Micheletto (Trustee), in the matter of Liu (Bankrupt) v Natural Home Textiles Pty Ltd
[2023] FedCFamC2G 264
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Micheletto (Trustee), in the matter of Liu (Bankrupt) v Natural Home Textiles Pty Ltd [2023] FedCFamC2G 264
File number(s): MLG 805 of 2022 Judgment of: JUDGE MANSINI Date of judgment: 6 April 2023 Catchwords: BANKRUPTCY – application to set aside subpoenas – whether application is incompetent – whether subpoenas should be set aside in part or entirety – subpoenas to be set aside in part Legislation: Bankruptcy Act 1966 (Cth) ss.120, 121,
Federal Circuit and Family Court of Australia Act 2021 (Cth) s.176(2)
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) r. 6.17, 6.18, 16.01, 16.05, 16.08, 16.12, 16.13, 16.15
Cases cited: Harwood v the Trustee of the Property of John Mervyn Harwood [2015] FCCA 1058
Pharm-a-Care Laboratories Pty Ltd v Commonwealth of Australia [2009] FCA 1203
Wong v Sklavos [2014] FCAFC 120
Division: Division 2 General Federal Law Date of hearing: 15 March 2023 Place: Melbourne Number of paragraphs: 75 Place: Melbourne Counsel for the Applicant: Mr D Harrison Solicitor for the Applicant: SLF Lawyers Counsel for the Respondents: Mr N Paterson Solicitor for the Respondents: Altus Lawyers
Table of Corrections 12 April 2023 In paragraph 2, the words “share transfer” have been replaced with “Share Transfer” and the words “at the time of the transfer” have been replaced with “at the time of the Share Transfer” 12 April 2023 In paragraph 15, the word “subpoenas” has been replaced with “Subpoenas” 12 April 2023 In paragraph 33, the words “or objecting to” have been replaced with “or objection to” 12 April 2023 In paragraph 42, the words “and two non-parties” have been replaced with “and one non-party” ORDERS
MLG 805 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
IN THE MATTER OF JAMES LIU, BANKRUPT
BETWEEN: FABIAN KANE MICHELETTO & MICHAEL CARRAFA IN THEIR CAPACITY AS JOINT AND SEVERAL TRUSTEE OF THE BANKRUPT ESTATE OF JAMES LIU (ALSO KNOWN AS ZHIHUA LIU), A BANKRUPT
Applicants
AND: NATURAL HOME TEXTILES PTY LTD (ACN 059 830 527)
First Respondent
ELAINE LIU
Second Respondent
JAMES LIU (ALSO KNOWN AS ZHIHUA LIU), A BANKRUPT
Third Respondent
order made by:
JUDGE MANSINI
DATE OF ORDER:
6 April 2023
THE COURT ORDERS THAT:
1.At the request of the Trustees, orders giving effect to these interlocutory reasons of 6 April 2023 will be entered on 13 April 2023.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE MANSINI
IN SUMMARY
This is an interlocutory determination of an application to set aside two subpoenas.
The substantive matter in which the interlocutory issue arises is an application by the Trustees of the Bankrupt Estate of James Liu for orders setting aside a share transfer, pursuant to ss.120 and/or 121 of the Bankruptcy Act 1966 (Cth) (Act) (among declarations and other alternative orders sought). The application relates to a transfer of 11,563 shares in Natural Home Textiles Pty Ltd (ACN 059 830 527) (First Respondent) (Share Transfer), by the Third Respondent bankrupt to the Second Respondent wife prior to his bankruptcy. By his initial response, the Third Respondent contends that ss.120(1)(b) and s.121(2) of the Act do not apply for reasons which include that: consideration was given by the Second Respondent in the form of security over a Shanghai property greater than the value of transferred shares; the purpose of the Share Transfer was to convey legal title in exchange for that consideration; and the Third Respondent was not about to become insolvent at the time of the Share Transfer.
There is an unfortunate procedural history in the matter to date. As will appear, the Trustees issued subpoenas in parallel to a process of discovery. Some of the persons and entities whose records are covered by the subpoenas first engaged with the subpoenas by way of inspection and objection and did not apply to set aside the subpoenas until a later stage.
For the reasons that follow, the setting aside application is granted in part and I have determined it appropriate to narrow the categories of the subpoenas.
CONTEXT
Parties
The Applicants in the substantive proceedings are the Trustees of the Bankrupt Estate of James Liu (Trustees).
The First Respondent in the substantive proceedings is the company Natural Home Textiles Pty Ltd (ACN 059 830 527). The First Respondent is a family company, was incorporated in 1993 and remains registered. The Second and Third Respondents were previously each 50% shareholders in the First Respondent.
The Second Respondent is a Mrs Elaine Liu, the bankrupt’s wife (Bankrupt’s Wife/Second Respondent).
The Third Respondent is a Mr James Liu, the Bankrupt (Bankrupt/Third Respondent).
In addition to the First and Second Respondents, the following are defined as an “Associated Entity” for the purposes of describing the documents to be produced under the subpoenas:
(a)GHL Enterprises Pty Ltd (ACN 068 498 475) ;
(b)Australian Natural Living Pty Ltd (ACN 625 365 861);
(c)Y E Australia Pty Ltd (ACN 167 359 480); and
(d)a Mr Matthew Liu, son of the Bankrupt and the Bankrupt’s Wife (Bankrupt/Third Respondent’s Son).
Counsel appeared for the three named Respondents and also entered an appearance in these interlocutory proceedings on behalf of Australian Natural Living Pty Ltd and the Bankrupt’s Son (objecting parties). There was no appearance entered for or on behalf of GHL Enterprises Pty Ltd or Y E Australia Pty Ltd and it was submitted by Counsel for the objecting parties that these entities are now deregistered.
Procedural Chronology
These proceedings commenced by way originating application filed on 14 April 2022.
On 10 August 2022, orders were made by consent that each party make discovery of “any document or class of documents which any other party reasonably requests the party to discover”, by 2 September 2022.
On 13 December 2022, at a procedural mention before a Registrar of this Court, the Trustees’ representative first requested that the First Respondent and the Bankrupt’s Wife discover documents in these proceedings. The Registrar made declarations and orders regarding discovery as follows:
(a)that discovery is in the interests of the administration of justice for the purposes of s.176(2) of the Federal Circuit and Family Court of Australia Act 2021 (FCFCOA Act); and
(b)the parties provide general discovery pursuant to r 14.02(2)(a) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) (FCFCOA Rules) by 6 February 2023.
On 22 December 2022, the Trustees lodged two subpoena requests with the Court:
(a)The first subpoena was addressed to “The Proper Officer of DNR Aust Pty Ltd (ACN 136 572 159)” (the Skeggs Subpoena). Annexed to these reasons and marked Annexure A is the schedule of books, documents and things for production at section E of the Skeggs Subpoena.
(b)The second subpoena was addressed to “The Proper Officer of A.C.N. 131 473 624 Pty Ltd” (the Madisons Subpoena). Annexed to these reasons and marked Annexure B is the schedule of books, documents and things for production at section E of the Madisons Subpoena.
On 22 December 2022, the Skeggs Subpoena and the Madisons Subpoena were issued by the Court’s Registry. The last date for service was noted on the Subpoenas as 10 January 2023. The required date of production was 23 January 2023.
On 17 January 2023, a bundle of documents was produced to the Registry on behalf of Madisons Lawyers Pty Ltd (ACN 113 131 507) in response to the Madisons Subpoena. On 18 January 2023, Madisons Lawyers Pty Ltd filed a notice of objection on its own behalf. Madisons Lawyers Pty Ltd objected to producing documents on grounds that the subpoena was addressed to an entity that does not conduct the legal practice known as Madisons Lawyers Pty Ltd. Madisons Lawyers Pty Ltd also stated that they had received written notice that the Respondents and the Bankrupt’s Son asserted privilege over the production of documents under the Madisons Subpoena.
On 24 January 2023, documents were produced to the Registry on behalf of the Bankrupt’s accountant (a Mr Ron Skeggs of DNR Australia Pty Ltd) in relation to the Skeggs Subpoena.
Also on 24 January 2023, the First Respondent, the Second Respondent, the Third Respondent Bankrupt and the Bankrupt’s Son filed notices of objection in relation to the Subpoenas respectively on grounds of “blanket claim of legal professional privilege”.
On 3 February 2023, the First Respondent and the Bankrupt’s Wife filed objections in relation to the Subpoenas on grounds that the Subpoenas were not served on “the Respondents” until 19 January 2023 and the production date was 23 January 2023 leaving minimal time to file objections prior to the date for production. Other grounds of objection to the Madisons Subpoena were on the basis it sought privileged material, which privilege had not been waived, and would likely contain privileged material. Other grounds of objection to both Subpoenas were made on the basis of being oppressive and of uncertain relevance.
On 6 February 2023, the Respondents are said to have produced some documents in response to the order to make discovery.
On 8 February 2023, the matter was listed for return of subpoena hearing before a Registrar of this Court. On that occasion, the Respondents’ representative said that they also act for the Bankrupt’s Son for the limited purpose of the return of the Trustees’ subpoenas. The Registrar made orders and notations which, most pertinently, included the following:
Regarding the Madisons Subpoena
(a)Documents had been produced to Registry on behalf of Madisons Lawyers Ltd in response to the Madisons Subpoena on 17 January 2023;
(b)Mr Dunn (Director of Madisons Lawyers Pty Ltd) had appeared and confirmed that the Madisons Subpoena had been answered and there were no further documents to produce;
(c)The objecting parties reserved their rights in relation to the Madisons Subpoena; and
(d)The solicitors for the First and Second Respondents had leave to inspect and copy the documents produced in response to the Madisons Subpoena and were to file and serve a schedule and/or affidavit by 4.00pm on 22 February 2023 which set out a short description of each document over which an objection or claim of privilege and/or confidentiality was made, the ground of each such objection and any facts supporting each objection or claim. In the event of any remaining objection more than 7 days after service of the schedule or affidavit then the contest were to be listed for hearing on application to the Duty Registrar.
Regarding the Skeggs Subpoena
(a)Documents had been produced to the Registry in response to the Skeggs Subpoena on 24 January 2023;
(b)The objecting parties reserved their rights in relation to the Skeggs Subpoena; and
(c)The solicitors for the First and Second Respondents had leave to inspect and copy the documents produced in response to the Skeggs Subpoena and were to file and serve a schedule and/or affidavit by 4.00pm on 22 February 2023 which was to set out and be subject of the same process as that in relation to the Madisons Subpoena at (d) above.
On 21 February 2023, the Trustees are said to have produced documents by way of discovery.
On 22 February 2023, the Second Respondent Bankrupt’s Wife filed and served an affidavit which outlined objections to the release of documents produced pursuant to the Subpoenas. Annexure A to that affidavit was in the form of a schedule and identified 267 documents produced pursuant to the Subpoenas over which there was an objection. The objections were identified in the schedule as “LPP” or “Without Prejudice” in each case.
Also on 22 February 2023, the Trustees filed an affidavit which annexed an index listing documents produced to Registry pursuant to the order for general discovery and various claims for privilege over production and were no longer within the Trustees’ control.
On 23 February 2023, further documents were produced on behalf of Madisons Lawyers Pty Ltd (ACN 113 131 507) in response to the Madisons Subpoena being invoices and receipts which were not included in the material produced to the Registry on 18 January 2023.
As the documents subject of the Subpoenas remained in contest, the matter was referred to a Judge and listed for directions hearing before the Court as presently constituted.
On 6 March 2023, Counsel appeared on behalf of the Trustees and Counsel appeared on behalf of the three Respondents and the Bankrupt’s Son. Orders were made which: granted leave to the Respondents to inspect and copy the further documents produced by Mr Dunn on 23 February 2023 in response to the Madisons Subpoena; required the Respondents to file and serve any application seeking that the Subpoenas be set aside by 7 March 2023. Other procedural orders related to the program of materials and interlocutory hearing of any setting aside application.
On 7 March 2023, the Respondents and the Bankrupt’s Son jointly filed and served this interim application seeking to set aside the Skeggs Subpoena and the Madisons Subpoena pursuant to r.16.08 of the FCFCOA Rules (the Setting Aside Application). Orders were also sought that the documents produced by returnees of the Subpoenas be returned to them and that the Respondents’ costs be paid (of the Setting Aside Application, the inspection of the subpoenaed documents and affidavits filed in relation to them and incidental to those matters).
On 9 March 2023, written submissions were filed in support of the Setting Aside Application. Those written submissions indicated they were made on behalf of the Respondents and two non-parties who were named in the definition of “Associated Entity” in the Subpoenas (the Bankrupt’s Son and Australia Natural Living Pty Ltd). The Respondents also filed an affidavit of a Mr Phillip Kotsanis in support of the Setting Aside Application.
On 15 March 2023, the Trustees filed written submissions in response to the Setting Aside Application as well as an affidavit of a Ms Emily Everett in reply.
On 15 March 2023, the Setting Aside Application proceeded to hearing. Counsel appeared on behalf of the Trustees and Counsel appeared on behalf of the Respondents and non-parties the Bankrupt’s Son and Australia Natural Living Pty Ltd.
STATUTORY FRAMEWORK
On initiative of the Court or request of a party, the Court or a Registrar may issue a subpoena for production, to give evidence or both: r.16.01. A subpoena must be served in accordance with Part 6 of the Court’s Rules, not more than 12 months after it is filed and within 3 months after it is issued: rr.16.05, 6.17 and 6.18. A failure to comply with a subpoena without lawful excuse may result in a warrant for arrest or an adverse costs order: r.16.15.
Once entered, the issuing party gains a right to inspect the subpoenaed documents in accordance with r.16.12. Such right of inspection is also subject to any successful application that the subpoena be set aside or objection to production or inspection: r.16.08 and r.16.13.
The principles applicable to an application to set aside a subpoena are well established and were conveniently summarised by the Full Federal Court in Wong v Sklavos [2014] FCAFC 120 at [12]:
The party issuing a subpoena bears the onus of demonstrating that the subpoena has a legitimate forensic purpose in relation to the issues in the proceedings. A subpoena may be set aside if it requires the production of documents which do not have apparent relevance to the issues arising on the pleadings. Other cases have used different terminology, but with essentially the same effect, for example, by requiring that, viewed realistically, the documents sought have a bearing on an issue which is not unreal, fanciful or speculative, or that the material sought is reasonably likely to add in some way to the relevant evidence in the case, or that it be “on the cards” that the documents sought will materially assist the party at whose request the subpoena has been issued.
(citations omitted).
Some of the grounds for setting aside a subpoena were helpfully restated in Pharm-a-Care Laboratories Pty Ltd v Commonwealth of Australia [2009] FCA 1203 per Flick J at [20]:
The various grounds upon which an application may be made to have a subpoena set aside need not be presently canvassed in any great detail. Some of these grounds have been usefully collated by Powell J in Botany Bay Instrumentation & Control Pty Ltd v Stewart [1984] 3 NSWLR 98 at 100 as follows (citations omitted):
Although a reference to the authorities makes it tolerably plain that the court will exercise its undoubted jurisdiction to set aside a subpoena in a variety of cases, as, for example:
1.unless the subpoena was issued for the purpose of a pending trial, hearing or application …
2. where to require the attendance of a witness would be oppressive …
3.where the subpoena had not been issued bona fide for the purpose of obtaining relevant evidence and the witness to whom the subpoena had been addressed was unable to give relevant evidence …
4.where the subpoena has been used for the purpose of obtaining discovery or further discovery against a party …
5.where the subpoena has been used for the purpose of obtaining discovery against a third party …
6.where to require a party to comply with a subpoena to produce documents would be oppressive …
7.where the subpoena has been issued for a purpose which is impermissible, as, for example, “fishing” …
There is an “old rule” that a subpoena cannot be used as a substitute for discovery, or as a substitute for an application for better discovery, which is of relatively limited application in modern times: Harwood v the Trustee of the Property of John Mervyn Harwood [2015] FCCA 1058 at [33]-[35] per Manousaridis J. For a non-party, who is not liable to make discovery, the justification was they are a stranger to the litigation who would not know the matters in issue between the parties. For a party, the principal objection for using subpoenas as a substitute to discovery was it would disrupt the normal course of litigation. Then, subpoenas were returnable at the final hearing whereas modern case management practices see subpoenas returnable at an earlier stage by reason of procedural efficiency.
THE RESPECTIVE CONTENTIONS
The Trustees primarily contended that the Setting Aside Application should not be allowed on grounds of incompetence because of the late filing of objections. They also complained of the constantly shifting nature of the Respondents’ case.
More specifically, the Trustees said that appearances have been entered and documents filed by and on behalf of differing compositions of Respondents and, at times (such as the present application), by and on behalf of non-parties. Further, and although the Trustees accepted the power of the Court to do so, they told the Court it would be wrong to set aside the Subpoenas in circumstances where they had already been (at least purportedly) complied with, inspected by the Respondents and objections made in accordance with Registrar’s orders.
In the alternative, were the Court so minded, the Trustee contended that the Court has the power to and should order a narrowing of the Subpoenas rather than to set them aside in their entirety. In this respect, the Trustees maintained that the Subpoenas have a proper forensic basis.
The Respondents and non-parties represented by Counsel at the hearing accepted that the Setting Aside Application ought to have been made earlier but maintained that the Court should not allow such wide, indiscriminate and irrelevant subpoenas to stand. They said, therefore, there could be no legitimate forensic purpose in the documents which have been produced in response to them.
The parties seeking the setting aside were transparent about foreshadowing that, were the Subpoenas allowed (in whole or in part), objections will follow on grounds of legal professional privilege and without prejudice privilege.
CONSIDERATION
This Setting Aside Application was made by and on behalf of the three Respondents to the substantive matter and one non-party, each of whom are defined as an “Associated Entity” in the Subpoenas.
There is no limitation under the Court’s Rules on who may apply to set aside a subpoena. In any event, each of the applicants to the Setting Aside Application (that is, the First, Second and Third Respondents and the Bankrupt’s Son) plainly have an interest in the proceedings. The Bankrupt’s Son is a non-party but is named in the Subpoenas as an “Associated Entity” and, by this definition, the Subpoenas cover documents belonging to him or pertaining to his affairs.
Australian Natural Living Pty Ltd is not named as an applicant to the Setting Aside Application but sought to address the Court at the hearing (together with the applicants to the Setting Aside Application) as a non-party who similarly has an interest in the proceedings by the definition of “Associated Entity”. I am content to receive submissions on their behalf in the present circumstances and limited to the Setting Aside Application.
To the extent that the Trustee complains of the changing faces or position of the parties, that may legitimately be a matter for the substantive proceedings but does not in my view arise in the context of this interlocutory application in which each of the parties and non-parties that sought to address the Court plainly have an interest in the Subpoenas.
There is no specified limitation in the Court’s Rules on the time for filing an application to set aside all or part of a subpoena. There has been no order of the Court specifying a time for such application. The Setting Aside Application is not “incompetent” in this respect.
Subpoenas are a procedure directed to obtaining documents for evidence for use in a proceeding. Under the Court’s Rules, the process is separate and distinct to that of discovery.
The notion that a subpoena cannot be used as a substitute for discovery, or as a substitute for an application for better discovery, might be an old rule which is of limited application to the present day but nonetheless the problems that may arise out of parallel or substitute processes are borne out in the present case.
The Trustees are understandably aggrieved by the process to date. However, the Trustees chose to issue the Subpoenas in parallel to (and prior to the conclusion of) discovery as between the parties. The Subpoenas cover categories of documents which could and should have been discovered. The Trustees’ contention that the Subpoenas were a necessary step because the Respondents’ discovery was inadequate is based on what they retrospectively learned of the documents produced by way of discovery and the list of documents over which objections to Subpoenas are pressed. In my view, this does not sufficiently justify their approach. The parallel processes have unnecessarily complicated the orderly progress of the matter.
The Trustees are otherwise correct that the Respondents and the Bankrupt’s Son have contributed to delay in these proceedings by first objecting to rather than applying to set aside the Subpoenas.
The prejudice that might arise from these matters may be addressed by way of costs which will be reserved to be heard on another occasion.
For completeness, the alleged failure of the Respondents to comply with discovery may be addressed as a separate matter on application of the Trustees, but is not presently a matter before the Court.
Notwithstanding the unfortunate procedural history to date, I am of the view that the Court should not allow a subpoena that is improper and by its nature oppressive to the proceedings and going to delay the course of justice. I turn now to address each category of the Subpoenas.
The Madisons Subpoena
The first category is not strictly required nor opposed.
The second category is apparently canvassed in categories 3, 4 and 5 and I did not understand it to be seriously pressed. To the extent it was, it would be set aside on grounds that it lacks sufficient precision as for the Court to identify that the documents sought are reasonably likely to add in some way to the relevant evidence in the case and so broad as to be oppressive.
The third category (at (a) to (c)) is said to relate to the file or matter under which Madisons Lawyers Pty Ltd provided advice to one or more of the Respondents about a deed executed on 30 April 2020. Essentially, the significance of that deed to the substantive proceedings is that the Respondents rely on it to explain the legitimacy of the Second Respondent’s agreement to give security over the Shanghai property among other disputes between the parties about the Share Transfer. The objectors accepted that the deed is in evidence and there is a legitimate forensic purpose in cross-examination over its existence. However, it is foreshadowed that some or all of those documents will be subject of a claim of legal professional privilege.
The objectors also resisted the production of all invoices under the third category (at (d)) on grounds of relevance but foreshadowed this would not be subject of a privilege objection.
The documents in this third category are plainly relevant to the extent they may establish the date of creation of the deed. That relevance also extends to the date on which instructions were first given to prepare the deed and on whose instruction the deed was created but does not extend to production of the entire solicitor’s file. I will order the narrowing of this category accordingly.
The fourth category was accepted as a narrower sub-set of the second category. I am not persuaded as to the legitimate forensic purpose or relevance to these proceedings other than to the extent that it relates to the Bankrupt and the period up to the date on which the deed was executed (30 April 2020). I will order the narrowing of this category accordingly.
The fifth category was not pressed and will be set aside.
The Skeggs Subpoena
The first category is not strictly required or opposed.
The second category is apparently canvassed in other categories and I did not understand to be seriously pressed. If it were pressed, I would not allow it for the same reasons as category two of the Madisons Subpoena. This category will be set aside.
The third category was said to be necessary for the purposes of establishing the scope of services being provided by the accounting firm or accountant to whom the Skeggs Subpoena was addressed and to enable identification of whether other accountants might properly be subpoenaed to produce documents in these proceedings. It is unclear why such documents are necessary in relation to each of the persons and entities defined as “Associated Entity”. In any event, I accept the submission that, if such information is not already known to the Trustees, then this amounts to nothing more than a fishing expedition. This category will be set aside.
The fourth category was not opposed to the extent it related to the period from 2014 to 2018 when the Share Transfer was completed. The remainder of the period from 1 January 2000 to the financial year ending 2021/22 was pressed on the basis it will disclose whether the Third Respondent Bankrupt owes interest on the $10,000 payment made by the Second Respondent to the First Respondent Company in 1994. The legitimate forensic purpose was essentially said to be verification of evidence on which the Respondents rely in the substantive matter. The objectors contended that the Respondents do not rely on the $10,000 payment in the substantive matter, it is not in issue and it was made in 1994 therefore is not remotely connected with the matters in issue. Further, it is a debt of the First Respondent Company. I am not persuaded of the legitimate forensic purpose or relevance of this category other than the period commencing with the financial year 1 July 2014 to 30 June 2015 and ending 31 December 2018, to cover the period when the Share Transfer was completed.
The fifth category related to all income tax returns for any of the persons and entities defined as “Associated Entity” for the period 1 January 200 to date. The legitimate forensic purpose is plainly to demonstrate disclosed earnings, outgoings and liabilities. I am persuaded of the relevance to the First and Second Respondents in the substantive proceedings, for the reasonable period prior to the share transfer commencing with the financial year 1 July 2014-30 June 2015 and ending 31 December 2018. I am not so persuaded and will set aside this category to the extent it is a duplication of category four (as it relates to the Third Respondent Bankrupt) and covers a longer period.
The sixth category was pressed on the basis it may disclose any accounting advices provided to the Third Respondent Bankrupt or any of the persons or entities defined as “Associated Entity”. Without more precision, this category is too broad to discern any legitimate forensic purpose and will be set aside.
The seventh category was pressed on the basis it will disclose assessments of the solvency of the Third Respondent Bankrupt. As earlier referenced, the Trustees accepted they are not aware of whether accounting advice was provided or, if it was, whether it was provided by the accounting entity to which the Skeggs Subpoena was addressed. To the extent that the questions of solvency and knowledge of insolvency of the Third Respondent Bankrupt are a live issue in the proceedings, the relevant facts may be established through other available means including other categories of this Subpoena which are not set aside or narrowed. I am not presently of the view the documents sought by this category are reasonably likely to add to the relevant evidence in the case and will set it aside.
The eighth and ninth categories were pressed on the basis that the Third Respondent Bankrupt was subject of a judgment given in China which referred to a complex web of dealings and payments and transfers. The Respondent conceded the documents would be relevant only for a limited period (as above) and only in relation to the Third Respondent Bankrupt- relevant to the assets held only in the terms limited to any trusts in respect to which he had an interest.. The assertion was that there is a company in China, by the name of Shanghai Hi-Tech Woolskin Co Ltd, that could pay the debts of the Third Respondent. A company by that name was not defined as an “Associated Entity” and there is no record of the existence of such company or its ownership which presumably is available (if it exists) through other forensic means. If these categories 8 and 9 are directed at another company presently unnamed in the proceedings and unknown to the Trustees then I will not allow the Trustees to engage in a fishing expedition to identify it without more in support. These categories will be narrowed to the extent of the period the period commencing with the financial year 1 July 2014 to 30 June 2015 and ending 31 December 2018 and limited to those documents in relation to the Third Respondent Bankrupt. These categories 8 and 9 are otherwise too broad and will be set aside.
The tenth category was not pressed.
The eleventh and twelfth categories relate to instructions to provide accounting advices (not further specified, narrowed or particularised) directed at the accountant and accounting entity to whom the Skeggs Subpoena was addressed and any other accountants (unspecified). I will set aside the eleventh category for the same reasons as category seven and because it otherwise amounts to a fishing expedition.
RESOLUTION
For the above reasons:
(a)The Madisons Subpoena was not pressed or will be set aside to the extent of the following categories: 1, 2 and 5. The Madisons Subpoena will be narrowed in accordance with the above reasons in relation to categories: 3 and 4.
(b)The Skeggs Supoena was not pressed or will be set aside to the extent of the following categories: 1, 2, 3, 6, 7, 10, 11 and 12. The Skeggs Subpoena will be narrowed in accordance with the above reasons in relation to categories: 4, 5, 8 and 9.
There will be consequential orders that:
(a)all books, documents and things originally returned to the Registry under the Madisons Subpoena and the Skeggs Subpoena be respectively returned to the person(s) or entity(ies) to whom each Subpoena was addressed;
(b)this ruling and related orders be respectively served on the person(s) or entity(ies) to whom the Madisons Subpoena and the Skeggs Subpoena are addressed within 7 days of the date of entry of the orders; and
(c)the categories of books, documents and things that have not been set aside and are to be returned under the Madisons Subpoena and the Skeggs Subpoena pursuant to this ruling, be so returned within 35 days of the date of entry of the orders.
At the conclusion of the hearing, having had the benefit of the Trustee’s oral submissions, counsel for the parties setting aside undertook to take instructions as to what categories might be voluntarily produced and that is an appropriate next step. The matter will be programmed for further case management hearing, at which time the parties will be asked to address the Court with proposals for the efficient management of the proceedings including the outcome of voluntary production and any remaining objections to the subpoenas and discovery issues.
The matter of costs will be reserved.
At the request of Counsel for the Trustees upon delivery of these reasons, orders giving effect to these interlocutory reasons of 6 April 2023 will be entered on 13 April 2023.
I certify that the preceding seventy-five (75) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Mansini. Associate:
Dated: 6 April 2023
ANNEXURE A
In this subpoena:
“documents” means all documents, emails, files, tax returns, financial statements, correspondence, memorandums, file notes, internal workpapers, advice, diaries and all other records of information, including originals and copies, in hard copy or electronic format, described as or failing within the descriptions below.
“James Liu” means James Liu (aka Zhihua Liu, aka Zhi Hua Liu), a bankrupt.
“Associated Entity” means one or more of:(a)Elaine Liu (aka Zhang Yi Ling, aka Yi Ling Zhang),
(b)Natural Home Textile Pty Ltd (ACN 059 830 527),
(c)GHL Enterprises Pty Ltd (ACN 068 498 475),
(d)Australian Natural Living Pty ltd (ACN 625 365 861),
(e)Y E Australia Pty Ltd (ACN 167 359 480),
(f)Matthew Liu.
(1)A copy of this subpoena.
(2)All documents in relation to the affairs of:
(a)James Liu,
(b)each Associated Entity,
for the period 1 January 2000 to date.
(3)A copy of any retainer agreement, agreement for the provision of services or similar document, between you and James Liu and/or any of the Associated Entities for the period 1 January 2000 to date.
(4)All of James Liu’s income taxation returns for the period 1 January 2000 to date.
(5)Income tax returns for any of the Associated Entities for the period 1 January 2000 to date.
(6)All invoices rendered to James Liu and all Associated Entities, together with documents evidencing payment of those invoices, for the period 1 January 2010 to date.
(7)All documents relating to any assessment of the financial position or solvency of James Liu or any Associated Entity for the period 1 January 2010 to date.
(8)All documents in relation to any property or assets in which James Liu or any Associated Entity has any interest, for the period 1 January 2010 to date.
(9)All documents relating to any trust or interest in any trust in respect of which the Bankrupt or any of the Associated Entities has an interest, is or was a trustee, or is or was an appointor.
(10)Your trust account ledger in respect of the Bankrupt or any of the Associated Entities for the period 1 January 2010 to date.
(11)A record of all matters on which you have previously received instructions from the Bankrupt or any of the Associated Entities for the period 1 January 2010 to date.
(12)Documents relating to the transfer to any other accountant or person of files or documents relating to James Liu or any associated entity, in the period 1 January 2015 to date.
ANNEXURE B
In this subpoena:
“documents” means all documents, emails, files, tax returns, financial statements, correspondence, memorandums, file notes, internal workpapers, advice, diaries and all other records of information, including originals and copies, in hard copy or electronic format, described as or failing within the descriptions below.
“James Liu” means James Liu (aka Zhihua Liu, aka Zhi Hua Liu), a bankrupt.
“Associated Entity” means one or more of:(a)Elaine Liu (aka Zhang Yi Ling, aka Yi Ling Zhang),
(b)Natural Home Textile Pty Ltd (ACN 059 830 527),
(c)GHL Enterprises Pty Ltd (ACN 068 498 475),
(d)Australian Natural Living Pty ltd (ACN 625 365 861),
(e)Y E Australia Pty Ltd (ACN 167 359 480),
(f)Matthew Liu.
(1)A copy of this subpoena.
(2)All documents relating to any advice given to James Liu or any Associated Entity in the period 1 January 2010 to date.
(3)All documents relating to or constituting:
(a)the file or matter given Madisons Lawyers Pty Ltd’s reference SD:PS:20047 (even if part of that reference changed),
(b)the creation of a deed of agreement between James Liu, Elaine Yiling Liu and Natural Home Textile Pty Ltd dated 30 April 2020 (Deed),
(c)all instructions received in relation to the preparation or creation of the Deed, all invoices rendered in respect of the Deed and all documents evidencing payment of such invoices.
(4)All documents relating to or evidencing any communication between any person for or on behalf of Madisons Lawyers, and any one or more of:
(a)Peter Andrew Goodin, or
(b)Any person for or on behalf of Peter Andrew Goodin, or
(c)James Liu, or
(d)any Associated Entity, or
in relation to James Liu, in the period 1 January 2015 to date.
(5)A record of all matters on which you have previously received instructions from the Bankrupt or any of the Associated Entities for the period 1 January 2010 to date.
0
3
0