Bidald Consulting (t/as Forstaff) v Miles Special Builders [2005] NSWSC 977

New South Wales Supreme Court

CITATION : Bidald Consulting (t/as Forstaff) v Miles Special Builders [2005] NSWSC 977

HEARING DATE(S) : 23 September 2005

JUDGMENT DATE : 23 September 2005

JURISDICTION : Equity

JUDGMENT OF : Campbell J

DECISION : Notice to produce not vitiated by nominating less than 14 days after service to produce documents. Some paragraphs of notice to produce held valid, others not valid.

CATCHWORDS : PROCEDURE - Uniform Civil Procedure Rules - notices to produce - time for compliance - whether order required abridging time if notice served requiring production in less than 14 days - whether notice to produce can be valid in part - onus of proof concerning reasonableness of time for production of documents pursuant to notice to produce - relevance of immediately pending trial to reasonableness of time period for production of documents pursuant to notice to produce

Supreme Court Rules 1970 LEGISLATION CITED : Uniform Civil Procedure Rules 2005

Bidald Consulting Pty Ltd (t/as Forstaff) - Plaintiff PARTIES : Miles Special Builders Pty Ltd (subject to Deed of Company Arrangement) - Defendant

FILE NUMBER(S) : SC 2583/05

MR Aldridge SC; VE Whittaker - Plaintiff COUNSEL : G Lucarelli; EW Young - Defendant

Kemp Strang - Plaintiff SOLICITORS : Colin Biggers & Paisley - Defendant

LOWER COURT JURISDICTION :

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST

CAMPBELL J

FRIDAY 23 SEPTEMBER 2005

2583/05 BIDALD CONSULTING PTY LIMITED (T/AS FORSTAFF) v MILES SPECIAL BUILDERS PTY LIMITED (SUBJECT TO DEED OF COMPANY ARRANGEMENT) JUDGMENT – Ex Tempore 1 HIS HONOUR: A point has arisen concerning the construction of a provision relating to Notices to Produce in the Uniform Civil Procedure Rules 2005. Part 21 division 2 sets out the regime under which Notices to Produce can be served between parties, where the notices require production of documents for inspection, out of court. (By comparison, Part 34 applies to Notices to Produce which require production of documents to the Court, either at the hearing or at some other time fixed by the Court). Rule 21.10 sets out the power for one party (A) to issue a Notice to Produce on the other (B). Rule 21.11 provides: "21.11 Production under notice to produce (cf SCR Part 23, rule 2(3) and (4); DCR Part 22, Rule 2 (3) and (4)) (1) Unless the court orders otherwise, party B must, within a reasonable time after being served with a notice to produce: (a) produce for party A's inspection such of the documents or things referred to in the notice (other than privileged documents) as are in party B's possession, and (b) serve on party A, in respect of any document that is not produced, a notice stating: (i) that the document is a privileged document, or (ii) that the document is, to the best of party B's knowledge, information and belief, in the possession of a person identified in the notice, or (iii) that party B has no knowledge, information or belief as to the existence or whereabouts of the document. (2) For the purposes of subrule (1): (a) unless party B establishes to the contrary, 14 days or longer after service of the notice is to be taken to be a reasonable time, and (b) unless party A establishes to the contrary, less than 14 days after service of the notice is to be taken to be less than a reasonable time." 2 In this case, the plaintiff served a Notice to Produce on the defendant on Monday of this week (today being a Friday). It was served in the usual way, between solicitors. It required production of documents to take place on Wednesday of this week. On Wednesday the question of its validity arose before the Court, and that question was stood over to today. Notices Always Invalid if Less than 14 Days Allowed and Time not Abridged? 3 Mr Lucarelli, for the defendant, submits that the notice is invalid by reason of not having provided 14 days in which to have compliance occur. He submits that it is a consequence of Rule 21.11 that a party who wishes to serve a Notice to Produce which allows less than 14 days for compliance must approach a registrar, or a duty judge and obtain an abridgment of the 14 day period. Such an abridgment, he submits, is provided for by the Rule recognising that the Court might "otherwise order". He submits that, if that procedure was not required, it would be open to any party to litigation to wreck the preparation for trial of their opponent by serving extensive Notices to Produce immediately before the hearing, and to require diversion of resources to dealing with the Notice to Produce, rather than the actual preparation of the case. 4 I do not accept that submission. The Notice to Produce procedure under Part 21 is designed to provide a means whereby a party to litigation can obtain documents from another party, with a legal sanction for non-compliance, but without involving the Court in the issuing of the documentation or in the receipt of the documents which are produced. There are many cases where a Notice to Produce served with less than 14 days notice could readily be complied with. 5 In my view, there is an appropriate analogy to be drawn with the way in which conduct money was dealt with under the former Supreme Court Rules 1970, and continues to be dealt with under Rule 33.6(1) Uniform Civil Procedure Rules 2005. That rule excuses a person from complying with the requirements of a subpoena unless conduct money is provided a reasonable time before the date on which attendance is required. That conduct money is defined in Rule 33.1 as: "… a sum of money or its equivalent, such as pre-paid travel sufficient to meet the reasonable expenses of the addressee of attending court as required by the subpoena and returning after so attending." 6 The obligation under Rule 21.11 being worded as it is, requiring the recipient of the Notice to produce documents "within a reasonable time after being served with a notice to produce", has its own reasonableness rule built in it. In a similar way, the conduct money provisions have their own reasonableness rule built in. If a party to litigation is served with a Notice to Produce which stipulates a time which is not reasonable, for compliance, then Rule 21.11 has the result that the Notice is ineffective. Just as a person served with a subpoena and given inadequate conduct money can take the chance of not complying, and defend any application, perhaps for contempt, which might be made against him, on the ground that the conduct money was inadequate, so the recipient of a Notice to Produce can make the decision to not comply with it, and take the chance, again possibly in proceedings for contempt, that it will be found that the time allowed was a reasonable time. Anyone who wishes not to take this chance can always apply to the Court to have the Notice to Produce set aside. In a similar way, a prudent recipient of a subpoena might decide to apply to the Court to have a subpoena set aside if inadequate conduct money were tendered. 7 I do not accept that there is any requirement for the party issuing a Notice to Produce to obtain any sort of order, whether from a judge or a registrar, shortening the time under Rule 21.11 to less than the 14 days provided by Rule 21.11(2) before the Notice is served. Rather, the effect of Rule 21.11(2) is to establish a rule concerning onus of proof – if the party serving a Notice wants to contend that the time allowed for compliance with a particular Notice is reasonable even though it is less than 14 days, that party bears the onus of so proving. Conversely, if the recipient of a Notice to Produce wants to contend that the time allowed is not reasonable even though it is 14 days or longer, it bears the onus of so proving. The capacity of the Court to "otherwise order", under Rule 21.11 (1) is directed to the obligation to produce, contained in Rule 21.11 (1). It enables the Court to order that, even though a Notice to Produce has been served which requires production of documents which are not privileged, that Notice need not be complied with in whole or part. The reasons why the court might "otherwise order" might include that the documents were irrelevant, or that production was oppressive. I cannot conceive that the drafter intended that the Court could, by "ordering otherwise" require a party to produce documents within a time which the court believed was unreasonable. 8 Thus, the fact that the Notice to Produce nominated less than 14 days after service to produce the documents is not enough, of itself, to vitiate it. 9 Rather, the question which must be asked is whether this particular Notice is an effective Notice - that is, is the period of less than 14 days which it allowed, a reasonable time in all the circumstances. In deciding what was a reasonable time, a court would ordinarily take into account the fact that, immediately prior to a trial, parties are likely to be busy with preparation for the trial itself. 10 The onus is on the issuer of the Notice to establish that less than 14 days is a reasonable time. It is possible for evidence to be adduced on that question. Can a Notice to Produce be Valid in Part? 11 The Notice to Produce in question contains some 15 paragraphs. Mr Aldridge SC, for the plaintiff, seeks to support only 6 of them. That gives rise to a preliminary question, of whether it is possible for a Notice to Produce to be valid in part. 12 In my view it can. Mr Lucarelli submitted that the obligation which arises under Rule 21.11 is an absolute one - that what the recipient of a Notice to Produce must do is produce all of the documents or things referred to in the Notice other than privileged documents which are in his or her possession, and serve a Notice accounting (in the way para (b) of Rule 21.11(1) requires) for all of the documents or things referred to in the Notice which are not actually produced. And further, what is a reasonable time is to be gauged by how long it takes to carry out the whole of those tasks. 13 While that is a construction which is open as a matter of grammar, it does not strike me as the preferable construction as a matter of the purpose of the rules. If it were not possible to subdivide a Notice to Produce, so that some parts listing categories of documents were regarded as valid and some were not, this would only lead to the pointless exercise of the service of multiple simple Notices to Produce, which together added up to a somewhat more complex Notice to Produce. That type of waste of time and effort can hardly have been intended. 14 In my view, it is possible to give a distributive reading to Rule 21.11(1)(a), so that the obligation of the recipient is to produce such of the documents or things referred to in the Notice as it can produce within a reasonable time after service. If by a time nominated for return of a Notice to Produce there has been a reasonable time to enable some of the documents to be produced, then those documents are to be produced, even though there might be others which are within the scope of the Notice to Produce which would require a longer time to produce. In relation to the first type of documents the Notice to Produce is valid, while in relation to the others it is not valid. That accords with the way that subpoenas and Notices to Produce have in practice been treated for many years in the courts. It is the preferable reading, as a matter of policy. Reasonableness of Items in this Notice to Produce 15 In this litigation the plaintiff, a creditor of the defendant, seeks to have a Deed of Company Arrangement declared void. 16 Paragraph 2 of the Notice to Produce requires production of: "All documents including, but not limited to, statements, loan applications, security documents, correspondence, emails, file notes or memoranda of the Defendant in relation to any finance, loans, mortgages, credit or other facility extended by the Bank of Western Australia (" BankWest ") to the Defendant." 17 Bankwest has been known since April to be a creditor of the defendant. There is no recent event which shows that there has been any change in the knowledge of the issuer of the Notice to Produce concerning the standing of Bankwest, or its relevance to these proceedings. Given that this Notice to Produce was served, in effect four days before the trial, I would not regard that as a reasonable time to require production of those documents, given the other pressures which a person facing litigation is inevitably under in the days immediately preceding a trial. I decline to regard paragraph 2 as having provided a reasonable time. 18 Paragraph 9 of the Notice to Produce seeks: "All documents, including but not limited to, correspondence, memoranda, file notes and emails between the Administrators and the directors of the Defendant in relation to one or more of the directors providing a personal guarantee for payments to be made towards the deed fund established under the deed of company arrangement dated 6 April 2005." 19 The directors' guarantee was one which was disclosed to creditors (including the plaintiff) only recently, in an updated report of the administrator dated 12 September 2005. 20 When there has been that comparatively new development, that makes a difference to assessment of what counts as a reasonable time for requiring production of the documentation. The volume of documentation called for does not seem, from its description, to be inherently likely to be large in volume, or scattered in location – it is all likely to be in the file of the administrator relating to this administration. In my view, the time allowed for production of the documents in paragraph 9 is reasonable. 21 Paragraph 11 seeks: "All documents evidencing payments made to creditors of the Defendant by the Defendant or a director of the Defendant since the appointment of the Administrators, being 24 February 2005." 22 Again, it was only the report of 12 September 2005 which disclosed to creditors that certain trade creditors had been paid, by the director of the defendant. The creditors of this company are few in number. The likely scope of documentation available is small. I would not regard paragraph 11 as setting an unreasonable time. 23 Paragraph 12 seeks: "All documents evidencing payment made to employees of the Defendant by the Defendant or a director of the Defendant since 24 February 2005." 24 The fact that employees stand outside the deed is, to some extent, something which has been apparent since the deed was first propounded, as the deed provides for employees to be creditors only in relation to their claims for superannuation, not in relation to other claims they were known to have. In my view, the time that there has already been to seek the documentation contained in paragraph 12 makes it unreasonable to ask for this documentation at the comparatively short notice and late time that the request was made. I also bear in mind that there is no evidence that there has been any new development in relation to payments to employees of recent times. 25 Paragraph 13 seeks: "All documents including but not limited to, correspondence, memoranda, file notes and emails between the Administrators and the directors of the Defendant in relation to the directors of the Defendant providing an indemnity for payment of the Administrator's costs." 26 The indemnity for payment of the administrator's costs is something which was contained in the deed itself. There is no suggestion that there has been any comparatively new development in relation to that topic. I would decline to regard this as having been a reasonable time for the production of the documents contained in paragraph 13. 27 Paragraph 15 seeks: "Annexure 1 to the letter of Anthony Warner to Mile and Jasna Kovacic dated 9 March 2005, being an Estimated Outcome Statement." 28 That is a single and very brief document. There is no reason why it could not be produced very easily if the defendant has it. I would allow paragraph 15. 29 I should also say that it is highly undesirable that valuable time at a final hearing has been taken up dealing with this issue. The preferable way for such disputes to be resolved is prior to the trial, by notice of motion, or by bringing the matter before the intended trial judge. 30 I should also say that, given the time at which the Notice was served, I would expect the defendants only to comply with the paragraphs which I have upheld to the extent that they are able. * * * * * * * * * * 31 Counsel for the defendant informs me that I have acted upon a concession made by counsel for the defendant that the information about the directors' guarantee was of comparatively recent origin, and that that concession was incorrectly made. Nonetheless, I note that the defendants will seek to comply with paragraph 9 as best they can. **********