The Oak Hotel Cessnock Pty Ltd (in liq) v Deputy Commissioner of Taxation (No 2)
[2021] NSWSC 261
•19 March 2021
Supreme Court
New South Wales
Medium Neutral Citation: The Oak Hotel Cessnock Pty Ltd (in liq) v Deputy Commissioner of Taxation (No 2) [2021] NSWSC 261 Hearing dates: 18 March 2021 Decision date: 19 March 2021 Jurisdiction: Common Law Before: Adamson J Decision: (1) Set aside the notice to produce issued by the plaintiffs dated 23 February 2021.
(2) Order the plaintiffs to pay the first defendant’s costs of the notice of motion filed on 10 March 2021 on an indemnity basis.
Catchwords: CIVIL PROCEDURE — Notices to produce — Application to set aside — Abuse of process
COSTS — Party/Party — Indemnity costs
Legislation Cited: Freedom of Information Act 1982 (Cth)
Taxation Administration Act 1953 (Cth), sch 1, s 260-5
Uniform Civil Procedure Rules 2005 (NSW), rr 21.9, 21.10
Category: Procedural rulings Parties: The Oak Hotel Cessnock Pty Ltd (in liq) (ACN 150 948 619) (First plaintiff)
Hunter Valley Dental Surgery Pty Ltd (ACN 089 023 696) (Second plaintiff)
Dr John Harvey (Third plaintiff)
Deputy Commissioner of Taxation (First defendant)
Commonwealth of Australia (Second defendant)Representation: Counsel:
Solicitors:
J Harvey, in person (First, second and third plaintiffs)
E Ball (First and second defendants)
Ashurst Australia (First and second defendants)
File Number(s): 2019/274489
Judgment
Introduction
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By notice of motion filed on 10 March 2021, the Deputy Commissioner of Taxation (the first defendant) sought an order to set aside the notice to produce issued by the plaintiffs dated 23 February 2021. The notice to produce sought production of the following documents:
“1 All documents referred to in the letter from Satomi Sword of the Australian Taxation Office to John Harvey dated 19 February 2021, in an unredacted form (attached);
2 All documents on First and/or the Second Plaintiff's file held by the Australian Taxation Office included in the FOI request made by John Harvey dated 22 January 2021 (attached).”
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In substance, the basis of the first defendant’s application is that the notice to produce ought be set aside as an abuse of process and also because it does not comply with the rules as to the form of such notices. In order to assess the first of these submissions, it is necessary to set out in summary form the nature of the plaintiffs’ claim and, where relevant, the procedural history.
The relevant facts
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The current pleading is the amended statement of claim filed on 20 November 2020. The first plaintiff is The Oak Hotel Cessnock Pty Limited (the Hotel). The second plaintiff is the Hunter Valley Dental Surgery Pty Ltd (the Dental Surgery). The third plaintiff, Dr Harvey is the controlling mind of the Hotel and the Dental Surgery and was the assignee of their causes of action.
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In substance, the statement of claim makes two allegations. First, the plaintiffs allege that on or about 25 June 2018, an employee of the Australian Taxation Office (ATO) misused confidential financial information about the Hotel to which he was privy by reason of his duties which, resulted in the financial demise of the Hotel. Secondly, the plaintiffs allege that the first defendant was guilty of public misfeasance in or around 2014 with respect to the consolidation of the tax positions of the Hotel and the Dental Surgery which led to the Hotel and Dental Surgery suffering loss.
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On 7 May 2019, the first defendant commenced proceedings against the Hotel in the Federal Court of Australia for an order to wind up the Hotel, based on failure to comply with a statutory demand. On 27 November 2019, the Federal Court ordered that the Hotel be wound up. On 22 July 2020, the liquidator of the Hotel caused the Hotel’s cause of action against the defendants to be assigned to Dr Harvey, the third plaintiff. The plaintiffs filed an amended statement of claim on 20 November 2020 to reflect the assignment and the addition of Dr Harvey as a party.
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On 11 December 2020, the first defendant issued a garnishee notice to Darren Gardner pursuant to s 260-5 of Schedule 1 to the Taxation Administration Act 1953 (Cth). Mr Gardner is the prospective purchaser of real property owned by the Dental Surgery. As such, it is anticipated that Mr Gardner will, in due course, be obliged to pay the Dental Surgery funds for the purchase of the property. Section 260-5 confers power on the first defendant to collect amounts payable from tax debtors (such as the Dental Surgery) by issuing a garnishee notice to the creditors of such debtors. The amounts which comprise the debt sought to be recovered by the garnishee notice relate principally to an unpaid Superannuation Guarantee Charge which the ATO collects for the benefit of the Dental Surgery’s employees.
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On 22 January 2021, Dr Harvey made a request of the ATO pursuant to the Freedom of Information Act 1982 (Cth) (FOI Act) seeking documents within the period from November 2019 to 22 January 2021, as follows:
“All correspondence, notes etc regarding the decision to send statutory demand to Hunter Valley Dental Surgery Ply Ltd and the decision made to have the statutory demand withdrawn and all correspondence, notes etc regarding the decision to send Darren Gardiner on 11 December 2020 pursuant to section 260-5 of schedule 1 of the Taxation Administration Act 1953 (TAA) (‘the notice’).”
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The ATO, by its officer, Satami Sword, responded by letter dated 19 February 2021, to which were attached 85 pages of documents, some of which were redacted. The ATO relied on various exemptions in the FOI Act to authorise the redactions. Dr Harvey relied on the bundle of documents produced in support of his submission that the balance of the documents sought and the redacted portions ought be produced in answer to the notice to produce. I confirm that I have reviewed those documents, which were tendered by Dr Harvey in opposition to the first defendant’s notice of motion.
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As referred to above, on 23 February 2021, Dr Harvey sought production by way of notice to produce of unredacted versions of documents produced in answer to the FOI request and any documents which had not been provided in answer to the request, but which fell within the description in the request.
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On 25 February 2021, the first defendant’s solicitors sent an email to Dr Harvey informing him that the notice was defective and did not comply with Uniform Civil Procedure Rules 2005 (NSW), r 21.10(1)(b) (set out below) and indicating that the first defendant would seek the costs of a notice of motion to have it set aside.
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On 5 March 2021, the first defendant’s solicitors again wrote to Dr Harvey, setting out the bases on which the notice to produce was defective and reminding him of the key allegations in the amended statement of claim which demonstrated that the documents sought by the notice to produce were not relevant to any issue in the proceedings.
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On 9 March 2021, Dr Harvey wrote to the first defendant’s solicitors, informing them that he did not propose to withdraw the notice to produce.
Consideration
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Dr Harvey contended, in substance, that the more documents he obtained from the ATO, the better his position to point out acts of public misfeasance of which it was guilty. He submitted that, whenever he had insisted on obtaining internal ATO documents, he had discovered that it had misrepresented the position. He contended that, although the documents sought by his FOI request did not fall within the relevant period covered by these proceedings, they would be apt to show a tendency for dissembling amongst ATO officials generally and one officer in particular. He referred to his lengthy experience in politics to explain his tenacity in seeking greater disclosure from the ATO than it had been prepared to give in response to the request under the FOI Act and contended that the plaintiffs’ whole case derived from documents which he had managed to obtain from the ATO.
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The purpose of a notice to produce is to obtain, from another party to proceedings, relevant documents to the proceedings, either for the purposes of tender or for another proper forensic purpose. For this reason, documents sought in a notice to produce must be described with relative precision and must be germane to the proceedings. These principles are reflected in the following rules.
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The UCPR relevantly provide:
“21.9 Definitions
(1) In this Division—
notice to produce means a notice to produce referred to in rule 21.10.
party A means a party to whom another party is producing, or being asked to produce, documents or things for inspection.
party B means a party who is producing, or being asked to produce, documents or things for inspection.
(2) For the purposes of this Division, a document or thing is to be taken to be relevant to a fact in issue if it could, or contains material that could, rationally affect the assessment of the probability of the existence of that fact (otherwise than by relating solely to the credibility of a witness), regardless of whether the document or thing would be admissible in evidence.
21.10 Notice to produce for inspection by parties
(1) Party A may, by notice served on party B, require party B to produce for inspection by party A—
(a) any document or thing that is referred to in any originating process, pleading, affidavit or witness statement filed or served by party B, and
(b) any other specific document or thing that is clearly identified in the notice and is relevant to a fact in issue.
(2) A notice to produce may specify a time for production of all or any of the documents or things required to be produced.”
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The notice to produce served by Dr Harvey on the first defendant fails to comply with UCPR, r 21.9(2) or r 21.10(1)(b). Dr Harvey was unable to identify any basis for supposing that the documents sought in the notice could “rationally affect the assessment of the probability of the existence of that fact (otherwise than by relating solely to the credibility of a witness)”. Further, the documents sought are not clearly identified in the notice.
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In substance, Dr Harvey is endeavouring to use the processes of this Court to obtain documents to which he is not entitled under the FOI Act and which do not bear on the issues in the proceedings. While documents which are not required to be produced under the FOI Act may be required to be produced in answer to a notice to produce, the touchstone of the latter obligation is relevance to the proceedings. The amended statement of claim is not concerned with the Dental Surgery at all, except in so far as its accounts were sought to be consolidated with those of the Hotel. There is nothing in the pleading at all about statutory demands served on the Dental Surgery. Nor is there any mention in the statement of claim of the garnishee notice for the debts due and owing under that garnishee notice. The possibility that documents might be unearthed which would cast a party to proceedings in a poor light is manifestly insufficient to found a notice to produce. This seems to be the only purpose of the notice in the present case.
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I am satisfied that the notice to produce ought be set aside on the grounds that it has been issued for an improper purpose, amounts to an abuse of process and does not comply with the UCPR.
Costs
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Dr Ball, who appeared on behalf of the first defendant, sought an order that the plaintiffs pay the first defendant’s costs of the notice of motion on an indemnity basis. He relied on the correspondence which had been sent to Dr Harvey explaining why the notice to produce ought be set aside. The reasons given in the letters from the first defendant’s solicitors to Dr Harvey correspond with the reasons I have given for setting aside the notice to produce.
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Dr Harvey’s conduct on behalf of the plaintiffs with respect to the issue and maintenance of the notice to produce has been wholly unreasonable. Notwithstanding the detailed letters sent on behalf of the first defendant which sought to explain why the notice to produce ought not be pressed, Dr Harvey continued to press it. Although Dr Harvey failed to identify any forensic significance of the documents he sought in the notice to produce, he refused to concede that it ought be withdrawn. Accordingly, I am satisfied that an order for indemnity costs is appropriate.
Orders
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For the reasons given above, I make the following orders:
Set aside the notice to produce issued by the plaintiffs dated 23 February 2021.
Order the plaintiffs to pay the first defendant’s costs of the notice of motion filed on 10 March 2021 on an indemnity basis.
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Decision last updated: 19 March 2021
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