Supreme Court New South Wales Medium Neutral Citation: In the matter of Kala Capital Pty Limited (in liquidation) [2012] NSWSC 721 Hearing dates: 25 June 2012 Decision date: 29 June 2012 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Paragraphs 8, 10 and 12 of Notice to Produce dated 18 May 2012 set aside. Interlocutory Process dated 14 June 2012 otherwise dismissed. Parties to be heard as to costs. Catchwords: PRACTICE AND PROCEDURE - Application to set aside notice to produce - Relevance of material sought - Legal professional privilege - Utility in requiring production of documents in circumstances where on their face a proper claim for privilege could be made and access not permitted. Legislation Cited: - Corporations Act 2001 (Cth) ss 530A, 539, 596A - Uniform Civil Procedure Rules 2005 (NSW) r 33.4 Cases Cited: - Pico Holdings Inc v Voss [2002] VSC 269 - Portal Software International Pty Ltd v Bodsworth [2005] NSWSC 1115 - Re Belinda International Pty Ltd (subject to deed of company arrangement) [2011] NSWSC 1420 Category: Interlocutory applications Parties: Schon Condon in his capacity as Liquidator of Kala Capital Pty Limited (in liquidation) (Applicant) Alfred Kin Chau Lee (Respondent) Representation: Counsel: J.T. Johnson (Applicant) A. Ogborne (Respondent) Solicitors: Carroll & O'Dea (Applicant) Paul Bard Lawyers (Respondent) File Number(s): 11/338044 Judgment 1By Interlocutory Process dated 14 June 2012, Mr Schon Condon in his capacity as liquidator ("Liquidator") of Kala Capital Pty Ltd (in liq) ("Company") seeks an order under Uniform Civil Procedure Rules 2005 (NSW) r 33.4 setting aside a notice to produce dated 18 May 2012 issued by the Respondent, Mr Alfred Lee, to the Liquidator. That rule provides that the Court may, on the application of a party or person having sufficient interest, move to set aside a subpoena in whole or in part or grant other relief in respect of it. 2By way of background, a Registrar of the Court issued two examination summonses (including one issued to Mr Lee under s 596A of the Corporations Act 2001 (Cth)). Mr Lee has applied for orders setting aside the two examination summonses and an associated order for production of documents and an order removing the Liquidator as official liquidator of the Company. That application is not presently listed for hearing before me and I make no comment as to its merits. 3It appears that the first basis for the application to set aside the examination summonses and orders for production is a contention by Mr Lee that the issue of the examination summonses and orders for production are an abuse of process because they are undertaken for the predominant purpose of advancing the position of a Ms Ng (the shareholder in the Company) or an undisclosed investor in other proceedings brought against Mr Lee. It appears that this allegation involves a contention that the Liquidator's predominant purpose in applying for the examination summonses was to give the Company, Ms Ng, or an undisclosed investor standing behind her an advantage in the other proceedings by allowing a basis for an adjournment of an application brought by Mr Lee for security for costs or for avoiding a stay arising from a failure to provide security for costs. 4It appears that the second basis for the application to set aside the examination summonses and orders for production is a contention by Mr Lee that a reasonably informed observer would apprehend bias on the part of the Liquidator against Mr Lee. It appears that this allegation is directed to a contention that the Liquidator was appointed after Ms Ng, as the Company's sole member, passed a special resolution to wind up the Company, and has retained the same solicitors as Ms Ng; has, it is alleged, failed to investigate certain matters in respect of Ms Ng's claim; and initiated the examinations after previously indicating that he would require Mr Lee to answer questions under s 530A of the Corporations Act. 5Two questions arise in an application to set aside the notice to produce: first, whether the material sought has apparent relevance to the issues in the principal proceedings and, second, whether the notice to produce is unfairly burdensome or prejudicial to the Liquidator. The Liquidator does not contend that the volume of documents required to be produced would be oppressive and the notice to produce would therefore not be set aside on the second basis. 6In Portal Software International Pty Ltd v Bodsworth [2005] NSWSC 1115 at [19]-[26], Brereton J noted that the Court's power to set aside a notice to produce was an instance of its power to regulate its own processes and in particular to intervene in a case of abuse of process; that lack of relevance is a sufficient ground to set aside a notice to produce; that it is sufficient to support relevance that the documents could "possibly throw light" on the issues in the substantive proceedings or it is "on the cards" that they will do so; and that a notice to produce has traditionally been treated somewhat more liberally than a subpoena to a third party in that regard. The proposition that lack of relevance was a ground to set aside a subpoena or notice to produce was also accepted in Re Belinda International Pty Ltd (subject to deed of company arrangement) [2011] NSWSC 1420 at [10]. 7The notice to produce issued by Mr Lee contains some 13 paragraphs although, as noted above, the Liquidator does not contend that the volume of documents required to be produced would be substantial. 8Paragraphs 1-2 relate to the value of the Company's assets and the balance of its accounts from 12 January 2012 to date. Paragraphs 3-5 require production of documents evidencing receipts and payments of the Liquidator lodged under s 539 of the Corporations Act and documents evidencing costs incurred by two firms of solicitors retained by the Liquidator in the Company's liquidation. Paragraph 6 requires production of all documents recording any arrangements between the Liquidator and any other party regarding the costs of the examination of Mr Lee. Paragraph 7 requires production of all documents recording or evidencing the terms on which one of those firms of solicitors, Carroll & O'Dea, who act for both Ms Ng and the Liquidator, act in the examinations. 9Mr Lee seeks to support those paragraphs on the basis that they have apparent relevance to the question whether Ms Ng, or the undisclosed investor standing behind her, is funding the examinations and that is relevant to whether the examination summonses are an abuse of process. At least in some circumstances, the fact that examinations are funded by a party to other proceedings may assist in creating an inference that those examinations are an abuse of process, and it is possible that the documents produced pursuant to these paragraphs might establish that proposition. 10I consider that these paragraphs are substantially wider than is necessary to address that issue, which could have been addressed by requiring production of documents recording or evidencing the funding of the examinations by Ms Ng (or the investor standing behind her) and not the much wider categories of documents which are sought. However, since no oppression point was taken by the Liquidator, I will not set aside those paragraphs on that basis. It is possible, but not certain, that at least some documents in respect of solicitors' costs will be subject to a proper claim for legal professional privilege, but such a claim can be advanced by producing the relevant documents in a sealed envelope, and opposing any order for inspection of those documents in the usual way. 11Paragraphs 8, 10 and 12 of the notice to produce require production of documents recording or evidencing instructions given by the Liquidator to the two firms of solicitors (and, in one paragraph, to Counsel) as to particular matters. It is apparent on the face of these paragraphs that the documents required to be produced would be subject to a proper claim for legal professional privilege and there is, in my view, no utility in requiring the production of those documents where a claim for privilege would then be made and access would not be permitted: Pico Holdings Inc v Voss [2002] VSC 269. I therefore set aside those paragraphs of the notice to produce. 12Paragraphs 9, 11 and 13 of the notice to produce seek production of documents recording the Liquidator's reasons for giving corresponding instructions. It is possible, but not certain, that documents within these paragraphs will be subject to a proper claim for legal professional privilege, but such a claim may be made in the manner set out above. I do not set aside those paragraphs on that basis. 13The Liquidator also contended that the notice to produce was an attempt at impermissible discovery. I do not accept that submission, since the categories contained in the notice to produce are relatively confined and do not require any assessment by the Liquidator of the relevance of documents to particular issues. The Liquidator also contended that the notice to produce was directed to matters relevant to the other proceedings, which is the corresponding allegation to that which Mr Lee puts against the liquidator in respect of the examination summonses. I do not consider that the basis for that inference was established by the evidence before me and I do not set aside the notice to produce on that basis. 14Accordingly, I order that paragraphs 8, 10 and 12 of the notice to produce be set aside and otherwise dismiss the Interlocutory Process. 15Each party has had a measure of success and, subject to hearing from Counsel, I will make no order as to the costs of the Interlocutory Process. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 July 2012