Marquess Investment Fund Pty Limited v Tjen

1. [1]

   This is an application for review of a part of a decision made by the Common Law Registrar on 23 November 2021. A notice of motion was filed by the plaintiff on 9 December 2021 seeking a stay of the Registrar’s orders, a review pursuant to Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) r 49.19 and/or s 121 of the Supreme Court Act 1970 (NSW) and an order setting aside part of a subpoena issued by the defendant to the Commonwealth Bank (“CBA”).

2. [2]

   Ancillary and facilitative orders were also sought, (orders 5 and 6 in the notice of motion), which are, because of my decision on the motion, irrelevant, and in any event were not the appropriate mechanism for dealing with the documents already produced to the Court by CBA in compliance with the subpoena.

3. [3]

   An order seeking that “any access to the CBA documents be limited to the defendant’s legal representatives and any expert retained” was the subject of agreement between the parties in November 2021 and I will make that order.

4. [4]

   As the relief sought concerns a decision by the Registrar about an application to set aside a subpoena, the issues raised in the pleadings need to be outlined for context and background.

The pleadings and procedural chronology

1. [5]

   The plaintiff company filed a Statement of Claim on 16 October 2020 claiming that it loaned $1.2 million to a company called Halcyon Rise Pty Ltd and South Land Holdings in early 2017. The defendant Mr Tjen signed an individual guarantee, as did two other guarantors. Neither of the other guarantors are named in the pleadings, nor are they parties to these proceedings. The loan agreement required the loan to be repaid in three months on an identified date. It was not repaid. The Statement of Claim seeks repayment of the loan together with interest in a sum of over $4.7 million.

2. [6]

   The defendant filed a Defence on 29 July 2021 alleging that a solicitor, Bernard Tan, acting on behalf of the plaintiff, proposed a deal in April or May 2017 that the plaintiff was prepared to convert the advanced sum into an equity of 8% of the net profit of the project and upon granting that equity, Halcyon Rise would not be liable to repay any of the money advanced by the plaintiff to it under the loan agreement.

3. [7]

   It is asserted in the Defence (filed in July 2021) that on 21 May 2017, Mr Tan acting on behalf of the plaintiff, sent an email to the defendant which attached various documents including a loan agreement, general security agreement, profit share agreement “for David’s 8% conversion of the earlier 1.2m loan” and a drawn down direction and mortgages.

4. [8]

   A Deed titled “Profit Sharing and Forbearance Deed” was created and there are various assertions in the Defence as to the effect of that Deed.

5. [9]

   I do not need to go into the detail of those matters for the purposes of this application other than to make two observations. First, it is most surprising given the substantive factual matters raised in the Defence that no Reply was filed. Second, the matter has some factual and other complexity and significant time and expense will be involved in preparing and presenting the case and engaging in the necessary processes to bring the matter to trial.

6. [10]

   On 12 April 2021 the defendant served a Notice to Produce upon the plaintiff’s solicitor seeking production of documents relating to the plaintiff’s financial position. It is common ground that early in the proceedings the defendant had inquired in writing as to the plaintiff’s financial position in respect of its ability to pay costs should its case fail. The plaintiff was not forthcoming in providing the requested information.

7. [11]

   On 3 August 2021 the defendant filed and served a notice of motion for security for costs. The plaintiff opposes that order. There are two threshold issues on the security for costs application under UCPR 42.21(1)(d) and (e) namely:

8. [12]

   On 14 October 2021 the Registrar ordered that the plaintiff comply with the April 2021 Notice to Produce. This order required compliance by a date in November but it should be observed that by this stage, the Notice was six months old with no compliance by the plaintiff.

9. [13]

   On 5 and 18 October 2021 the defendant served the plaintiff with a copy of various subpoenas for production that had been issued by him. It is evident the subpoenas were issued to pursue the obtaining of documents regarding the financial position of the plaintiff for the purposes of the application for security for costs.

10. [14]

    On 18 October 2021 the plaintiff filed a notice of motion seeking to set aside all of the subpoenas issued by the defendant. This included in effect an application to refuse to allow the defendant access to the plaintiff company’s own bank records, despite the opposed security for costs application yet to be heard and the lack of response to the Notice to Produce.

11. [15]

    On 2 November 2021 the plaintiff produced documents purportedly in answer to the Notice to Produce, but with redactions applied to some of the records of the CBA showing transactions in the plaintiff company’s account. This is the day before the Registrar was to hear the plaintiff’s notice of motion seeking the subpoenas (including the one to CBA) be set aside.

12. [16]

    On 3 November 2021 the Registrar heard the application to set aside the subpoenas.

13. [17]

    On 23 November 2021 the Registrar published her reasons.

14. [18]

    Relevantly to the notice of motion before me, the Registrar declined to set aside the CBA subpoena, including that part of the subpoena that required the production of:

15. [19]

    The application for review is limited to that part of the Registrar’s decision. The plaintiff argues that the Registrar was wrong in refusing to set aside that part of the subpoena because although Mr David Tan is the sole director and shareholder of the plaintiff company, he is not a named party and so is a “stranger” to the proceedings and this invasion of his privacy is not warranted.

Principles that apply

1. [20]

   The relevant principles have been extracted with precision by Barrett J in Wily re LED (South Coast) Pty Ltd (2009) 76 NSWLR 428; [2009] NSWSC 946 at [23] to [26]:

2. [21]

   UCPR 49.19 provides relevantly:

3. [22]

   Section 121 of the Supreme Court Act provides:

4. [23]

   In Noble Earth Technologies Pty Ltd v Hampic Pty Ltd trading as Cyndan Chemicals [2012] NSWSC 935 at [39] Hallen J set out the principles with some further illustrative gloss:

5. [24]

   Counsel for the defendant drew my attention to a decision of Kunc J in Soraya Ahmed v Osman Ahmed [2013] NSWSC 1814 in which his Honour made comment at [14] to [16] regarding the role of subpoenas issued to non-parties comprising something closer to a determinative matter where it engages a court’s powers of compulsion against a non-party and so a court may there be more willing to intervene than it would in a decision that was purely procedural. His Honour stated that given that there can be significant consequences for non-compliance, it is not always necessary to be able to demonstrate a problem in the decision of the Registrar that rises as high as an error of law as suggested by Hodgson JA in Tomko v Palasty (No. 2) [2007] NSWCA 369 and the question is simply whether it is in the interests of justice to substitute the reviewing Court’s own discretionary decision.

The Common Law Registrar’s Decision - 23 November 2021

1. [25]

   The Registrar heard argument on 3 November and published her judgment on 23 November 2021. A summary of the procedural background was noted followed by articulation of the schedules to the subpoenas in issue.

2. [26]

   Three affidavits of solicitors acting for the plaintiff were tendered and the same affidavits were tendered before me. Mr Fan’s affidavits were affirmed on 18 October and 2 November 2021 and were directed to the subpoenas issue and Ms Jackson’s affidavit, affirmed 15 September 2021, was directed to opposition to the application for security for costs. There is an apparent tension between something stated in Ms Jackson’s affidavit when compared with an assertion in Mr Fan’s affidavit about the business the plaintiff company conducts and thus the origin and use of money in certain bank accounts. I will come to that tension shortly.

3. [27]

   The defendant relied upon three affidavits of solicitor Mr Secivanovic, sworn 25 October 2021, 3 August 2021 and 13 October 2021, the latter two regarding the security for costs application.

4. [28]

   The Registrar noted the plaintiff’s grounds to set aside the CBA subpoena were that the subpoena was an abuse of process akin to discovery and that investigating the nature of the plaintiff’s business and available funds for the purpose of prosecuting the security for costs application was an improper purpose. Second, that documents are now disclosed (on 2 November 2021 after 7 months of delay), and that Mr Fan, solicitor, disclosed all the necessary relevant information in the 2 November 2021 affidavit that:

5. [29]

   Third, there is no legitimate forensic purpose because the defendant does not have to establish the plaintiff’s financial position to succeed in his application. He just has to raise the issue and then the plaintiff has to explain why he should not have to give security.

6. [30]

   Fourth, David Tan is not a party to the proceedings and so there is no basis to seek production of documents relating to his financial affairs.

7. [31]

   The Registrar then set out the arguments of the defendant which were in short that the plaintiff had not satisfactorily complied with the Notice to Produce because the records provided were redacted and incomplete. Second, there were inconsistencies in the plaintiff’s description of the nature of the business as “funds management” (Ms Jackson’s assertion) and what was later said in Mr Fan’s November affidavit that the funds in the plaintiff’s account number ending in 5384 all belonged to Mr Tan and that the plaintiff “does not manage funds for any other person”. Third, the defendant is entitled to investigate and test the authenticity of the plaintiff’s assertions about the origin and use of the money in the accounts given also the settlement or recovery of money that the plaintiff has secured is relevant to a fact in issue for consideration in the security for costs application.

8. [32]

   Unsurprisingly, the Registrar found the defendant’s arguments persuasive as do I.

9. [33]

   Under the heading “Consideration” the Registrar set out the appropriate and timely steps taken by the defendant’s solicitors to investigate whether the plaintiff could satisfy any potential costs order. The Registrar appropriately concluded that the defendant had little choice other than to proceed with filing the security for costs motion.

10. [34]

    I agree, with the additional observation that the plaintiff’s approach was obstructive and inconsistent with the obligations it holds under ss 56 to 60 of the Civil Procedure Act 2005 (NSW) as a party to litigation in this Court. The plaintiff’s legal representatives also have obligations under those provisions, and they would do well to re-read them and apply some focus to better acting in compliance with those obligations.

11. [35]

    I agree that the issue of subpoenas by the defendant after months of waiting was appropriate, and perhaps more relevantly for the purposes of this review, the Registrar’s helpful analysis of the authorities in [22] to [24] of her decision as to the issue of “apparent relevance of the documents” to the issue before the Court – security for costs – is undoubtedly correct:

12. [36]

    The Registrar’s reference to the Court of Appeal's decision in Secretary of the Department of Planning, Industry and Environment v Blacktown City Council [2021] NSWCA 145 (“Blacktown Council”) was an entirely appropriate extraction and application of principle.

13. [37]

    The Registrar then moved to the reasons why she rejected the plaintiff’s submissions. They are, in short, that late, incomplete assertions by Mr Fan in an affidavit do not close the issue of the true and correct position of the plaintiff’s ability to pay costs and the defendant is entitled to investigate those assertions with the benefit of what the CBA records in fact show.

14. [38]

    Part of the evidence before the Registrar, and before me, was CBA accounts held by the plaintiff that showed (in heavily redacted form) that millions of dollars moved in and out of the plaintiff’s accounts on a seemingly random basis - (given the redactions, the basis or purpose cannot be gleaned) - leaving on various dates over a recent six month period, less than $2,000 in the account for a period, and on one occasion a debit of $5.

15. [39]

    The Registrar also succinctly and correctly dealt with an oppression argument that does not seem relevant to the application for review, but to the extent that it may be said to be relevant, she was entirely correct to observe that the subpoena was not framed in such a way that it was insufficiently specific or required the CBA to form a judgment on what is relevant to the issue for the security for costs application.

Decision

1. [40]

   The plaintiff bears the onus of making out a case that the Court in the interests of justice should exercise its discretion to set aside the Registrar’s decision. It has not met that onus. I am not persuaded that there was any error at all in the Registrar’s decision in the way she dealt with the CBA subpoena. Whilst obviously this is not an appeal, I consider it relevant in my dealing with this application for review to observe that it is in my opinion a correct, fair, well-reasoned decision as to why the plaintiff’s application in respect of the CBA subpoena had to fail and does fail.

2. [41]

   As well as the combative and obstructive approach taken by the plaintiff to production of its financial information, there are what seem to be, contrary assertions in two different solicitor’s affidavits as to what the nature of the plaintiff’s business was (and is) and the role and control of relevant bank accounts. Mr Fan’s affidavit names David Tan as the holder and “owner” of all those funds. Ms Jackson’s affidavit made no such assertion, simply referring to the plaintiff’s business as “funds management”. The defendant is entitled to investigate that assertion by subpoenaing and accessing relevant bank accounts and to, if appropriate, cross-examine the deponents of the affidavits as to the conclusion(s) asserted in those affidavits about the effect of that material. This is entirely consistent with principle as clearly stated recently by the Court of Appeal, and the instructive analysis and remarks of Bell P in Blacktown Council.

3. [42]

   There is accordingly no basis at all upon which I would intervene. Not only do I not “cast aside” the Registrar’s judgment, I embrace it as correct and I reach the same conclusions, having independently reviewed the evidence and submissions.

Other matters

1. [43]

   There have been delays caused to the progress of this litigation by the plaintiff’s obstructive conduct. That situation needs to change.

2. [44]

   I have listed the matter for case management directions before me on Thursday 10 March 2022, at which time counsel for the parties and their instructing solicitors should have liaised and agreed on a proposed timetable for the ongoing conduct of the litigation, including appropriate arrangements and proposed orders and timing for access to the documents produced on subpoena by CBA and the other subpoenas that were not set aside, for the plaintiff to file a Reply, and a timetable for the final stages of preparation for the application for security for costs as well as potential available dates for that application to be heard.

Orders

1. [45]

   I make the following orders:

   1. (1)

      By consent, access to the documents produced in response to the CBA subpoena is limited to the defendant’s legal representatives and any expert required.

   2. (2)

      The plaintiff’s notice of motion filed on 9 December 2021 is otherwise dismissed.

   3. (3)

      The plaintiff to pay the defendant’s costs of the notice of motion

   4. (4)

      The proceedings are listed for case management before Lonergan J at 12:45pm on 10 March 2022.