Verde Terra Pty Ltd v Central Coast Council (No 4)

[2020] NSWLEC 45

Land and Environment Court

New South Wales

Medium Neutral Citation:

Verde Terra Pty Ltd v Central Coast Council (No 4) [2020] NSWLEC 45

Hearing dates:

24 April 2020 and 30 April 2020

Date of orders:

01 May 2020

Decision date:

01 May 2020

Jurisdiction:

Class 4

Before:

Pepper J

Decision:

See orders at [72].

Catchwords:

PROCEDURE: application to set aside three subpoenas issued by a council on the grounds of oppression and a lack of forensic purpose – parties resolved issues in dispute concerning two of the three subpoenas prior to the hearing – application at the hearing by the council to amend the schedule of the subpoena – application allowed – whether amended subpoena lacked forensic purpose - whether amended subpoena oppressive – application dismissed – whether inspection should be subject to a confidentiality order – no exceptional circumstances or particular reasons warranting the making of such an order.

 

COSTS: application to set aside subpoena – subpoena amended at hearing to narrow its scope – amendment foreshadowed earlier prior to hearing – dispute concerning confidentiality of documents to be produced necessitated extra day of hearing – costs are costs in the cause.

 COSTS: application to set aside notice to produce settled prior to hearing – claim for legal professional privilege made in respect of documents produced – redacted documents provided to settle dispute – costs are costs in the cause.

Legislation Cited:

Uniform Civil Procedure Rules 2005, rr 31.19, 33.4

Cases Cited:

A v Z [2007] NSWSC 899; (2007) 212 FLR 255
Azar Building and Construction Services Pty Ltd v Transport Infrastructure Development Corporation [2010] NSWLEC 110
Black Hill Residents Group Incorporated v Marist Youth Care Limited [2019] NSWLEC 112
Elanor Investors Limited v Sydney Zoo Pty Limited (No 2) [2019] NSWLEC 121
Elanor Investors Limited v Sydney Zoo Pty Limited (No 4) [2019] NSWLEC 191
Hearn v Street [2008] HCA 36; (2008) 235 CLR 125
Lane v Registrar, Supreme Court of New South Wales [1981] HCA 35; (1981) 148 CLR 245
Liristis v Gadelrabb [2009] NSWSC 441
Patonga Beach Holdings Pty Ltd v Lyons [2009] NSWSC 869
Rinehart v Rinehart [2018] NSWSC 1102
Santos Limited v Pipelines Authority of South Australia (1996) 66 SASR 38
Verde Terra Pty Ltd v Central Coast Council [2019] NSWLEC 166
Verde Terra Pty Ltd v Central Coast Council; Central Coast Council v Verde Terra Pty Ltd (No 2) [2020] NSWLEC 10
Verde Terra Pty Ltd v Central Coast Council; Central Coast Council v Verde Terra Pty Ltd (No 3) [2020] NSWLEC 40

Category:

Procedural and other rulings

Parties:

Verde Terra Pty Ltd (Applicant/First Cross Respondent)
Central Coast Council (Respondent/Cross Claimant)
Environment Protection Authority (Second Respondent)
Mangrove Mountain Landfill Pty Ltd (Second Cross Respondent)
Mangrove Properties (NSW) Pty Ltd (Third Cross Respondent)

Representation:

Counsel:

 

P Larkin SC with G Tsang and J Stuckey-Clarke (Applicant)
T Howard SC with M Astill (Respondent/Cross Applicant)
P Larkin SC with G Tsang and J Stuckey-Clarke (First, Second and Third Cross Respondents)
N/A (Second Respondent)

 

Solicitors:

  Ashurst (Applicant/First, Second and Third Cross Respondents)
MBM Legal (Respondent/Cross Applicant)
N/A (Second Respondent)

File Number(s):

2019/101279

Judgment

Yet More Subpoenas and Notices to Produced Are Issued by the Parties

1. The background to this long running and complex set of proceedings is set out in Verde Terra Pty Ltd v Central Coast Council; Central Coast Council v Verde Terra Pty Ltd (No 2) [2020] NSWLEC 10 (at [1]-[54]) and Verde Terra Pty Ltd v Central Coast Council; Central Coast Council v Verde Terra Pty Ltd (No 3) [2020] NSWLEC 40 (at [1]-[7]). They are relied upon without repetition. To the extent that it is convenient to do so, the same abbreviations are used in this judgment as are used in Verde Terra (No 2).

2. The substantive proceedings are part-heard, having been adjourned on 6 December 2019 after 15 days of hearing. On that day, by consent, the matter was listed to resume on 14 April 2020 for a further 11 days.

3. Due, however, to the Court’s inability to conduct a hearing other than by telephone, the April 2020 dates were vacated on 6 April 2020. On 16 April 2020 the matter was relisted to resume on 12 October 2020.

4. Orders 4 and 5 of the timetabling orders made on 6 December 2019 provided as follows (“the December 2019 orders”):

4. Pursuant to UCPR r 31.19, the Verde Terra Parties are granted leave to file and serve on or before 3 February 2020, evidence of the financial expenditure incurred, and likely to be incurred, in relation to the subject site since the making of the Court’s orders on 29 August 2014 in proceedings 40900 of 2012 (forensic accounting evidence).

5.   The Verde Terra Parties are granted leave to file and serve lay evidence on or before 29 January 2020, of:

(a)   the facts, matters and circumstances relied upon by the third cross-respondent in deciding to purchase, and deciding to proceed with the purchase of, the subject site by Mangrove Properties (NSW) Pty Ltd; and

(b)   the financial expenditure incurred in relation to the subject site since the making of the Court’s orders on 29 August 2014 in proceedings 40900 of 2012.

5. When the matter came before the Court on 16 April 2020, the Court was informed by the Verde Terra parties that pursuant to order 5 of the December 2019 orders, it would be seeking to rely upon three additional lay witnesses and that no expert forensic accounting evidence was sought to be relied upon pursuant to order 4.

6. The lay evidence served by the Verde Terra parties directly in response to order 5 of the December 2019 orders may be summarised as follows:

1. an affidavit of Mr Damian Ryan, affirmed 6 February 2020 (he was sole director and secretary of some of the Verde Terra parties from about March 2014 to October 2017) (“the February Ryan affidavit”). Mr Ryan deposed to the decision-making surrounding the purchase of the site the subject of the proceedings and the expenses related to the implementation of the 2014 consent orders and the operation of the landfill on the site;

2. an affidavit of Mr Tony Tartak, sworn 7 February 2020 (an owner in the Verde Terra parties at the relevant time) (“the February Tartak affidavit”). Mr Tartak deposed to the purchase of Verde Terra Pty Ltd (“Verde Terra”), the risks associated with the 2012 proceedings and the agreement to the making of the 2014 consent orders, the decision to purchase the subject site, and the expenses associated with complying with the 2014 consent orders and landfill operations, including loans from various family members and discretionary trust distributions that were advanced for that purpose. Exhibited to his affidavit were various financial documents that presumably (the exhibits were not tendered: TARTAK-01, TARTAK-02 and TARTAK-03) evidenced the expenses, loans and trust distributions that were advanced; and

3. an affidavit of Mrs Mary Tartak, sworn 7 February 2020 (Mr Tartak’s wife and an investor in the Verde Terra parties at the relevant time). Mrs Tartak also deposed to the various loans and advances made to the Verde Terra parties.

7. From the affidavits of Mr and Mrs Tartak referred to above, it appears that Mangrove Mountain Landfill Pty Ltd (“MML”) is the company that operates the landfill on the subject site under the direction of Verde Terra. TPT (NSW) Investments Pty Ltd as the trustee for TPT Investment Trust (“TPT”) is a company wholly owned and controlled by Mrs Tarktak. TPT loaned money to MML during the relevant period. AUG Investments Pty Ltd as trustee for AUG Investment Trust (“AUG”) is a company that is also wholly owned and controlled by Mrs Tartak, and also loaned money to MML during the relevant period. Spreadsheets detailing the loans and advances to MML from TPT and AUG were exhibited to the February Tartak affidavit.

8. Notwithstanding that the Verde Terra parties did not intend to rely upon any expert forensic accounting evidence, the Council filed and served an affidavit of Mr Nicholas Gaudion, purportedly in response to the lay evidence served by the Verde Terra parties. No direction was sought by the Council to rely upon this evidence as required by r 31.19 of the Uniform Civil Procedure Rules 2005 (“UCPR”).

9. The dispute concerning the Council’s reliance on the expert evidence of Mr Gaudion has since been resolved by, upon the Court determining that this course was appropriate pursuant to r 31.19 of the UCPR, leave being granted to the filing of Mr Gaudion’s report provided that cognate leave was given to the Verde Terra parties to rely upon a reply expert forensic accounting report from Dr Rodney Ferrier. Joint conferencing between the expert forensic accountants will occur upon the controversy the subject-matter of these applications being dealt with.

Subpoenas are Issued to MML, TPT and AUG by the Council

10. On 8 April 2020 the Council issued subpoenas to MML, TPT and AUG seeking the production of various financial documents for the financial years ending 2015 to 2019.

11. Somewhat inevitably given the robust conduct of this litigation by the parties to date, an application to set aside the subpoenas was filed by the Verde Terra parties soon thereafter, namely, on 16 April 2020.

12. Settlement has been achieved in respect of two of the three subpoenas, namely, to TPT and AUG, in the following terms (as set out in a letter dated 28 April 2020 from the solicitors for the Verde Terra parties to the solicitors for the Council (“28 April Ashurst letter”)):

All TPT and AUG bank statements showing the payment of loan amounts described in paragraph 60 of the Affidavit of Tony Tartak dated 7 February 2020, and any repayment are redacted.

13. Only the dispute in respect of the subpoena to MML remains.

14. Originally the terms of the subpoena to MML were as follows:

1.   The accounting data files of the company for the years ended 30 June 2015, 2016, 2017, 2018 and 2019.

2.   The name and version of the accounting software.

3.   Log in and passwords for each file.

15. The Verde Terra parties submitted that in this form the subpoena was tantamount to discovery insofar as the term “the accounting data files of the company” was so broad that it lacked forensic purpose and was oppressive.

16. Having regard to the legal principles to be applied to the setting aside of the subpoenas (see below) and the breadth of material that the subpoena would have captured and would have required MML to produce, not all of it relevant to the issues in dispute, there was some force in this assertion. This was not, however, the end of the matter.

A Notice to Produce is Issued to the Council

17. Meanwhile, the Council was served by the Verde Terra parties with a notice to produce in respect of email communications dated 1 and 3 April 2020 passing between Mr Martin Ball, the solicitor acting for the Council, and Mr Gaudion.

18. A claim for legal professional privilege was made by the Council in an attempt to resist production. This later transmogrified into an application to set aside the notice to produce.

19. The dispute concerning the notice to produce was resolved prior to the hearing of the motion by the provision of a redacted version of the emails by the Council to the Verde Terra parties (the Council complied with the notice to produce by producing the unredacted emails to the Court in a sealed envelope. The Court was not invited to examine these emails). The Verde Terra parties nevertheless seek an order for costs notwithstanding the dismissal by consent of the Council’s notice of motion.

20. In support of their application for costs the Verde Terra parties relied upon an affidavit of Ms Rachel Daniel affirmed 21 April 2020. Ms Daniel is a solicitor employed by Ashurst, the legal firm representing the Verde Terra parties. Relevantly for present purposes, the affidavit merely set out correspondence passing between the parties in which a copy of the email exchange is requested. It did not, for example, grapple with the issue of the legal professional privilege claimed by the Council in respect of the communications.

21. Although not expressly relied upon for the purpose of the costs application, the affidavit of Ms Daniel affirmed 23 April 2020 (see below) also referred to the emails the subject of the notice to produce. It rejected the Council’s claim of legal professional privilege but nevertheless accepted the provision of the redacted documents.

22. The Verde Terra parties submit that they ought to be awarded their costs of the dismissed notice of motion because but for the notice to produce they would not have been provided with the communications.

23. There is insufficient evidence before the Court to make good this assertion. From the outset, the Council maintained its claim for legal professional privilege, a claim that was not relinquished but was reinforced by the provision of the redacted emails, the latter of which achieved a practical resolution of the controversy. In my opinion, therefore, the appropriate costs order in respect of the application to set aside the notice to produce is that the costs be costs in the cause.

Legal Principles to be Applied in Setting Aside the MML Subpoena

24. A subpoena may be set aside pursuant to r 33.4(1) of the UCPR which states that:

33.4     Setting aside or other relief

(1)    The court may, on the application of a party or any person having a sufficient interest, set aside a subpoena in whole or in part, or grant other relief in respect of it.

25. In Verde Terra Pty Ltd v Central Coast Council [2019] NSWLEC 166 the Court summarised the applicable legal principles that it must consider in determining whether or not to set aside a compulsory production process such as a subpoena (at [63]-[73]). These are relied on for the purpose of this application and are alluded to briefly below.

The Documents Must be Specifically Identified

26. The requirement under r 33.3(4) of the UCPR that the subpoena “identify” the documents to be produced exists to “cut the document out from the universe of documents by some description or specification” (Patonga Beach Holdings Pty Ltd v Lyons [2009] NSWSC 869 at [13] per Barrett J).

27. A subpoena to produce is not a substitute for discovery and must identify with reasonable particularity the documents the production of which is required (Lane v Registrar, Supreme Court of New South Wales [1981] HCA 35; (1981) 148 CLR 245 at 259 and Patonga at [14]-[15] per Barrett J).

There Must be a Forensic Purpose

28. The documents sought must be of forensic relevance. The principles to be applied in determining whether there is a legitimate forensic purpose are well known and are not restated here (Rinehart v Rinehart [2018] NSWSC 1102 at [43]-[48] and [51] per Ward CJ in Eq and Azar Building and Construction Services Pty Ltd v Transport Infrastructure Development Corporation [2010] NSWLEC 110 at [20]-[21] per Craig J).

29. Most recently, these principles were applied by this Court in Black Hill Residents Group Incorporated v Marist Youth Care Limited [2019] NSWLEC 112 (at [10] and [13] per Robson J), Elanor Investors Limited v Sydney Zoo Pty Limited (No 2) [2019] NSWLEC 121 (at [42] per Pain J), and Elanor Investors Limited v Sydney Zoo Pty Limited (No 4) [2019] NSWLEC 191 (at [10] and [11] per Duggan J).

The Production Must Not be Oppressive

30. Even if the documents sought are of forensic relevance, the subpoena may nevertheless be set aside if it is oppressive. Thus the Court must examine the impact of the subpoena on its recipient. A subpoena that is productive of serious and unfair or unjustified burden, trouble and harassment will be oppressive, and therefore, amenable to be set aside.

31. As was opined in Rinehart (at [49]-[50]):

49   Whether a party has cause to believe that particular documents exist is a relevant factor (in conjunction with the potential relevance of the documents sought and the breadth of the subpoena) in determining whether the subpoena is oppressive and/or constitutes “fishing”.

50   In Universal Press Pty Limited v Provest Limited [1989] FCA 402, Hill J stated (at [9]-[10]):

9    Like Clark J, as his Honour then was, in Southern Pacific Hotel Inc v Southern Pacific Hotel Corporation (1984) 1 NSWLR 710 at p 717, I am of the view that there are two separate grounds for setting aside a subpoena that are often confused. The first, to which I have already referred, is the ground that the subpoena is so widely framed as to be burdensome and oppressive and therefore an abuse of process. The second, often linked with the first, is that the subpoena requires the addressee, being a third party to the litigation, to produce all documents which may afford evidence of the matters in dispute between the parties, is thus used as a way of obtaining discovery against a person not party to the litigation and so should be set aside (cf Small’s case supra).

10    Where the objection to a subpoena is that it is a misuse of the process of the Court for the purpose of discovery, what is usually meant is that it is an abuse of process to require a person not a party to litigation to form a judgment as to what is relevant to the issues joined in a proceeding to which he is not a party: National Employers’ Mutual Association Ltd v Waind & Hill (1978) 1 NSWLR 372 at p 382. It does not follow that a subpoena, issued in circumstances where the person requesting its issue is uncertain whether any documents exist which fall within the description in the subpoena, that description being otherwise precise, will be bad…

32. In Elanor (No 4) Duggan J further noted that (at [13]):

13   Such principles were also identified in Trade Practices Commission v Arnotts Limited (1989) 88 ALR 90, in the following terms at 102-103:

The general test for present purposes is well settled. The issue of a subpoena will be an abuse of process if it is not used for a legitimate forensic purpose …….  But, as Deane and Gaudron JJ observed in Hamilton v Oades (1989) 85 ALR 1 at 11, the court’s general powers in this area have a dual aspect: “The inherent power of a court to control and supervise proceedings includes the power to take appropriate action to prevent injustice …[This] power … is not restricted to defined and closed categories … In this context injustice is not simply a question of the purpose or motive for which the relevant proceedings were instituted but includes a consideration of the consequences of the proceedings for the person invoking the power. The terms ‘oppressive’ and ‘vexatious’ are often used to signify those considerations which justify the exercise of the power to control proceedings to prevent injustice, those terms respectively conveying, in an appropriate context, the meaning that the proceedings are ‘seriously and unfairly burdensome, prejudicial or damaging’ and ‘productive of serious and unjustified trouble and harassment’: Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 62 ALJR 389 per Deane J at 411; 79 ALR 9 at 45.”

In other words, the present inquiry is not limited to an analysis of the true purpose of Arnotts in procuring the issue of the subpoena.  It is also material to look at the impact of the subpoena upon Mattingly.

Without restricting this inquiry, it is convenient to address the present application in the first instance by reference to two questions:

(1)   Does the material sought have an apparent relevance to the issues in the principal proceedings, ie, is adjectival, as distinct from substantive, relevance established? Does the subpoena have a legitimate forensic purpose to this extent?  This involves a consideration of the matter from the standpoint of Arnotts.

(2)   Is the subpoena seriously and unfairly burdensome or prejudicial? This is to look at the matter from the point of view of Mattingly.

The Evidence of the Parties

33. An extraordinary amount of evidence was relied upon by the Verde Terra parties in support of their application to set aside the MML subpoena. When the matter was first heard on 24 April 2020, in addition to the February Ryan and February Tartak affidavits, reliance was also placed upon:

1. the expert report of Dr Ferrier dated 31 March 2020 (which the Court was not taken to), where he responded to comments made by Mr Gaudion concerning the monies loaned, advanced and spent by MML and the alleged deficiencies in the material contained in exhibit TARTAK-03 (that is, that the material was limited and inconsistent);

2. another affidavit of Mr Tartak sworn 31 March 2020, in which Mr Tartak responded to some of the queries raised by Mr Gaudion in respect of the financial material contained in TARTAK-03;

3. three affidavits of Ms Daniel. In addition to her 21 and 23 April affidavits, Ms Daniel swore a further affidavit on 16 April 2020. Some of the material contained in the 16 and 23 April affidavits is now otiose in light of the amendments made to the MML subpoena. In her earliest affidavit, however, Ms Daniel attested to various opinions provided by Dr Ferrier about the scope of the material sought by the Council in the MML subpoena (that is to say, that it was “unnecessary”) and that the material sought to be produced in the MYOB/Quickbooks accounting software system relevant to any financial year would include private and confidential material of employees, customers and suppliers of MML. In her affidavit sworn 23 April 2020, Ms Daniel responded to an affidavit of Mr Martin Ball, the solicitor for the Council, dated 22 April 2020 (“the Ball affidavit”. See the description of that affidavit below), wherein she deposed that:

1. on 23 April 2020 at approximately 2.30pm an offer was made by the Verde Terra parties to resolve the MML subpoena dispute by the production of:

A complete accessible electronic general ledger record in Excel format for MML transactions from 1 July 2014 to 30 June 2019 (which includes ledger accounts which has no transactions for the relevant years (Excel General Ledger).

2. the Excel General Ledger contains every single transaction engaged in by MML in the relevant financial year, trial balances, and most of the documents referred to in the Ball affidavit; and

3. the annual payroll activity summaries and annual payroll advice reports could be provided with confidential personal information redacted; and

4. an affidavit of Mr Ball dated 3 April 2020, wherein Mr Ball referred to communications between himself and Mr Gaudion noting inconsistencies between the financial records of MML and other related entities, on the one hand, and the proposition that MML had borrowed and expended monies as claimed by the Verde Terra parties, on the other. Mr Gaudion had stated that the general ledger was only part of the accounting records and that the “accounting data files” were needed to review for inconsistencies.

34. By contrast, the Council relied on a single affidavit, namely, the Ball affidavit referred to above. In that affidavit Mr Ball noted anomalies in the $4m of invoices asserted to have been paid by MML in the operation of the landfill. In particular, he observed that there was $2.5m of asserted expenditure that was not substantiated by the invoices produced to date.

The MML Subpoena is Amended

35. At paragraph 21 of the Ball affidavit the following amendment to the schedule to the MML subpoena was suggested:

…the schedule can be amended to refer to the MYOB and Quickbooks files of MML for the years ended 30 June 2015, 30 June 2016, 30 June 2017, 30 June 2018 and 30 June 2019, that were used to produce the general ledger printouts included in Exhibit TARTAK-03.

36. The amendment was neither formally made by the Council, nor was the suggestion ever taken up by the Verde Terra parties.

37. On 24 April 2020, at the outset of the hearing of the application to set aside the MML subpoena, the Verde Terra parties repeated the offer referred to above in paragraph 33(c)(i) in open court. It was rejected by the Council on the basis that this would not produce sufficient data for the Quickbooks/MYOB entries for the relevant financial years to be properly interrogated in order to test the claims made by the Verde Terra parties.

38. Subsequently, during the course of the hearing the Council moved to amend the schedule to the MML subpoena by deleting paragraphs 1, 2, and 3, and in lieu thereof inserting the following single paragraph:

The MYOB and Quickbooks files of MML for the years ended 30 June 2015, 30 June 2016, 30 June 2017, 30 June 2018 and 30 June 2019 that were used to produce general ledger printouts included in Exhibit TARTAK-03.

39. This wording was taken from the Ball affidavit. The amendment was granted on the basis that it did not appear to be futile and that it appeared to considerably narrow the scope of the subpoena. Costs were reserved and the application to set aside the newly amended subpoena was adjourned to 30 April 2020 in order for the parties, especially the Verde Terra parties, to take instruction on whether the amended subpoena ought nevertheless to be set aside.

40. Regrettably, no orders were made for the filing of further affidavits by the parties. Instead, the Court said the following on 24 April 2020 (T33:45-34:08):

HER HONOUR: Do I need to make an order in relation to the filing of any further evidence?  Is that necessary?

LARKIN: I just wanted to give the opportunity for the experts to actually discuss it between them, and then for us to deal with it, so long as the experts are available to do that promptly, then we won't drag our feet, if there is going to be evidence about it.

HER HONOUR: Thank you, I won't make an order.  Again, everybody now understands the limitations of the Court, the limitations of having to run hearings in these ways.  The fact that if I don't have the documents at least the night before the morning of, I just can't prepare properly, and of course, anybody who serves anything outrageously late will be met with a justifiable submission as to fairness, so if we can avoid all that, that would be excellent. 

41. Notwithstanding these remarks, on the afternoon of 29 April 2020 the Verde Terra parties filed and served an affidavit of Ms Rebecca Dixon (a partner at Ashurst) sworn that day on the Council (“the Dixon affidavit”). In the affidavit, in addition to attaching the 28 April Ashurst letter emailed to the Council at 9.30pm that same day, she deposed to a conversation that had taken place between Dr Ferrier and Mr Gaudion on 27 April 2020.

42. Upon the resumption of the motion on 30 April 2020, objection was made to the Dixon affidavit on the basis that its late service meant that instructions were not able to be obtained from Mr Gaudion as to the accuracy of the conversation deposed to therein, and therefore, reliance on it would be unfair. The objection was upheld and the affidavit was rejected.

43. The 28 April Ashurst letter set out a further offer:

1.   MML is to produce to the Court, pursuant to an order of the Court in answer to the MML Subpoena, the following, on a USB stick:

(a)   MYOB database files referred to in the MML Subpoena for the financial years ending 30 June 2014 to 2018 and the Quickbook database files for the financial years ending 30 June 2018 to 2019 (Accounting Database Files);

(b)   payroll activity summaries and payroll advice reports for MML for the financial years ending 30 June 2015 to 2019.

44. However, acceptance of the offer was conditioned on the following confidentiality regime being entered into by the Council:

3.   Items 1(a), 1(b) and 2(a) above are also to be directly provided to Mr Gaudion on a USB stick. Access will be governed by the terms of the following written undertakings to be provided by Mr Gaudion and the Council’s external legal representatives, with these undertakings being noted by the Court.

Confidentiality Undertaking – Mr Gaudion

I, Nicholas Robert Gaudion of 25 Bolton Street Newcastle, undertake to the Court, TPT (NSW) Investments Pty Ltd, AUG Investments Pty Ltd and Mangrove Mountain Landfill Pty Ltd (MML), in relation to any material produced in response to the Court’s order of [DATE] (Confidential Material) in proceedings 2019/101279 and 2019/203552 (Proceedings) that, until further order of the Court:

1.   I will at all times keep the Confidential Material confidential and secure in my office at 25 Bolton Street, Newcastle.

2.   I will not use the Confidential Material or any part of it for any purpose other than for the purposes of the Proceedings.

3.   I will not:

(a)   disclose to any other person the Confidential Material or any part of it;

(b)   make or cause to be made any copy (whether electronic or paper) of the Accounting Database Files themselves.

3A   For the avoidance of doubt, 3(b) above does not prohibit the making by me of copies of extracts of data or information derived from the Accounting Database Files such as the general ledger or reports.

4.   Notwithstanding 3 above, but subject to 5 below, information contained in the Confidential Material (but not copies of the Accounting Database Files themselves) may be disclosed by me to:

(a)   Dr Rodney Ferrier;

(b)   the external solicitors and counsel for the Central Coast Council, provided they have provided to Ashurst a signed confidentiality undertaking in the form entitled “Confidentiality Undertaking – Council’s external legal representative”;

(c)   the Court, provided that such disclosure occurs in a manner that does not undermine confidentiality in the Confidential Material.

5.   I will not disclose or provide to any other person any of the following confidential or personal identifying information contained in the Confidential Material concerning any officers, employees or staff of MML:

i.   tax file numbers;

ii.   bank account details;

iii.   dates of birth;

iv.   contact details;

v.   addresses.

6.   Notwithstanding 3 above, but subject to 5 above, information contained in the Confidential Material (excluding the Accounting Database Files themselves) may be copied for disclosure in any joint report to be made by me in the Proceedings, but only if it is included in a confidential annexure or exhibit.

7.   I will, within 14 days of a final judgment being delivered in the Proceedings, permanently destroy all copies of the Confidential Material in my possession.

Confidentiality Undertaking – Council’s external legal representative

I, [NAME] of [address], undertake to the Court, TPT (NSW) Investments Pty Ltd (TPT), AUG Investments Pty Ltd (AUG) and Mangrove Mountain Landfill Pty Ltd (MML), in relation to any material produced in response to the Court’s order of [DATE] (Confidential Material) in proceedings 2019/101279 and 2019/203552 (Proceedings) that, until further order of the Court:

1.      I will at all times keep the Confidential Material confidential.

2.      I will not use the Confidential Material or any part of it for any purpose other than for the purposes of the Proceedings.

3.      I will not disclose the Confidential Material or any part of it to any other person apart from:

(a)   Mr Nicholas Gaudion;

(b)   external legal representatives of the Central Coast Council, provided they have provided to Ashurst a signed confidentiality undertaking in terms substantially the same as this undertaking;

(c)   external legal representatives of TPT, AUG and MML;

(d)   the Court, provided that such disclosure occurs in a manner that does not undermine confidentiality in the Confidential Material.

45. The offer was further contingent upon the Council paying the Verde Terra parties’ costs of the notice of motion to set aside all of the subpoenas up to and including the hearing on 24 April 2020.

46. The Council responded within the timeframe demanded by Ashurst in the 28 April Ashurst letter. In summary, the Council stated that it had never sought the documents referred to in paragraph 1(b) of the 28 April Ashurst letter and that what was being offered in paragraph 1(a) was the same as that proposed by the amended schedule to the summons. The proposed confidentiality regime was rejected on the basis that this was not an exceptional case warranting the making of such an order. The reply noted the following:

I am content for the information to be provided to myself and Mr Gaudion on a USB stick. No copies of the information will be made except that Mr Gaudion may make any copies of the data files on the USB, either on network drives controlled by Cutcher and Neale or on the personal computers of himself and employees assisting him, which are necessary to upgrade the software to the version of software required to access the data. I understand this is an IT issue, in that copies are made when such upgrades occur.

47. Finally, the appropriate costs order was mooted to be the Council’s costs in the cause on the basis that the amendments to the schedule to the subpoena, which the parties had now ostensibly agreed to, were foreshadowed in the Ball affidavit on 22 April 2020. Had the amendments been accepted, the hearing could have been avoided.

48. The Verde Terra parties replied to the Council’s letter later that day. Of relevance was their expressed concern that the Council proposed to “make the material available to not only Mr Gaudion but to an unspecified number of ‘employees assisting him’ and with no restriction upon which other persons within the Council that might have access to the information” [sic].

The Application to Set Aside the MML Subpoena Must be Dismissed

49. Despite the parties seemingly reaching agreement on the terms of the subpoena to MML – namely, that as set out in paragraph 1(a) of the 28 April Ashurst letter - and the scope of the documents to be produced pursuant to it, neither party sought to dismiss the application. Accordingly, I will therefore formally determine the motion.

50. Applying the legal principles set out above, given the material now sought in the amended subpoena it can no longer be seriously contended that the MML subpoena lacks forensic purpose. This is because the Verde Terra parties have pleaded discretion in defence to the allegation made by the Council that the agreement to procure the 2014 consent orders is voidable for illegality, irregularity, or for being contrary to public policy. Specifically, the Verde Terra parties rely on financial detriment evidence (the Ryan, Tartak and Ferrier evidence referred to above), that is, that in reliance upon the 2014 consent orders they expended significant financial resources and if those orders are set aside, they will suffer detriment.

51. The material sought by the Council in the MML subpoena has, on any view, apparent relevance to the issues for determination in the proceedings that goes well beyond mere speculation. Put another way, it is on the cards that the documents will shed some light on whether or not the Verde Terra parties have suffered, or will suffer, financial detriment if the 2014 consent orders are set aside.

52. Whether or not the expert forensic accountants believe that the documents are (in Mr Gaudion’s opinion), or are not (in Dr Ferrier’s opinion), necessary to establish what expenses the Verde Terra parties incurred in purchasing the subject site and operating the landfill is not the test. With great respect to those experts, their opinion as to the forensic relevance of the material sought to be produced is not to the point; that is a matter for the Court to determine.

53. To the extent that the Verde Terra parties complained that production of the documents would include information that is private and confidential, this can, as Ms Daniel’s evidence expressly indicated, be dealt with by way of redaction. Alternatively, orders can be made, if it is established that it is appropriate to do so, restricting access to the documents produced to the forensic accounting experts and the parties’ legal representatives.

54. In any event, that orders protecting the confidential content of the documents produced may be necessary does not mean that the subpoena lacks forensic purpose or that it is oppressive (Santos Limited v Pipelines Authority of South Australia (1996) 66 SASR 38 at 56).

55. Nor does the compulsory production of documents for the purpose of cross-examination mean that the subpoena can be set aside. It is not a proper objection to a subpoena that it seeks documents relating to credit (cf discovery). As Brereton J noted in Liristis v Gadelrabb ([2009] NSWSC 441 at [5]):

5   I do not understand it ever to have been a proper objection to a subpoena that it seeks documents relating only to credit. Indeed, one of the fundamental distinctions between the processes of subpoenas for production and discovery is that subpoenas, unlike discovery, may be used to obtain documents relevant only to questions of credit, for the purpose of assisting cross-examination as to credit. It is true that in Fried v National Australia Bank (2000) 175 ALR 194, Weinberg J in the Federal Court of Australia said that it was inappropriate to permit a subpoena to stand which does little more than to trawl for documents that may be used to impugn the credit of a particular witness. I do not disagree with that observation, but that is not to say that it is inappropriate to permit a subpoena to stand that seeks documents that may be used to impugn the credit of a particular witness, as distinct from merely trawling for such documents. The concept of "trawling" in this context is the same as that of "fishing". It is not fishing to seek documents when there are reasonable grounds to think that fish of the relevant type are in the pond or, as it has been expressed in other cases, that it is "on the cards" that relevant documents (even if they are relevant only to credit) will be elicited by the subpoena.

56. The test is whether the documents are apparently relevant or capable of providing a legitimate basis for cross-examination, or whether they are manifestly irrelevant and incapable of touching upon matters of credit. If the latter, the subpoena is likely to be an abuse of process (A v Z [2007] NSWSC 899; (2007) 212 FLR 255 at [19] per Brereton J).

57. From the terms of the amended subpoena to MML it is abundantly plain that the documents sought by it have sufficient apparent relevance to the issue of the financial detriment asserted by the Verde Terra parties. Furthermore, given its now limited scope, it can no longer be considered to be oppressive. The Verde Terra parties did not press this argument when the hearing resumed on 30 April 2020.

58. The application to set aside the amended MML subpoena ought therefore be dismissed. The only remaining issue is whether access to the documents produced pursuant to it should be subject to a confidentiality regime either in the terms proposed by the Verde Terra parties or by recourse to some other framework.

Confidentiality Regime

59. The only basis upon which the Verde Terra parties claimed that the material likely to be produced should be subject to a confidentiality regime was because the data disclosed would include the private details of third parties. These details would include names, telephone numbers, tax information and so on.

60. However, as the Council submitted, the material likely to be produced will comprise standard accounting information that professional forensic accountants such as Dr Ferrier and Mr Gaudion routinely examine. There is nothing exceptional about the information. Moreover, in addition to being bound by their own professional standards, both are bound by the usual implied undertaking not to use the documents for any purpose other than for the purpose of these proceedings. The parties to the proceedings are similarly subject to this rule.

61. In Hearn v Street [2008] HCA 36; (2008) 235 CLR 125 Hayne, Heydon and Crennan JJ observed in respect of the implied undertaking referred to above that (at [116]-[117], emphasis added):

116   The appellants submitted that the majority approach did not sit comfortably with the fact that an express undertaking may be given in place of an implied undertaking. They did not say why not. The point of insisting on an express undertaking, commonly employed in relation to documents which it is particularly desired to keep secret, is to bring explicitly home to the minds of those giving it how important it is that the documents only be used for the purpose of proceedings. It does not follow that the obligation in question does not exist in more routine cases without the need for an express undertaking. If the appellants’ stance were sound, it would be necessary for litigants, in order to obtain protection partially, but not completely, as effective as that given by the approach urged by the residents, to seek express undertakings to the court from all servants and agents of a party, from all potential lay and expert witnesses, and from all other persons into whose hands documents generated in the proceedings may come. At present this happens in exceptional cases for particular reasons. If it were necessary for that general practice to develop, it would be extremely cumbersome, and extremely wasteful of time, energy and money.

Implied undertaking expressly modified by court

117   The appellants submitted that the majority approach did not sit comfortably with the fact that an implied undertaking may be expressly modified by the court. Again, they did not say why not. Modification is not common…

62. The evidence does not establish that the present case is an “exceptional case” or that there are “particular reasons” why the implied undertaking should be expressly modified as demanded by the Verde Terra parties. The Verde Terra parties point to no trade secrets, sensitive intellectual property, or commercial-in-confidence material, that may be revealed by the production and inspection of the material the subject of the MML subpoena.

63. I therefore decline to make a confidentiality order. In my view, it is not necessary in the circumstances of this case.

Costs of the Applications to Set Aside the MML Subpoena

64. The Verde Terra parties submitted that even though they have been unsuccessful in their application to set aside the subpoena, they should not be liable for the Council’s costs, as the Council contends. This is because:

1. first, in its original form the subpoena would have been set aside, a matter implicitly acknowledged by the amendments made to it by the Council;

2. second, a reasonable and sufficiently timely offer to narrow the scope of the documents to be produced was made by them on 23 April 2020, which, had it been accepted, would have avoided the need for a hearing; and

3. third, prior to the filing of the notice of motion to set aside the MML subpoena they had made repeated requests to the Council for it to articulate the forensic purpose of the documents sought, and subsequently, they had made multiples entreaties to the Council to narrow the scope of the documents to be produced, including with the assistance of the expert forensic accountants, all of which were either ignored or not responded to in a timely manner.

65. At the very least, the Verde Terra parties submitted that an appropriate costs order should be that the Council pay their costs up to and including the hearing on 24 April 2020, and thereafter, because agreement was reached at least as to the scope of the documents sought, the costs of the motion should be costs in the cause.

66. In response, the Council submitted that the appropriate cost order should be the Council’s costs in the cause. This was because, first, had the Verde Terra parties accepted the offer made in the Ball affidavit then, subject to the confidentiality controversy, the dispute could have been resolved as at 22 April 2020: what was ultimately agreed to by the parties as to the scope of the subpoena mirrored what was suggested in that affidavit.

67. Second, that the evidence discloses that the Verde Terra parties did in fact understand what was meant by the term “accounting data files” in the original MML subpoena and that even in its unamended form the subpoena neither lacked forensic purpose nor was it oppressive.

68. In my view, the original schedule to the MML subpoena containing the description “accounting data files” can in no way be equated to the current terms of that subpoena. In my opinion, the Verde Terra parties were not unreasonable in their requests for clarification. Those requests and the consequential amendments have considerably narrowed the width of the subpoena. Without determining the matter, the contention of the Verde Terra parties that the vague language of the term “accounting data files” rendered the original subpoena amenable to be set aside, or at the very least, substantially narrowed in breadth, is compelling.

69. Nevertheless, the issue of costs remains finely balanced. On the one hand, there is merit in the submission that it is only by reason of the narrowing of the schedule to the subpoena that matter has been able to be largely resolved. The Council ought to have formally moved to amend the schedule to the MML subpoena earlier than at the hearing on 24 April 2020. On the other hand, nothing prevented the Verde Terra parties from agreeing to the suggested amendment proffered by Mr Ball in his affidavit on 22 April 2020. Had they done so, the need for two days of hearing may have been avoided. Furthermore, the hearing on 30 April 2020 was only required in order to resolve the dispute about the confidentiality regime, a dispute that the Verde Terra parties lost.

70. In all these circumstances, it is appropriate that the costs of the application to set aside the MML subpoena should be costs in the cause.

71. I make no orders in respect of the costs of the applications to set aside the subpoenas to TPT or AUG in light of the fact that the parties made no submissions to me whatsoever respect of those subpoenas.

Orders

72. In conformity with the reasons given above, the formal orders of the Court in respect of all applications to set aside are that:

1. in answer to the MML subpoena (as amended), MML is to produce to the Court on a USB stick all MYOB database files referred to in the MML subpoena for the financial years ending 30 June 2014 to 30 June 2018 and the Quickbook database files for the financial years ending 30 June 2018 to 30 June 2019, otherwise the notice of motion to set aside that subpoena is dismissed;

2. in answer to the subpoenas to TPT and AUG, by no later than 7 May 2020, TPT and AUG are to produce to the Court all bank statements showing the payment of the loan amounts described in paragraph 60 of the affidavit of Mr Tony Tartak dated 7 February 2020 set out below, and any repayments, but which are otherwise redacted:

60   Several Tartak family entities have advanced loans to Mangrove Mountain Landfill since the making of the Orders, including the following:

a.   During the period of 5 February 2015 to 18 June 2015, AUG Investments Pty Ltd as trustee for AUG Investment Trust (“AUG”) lent a total of       $331,500.00.

b.   During the period of 26 November 2015 to 30 June 2016, TPT (NSW) Investments Pty Ltd as trustee for TPT Investment Trust (“TPT”) lent a       total of $746,000.00.

c.   During the period of 1 July 2015 to 29 October 2015, AUG lent a total of $750,000.00.

d.   During the period of 7 July 2016 to 29 June 2017, TPT lent a total of $3,532,000.00, of which $1,500,000 was lent to TPT by my son Nathan Tartak. That amount was transferred directly to Mangrove Landfill from Nathan Tartak at the direction of TPT.

e.   During the period of 6 July 2017 to 20 December 2017, TPT lent a total of $1,220,000.00,

otherwise the notice of motion to set aside those subpoenas is dismissed;

3. the costs in respect of the application to set aside the notice to produce to the Council are costs in the cause:

4. the costs in respect of the application to set aside the subpoena to MML are costs in the cause;

5. exhibits B, C, D and 1 are to be returned;

6. the forensic accounting experts, Mr Gaudion and Dr Ferrier, are to participate in a joint conclave by no later than 29 May 2020;

7. pursuant to their joint conclave, the forensic accounting experts are to file and serve a joint expert report by no later than 12 June 2020; and

8. liberty to restore on three days’ notice.

**********

Decision last updated: 27 July 2020