Orbito Nominees Pty Ltd v Betts Nominees Pty Ltd - [2015] WASC 431

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: ORBITO NOMINEES PTY LTD -v- BETTS NOMINEES PTY LTD [2015] WASC 431

CORAM: ACTING MASTER GETHING

HEARD: 14 OCTOBER 2015

DELIVERED : 14 OCTOBER 2015

PUBLISHED : 12 NOVEMBER 2015

FILE NO/S: CIV 2206 of 2015

BETWEEN: ORBITO NOMINEES PTY LTD
Plaintiff
AND
BETTS NOMINEES PTY LTD
Defendant

Catchwords:

Practice and procedure - Subpoena for production of documents - Application to set aside

Legislation:

Rules of the Supreme Court 1971 (WA), O 36B

Result:

Application to set aside subpoenas dismissed

Category: B

Representation:

Counsel:

Plaintiff: Mr J Thomson SC
Defendant: Mr J R Birman

Solicitors:

Plaintiff: Tottle Partners
Defendant: Birman & Ride

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

Elovalis v Elovalis [2008] WASCA 141
Stanley v Layne Christensen Co [2004] WASCA 50
PRINCIPAL REGISTRAR GETHING:
(This judgment was delivered extemporaneously on 14 October 2015 and has been edited from the transcript.)

The application before me dated 3 September 2015 is brought by the plaintiff in this action, Orbito Nominees Pty Ltd (Orbito Nominees), to set aside five subpoenas issued to the following persons: Paul Blackburn, a partner in Tottle Partners; the proper officer of Pacer Legal Pty Ltd; Christine Simone Steinier; Steven Blyth of Messrs Lewis Blyth & Hooper; and Rick Gavin Hopkins.
The application is brought on the basis that the issue of the subpoenas to each addressee is an abuse of process, in particular that each of them is issued for an improper or collateral purpose. The plaintiff submits that each subpoena seeks material which has no apparent relevance to the issues within the proceedings and none of the subpoenas have a legitimate forensic purpose. At the commencement of the hearing it was conceded that the subpoena to Pacer Legal Pty Ltd ought to be set aside, leaving the four other subpoenas.
The context in which the application arises is an application pursuant to the Trustees Act 1962 (WA) (TA) s 77 to remove the trustee of the Drummond Cove Unit Trust (the DCUT). The current trustee of the DCUT is Sunlea Enterprises Pty Ltd, which is jointly owned and controlled by Phillipe Fernand Leon Raoul Steinier and Trevor Stanley John Betts. It is immediately apparent on the material before me that Mr Betts and Mr Steinier are in an irreconcilable conflict. There appears to be consensus across the bar table that Sunlea ought to be removed as the trustee of the DCUT.
The plaintiff, that is the Steinier interests, assert that a company by the name of Baylink Nominees Pty Ltd should be appointed as the trustee in lieu of Sunlea, being a company controlled by Mr Steinier and his interests. The defendant, being the unit holder nominees of Mr Betts' interests, asserts that the trustee ought to be an independent insolvency practitioner. In practical terms, the issue will become what course of action is best in the welfare of the beneficiaries of the trust.[1]
[1] Elovalis v Elovalis [2008] WASCA 141 [30] (Martin CJ, with whom Buss & Newnes JJA agreed).
In terms of the case made on behalf of Mr Betts, there are, in essence, two issues. The first is whether the past conduct of Mr Steinier means that it is unsuitable for an entity controlled by him to act as the trustee of the DCUT. The second is whether the already extensive litigation involving Sunlea and, to an extent Mr Steinier, and Mr Betts, creates an irreconcilable conflict between Mr Steinier's position as one of two beneficiaries of the DCUT and his position as a trustee. That point might be phrased as being whether he has lost the ability to act in the best interests of the beneficiaries of the DCUT as a whole.
The issues in dispute between the parties have not been the subject of pleadings. Accordingly, the issues need to be discerned out of the affidavit evidence that has been filed before the court.
The principles upon which a subpoena ought to be set aside are summarised in the decision of the court in Stanley v Layne Christensen Co.[2] For present purposes, there are four statements that I want to draw attention to. The first is that a legitimate forensic purpose will be established if a document gives rise to a line of inquiry which is relevant to the issues before the trier of fact, including for the purposes of meeting the opposing case by way of cross‑examination. The second is that whether a document is necessary to fairly dispose of proceedings is to be understood in the broad sense of embracing any document which has value, in the sense of at least apparent relevance, even if it might not readily be seen at the pre‑inspection stage necessarily to be admissible in evidence. The third is that at least one object of the rule permitting early return of subpoenas is to appraise the parties of weakness and strength of their case at an early stage. Hence, no narrow view as to the legitimate purposes of the subpoena ought to be taken. And finally, in the interests of a fair trial, litigation should be conducted on the footing that all relevant documentary evidence is available.
[2] Stanley v Layne Christensen Co [2004] WASCA 50 [9] (Judgment of the Court).
I will deal first with the collateral purpose challenge. In the affidavit evidence before me, it is the case that on 9 July 2015 Mr Betts, in his capacity as a director of Sunlea, issued notices pursuant to Corporations Act 2001 (Cth) (CA) s 237, giving notice of his intention to apply to the court for leave to bring proceedings against Lewis Blyth & Hooper and Tottle Partners. On the same date, Mr Betts issued a similar notice in his capacity as director of another company involved in the issues arising in the proceedings, Crosswest Corporation Pty Ltd (Crosswest).
The two notices pursuant to CA s 237 relate to a transaction involving a company by the name of Allstrike Enterprises Pty Ltd (Allstrike). The nature of the transaction is in evidence before me in the present proceedings in relation to the appointment of a replacement trustee. Three of the four subpoenas in issue relate to the Allstrike transaction. The concern is raised that the provision of information to Mr Betts in his capacity as litigant in this case may well be used in his capacity as a director of Sunlea and Crosswest in his foreshadowed applications pursuant to CA s 237.
The issue then becomes whether or not it is appropriate to limit the extent to which Mr Betts is entitled to issue subpoenas in relation to this case on the basis that he may use the evidence in another case. The result, or the consequence, of that argument, if taken to its extension, is that the application to determine whether or not a replacement as trustee should be ordered will, or may well be, determined on less than a complete set of information. Or put slightly differently, the application may well be determined in the context of Mr Betts, through his company, not being able to place before the court what he considers to be all relevant documentary evidence. This, it seems to me, cuts across one of the principles I have set out earlier in relation to Stanley, that in the interests of a fair trial, litigation should be conducted on the footing that all relevant documentary evidence is available.
It seems to me that there are two protections which exist to mitigate any risk foreshadowed by the Steinier interests. The first is that the documents received under a subpoena are subject to an implied undertaking as to use, that is, they can only be used for the purposes of this litigation. The second is that to the extent that there is a concern that, in particular, Mr Betts' current legal advisors, Birman & Ride, are in possession of information from these proceedings which may place them in a position of conflict of interest in relation to the CA s 237 proceedings, an application can be made in those proceedings that Birman & Ride be directed to cease to act. These protections ensure that this case can proceed on the basis that all relevant documentary evidence is available to the court, and that any other case commenced by Mr Betts, assuming leave is granted, proceeds on the basis of only information that he is entitled to have for the purposes of that case.
I do not consider that, in the circumstances of the present case, the foreshadowed action under CA s 237 is a ground for setting aside the subpoenas.
The issue then becomes one of relevance.
It is convenient to deal with the subpoenas in two groups. The first three, those issued to Mr Hopkins, Mr Blyth and Ms Steinier, can be grouped together as they relate to the Allstrike transaction. The history of the Allstrike transaction is somewhat convoluted, but may be summarised in the following terms. The primary business of the DCUT was developing land in the vicinity of Geraldton. This venture did not proceed as the parties anticipated. In June 2004, a company controlled jointly by Mr Betts and Mr Steinier, Crosswest, received trust land of which it declared itself a bare trustee, the beneficial ownership being retained in the DCUT. Crosswest ended up being in legal ownership of that trust property. In July 2010, Crosswest signed a loan agreement with Allstrike, and granted it an undated deed of charge and mortgage.
The sole director of Allstrike is Mr Hopkins. Mr Hopkins is Mr Steinier's accountant and the accountant appointed by Mr Steinier to prepare the accounts of DCUT. Allstrike made a demand pursuant to the loan agreement, and between June 2011 and December 2012, Allstrike proceeded to sell seven lots as a mortgagee in possession. Lewis Blyth & Hooper, acting for Allstrike, received the proceeds of the sale of the trust and then placed the proceeds into their trust account. The total amount received was just over $1 million.
During this time, Mr Betts caused Crosswest to commence an action in the Supreme Court seeking declarations that the deed of charge and mortgage were void and of no effect. In July 2014, the court made orders by consent to the effect that the deed of charge and mortgage be set aside. As a consequence of that, Lewis Blyth & Hooper paid a sum of money to Tottle Partners for the benefit of the DCUT. I will come back to that in relation to the second area of concern.
In the material before me, Mr Betts has raised two areas of concern in relation to the transfers of land by Allstrike. The first is that three of the lots went to Christine Simone Steinier, who I understand is the wife of Mr Steinier. The concern is raised by Mr Betts as to whether or not Allstrike actually received money from Mrs Steinier, and if so, what has happened to it.
The second area of concern is that the balance of the sales proceeds totalling just over $600,000 do not appear to have been accounted for. In this context, the subpoenas addressed to Mr Hopkins, Mr Blyth and Mr Steinier seek information relevant to those issues.
In addressing the issue of relevance, counsel for the plaintiff focused on two transactions, which appeared to Mr Steinier to be the ones primarily of concern. However, they are more downstream from the Allstrike transaction.
I share some of the concerns of counsel for the plaintiff that the precise nature of the allegations are not crystallised, at least to the extent that they would be in the pleading context. However, the issue, in my view, is fairly there in terms of the affidavits. It may well be that as part of the trial preparation process, this issue will be crystallised either through a statement of issues, or through the submissions process.
In my view, the issues relating to the Allstrike transaction and the extent of Mr Steinier's involvement in it are fairly raised in the affidavit material before me. On that basis, I am satisfied that these subpoenas relate to issues which are relevant.
The fourth subpoena is addressed to Mr Paul Blackman, one of the principals of Tottle Partners. The documents sought from Tottle Partners are:
(a)records of all moneys held by Tottle Partners on trust for Sunlea and details of disbursements of such funds;
(b)authorisations for the disbursements of the above funds; and
(c)copies of any duplicate certificates of title in respect of land which Sunlea or Crosswest is the registered proprietor.
The third category goes to the issue of what trust assets exist and, therefore, ought to be transferred to the incoming trustee. That incoming trustee may, as I have indicated, be, in effect, the nominee of Mr Steinier or an independent insolvency practitioner nominated by Mr Betts. So, I think that the documents are fairly sought.
In relation to the wider trust account issues, it is necessary to briefly look at the background to related proceedings in this court. In October 2012, Mr Steinier was granted leave to commence a derivative action in the name of Sunlea as trustee for DCUT against Mr Betts and 13 other defendants, claiming damages for losses suffered as a result of the failure of the real estate project. Those proceedings were commenced by writ of summons on 11 October 2012.
In 2013, eight of the 14 defendants, including Mr Betts, made an application for security for costs. On 21 March 2014, Allanson J delivered his decision on those applications and ordered that Sunlea give security in an amount of $200,000. Mr Steinier caused Sunlea to pay the amount of security in to court in satisfaction of this order. This amount was paid from funds held by Sunlea in trust. It also appears that Mr Steinier has caused Sunlea to use its trust funds for legal costs to pursue the Sunlea proceedings.
The evidence provided by Mr Steinier is that he believed that he was authorised by the court order requiring Sunlea (and not himself) to pay the security for costs amount. He also deposes a belief to be entitled to use trust funds to fund the costs. However, given the arguments raised on this issue, earlier in the year Mr Steinier reimbursed Sunlea an amount equal to the amount spent by Sunlea on legal costs.
Mr Steinier has also foreshadowed making an application seeking directions as to whether it was appropriate for Sunlea to pay both the security for costs and Sunlea's costs. There was an attempt to bring that issue into the present proceedings. I made a ruling that leave to that effect ought not be granted, but I do proceed with the present application on the basis that an application in these terms, either under the CA or under the TA, is strongly foreshadowed.
The positon of the plaintiff, that is the Steinier interests, is that, in effect, the concerns as to whether or not trust funds were used to pay Sunlea's proceedings has been resolved, because the amounts have been paid by Mr Steinier, and because he also is going to seek authorisation for that. The argument then, as I understand it, is that this underlying factual issue becomes a non‑dispute for the purposes of the present application.
As I have said, the position advanced by Mr Betts is that the documents sought by the subpoena may give rise to relevant lines of inquiry as to the propriety of Mr Steinier's actions and whether or not that in turn leads to sufficient concerns that an entity which he controls ought not to be appointed as trustee.
The difficulty I have with the plaintiff's submission is that it presupposes too much the ultimate outcome of the proceedings. It may well be the case that Mr Steinier has valid explanations for his conduct in relation to the use of the funds of the trust for the Sunlea proceedings, and it may well be on the determination of the case that no impropriety or element of unsuitability is drawn against him from his conduct. However, that is jumping the gun.
The issue of whether or not his conduct in relation to the use of trust funds for the Sunlea proceedings does lead to a concern as to suitability is fairly before the court in the present proceedings as to who should be the trustee. If that is the case, then, and quoting from Stanley 'in the interests of a fair trial, litigation should be conducted on the footing that all relevant documentary evidence is available'.[3]
[3] Stanley [9].
It thus seems to me that having squarely raised the issue, Mr Betts is entitled to a subpoena to get relevant documentation relating to the issue. I am of the view that the issue of this subpoena will give rise to a legitimate forensic purpose, in that it gives rise to a line of inquiry which is relevant to the issues before the trier of fact.[4]
[4] Stanley [9].
For those reasons, I am of the view that the four subpoenas ought not to be set aside. I will hear from the parties in terms of costs and final orders.