National Australia Bank Limited v The Computer Supply Store

[2010] NSWSC 851

CITATION:	National Australia Bank Limited v The Computer Supply Store [2010] NSWSC 851
HEARING DATE(S):	30 July 2010
JUDGMENT DATE :	30 July 2010
JUDGMENT OF:	Price J at 1
EX TEMPORE JUDGMENT DATE:	30 July 2010
DECISION:	1. I set aside paragraph 7 of the notice to produce issued by the second defendant to the plaintiff dated 15 March 2010. 2. The second defendant is to pay the plaintiff's costs of this motion on an ordinary basis.
CATCHWORDS:	PROCEDURE - Notice to produce for inspection - relevance
LEGISLATION CITED:	Uniform Civil Procedure Rules r 6.24, r 21.10
CATEGORY:	Separate question
CASES CITED:	Associated Dominions Assurance Society Pty Limited v Fairfax & Sons Pty Limited (1955) 72 WN (NSW) 250 Norris v Kandiah [2007] NSWSC 1296 National Australia Bank Limited v The Computer Supply Store (Aust) Pty Limited (Supreme Court of New South Wales, Latham J, 23 December 2009, unreported)
PARTIES:	National Australia Bank Limited The Computer Supply Store (Aust) Pty Limited Lynpland Pty Limited
FILE NUMBER(S):	SC 2009/296431
COUNSEL:	Mr D C Price (Plaintiff) Mr T Stuart (2nd Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

PRICE J

30 July 2010

2009/00296431 National Australia Bank Limited v The Computer Supply Store (Aust.) Pty Limited

JUDGMENT (ex tempore):

1 PRICE J: By notice of motion filed 30 April 2010 the National Australia Bank, the plaintiff, seeks an order setting aside paragraph 7 of the notice to produce issued by the second defendant to the plaintiff dated 15 March 2010.

2 Paragraph 7 is as follows:

"Any document howsoever described evidencing lending procedures, guidelines, required mortgagee documentation and/or policies of the National Australia Bank Limited in respect to the grant of a Fixed Rate Interest Only Home Loan National Choice Package Interest in Advance Facility, effective during the period 20 March 2006 and 29 June 2006."

3 The plaintiff's opposition to the production of the document sought in paragraph 7 is founded on the contention that they are not relevant to any potential issue between the plaintiff and Lynpland Pty Limited, the second defendant.

4 The second defendant contends that the relevance of the documents in dispute bear upon the issues which have been identified: The second defendant anticipates that the basis by which it will claim to be entitled to resist possession by the plaintiff will be:

(a) that the plaintiff had actual notice of its interest; or
(b) that the plaintiff had constructive notice of its interest; or
(c) that the plaintiff should not be allowed possession, on equitable principles, by the fact that it wilfully “shut its eyes” in failing to enquire whether any interest existed;
(d) that the court should only order possession in any event after the Victorian proceedings (in which the ownership of the subject property is to be determined) have been decided. The second defendant contends that those proceedings would otherwise be rendered nugatory.

5 Before considering the competing arguments it is helpful to recount the background to these proceedings. On 1 October 2009 the plaintiff commenced proceedings against The Computer Supply Store (Aust) Pty Limited, the first defendant, seeking an order for judgment in possession of the whole of the land comprised in certificate of title folio identifier 2/836777 and known as 2A Treatts Road, Lindfield in the State of New South Wales ("the property"). Leave was sought to issue a writ of possession to enforce the judgment.

6 The first defendant is the registered proprietor of the property. By mortgage dated 12 July 2006 the first defendant mortgaged the property to the plaintiff to secure a guarantee that it had entered into with the plaintiff on or about 29 June 2006 in respect of a loan of $1,650,000 the plaintiff had advanced to Giuseppe De Simone. Mr De Simone defaulted under the loan agreement and the plaintiff made demands pursuant to the loan agreement, guarantee and mortgage.

7 On 15 October 2009 the second defendant filed a motion seeking to be joined in the proceedings pursuant to Rule 6.24 Uniform Civil Procedure Rules (“UCPR”). On 22 October 2009 judgment for possession of the property was entered for the plaintiff with the consent of the first defendant.

8 The second defendant's motion was heard by Latham J on 22 December 2009. On the following day her Honour ordered that the second defendant be joined to the proceedings. Her Honour's judgment in [2 – 5] provides a succinct recitation of the background to the second defendant's claim for joinder which bears repetition here:

"The affidavit of David John McLeod of 19 September 2009 establishes that Mr McLeod and his wife are the directors of the applicant company. They have resided together with their three children at the subject property for the previous eight years. In June of 2006 the property was transferred to the defendant pursuant to a commercial arrangement set out in a transfer agreement and a deed. The deed provided that the defendant would act solely as trustee of a discretionary trust, the beneficiaries of which included Mr McLeod's wife and children. The defendant under the deed was required to bid for the subject property at auction on 18 March 2006 and, if successful, allow Mr McLeod's family to remain in the subject property as tenants.
The transfer agreement further provided that when the final payment fell due under that agreement, the director of the defendant would resign his position and appoint a trustee nominated by Mr McLeod's wife. The effect of the deed together with the transfer agreement was to allow the defendant to provide the amount of $2.46 million to the applicant company as payment for the sale of its interest in a joint-venture, by the purchase of the subject property. The completion of the deed and the transfer agreement would then result in the effective transfer of the property back to Mr McLeod's family.

The sole director of the defendant, rather than the defendant, borrowed the funds for the purchase from the plaintiff. Mr McLeod claims that this was in breach of the deed and that he would never have agreed to the director personally borrowing the funds from the plaintiff. In addition, it appears that the defendant company provided the property as security in respect of other commercial loans from the plaintiff. The defendant's default in respect of those loans appears to have triggered the proceedings for possession by the plaintiff.

The applicant filed proceedings in this Court on 27 June 2008 against the defendant. Those proceedings have been transferred to the Victorian Supreme Court and are yet to be heard. The proceedings claim, amongst other things, a declaration that the defendant holds the whole of the property known as 2A Treatts Road Lindfield on an express or resulting and/or express consultative trust for the applicant."

9 It is the second defendant's case that it has a beneficial interest in the property. A writ of possession has not been issued.

10 The notice to produce is entitled "Notice to produce for inspection". Rule 21.10 UCPR relevantly provides:

"(1) Party A may, by notice served on party B, require party B to produce for inspection by party A:
(a) any document or thing that is referred to in any originating
process, pleading, affidavit or witness statement filed or served
by party B, and
(b) any other specific document or thing that is clearly identified in
the notice and is relevant to a fact in issue."

11 It is the cornerstone of a notice to produce for inspection that the documents are clearly identified in the notice and are relevant to a fact in issue. In Norris v Kandiah [2007] NSWSC 1296 Brereton J said at [7]:

"Where the sustainability on grounds of relevance of a notice to produce is called into question, the issuer bears at least a forensic onus of identifying how the documents called for by the notice are said to relate to a fact in issue in the case. A document relates to a fact in issue if it bears on the probability of that fact."

12 The plaintiff submits that the documents sought in paragraph 7 do not relate to the property; and/or the facilities of the first defendant, Mr De Simone and/or the second defendant. The plaintiff further submits that paragraph 7 will in no way bear upon the probability as to whether:

(i) the second defendant has any interest in the property;

(ii) the first defendant and or Mr De Simone had declared a trust over the property in favour of the second defendant or any other person;

(iii) the plaintiff was aware of any interest that the second defendant may have had in the land; and

(iv) the plaintiff's interest as mortgagee was subject to any interest that Lynpland or any other person may have in the land.

13 The plaintiff contends that what is articulated by the second defendant as the relevance of paragraph 7 of the notice to produce is nothing more than a “fishing expedition”. My attention was drawn by counsel for the plaintiff to what was said by Owen J in Associated Dominions Assurance Society Pty Limited v Fairfax & Sons Pty Limited (1955) 72 WN (NSW) 250 at 254:

"…whether a particular expedition is a mere “fishing expedition” depends upon the meaning of that phrase. A “fishing expedition” in the sense in which the phrase has been used in the law, means, as I understand it, that a person who has no evidence that fish of a particular kind are in a pool desires to be at liberty to drag it for the purpose of finding out whether there are any there or not."

14 The plaintiff's counsel argues that any secondary basis of relevance that the plaintiff may have failed to produce all necessary documents should be the subject of a separate notice of motion with a supporting affidavit founding that assertion.

15 Counsel for the second defendant made particular reference in oral argument to what is said to be the failure by the plaintiff to produce an application form which bears upon the agreement between the plaintiff and Mr De Simone. What is contended is that paragraph 7 bears upon whether or not such an application form exists and if it does not exist then the second defendant should be entitled to ask "why not"?

16 The plaintiff aptly describes the documents in paragraph 7 as policy documents. I am not satisfied that the documents sought in paragraph 7 are relevant to a fact in issue. In my view, paragraph 7 amounts to no more than a “fishing expedition”. What the second defendant seeks to do is to discover further material which might be of assistance in its case. Accordingly it is appropriate that the plaintiff's motion succeeds and that the order sought is granted. There is insufficient material before me to justify an order for costs on an indemnity basis.

Orders

17 I make the following orders:

1. I set aside paragraph 7 of the notice to produce issued by the second defendant to the plaintiff dated 15 March 2010.
2. The second defendant is to pay the plaintiff's costs of this motion on an ordinary basis.

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