Stancu v Barua (No 2)

[2022] VSC 739

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL COURT

S ECI 2021 03171

MIRCEA STANCU	Plaintiff
v
ATANU BARUA	1st defendant
AND
SYBILLA JANE MARGIT DE URAY	2nd defendant

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JUDGE:	Elliott J
WHERE HELD:	Melbourne
DATE OF HEARING:	25 November 2022
DATE OF JUDGMENT:	25 November 2022
CASE MAY BE CITED AS:	Stancu v Barua (No 2)
MEDIUM NEUTRAL CITATION:	[2022] VSC 739

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PRACTICE AND PROCEDURE – Claims of equitable fraud, deceit or negligence – Discovery of tax-related documents sought – Relevance – Intended use – Complexity of inquiry – Tax consequences not readily ascertainable and quantifiable – Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 29.08(2) – Civil Procedure Act 2010 (Vic), s 55 – Application dismissed.

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APPEARANCES:	Counsel	Solicitors
For the plaintiff	S Bunce	Karolidis & Co
For the 1st defendant	S Ahmed	Hanna Legal
For the 2nd defendant	Dr M Sharpe	McKean Park

HIS HONOUR:

IntroductionA.        

1. By a summons filed 15 November 2022, the second defendant, Sybilla Jane Margit de Uray (“de Uray”), seeks further discovery from the plaintiff, Mircea Stancu (“Stancu”), of “[a]ny taxation returns of [Stancu] and [n]otices of [a]ssessment from the Australian Taxation Office for the financial years ended 30 June 2017 and 30 June 2022” (“the Tax Documents”).[1]  The details of this proceeding have been set out in broad terms in a judgment already delivered in relation to interlocutory relief sought by Stancu.[2]  It is unnecessary to repeat those facts today.

Background B.         

[1]Although not explicitly referred to in the application, de Uray in effect sought an order pursuant to r 29.08(2) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic).

[2]Stancu v Barua [2022] VSC 481, [4]-[14], [44], [49]-[63].

1. In broad terms, Stancu claims that he was the subject of a scam pursuant to which he handed over some $133,000.00 in the belief that he was investing in certain shares, including shares in the Tesla Corporation (“Tesla”).  It was alleged that those moneys, or some of them, were misappropriated by the first defendant, Atanua Barua, or de Uray, or both.  Stancu seeks not only the return of those moneys but the profits that he alleges he would have made; or more specifically, the value he alleges the Tesla shares would have had if the shares had been purchased as ordered.

2. By this application, de Uray effectively seeks to obtain the Tax Documents to make some form of assessment in relation to Stancu’s taxation position in the event that he is successful at trial in proving any loss. 

Legal principles C.        

1. The legal principles applicable to an order for particular discovery may be succinctly stated.

2. Rule 29.08(2) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) provides:

   Where, at any stage of a proceeding, it appears to the Court from evidence or from the nature or circumstances of the case or from any document filed in the proceeding that there are grounds for a belief that some document or class of document relating to any question in the proceeding may be or may have been in the possession of a party, the Court may order that party to make and serve on any other party an affidavit stating—

   (a)whether that document or any, and if so what, document or documents of that class is or has been in that party’s possession; and

   (b)if it has been but is no longer in that party’s possession, when the party parted with it and that party’s belief as to what has become of it.

   (Emphasis added.)

3. Section 55(1) of the Civil Procedure Act 2010 (Vic) provides that a court may make any order or give any directions in relation to discovery that it considers necessary or appropriate.

4. In considering the application of the Civil Procedure Act, J Forrest J observed in Volunteer Fire Brigades Victoria Inc v Country Fire Authority:[3]

   The overriding consideration of the [Civil Procedure Act] is to ensure that the parties receive a fair trial i.e. “a just resolution” to use the words of the [Civil Procedure Act]. However, a fair trial is not a perfect trial.  It is, rather, the best trial that a court can provide to the parties within reason and in proportion to the issues in dispute and the court’s resources. Accordingly, demands for discovery of documents which are peripheral to the central issues cannot be entertained.  The Court is obliged to focus on the central issues as best it can be determined at this point in the litigation.

   (Emphasis added.)

Consideration D.        

[3][2016] VSC 573, [34].

1. In my view, the application ought to be dismissed for a number of reasons.

2. Primarily, the documents are simply not relevant to the real issues in dispute between the parties.  The court was not taken (despite invitation) to any authority which has suggested, for a claim of equitable fraud, deceit or negligence, that on an application such as this, documents relevant to the individual tax position or circumstances of a plaintiff are relevant to the determination of the real issues in dispute, including loss.  Indeed, authority would suggest that such documents ought to be treated as irrelevant.[4]

   [4]See, for example, Archer Capital 4A Pty Ltd v Sage Group Plc (No 1) (2013) 96 ATR 819, 827 [27], 828 [31]-[32] (Wigney J); Daniels v Anderson (1995) 37 NSWLR 438, 585G-586B (Clarke and Sheller JJA, with whom Powell JA relevantly agreed), citing Williamson v Commissioner for Railways (1960) SR (NSW) 252.

3. Even if I am wrong about the relevance of the Tax Documents, on the facts of this case it would not be appropriate for an order for particular discovery to be made.  Stancu’s solicitor has put on evidence to demonstrate that for the financial year ending 30 June 2017, a capital loss would have been suffered.  Stancu’s solicitor also put on evidence that Stancu’s case is that for the financial year ending 30 June 2022, he would have retained his Tesla shares and, therefore, there would have been no capital gains tax event.  (As an aside, the primary submission put by counsel for Stancu was that the requested documents were not relevant to the issues in dispute.  I have accepted that submission.  Accordingly, contrary to counsel for de Uray’s submissions, I do not consider reliance upon this affidavit in response to be a concession that the documents may be relevant.)

4. The evidence put before the court on the basis that the Tax Documents might be relevant is such that, between Stancu’s requested purchase of Tesla shares in 2015 and 2016, and 30 June 2017, Stancu would have suffered a capital loss in any event.  Thus, it would seem on the facts of this case, that the tax returns and notices of assessment for the 2017 financial year would not be relevant to determining what loss might have been suffered.  Further, there was no evidence before the court that Stancu would have sold his Tesla shares in the 2022 financial year, giving rise to a capital gains tax event. In short, this aspect of the application is entirely speculative.

5. Furthermore, and in any event, in my view, it is misconceived for de Uray to contend that the Tax Documents alone would put the court in a position to make “an assessment of what the loss would be after tax” in relation to Stancu’s situation.  In short, what loss would be suffered after tax in relation to a plaintiff would need to be determined by the facts surrounding the taxation position of that particular plaintiff.

6. Producing the documents sought would not put the court in the position to make any proper assessment of the tax position of Stancu.  For that to occur there would need to be discovery of further, perhaps a large number of other, documents so that the full tax position of the plaintiff could be known.  In addition to this being problematic, it is not the role of the court in a proceeding such as this to be making some finding of the overall assessment of Stancu’s taxable income for a particular year and the amount of tax that would be payable if a judgment amount was received.

7. This leads to the next point, the application proceeded on the stated assumption that any judgment sum received by Stancu would not be taxable.  When counsel for de Uray was asked about the premise for that assumption, it was justified on the basis that she did not believe the amount would be taxable.  Again, such a position is problematic as the court is not in any position to properly assess this and it is unlikely that such a matter would be justiciable (and certainly would not be binding on the Australian Taxation Office).[5]  

   [5]See also the comments made in relation to problems with assessment in Daniels v Anderson (1995) 37 NSWLR 438, 586A (Clarke and Sheller JJA, with whom Powell JA relevantly agreed).

8. Finally, the fact that the accounting expert engaged by de Uray has stated that the Tax Documents are necessary to prepare a report responsive to his brief is not determinative of the application.  For the reasons stated, I have a contrary view.

ConclusionE.         

1. The application will be dismissed.

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