,000 and the assumption of certain liabilities to a maximum of $400,000. Mr Nicholls admits these allegations and says further that the purchaser assumed all the liabilities in relation to the guarantees and the true consideration exceeded $400,000 (paragraph 23);

(p) The liabilities referred to in the ASA were debts owing to financiers for the assets in the sum of $238,969.00 and contingent liabilities under certain guarantees guaranteeing loans over properties owned by Mr Nicholls and one Marian Powell. Nicholls admits the value of the debts owing to financiers and says that the purchaser assumed all the liabilities in relation to the guarantees and the true consideration for the purchase exceeded $400,000 (paragraph 24); and

(q) The effect of the ASA was alleged to -

(iv)Value the net assets of HRF Nominees at 0;

(v) Transfer the Business and the Trust Assets to a Trust under the sole control of Mr Nicholls;

(vi)Avoid making trust distributions to Pavjo;

(vii) Avoid meeting the debts owed by HRF Nominees to creditors, including Pavjo;

(viii) Extinguish Pavjo’s opportunity or ability to redeem its investment in HRF Nominees and the HRF Unit Trust. Mr Nicholls denies these allegations and refers back to earlier allegations he makes regarding the true value of the Trust Assets as referred to above (paragraph 25).

The statement of claim then proceeds to allege that the entry into the ASA was a breach of HRF Nominees’ and Nicholl’s fiduciary duties and a breach of trust, that Nicholls has been knowingly involved in a breach by HRF Nominees of its fiduciary duties or its breach of trust; that Nicholls has knowingly received the Trust Assets by reason of HRF Nominees’ breach of fiduciary duties or breach of trust. All of these allegations are denied by Mr Nicholls. The plaintiffs relief includes setting aside the ASA and clawing back the Assets, an accounts of profits against JSG Nominees, Man Civil and Mr Nicholls as well as damages against JSG Trust, Greer and Nicholls.

Application to Set Aside Subpoena to Sinclair Wilson

Order 42A provides so far as relevant as follows:

Order 42A Subpoena to Produce Documents
Rule 42A.01 provides:
(1)This Rule applies where a party who has a solicitor in the proceeding seeks to require a person not a party to produce any document for evidence before:
(a)the hearing of an interlocutory or other application in the proceeding;

(b) the trial of the proceeding.
(2)Order 42 applies so far as is practicable to a subpoena to produce under this Order.

The Prothonotary subpoena enabled by Order 42A was originally introduced as r 42.10 of the Rules. The terms of the Rule make tolerably clear that the procedure is directed to obtaining the production of documents for evidence before the hearing of an interlocutory or other application in the proceeding, or for the trial of the proceeding. The procedure was introduced because of the desirability of dealing with subpoenaed documents before the trial (or other hearing) at which it was proposed for those documents to be used. This was desirable because it would overcome the inconvenience and disadvantages which could arise from the production of documents at trial, including delay and sometimes adjournment.[9]
[9]Kennedy Taylor (Vic) Pty Ltd v Grocon Pty Ltd [1999] VSC 242; Re APCHL (No 3) [2013] VSC 154, [97]; Liberty Financial Pty Ltd v Scott [2004] VSC 382, [21] (Smith J).

A practical and non-pedantic approach should be taken to the interpretation of the Order: Pico Holdings Inc v Voss.[10] Further, Order 42A should be construed having regard to the policy behind the Order, namely to facilitate the conduct of both interlocutory hearings (and other applications) and the trial of the proceeding: Liberty Financial Pty Ltd v Scott.[11]
[10][2002] VSC 269, [26] (Gillard J); Liberty Financial Pty Ltd v Scott [2004] VSC 382, [21] (Smith J).
[11][2004] VSC 382, [21] (Smith J).

In Re APCHL (No 3)[12] Robson J considered at some length the procedure established by Order 42A. Some of the matters his Honour identified are:
[12][2013] VSC 154.

(a) Under O 42, an addressee has the option of producing the documents at the hearing of the proceeding or to the Prothonotary (r 42.06(4)). If the addressee elects to produce the subpoenaed documents to the Prothonotary, r 42.09 provides for the Prothonotary to permit inspection of the documents. Provision is also made for objections to inspection by the addressee or any party having sufficient interest or the parties (r 42.09(4));

(b) In contrast, under O 42A there is only provision for production of the documents by the addressee to the Prothonotary. The addressee does not have the discretion of producing them to the Court rather than to the Prothonotary. Further, if no relevant objection is made to the production or inspection of a document produced or sought to be produced under the subpoena, each party may as of right inspect the documents produced. The permission of the Prothonotary or the Court is not required;

(c) The procedure under Order 42A can only be adopted by a party who has a solicitor in the proceeding;

(d) The subpoena under Order 42A may only be served on a person who is not a party to the proceeding;

(e) Under r 42A.08, if a party has any objection to the inspection by another party of a document identified in the subpoena, the party having the objection shall notify the Prothonotary in writing of that objection and state the grounds of that objection before the day specified in the subpoena. The day specified in the subpoena is the day specified by the Prothonotary on or before which the addressee is to produce the document specified in the subpoena: r 42A.02; and

(f) An objector may successfully object to the inspection by a party (who need not be the party who issued the subpoena) of a particular document, but otherwise inspection by all other parties may proceed as of right under r 42A.10.

In addition to these matters, I further note that:

(a) Rule 42.04, provides that the Court may, of its own motion, or on the application of a party or any person having a sufficient interest, set aside a subpoena in whole or in part or grant other relief in respect of it; and

(b) Rule 42A.04(2) requires the issuing party to serve a copy of the subpoena on each other party as soon as is practicable after it has been served on the addressee.

There are a number of other authorities bearing upon the interpretation of Rule 42A.01, including decisions that pre-date the introduction of Order 42A in 2007. In summary, in my opinion those decisions establish that:

(a) Like the subpoena process under Order 42, the Order 42A procedure should not be used as a substitute for discovery or non-party discovery. This follows from the principles applicable in relation to Order 42[13] and from the requirement that the document is produced 'for evidence';[14]
[13]Commissioner for Railways v Small (1938) 38 SR (NSW) 564; Burchard v MacFarlane [1891] 2 QB 241; National Employers’ Mutual General Issurance Association Ltd v Waind & Hill [1978] 1 NSWLR 372.
[14]Burchell v Hill [2010] VSC 96, [15] (Mukhtar AsJ).

(b) Because the same rules and principles applicable to subpoenas generally apply to subpoena under Order 42A (so far as is practicable), the subpoena:

(ix) must sufficiently describe the documents to be produced so as to not require the recipient to make a judgment about the documents being sought;

(x) must not be oppressive;

(xi) must not be used as a ‘fishing expedition’;

(c) There must be a legitimate forensic purpose for the use of the documents in evidence. If that is established, then it is likely that the requirement ‘for evidence’ will be established;[15]
[15]Ibid [17].

(d) ‘For evidence’ means that a document may potentially be required for evidence, either in-chief or in cross examination,[16] and that means it must have at least some potential relevance to the issues in the proceeding;[17]
[16]Ibid [16].
[17]Newnham v Davis [2010] VSC 13, [6] (Kaye J).

(e) The width of the expression ‘for evidence’ is better understood when it is recognised that the procedure enables a party to inspect a document in order to make a decision whether or not to adduce it in evidence. It is available even though, in the end result, the document is not adduced into evidence;[18]
[18]Kennedy Taylor (Vic) Pty Ltd v Grocon [1999] VSC 242, [71] (Gillard J); Yunghanns v Candoora No. 19 Pty Ltd [2000] VSC 505, [11]-[12] (Byrne J).

(f) Thus, the test of relevance may be a general one, particularly where the Court has only a general idea of the nature of the evidence which may be led as relevant to an issue or as to credit of an expected witness.[19] The Court should not be unduly astute to reject the possibility that a document does not meet this test of relevance and:
[19]Yunghanns v Candoora No. 19 Pty Ltd [2000] VSC 505, [11]-[12] (Byrne J).

[I]t may be that it will so conclude only where it appears that no useful evidentiary purpose could be attributed to the document, raising in this way an inference that the order for production is sought for some illicit purpose, or for no good purpose…[20]

(g) A useful test to determine whether a subpoena to produce documents is ‘for evidence’ is whether the subpoena would have been objectionable if it was made returnable at trial.[21]

[20]Ibid.

[21]Burchell v Hill [2010] VSC 96, [20] (Mukhtar AsJ.

In relation to testing whether a subpoena is ‘for evidence’ by asking whether the subpoena would have been objectionable if it was made returnable at trial, the observations of Nettle J (as he then was) in Skrijel v Mengler,[22] may be apt. That case concerned subpoenas to produce documents returnable at trial under Order 42.[23] His Honour held that the relevant test to be applied in determining whether documents may be subject of a subpoena to produce documents is whether, having regard to the issues as defined in the pleadings, the documents are either directly relevant to matters in issue or might come within the second leg of the test in Peruvian Guano,[24] as documents that could lead the plaintiff upon a path of inquiry either to advance his own case or to impeach the case which is made against him.[25]
[22][2003] VSC 55, particularly at [5] and [14].
[23]Rule 42.01 then provided that ‘subpoena for production’ means an order in writing requiring a person named to attend as directed by the order for the purpose of producing a document or thing for evidence.
[24]Compagnie Financiere du Pacifique v Peruvian Guano Co (1882) 11 QBD 55, 62, 63.
[25]see Waind v Hill [1978] 1 NSWLR 372, 383.

Although the authorities are not entirely consistent, the better view, in my opinion, is that the expression ‘for evidence’ encompasses both direct and indirect relevance or use and the expression ‘for evidence’ is as wide as Bongiorno J suggested in Atlas v DPP.[26] There his Honour noted in the context of considering the then Evidence (Confidential Communications) Act 1988:

Although a subpoena for production is defined by reference to documents produced “for evidence” (rule 42.01, Rules of Civil Procedure)[27] persons producing documents pursuant to a subpoena will often not be witnesses and the documents they produce will often not be tendered or, to use the words of s.32C, not “be adduced in a legal proceeding” unless that phrase has a much wider meaning than the words suggest. In many instances the documents will not be “evidence” as that word is properly understood. They may be no more than documents containing information which the party who issued the subpoena may have (or alleges he has) a legitimate forensic purpose in having produced.

[26](2001) 3 VR 211, [43].

[27]The requirement that the production be ‘for evidence’ arose from the definition of ‘subpoena for production’ in r 42.01. It meant an order in writing requiring a person named to attend as directed by the order for the purpose of producing a document or thing for evidence.

It is relevant to observe that when the 1986 Rules were introduced (General Rules of Procedure in Civil Proceedings 1986, SR 99 of 1986), r 42.01 included a definition of ‘subpoena for production’, which provided it to mean ‘an order in writing requiring a person named to attend as directed by the order for the purpose of producing a document or thing for evidence’ [emphasis added].

The current Order 42 does not have the ‘for evidence’ qualification. Rule 42.01 defines ‘subpoena to produce’ to mean ‘a subpoena requiring the addressee to produce the subpoena or a copy of it and a document or thing’.[28] It is nevertheless well established, as I mention below, that for a subpoena to be justified there must, at least, be a legitimate forensic purpose for which access to the documents is sought, and this requires both relevance to the issues, and that it is reasonably possible, or ‘on the cards’, that the document will assist in the claim or the defence the issuer seeks to establish.
[28]There is also a definition of ‘subpoena’ which refers to it being an order in writing requiring the addressee to, amongst other things, to produce the subpoena or a copy of it and a document or thing.

I propose, therefore, to approach the question of whether the subpoenas in this case are within the Rule by reference to the wide approach adopted by Nettle J in Skrijel v Mengler[29] and Bongiorno J in Atlas v DPP.[30]
[29][2003] VSC 55, particularly at [5] and [14].
[30][2001] VSC 209.

Lastly it is desirable to refer to the relevant principles relating to the inspection of subpoenaed documents summarised by J Forrest J in Commissioner of the Australian Federal Police v Magistrates’ Court of Victoria,[31] as follows:
[31][2011] VSC 3; followed by Kyrou J in DPP v Debono [2012] VSC 350, [197].

The following principles apply in determining whether a party is entitled to access documents the subject of a subpoena:
(a)it is necessary for the party at whose request the witness summons was issued to identify expressly and precisely the legitimate forensic purpose for which access to the documents is sought;
(b)the identification of such a legitimate forensic purpose is to be considered by the court without inspecting the documents sought to be produced;
(c)the applicant for the witness summons must also satisfy the court that it is “on the cards”, or that there is a “reasonable possibility”, that the documents sought under the subpoena “will materially assist the defence”.
(d)a “fishing expedition” is not a legitimate forensic purpose and will not be permitted;
(e)the relevance of a document to the proceeding alone will not substantiate an assertion of legitimate forensic purpose. There is no legitimate forensic purpose if the party is seeking to obtain documents to see whether they may be of relevance or of assistance in his or her defence.
(f)a mere assertion of bad faith by an applicant or that something might be found demonstrating bad faith is not enough – the criteria set out in (c) must be satisfied.
(g)in criminal proceedings a “more liberal” view is taken by a court in respect of the application of the test. Special weight is to be given to the fact that the documents may assist the defence of the accused.
(h)where a party fails to demonstrate a legitimate forensic purpose, the court should refuse access to the documents and set aside the witness summons.[32]

[32]Commissioner of the Australian Federal Police v Magistrates’ Court of Victoria [2011] VSC 3, [28] (citations omitted).

In relation to the principle in paragraph 30(b) above, that the identification of the a legitimate forensic purpose for documents sought in a subpoena is to be considered by the court without inspecting the documents, the observations of the Court of Appeal in Woolworths Ltd v Svajcer[33] need to be noted. In that case the primary judge did not inspect the documents in question. The Court of Appeal regarded the statement of J Forrest J as being too broadly expressed. As the cases cited revealed, the generally applicable practice is to the contrary:

It will not usually amount to an error in the House v King[34] sense for a judge to decide whether access should be granted to documents without inspecting them. However except in cases where the subpoena is plainly too broad, and merits the description of a fishing expedition, the judge should normally inspect the documents for the purpose of making a final decision as to whether access should be granted. In this case it would have been unnecessary for the judge to inspect the documents because the material produced was based on a ‘bare unsupported assertion’ that there might be something in there that would assist the applicant.[35]
[33][2013] VSCA 270, [40]-[47] (Nettle, Ashley and Neave JJA).
[34](1936) 55 CLR 499.
[35][2013] VSCA 270, [43].

Defendants’ Submissions

Under the rubric of abuse of process, Mr Herskope of Counsel, who appeared for the Defendants, submitted that the Sinclair Wilson Subpoena should be set aside, or the plaintiffs should be refused leave to inspect the documents because:

(a) The description of the documents in the subpoena is too wide and, given the nature and the breadth of the documents described, the Sinclair Wilson Subpoena is both oppressive and a fishing expedition and there could be no legitimate forensic purpose served by it;

(b) The documents described in the subpoena could not be ‘for evidence’ at trial, and there is no identifiable interlocutory proceeding for which they could be relevant;

(c) Sinclair Wilson are, and were at the relevant times (as identified in the pleading), the accountants and financial advisors to the Defendants. As such they were and are the agents of the Defendants. If there are documents emanating from the accountants that are not presently discovered, then rather than subpoena the accountants, further discovery should have been sought.

The Defendants contended that the Sinclair Wilson Subpoena should be set aside because none of the circumstances identified in O 42A were available to the plaintiffs at the time the subpoena was issued.

A part of the application by the Defendants by their summons was to seek leave to object to inspection of the Sinclair Wilson subpoenaed documents out of time. I have referred above to the affidavit of Mr Broberg, and the fact that Sinclair Wilson provided him with a copy of the subpoena on 6 December 2013, but that he was not served formally by the plaintiffs’ solicitors until after the date for production of the documents.

On behalf of the Defendants, Mr Herskope contended that:

(a) It was not open to the plaintiffs to suggest that because Mr Broberg had received a copy of the subpoena from Sinclair Wilson on 6 December 2013 that that was sufficient service for the purposes of enabling the Defendants to make their objection, within time, to the inspection by the plaintiffs of the documents produced;

(b) It must have been obvious to the plaintiffs’ solicitors that the scope of the documents the subject of the Sinclair Wilson Subpoena was, in all likelihood, going to result in the production of documents that were already the subject of dispute and at the time of the issue of the subpoena were the subject of the reserved judgment;

(c) This was, or ought to have been, a ‘red flag’ to the plaintiffs’ solicitors to ensure that the Rules were properly complied with; and

(d) This provided a further basis for the Court to set aside the Sinclair Wilson Subpoena as an abuse of process.

Plaintiffs’ Submissions

In relation to the abuse of process claim, counsel for the plaintiffs, Mr R L Moore, submitted:

(a) There is no power allowing a party to apply to set aside a subpoena under Order 42A. Essentially this is because r 42.04 (to which I have referred above) is excluded by r 42A.07(b);

(b) That the Sinclair Wilson subpoenaed documents were sought for evidence at trial of the proceeding. It is enough, the plaintiffs submitted, that the documents the subject of the subpoena may potentially be admissible as evidence in the proceeding; and

(c) The subpoena was not too wide, oppressive or fishing having regard to the issues raised on the pleadings.

Mr Moore presented no serious opposition to the late application by the Defendants to object to the Sinclair Wilson subpoena, having regard to the late service of the copy of the subpoena, and that was a sensible approach to take.

Consideration – Application to Set Aside Sinclair Wilson Subpoena
The Power to Set Aside

The plaintiffs’ first submission that the Court had no power was supported by the observations of Smith J made (obiter dicta), in Liberty Financial Pty Ltd v Scott, which concerned the predecessor to Order 42A–r 42.10–as follows:[36]

The first issue to consider is the challenge by Mr Scott to the standing of Liberty to seek to set aside the non-party subpoenas. Counsel for Mr Scott submitted that having regard to the language of Rule 42.10, a party does not have standing to object to the production of a document pursuant to the subpoenas. Emphasis was placed on the specific provisions as to the right to challenge in Rule 42.10. In particular under Rule 42.10(8)(a), the person named in the subpoena can notify the Prothonotary of any objection to production before the day specified for delivery of the documents in the subpoena. Under Rule 42.10(8)(b) a person, other than a party, who has a “sufficient interest” can also object in the same way. On the other hand Rule 42.10(9) simply states that if a party has any objection to inspection by another party of a document, it should notify the Prothonotary before the date specified in the subpoena. There is nothing in the Rules stating that the party who is the opponent of the party seeking the subpoenaed non-party documents can object to their production or challenge the subpoena itself. Counsel also relied upon the authority of Re ACI International[37] where it was held that an objection to production of subpoenaed documents on the grounds that the contents are confidential is not a ground for having a subpoena set aside.
If the issue were simply one of “standing”, it might be said that, in our adversary system, any party has an obvious interest in denying access to subpoenaed documents which may be relevant and used against it. In the present case the documents plainly concern the affairs of the first plaintiff and related companies. On the other hand, the provisions of Rule 42.10 are detailed and on their face appear to be intended to define with precision the precise rights of the parties and subpoenaed persons. The provisions do not give a party itself the right to object to production. The issue is also complicated by the fact, as noted above, that Mr Scott agreed to the procedure being followed of advising the person subpoenaed that the plaintiff was objecting and that those objections would be dealt with. In those circumstances Mr Scott may well be estopped from arguing a lack of standing.
In light, however, of the conclusions I have reached on the substantive issues, it is not necessary to resolve the standing issue and it is better left to another occasion.

[36][2004] VSC 382, [14]-[16].

[37](1986) 11 ACLR 240, 241-2 and 243.

There are a number of points to be made about this passage. First, of course, his Honour did not find it necessary to decide the matter. Secondly, his consideration of the matter, at least in written form, is brief. Third, the terms of r 42.10 as then in force, although similar in terms and structure to Order 42A, were different in a significant respect. That is, Rule 42A.01(2) provides that Order 42 applies so far as is practicable to a subpoena to produce under Order 42A. There was no corresponding express provision in Order 42.

The terms of Order 42A that relate to objections, both to production (by the addressee or a person having a sufficient interest other than a party: r 42A.07) and inspection (by a party: 42A.08) do not deal at all with the wider question of setting aside a subpoena altogether. They deal with two of the stages identified and accepted as applying to the subpoena process, as Byrne J observed in Roux v ABC:[38]

…there are a number of stages in the subpoena process at which the court may have a role to play: first at the issue of the subpoena where the court may refuse to issue process which is bad on its face; secondly upon an application to set aside the subpoena on the ground that it is objectionable in form or oppressive; thirdly upon the answer to the subpoena where the witness might advance good reason why the documents should not be produced; fourthly upon an application by the parties to inspect the documents which are then in the custody of the court when it may be contended that the right to inspection should be qualified or even denied; and fifthly where the party seeks to tender the document in evidence.

[38][1992] 2 VR 577, 595.

To similar but more restricted effect are the observations of Moffitt P, (Hutley and Glass JJA agreeing) in National Employers’ Mutual General Association v Waind and Hill.[39] There are three steps of having a third party bring documents to Court, and in their use thereafter:

The first is obeying the subpoena, by the witness bringing the documents to the court and handing them to the judge. This step involves the determination of any objections of the witness to the subpoena, or to the production of the documents to the court pursuant to the subpoena. The second step is the decision of the judge concerning the preliminary use of the documents, which includes whether or not permission should be given to a party or parties to inspect the documents. The third step is the admission into evidence of the document in whole or in part; or the use of it in the process of evidence being put before the court by cross-examination or otherwise.

[39][1978] 1 NSWLR 372, 381.

The terms of Order 42A are written against this well-known and understood background. They proceed on a clear understanding of the distinction between the various stages identified by Byrne J and the steps referred to by Moffitt P.

The terms of r 42A.01(2), by preserving the operation of Order 42 ‘so far as is practicable, under Order 42A’, clearly do not exclude the power in r 42.04 to set aside a subpoena. I therefore reject the first ground raised by the plaintiffs.

Too Wide, Oppressive and Fishing

The description of the documents sought by the Sinclair Wilson Subpoena is set out in Schedule A to these reasons. The first thing to note is that before any application to set the subpoena aside was launched, Sinclair Wilson complied with the subpoena by producing four boxes of documents apparently responding to the description in the subpoena. That firm had no difficulty in complying with it, although they objected to the plaintiffs inspecting some of the documents contained in a sealed envelope.[40] Thus the ‘oppression’ ground of setting aside falls away. It has not proven too burdensome for Sinclair Wilson to comply with the subpoena.
[40]Letter from Sinclair Wilson dated 13 December 2013, Exhibit RJB-3 to the Broberg affidavit.

The descriptions of the documents appears to be very broad (see Schedule A). When looked at a little further, however, they primarily concern the production of that firm’s files in acting for each of MAN Civil, HRF Nominees, Man Constructions Pty Ltd, JSG Nominees, Justine Greer and Mr Nicholls between 2009 and the date of the subpoena.

The starting point is explicable because in 2009 Mr Coleiro received from a member of Sinclair Wilson a valuation of the business in which entities associated with Mr Coleiro invested. The date range through to the date of the subpoena is explicable by reason of the injunction granted at the commencement of the proceeding in 2012 and the fact that by all accounts the business conducted by MAN Civil is still conducted with the equipment referred to in the Schedule to the statement of claim, being in substance the Trust Plant and Equipment about which the plaintiffs complain in the statement of claim. The plaintiffs claim damages and an account of profits which necessarily involves having accounting material through to the present. Thus it seems to me that date range is relevant to the claims in the statement of claim.

The broad description of the documents sought will be likely to include documents relevant to the issues arising on the pleadings, including:

(a) Documents relating to the valuation of the business referred to in paragraph 11 of the statement of claim and the position of the Trust Plant and Equipment;

(b) Documents relating to the ownership of the Trust Plant and Equipment referred to in paragraph 16 of the statement of claim and the existence of and amounts owing under the equipment leases and hire-purchase agreements referred to in paragraph 16 of the defence of Nicholls;

(c) The accounts of the business during the period of operation by HRF Nominees as trustee of the HRF Unit Trust. This arises from the dispute about when the ASA was entered into: in November 2011 as the plaintiffs contend, or on its purported date of execution, 16 August 2011, as Mr Nicholls contends;

(d) The financial reports of the business conducted by HRF Nominees as at 30 June 2011, and documents relating thereto. This is particularly relevant to the allegations in paragraph 19 of the statement of claim, and defences to that paragraph (see paragraph 16(k) above) and the value of the assets as disclosed to the plaintiffs by draft financial report prepared by Sinclair Wilson and referred to in the particulars to paragraph 19 of the statement of claim;

(e) Documents relating to the ASA and the value of the assets the subject of it and the liabilities to which the assets were subject (paragraphs 20-24 of the statement of claim); and

(f) Financial statements and related documents concerning the conduct of the business by the several entities that conducted it up to the date of the subpoena and relevant to the claims for damages and an account of profits.

In short, the documents sought, even so broadly described, are likely, having regard to fact that Sinclair Wilson was the accountant and financial adviser to all the Defendants, to contain documents relevant to all the disputed factual allegations in the statement of claim. There is thus direct and indirect relevance for the whole of files to be produced. Moreover it is undoubtedly on the cards that the documents described above will materially assist the plaintiffs in proving their claims at trial.

Absent this broad range of documents relevant to the issues on the pleadings, the breadth of the description of the documents in the subpoena would be too wide, or perhaps fishing. A fishing expedition is, of course, an attempt to find out whether the person to whom the summons is addressed has or has not any documents relevant to an issue and, if so, what those documents are. In The Commissioner for Railways v Small,[41] Jordan CJ described fishing as endeavouring, not to obtain evidence to support his case, but to discover whether he has a case at all, or to discover the nature of the other side’s evidence.
[41](1938) 38 SR (NSW) 564, 575.

The fact that there are a range of documents relevant on the pleadings that are likely to be in the possession of Sinclair Wilson and to be within the description in the subpoena means that this is not a case where the subpoena is fishing. In a sense, the requirement that it is ‘on the cards’ that the documents sought will materially assist the prosecution of the plaintiff’s case at trial is the counterpart of a ‘fishing expedition’. There are some concrete grounds for the contention that the documents will assist in the legitimate forensic purpose advanced.[42]
[42]Matthews v SPI Electricity Pty Ltd & Ors (No 12) [2014] VSC 131, [37].

To the extent that the subpoenaed documents include some that are not relevant, case management principles point to the appropriate course being to manage the process of inspection. The Defendants are already undertaking the production of a list of the subpoenaed documents. The alternative, setting aside the subpoena in whole, is wasteful of everyone’s resources and will only lead to the issue of another more specific or limited version. It would be wasteful of resources and an elevation of form over substance to force the plaintiffs to seek the issue of a fresh subpoena.[43] The path that is most conducive to the achievement of the overarching purpose in the Civil Procedure Act 2010, and the overarching obligations in Part 2.3 of that Act, is to set aside the subpoena insofar as it catches documents that are not relevant to the issues in the proceeding.
[43]See the observations of Sundberg J (in a different context) in Wimmera Industrial Minerals Pty Ltd v RGC Mineral Sands (1997) 40 IPR 110, 116.

Having identified a legitimate forensic purpose for the production and inspection of documents within the description in the subpoena, I note that the authorities point to it being desirable that the judge should normally inspect the documents for the purpose of making a final decision as to whether access should be granted. In relation to the contentious documents, these are extracted by the Defendants’ solicitor and are in exhibits RJB-5 and RJB-6. I have inspected them, and I refer to my conclusions later. As to the balance of the documents, they will be inspected once the Defendants’ solicitors have returned the documents with a table for them.

Are the Documents ‘For Evidence’

Having regard to my conclusions as to the appropriate test for determining whether the documents sought are ‘for evidence’, and my reference above to the relevance of a considerable number of the documents likely to be within the broad description in the subpoena for the trial of the proceeding, it seems to me to be clear that the subpoena does satisfy the ‘for evidence’ requirement.

The Subpoenas to SME’s R Us and Mark O’Neill

The description of the documents in the subpoenas to SME’s R Us and to Mark O’Neill is set out in Schedule B to these reasons. It is much more specific and focussed than the description in the Sinclair Wilson subpoena. It also refers to and attaches documents that were exhibited to the Nurse Affidavit. I do not consider it too wide, oppressive or fishing. It covers matters directly relevant to the disposition of the assets of the HRF Constructions business dealt with in the ASA and the process of the transfer of the assets from HRF Nominees to the JSG Trust and thence to MAN Civil, and the role of SME’s R Us in that process. It also seeks:

(a) Documents concerning bank accounts identified by reference to exhibits to the Nurse Affidavit.

(b) Documents relevant to the matters to which I have referred that are raised by way of defence, that is, the financing contracts relating to the Trust Plant & Equipment;

(c) Documents relating to the transfer of the registration of that equipment;

(d) Documents relating to the loan agreement between MAN Constructions Pty Ltd and HRF Nominees or Pavjo and related matters.

The subpoenas have been responded to by the subpoenaed persons without objection. For the same reasons I have given in relation to the Sinclair Wilson Subpoena, I consider that these subpoenas have a legitimate forensic purpose and are for evidence at trial.

Client Legal Privilege

The Defendants relied on ss 118 and 119 of the Evidence Act 2008 (Vic), which concern legal advice and litigation privilege, respectively. These sections read as follows:

118 Legal advice
Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of—
(a)a confidential communication made between the client and a lawyer; or
(b)a confidential communication made between 2 or more lawyers acting for the client; or
(c)the contents of a confidential document (whether delivered or not) prepared by the client, lawyer or another person—

for the dominant purpose of the lawyer, or one or more of the lawyers, providing legal advice to the client.
119 Litigation
Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of—
(a)a confidential communication between the client and another person, or between a lawyer acting for the client and another person, that was made; or
(b)the contents of a confidential document (whether delivered or not) that was prepared—

for the dominant purpose of the client being provided with professional legal services relating to an Australian or overseas proceeding (including the proceeding before the court), or an anticipated or pending Australian or overseas proceeding, in which the client is or may be, or was or might have been, a party.

The evidence of the Defendants in support of the claim to advice and litigation privilege was sparse.[44] Counsel for the Defendants made no bones about the fact that he sought that the Court inspect the documents in the exhibits to Mr Broberg’s affidavit for the purposes of seeing whether that inspection bears out the broad description of the privilege claimed.
[44]See paragraph 14(j) above.

Plaintiffs’ Submissions

The plaintiffs submitted that the Broberg affidavit did not properly prove that the documents sought to be the subject of client legal privilege were prepared by the lawyer for the dominant purpose of giving legal advice.

The plaintiffs also submitted that even if the documents claimed to be subject to client legal privilege are regarded as prima facie privileged from production or inspection, then the plaintiffs rely on s 125 Evidence Act 2008 (Vic).

Has Client Legal Privilege been established?

The evidence in support of the privileges claimed was that the documents in exhibits RJB-5, RJB-6, RJB-7, RJB-8 and RJB-9:

a.consist of correspondence and documents passing between Sinclair Wilson, SME’s R US, Steve Marks and solicitors and accountants including JBT Lawyers, Irlicht & Broberg, Ian Jackson and Moore Stevens acting and advising at various times on behalf of the defendants for whom I act both during the course of and for the purpose of matters relating to the present proceeding or contemplation of that proceeding.
b.Consist of communication (sic) and documents which may render the third defendant liable to either a civil penalty or a criminal offence if they are produced for inspection.[45]

[45]Affidavit of Robin John Broberg sworn 9 April 2014 at [14].

The Defendants bear the onus of establishing the claims, including each factual element necessary to establish the requisite dominant purpose. In that respect, focused and specific evidence is required in respect of each communication, rather than mere generalised assertion let alone opaque and repetitious verbal formulae. There should be sufficient evidence which proves directly or by inference that the dominant purpose for the communication was for the relevant client to be given or to obtain legal advice, or satisfied the test for litigation privilege. The communication also has to be confidential.^[46]
[46]Asahi Holdings (Australia) Pty Ltd v Pacific Equity Partners Pty Ltd (No 4) [2014] FCA 796, [29]; see also Australian Crime Commission v Stewart (2012) 286 ALR 713, [69] and AWB Ltd v Cole (2006) 232 ALR 743; Ausnet Electricity Services v Liesfield [2014] VSC 474, [119] (per Robson J).

The test for establishing dominant purpose is summarised in Barnes v Commissioner of Taxation as follows:^[47]

The authorities emphasise the need for focused and specific evidence in order to ground a claim for legal professional privilege. In Kennedy v Wallace, Black CJ and Emmett J reiterated the principles that verbal formulae and bare conclusory assertions of purpose are not sufficient to make out a claim for privilege: see also National Crime Authority v S (per Lockhart J); Grant (per Stephen, Mason and Murphy JJ). Where possible the court should be assisted by evidence of the thought processes behind, or the nature and purpose of advice being sought in respect of, each particular document. The fact that generalised evidence is not challenged in cross-examination does not mean that such evidence must be accepted, particularly when it is as manifestly inadequate as it is in this case. As in Kennedy, mere general assertions of the purpose of creation of the documents are insufficient to discharge this onus. Even though in that case some evidence as to the purpose of particular records was adduced, Allsop J at [168] considered that the onus had not been discharged because the evidence did not permit a conclusion to be drawn as to the dominant purpose of the creation of any particular document or entry in a document. Simply to show that one purpose for creation of the document was to obtain legal advice or assistance is not good enough.

[47]Barnes v Commissioner of Taxation (2007) 242 ALR 601, [18] (emphasis added; citations omitted). Cited with approval in Ausnet Electricity Services v Liesfield [2014] VSC 474, [116] (per Robson J).

It is also helpful to set out what Young J said in AWB Ltd v Cole (No 5), as follows:^[48]

The existence of legal professional privilege is not established merely by the use of verbal formula: Grant v Downs per Stephen, Mason and Murphy JJ. Nor is a claim of privilege established by mere assertion that privilege applies to particular communications or that communications are undertaken for the purpose of obtaining or giving ‘legal advice’: National Crime Authority v S per Lockhart J; Candacal Pty Ltd v Industry Research & Development Board (‘Candacal’); Seven Network Limited v News Limited. If assertions of that kind are received in evidence in support of the privilege claim, their conclusionary nature can leave unclear what advice was really being sought. There will be cases in which a claim of privilege will not be sustainable in the absence of evidence identifying the circumstances in which the relevant communication took place and the topics to which the instructions or advice were directed: Kennedy v Wallace (‘Kennedy v Wallace’) per Black CJ and Emmett J and per Allsop J; see also Southern Equities Corporation Ltd (in liq) v Arthur Andersen & Co (No 6).

[48]AWB Ltd v Cole (No 5) (2006) 234 ALR 651, [44] (citations omitted).

It is plain that the evidence does not rise above a bare conclusory assertion of purpose and, by itself, is not sufficient to make out the claims for client legal privilege. The Defendants also relied, however, on the proposition that I should inspect the documents pursuant to the power now expressly given in s 133 of the Evidence Act. That section reflects the common law position, which the New South Wales Court of Appeal described thus:

In ruling on a claim to legal professional privilege or client legal privilege the court may inspect the relevant documents (Grant v Downs (1976) 135 CLR 674 at 677, 688-9; Trade Practices Commission v Sterling (1979) 36 FLR 244 at 246-7; Woollahra Municipal Council v Westpac Banking Corporation (1994) 33 NSWLR 529 at 541-2; Esso Australia Resources Ltd v Commissioner of Taxation at [52]; AWB Ltd v Cole (2006) 152 FCR 382 at 391; see also s 133 of the Act). Inspection is discretionary (Grant v Downs at 688-9; Mallalla District Council v Livestock Markets Ltd (2006) 94 SASR 258 at [30]), for such assistance as it may provide in arriving at the documents’ status. In Esso Australia Resources Ltd v Commissioner of Taxation at [52] Gleeson CJ and Gaudron and Gummow JJ said, after observing that a claim for privilege is not conclusively established by use of a verbal formula, that a court “should not be hesitant to exercise” its power to examine documents. Where the parties have put evidence before the court, however, beyond the use of a verbal formula, I respectfully remain of the view expressed in Woollahra Municipal Council v Westpac Banking Corporation at 542, that the court should not unnecessarily pay regard to material which cannot be known to the party challenging the claim to privilege.[49]

[49]Per Giles JA (Mason P and Beazley JA agreeing) in New South Wales v Jackson [2007] NSWCA 279, [24].

In Woollahra Municipal Council v Westpac Banking Corporation[50] Giles J (as he then was) considered whether he should inspect the documents in dispute for the purpose of reaching a conclusion as to whether they were privileged. He observed:

In Grant v Downs (1976) 135 CLR 674 at 689, the power to do so [that is, to inspect] was recognised and it was said that ‘in many instances the character of the documents the subject of the claim will illuminate the purpose for which they were brought into existence’. Inspection should not be undertaken unless there is good reason to do so. The Court should be able to proceed upon evidence describing the documents and the circumstances of their creation, and should not unnecessarily pay regard to material which cannot be known to the party challenging the claim to privilege.

[50](1994) 33 NSWLR 529, 542; Cited with approval by Tobias JA (Allsop P and Hodgson JA agreeing) in Bailey v Department of Land and Water Conservation [2009[ NSWCA 100, [61].

In Bailey v Department of Land and Water Conservation,[51] Tobias JA remarked after quoting this passage:

His Honour was there dealing with the power to inspect at common law. The critical word in the passage referred to is “unnecessarily”. If the court is unable to proceed upon the evidence, as in the present case, then in my view there is no impediment to the court exercising its undoubted discretion under s 133 to order that the document or documents be produced and inspected for the purpose of determining the question of whether privilege attaches. How the court utilises the power to inspect under s 133 will obviously depend on the circumstances of each case. I do not consider that merely because the party resisting the claim for privilege objects to the judge exercising the power under s 133 is of itself a legitimate reason to refuse to exercise the discretion: cf Singapore Airlines v Sydney Airports Corporation [2004] NSWSC 380 at [66] per McDougall J. As was noted by Giles JA in Jackson in the passage which I have recorded at [60] above, in Esso Australia Resources v Commissioner of Taxation [1999] HCA 67; (1999) 201 CLR 49 at 70 [52], Gleeson CJ, Gaudron and Gummow JJ observed that a court “should not be hesitant to exercise” its power to examine documents.

[51][2009] NSWCA 100, [62].

Allsop P, whilst agreeing with the reasons of Tobias JA generally, commented on the inspection power thus:

For myself, I would not accept as satisfactory the reasons advanced by Mr Harvey for the inadequacy of the evidence [in support of the privilege]. The respondents appeared to have approached the protection of the privilege in a way which can be described as cavalier. Parties should not assume that a judge will put himself or herself to the time and trouble of examining a multitude of documents if the relevant party cannot muster sufficient interest in the protection of its rights to provide an affidavit in support of its claim. That said, the primary judge was plainly entitled to examine the documents to make a decision about privilege. The transcript makes clear that the course he took in inspecting the documents was not opposed by the appellants. In those circumstances, it is not open to the appellants to assert that this decision of his Honour to examine the documents was a miscarriage of any power.[52]

[52]Bailey v Department of Land and Water Conservation [2009[ NSWCA 100, [2].

The exercise of the discretion to inspect is one which depends in part on the evidence advanced in support of the privilege. The question whether to inspect the documents when faced with an insufficient verbal formula or bare assertion of privilege will depend on the circumstances of the particular case. The power to inspect is discretionary, and it is a discretion which must be informed by the fundamental nature of the common law and statutory right to legal professional and client legal privilege, a privilege that can be asserted outside the context of adversarial litigation.[53]
[53]Baker v Campbell (1983) 153 CLR 52; Daniels Corp International Pty Ltd v ACCC (2002) 213 CLR 543, [9]-[11] & [44]; AWB Ltd v Cole (No.5) (2006) 155 FCR 30, [140].

It is also relevant in this case that:

(a) Not only did the Defendants submit that I should inspect the documents, the plaintiffs’ counsel proceeded on the footing that I would do so;

(b) It is necessary to inspect documents for the purposes of determining whether the privilege against self-incrimination of self-exposure to a penalty applies.

Accordingly I have inspected the documents produced by Sinclair Wilson, SME’s R Us and Mark O’Neill, insofar as they are contained in the confidential exhibits, so as to confirm or deny the general claim for client legal privilege and the privileges against self-incrimination and self-exposure to a penalty.

The results of my inspection, so far as client legal privilege is concerned (subject to the application of s 125), is as follows:

(a) The documents in RJB-5 (documents produced pursuant to the Sinclair Wilson Subpoena) are the subject of client legal privilege in their entirety. They concern communications between Sinclair Wilson and the Defendants’ solicitors (and others) after the commencement of this proceeding – although the correspondence attaches documents that relate to events the subject of the proceeding. Those communications appear to me to be for the dominant purpose of the lawyers giving legal advice to the Defendants;

(b) The documents in RJB-6 (documents produced pursuant to the Sinclair Wilson Subpoena) are the subject of client legal privilege in part. I have numbered the documents in the confidential bundle. The documents numbered 1, 7, 15, 16, 17, 18, 19, 20, 22, 23, 37 and 38 are not, in my view, the subject of privilege. They do not appear to be for the purpose, let alone the dominant purpose, of lawyers providing legal advice or professional legal services related in any way to an Australian proceeding, or a pending or anticipated proceeding. There are some documents that appear to fall within the exception covered by s 125 of the Evidence Act;

(c) The documents in RJB-7 (documents produced pursuant to the subpoena to SME’s R Us and Steve Marks) have a table of contents at the front (but the documents were not numbered according to the table, so I have numbered them). They contain:

(xii) Document 2 - A copy of an email from ‘Steve’ to Mr Nicholls dated 25 October 2011 which is a duplicate of the email in exhibit MAN-4 to the Nurse Affidavit;

(xiii) Document 3 - A copy of an email from Steve Marks to Stephen Southwood and Mr Nicholls dated 15 November 2011 which is a duplicate of the email in exhibit MAN-9 to the Nurse Affidavit;

(xiv) Document 4 – includes in the top half a copy of an email from Steve Marks to Mr Nicholls dated 3 January 2012 which is a duplicate of the email in exhibit MAN-13 to the Nurse Affidavit.

The balance of the documents in this exhibit are not, or are not capable of being, the subject of client legal privilege and will be dealt with under the heading of ‘Does the Privilege against self-incrimination apply?’.

(d) The documents in RJB-8 (documents produced pursuant to the subpoena to SME’s R Us and Steve Marks) comprise two only:

(i) First, an email chain commencing on 4 January 2012 between Clare Jordan of JBT Lawyers acting on behalf of HRF Nominees Pty Ltd and Mr Nicholls, copied to Steve Marks and Jonathan Bowers-Taylor (the principal of JBT Lawyers), concerning Supreme Court proceeding S CI 2011 6094 and described as between HRF Nominees Pty Ltd and the Deputy Commissioner of Taxation, and ending with an email from Steve Marks to the Clare Jordan and the others;

(ii) Secondly, an email chain dated 13 February 2012 between Jonathan Bowers-Taylor, and Steve and Mr Nicholls relating to an upcoming appearance in the Supreme Court proceeding referred to above.

These emails appear to be the subject of client legal privilege;

(e) The documents in RJB-9 (documents produced pursuant to the subpoena to SME’s R Us and Steve Marks) are emails and attached documents passing between Steve Marks of SME’s R Us and Mr Nicholls and employees of the ‘business’ HRF Constructions (Teri Custodio and Stephen Southwood) concerning the re-structure that SME’s R US was engaged by Mr Nicholls to undertake. Sometimes the emails are sent to or received from solicitors acting for the several entities that from time to time appear to have operated the business. On other occasions they are copied to those lawyers. I have not numbered these documents as they appear to all be a part of the process of dealing with the sale of the assets of the business by HRF Nominees to the JSG Trust under the ASA and matters related to the conduct of the business with those assets by MAN Civil, and related details and problems that emerged both before HRF Nominees went into liquidation on 22 February 2012 and after that date. Insofar as emails are

(i) Sent to solicitors acting for Mr Nicholls or the entities controlled by him, they do not on their face appear to be for the purpose, let alone the dominant purpose, of the lawyer providing legal advice to any of the Defendants;

(ii) Copied to solicitors acting, particularly to Mr Ian Jackson of RP Hoban, Lawyers, there is nothing to indicate that copying the emails is for the purpose of advice as distinct from keeping him informed of what is happening.

In my view none of these documents are properly the subject of client legal privilege. The privileges against self-incrimination and self-exposure to a penalty are dealt with below.

The Iniquity Exception

Section 125 of the Evidence Act 2008 (Vic) provides:

125 Loss of client legal privilege—misconduct
(1) This Division does not prevent the adducing of evidence of—
(a)a communication made or the contents of a document prepared by a client or lawyer (or both), or a party who is not represented in the proceeding by a lawyer, in furtherance of the commission of a fraud or an offence or the commission of an act that renders a person liable to a civil penalty; or
(b)a communication or the contents of a document that the client or lawyer (or both), or the party, knew or ought reasonably to have known was made or prepared in furtherance of a deliberate abuse of a power.

(2)For the purposes of this section, if the commission of the fraud, offence or act, or the abuse of power, is a fact in issue and there are reasonable grounds for finding that—
(a)the fraud, offence or act, or the abuse of power, was committed; and
(b)a communication was made or document prepared in furtherance of the commission of the fraud, offence or act or the abuse of power—

the court may find that the communication was so made or the document so prepared.

(3)In this section, power means a power conferred by or under an Australian law.

The plaintiff submitted, and the Defendants accepted, that for the application of this exception to client legal privilege the Court must be satisfied that there are reasonable grounds for finding that:

(a) A fraud, offence or act, or an abuse of power was committed;

(b) A communication was made or document prepared in furtherance of the commission of the fraud, offence or act or the abuse of power.

The plaintiff set out the relevant statements of principle and authority applicable, and the Defendants did not cavil with them, as follows:

(a) The range of instances of fraud are not limited to legal fraud in the narrow sense, but applies to all forms of fraud and dishonesty as fraudulent breach of trust, fraudulent conspiracy, trickery and sham contrivances: Kang v Kwan;[54]
[54][2001] NSWSC 698, [37]. In this paragraph Santow J sets out a number of propositions that are generally relevant.

(b) In ATH Transport v Jas (International),[55] Barrett J found that the s 125 exception or negation activated by ‘fraud’ is a statutory emanation of the principle that there is no privilege in iniquity;
[55][2002] NSWSC 956, [12].

(c) An element of actual dishonesty is not required: Amcor v Barnes;[56]
[56][2011] VSC 341, [47].

(d) Privilege does not attach to a lawyer and client communication made for some illegal or improper purpose contrary to public interest: Hodgson v Amcor; Amcor v Barnes (No.2).[57]
[57][2011] VSC 204, [70].

(e) Proof of the fraud to the civil standard, taking into account the Briginshaw[58] test is not required. Various descriptions of the standard have been used namely:
[58]Briginshaw v Briginshaw (1938) 60 CLR 336.

(iii) there must be something to give colour to the charge;

(iv)it is enough that circumstances are made to appear which sufficiently point to the bona fides and credibility of the allegation;

(v) some prima facie evidence that has some foundation in fact: Hodgson v Amcor; Amcor v Barnes (No.2).[59]
[59][2011] VSC 204, [82].

(f) With respect to the requirement that the communication be in furtherance of a fraud or an offence, it has been held that:

(i) furtherance equates to communications intended to facilitate or to guide the client in the commission of a crime or fraud: P & V Industries Pty Ltd v Porto & Ors (No.3);[60]
[60][2007] VSC 113, [22] and [26].

(ii) Further, the reference to a communication being in ‘furtherance’ of a fraud ought not be read too narrowly, or be too confined in a temporal sense: Hodgson v Amcor; Amcor v Barnes (No.2);[61]
[61][2011] VSC 204, [81].

(iii) The fraud exception will not protect legal privilege if a solicitor or third party is consulted to cover up or stifle a fraud or steps are taken to conceal profits, or to defeat or delay recovery by victims of an initial fraud: Hodgson v Amcor; Amcor v Barnes (No.2);[62]

(iv)Conduct occurring after the fraud may amount to furtherance of the fraud: Amcor v Barnes.[63]

[62]Ibid.

[63][2011] VSC 341, [57]-[63].

I have already noted in my earlier decision that:

(a) The plaintiffs contend that Mr Nicholls is in breach of trust, has breached his fiduciary duty owed to HRF Nominees and has breached his duties as a director of HRF Nominees. Barnes v Addy claims are made against Nicholls, Greer, Man Civil and JSG Nominees;[64]

(b) The underlying contention of the plaintiffs is that Mr Nicholls has ‘phoenixed’ Man Civil and JSG Nominees to take over the Unit Trust Assets and operate the business of HRF Nominees, to the detriment of Pavjo and other creditors of HRF Nominees; and

(c) The offences revealed included contraventions of ss 180-182 and 184 of the Corporations Act 2001. Sections 180(1) and (2), 181(1) and (2), 182(1) and (2) and 183(1) and (2) are sections the contravention of which under s 1317E give rise to civil penalties under s 1317G of the Corporations Act2001.

[64]HRF Nominees Pty Ltd (In Liq) & Others v Man Civil Constructions Pty Ltd & Others [2014] VSC 93, [8].

The material in the emails to which I have referred above (see paragraphs 9 to 11) may also disclose conduct that constitutes an offence or offences under the taxation laws.

The plaintiffs submitted that exhibits MAN-4, MAN-6, MAN -7, MAN-8, MAN-10, MAN-12 and MAN-14 to Nurse Affidavit:

(a) Give rise to reasonable grounds, a prima facie case, or colour to the charge that a fraud or an offence (in its wider meaning as referred to above) has been committed;

(b) There is a prima facie case to suggest that the arrangements to transfer the Unit Trust Assets into the new corporate structure were done after the date of the purported ASA.[65] That case can be seen to be a strong one when the emails to which I have referred above are read; and

(c) The Defendants’ solicitor, Mr Broberg, at paragraph 14(b) of his affidavit concedes that the alleged privileged communications may render Mr Nicholls liable to a civil penalty or criminal offence if they are produced.

[65]HRF Nominees Pty Ltd (In Liq) & Ors v Man Civil Constructions Pty Ltd & Ors [2014] VSC 93, [9].

These matters point strongly to there being reasonable grounds for a finding that Mr Nicholls has contravened the Corporations Act 2001, namely s 180(1) (breach of director’s duty of care) and s 182(1) (improperly using position as a director to gain an advantage for himself or someone else), at the least. These contraventions are offences for the purposes of s 125 Evidence Act.

The question then is, do any of the documents in the confidential exhibits that are the subject of claims to client legal privilege documents satisfy the requirement that it -

(a) Is a communication made, or its contents were prepared, ‘by a client or lawyer (or both), or a party who is not represented in the proceeding by a lawyer, in furtherance of the commission of the offence or the commission of an act that renders a person liable to a civil penalty’; or

(b) Is a communication made, or its contents are such, that the client or lawyer (or both), or the party, knew or ought reasonably to have known was made or prepared in furtherance of a deliberate abuse of a power.

It seems to me that there are just a few documents in the several confidential exhibits to Mr Broberg’s affidavit that satisfy these tests. They are in exhibit RJB-6 (documents produced pursuant to the Sinclair Wilson Subpoena), being documents numbered 41, 42 and 45.

Do the Privileges against Self-incrimination or self-exposure to a penalty apply?

In my previous decision there are two matters of law that are not disputed by the Defendants that are relevant to the question whether documents produced by Sinclair Wilson, SME’s R Us and Steve Marks may be privileged from inspection because of the self-incrimination or self-exposure to a penalty privileges, as follows:[66]

It is important to recognise two fundamental propositions relevant to this matter. First, one person cannot assert the self-incrimination privilege on the ground that the giving of discovery, or compliance with a subpoena or notice to produce, tends to incriminate another person: Rochfort v Trade Practices Commission;[67] Environment Protection Authority v Caltex Refining Co Pty Ltd;[68] Trade Practices Commission v Abbco Iceworks Pty Ltd;[69] Bond v Tuohy;[70] Microsoft Corporation v CX Computer Pty Ltd.[71]
Secondly, and vitally to this matter, an individual cannot complain about the giving of discovery or responding to a subpoena or notice to produce by a company, or another person, on the ground that he (the individual) might tend to be incriminated as a result, because this is not self-incrimination: cf Environment Protection Authority v Caltex Refining Co Pty Ltd;[72] Garvin v Domus Publishing Ltd;[73] Microsoft Corporation v CX Computer Pty Ltd;[74] Australian Securities and Investments Commission v Mining Projects Group Ltd (No 2).[75] The same principle applies to self-exposure to a penalty.

[66]Ibid [41-[42].

[67](1982) 153 CLR 134, 145 (Mason J) (with whom Wilson J agreed); 150 (Murphy J).

[68](1993) 178 CLR 477, 549 (McHugh J).

[69](1994) 52 FCR 96, 116 (Burchett J).

[70](1995) 56 FCR 92, 99-100 (Ryan J).

[71](2002) 187 ALR 362; [2002] FCA 3, [32], (Lindgren J).

[72](1993) 178 CLR 477, 490–3 (Mason CJ and Toohey J); 548-549 (McHugh J).

[73][1989] Ch 335, 348 (Walton J).

[74](2002) 187 ALR 362; [2002] FCA 3, [32], (Lindgren J).

[75][2008] FCA 951, [7].

It is in my view clear that in relation to the documents produced by SME’s R Us and Steve O’Neill, Mr Nicholls cannot rely on the privileges against self-incrimination or self-exposure to a penalty. There is no suggestion that those persons were acting as agents for Mr Nicholls in a way that would enable him to claim that their acts were his acts.

On the other hand, it was submitted on behalf of Mr Nicholls that because Sinclair Wilson are, and were at the relevant times, the accountants and financial advisors to the Defendants, that:

(a) They were and are the agents of the Defendants;

(b) If there are documents emanating from the accountants that are not presently discovered, then rather than subpoena the accountants, further discovery should have been sought from the Defendants; and

(c) Mr Nicholls is entitled, by virtue of the agency, to prevent inspection of the documents produced on the basis of the privileges against self-incrimination or self-exposure to a penalty.

An examination of the affidavits of documents filed on behalf of the Defendants discloses very little that can be identified as emanating from Sinclair Wilson. References below to ‘relevant documents’ is a reference to such documents.

Mr Nicholls has sworn the following affidavits of documents:

(a) On his own behalf, an affidavit sworn 24 April 2013 which includes some limited financial statements of the HRF Constructions Unit Trust as at December 2010 and January 2011;

(b) On behalf of JSG Nominees (the seventh defendant), an affidavit sworn 24 April 2013 which discloses the Asset Sale Agreement, an Income statement for the JSG Trust for the year ended 30 June 2013 and a tax return for the JSG Trust for the 2012 year;

(c) On his own behalf, a supplementary affidavit sworn 30 July 2013 which reveals a few emails and letters between himself and Sinclair Wilson and documents relating to the agreement under which Pavjo and other entities related to Mr Coleiro invested in MAN Constructions Pty Ltd; and

(d) On behalf of the seventh defendant, a supplementary affidavit sworn 6 June 2013 which discloses various hire-purchase and financing documents.

Ms Greer has sworn the following affidavits of documents:

(a) On behalf of the first defendant, an affidavit sworn on 24 April 2013, which reveals bank statements and financial statements of the MCC Trust for the 2012 and 2013 financial years;

(b) On behalf of the second defendant, an affidavit sworn on 24 April 2013 which reveals no relevant documents;

(c) On behalf of the first defendant, a supplementary affidavit sworn 1 July 2013 which reveals no relevant documents; and

(d) On behalf of the second defendant, a supplementary affidavit sworn 1 July 2013 which reveals no relevant documents.

There are therefore few documents discovered by the Defendants that, on their face, may be said to be the product of the work of Sinclair Wilson. Further, there are no claims in the affidavits of documents to withhold inspection of documents discovered on the basis of the privileges against self-incrimination or self-exposure to a penalty.

The first question is whether inspection of the Sinclair Wilson documents should be refused because it is being used as a substitute for further discovery against the defendants. Discovery by the Defendants has been limited and, from the Court’s and, no doubt, the plaintiffs’, perspective slow and unsatisfactory. My previous reasons refer to the delays by the Defendants.[76] There is also reason to think that Sinclair Wilson’s documents would go further than the documents truly discoverable by the Defendants by reference to work undertaken by Sinclair Wilson as their agents. There may be file notes and working papers and the like that are the property of that firm.
[76]HRF Nominees Pty Ltd (In Liq) & Ors v Man Civil Constructions Pty Ltd & Ors [2014] VSC 93, [18-[26].

For reasons similar to those I have given for refusing to set aside the subpoena to Sinclair Wilson, requiring the plaintiffs to renew their applications for discovery against the defendants is wasteful of everyone’s resources and it would be an elevation of form over substance to force the plaintiffs to seek further discovery of documents prepared by Sinclair Wilson that are, or may be, within the ‘possession, custody or power’[77] of the Defendants. The path that is most conducive to the achievement of the overarching purpose in the Civil Procedure Act 2010, and the overarching obligations in Part 2.3 of that Act, is to allow inspection of the documents the subject of the subpoena, except insofar as it can be said that the documents:

(a) Are discoverable by Mr Nicholls or Ms Greer; and

(b) Would, if discovered by Mr Nicholls or Ms Greer, be immune from inspection by the plaintiffs because of the privileges against self-incrimination or self-exposure to a penalty.

[77]See Rule 29.01 of the Rules.

Whether a document produced by Sinclair Wilson is such a document (as described in the last paragraph) depends on the capacity in which, and the purpose for which, the documents were produced, or the communications recorded in them were made.

In relation to the documents in exhibit RJB-7, I have dealt with some of them under the heading of Client Legal Privilege (documents 2, 3 and 4 – see paragraph 70(c)). My conclusions regarding the balance of the documents are as follows:

(a) Document 1 – is an email that is sent by Steve Marks to Mr Nicholls giving advice in the course of giving effect to the restructure referred to in the email set out in full in paragraph 9 above. To the extent that it incriminates Mr Nicholls, it is not his document nor does it come from him and does not involve him in self-incrimination or self-exposure to a penalty;

(b) Documents 5, 6, 7, 9, 10, 11 and 12 are emails that were sent by Steve Marks to Teri Custodio, and someone called Mev, of HRF Constructions (sometimes copied to Mr Nicholls), giving advice in the course of giving effect to the restructure referred to in the email set out in full in paragraph 9 above. It does not involve Mr Nicholls in self-incrimination or self-exposure to a penalty;

(c) Document 8 – is an email from Steve Marks to a variety of people advising of new legislation relating to ‘Phoenix’ companies. It does not incriminate anyone directly and certainly does not involve Mr Nicholls in self-incrimination or self-exposure to a penalty; and

(d) Document 13 – is an email from Teri Custodio to Steve Marks giving him information requested in the course of giving effect to the restructure referred to in the email set out in full in paragraph 9 above. It does not involve Mr Nicholls in self-incrimination or self-exposure to a penalty.

In relation to the documents in exhibit RJB-9, I have dealt with some of them under the heading of Client Legal Privilege (paragraph 70(c)). The general description of the documents that I give there need not be repeated. They are all documents produced by SME’s R Us and Steve Marks. Only a very few include emails from Mr Nicholls. My inspection of them discloses no reason to suppose that they involve him in self-incrimination or self-exposure to a penalty.

Conclusion

By way of a general summary of my conclusions as set out in detail above:

(a) The application to set aside the subpoena to Sinclair Wilson should be refused;

(b) The documents in exhibit RJB-5 (copies and originals) to the Broberg affidavit, are the subject of client legal privilege;

(c) The documents in exhibit RJB-6 (copies and originals) to the Broberg affidavit, are in some cases subject to client legal privilege (documents 2-6, 8-14, 21, 24-36, 39, 40, 43 and 44) and some documents fall within the exception to that privilege arising under s 125 of the Evidence Act 2008 (41, 42 and 45). The other documents (1, 7, 15, 17, 18, 19, 20, 22, 23, 37 and 38) are not the subject of any privilege;

(d) The documents in exhibit RJB-7 (copies and originals) to the Broberg affidavit, are not privileged from inspection;

(e) The documents in exhibit RJB-8 (copies and originals) to the Broberg affidavit, are subject to client legal privilege; and

(f) The documents in exhibit RJB-9 (copies and originals) to the Broberg affidavit, are not privileged from inspection.

I will hear the parties as to the appropriate orders to be made in consequence of these conclusions.

SCHEDULE A
The documents the subject of the Subpoena to Sinclair Wilson:
The documents and things you must produce are as follows:
1.All notes, working papers, instructions, letters of engagement, correspondence (including email correspondence), financial records, receipts, tax declarations (including draft tax declarations) and all documents, and your complete file, in relation to, or howsoever referring to, each of the following entities:
(a)MAN CIVIL CONSTRUCTIONS PTY LTD (ACN 154 144 322);
(b)HRF NOMINEES PTY LTD (IN LIQUIDATION) (ACN 139 212 678);
(c)MAN CONSTRUCTIONS PTY LTD (ACN 110 238 321); and
(d)JSG NOMINEES PTY LTD (ACN 154 146 522),
Between 29 June 2009 until the date of this Subpoena.

2.All notes, working papers, all documents, whatsoever, and your complete file, in relation to, or howsoever referring to:
(a)JUSTINE SARAH GREER; and
(b)MARK ANDREW NICHOLLS,

Between 29 June 2009 until the date of this Subpoena.

SCHEDULE B

The documents the subject of the Subpoenas to SME’s R US Pty Ltd and to Steve Marks (aka Stephen Mark O’Neill):
The documents and things you must produce are as follows:
1.All documents passing between the First, Second, Third and Seventh Defendants and Steve Marks (aka Stephen Mark O’Neill) of SME’s R US Pty Ltd between July 2011 to date.
2.The “advice” referred to in the email from Steve Marks to Mark Nicholls dated 25 October 2011, being Annexure A to this Subpoena.
3.Any and all drafts of the alleged “Asset Sale Agreement” dated 16 August 2011, being Annexure B to this Subpoena.
4.All contracts entered into by MAN Civil Constructions Pty Ltd since November 2011.
5.All bank statements on all accounts operated by MAN Civil Constructions Pty Ltd since November 2011.
6.All documents of whatsoever nature (including, but not limited to, emails, letters, file notes, notes of meetings, SMS text messages, draft documents) concerning or in relation to the creation of the JSG Trust, being Annexures C and D to this Subpoena.
7.All bank statements in respect of the following accounts since November 2011:
(a)ANZ Account Number -                 013 822 4952 32128;
(b)ANZ Account Number -                 013 822 5262 88782;
(c)ANZ Account Number -                 4564 8070 0593 7386; and
(d)Bank Account Numbers (referred to in Annexure E to this Subpoena) -           4564 8070 0910 8141, 4564 8070 0069 7410, and 4564 8070 0883 5942.

8.All financing contracts over any of the Trust Plant & Equipment (identified in Annexure F to this Subpoena, being a copy of the annexure to the Plaintiff’s Statement of Claim) that have been entered into or taken over from HRF Nominees Pty Ltd (In Liquidation) by MAN Civil Constructions Pty Ltd since August 2011.
9.All documents whatsoever concerning the registration, or transfer of registration of any Trust Plant & Equipment (identified in Annexure F to this Subpoena).
10.All documents of whatsoever nature concerning a loan agreement between MAN Constructions Pty Ltd and HRF Nominees Pty Ltd and/or Pavjo Pty Ltd, and all documents whatsoever concerning any dealings between HRF Nominees Pty Ltd/MAN Civil Constructions Pty Ltd, MAN Civil Constructions Pty Ltd, and TTM Constructions Pty Ltd, including in relation to Barry Road Gisborne (including all correspondence in relation to the removal of any caveats held in respect of the above-mentioned property).
11.Bank account transaction records, and account statements, for all bank accounts owned or operated by Justine Sarah Greer, and Mark Nicholls, since July 2011 to date.

SCHEDULE OF PARTIES

S CI 2012 03303
BETWEEN:
HRF NOMINEES PTY LTD (ACN 139 212 678) (In Liquidation) ATF HRF CONSTRUCTIONS UNIT TRUST	First Plaintiff
PAVJO PTY LIMITED (ACN 109 516 289)	Second Plaintiff
- and -
MAN CIVIL CONSTRUCTIONS PTY LTD (ACN 154 144 322)	First Defendant
JUSTINE SARAH GREER	Second Defendant
MARK ANDREW NICHOLLS	Third Defendant
HRF NOMINEES PTY LTD (In Liquidation) (ACN 139 212 678)	Fourth Defendant
ANDREW LEONARD DUNNER	Fifth Defendant
MAN CONSTRUCTIONS PTY LTD (ACN 110 238 321)	Sixth Defendant
JSG NOMINEES PTY LTD (ACN 154 146 522)	Seventh Defendant

[2014] VSC 613

8 December 2014