Wornes v Freewater Australia Pty Limited
[2022] ACTSC 147
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Wornes v Freewater Australia Pty Limited |
Citation: | [2022] ACTSC 147 |
Hearing Date: | 27 May 2022 |
DecisionDate: | 24 June 2022 |
Before: | Kennett J |
Decision: | See [51] |
Catchwords: | CIVIL LAW – PRACTICE AND PROCEDURE – Subpoenas – application to set aside subpoenas – whether legitimate forensic purpose |
Legislation Cited: | Civil Procedure Act 2005 (NSW) s 56 Court Procedures Act 2004 (ACT) s 5A Uniform Civil Procedure Rules 2005 (NSW) r 33.4 |
Cases Cited: | A v Z [2007] NSWSC 899; 212 FLR 255 Botany Bay Instrumentation and Control Pty Ltd v Stewart [1984] 3 NSWLR 98 Secretary of the Department of Planning, Industry and Environment v Blacktown City Council [2021] NSWCA 145 |
Parties: | Shaun Wornes ( Plaintiff) Freewater Australia Pty Limited ( First Defendant) David Muir (Second Defendant) |
Representation: | Counsel G Blank ( Plaintiff) B Buckland ( Defendants) |
| Solicitors Trinity Law ( Plaintiff) Kamy Saeedi Law ( Defendants) | |
File Number: | SC 185 of 2021 |
KENNETT J:
Introduction
The plaintiff (Mr Wornes) sues the defendants in debt, relying on what are said to be two loan agreements.
The first loan agreement is contained in a deed, which describes itself as a Debenture Agreement, dated 15 March 2018. The first defendant (Freewater Australia) was the borrower under that agreement and the second defendant (Mr Muir) was the guarantor.
The deed acknowledged various advances and amounts that Freewater Australia had the benefit of, amounting to $350,000. It contained provisions for interest and for monthly repayments commencing in March 2019. It provided that failure to pay any money or instalment required under the agreement within 90 days was a default event, which would authorise Mr Wornes to demand payment of all money owing.
It is pleaded that there was a failure to make repayments constituting a default event, a demand letter was duly sent, and the outstanding amount demanded in that letter has not been paid.
The second loan agreement is contained in an exchange of emails on 13 June 2019. It is pleaded that, pursuant to this agreement, Mr Wornes advanced $150,000 to Freewater Australia with that sum due for repayment on 25 July 2019. Repayment did not occur on that day. It is further pleaded that the parties agreed (orally) that the loan would be repaid on 27 November 2019; $60,000 was paid on that date and a further $80,000 on 12 February 2021; and the remainder (including interest) remains unpaid.
As to the first loan agreement, the defendants by their Amended Defence admit that they executed the deed and have not made payments in accordance with its terms. However, they plead that it was of no legal effect as a result of a series of background facts and collateral agreements between the parties. Put shortly, they say that:
(a)there was no advance of $350,000;
(b)that sum represented an approximation of the combined value of Mr Wornes’ interest in a trust, amounts owed to him by a related company (Freewater Accountants Pty Limited) and amounts proposed to be lent in the future;
(c)the deed was entered into to give Mr Wornes comfort in case Mr Muir became seriously ill or died and to assist Mr Wornes in supporting a home loan application; and
(d)the parties agreed that the deed would have no effect unless and until Mr Muir did become seriously ill or die (neither of which has happened).
The defendants also say that the first loan agreement was actually executed around March 2019. Affidavit evidence of Mr Wornes filed in the proceeding is consistent with this.
As to the second loan agreement, Freewater Australia admits the essential nature of the agreement and its non-payment in July 2019. It does not admit the further agreement in November 2019. It admits the making of the payments of $60,000 and $80,000 and says that Mr Muir made these payments on its behalf (the latter in his capacity as trustee of a family trust). It says that the amount outstanding under the second loan agreement is $10,000 rather than the $66,807 claimed by Mr Wornes.
The defendants’ application
Mr Wornes has issued subpoenas to each of the defendants and to Freewater Accountants Pty Limited (ACN: 149 358 341) (Freewater Accountants). The defendants have filed an Application in Proceeding seeking to have the subpoenas set aside. That is the application currently before me.
The only ground stated in the application is that the subpoenas lack a legitimate forensic purpose and are otherwise an abuse of process. It is not alleged that they are oppressive and there is no evidence that complying with them would be particularly burdensome for the defendants. However, some aspects of the subpoenas are very broad and it is in that breadth that their forensic purpose needs to be justified.
The application as filed sought to have the subpoenas wholly set aside. However, correspondence and discussions between the parties have narrowed the issues. The defendants have agreed to produce documents in some categories and these aspects of the subpoenas are therefore no longer challenged. Mr Wornes has agreed not to press some other aspects of the subpoenas.
What remains in dispute
I set out below the relevant parts of the schedule to each subpoena. Paragraphs that are no longer challenged are in plain text; paragraphs that are no longer pressed are struck through; and paragraphs that remain controversial are underlined.
Freewater Australia
The documents and things you must produce are as follows:
In this Subpoena, ‘document’ means ‘document’ as that term is defined in the Evidence Act (Cth) 1995. In the financial years ending 2016 to the date of this subpoena in respect of the Recipient of this Subpoena:
a. Any agreements in respect of work which the Plaintiff performed or was to perform for the Recipient (Agreements);
b. Any emails, letters, minutes and notes regarding the Agreements;
c. Any invoices, receipts, statements regarding the Agreements;
d. Any constitution of the Recipient;
e. Any shareholder agreement in respect of the Recipient;f. Any loan applications involving the Recipient (Loans);
g. Any emails, letters, minutes, and notes regarding the Loans;
h. Financial statements including end of year journals;
i. Bank Statements;
j. Tax returns;
k. Authorities to lodge returns; and
l. Business Activity Statements.
Mr Muir
The documents and things you must produce are as follows:
In this Subpoena, ‘document’ means ‘document’ as that term is defined in the Evidence Act (Cth) 1995.
1.In the financial years ending 2016 to the date of this subpoena in respect of the DMD Unit Trust the following documents:
a. Any trust deeds including variations or amendments to the trust deed (except if such documents have been provided pursuant to Rule 620 of the Court Procedure Rules 2006 (ACT));
b. Any unit holder agreements;
c. Any loan applications involving the DMD Unit Trust (Loans);
d. Any emails, letters, minutes and notes regarding the Loans;
e. Any receipts for interest payments made in relation to Loans;
f. Resolutions of the trust including in relation to the distributions to be made;
g. Documents or certificates regarding issue of units;
h. Financial statements;
i. Tax returns;
j.
Authorities to lodge returns; and [sic]k.
Business Activity Statements;l. Bank Statements;
2.In the financial years ending 2016 to the date of this subpoena in relation to Sans Damada Pty Ltd (ACN: 161 369 062) the following documents:
a. Any constitution;
b. Any shareholder agreement;
c. Any loan applications involving Sans Damada Pty Ltd (Loans);
d. Any emails, letters, minutes and notes and document [sic] regarding the Loans;
e. Any receipts for interest payments made in relation to Loans;f. Financial statements;
g. Tax returns;
h. Authorities to lodge returns; and[sic]
i. Business Activity Statements; andj. Bank Statements.
3.In the financial years ending 2016 to the date of this subpoena in respect of the Muir Family Trust Deed the following documents:
a.Any trust deeds including variations or amendments to the trust deed (except if such documents have been provided pursuant to Rule 620 of the Court Procedure Rules 2006 (ACT));
b.Any unit holder agreements;c.Any loan applications involving the Muir Family Trust (Loans);
d.Any emails, letters, minutes and notes and document [sic] regarding the Loans.
e.Resolutions of the trust including in relation to the distributions to be made;
f.Documents or certificates regarding issue of units;g.Financial statements;
h.Tax returns;
i.Authorities to lodge returns;
j.Business Activity Statements; andk.Bank Statements.
4.
In the financial years ending 2016 to the date of this subpoena in relation to Cadasystems Pty Ltd (ACN: 169 793 284) the following documents:
a.Any constitution;
b.Any shareholder agreement;
c.Any loan applications involving Cadasystems Pty Ltd (ACN: 169 793 284) (Loans);
d.Any emails, letters, minutes and notes and document [sic] regarding the Loans;
e.Financial statements;
f.Tax returns;
g.Authorities to lodge returns; and
h.Business Activity Statements.
5.In the financial years end 2016 to the date of this subpoena in respect the [sic] Recipient of this Subpoena the following documents:
a.Any loan applications involving the Recipient of this Subpoena (Loans);
b.Any emails, letters, minutes and notes and document [sic] regarding the Loans.
c.Financial statements;
d.Tax returns;
e.Authorities to lodge returns; and
f.Business Activity Statements.
Freewater Accountants
The documents and things you must produce are as follows:
In this Subpoena, ‘document’ means ‘document’ as that term is defined in the Evidence Act (Cth) 1995.
1.In the financial years ending 2016 to the date of this subpoena in respect of the DMD Unit Trust the following documents:
a. Any trust deeds including such variations or amendments to the trust deed (except if such documents have been provided pursuant to Rule 620 of the Court Procedure Rules 2006 (ACT));
b. Any unit holder agreements;
c. Any loan applications involving the DMD Unit Trust (Loans);
d. Any emails, letters, minutes and notes regarding the Loans;
e. Any receipts for interest payments made in relation to Loans;
f. Resolutions of the trust including in relation to the distributions to be made;
g. Documents or certificates regarding issue of units;
h. Financial statements including end of year journals;
i. Tax returns;
j. Authorities to lodge returns;
k. Business Activity Statements; andl. Bank Statements;
2.In the financial years ending 2016 to the date of this subpoena in relation to Sans Damada Pty Ltd (ACN: 161 369 062) the following documents:
a.Any constitution;
b.Any shareholder agreement;
c.Any loan applications involving Sans Damada Pty Ltd (Loans);
d.Any emails, letters, minutes and notes regarding the Loans;
e.Any receipts for interest payments made in relation to Loans;f.Financial statements including year journals;
g.Tax returns;
h.Authorities to lodge returns;
i.Business Activity Statements; andj.Bank Statements.
3.In the financial years ending 2016 to the date of this subpoena in respect of the Muir family Trust Deed the following documents:
a.Any trust deeds including variations or amendments to the trust deed (except if such documents have been provided pursuant to Rule 620 of the Court Procedure Rules 2006 (ACT));
b.Any unit holder agreements;c.Any loan applications involving the Muir Family Trust Deed (Loans);
d.Any emails, letters, minutes and notes regarding the Loans.
e.Resolutions of the trust including in relation to the distributions to be made;
f.Documents or certificates regarding issue of units;g.Financial statements including any end of year journals;
h.Tax returns;
i.Authorities to lodge returns;
j.Business Activity Statements; andk.Bank Statements.
4.In the financial years ending 2016 to the date of this subpoena in relation to Cadasystems Pty Ltd (ACN: 169 793 284) the following documents:
a.Any constitution;
b.Any shareholder agreement;
c.Any loan applications involving Cadasystems Pty Ltd (ACN: 169 793 284) (Loans);
d.Any emails, letters, minutes and notes regarding the Loans;
e.Financial statements;
f.Tax returns;
g.Authorities to lodge returns; and
h.Business Activity Statements.
5.In the financial years ending 2016 to the date of this subpoena in respect the [sic] Recipient of this Subpoena the following documents:
a.Any agreements in respect of work which the Plaintiff performed or was to perform for the Recipient (Agreements);
b.Any emails, letters, minutes and notes regarding the Agreements;
c.Any invoices, receipts, statements regarding the Agreements;
d.Any constitution of the Recipient;
e.Any shareholder agreement in respect of the Recipient;f.Any loan applications involving the Recipient (Loans);
g.Any emails, letters, minutes, and notes regarding the Loans;
h.Financial statements including end of year journals;
i.Tax returns;
j.Authorities to lodge returns;
k.Business Activity Statements; andl.Bank Statements.
Relevant principles
Rule 6604 of the Court Procedures Rules 2006 (ACT) gives the Court power to set aside a subpoena completely or partly. This power, its predecessors and comparable powers in other jurisdictions have been the subject of reported cases stretching back to the late nineteenth century discussing the grounds upon which a subpoena can or should be set aside. One such ground, recognised in this country since the expression was used in Maddison v Goldrick [1976] 1 NSWLR 651 at 666, 668 (Samuels JA, with whom Street CJ and Moffitt P agreed), is that the documents identified in the subpoena are not being sought for a “legitimate forensic purpose”.
“Legitimate forensic purpose” is a protean concept. What one regards as legitimate in the context of a subpoena for production in a civil proceeding will depend on the nature of the proceeding in which it has been issued, and contemporary approaches to civil litigation more generally. In Secretary of the Department of Planning, Industry and Environment v Blacktown City Council [2021] NSWCA 145 (Blacktown CC) Bell P (with whom Brereton and McCallum JJA agreed) said at [58]:
As Moffitt P observed in [National Employers’ Mutual General Association Ltd v Waind [1978] 1 NSWLR 372], writing in 1978, “concepts as to what is appropriate between parties have changed in favour of fuller disclosure of relevant matters”: at 384. Examining the question more than 40 years later, one important contemporary contextual matter that informs the Court’s consideration of the proper use of subpoenas in civil litigation is s 56 of the Civil Procedure Act and its identification of the overriding purpose of that Act and of the Uniform Civil Procedure Rules in their application to civil proceedings, namely to “facilitate the just, quick and cheap resolution of the real issues in the proceedings”. An appropriately targeted subpoena may advance the overriding purpose in a particular case, even though it may not be able to be shown that the documents subpoenaed either will or will be likely to assist the case of the party that has issued the subpoena.
Blacktown CC concerned a subpoena issued in proceedings in the Land and Environment Court of NSW. However, what was said in that case is relevant here. Rule 33.4 of the Uniform Civil Procedure Rules 2005 (NSW), which applied in that case, is in substantially the same terms as r 6604, and decisions on setting aside subpoenas in other common law jurisdictions have long been regarded as providing useful guidance. In addition, s 56 of the Civil Procedure Act 2005 (NSW), referred to by Bell P in the passage set out above, is a direct analogue of s 5A of the Court Procedures Act 2004 (ACT). The decision has been relied on in this Court: Bloc (ACT) Pty Ltd v Crafted Capitol Pty Ltd (in liq) (No 3) [2021] ACTSC 178, [17]–[18] (McWilliam AsJ).
Consideration of whether a subpoena lacks any legitimate forensic purpose, and is therefore to be set aside, must now proceed by reference to the main purpose set out in s 5A. In particular, attention needs to focus on whether the subpoena is apt to assist “the just resolution of the real issues” in the proceeding rather than taking any narrow view of what is put in issue by the pleadings or what material is apparently relevant to those issues. It must also recognise that a “subpoena to produce documents is an important means of establishing the facts in issue in litigation and thereby enabling justice to be done”: Lane v Registrar of the Supreme Court of New South Wales (1981) 148 CLR 245, 259. However, other considerations referred to in s 5A (including proportionality between the importance of the dispute and the costs generated) should not be ignored.
In Blacktown CC, Bell P continued:
There is a danger in using the language of “tests” for the setting aside of subpoenas and such terminology should, in my opinion, be eschewed. It is sufficient to observe that subpoenas will and should be set aside when they can be seen to involve or amount to an abuse of process as part of the Court’s general power to regulate and protect its own processes. Such a power is not to be restricted to defined and closed categories: see CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345 at 392. The variety of grounds on which a subpoena may be set aside is illustrated by the list of examples supplied by Powell J in [Botany Bay Instrumentation and Control Pty Ltd v Stewart [1984] 3 NSWLR 98] at 100 (see [45] above).
As Brereton J said in [A v Z [2007] NSWSC 899; 212 FLR 255] at [3], a “subpoena will self‐evidently be an abuse of process if it is not issued for a legitimate forensic purpose, of which it is an instance if it has not been issued bona fide for the purpose of obtaining relevant evidence.” Evidence in that sense need not be admissible evidence and, as Samuels JA observed in Maddison v Goldrick [1976] 1 NSWLR 651] at 663, documents subpoenaed for the purposes of cross-examining a witness have been treated as documents required for the purposes of evidence. This extends to cross-examination on issues of credit: see, eg, [Brand v Digi‐Tech [2001] NSWSC 425] at [36]; Norris v Kandiah [2007] NSWSC 1296 at [3]; and Liristis v Gadelrabb [2009] NSWSC 441 at [5] (Liristis). In Liristis, copies of the plaintiff’s criminal records regarding any convictions for dishonesty, particularly perjury, and any convictions under the Oaths Act 1900 (NSW) were successfully subpoenaed in circumstances where there was evidence before the Court that an earlier conviction for perjury had been quashed but a new trial ordered; see also Lowery at [10], [54].
The particular controversy in Blacktown CC was as to whether it was necessary to demonstrate any degree of likelihood that the documents sought would assist the party that issued the subpoena. It was held that that need not be demonstrated; it was sufficient that the documents were such as to be likely to “materially assist on an identified issue” (at [65]; see also Brereton JA at [89], McCallum JA at [98]). As it had been put by Young JA in Nicholls v Michael Wilson & Partners Limited [2010] NSWCA 100 at [34] (cited in Blacktown CC at [67]), a legitimate forensic purpose exists if the person issuing the subpoena “has a reasonable cause to believe the documents subpoenaed have the capacity to throw some light on the issues in the proceedings”.
The party issuing the subpoena bears at least the forensic onus of demonstrating potential relevance in that sense: Sahore v Ahmad [2021] ACTSC 30, [22]. Faced with an application to set the subpoena aside, that party will need to explain the way in which the documents sought have the potential to shed light on the issues in the proceeding. That explanation will normally proceed by reference to the pleadings (if there are pleadings), the evidence likely to be adduced at the hearing, and such other evidence as is adduced specifically on the application to set aside the subpoena.
The subpoena to Freewater Australia
The disputed aspects of this subpoena concern, first, “any loan applications involving the Recipient” together with certain documents regarding those loans (paras (f)–(g)), and second, financial statements and bank statements (paras (h)–(i)).
Loan applications
As to the documents concerning loans, submissions for the defendants were advanced on the basis that Freewater Australia ran an accountancy practice. Some connection with financial services can perhaps be inferred from its apparent connection with Mr Muir and Freewater Accounting. If Freewater Australia was involved in this line of work at relevant times, a subpoena seeking loan applications “involving” it (and documents related to those applications) is, at least on one reading, extremely broad and apt to capture a large class of documents of which only a tiny fraction (if any) might have anything to do with the case.
Counsel for Mr Wornes pointed out that, in fact, there was no evidence before the Court concerning the nature of the first defendant’s business except for what he described as speculation in his client’s affidavit. Mr Wornes’ affidavit includes his recollection (for which he claimed no firm basis) that “Freewater Australia commenced first then the accounting side became Freewater Accountants and Freewater Australia became an overarching company”.
That, however, is more a problem for Mr Wornes than for the defendants, given the onus that he bears. If there were a basis in the evidence to conclude that Freewater Australia did not ordinarily enter into loans, or have clients who it assisted in organising loans, these paragraphs of the subpoena might be said to be fairly tightly focused on transactions potentially relevant to the proceeding. However, that focus can not be said to be present if nothing is known about Freewater Australia’s business. Further, Mr Wornes’s affidavit (currently the only evidence on the point) is unhelpful in that it suggests that Freewater Australia has an accounting practice as a subsidiary. This makes it at least possible that it is “involved” in one capacity or another in loan applications, as part of its business, for itself or for clients whose affairs have nothing to do with the issues in the proceeding (and whose private dealings should not be disclosed without good reason).
A narrower version of these paragraphs might well be shown to have a legitimate forensic purpose. In correspondence, Mr Wornes’s solicitor suggested as a compromise redrafting para (f) so as to refer to “loan applications (which includes informal requests for funds from third parties that are not financial institutions) involving the Recipient which relate to the Plaintiff or monies payable to the Plaintiff” (emphasis in original). That reformulation causes difficulty in that in one respect it expands the paragraph rather than limiting it. The proposed limiting words (“which relate to the Plaintiff …”) might have been sufficient if they had been included in the terms of the subpoena. However, they represent one of several ways in which the paragraph might have been narrowed down.
In Lowery v Insurance Australia Ltd [2015] NSWCA 303; 90 NSWLR 320 at [24]–[25], Basten JA accepted that a narrower version of the impugned subpoena would have been permissible but held that it was not the task of the Court to redraft it, and therefore set the subpoena aside. That reasoning applies here. It may be permissible for the Court (for example) to strike out certain words or shorten the period for which documents are sought. However, the present problem cannot be solved by simple amendments of that kind (in effect setting aside part of the subpoena’s coverage). Rather, bringing the requisite focus to these paragraphs involves making a forensic choice which the Court cannot make on Mr Wornes’s behalf.
Paragraphs (f) and (g) of this subpoena should be set aside.
Financial records
Freewater Australia is a party to both of the loan agreements pleaded in the proceeding. Its financial statements and bank statements for relevant periods are capable of shedding light on the issues in the proceeding, at least by being used in cross-examination and possibly in other ways as well: for example, by establishing whether any advances were made by Mr Wornes; what (if anything) was done with those funds; how the liabilities reflected in the loan agreements were accounted for; when payments were made; and possibly what the sources were of funds for those payments.
Counsel for the defendants drew attention to the long period in respect of which documents are sought. The form of words used to define the relevant period in the subpoena is somewhat unclear (“in the financial years ending 2016 to the date of this subpoena”); however, after hearing from counsel, I take it to mean from 1 July 2015 to the day the subpoena was issued (8 April 2022).
I do not regard the length of this period, in itself, as a potential reason to set aside the subpoena. As noted earlier, the application was not put on the basis of oppression and there is no evidence going to that issue. The question is whether documents generated throughout the whole of that period have the potential to shed light on issues in the proceeding.
No real attempt was made to argue that the period covered by the subpoena is too long from the point of view of legitimate forensic purpose. The starting point (1 July 2015) is more than three years before the first loan agreement was executed. However, I accept that there were various dealings between Mr Wornes and Mr Muir commencing before that time, and Mr Wornes claims to be somewhat in the dark about which particular entities Mr Muir either worked for or used to effect these transactions. The finishing point (the date of issue of the subpoena in April 2022) is perhaps more questionable; however, no distinct complaint was made in relation to this aspect.
I will allow paragraphs (h) and (i) of this subpoena.
The subpoena to Mr Muir
Clause 3 of this subpoena concerns the Muir Family Trust (the Trust). Despite certain paragraphs in the clause not being pressed, what remains is a very broad inquiry into the affairs of that Trust over a period of nearly seven years including all resolutions of the Trust, all loan applications in which it was involved (and associated documents) and all of its financial reports, tax returns and bank statements.
The Trust appears in the pleaded facts only in two tangential ways. First, I was informed that the first loan agreement included a provision authorising Mr Wornes to place a caveat on a particular parcel of land in NSW and identified the Trust as the owner of the land. Secondly, in response to the paragraph of the Amended Statement of Claim noting the payment of $80,000 in February 2021, the Amended Defence (unsurprisingly) admits the payment and (unnecessarily) says that the payment was made on behalf of Freewater Australia by Mr Muir in his capacity as trustee of that Trust.
Counsel for Mr Wornes pointed to aspects of the evidence that suggest a deeper involvement of the Trust in the uses to which some of the money advanced was put (or as an entity that benefited in some way from the matters sought to be recognised, and treated as giving rise to debts, in the loan agreements). The second loan agreement, at least, appears to have been related to the completion of work on the property in NSW which Mr Muir owned in his capacity as trustee of that Trust.
It was put in oral submissions this way:
So once you have that connection there it then becomes a relevant question as to the loan, the relationship, the terms and various other matters, particularly in a context where he keeps saying, 'I don't need to pay anything back. This isn’t the arrangement. The arrangement is with Freewater Australia,' and so on.
So we say that the Muir Family Trust actually ties in far more specifically to the entitlements and the returns which my client is entitled to under the debenture agreement, which agreement was drafted by Mr Muir and the estimated value of which was calculated by Mr Muir. So we don't actually have the information to say exactly how the loans were calculated.
They were numbers provided by Mr Muir, and Mr Muir is trying to put a case that the debenture agreement is in fact not what it appears to be in any event. So there is a question of who the relevant parties are to the debenture agreement, how the funds making up my client’s entitlements pursuant to the debenture agreement arise and the interconnectedness between the borrowings, because – between the DMD Trust and potentially Mr Muir or potentially other entities.
Because he says to my client, ‘I have loaned the money out at good interest. You will get your return,’ but we don’t have any details of any of that information.
The claim is in contract. It relies upon two loan agreements in which Freewater Australia is said to have undertaken obligations to pay money, and in one of which Mr Muir guaranteed those obligations. There is no claim relying on any obligations said to arise outside the framework of those contracts. Issues are raised by the defendants as to the extent to which money has actually become due for payment. However, these are questions as to what the parties agreed in the contracts that they made. What the parties were thinking about or basing their calculations on at the time of entering into each contract appears to be relevant only to the extent that it might provide material for cross-examination; and the machinations of the second defendant’s financial interests at later times seem unlikely to be relevant even in that way. Investigating those interests with a view to finding out whether there is some other basis upon which a claim could be made against him would not, of course, be a proper purpose for a subpoena.
For these reasons, while it may be that a more specific class of documents relating to the Trust could be identified such that a subpoena to obtain those documents would have a legitimate forensic purpose, I do not think this can be said of the contested paragraphs of cl 3 as they stand.
Paragraphs 3(a), (c), (d), (e), (g), (h), (i) and (k) of the subpoena should therefore be set aside.
Although counsel for the plaintiff said at one point that the only contested aspects of this subpoena were the paragraphs discussed above, the correspondence and the submissions for the defendant indicated that paras 5(a) and (b) were also still pressed and resisted.
These paragraphs are in the same form as paras 5(f) and (g) of the subpoena to Freewater Australia, which I have decided should be set aside. In the context of the subpoena to Mr Muir, I read these paragraphs as referring to loans “involving” him in a personal capacity, and not including transactions that he worked on in the course of his employment with Freewater Australia or Freewater Accountants (or any other entity) except for those, if any, in which he also had a personal interest.
Mr Muir was the guarantor under the first loan agreement, and it is apparent that both agreements arose out of a long course of personal and business dealings between him and Mr Wornes. Information concerning any other loans or proposed loans to which Mr Muir was a party (or that he was attempting to arrange between other parties for his own purposes) has a clear potential to shed light on the circumstances in which the two loan agreements in issue were made and, thus, the contractual rights arising from them. I will therefore allow paras 5(a) and (b).
Freewater Accountants
Freewater Accountants is not a party to the proceedings. However, it is clearly connected to the events that give rise to the proceedings. Mr Wornes understood himself to be employed by that company for a period, and also understood that the second defendant played some role in it.
The controversial aspects of this subpoena are in cls 3 and 5.
Clause 3 is in the same terms as cl 3 of the subpoena issued to Mr Muir. For reasons set out above at [32]–[37], I do not consider that Mr Wornes has a legitimate forensic purpose in seeking the categories of documents referred to in this clause.
The parts of cl 5 that remain contested (paras (f)–(i)) are in the same terms as the corresponding paragraphs of the subpoena to Freewater Australia, which are discussed above at [21]–[30], although in this instance the claim for tax returns appears still to be pressed. The difference is that the “Recipient” referred to in these paragraphs is Freewater Accountants rather than Freewater Australia.
The paragraphs that relate to loan documents are more clearly problematic in this instance, for two reasons. One is that Freewater Accountants was not a party to any of the contracts whose terms are in issue and its own borrowing seems very unlikely to shed any light on the issues in the proceeding. The other is that, because there does not seem to be any doubt that this entity was engaged in running an accounting practice, the likelihood of it having been “involved” in “loan applications” made by or for other persons in the course of that practice is fairly clear. These paragraphs therefore seek a very wide category of documents, in circumstances where the likelihood of even a handful of them shedding light on the issues in the proceeding appears small.
The basis upon which I consider that the financial reports and records of Freewater Australia are potentially relevant does not apply here, because Freewater Accountants is not a party to either of the loan agreements.
However, records of Freewater Accountants may have sufficient relevance to be the proper target of a subpoena, in that Mr Wornes apparently worked for that company from 2014 up to (on his evidence) April 2021; and the Amended Defence alleges that part of the $350,000 “principal” in the first loan agreement reflects amounts owed by the company to him. The testing of that allegation could potentially be assisted by obtaining relevant documents from Freewater Accountants’ financial and other records. The documents sought travel far beyond those (if any) specifically referring to Mr Wornes. However, access to the entire corpus of documents may be needed in order to discern what entries are relevant, see them in context and understand them.
I will therefore allow paras 5(f), (g), (h) and (i) of the subpoena. However, paras 3(a), (c), (d), (e), (g), (h), (i) and (k) should be set aside.
Costs
The defendants’ Application in Proceeding seeks costs but the issue was not addressed in the submissions of the parties. The costs of the Application will be reserved.
Orders
The orders of the Court are therefore as follows.
(1)Paragraphs (f) and (g) of the schedule to the subpoena dated 8 April 2022 and addressed to the first defendant are set aside.
(2)Paragraphs 3(a), (c), (d), (e), (g), (h), (i) and (k) of the schedule to the subpoena dated 8 April 2022 and addressed to the second defendant are set aside.
(3)Paragraphs 3(a), (c), (d), (e), (g), (h), (i) and (k) of the schedule to the subpoena dated 8 April 2022 and addressed to Freewater Accountants Pty Limited are set aside.
(4)The Application in Proceeding filed on 6 May 2022 is otherwise dismissed.
(5)Costs reserved.
| I certify that the preceding fifty-one [51] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Kennett Associate: Date: |
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