Smith v Young

[2017] FCCA 1085

FEDERAL CIRCUIT COURT OF AUSTRALIA

SMITH v YOUNG [2017] FCCA 1085

Catchwords:
BANKRUPTCY – Application to set aside bankruptcy notice.

PRACTICE & PROCEDURE – Application in a Case to adduce expert evidence of pocket books and diaries – whether the expert evidence would have any probative value – application allowed.

Legislation:

Federal Circuit Court Rules 2001 (Cth), r.13.01

Cases cited:

Ebert v The Union Trustee Co of Australia [1961] HCA 29; (1961) 105 CLR 327
Vogwell v Vogwell (1939) 11 ABC 83
Guss v Johnstone [2000] HCA 26; (2000) 171 ALR 598
Scanhill Pty Ltd v Century 21 Australasia Pty Ltd [1993] FCA 618; (1993) 12 ASCR 341

Applicant: JOSEPHINE AAPA SMITH

Respondent: JOANNE ELIZABETH YOUNG

File Number: SYG 244 of 2016

Judgment of: Judge Nicholls

Hearing date: Decided on the papers

Date of Last Submission: 13 May 2016

Delivered at: Sydney

Delivered on: 29 May 2017

REPRESENTATION

Counsel for the Applicant: Mr E Walker

Solicitors for the Applicant: Greg Walsh & Co Solicitors

Counsel for the Respondent: Mr J Sheller

Solicitors for the Respondent: Levitt Robinson Solicitors

ORDERS

1. Leave is granted to the respondent to adduce at the final hearing expert evidence on the following question: “For each of the entries appearing in the “little red book” and in the 2000, 2002 and 2003 pocket diaries that relates to an alleged advance made by the applicant to the respondent, was it made contemporaneously with the alleged advance or at some other time?”.

2. The respondent may uplift the contents of Packets S1 and S2 produced by the applicant to the Court under a Notice to Produce and provide them to Forensic Document Services Pty Limited for the purposes of forensic examination and the preparation of an expert report.

3. The respondent to file and serve any expert evidence by way of affidavit on or before 13 June 2017.

4. The applicant to file serve any expert evidence in reply by way of affidavit on or before 27 June 2017.

5. The applicant to file and serve any evidence by way of affidavit on or before 13 June 2017.

6. The respondent to file and serve any evidence by way of affidavit on or before 27 June 2017.

7. The matter is set down for further directions on 12 July 2017 at 9:30am before Judge Nicholls at Court 8.2, 80 William Street Sydney.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 244 of 2016

JOSEPHINE AAPA SMITH

Applicant

And

JOANNE ELIZABETH YOUNG

Respondent

REASONS FOR JUDGMENT

1. This is an Application in a Case (“AIC”) formally filed by Ms Young in these proceedings on 10 May 2016, seeking that she be permitted to adduce, at the final hearing, expert evidence from a forensic document examiner regarding certain entries said to be made in a notebook (“little red book”) and various “pocket diaries” by Ms Smith. It is submitted that the expert evidence is needed to be adduced for the purpose of determining whether the entries were made contemporaneously with alleged advances, said to have been made by Ms Smith to Ms Young under an alleged loan agreement, or at some other time.

Evidence Before the Court

1. For the purposes of the AIC, the following affidavit evidence is before the Court:

   a)The affidavit of Joanne Elizabeth Young, Solicitor, sworn 21 March 2016.

   b)The affidavit of Gregory Alexander Walsh, Solicitor, made on 21 March 2016.

   c)The affidavit of Gregory Alexander Walsh, Solicitor, sworn 6 April 2016.

   d)The affidavit of Josephine Aapa Smith, Director, sworn 5 February 2016.

   e)The affidavit of Josephine Aapa Smith, Director, sworn 18 March 2016.

   f)Documents contained in packets “S1” and “S2” produced by Ms Smith pursuant to a Notice to Produce dated 21 March 2016.

   g)Correspondence marked “annexure A” and “annexure B” attached to Ms Young’s written submissions, formally filed on 10 May 2016 and tendered by Ms Young for the purposes of the AIC.

2. The parties have each filed written submissions in relation to the AIC.

Background

1. On 14 January 2016, Ms Young issued a bankruptcy notice in relation to Ms Smith. Ms Smith made her application to set aside the bankruptcy notice on 5 February 2016. The debt, the subject of the bankruptcy notice, arose from a judgment of the Supreme Court of New South Wales in the amount of $326,680.59.

2. The application was supported by Ms Smith’s affidavit of 5 February 2016, in which she stated that she had a “set-off claim” against Ms Young, which was the subject of a Statement of Claim filed in the District Court of New South Wales on 4 February 2016. Ms Smith submitted that the amount claimed in the Statement of Claim was “greater than the amount claimed” by Ms Young, and was said to arise from certain cash advances under an alleged loan agreement entered into by Ms Smith and Ms Young. Ms Young denies the receipt of any cash advances, or entering into any loan agreement with Ms Smith.

3. The matter was listed before Registrars of this Court on three separate occasions. It was referred to my docket by a Registrar of the Court by orders made on 22 March 2016, following a dispute about access to an exhibit sought by Ms Young. Ms Young sought access to an exhibit by an expert witness for examination of the exhibit, which she claimed was “central” to the Statement of Claim before the District Court. Ms Smith refused access.

4. The parties first appeared before me on 13 April 2016 and orders were made, by consent, providing for the filing of the relevant AIC by the respondent, and any evidence in support by way of affidavit and written submissions by both parties. The Court also noted, by consent, that a decision on the AIC would be made “on the papers”, with the intention that a decision will be delivered in May 2016.

5. Subsequent developments in the proceedings meant that a decision on the AIC was not required in May 2016. Ms Young sought directions from this Court as Ms Smith’s Statement of Claim filed in the District Court on 4 February 2016, had been summarily dismissed by Judge Olsson of the New South Wales District Court  on 3 June 2016. The matter was listed for directions before this Court on 29 June 2016.

6. However, on 28 June 2016, Ms Young filed another AIC with the Court seeking that Ms Smith’s application filed on 5 February 2016 be dismissed pursuant to r.13.10 of the Federal Circuit Court Rules 2001 (Cth) (“the FCC Rules”). At directions on 29 June 2016, and in circumstances where it was submitted that a Notice of Intention to Appeal had been filed with the New South Wales Court of Appeal from the decision of Olsson DCJ, it was decided that Ms Young’s AIC filed on 28 June 2016 should be heard first, and was listed for hearing on 22 July 2016 and further orders were made for the filing of evidence and submissions.

7. Judgment on Ms Young’s AIC for summary dismissal was reserved following the hearing on 22 July 2016, and the time for compliance with the bankruptcy notice was extended until further order of the Court.

8. While the judgment on the AIC was reserved, the Court was notified that the New South Wales Court of Appeal had heard argument on Ms Smith’s appeal, and in the result, set aside the orders of Olsson DCJ made on 3 June 2016. Accordingly, Ms Smith’s application is still live before the District Court.

9. The matter was subsequently listed for directions at Ms Smith’s request on 22 November 2016. On that date, Ms Young did not appear and the directions were adjourned to 8 February 2017. On that date, Ms Young also did not appear. The directions were adjourned again until 22 February 2017.

10. On 21 February 2017 orders were made, by consent, which included that Ms Young’s AIC for summary dismissal, made on 28 June 2016, be dismissed, as well as providing for the filing of written submissions in relation to the costs of that AIC. The relevant decision of which was to be made “on the papers”.    The matter was also listed for further directions on 29 March 2017.

11. On 29 March 2017, Ms Young conceded and was ordered to pay Ms Smith’s costs of the AIC for summary dismissal. What is left for determination now is Ms Young’s first AIC filed on 10 May 2016, in relation to her ability to adduce expert evidence regarding the entries in the “little red book” and various other “pocket diaries”.

Ms Young’s Submissions in support of the AIC

1. In order for the bankruptcy notice, the subject of these proceedings, to be set aside on the basis of Ms Smith having a “counter-claim, set-off or cross demand”, Ms Young contends that Ms Smith must first satisfy the Court “that she has a bona fide claim”, and second, that she has a “prima facie case” citing Ebert v The Union Trustee Co of Australia [1961] HCA 29; (1961) 105 CLR 327 (“Ebert”) at [350], Vogwell v Vogwell (1939) 11 ABC 83 at [85] and Guss v Johnstone [2000] HCA 26; (2000) 171 ALR 598 at [38] – [40] ([5] of Ms Young’s written submissions filed on 10 May 2016). There does not appear to be a dispute between the parties on this particular point.

2. Ms Young contends that the Court must approach the “factual merit” of Ms Smith’s case based on the “cogency of evidence of the facts” giving rise to the alleged loan and advances made thereunder, said to be the basis of the claimed “counter-claim, set-off or cross demand”. Ms Young submits that the Court “must take into account the plausibility or implausibility of the [a]pplicant’s story” ([6] of Ms Young’s written submissions).

3. Ms Young characterises Ms Smith’s evidence regarding the alleged loan agreement as “say so”, and that Ms Smith is attempting to “bolster deficiencies in her own ‘say so’” evidence by relying on the “little red book” and “the pocket diaries”. In this light, Ms Young submits that in order for her to support her submissions at the final hearing on the cogency of the “little red book” and the “pocket diaries”, she should be able to rely on expert evidence in this regard, on a number of bases (see [11] of Ms Young’s written submissions).

4. First, Ms Young contends that “lay examination” of the “little red book” and the “pocket diaries” of itself reveals a number of issues with the cogency of the evidence contained therein (see [12](a) – (i) and [13](a) – (d) of Ms Young’s written submissions), and raises “serious concern” that the entries were not contemporaneous with the alleged cash advances made under the alleged loan agreement. Ms Young contends that “expert evidence is the best evidence on this issue and [Ms Young] therefore ought to be allowed to adduce it at the final hearing” ([14] of Ms Young’s written submissions).

5. Second, Ms Young points to a number of contextual issues that she says also support her concerns about the “bona fides” of the entries in the “little red book” and the “pocket diaries” (see [15] of Ms Young’s written submissions).

6. Third, Ms Young submits that there has been a “long and bitter history between these parties”, and that Ms Smith has never previously raised the issue of the alleged loan or cash advances in that time. Further, there have been previous “judicial findings” relating to Ms Smith’s credibility in that she had been found not to be “truthful or reliable”, and that she has engaged in a “subterfuge” where she tried to purchase the debt the subject of the bankruptcy notice ([16] of Ms Young’s written submissions, and see the “correspondence” attached to those submissions).

Ms Smith’s submissions against the AIC

1. Ms Smith contends that in these proceedings, she must satisfy the Court that she has a prima facie case, and also relies on the decision of Ebert at [350].

2. First, Ms Smith highlights the issue that the fact that Ms Young ([6] of the applicant’s written submissions filed on 13 May 2016):

   “…wishes to challenge the applicant’s claim at a level of detail that requires expert evidence of the kind proposed itself suggests that the evidence put forward by the applicant makes out a prima facie case…”

3. Second, Ms Smith also highlights the lower threshold required in this Court to establish a prima facie case, as opposed to the balance of probabilities threshold required in the District Court for Ms Young to establish her “claim”. The purpose of which is said to avoid a Court of Bankruptcy becoming the forum in which the “claim” itself is determined. In this light, Ms Smith submits that adducing expert evidence would turn the current proceedings into such a determination, which is not the task of this Court ([8] – [9] of Ms Smith’s written submissions).

4. Third, Ms Smith seeks to draw an analogy between the current circumstances and “statutory demand” cases which operate in the corporate insolvency context, with reference to Scanhill Pty Ltd v Century 21 Australasia Pty Ltd [1993] FCA 618; (1993) 12 ASCR 341 (“Scanhill”) at page 354, where the Federal Court considered it “inconceivable” that expert evidence would be required to consider whether there was a “serious question to be tried”. Ms Smith distinguishes the relevant tests as they not identical, but submits that they are both “summary in nature and not exhaustive”. Therefore, Ms Smith submits that the reasoning in Scanhill is equally applicable to the current issue before the Court ([10] of Ms Smith’s written submissions).

5. Ms Smith further submits that Ms Young has not established why the expert evidence is necessary for the determination of the issue of whether Ms Smith has a prima facie case. Ms Smith points to the “lay examination” of the “little red book” and the “pocket diaries” in Ms Young’s submissions (see above at [18]), to say that Ms Young is already of the belief that the evidence, in its current form, supports a finding that the applicant does not have a prima facie case. In this light, Ms Smith contends that Ms Young is attempting to “bolster” her case with expert evidence ([12] of Ms Smith’s written submissions).

6. Ms Smith further submits that permitting Ms Young to adduce expert evidence would unduly add to the cost, and “technicality” of the proceedings, which is unnecessary in the circumstances of considering the threshold issue of whether the applicant has a prima facie case ([13] of Ms Smith’s written submissions).

Consideration

1. It is important to keep in mind the question that is currently before the Court. Ms Smith asserts she has a “counter-claim, set-off or cross demand” relevant to her application to have the bankruptcy notice set aside. In that context, Ms Smith needs to show she has such a prima facie case for the setting aside of the bankruptcy notice. At this time however, the Court is not being asked to consider whether Ms Smith has a prima facie case, that issue is to be considered, and submissions made by the parties, at the final hearing of Ms Smith’s application for an order setting aside the bankruptcy notice.

2. The current consideration is whether Ms Young should be able to adduce expert evidence at that hearing regarding Ms Smith’s “little red book” and various other “pocket diaries”, going to the contemporaneity of certain entries in the documents which are said to be evidence of certain cash advances made under an alleged loan agreement between the parties.

3. It appears from written submissions that Ms Smith has conflated both the issue of whether or not she has a prima facie case for the setting aside of the bankruptcy notice, the nature of her case, and the consideration of whether Ms Young should be able to adduce expert evidence at the final hearing in relation to that case.

4. Simply because the relevant test at the hearing of Ms Smith’s application to set aside the bankruptcy notice is one of a prima facie case, does not mean that that hearing will not finally determine that issue between the parties.

5. That hearing, in that sense, is not an interlocutory hearing. The final determination of the issue between the parties cannot, in my view, fairly arise from an assertion made by Ms Smith that a loan agreement existed between the parties. Such an assertion, on its own, without more, could not be sufficient to rise to a prima facie case.

6. Ms Smith appears to recognise this and has put forward what she says are “contemporaneous” records (the “little red book” and the other “pocket diaries”), that support her assertion.

7. Importantly, the “little red book” and the various other “pocket diaries” are the only documentary evidence corroborative of the alleged loan agreement. Aside from this documentary evidence, the parties’ positions are as follows. Ms Smith claims that there is a loan agreement between the parties. Ms Young claims that there is no such loan agreement between the parties. Therefore, as it stands, the “little red book” and the various other “pocket diaries” are the only corroborative evidence supporting Ms Smith’s contention that a loan agreement was made between the parties.

8. In this light, the cogency of the evidence contained in the “little red book” and the various other “pocket diaries” becomes a central issue for Ms Smith, in supporting her claim that she has a prima facie case for setting aside the bankruptcy notice. Ms Young should be able to test the only piece of corroborative evidence that is said to support Ms Smith’s claim that she has a prima facie case regarding her claimed “set-off, counter-claim or cross-demand”.

9. To deprive Ms Young of the opportunity to satisfy herself as to the “authenticity” of this material would, in my view, unfairly prejudice her capacity to argue against Ms Smith’s proposition that a prima facie case exists for the setting aside of the bankruptcy notice. I cannot see that Ms Smith would be unfairly prejudiced if Ms Young were permitted to test this material. It may well be that the result of any such testing may support her contention.

10. I will make the order sought by Ms Young.

I certify that the preceding thirty-six (36) paragraphs are a true copy of the reasons for judgment of Judge Nicholls

Date: 29 May 2017