Walker v Chamberlains Law Firm Pty Ltd
[2024] ACTSC 76
•26 March 2024
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Walker v Chamberlains Law Firm Pty Ltd |
Citation: | [2024] ACTSC 76 |
Hearing Date: | 22 March 2024 |
Decision Date: | 26 March 2024 |
Before: | McCallum CJ |
Decision: | (1) I strike out the words in subparagraph (e) in the definition of “Mr Mark Robert Walker's Entities” in the schedule to the subpoena. (2) I otherwise dismiss the application insofar as it relates to the Maxim subpoena. (3) I order the plaintiffs to pay the defendants’ costs for the application. |
Catchwords: | CIVIL LAW – JURISDICTION, PRACTICE AND PROCEDURE – Application to set aside subpoena to accountant – failed joint venture – where plaintiffs sue solicitors for failure to protect them against financial risks of joint venture – financial position of the plaintiff entities plainly in issue |
Cases Cited: | Secretary of Department of Planning, Industry and Environment v Blacktown City Council [2021] NSWCA 145 |
Parties: | Mark Robert Walker ( First Plaintiff) Rednax Investments Pty Ltd (ACN 615 461 106) (Second Plaintiff) MZ Walker Family Super Pty Ltd (ACN 611 390 197) (Third Plaintiff) Chamberlains Law Firm Pty Ltd (ACN 120 287 443) (First Defendant) Louise Patricia Morris Millwood (Second Defendant) |
Representation: | Counsel Z Graus ( Plaintiffs) A Macauley ( Defendants) |
| Solicitors Namadgi Legal ( Plaintiffs) Wotton + Kearney ( Defendants) | |
File Number: | SC 130 of 2023 |
McCALLUM CJ:
EX TEMPORE REASONS (REVISED)
1․By application in proceeding dated 14 December 2023, the plaintiffs sought a variety of orders including orders concerning a subpoena issued by the defendant to Maxim, a firm of chartered accountants which is not a party to the proceedings. The application was dealt with, in part, by Ainslie-Wallace AJ. However, the issues concerning the subpoena were not determined by her Honour and it is common ground that her Honour is not part-heard on that aspect of the application.
2․As acknowledged by the plaintiff, the application, insofar as it concerns the subpoena, came before me in an unorthodox way. Documents were produced in response to the subpoena before the plaintiffs’ application to have it set aside in part had been determined. As I read the bench sheets, Ainslie-Wallace AJ made directions by consent requiring the parties to take certain steps so as to obviate the need for the challenge to the subpoena to be determined.
3․The orders her Honour made included a requirement that the plaintiffs provide to the defendants all documents produced pursuant to the subpoena other than those in respect of which a claim of privilege was made. In relation to any document in respect of which a claim of privilege was made, the plaintiffs’ solicitor was to provide an affidavit identifying the document and the nature of the privilege asserted. Her Honour’s orders also made provision for the challenge to the subpoena to be resumed and that is the part of the application that ultimately came before me last Friday.
4․After embarking on the process of indexing and identifying the claims for privilege, the plaintiffs came to the view that it would be more efficient to proceed with the application to have the subpoena set aside. The plaintiffs produced short minutes of order as to what narrowed version of the subpoena they would accept. However, the documents having already been produced by the non-party, it seems to me that it would be impractical for the Court to tailor the subpoena in that way; in particular, it is not clear what task the producing party would then be required to undertake.
5․In any event, accepting that the processes undertaken so far by the plaintiffs may have entailed a measure of inconvenience and been the source of some irritation, I consider that the proper approach is to determine the application in the orthodox way by reference to the schedule to the subpoena.
6․For that purpose, it is necessary to understand the issues in the proceedings. A convenient summary of the pleadings was provided in submissions provided by the defendant, evidently for the purpose of the application as it came before Ainslie-Wallace AJ. The summary that follows is drawn largely from those submissions.
7․The proceedings concerned a failed joint venture. In June 2016, one of the plaintiffs, Mr Walker, along with two other persons, Mr Kelly and Mr Blazic, formed the joint venture to acquire real property in Bruce and to develop that property. The joint venture vehicle was Banyan Bruce Pty Ltd. That entity purchased the land.
8․Mr Walker and Messrs Kelly and Blazic retained the defendant law firm to provide legal services at various points in the joint venture. There were five separate retainers covering the stages of the joint venture, including its appropriate structure, the establishment of trusts and shareholder agreements and relevantly, for present purposes, a series of loans to the joint venture vehicle by each of the partners and entities related to them. They included loans to the joint venture entity by Mr Walker, his superannuation company and a company called Rednax Investments Pty Ltd as trustee for Rednax Investments Trust.
9․The statement of claim pleads numerous alleged breaches of duty. Importantly for present purposes, many of those include allegations that the law firm failed, in collaboration with Maxim, Mr Walker's accountants, to protect him and the related entities against various financial risks. Plainly, an issue in the proceedings will be the financial position of the plaintiff entities, their dealings with Maxim in the development of the joint venture, and their financial position following the alleged breaches and the failure of the development project, particularly where, as noted by Mr Macauley on behalf of the defendant, the claim is brought or damages are sought on the basis of an allegation that, had the proper advice been given, the plaintiff entities would not have entered into the transaction at all.
10․The defendants’ submissions also include a convenient summary of the relevant legal principles, largely drawn from the decision of the New South Wales Court of Appeal in Secretary of Department of Planning, Industry and Environment v Blacktown City Council [2021] NSWCA 145. The primary judgment in that case was written by Bell P, with whom I agreed, then being a member of that Court. Importantly, the decision holds at [57]:
So long as the subpoena can plausibly be seen to relate to an issue or issues in the proceedings or to “cast light” on such an issue, and the subpoena is not in other respects either too vague or oppressive, it should not be set aside, nor should the inspection of documents produced be refused (citation omitted).
11․I turn to consider the schedule to the subpoena against those principles. Category two seeks all financial records for Banyan Bruce Pty Ltd between the relevant years. I mention that category only because those documents have been produced by Maxim and provided to the defendants. That is a matter relied upon by the plaintiffs in respect of category three, to which I now turn.
12․Category three seeks all financial records for Mr Walker’s Entities for the financial years in question, being 2016 to 2021. Importantly, the financial records are defined in the schedule as follows:
Financial Records mean profit and loss statement(s), income statement(s), business activity statement(s), balance sheet(s), cash flow statement(s), depreciation schedule(s), taxation return(s), general ledger(s) and/or journal(s), ASIC notices, and any relevant registers and minutes of members or directors’ meetings (and each of them).
13․The term “Mr Walker's Entities” is also defined as follows:
(a)Mark Robert Walker;
(b)Rednax Investments Pty Ltd (ACN 615 461 106);
(c)MZ Walker Family Super (ACN 611 390 197);
(d)Elite Bricklaying Services Pty Ltd (ACN 147 677 843); and
(e)any other entity in which Mark Robert Walker was a director, shareholder or beneficiary at the relevant time (where the company is trustee for a trust).
14․The plaintiffs object to the breadth of the definition of “financial records” as being beyond the scope of what could reasonably meet the test for issuing a subpoena. Separately, they object to the range of companies included in the definition of Mr Walker's Entities, being not only the joint venture entities, but “any other entity in which Mark Robert Walker was a director, shareholder or beneficiary at the relevant time (where the company is trustee for a trust)”.
15․The plaintiffs propose orders identifying a narrowly confined subset of such documents. That approach reflects the history of the present application which I have explained, however, with respect, it does not reflect the proper approach to determining an application to have a subpoena set aside. It is, instead, informed by the plaintiffs’ knowledge, which is not shared by the defendants, as to what the documents contain. Furthermore, the plaintiffs propose redactions to those documents so as to obscure information they contend is not relevant to any issue in which the defendant might have an interest. In my view, that is not a fair approach to the production of financial records and, indeed, does not reflect how financial records are read.
16․In my assessment, as to the three plaintiffs, the defendants’ subpoena plainly meets the requirement specified in Blacktown City Council to which I have referred. The subpoena in that respect is not an abuse of process. It seeks documents which may “cast light” on the issues in the proceedings and it should not be set aside.
17․I am also satisfied that that is the case in respect of the fourth entity named, Elite Bricklaying Services Pty Ltd, as the evidence reveals that that entity advanced significant funds to the joint venture.
18․I am not, however, persuaded that any other entity in which Mr Walker was a director, shareholder or beneficiary, should be required to produce their financial records or, more accurately, that Maxim should be compelled to produce that material. I understand the point raised by the defendant in respect of those entities. It derives from the fact that the plaintiffs’ evidence includes the following statement:
Some of the advances and repayments claimed by Rednax as trustee for Rednax Trust as part of [the proceedings in which a consent judgment was obtained] involved cash transactions made by entities related to [Mr Walker], other than Rednax as trustee for Rednax Trust.
19․The reference to other entities related to Mr Walker making advances and receiving repayment from the joint venture has been seized upon by the defendants as indicating that the broader range of entities should or may have relevant financial information that Maxim should produce. As I have indicated, I understand the argument, but I think the connection is too obscure and I propose to strike that part of the definition of the Walker entities from the schedule to the subpoena. Otherwise, the documents listed in category three should be produced.
20․I turn to category four, which seeks all files, documents and correspondences in relation to the Bowery joint venture insofar as they are relevant to Mr Walker’s Entities involvement in same, for the period 1 June 2016 to 30 June 2021 including:
(a)copies of all file notes recording correspondence and/or conversations between Maxim CA and Mark Robert Walker (or his representative);
(b)copies of all letters to Mark Robert Walker from Maxim CA;
(c)copies of all letters to Banyan Bruce Pty Ltd from Maxim CA; and
(d)copies of all emails between Maxim CA, Mark Robert Walker and Banyan Bruce Pty Ltd (and each of them) (including those emails in which other parties are recipient).
21․The plaintiffs’ objection to producing material in that category is an objection to relevance. The written submissions state:
Category 4 is said to be relevant to Mr Walker's knowledge and understanding at the relevant time, and his reasons for making investment decisions in the joint venture.
22․The plaintiffs do not quibble with the relevance of documents which are genuinely capable of casting light on such issues. The proposed limitation to this category has been drafted with this in mind; however, objection is taken to the category as drafted in the subpoena which seeks a much broader range of documents. The category, as drafted, would catch any documents with the most passing relevance to Mr Walker's involvement in the Bowery joint venture even where those documents make no mention of and have nothing to do with Mr Walker's financial decisions in relation to the Bowery joint venture.
23․The difficulty with that submission is, again, that it is, with respect, I think informed by the plaintiffs’ knowledge of the contents of the documents, having inspected them. Even if that is not right, I think it overlooks the approach in Blacktown City Council which acknowledges that a subpoena will necessarily be issued by a party who does not have knowledge of the contents of documents and who can only do their best to seek categories which plausibly relate to an issue in the proceedings or which may cast light on such issues.
24․As noted by Mr Macauley in his oral submissions, the category confines the documents sought to those in relation to the joint venture insofar as they are relevant to Mr Walker's Entities’ involvement in the joint venture within the confined period. I am not persuaded that that category is too broad and I am not prepared to strike it out.
25․The fifth category seeks documents described as follows:
All documents held in relation to the bank account colloquially referred to by Liam Sean Kelly as the “Downer Account” insofar as they are relevant to the involvement of Mr Mark Robert Walker’s Entities in that business/project including, but not limited to:
any statements held in relation to the Downer Account for the period June 2016 to June 2017 (inclusive); and
any documents recording the involvement of Mark Robert Walker and Liam Sean Kelly (and each of them) in the business or project the subject of the Downer Accounts.
26․The reference to the “Downer account” can only be understood by reference to evidence relied upon by the defendants in support of the application. It was not the account set up for the purposes of the Bowery joint venture. However, the defendants have evidently had access to text messages exchanged between two of the three individuals whose entities joined into the joint venture. Mr Macauley relied upon those exchanges as the basis for an inference the Court would draw that the “Downer account” may well have been used by those gentlemen as an account into which and out of which payments relating to the Bowery joint venture might be made.
27․I have given close consideration to the contents of the text exchanges between the two gentlemen. The first thing that may be noticed is that they show what might be described as a cavalier approach to the use of a particular bank account from an accounting point of view; for example, some of them (not relied upon by Mr Macauley) show one of the two gentlemen regularly asking for loans from the other for purposes which may or may not be related to the joint venture, but which certainly do not appear to have any connection to the Downer account. I may be wrong in holding those suspicions, but the exchanges are, from an accountant's point of view, quite extraordinary; for example, there are requests claimed as follows:
“Hey mate can i borrow 15k today so I can cover my wages. I can give that 15k and the other 35k back by the end of this month.”
“Cheers”.
28․Some days later:
“115k in downer. For you to take back”
“Thanks heaps for the lend. I will put that 58k back in for you around 30th of this month.”
29․Perhaps more pertinently for present purposes, there is an exchange relied upon by Mr Macauley in which the same member of the joint venture asks Mr Walker to transfer “290 into Downer”. “… Im at Land Titles and have to pay a fee and have no cash like always.” That may be a reference to a sum of only $290, but it does appear, by its timing, to refer to the Bowery joint venture.
30․Finally, there are exchanges which are relied upon by Mr Macauley suggesting that the account was used for large amounts of money to be paid in and paid out, or at least made available; for example, references to sums in the hundreds of thousands of dollars being available for “boys”.
31․Whilst there is, no doubt, a deal of additional context that could be explained around those exchanges, I am satisfied that there is, at least, a proper basis for inferring that the account was or may have been used for purposes related to the Bowery joint venture and that production of those records should be compelled.
32․It remains to refer to some discrete points made by Ms Graus, on behalf of the plaintiffs, in seeking to have the subpoena set aside. Firstly, she submitted that it was a clear attempt by the defendants to circumvent discovery. I do not accept that submission. The service of a subpoena to a party that might have counterpart records produced by a party is not an uncommon procedure and certainly not an abuse of the process of the Court.
33․Secondly, Ms Graus submitted that the subpoena was encyclopaedic in scope and had not been drafted with any view to identifying a narrower scope of documents that might actually shed light on the issues in the proceedings. The difficulty with that submission, at this stage, is that the documents have, in fact, been produced without any objection by Maxim on the grounds that the subpoena was oppressive. For the reasons I have explained, I think the categories described by the defendants were appropriately broad.
34․The next objection related to relevance of the documents and I have dealt with those particular points.
35․The final objection was that the subpoena seeks commercially sensitive documents belonging to companies which have no connection with the proceedings. I apprehend that particular submission relates to the documents which I have disallowed relating to other Walker entities, however, to the extent that there is any claim for commercial sensitivity in respect of the documents I have allowed, that should be addressed by separate evidence and determined in a separate application.
Orders
36․For those reasons, I make the following orders:
(1)I strike the words in subparagraph (e), in the definition of “Mr Mark Robert Walker's Entities” in the schedule to the subpoena.
(2)I otherwise dismiss the application insofar as it relates to the Maxim subpoena.
(3)I order the plaintiffs to pay the defendants’ costs for the application.
(4)I list the matter before the Registrar for directions on Tuesday 2 April 2024 at 10:15am.
| I certify that the preceding thirty-six [36] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Chief Justice McCallum Associate: Date: |
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