Prechelt, in the matter of Hillcrest Pty Ltd v Hillcrest Pty Ltd
[2017] NFSC 1
•19 January 2017
SUPREME COURT OF NORFOLK ISLAND
Prechelt, in the matter of Hillcrest Pty Ltd v Hillcrest Pty Ltd [2017] NFSC 1
File number: SC 3 of 2016 Judge: BESANKO CJ Date of judgment: 19 January 2017 Catchwords: PRACTICE AND PROCEDURE – application to set aside or amend notices of non-party production – where application brought by defendant – whether all relevant documents already tendered – whether categories specified in notices are reasonably necessary for fairly disposing of the proceeding – whether notices specifically particularise documents sought – whether notices are being used for fishing – Court Procedure Rules 2006 (ACT), rr 660, 663. Legislation: Companies Act 1985 (Norfolk Island) s 467
Court Procedure Rules 2006 (ACT) rr 660, 663
Land Administration Fees Act 1996 (Norfolk Island) s 4
Land Titles Act 1996 (Norfolk Island)
Rules of the Supreme Court of Queensland, O 40 r 38A
Supreme Court Rules of the Australian Capital Territory, O 34B
Cases cited: Better Building Services Pty Limited v Diana Vere Dyer [2004] ACTSC 65
Lebon v Lake Placid Resort Pty Limited [1995] 1 Qd R 24
Uthmann v Ipswich City Council [1998] 1 Qd R 435
Date of hearing: Heard on the papers Date of last submissions: 28 October 2016 Registry: Norfolk Island Category: Catchwords Number of paragraphs: 34 Solicitor for the Plaintiff: Shand Taylor Lawyers Solicitor for the Defendant: Willis & Bowring Solicitors ORDERS
SC 3 of 2016 IN THE MATTER OF HILLCREST PTY LTD NI COMPANY REGISTRATION NO. 02/96
BETWEEN: GREGG PRECHELT
Plaintiff
AND: HILLCREST PTY LTD
Defendant
JUDGE:
BESANKO CJ
DATE OF ORDER:
19 JANUARY 2017
THE COURT ORDERS THAT:
1.The Notice of Non-Party Production addressed to Heritage Hill Investments Pty Ltd filed on 16 August 2016 be amended as follows:
(a)paragraphs 2 and 8 of the Schedule be deleted; and
(b)paragraph 7 of the Schedule be deleted and replaced with the following words:
“All written shareholders agreements between Mr Kerry Douran and Mr King concerning the ownership of shares in Heritage Hill”.
2.The Notice of Non-Party Production addressed to Michael William King filed on 16 August 2016 be amended as follows:
(a)paragraphs 1, 2, 4, 6, 7 and 9 of the Schedule be deleted; and
(b)paragraph 8 of the Schedule be deleted and replaced with the following words:
“All written shareholders agreements between Mr Kerry Douran and Mr King concerning the ownership of shares in Heritage Hill”.
3.The parties be heard as to the costs of the defendant’s application.
REASONS FOR JUDGMENT
BESANKO CJ:
Introduction
This is an application by the defendant to this proceeding for orders setting aside or amending two notices to produce served on two non-parties and issued at the request of the plaintiff. The defendant’s standing to bring this application is not challenged by the plaintiff (see Court Procedure Rules 2006 (ACT) (“the Rules of Court”), r 663).
The plaintiff is Mr Gregg Prechelt and he requested the Registrar to issue the notices to produce which the Registrar duly did. In his originating process, Mr Prechelt seeks relief against the defendant, Hillcrest Pty Ltd (“Hillcrest”) under the Companies Act 1985 (Norfolk Island) (“the Act”). Mr Prechelt seeks an order pursuant to s 467 of the Act that Hillcrest be wound up in insolvency, an order for the appointment of two individuals as joint and several liquidators and other orders. Mr Prechelt seeks this order on the following grounds: the company has suspended its business for 12 consecutive months; the company is unable to pay its debts; the directors have acted in the affairs of the company in their own interests rather than the interests of the members as a whole or some other manner that appears to be unfair or unjust to some or all of the members; an act or omission by or on behalf of the company was oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member or members or was contrary to the interests of the members as a whole; and it is just that the company be wound up.
The Plaintiff’s Case
Mr Prechelt has filed and served an affidavit in support of his originating process. That affidavit sets out Mr Prechelt’s case. In summary form, it is as follows:
(1)Hillcrest was registered as a proprietary company on 22 January 1996. The company’s authorised share capital is 1,000,000 one dollar shares and the issued share capital is 2,500 one dollar ordinary shares.
(2)The shareholders of the company and their respective holdings are Mr Kerry Douran (2,199 ordinary shares), Mr Prechelt (300 ordinary shares) and Ms Gordina Douran (1 ordinary share). Mr Prechelt claims that he has an entitlement to a further 400 shares from Mr Douran and reserves his rights in respect of that claim.
(3)Hillcrest filed an Annual Return for the 2014 year signed (it seems) by Mr Douran on 19 January 2015. In that document the directors of the company are said to be Mr Douran and Ms Gordina Douran, and Mr Douran is said to be the company secretary. The Directors’ Statement which is part of the Annual Return contains the following statements:
1. The Profit and Loss Account of the company is drawn up so as to give a true and fair view of the results of the company for the year ended 30 June 2014.
2. The balance sheet of the company is drawn up so as to give a true and fair view of the state of affairs of the company as at 30 June 2014.
3. The accounts have been set out in accordance with approved accounting standards.
And note that:-
a) the company ceased trading effective 21 November 2012 and has reached accommodation with creditors outstanding at the date of cessation. These arrangements are reflected in the balance sheet.
b) the company is insolvent with no outstanding creditors except directors and shareholders loans.
c) there are no written agreements to support their loans to the company and that given the financial state of the company there are no prospects for repayment of the loans.
The Directors’ Report states that the company was, until 21 November 2012, operating as a tourist accommodation and hospitality business. The company ceased trading on that date and has not traded since. The Directors’ Report states that the company has no plans to resume trading of any type and that the company “continues to work towards winding up its affairs”.
The Annual Return includes a balance sheet for the company for the financial year ended 30 June 2014 which records (among other matters) the long term liabilities of the company as shareholder loans by Mr Douran ($1,034,930) and Mr Prechelt ($1,368). The net assets of the company are recorded as a deficit of $1,036,157.
The Notes to the Financial Statements for the period ended 30 June 2014 state that all outstanding creditors have been settled on negotiated terms and with further assistance from Mr Douran.
(4)A company called Heritage Hill Investments Pty Ltd (“Heritage Hill”) was registered under the Act on 29 October 2012. The authorised share capital of Heritage Hill is 10,000 one dollar shares and the issued share capital is 100 ordinary shares. The shareholders of the company and their respective holdings as recorded on the certificate of incorporation are Mr Douran (50 ordinary shares) and a Mr Michael King (50 ordinary shares). Mr Douran and Mr King are shown as the directors of the company and Mr King is shown as the company secretary.
(5)The Annual Return for Heritage Hill for the 2014 year records Mr King as holding 94 ordinary shares in the company and Mr Douran as holding 50 ordinary shares.
(6)On 20 November 2012, Hillcrest and Heritage Hill entered into a written Assets Sale Agreement for the sale by Hillcrest to Heritage Hill for a total consideration of $500,000 of land, a business and plant and equipment (“Assets Sale Agreement”). The assets and the amounts allocated to each of them by the Agreement are as follows:
1.The Business, being a licensed hotel business known as “Hillcrest Hotel” or “Hillcrest Bed & Breakfast” carried on by Hillcrest on the land prior to completion ($20,000);
2.The Land, being the land specified in Schedule 1 to the Agreement (Lots 28, 29, 30 and 32) and includes all improvements and fixtures located on the land ($460,000); and
3.The Plant and Equipment, being the plant and equipment specified in Schedule 3 to the Agreement ($20,000).
The Assets Sale Agreement was signed by Mr Douran as director and secretary of the vendor, Hillcrest, and by Ms G Douran as director of Hillcrest, and by Mr Douran as a director of the purchaser, Heritage Hill, and by Mr King as a director and the secretary of Heritage Hill.
(7)Mr Prechelt claims that the directors of Hillcrest did not inform him of the proposed assets sale by Hillcrest and that he did not become aware of the sale until about December 2012.
(8)Hillcrest gave notice of an Annual General Meeting of the company to be held on 24 June 2014. One of the items of business was to receive the company’s financial statements for the years ending 30 June 2011, 30 June 2012 and 30 June 2013. The profit and loss statement for Hillcrest for the financial year ended 30 June 2013 records the sale of the company’s assets “at directors’ valn” (i.e., valuation).
(9)The land transfer lodged under the Land Titles Act 1996 (Norfolk Island) for the transfer of Lot 32 from Hillcrest to Heritage Hill includes a notation that the value of the Land Transfers was reassessed at $800,000.
(10)In his affidavit, Mr Prechelt expresses his concern that on the above state of affairs, not only have the directors of Hillcrest sold the company’s assets to a related entity without his knowledge, but it appears (he contends) that Hillcrest have done so at a significant under-value. He proposes to offer funding to a liquidator of Hillcrest to investigate the transaction should the company be wound up.
Hillcrest’s Response
Hillcrest opposes the application that it be wound up. It admits that it has suspended its business for 12 consecutive months, but contends that the Court’s power to wind up the company on that ground alone is discretionary and that the power should not be exercised in the circumstances. In response to the allegation that it is unable to pay its debts, it contends that the company’s only debts are shareholder loans which are not due and payable. The company denies that the directors have not acted in the interests of the company and denies that an act or omission of the company was oppressive, unfairly prejudicial, unfairly discriminatory or contrary to the interest of the members as a whole.
Mr Kerry Douran has filed a lengthy affidavit in response to Mr Prechelt’s affidavit and a second affidavit in support of Hillcrest’s application to set aside the notices to produce. In his first affidavit, Mr Kerry Douran deposes to a number of matters, but this is not the occasion to examine each of those matters. On behalf of Hillcrest, he admits that the company has suspended its business for 12 consecutive months. He denies that the company is unable to pay its debts. He claims that the company has no outstanding debts. He has paid debts resulting from the company’s trading losses for the five years ending 30 June 2013, amounts owed to Westpac Banking Corporation Limited and all other liabilities of the company. The company has no other liabilities other than the shareholders’ loans and, in the case of his loan, he has not demanded repayment and has no intention of doing so and, in the case of Mr Prechelt’s loan, there has been no demand on the company for repayment and, in any event, he stands ready, willing and able to repay the loan.
With respect to the Assets Sale Agreement, Mr Kerry Douran states that as at October 2012, the company had no option but to consider selling the property and the directors resolved to sell the assets of the company to a new company funded by Mr King, Heritage Hill, which was incorporated for the purpose. The consideration under the agreement was paid to Westpac for a discharge of Westpac’s mortgage and charge over the property. Mr Kerry Douran states that he made no contribution to the capital of Heritage Hill and that he received no personal financial benefit from the transaction which is the subject of the Assets Sales Agreement. He states that he derived no director’s fees or dividends from Heritage Hill. He states that Heritage Hill is trading at a loss. Mr Kerry Douran further states that Heritage Hill was required by the Registrar of Titles to obtain a valuation of the property and a valuation report of Eastpoint Valuations dated 6 June 2013 was obtained. On 6 August 2013, an entity other than Hillcrest paid ad valorem duty of $32,000 to the Registrar of Titles.
Mr Prechelt has filed an affidavit in response.
The Notices to Produce
The two non-parties who have each been served with a notice to produce are Heritage Hill and Mr King.
The notice to produce directed to Heritage Hill contains a definition of the relevant assets and agreements. They are the Land, the Assets Sale Agreement and the Land Transfers. The notice to produce also contains a definition of the Land Administration Fee, being the fee payable to the Registrar of Titles in Norfolk Island under s 4 of the Land Administration Fees Act 1996 (Norfolk Island) in respect of the registration of instruments under the Land Titles Act 1996 (Norfolk Island).
I will not set out the precise terms of the notice to produce directed to Heritage Hill because a summary will suffice. The documents sought relate to the following matters:
(1)The calculation and payment of the Land Administration Fee to the Registrar for the registration of the transfers in respect of the land (paragraph 1);
(2)The negotiations leading up to and resulting in the execution of the Assets Sale Agreement (paragraph 2);
(3)The execution of the Assets Sale Agreement by Heritage Hill (paragraph 3);
(4)The completion or settlement of the Assets Sale Agreement (paragraph 4);
(5)The incorporation of Heritage Hill (paragraph 5);
(6)The allotment of shares in Heritage Hill (paragraph 6);
(7)Any agreements between Mr Douran and Mr King concerning the ownership in shares in Heritage Hill (paragraph 7); and
(8)Any agreements between Mr Douran and Mr King concerning the operations, affairs and undertaking of Heritage Hill (paragraph 8).
The notice to produce directed to Mr King relates to broadly similar matters to the notice to produce directed to Heritage Hill. The documents sought relate to the following matters:
(1)The negotiations leading up to and resulting in the execution of the Assets Sale Agreement (paragraph 1);
(2)Any agreement, arrangement or understanding between Mr King and Mr Douran concerning the subject matter and/or the terms of the Assets Sale Agreement (paragraph 2);
(3)The incorporation of Heritage Hill (paragraph 3);
(4)Any agreement arrangement or understanding between Mr King and Mr Douran concerning the incorporation of Heritage Hill (paragraph 4);
(5)The allotment of shares in Heritage Hill (paragraph 5);
(6)Any agreement, arrangement or understanding between Mr King and Mr Douran concerning the allotment of shares in Heritage Hill (paragraph 6);
(7)Any negotiations or other communications between Mr King and Mr Douran concerning the allotment of shares in Heritage Hill (paragraph 7);
(8)Any agreement, arrangement or understanding between Mr King and Mr Douran concerning their respective ownership of shares in Heritage Hill (paragraph 8); and
(9)Any agreement, arrangement or understanding between Mr King and Mr Douran concerning the operations, affairs and undertaking of Heritage Hill (paragraph 9).
In Mr Kerry Douran’s affidavit on behalf of Hillcrest he states that the objections to the notices to produce are as follows:
(1)All relevant documents in relation to the issues in dispute have been tendered in the proceeding;
(2)The categories of documents specified in the notices to produce are not reasonably necessary for fairly disposing of the proceeding;
(3)The notices to produce do not specifically particularise the documents sought by the plaintiff; and
(4)The notices to produce are being used for fishing, against parties not a party to the proceedings.
The Rules of Court
Rule 660 of the Rules of Court provide that, unless the Court orders otherwise, the Registrar shall issue a notice to produce at the request of a party to a proceeding requiring a non-party to produce for inspection a document which meets the following criteria: it relates to a matter in issue in the proceeding; it is in the party’s possession; and it is a document that the person could be required to produce at the trial of the proceeding. An applicant for a notice to produce may not require production of a document if there is available to the applicant another reasonably simple and inexpensive way of proving the matter sought to be proved by the document. A matter is in issue until it is admitted or taken to be admitted or is withdrawn, struck out or otherwise disposed of. A respondent to the notice for non-party production or any other party to the proceeding may apply to have the notice amended or set aside (r 663).
Relevant Authorities
In Lebon v Lake Placid Resort Pty Limited [1995] 1 Qd R 24, Lee J of the Supreme Court of Queensland considered the scope of Order 40 r 38A of the then Rules of the Supreme Court of Queensland which dealt with the writ of non-party discovery. The rule was in the following terms:
A party to a cause may, by writ of non-party discovery, require a person who is not a party to the cause, to produce to the party a document that —
(a)relates to the matter in question in the cause; and
(b)is in the person’s possession or control; and
(c)the person could be required to produce at the trial of the matter.
The terms of this rule are similar to the terms of r 660 of the Rules of Court.
Justice Lee made the point that whether a document relates to a matter in question in the cause is ordinarily capable of being determined by reference to the pleadings and particulars, although there may be cases where a matter in question in the cause can be determined at an earlier stage or in some other way. His Honour said that the reference in r 38A to “a document” means that the rule is limited to specific documents or classes of documents which must be sufficiently identified as probably being in existence and in the third party’s possession or control and which could be the subject of production at the trial pursuant to a subpoena duces tecum. Furthermore, the party seeking production must establish that the documents sought relate to the matter in question in the cause. The rule does not authorise general discovery against a stranger to the action, nor does it authorise a fishing expedition against a stranger to the action in the hope that a document which is relevant and material will be produced.
In Uthmann v Ipswich City Council [1998] 1 Qd R 435, Lee J again considered the scope of the writ of non-party discovery. His Honour summarised the relevant guidelines as follows:
(1)The procedure cannot be used if its only purpose is to engage in a purely fishing expedition.
(2)Documents sought must be shown by the issuer of the writ to probably relate to a matter in question in the cause. This “matter” is usually demonstrated by the pleadings and/or particulars but may in some cases be shown in some other way.
(3)The issuer of a writ must demand production only of specific documents which would be the subject of a subpoena duces tecum at the trial, which he can show are probably in the possession or control of the third party and which probably relate to a matter in question in the cause. If this is not done, the issuer of the writ may be at risk as to costs if an application is brought to the Court by either party.
(4)The issuer of the writ must formally give sufficient information in writing to enable the third party to make an informed decision. If this is not done, the issuer of the writ may again be at risk as to costs if an application is brought to the Court.
(5)The third party must independently be satisfied that the documents relate to a matter in question in the cause, before they are produced.
(6)If the third party produces demanded documents which relate to a matter in question in the cause, the third party is probably protected although this should be clarified by amendment.
(7)If the third party is of the view that the documents do not relate to a matter in question in the cause or if there is a doubt in relation to it or if there is any other proper basis for objection to produce the documents whether on the ground of privilege or on a discretionary basis or otherwise, the third party should prudently apply to the Court for an order.
(8)The Court has a discretion whether or not to order production or the extent of it, but if the rules are complied with, an order for production will usually be made having regard to the purpose of the procedure which is to assist the administration of justice by minimising costs and facilitating the disclosure of information which would advance fair determination of the issue as early as possible: O’Sullivan v. Herdmans Ltd [1987] 1 W.L.R. 1047 at 1055–6; Ansett Transport Industries Ltd v. The Commonwealth; Lebon v. Lake Placid Resort Pty Ltd at 28. If production is ordered, the Court may impose conditions and require undertakings to meet the individual circumstances.
(9)If the person who issues the writ is permitted to adduce further evidence at the hearing in order to sustain the order sought, and the third party has no prior notice of it, this may be relevant to the question of costs of the application.
(10)There is no reason why before any application is brought to the Court, there should not be dialogue between the third party and the person who issues the writ for clarification or to state grounds of objection. The person who issues the writ may then satisfy the third party in writing, or might desist if the objections raised are accepted.
In Better Building Services Pty Limited v Diana Vere Dyer [2004] ACTSC 65, Master Harper of the Supreme Court of the Australian Capital Territory considered the scope of Order 34B of the Supreme Court Rules of the Australian Capital Territory which was in the following terms:
Notice for Non-Party Production
2On application by a party to an action, the Registrar shall, unless the Court otherwise orders, issue a notice requiring a person who is not a party to the action to produce for inspection a document in the person's possession or control relating to a matter in question in the action that the person could be required to produce at the trial of the action.
Service of Notice
4 (1) A notice for non-party production shall be served personally;
(2)A copy of the notice must be served on each other party to the action who has an address for service by leaving it at that address within two days after the day the notice is served on the respondent to the notice.
Application to Set Aside or Vary
6(1) The respondent to a notice for non-party production or any other party to the action may, within 14 days after the day the notice is served on the respondent, apply to the Court to have the notice set aside or varied.
(2)On an application under subrule 1, the Court may make such orders as the Court thinks fit.
Privilege or Objection
7(1) If the respondent to a notice for non-party production or any other party to the action -
(a)claims that a document specified in the notice is privileged from production; or
(b) otherwise objects to its production;
the respondent need not produce the document and the applicant for the notice, the respondent or that other party may apply to the Court for a determination in relation to the claim or objection.
…
(3)On an application under subrule (1) … the Court may make such orders as the Court thinks fit.
The non-party in that case did not object to the notice for production, but the defendant did. The defendant did not apply to set aside the notice, but it did object to the documents being produced to the plaintiff on the ground of relevance. His Honour referred to the two Queensland cases to which I have referred and expressed agreement with the guidelines stated by Lee J.
The Issues on the Application
Hillcrest submits that the documents identified in paragraphs 6 and 7 (Heritage Hill) and paragraphs 5, 6, 7 and 8 (King) which relate to the allotment of shares in Heritage Hill and, speaking broadly, any agreement between Mr Kerry Douran and Mr King concerning shares in Heritage Hill do not relate to a matter in issue in the proceeding because the allegation that they each own 50 shares is admitted.
Hillcrest submits that the documents identified in paragraph 5 (Heritage Hill) and paragraphs 3 and 4 (King) which relate to the incorporation of Heritage Hill and any agreement of the directors concerning incorporation do not relate to a matter in issue because the incorporation of the company and the directors at incorporation are admitted.
Hillcrest submits that the documents identified in paragraphs 2, 3 and 4 (Heritage Hill) and paragraphs 1 and 2 (King) which relate to the Assets Sale Agreement do not relate to a matter in issue in the proceeding because the Assets Sale Agreement and the transaction are admitted.
Hillcrest submits that the documents identified in paragraph 1 (Heritage Hill) which relate to the Land Administration Fee do not relate to a matter in issue in the proceeding because the reassessment and the payment of stamp duty are admitted.
Hillcrest submits that the notices to produce do not describe the documents with sufficient particularity, represent an attempt to obtain general discovery and are part of a fishing expedition.
Mr Prechelt submits that the Rule refers to a matter in issue and not a fact in issue, and that in the absence of pleadings or particulars, the matters in issue are the grounds upon which he seeks to have the company wound up. He further submits that, on the facts, there is a prima facie case that Mr Kerry Douran breached his statutory, fiduciary and common law duties to the company. He submits that the conduct of Mr Kerry Douran and Mr King in relation to the Assets Sales Agreement and Mr Kerry Douran’s directorship and shareholding in Heritage Hill and the valuation is relevant. He submits that he need only establish that the documents referred to in the notices to produce relate in a general sense to the matters in issue. He submits that there is evidence that there are other documents such, as the Shareholders Agreement referred to in an affidavit of Ms Lisa Boler sworn on 31 August 2016. He submits that as to whether the documents are described with sufficient particularity, it is relevant that neither of the respondents have objected to the notices to produce on this ground. He submits that the notices to produce are not part of a fishing expedition.
Hillcrest submits in reply that the Originating Process cannot be used to identify the matters in issue because it is not a pleading. The matters in issue must be determined having regard to Mr Prechelt’s affidavit. Mr Prechelt has not pleaded a breach of statutory, fiduciary and common law duties of Mr Kerry Douran and those matters must be specifically pleaded (r 407). Hillcrest submits that the onus is on Mr Prechelt, in the first instance, of proving that documents sought fall within the scope of the notices. Furthermore, Hillcrest submits that Mr Prechelt impermissibly invites the Court to make findings of fact in his favour.
The document(s) must relate to a matter in issue in the proceeding. In this case, there is the Originating Process, the Amended Grounds of Opposition to Winding Up and the affidavits sworn by the parties. There are no pleadings or particulars. I do not agree with Mr Prechelt’s submission that the issues in the proceeding are defined by reference to the general issues identified in the Originating Process and the Amended Grounds of Opposition to Winding Up. The allegations are relevant, but they are very general and the affidavits must be used to identify with further precision, the issues in the proceeding. At the same time, I do not agree with Hillcrest’s submission that there is no issue of breach of duty by Mr Kerry Douran because it is not pleaded. If breach of duty is raised on the affidavit evidence, then it is an issue in the proceeding.
I am not making findings of fact at this stage. Mr Prechelt’s claim is that there is a prima facie case that Hillcrest sold its assets at a significant undervalue. Mr Kerry Douran and Ms Gordina Douran were directors at the time. Mr Prechelt’s claim is that there is a prima facie case that Mr Kerry Douran, because of his involvement in Heritage Hill, had a conflict of interest at the time. Mr Prechelt’s claim is that Mr Kerry Douran received, or may have received, a benefit by reason of the transaction because of his shareholding in Heritage Hill. Mr Prechelt’s claim is that there is a Shareholders Agreement between Mr Kerry Douran and Mr King.
I do not think Mr Kerry Douran would fail to understand that these allegations are made. Why else, it may be asked, would Mr Kerry Douran’s affidavit contain the following (at [25]):
I am a director and shareholder of Heritage Hill. The other director and shareholder is Mr King. I made no contribution to the capital of Heritage Hill. I received no personal financial benefit from the transaction deposed to in paragraphs 23-24 above. I derived no director’s fees nor dividends from Heritage Hill. Heritage Hill is trading at a loss. In that regard, I refer to pages 26-27 of Exhibit GP-1. My involvement in Heritage Hill exists by courtesy of Mr King, and not because of my financial or other contributions to that company.
The key concepts are relevance, the existence of the document or class of documents and the probability that the document or class of documents are in the possession of the non-party. These concepts can run together in that the description of a “category of documents” may be so broad that it cannot be said with any degree of confidence that they are relevant or, indeed, that any specific documents exist or, if they do, that they are in possession or control of the non-party. The overarching concepts are that a party cannot use a notice to produce to undertake a fishing expedition or to obtain general discovery against a non-party.
In the case of the notice to produce directed to Heritage Hill, I am satisfied that categories (1), (3), (4), (5) and (6) meet the requirements of the Rules of Court. I am not satisfied that categories (2) and (8) meet the requirements of the Rules. They seem to me to be in the nature of fishing or, if not that, a request for general discovery. Subject to one matter, category (7) falls into the same group as categories (2) and (8). The one matter is that I think that the agreement between the shareholders of Heritage Hill (Mr Kerry Douran and Mr King) does fall within the terms of the notice to produce and the Rules of Court and should be produced. That there is such an agreement is established by the evidence of Ms Boler to which I think I may properly have regard.
I would vary the notice to produce directed to Heritage Hill by deleting paragraphs (2) and (8) of the categories of documents sought and amending paragraph (7) to read as follows:
All written shareholders agreements between Mr Kerry Douran and Mr King concerning the ownership of shares in Heritage Hill.
In the case of the notice to produce directed to Mr King, I would allow categories (3) and (5) and I would amend category (8) in the same way in which I would amend category (7) in the case of the notice to produce directed to Heritage Hill. In the case of the other categories, I am not satisfied with any degree of confidence that there are specific documents or classes of documents, or if there are, they are probably in the possession of Mr King. In any event, the categories have all the hallmarks of an order for general discovery against a non-party.
The orders of the Court will be as follows:
1.The Notice of Non-Party Production addressed to Heritage Hill Investments Pty Ltd filed on 16 August 2016 be amended as follows:
(a)paragraphs 2 and 8 of the Schedule be deleted; and
(b)paragraph 7 of the Schedule be deleted and replaced with the following words:
“All written shareholders agreements between Mr Kerry Douran and Mr King concerning the ownership of shares in Heritage Hill”.
2.The Notice of Non-Party Production addressed to Michael William King filed on 16 August 2016 be amended as follows:
(c)paragraphs 1, 2, 4, 6, 7 and 9 of the Schedule be deleted; and
(d)paragraph 8 of the Schedule be deleted and replaced with the following words:
“All written shareholders agreements between Mr Kerry Douran and Mr King concerning the ownership of shares in Heritage Hill”.
3.The parties be heard as to the costs of the defendant’s application.
I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Besanko. Associate:
Dated: 19 January 2017
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