FEDERAL COURT OF AUSTRALIA Elkateb v Lawindi, in the matter of Elkateb [2000] FCA 1561 PRACTICE AND PROCEDURE – whether subpoena to produce should be set aside McCallum v Ifield [1969] 2 NSWLR 329 at 330 referred to Angor Pty Ltd v Ilich Motor Company Pty Ltd (1992) 37 FCR 65 referred to Adams v London Improved Motor Coach Builders Ltd [1921] 1 KB 495 referred to IN THE MATTER OF MOHAMED SAFWAT ELKATEB MOHAMED SAFWAT ELKATEB V WASFY LAWINDI N 7299 of 2000 STONE J 23 OCTOBER 2000 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 7299 OF 2000 BETWEEN: MOHAMED SAFWAT ELKATEB APPLICANT AND: WASFY LAWINDI RESPONDENT JUDGE: STONE J DATE OF ORDER: 23 OCTOBER 2000 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The subpoena for production addressed to Ian John Cheney filed on 22 June 2000 be set aside. 2. The applicant pay the respondent's costs of these proceedings in relation to the respondent's notice of motion except in relation to 13 October 2000. 3. The respondent pay the applicant's costs in relation to 13 October 2000. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 7299 OF 2000 BETWEEN: MOHAMED SAFWAT ELKATEB APPLICANT AND: WASFY LAWINDI RESPONDENT JUDGE: STONE J DATE: 23 OCTOBER 2000 PLACE: SYDNEY REASONS FOR JUDGMENT 1 The notice of motion which I am asked to consider today was filed on 18 July 2000 and concerns the subpoena for production issued on 22 June 2000 and addressed to Ian John Cheney of Turner Freeman Solicitors. The notice asks that the subpoena be set aside. 2 The respondent, who is the applicant under the notice of motion, has submitted that the subpoena does not relate to the issue on which the applicant challenges the bankruptcy notice. The bankruptcy notice is based on a judgment debt arising from an order of the Local Court in the amount of $4,783.24. The applicant has applied to set aside the bankruptcy notice. He claims that he has a counter claim, set off or cross demand for an amount which exceeds the debt claimed under the bankruptcy notice and which he could not have set up in the Local Court proceedings. He bases his claim on s 40(1)(g) of the Bankruptcy Act 1996 (Cth) (the Act). Importantly the application does not dispute the validity of the debt claimed in the bankruptcy notice. 3 The schedule to the subpoena list the following documents which Mr Cheney is required to produce: 1. Copies of all memorandum of fees and disbursements sent by Turner Freeman to Wasfy Lawindi with respect to any legal proceedings in any court between the Applicant and the Respondent. 2. Copies of all documents with respect to cost agreements between Turner Freeman and Wasfy Lawindi regarding any legal proceedings in any court between the Applicant and the Respondent. 3. Copies of all documents with respect to any demands made by Turner Freeman to Wasfy Lawindi for payment of legal fees incurred by Wasfy Lawindi regarding any legal proceedings in any court between the Applicant and the Respondent. 4 The respondent submits that the material referred to in the Subpoena could only be relevant to establishing that the debt underlying the court order does not exist and that such material is irrelevant to the present challenge to the bankruptcy notice. The respondent also submits that the court's power to go behind a judgment debt is limited and that where there is a court order for costs, those costs have been assessed and there was an opportunity of appeal, this Court should not exercise its power to go behind that debt. 5 In his submissions, the applicant did not address the respondent's submission that the documents listed in the subpoena were not relevant to the basis on which he was challenging the bankruptcy notice even when I specifically invited him to do so. Instead his arguments were directed to establishing that the respondent had no legal obligation to pay his solicitors' costs and, on that basis, that there was no debt underlying the Local Court's costs order. The applicant's submissions were based on the indemnity principle. He referred to McCallum v Ifield [1969] 2 NSWLR 329 and specifically drew my attention to the comment of Taylor J at 330 where his Honour stated: "It is established that if a party to an action has an agreement with his solicitor that he will not have to pay any costs then he cannot recover party and party costs against the adversary." 6 However the applicant's reasons for challenging the bankruptcy notice do not challenge the debt. In fact, his claim that he has a counter claim, set off or cross demand for an amount which exceeds the debt claimed under the bankruptcy notice and which he could not have set up in the Local Court proceedings implicitly admits the debt. It follows that a subpoena, which is directed to the production of documents that are to be used to attack the debt, is irrelevant to the issue in these proceedings. 7 It may be, as counsel for the respondent commented, that the applicant could seek to expand the scope of his challenge to the bankruptcy notice and issue a similar subpoena. Therefore it may be helpful if I briefly record my views as to the scope of the subpoena and its relevance in relation to a challenge to the validity of the debt referred to in the bankruptcy notice. 8 Although the indemnity principle is clearly established, the limits of that principle should also be noted. In this regard the comments of French J in Angor Pty Ltd v Ilich Motor Company Pty Ltd (1992) 37 FCR 65 at 72 are relevant. In that case, referring to the case of Adams v London Improved Motor Coach Builders Ltd [1921] 1 KB 495, French J commented "the decision in Adams is clear authority for the proposition that the indemnity principle will permit recovery of costs by a successful party who is under a legal liability to his solicitors to pay them even though the likelihood of being called upon to do so is remote." 9 Having considered the three categories of documents described in the subpoena, it seems to me that, even if the challenge to the bankruptcy notice included a challenge to the validity of the relevant debt, the subpoena is defective. I will comment on each category in turn. 10 The documents in the first category are irrelevant. Were such memoranda of fees and disbursements to exist it seems to me that they would be against the applicant as evidencing a demand by the solicitors. If they do not exist then this would be of little assistance to the applicant . 11 Category two, including as it does all documents with respect to cost agreements, is too wide. The bankruptcy notice is based on a specific debt relating to specific proceedings. 12 Category three suffers from the combined effects of the first two in that for similar reasons it is both irrelevant and too wide. 13 For these reasons, the court orders that: 1.The subpoena for production addressed to Ian John Cheney filed on 22 June 2000 be set aside. 2.The applicant pay the respondent's costs of these proceedings in relation to the respondent's notice of motion except in relation to 13 October 2000. 3.The respondent pay the applicant's costs in relation to 13 October 2000. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stone. Associate: Dated: 2 November 2000 Counsel for the Applicant: The applicant appeared in person Counsel for the Respondent: Mr R P Freeman Solicitor for the Respondent: Turner Freeman Date of Hearing: 23 October 2000 Date of Judgment: 23 October 2000