Crown Joinery v Lyleho [2007] VSC 214
In the Practice Court of the Supreme Court of Victoria, Maxwell P dismissed a creditor's appeal from a Master, setting aside a notice to produce that listed documents not referred to in the affidavits it specified, was fishing and was too wide and oppressive, and dismissing as an abuse of process a winding up application for insolvency that was bound to fail [27], [34], [44], [46].
What the court decided
Crown Joinery served a statutory demand on Lyleho under section 459E of the Corporations Act 2001 [1]. The Master found no genuine dispute about the debt but an offsetting claim, and varied the demand to $34,665.20 [3]. Crown Joinery applied to wind Lyleho up in insolvency, relying not on the demand but on a failure to pay debts as they fell due [4]. The Master dismissed the winding up application and declined to require production under Crown Joinery's notice to produce [26], [43]. Crown Joinery appealed, and Maxwell P heard the appeal de novo [27], [34].
His Honour held that Crown Joinery had standing as a creditor, the Master having found no genuine dispute about the debt [10]. His Honour agreed with the Master, as Crown Joinery's own expert's report confirmed, that Crown Joinery had not established even a prima facie case of insolvency [19], [20], [21]. Crown Joinery did not argue on appeal that the material showed insolvency, but sought to add to its evidence by inspecting Lyleho's financial records [25]. Its notice to produce relied on rule 29.10(2) of the Supreme Court (General Civil Procedure) Rules 2005 [23].
Maxwell P held first that the notice was not authorised by the rule, because none of the listed documents was referred to in the affidavits it specified [27]. Second, it was common ground that the considerations for setting aside a subpoena apply equally to a notice to produce, and his Honour said a fishing notice will be set aside [31]. He applied the principle stated by Jordan CJ in Commissioner for Railways v Small that, absent special circumstances, a subpoena may not be used to fish [32]. He held the notice to be "a paradigm example of fishing" [33]. He also found it too wide and oppressive, and set it aside on each ground [34].
Crown Joinery relied in the alternative on section 58C of the Evidence Act 1958 [24]. As no separate application under section 58C was made the point did not arise, but his Honour said such an application would have failed [36]. In his view section 58C does not create a "free-standing and unlimited right" to inspect the opposing party's books of account [37]. He read "the original entries", with section 58B, as the originals of entries made relevant and admissible by the issues in the proceeding [39], [41]. On that view section 58C gives no right to inspect records to fish for a cause of action [42].
Maxwell P upheld Lyleho's submission that the winding up proceeding was bound to fail and should be dismissed as an abuse of process [44]. He was reinforced by his view that the attempt to obtain exhaustive production of Lyleho's financial records was itself an abuse of process [45]. Rule 29.10(2) cannot be used to obtain blanket production of documents held by the opposing party [45]. The appeal from the Master was therefore dismissed [46].
Why it matters
A creditor not relying on non-compliance with a statutory demand needs its evidence of insolvency in hand, since absent special circumstances compulsory production cannot be used to find out whether it has a case. A notice to produce that is not confined to specific documents referred to in the other side's affidavits risks being set aside and treated as an abuse of process. The section 58C views were obiter, because no application under that section was made [36]. Readers should check the current rules and legislation.
Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.