Piscopo v Hill
[2009] FMCA 658
•22 July 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| PISCOPO v HILL (No.2) | [2009] FMCA 658 |
| BANKRUPTCY – Third further amended Interim Application regarding Summons for Examination – application to discharge Summons – Interim Application seeks to file and read an affidavit in relation to proof that the solicitors for the respondent in the main proceedings is a creditor of the bankrupt estate of Terry Donald Hill. |
| Civil Procedure Act 2005 (NSW), s.56 Evidence Act 1995 (Cth), ss.69, 135 Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth), r.6.05 |
| Hill v James [2006] FCA 981 Hill v James (No 3) [2006] FMCA 622 James v Hill [2005] FCA 853 James v Hill [2005] FMCA 743 Roaches & Ors v Page & Ors (No 27) [2003] NSWSC 1046 |
| Applicant: | SAMUEL PISCOPO |
| Respondent: | TERRY DONALD HILL |
| File Number: | SYG 344 of 2008 |
| Judgment of: | Lloyd-Jones FM |
| Hearing date: | 24 June 2009 |
| Delivered at: | Sydney |
| Delivered on: | 22 July 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr R Dubler SC with Mr D Allen |
| Solicitors for the Applicant: | Catalyst Legal |
| Solicitors for the Respondent: | NOT Lawyers |
ORDERS
The affidavit of Michael Stevens sworn on 2 April 2009 is accepted into evidence subject to its relevance in the main proceedings.
There be no order as to costs.
| 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 made by NOT Lawyers seeking to file and read an affidavit of Michael Stevens sworn on 2 April 2009 claiming that NOT Lawyers lodged a Proof of Debt in the amount of $4,437.43 representing unpaid bills for legal services incurred on behalf of Terry Donald Hill prior to his entering a personal insolvency agreement on 25 July 2005. The filing and reading of this affidavit was objected to by counsel for Samuel Piscopo, the Trustee.
The proceedings
Mr Piscopo is the Trustee of the bankrupt estate of Terry Donald Hill. The main proceedings before this Court concern an examination of the affairs of Mr Hill. The deposed examinees are Mr Hill, Eleanor Rose (Mr Hill’s wife) and their two solicitors, Michael O’Neill and Nicholas Eddy. An Application for Summons to Examine Relevant Person or Examinable Person 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. This matter has yet to be decided by this Court.
The Summons for Examination had 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 Jacqueline 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 her and Messrs Hill and O’Neill be discharged. The interim application was heard on 19, 20 and 26 March 2009 and the judgment is currently reserved.
Previous attempt to file Proof of Debt
On 26 March 2009 Mr Marshall, appearing for Messrs Hill, O’Neill and Eddy and Ms Rose sought to tender parts of the affidavit of Mr Piscopo sworn and filed in Court on 5 March 2009. Mr Dubler raised an objection to page 122 of that affidavit on the ground that truth of the fact of NOT Lawyers being a creditor in that amount is not made admissible by the hearsay document. Mr Dubler submits that the document belongs to Mr Rogers, the controlling Trustee appointed at the time of Mr Hill’s personal insolvency agreement of 25 July 2005. It was argued that the document only evidences that Mr Rogers permitted NOT Lawyers to vote at a meeting of the creditors. It does not in any way constitute evidence of NOT Lawyers being a creditor, nor that this was within the personal knowledge of Mr Rogers. Further to the extent that para.19 of the affidavit contained an admission, Mr Piscopo does not accept the position of NOT Lawyers as creditor for that amount.
Consequently, I ruled p.122 of Mr Piscopo’s affidavit of 5 March 2009 as inadmissible.
Filing of a new affidavit
By way of facsimile transmission on 6 April 2009, the Court received a copy of an affidavit of Michael Stevens sworn on 2 April 2009. The same was sent to Mr Allen, counsel for Mr Hill and others. Mr Allen objected to the filing of Mr Stevens’ affidavit on the grounds that it was the respondent’s understanding that there was no application to re-open the case and read the affidavit. Mr Stevens indicated that it was the applicant’s understanding that its case was not closed in relation to the proof that NOT Lawyers was a creditor of the bankrupt estate of Mr Hill. To resolve this issue, the matter was listed for hearing on 24 June 2009.
List of exhibits
Mr Dubler acknowledged that it is not the usual practice to tender decisions as exhibits but sought to have tender the following bundle of judgments which I have marked Exhibit “R1”: Hill v James (No 3) [2006] FMCA 622; Hill v James [2006] FCA 981; James v Hill [2005] FCA 853; James v Hill [2005] FMCA 743.
Tender of the affidavit of Michael Stevens sworn on 2 April 2009
Mr Stevens then sought to formerly tender his affidavit sworn on 2 April 2009 attaching Form 7 of the Insolvency and Trustee Service Australia (ITSA). Annexure A of that affidavit is a “Statement of Claim and Proxy Form” and a copy of the Extensive Trial Balance (“EXTB”).
Mr Dubler objected to the tender on the basis that objection was taken to a previous tender of that evidence which was eventually withdrawn. Mr Marshall indicated that the applicant may wish to put on better evidence and the proceedings were then reserved. An email exchange dated 6 April 2009 indicated that there would be an application to read a new affidavit. The basis of Mr Dubler’s objection was that the affidavit of Mr Stevens was put on too late, in that there was no explanation for why this affidavit was not put on in a timely fashion prior to the hearing. The prejudice being that the affidavit was attempting to prove that NOT Lawyers were creditors of Mr Hill.
The objection was also because the claim could have been put to Mr Hill in cross-examination. Mr Dubler indicated that the respondent disputed the facts underlying the claimed debt. In particular, in circumstances where other parties are alleged to have been paying legal bills rendered to Mr Hill, Mr Dubler submits that Mr Piscopo has lost the opportunity to challenge the evidence and clarify the issues with Mr Hill. Directions were made for the filing of affidavits prior to the three days of hearing set down in March 2009. Mr Dubler submits that it is not consistent with s.56 of the Civil Procedure Act 2005 (NSW) that matters be disposed of in a just, quick and cheap manner, without the opportunity to call Mr Hill for further cross-examination on the contents of the affidavit. Consequently, the respondent objects to the application to read the new affidavit.
Mr Stevens submitted that the pleadings in the application do not deny that Mr O’Neill was actually a creditor of Mr Hill. Mr Piscopo was only put on notice at the actual hearing about whether standing was disputed. Mr Stevens indicated he filed his affidavit in order to try and resolve this issue. He submits that he swore the affidavit as to the fact that as at August 2005, the Proof of Debt had been submitted and the affidavit should be read and given the appropriate weight in accordance with the annexures attached to it.
Sworn testimony of Michael Stevens
Leave was granted to Mr Dubler to ask Mr Stevens on a voir dire to confirm certain matters in respect of the preparation and contents of his affidavit. Mr Stevens was sworn and confirmed that he was a solicitor employed by NOT Lawyers, that he had sworn an affidavit on 2 April 2009 in these proceedings and that the contents of the affidavit were true and correct.
Applicant’s submissions in respect of admissibility
Mr Dubler objected to para.4 of the affidavit on the basis of hearsay evidence because Mr Stevens did not have personal knowledge of the document he referred to which was created on 17 August 2005. He was not an employee of NOT Lawyers until March 2008 and consequently was not in a position to say what that organisation did at the time the Proof of Debt was produced. Mr Dubler submits that Mr Stevens was simply describing a document as it was presented to him.
With respect to the annexures, the Statement of Claim was objected to on the basis that it is not a business record. In support of this argument, Mr Dubler referred to Roaches & Ors v Page & Ors (No 27) [2003] NSWSC 1046 at [9] where Spurling J referred to s.69 of the Evidence Act 1995 (Cth):
[9] So far as is presently relevant, it is the recording of business activities in the course of carrying on a business which is critical. The publication of a book by a business provides a history of business may record details of the business carried on but it is not a “record of business within the meaning of s.69. Similarly, a flyer or a media advertisement or a website publication, extolling the virtues of the business in a way such publications do, is not a record of a business merely because it purportedly records activities of a business.
It is submitted that the Statement of Claim is in the nature of an allegation and is not part of the business records of NOT Lawyers. NOT Lawyers is presumed to be a provider of legal services. This is not a record created as part of that business’ activity but rather is an assertion.
Mr Dubler submits that even if his submission on whether the Statement of Claim was a business record is wrong there are further issues to consider:
a)Evidence needs to be given that the Statement of Claim was written by a person who has personal knowledge of the matters asserted in it. Mr O’Neill had personal knowledge of these matters and could give evidence, which, as presently submitted, is not in admissible form. In the absence of evidence that the author of the document had personal knowledge, it cannot be admitted pursuant to s.69(2) of the Evidence Act.
b)Even if the issue in (a) above is resolved, Mr Dubler relies upon s.69(3) of the Evidence Act which states that a hearsay statement in a business record cannot be admitted if it has been prepared for the purpose of conducting, or for or in contemplation of or in connection with, an Australian or overseas proceeding. This document was prepared for the purpose of making a claim upon a liquidator in order to have the Proof of Debt accepted. It was in contemplation of proceedings in liquidation in respect of that claim and hence comes within the exemption in s.69(3). The purpose of this subsection is to prevent assertions of claims from being treated as business records.
Mr Dubler submits in respect of the second document in the annexure, being the EXTB, that there is no admissible evidence as to the provenance of the document. Mr Stevens’ assertion that it is a business record of NOT Lawyers has no probative weight because he has no personal knowledge to give that evidence. In the absence of any evidence that the EXTB is a business record, it should not be perceived as such. Mr Dubler submits that his other difficulty with the EXTB is that there is no evidence about its authors, how it was created or that the authors had personal direct knowledge of the matters in its contents. Mr Dubler submits that this is a pre-condition to accepting the EXTB as a business record.
Alternatively, Mr Dubler submits that if the above submissions are wrong he relies upon s.135 of the Evidence Act and requests that the Court exercises its discretion to exclude the documents primarily because persons who have personal knowledge about the contents are available and have not been called to give evidence. He submits that indirect business records should not be received in circumstances where persons who could give evidence choose not to. Mr Dubler referred to Roach v Page (supra) at [74]. He submits that it would be prejudicial to the respondent to be confronted with evidence without being allowed to cross-examine on the following:
a)There has been no tender of the fee agreement which must be in existence and which would identify the parties actually liable for the services;
b)Identification of someone as a client who is contractually liable to pay the bills;
c)The evidence is of no probative value unless it can be proved who the party liable for the bill is. There is no evidence of the assertion that BDT Holdings Pty Ltd (“BDT”) claims to have paid bills and may have been the actual contractual party liable on the bill, even though Mr Hill was identified as a client.
d)Evidence as to whether or not the bills listed in the annexures to the affidavit are still outstanding and whether or not NOT Lawyers was a creditor in 2009.
Submissions on behalf of Terry Donald Hill
Mr Stevens submits that the Statement of Claim and Proxy Form contained in the annexure is a business record as it was not created for the purpose of litigation. He submits it is a record that was created with the Trustee’s records in relation to the bankrupt estate of Mr Hill. There was no litigation anticipated by the filling out of the Statement of Claim and Proxy Form. The EXTB names the client as Mr Hill and lists monies due and payable at the time of its preparation.
Mr Stevens indicated that the fifth column of the EXTB is headed “Aged Debtors” which indicates that the account had already been rendered at the time the Proof of Debt was lodged in August 2005. Mr Stevens advised the Court that he did not have any evidence as to whether the account was still outstanding but the Proof of Debt lodged in the bankrupt estate had been admitted only for voting purposes. NOT Lawyers have not been required by the Trustee to verify that the debt was due and owing. Mr Stevens contends that there is still a debt and a Proof of Debt in the bankrupt estate of Mr Hill. The arrangement with BDT Holdings to pay bills incurred by Mr Hill is a post-bankruptcy arrangement which was not in existence pre-bankruptcy. He further submits that Mr Hill has been in bankruptcy for approximately three years and there exists an arrangement with BDT Holdings that any debts incurred post-bankruptcy are the liability of that organisation. In relation to the objections to the affidavit, Mr Stevens contends that para.4 explains what the EXTB is and therefore should be given the appropriate weight by the Court.
Consideration
When Mr Stevens forwarded his affidavit sworn on 2 April 2009 to the Court Registry, Mr Allen indicated that he understood that the case was closed and that there had been no application to re-open or read Mr Stevens’ affidavit. A review of the hearing transcript of 26 March 2009 shows that Mr Marshall submitted that subject to the issue of the NOT Lawyers accounts, he intended to close his case.
The issue was again raised at the conclusion of the hearing on which both parties addressed the Court. Mr Marshall indicated that the third parties’ sworn affidavits were tendered to show the existence of the EXTB rather than the truth of its contents. He submits that the truth was contained in the affidavit of Mr Piscopo sworn on 5 March 2009.
Under the circumstances and in the absence of any direct order in relation to the tendering of evidence as to the status of NOT Lawyers, I will allow the affidavit to be read and will consider objections as to its contents to determine its admissibility.
Paragraphs 1, 2 and 3 of Mr Stevens’ affidavit were not objected to and require no comment. Paragraph 4 was objected to on the basis of hearsay evidence. The objection was on the ground that Mr Stevens was not an employee of NOT Lawyers at the time the EXTB was created on 17 August 2005 from the NOT Lawyers Locus accounts system and that he was simply describing a document that had been provided to him. I acknowledge the evidence given by Mr Stevens in re-examination that the person responsible for running the accounts department was a Philomena Lee and that she was the person who produced the EXTB on 23 August 2005 for the client identified as “Hill-TD and Hill-TER”. On my reading of para.4, three issues were addressed:
a)The date that the EXTB was created and the source was NOT Lawyers’ Locus accounting system;
b)That the accounting system recorded a solicitor’s time spent in minutes for each matter and his/her disbursements;
c)The accounting system was, at any particular time, a record of these and the billings relevant to a client.
Nothing in para.4 suggests that the records are accurate, or that Mr Stevens would need to have been an employee of NOT Lawyers at the time of their production. Paragraph 4 is nothing more than a simple description of the document provided to Mr Stevens which was attached to the Statement of Claim and Proxy Form and lodged by NOT Lawyers with the Trustee. I am satisfied that the paragraph does nothing more than identify the attachment to the affidavit and should not be struck out on the ground of hearsay.
The Statement of Claim and Proxy Form which is Annexure A to the affidavit of Mr Stevens is challenged as not being a business record. I note the decision of Spurling J in Roaches & Ors v Page & Ors (No 27) (supra) at [9] which refers to documents that are not business records and can be distinguished from the Statement of Claim. A business record is normally defined as a report, memorandum or other record made in the usual course of ordinary business. The Statement of Claim and Proxy Form in question is a report prepared for submission to ITSA. It is a claim taken against a debtor seeking an assessment to enable that organisation to vote and determine the method of dealing with the debtor’s assets to best satisfy the recovery of the debt owed to it. The document does not initiate any form of litigation in respect of the outstanding debt. It is no more than a notification to ITSA in the form of a report to establish eligibility to vote. The production of such a form may not be a regular occurrence but it does form an integral part of an organisation’s course of business. I am satisfied that the document in question is a business record.
The Statement of Claim and Proxy Form was prepared and signed by Mr O’Neill on 23 August 2005. It is not in dispute that Mr O’Neill had personal knowledge of these matters.
In respect of s.69(3) of the Evidence Act, the Statement of Claim and Proxy Form was prepared for the purpose of notifying the Trustee of the creditor’s claim and to establish the right to vote at the creditor’s meeting. It does not initiate any domestic or overseas proceedings. I am satisfied that the Statement of Claim and Proxy Form is not excluded by the operation of s.69(3) of the Evidence Act.
The EXTB is produced by a computerised accounting system which has numerous inputs from different authors. Equally numerous reports of the system’s contents can be initiated by various staff members of NOT Lawyers. Because of the nature of the report writing features of the Locus accounts system, it is not possible for any individual author to give evidence and be cross-examined as to how the EXTB was created. No individual would have complete personal knowledge of the contents of that computer record. In the circumstances, I am willing to accept that the EXTB is a business record of NOT Lawyers.
The Court has been requested to exercise its general discretion to exclude the annexures to Mr Stevens’ affidavit on the ground that a person with personal knowledge of the Locus computer system has not been called to give evidence. I am not satisfied that any single individual can have personal knowledge of all the relevant data recorded in the system and also possess computing knowledge in respect of preparing the relevant report, including being able to verify and audit each component. The computer system is a resource utilised by numerous individuals within NOT Lawyers which transfers information so that it is available to other staff members. The resources in the exercise to audit and verify the contents of the computer files in order to substantiate the contents of the report contained in the EXTB far outweigh the practical significance of the evidence contained in that document.
Consequently I am willing to accept the EXTB annexed to the affidavit of Mr Stevens sworn on 2 April 2009, subject to its relevance in the main proceedings before this Court. At the time of this ruling it is not possible to fully consider all of the relevant issues in a determination of the relevance of the contents of this affidavit.
I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for judgment of Lloyd-Jones FM.
Associate:
Date: 22 July 2009
5
3