Piscapo v Hill
[2008] FMCA 1266
•9 September 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| PISCOPO v HILL (No.1) | [2008] FMCA 1266 |
| BANKRUPTCY – Summons for examination – application to discharge summons – interim application to set aside a paragraph from a set of subpoenas issued as part of application to discharge summons. |
| Federal Magistrates Court Rules 2001 (Cth), r.15.18 Federal Magistrates Court (Bankruptcy Rules) 2006 (Cth), rr.6.05, 6.17 Legal Profession Act 2004 (NSW), s.48 Bankruptcy Act 1966 (Cth), s.5, Part X |
| Arhill Pty Ltd & Ors v General Terminal Company Pty Ltd & Ors (1990) 23 NSWLR 545 Brooks v Prothonatory of the Supreme Court of New South Wales [2008] NSWCA 31 Clark v Wood (1997) 78 FCR 356 Commissioner of Railways v Small (1938) 38 SR (NSW) 564 Jones v Hill [2004] NSWCA 301 Karounos v Official Trustee (1988) 19 FCR 330 Mandic v Phillis [2005] FCA 1279 National Employers Mutual General Association Ltd v Waind & Hill [1978] 1 NSWLR 372 Re Abrahams; ex parte Thomas (1985) 9 FCR 232 at 237 Re Aitken; ex parte Transpacific Timbers Pty Ltd (1987) 17 FCR 71 Telstra Corporation Ltd v Phone Directory Company Pty Ltd [2008] FCA 969 Terry Donald Hill v David Anthony James & Ors [2004] NSWSC 55 |
| Applicant for Interim Orders: | SAMUEL PISCOPO |
| Respondent for Interim Orders: | TERRY DONALD HILL |
| File number: | SYG344 of 2008 |
| Judgment of: | Lloyd-Jones FM |
| Hearing date: | 17 June 2008 |
| Delivered at: | Sydney |
| Delivered on: | 9 September 2008 |
REPRESENTATION
| Counsel for the Applicant (on Interim Application): | Mr D Allen |
| Solicitors for the Applicant (on Interim Application): | Catalyst Legal |
| Counsel for the Respondent (on Interim Application): | Ms R Francois |
| Solicitors for the Respondent (on Interim Application): | NOT Lawyers |
ORDERS
The interim application filed by Samuel Piscopo on 13 June 2008 is dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 344 of 2008
| SAMUEL PISCOPO |
Applicant
And
| TERRY DONALD HILL |
Respondent
REASONS FOR JUDGMENT
Interim application
The matter before the Court concerns an interim application filed on behalf of Samuel Piscopo on 13 June 2008 and returnable on 20 June 2008, seeking that paragraph 3 of each of the subpoenas issues to Samuel Piscopo, Anthony Stewart Foate, David Anthony James and David George Brooks be set aside.
The proceedings
Samuel Piscopo is a trustee of the bankrupt estate of Terry Donald Hill. These proceedings concerns an examination of the affairs of Mr Hill. The proposed examinees are Mr Hill, Elena Rose (Mr Hill’s wife) and two of their solicitors, Michael O’Neill (solicitor for Mr Hill and Ms Rose in these proceedings) and Nicholas Eddy. An Application for Summons to Examine Relevant Persons or Examinable Persons was filed on 13 February 2008 with a supporting affidavit of Mr Piscopo. Summons for examination were filed in respect of each examinee on the same date. The summons for examination have been served on Messrs Hill, O’Neill and Eddy. On 6 May 2008, Hedge R made an order pursuant to r.6.05 of the Federal Magistrates Court (Bankruptcy Rules) 2006 (Cth) (“FMC Bankruptcy Rules”) that the summons addressed to Ms Rose may be served by delivering it to Jacqui Cole of NOT Lawyers, solicitors for Mr Hill. An interim application was filed by Ms Rose on 26 May 2008 seeking that the examination summons issued to herself and Messrs Hill and O’Neill be discharged. That application was listed for hearing on 24 June 2008 but subsequently vacated because of the application currently before the Court. On 4 June 2008, NOT Lawyers filed subpoenas to Messrs Piscopo, Foate, James and Brooks which are the subject of the interim application before this Court.
The interim application filed on 4 June 2008 states:
On grounds stated in supporting affidavits, the applicant, Samuel Piscopo seeks the following interim orders:
1. That paragraph 3 of each of the subpoenae issued to Samuel Piscopo, Anthony Stuart Foate, David Anthony James and David George Brooks be set aside pursuant to Rule 15.18 of the Federal Magistrates Court Rules, 2001.
2. That the costs of this application be met by Elana Rose, also known as Elena Rose.
3. Such further or other orders that the Court sees fit.
Evidence
The affidavit of Samuel Piscopo sworn on 12 June 2008 and filed in Court on 30 June 2008 was referred to in the interim application filed on the same date. That affidavit was not read in respect of this interim application (see [3] above).
Mr Allen, for the applicant on the interim application, tendered the following:
a)Exhibit “A1” - Subpoena addressed to Samuel Piscopo (dated 4 June 2008);
b)Exhibit “A2” - Subpoena addressed to Anthony Stewart Foate (dated 4 June 2008);
c)Exhibit “A3” - Subpoena addressed to David George Brooks (dated 4 June 2008);
d)Exhibit “A4” - Subpoena addressed to David Anthony James (dated 4 June 2008);
e)Exhibit “A5” (tendered but not read) - Letter from NOT Lawyers dated 15 May 2008 addressed to Catalyst Legal (Annexure “A” to the affidavit of Jacqui Lyn Cole sworn on 26 May 2008).
Ms Francois, for the respondent on an interim application, tendered the following documents:
a)Exhibit “R1” - A bundle of material that forms a sub-set of Exhibit “TH-1”, which is the affidavit of Terry Donald Hill sworn on 10 June 2008 and is restricted to the following documents:
i)Tab 1 - Judgment of Bergin J of the Supreme Court of New South Wales reported at [2004] NSWSC 55;
ii)Tab 2 - Judgment of the Court of Appeal reported at [2004] NSWCA 301;
iii)Tab 4 - Certificate of bankruptcy;
iv)Tab 5 - Search of the register of the Office of the Legal Services Commissioner of 2 June 2008 together with a copy of the Judgment of Bell JA in Brooks v Prothonotary of the Supreme Court of New South Wales [2008] NSWCA 31;
v)Tab 7 - Deed of Release dated 19 April 2006 between David James and David Brooks;
vi)Tab 8 - Order of Rares J in the Federal Court of Australia dated 4 July 2006;
vii)Tab 14 - Notice to Produce; and
viii)Tab 15 - Subpoenae to produce issued by Mr Piscopo.
b)Exhibit “R2” - Affidavit of Samuel Piscopo sworn on 12 June 2008 paragraphs 2(a) and 2(c).
c)Exhibit “R3” – Letter from NOT Lawyers dated 15 May 2008 addressed to Catalyst Lawyers (also annexure “D” to the affidavit of Jacki Lynn Cole sworn on 22 May 2008).
Mr Allen relies on r.6.17 of the FMC Bankruptcy Rules which states:
6.17 Application for discharge of summons
(1) An examinable person who is served with a summons and wishes to apply for an order to discharge the summons may do so by filing:
(a) an interim application in accordance with Form 3 in the proceeding in which the summons was issued; and
(b) an affidavit setting out the grounds in support of the application.
(2) As soon as possible after filing the interim application and supporting affidavit, the examinable person must serve a copy of each document:
(a) on the person who applied for the summons; and
(b) if the person who applied for the summons is not the Official Receiver, on the Official Receiver.
Mr Allen also referred the Court to the definition in s.5 of the Bankruptcy Act 1966 (Cth) of “examinable affairs” and claims it is pertinent to note how wide are the examinable affairs of a person who is made bankrupt:
"examinable affairs" , in relation to a person, means:
(a) the person's dealings, transactions, property and affairs; and
(b) the financial affairs of an associated entity of the person, in so far as they are, or appear to be, relevant to the person or to any of his or her conduct, dealings, transactions, property and affairs.
Background
I rely on Terry Donald Hill v David Anthony James & Ors [2004] NSWSC 55 per Bergin J and the subsequent appeal decision in Jones v Hill [2004] NSWCA 301 per Sheller, Hodgson and Tobias JJA for background material to contextualise the proceedings before this Court (Exhibit “R1” – Tabs 1 & 2).
Mr Allen objected to these judgments being admitted into evidence on the basis that they cannot be tendered as proof of facts. Mr Allen contends that if certain facts are to be relevant to these proceedings, they should be independently proven. I allowed the judgments to be tendered to provide background to an extended and vigorously fought dispute between Messrs Hill, James and Brooks. I refered to those judgments for that purpose only.
Those decisions arose out of the liquidation of the Hill Wine Group of Companies in 2002 and an attempted purchase back of some of the assets of the Hill Wine Group by Mr Hill in conjunction with Mr James.
Mr Hill purchased a liquor distribution business in 1984 and began trading as Blue Hill’s Liquor Distribution Pty Ltd. That business expanded its operations and acted as exclusive distributor for a number of wine companies, including Marienberg Wine Company Ltd. Between 1992 and 1998 another company of which Mr Hill was a director and shareholder, Lymall Pty Ltd, traded as Hill International Wines and operated as a fine wine distribution business selling McGuigan Wines. In 1994 another company within the Hill Wine Group, Saidwick Pty Ltd, purchased Thomas Fernhill Wines and changed the name to Fernhill Estate. In 1996 Fernhill Wine Group purchased Basedow Wines Pty Ltd. In October 1998 Fernhill Wine Group purchased the Douglas Gallery Vineyard in McClaren Vale, South Australia.
Prior to 11 February 2002, the Hill Wine Group consisted of a number of companies that conducted what has been referred to as the “Wine Business”, the “Distribution Business” and the “Fernhill Winery”. The wine business was a grape growing and production business carried on by Marienberg and Basedow primarily in McLaren Vale and Tannunda in South Australia. It included the Limeburners Restaurant. The distribution business consisted of the wholesaling of liquor and the exclusive agency distribution of wines and alcoholic beverages. The group also owned a number of residential properties in New South Wales and Queensland.
On 11 February 2002 George Georges and Peter McCluskey of Ferrier Hodgson were appointed joint administrators of BHL Holdings Pty Ltd, Lymall, HWG Logistics Pty Ltd and Docvin Pty Ltd, Marienberg, HGW Vineyard, Basedow, Saidwick and another company in the Hill Wine Group, TD & RJ Hill Investments Corporations Pty Ltd.
Mr James was director and shareholder of a number of companies including Bearing Traders Pty Ltd, Liquor National Pty Ltd and Wine National Pty Ltd. He had business experience in the wine vineyard and winery business. He had previously acquired businesses of this nature from liquidators and developed those businesses. In February 2002 Mr James became aware that parts of the Hill Wine Group had gone into administration and that the administrators, Ferrier Hodgson, were seeking expressions of interest for the business of the Hill Wine Group.
David George Brooks was a solicitor of Catalyst Partners and was the solicitor for Mr James and the other defendants in the matter before Bergin J, Bearing Trading Pty Ltd, Liquor National Pty Ltd and Wine National Pty Ltd, at the relevant times.
On 22 April 2002 a meeting of creditors took place chaired by the administrators. A proposal was put at that meeting which failed and the administrators were appointed as liquidators of the Hill Wine Group. The liquidators advised that they intended to sell Hill Wine Group’s assets as a matter of urgency and that if Mr Hill wished to make an offer for any or all of the assets, he should do so by 24 April 2002. A number of parties became involved in the negotiation of the purchase of the assets under various arrangements.
Mr Hill wished to acquire the wine business from the liquidator. However the liquidator was not prepared to deal with Mr Hill. Mr Hill then organised for Mr James to purchase the business from the liquidator and contemporaneously on sell it to Mr Hill at the same price. Messrs James and Hill entered a contract to this effect. It was a term of the contract that Mr Hill was to pay the deposit for the sale between Mr James and the liquidator. It was also a term of the contract that if Mr Hill was unable to complete then Mr James would not continue with the purchase and Mr Hill would have no claim against Mr James to recover the deposit.
To secure funds to complete the purchase from Mr James, Mr Hill entered into negotiations with a Swiss investor, Mr Wehrle, whereby Mr Hill planned to sell 45% of the business to Mr Wehrle. Mr Hill represented to Mr Wehrle that the business was worth substantially more than the amount that Mr Hill was paying. Mr James became aware that Mr Hill stood to profit if Mr Wehrle purchased 45% of the business. Mr James negotiated with the liquidator to buy the business at less than originally agreed but hid this fact from Mr Hill such that Mr Hill continued to act on the basis that he was buying the business for the amount contained in the contract. Accordingly, Mr James stood to benefit at Mr Hill’s expense by on selling the business. At the time of completion, Mr Hill who was not ready, willing and able to complete discovered Mr James’ actual purchase price. At first, Mr Hill sought an order for specific performance, thereby attempting to keep the contract on foot, before finally deciding to terminate and sue for breach. Mr Hill also sought relief against forfeiture in relation to the deposit and sued for misleading and deceptive conduct and sought exemplary damages.
Mr Hill commenced the Supreme Court proceedings by the filing of a summons on 29 August 2002 seeking relief against Mr James, Bearing Trading Pty Ltd, Mr Brooks, Wine National Pty Ltd. Mr Hill’s case for damages for breach of contract and breach of fiduciary duties failed, however, he was entitled to the relief against forfeiture of the deposit required under the contract. He also received damages for misleading and deceptive conduct and for the tort of deceit in the amount equal to the difference between the deposit paid and the deposit required under the contract at the lower price. Mr Hill was entitled to the whole of the amount he paid by way of deposit.
In mid-2005, Mr Hill appointed Peter David Rogers as his trustee under Part X of the Bankruptcy Act principally because of pressures on him for personal guarantees given to trade supplies of the Hill Wine Group. In mid-2006 the personal insolvency agreement entered into by Mr Hill was set aside on the application of several of his creditors and Mr Piscopo was appointed Mr Hill’s trustee in bankruptcy.
Ms Rose controls a BDT Holdings Pty Ltd which owns the residence in which Mr Hill and her reside but does not conduct any trading activities. BDT Holdings is also claimed to be a creditor of Mr Hill. Ms Rose also controls two companies called Vintage Wine & Spirits Australia Pty Ltd and Rosehill Wine Corporation Pty Ltd which are in the business of buying and selling wine.
Mr O’Neill, solicitor of NOT Lawyers and Mr Eddy, solicitor of Nicholas Eddy & Co Lawyers represents Mr Hill and Ms Rose.
Applicant’s submissions
Mr Allen referred the Court to the subpoena addressed to Anthony Stuart Foate issued on 4 June 2008, who is Mr Allen’s instructing solicitor. Mr Allen indicated that he would only deal with this subpoena because paragraph three is in different forms in each subpoena but sufficiently similar in that the submissions are the same for each of the addressees. Paragraph three of the subpoena issued to Mr Foate states:
All documents (as defined in the Evidence Act, 1995) recording any communications between you and/or any person employed by your firm and:
(a) Mr David George BROOKS; and/or
(b) Mr David Anthony JAMES;
for the period 1 May 2006 to the present in relation to:
(c) Terry Donald HILL and / or any company of which he was a shareholder or officer; and/or
(d) Elena ROSE and / or any company of which she was or is a shareholder or officer.
Mr Allen submits that this paragraph is very wide in that it covers a large period of time and seeks documents for which the recipient is to form an opinion about whether they relate to a large number of matters, being about Mr Hill and Mr Rose and any company of which they were ever a shareholder or an officer.
Mr Allen then referred to Commissioner of Railways v Small (1938) 38 SR (NSW) 564 per Jordan CJ (with whom Davidson and Owen JJ agreed):
Where the subpoena is addressed to a party, it is still necessary that it should state with reasonable particularity the documents which are to be produced: A.-G v Wilson (7); Earle of Powis v Negus (8).
(7) 9 Sim. 526 at [529]
[8] [1923] 1 Ch. 186 at 190
Mr Allen submits that it is clear that paragraph 3 does not comply with that requirement because it is expressed in such broad terms and seeks on its face a significant range of documents. Chief Justice Jordan goes on to say:
…but it is not legitimate to use a writ of subpoena duces tecum as a substitute for an application for discovery of documents, or as an alternative to an application for further and better discovery.
Mr Allen submits that the wording of paragraph 3 is really seeking discovery, because of the nature of the documents and the breadth of what is sought.
Mr Allen contends that those submissions have more resonance in relation to the non-party subpoenas, being the subpoenas addressed to Messrs James and Brooks. In support of this contention Mr Allen again relied on the Commissioner of Railways v Small at [575]:
In the absence of special circumstances, eg Griebart v Morris (1), a party is no more entitled to use a subpoena duces tecum than he is a summons for interrogatories, for the purpose of “fishing” ie endeavouring not to obtain evidence to support his case, but to discover whether he has a case at all: Hennesy v Wright (2), or to discover the nature of the other side’s evidence: Griebart v Morris. (3) Even if the documents are specified, a subpoena to a party will be set aside as abuse if great numbers of documents are called for and it appears that they are not sufficiently relevant: Steele v Sovory (4).
(1) [1920] 1 KB 659
(2) 24 Q.B.D 445 at 448
(3) [1920] 1 KB 659 at 666
(4) [1891 W.N. 195
Mr Allen has two complaints in respect of paragraph 3 of the subpoenas:
a)It is really seeking a form of discovery; and
b)It is really a fishing exercise.
The first ground for an abuse of process argued was that Mr James was funding the examination summons – that is the omission which is being made – and paragraphs 1 and 2 of the subpoena address that allegation. The other abuse of process ground is that the summons is a means of obtaining information about Ms Rose’s affairs, which is impermissible. Mr Allen argues that the breadth of what is being sought in paragraph three clearly indicates no particularity in seeking documents which may establish that fact. Mr Allen submits that the only way to deal with obtaining evidence where there is an abuse is to confine the subpoena to those communications if they exist.
Submissions for the respondent
Ms Francois submits that each subpoena is in relatively different terms. In respect of Mr Foate, the period of time for which the documents are sought is after 1 May 2006, being the period of time after the Deed of Release between Mr James and Mr Hill dated 19 April 2006 was entered into (Exhibit “R1” – Tab 7).
At the time of the execution of the Deed of Release, Mr Rogers was the trustee of the personal insolvency agreement of Mr Hill. Paragraph 3 of the Deed is headed “Settlement of Proceedings” and lists the proceedings between Mr Hill and Mr James that was settled on various terms by the Deed. Paragraph 4 deals with mutual releases and ends any litigation directly between Mr Hill and Mr James. The consequence of that is that at no time, covered by the subpoena, could Mr James instruct Mr Foate in relation to any of his claims against Mr Hill. The only communication that Mr James could have had with Mr Foate over the period of time covered by the subpoena was in relation to Mr Piscopo’s conduct as trustee in bankruptcy for Mr Hill.
Ms Francois argues that the range of documents requested is narrow and specific. The request was also directed to a person well aware of Mr Hill and his company’s position. Ms Francois submits that Mr Hill and Mr James have been engaged in litigation with each other for a number of years and so that the obligation to understand who Mr Hill and Ms Rose are and which companies they own is not particularly onerous. Consequently in relation to Mr James the only communication with Mr Foate was limited to the conduct of another client’s matter, that of Mr Piscopo.
Ms Francois further submits that Mr Brooks was made bankrupt in April 2005 (Exhibit “R1” - Tab 4) and could not have been speaking to Mr Foate for any purpose in relation to Mr Hill or Ms Rose other than about Mr Piscopo’s conduct of the bankruptcy proceedings. Mr Piscopo’s affidavit sworn on 12 June 2008 (which was filed in these proceedings but not read in this interlocutory application) indicates that Mr Brooks was acting in relation to Mr James’ legal affairs which Ms Francois says is surprising when one has regard to the records from the office of the Legal Services Commission (Exhibit “R1” – Tab 5).
Once Mr Brooks was made bankrupt, his practicing certificate was cancelled and he was refused a new practicing certificate on grounds pursuant to s.48(1) and (3) of the Legal Profession Act 2004 (NSW). In the case before Bell JA, Mr Brooks sought to have his name removed from the roll of solicitors and the nature of that application is not an issue in the proceedings (Exhibit “R1” – Tab 4). In that case, Mr Brooks disputed that he had engaged in the conduct as found by Bergin J. However, he did acknowledge that his conduct in connection with those proceedings exhibited faults which showed serious failings of character. Ms Francois relies on that admission.
Mr Brooks also indicated that he had a mental condition which caused severe mood swings and occasional violent outbursts. For those reasons he did not consider that he was fit to be a legal practitioner. The issue before Bell JA was whether or not Mr Brooks would allow himself to be removed from the role. The allegation by the Law Society was that their investigation into his conduct was thwarted so that he could not be disciplined and removed by them. The application made by Mr Brooks to be removed from the roll of solicitors on the basis of not being a fit and proper person is not an issue in these proceedings.
Ms Francois submits that Mr Foate is being subpoenaed to produce evidence of any conversations he might have had with Mr James and Mr Brooks (Mr James’ solicitor at the relevant time). Mr James no longer had any ongoing litigation against Mr Hill. Consequently there was no substantive issue on foot between the parties so any conversation that Mr Brooks had from 1 May 2006 in relation to Mr Hill or Ms Rose was at the heart of what the respondents say is an abuse of process because Mr Piscopo seeks information that goes far beyond the examinable affairs of Mr Hill.
In support of this contention, Ms Francois relied on the contents of the letter from Ms Cole of NOT Lawyers to Mr Foate of Catalyst Legal (Exhibit “R3”).
Ms Francois submits that Exhibit “R3” addresses the summons of examination of Ms Rose which goes far beyond Mr Hill’s affairs and traverses squarely into Ms Rose’s. This is repeated in the Notice to Produce (Exhibit “R1” – Tab 14). Ms Francois submits that the Examination Summons, Notice to Produce and Subpoenas (examination) to Ms Rose seek documents in respect of BDT Holdings Pty Ltd which relate to her and are not in any way directed to the affairs of Mr Hill. None of the documents sought are restricted to Mr Hill’s affairs. It is submitted that the Examination Summons, Notice to Produce and Subpoenas (examination) are prima facie an abuse of process.
Ms Francois contends that a subpoena was addressed to Mr Foate, who although is nominally a third party, is the solicitor acting for Mr Piscopo and is well aware of these proceedings. Insofar as the subpoena addressed to Mr Piscopo, paragraph 3 seeks his communications for the same period of time with Messrs Brooks and James as about Mr Hill and Ms Rose. Again it is confined as it is for a set period of time in relation to specific people and matters which would be within his knowledge because he was conducting investigations. The subpoena addressed to Mr James is limited to Mr James’ communications with Mr Piscopo and Mr Brooks for the same period of time in relation to the same people. The subpoena addressed to Mr Brooks seeks his communication with Mr Piscopo and Mr James about Mr Hill and Ms Rose and their companies. This is for the period of time after which Mr Brooks had been bankrupt and Mr James had settled all his litigation.
In support of her argument, Ms Francois relies on National Employers Mutual General Association Ltd v Waind & Hill [1978] 1 NSWLR 372 at 382 per Moffitt P (with whom Hutley and Glass JJA agreed):
It is oppressive to place upon a stranger the obligation to form a judgment as to what is relevant to the issue joined in a proceeding, to which he is not a party. Hence it is an abuse of the use of a subpoena to impose this obligation. It follows that it is an abuse to use any subpoena, ie. Even to a party to obtain discovery. This was the reasoning in Small’s case(36). Of course, discovery as such is otherwise available to a party. It follows that a subpoena can only properly be used for the production of documents described in particular or general terms which does not involve the making of such a judgment. It does not follow, however, that because the party who issues a subpoena is unaware of the precise description of a particular document, or whether a particular document or documents is in the possession of the witness, or even whether it exists, or is unaware of its contents, that the subpoena, or even a subpoena in general terms, amounts to the use of the subpoena for the purpose of “discovery”. To state it does involve a misconception of the different functions of discovery and of a subpoena for production. Of course, it may be that the terms of a subpoena are so wide that it is oppressive, but this is not because it is used for “discovery” in the sense used in Small’s case (37) and Burchard’s case (38), but because it imposes an onerous task on a stranger to collect and produce documents many of which can have no relevance to the litigation. To require the branch of a bank to produce all cheques received by it in a particular year in order to find, if it exists, a cheque of the opponent in a false name would be oppressive, whereas, to require a hospital to produce its file in respect of the medical treatment of the opposing party would not. It is a misuse of terms to say the person who inspects the latter is using it for the purposes of discovery, because he is unaware o the contents of the documents or some of them. It is not in point to seek to define the excessive use of the subpoena. The documents in this case are not such, and the witness itself does not so claim.
Ms Francois submits that there is no relevant judgment to be made by the person in receipt of these subpoenas. The subpoenas call for communications between certain people on certain topics. Relevance is not asked. All the documents call for are whether or not Mr Piscopo had communications with Mr James about Mr Hill, Ms Rose and their companies. Ms Francios submits that the subpoenas do not seek every document that Mr Piscopo has but is confined to issues between the parties who are highly antagonistic to each other.
Part of this results from the proceedings before Bergin J. If one party brings proceedings against another party and a Court makes an adverse finding (whether true or false), this would cause a high level of animosity between the parties. This would be further accentuated if the losing party’s appeal is rejected and they are ordered to pay costs. The history of litigation recorded in the Deed of Release (Exhibit “R1” – Tab 7) shows the breadth of the dispute between Messrs Hill and James and the level of animosity that has resulted can be assumed.
Ms Francois also relies on Arhill Pty Ltd & Ors v General Terminal Company Pty Ltd & Ors (1990) 23 NSWLR 545 per Rogers CJ (CommD) at 556:
Decisions on claims of oppression, relevantly for present purposes, fall into two categories. The first involves claims that the subpoena seeks discovery against a third party. The second category of claims is that the terms of the subpoena are so wide and indeterminate as to be oppressive. The rationale for the first category once again highlights the incongruity present in this case where the relationship between the defendants and the “third party” appears so close. This is a point made in Clarke J in Southern Pacific Hotel (at 712, 720). Jordan CJ explained in Commissioner for Railways v Small (1983) 38 SR (NSW) 564 at 573 that:
“…A stranger to the cause ought not to be required to go to the trouble and perhaps to expense in ransacking his records and endeavouring to form a judgment as to whether any of his papers throw light on a dispute which is to be litigated upon issues of which he is presumably ignorant”.
The “most harassing duty” of which the authorities speak, in this case, falls upon a person well able to make the necessary judgment, the solicitor for the defendents.
Ms Francois submits that the above judgment is apposite to the matter before this Court. What is being asked and the only part of the subpoena that might require some knowledge is, “What are the companies of Mr Hill and what are the companies of Ms Rose”? In so far as that is asked of Mr Piscopo, he knows that there are companies the subpoenas seek to identify. She submits that insofar as it is addressed to Mr Foate he knows he is acting for Mr Piscopo. Insofar as it relates to Mr James, he is funding the litigation that has been in a dispute for ten years. Insofar as it relates to Mr Brooks, he apparently conducted legal affairs for Mr James and has also been on the periphery of this matter for a number of years. Consequently nowhere is a judgment required to be exercised by these individuals that is difficult, onerous or harassing. Whether or not ultimately the way in which the examination proceedings are conducted and funded is an abuse to further some display of animosity that Mr James and/or Mr Brooks hold for Mr Hill, must be considered in the context that there is an admission of the animosity between Mr James and Mr Hill.
Ms Francois submits that the documents sought from the subpoena are essential to a fair disposal of these proceedings because what lies at the heart of whether or not there is an abuse is what is occurring between Mr Piscopo, Mr James and Mr Brooks in relation to the pursuit of Mr Hill through these proceedings.
Consideration
The inquisitorial nature of the power to examine is broad, however, Courts with bankruptcy jurisdiction must take care in the exercise of allowing examinations so that the power is not abused and the examinee is not embarrassed or disadvantaged, see Re Abrahams; ex parte Thomas (1985) 9 FCR 232 at 237 per Lockhardt J:
They establish, amongst other things, that the power prescribed by s.81 of the Act is an extraordinary power, that it must be carefully exercised, that the power given to the Court or a Registrar to issue a summons under s.81 is a discretionary one, and that no rigid rules should be laid down for the proper exercise of the discretion by the Court or the Registrar, but that it must be born in line at all times that in the exercise of that discretion the Court or the Registrar must not lend aid to an unfair or oppressive use of this compulsory process.
The Courts have held that there must be a balance between the public interest to ensure efficient and open administration of the bankrupt estate and the private interest of an examinee to confidentiality and privacy in respect of issues relevant to the bankruptcy, see Clark v Wood (1997) 78 FCR 356 at 359 per Finkelstein J:
…if an examination is not strictly controlled real harm may be suffered by an examinee and by other persons as well. Private, sensitive or confidential information might be disclosed and should not have been. Incriminating answers may be given when the question that led to them should not have been asked. Some unfair advantage might be obtained for other litigation.
The examination power is restricted in two ways:
a)Where there is an abuse of process: Karounos v Official Trustee (1988) 19 FCR 330 at 335; Re Aitken; ex parte Transpacific Timbers Pty Ltd (1987) 17 FCR 71 at 77.
b)Where the examinee is not the bankrupt, legal professional privilege may be significant.
The substantive issue in these proceedings concerns the summons of examination filed by the registered trustee in bankruptcy, Mr Piscopo, together with the Notices to Produce and the subpoenas to appear for the examination. Under the application, the relevant person is Terry Donald Hill, the bankrupt, and the examinable persons are Elena Rose (his wife), Mr O’Neill and Mr Eddy, their solicitors. An interim application and subsequently an amended and further amended interim application have been filed in these proceedings seeking to have the examination summons discharged.
As part of the process seeking to have the summons of examination discharged, the legal representatives of Mr Hill and Ms Rose have issued subpoenas to Mr Piscopo, Mr Foate, Mr James and Mr Brooks which in essence seek:
a)Documents that indicate payment to Catalyst Legal or to Mr Piscopo for work performed as trustee in the bankruptcy of Mr Hill;
b)Documents setting out any fee arrangement or arrangement for payment of costs incurred by Mr Piscopo as trustee in the bankruptcy of Mr Hill;
c)Documents recording any communication between a combination of persons including Mr Piscopo, Mr James, Mr Foate and Mr Brooks in relation to Mr Hill or Ms Rose.
Ms Cole of NOT Lawyers has the day to day carriage of the files for Mr Hill and Ms Rose and entities associated with Ms Rose, under the supervision of Mr O’Neill (partner). Ms Cole expressed her clients’ concern that Mr James or his associates are funding or indemnifying Mr Piscopo with regard to Mr Hill’s bankruptcy. Mr James is a business rival of Ms Rose and claims that it would be improper for Mr Piscopo to have himself used as a tool in Mr James’ business interests. It is stated that Ms Cole’s clients suspected this was occurring in regard to the documents sought to be obtained by summons of examination.
The basis of the argument in support of the application to have the summons discharged is that there has been an abuse of process in Mr James funding the examination process. The allegation goes further to suggest that Mr James is motivated by some form of malice or dislike for Mr Hill, the bankrupt.
I am of the view that the ultimate question of whether these proceedings are being used for an improper purpose can only be determined once all the evidence is before the Court. That is clearly not the case at this stage of the proceedings. At this stage, I believe that the only issue which can be resolved is whether paragraph 3 of each of the subpoenas issued to Messrs Piscopo, Foate, James and Brooks should be set aside pursuant to r.15.18 of the Federal Magistrates Court Rules 2001 (Cth). This can only be established by applying the relevant general principles.
The relevant principles that apply in a determination to set aside a subpoena are considered in Telstra Corporation Ltd v Phone Directory Company Pty Ltd [2008] FCA 969 at [3] per Gordon J:
[3] The Court has power to refuse to grant leave to issue or to set aside a subpoena: O 27A and O 27 of the Federal Court Rules. It is well established that a subpoena must be issued for a legitimate forensic purpose: NSW Commissioner of Police v Tuxford [2002] NSWCA 139 at [20]. A subpoena will be refused unless the documents sought to be produced “on their face, have some potential relevance to the issues in dispute between the parties”: Dunstan v Human Rights and Equal Opportunity Commission [2004] FCA 1137 at [29]. Subpoenas may be issued to non-parties provided that they specify with reasonable particularity the documents which are required to be produced: P Dawson Nominees Pty Ltd v Multiplex Pty Ltd (2007) 64 ACSR 53 at [24].
A more detailed analysis is found in Mandic v Phillis [2005] FCA 1279 at [33] per Conti J:
[33] In Trade Practices Commission v Arnotts Ltd (1989) 88 ALR 90 at 102, Beaumont J stated that the issue of a subpoena would be an abuse of the process of the Court if it is not used for a legitimate forensic purpose, referring thereby to the following passage in the reasons for judgment of Powell J in Botany Bay Instrumentation & Control Pty Ltd v Stewart [1984] 3 NSWLR 98 at 100–101:
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” …
the authorities do not make clear whether such classes of case to which I have referred above are to be regarded as the only cases in which the court will intervene, or, whether such cases are to be regarded as merely particular examples of a broad class of case in which the court will intervene to exercise its jurisdiction to set aside a subpoena, or, indeed, whether the jurisdiction to set aside a subpoena is but one part of a wider jurisdiction of the court. It seems to me, however, that when, as one does, one finds assertions that the court’s jurisdiction to set aside a subpoena is but part of the inherent jurisdiction of the court … coupled with assertions that a subpoena will be set aside if it be issued for an impermissible, or illegitimate, purpose, or if to require compliance with it would be oppressive … it is difficult to avoid the conclusion that, in reality, the court’s jurisdiction to set aside a subpoena is but one aspect of the court’s jurisdiction to act to prevent an abuse of process, and that particular classes of case which I have recorded above are to be regarded as no more than examples of situations which the courts, in the past, have held, and, in the future, would hold, to be cases of an abuse of process.
Then at [36]:
[36] His Honour at 103 referred to the meaning of ‘apparent relevance’ in the following terms:
The test of adjectival relevance is satisfied if the material has apparent relevance. In my opinion, the documentation called for here could possibly throw light on the issues in the main case. In my opinion, adjectival relevance is established.
In Kimberly Homes at 115–6, Hill J referred with approval to Beaumont J’s test for relevance and emphasised that it was not necessary for the court to determine whether the documentation or material the subject of the subpoena would be admissible in any final hearing of the proceedings. Although it is not necessary for the material to meet the standards of relevance required of evidence adduced at trial, Hill J considered that it was appropriate to have regard to the issues in dispute, as they appeared in the pleadings. In Cosco Holdings Pty Ltd v Commissioner for Taxation [1997] FCA 1504, Spender J also considered Beaumont J’s test of ‘adjectival relevance’ and explained it as follows:
Notwithstanding the use of the word “possibly” in this paragraph, in my opinion, that word is not used in any speculative sense. I take his Honour’s conclusion expressed in that paragraph as an acquiescence to the correctness of the submission that the material sought could reasonably be expected to throw light on some of the issues in the principal proceedings. It is not a question of looking at the documents to see if the documents might permit a case to be made.
As is the case presently before the Court, Spender J was there concerned with a submission that a request for documents (contained in a summons) amounted to merely a ‘fishing expedition’.
Then at [37]:
[37] In determining whether a subpoena is an abuse of the court’s process, it is necessary to bear constantly in mind the need to balance the conflicting rights of the party to the proceedings, who has issued the subpoena, with those of the third party who now objects to it. The issuing party has a right to obtain access to documents in the hands of a third party in order to further the ends of justice, and so that he or she may therefore prepare a case meeting each issue arising in the proceedings. Compliance with a subpoena to produce may involve an invasion of the third party’s right to privacy, and his or her right accordingly not to be required to seek out, identify, collate and produce his or her documents to court, in circumstances where he or she has no interest in the proceedings: see R v Barton [1981] 2 NSWLR 414 at 419 (per Cantor J). In the present circumstances, compliance with the disputed parts of the RailCorp subpoena has the potential to reduce or extinguish the confidentiality the Institute has enjoyed over its trade secrets. Production of the relevant material has potentially serious implications also for public safety, were the methodology of the Institute’s psychological testing to became publicly known; moreover there is the possibility of Ms Phillis experiencing adverse psychological effects from release of the information. Balanced against that area of concern is the desire of Mr Mandic to obtain further material about Ms Phillis’ mental health as it was at or around the time she made her affidavit of 31 January 2005. The latter factor raises the question however as to why Mr Mandic, or his legal representatives, did not seek that information at some earlier time before Ms Phillis’ complaints came on for final hearing before the Federal Magistrate.
The initial argument in respect of these subpoenas is that paragraph 3 would require a very substantial number of documents to be delivered by each party subpoenaed. However, there is no evidence that a large number of documents are involved in this matter. I paid particular attention to Ms Francois’ submissions which indicates that the period for which the documents are sought is clearly defined and the involvement of each of the four named parties is limited as they call for communications between certain people on certain topics. The issue of relevance does not arise.
Essentially, all the documents called for are about whether or not Mr Piscopo communicated with Mr James about Mr Hill and his companies and Ms Rose and her companies, so there is no judgment as to relevance required. The subpoenas do not seek every document that Mr Piscopo or any other person has. In this respect, they are confined as between the parties on a specific issue. I acknowledge that the dispute between Mr Hill and Mr James has endured for a considerable time with a high level of animosity between them. However, the subpoenas are the subject of this interim application and do not encompass that subject area. Although the admissibility in the final hearing of these proceedings is yet to be determined, I believe it is appropriate that these documents be submitted to enable the conflicting rights of the parties to be properly assessed. Consequently, I dismiss the interim application.
I certify that the preceding fifty-eight (58) paragraphs are a true copy of the reasons for judgment of Lloyd-Jones FM
Associate:
Date: 9 September 2008
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