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Zabusky v Virgtel Limited QCA 134
SUPREME COURT OF QUEENSLAND
Zabusky & Ors v Virgtel Limited  QCA 134
D A WERBER LIMITED (RC 261285)
VIRGTEL LIMITED (IBC 311178)
Appeal No 4975 of 2022
Court of Appeal
Application to Set Aside Subpoena
Supreme Court at Brisbane –  QSC 46 (Bowskill CJ)
1 August 2022
29 July 2022
The subpoena for production issued on 4 July 2022 and served on James Conomos Lawyers is set aside.
APPEAL AND NEW TRIAL – PROCEDURE – QUEENSLAND – POWERS OF COURT – OTHER MATTERS – where the primary judge had to decide whether the respondent was entitled to the benefit of costs orders made in the proceeding in favour of the respondent or whether the third party payer had the entitlement to the benefit of the costs orders – where the respondent was found to hold the costs orders on trust for the third party payer – where the appellants appealed against that finding – where the costs agreement signed by the third party payer was in evidence before the primary judge – where the appellants had the registrar issue a subpoena for the purpose of the appeal to the solicitors for the respondent to obtain electronic documents to assess the authenticity of the costs agreement – where the authenticity of the costs agreement was not in issue before the primary judge and was not the subject of a ground of appeal – whether the subpoena issued at the request of the appellants should be set aside
Uniform Civil Procedure Rules 1999 (Qld), s 766
Collier v State of New South Wales  NSWCA 442, cited
C A Johnstone for the applicant non-party James Conomos Lawyers Pty Ltd
HopgoodGanim Lawyers for the applicant non-party James Conomos Lawyers Pty Ltd
- MULLINS P: In these reasons I will refer to the parties by their designations in the appeal. At the request of the appellants, the registrar on 4 July 2022 issued a subpoena for production of documents to James Conomos Lawyers (JCL) who are solicitors for the respondent in the appeal. The subpoena was returnable before me on 29 July 2022 at which time I heard JCL’s application to set aside the subpoena. I extended the time for complying with the subpoena until 2.15 pm on 1 August 2022 and the application to set aside the subpoena was adjourned to the same date and time. These are my reasons for setting aside the subpoena.
- The appeal is against the decision of the Chief Justice given on 7 April 2022: Zabusky & Ors v Virgtel Limited  QSC 46. Crow J had ordered that proceeding BS No 8849 of 2020 (proceeding 8849) be permanently stayed: Zabusky & Ors v Virgtel Limited  QSC 17. On 22 February 2021 Crow J ordered the appellants to pay the respondent’s costs of the application for a permanent stay and of proceeding 8849. There was no appeal from orders of Crow J made on 12 and 21 February 2021.
- The application heard by the Chief Justice was to lift the stay. One of the grounds of the application was that, as a result of Crow J’s making the costs orders in the respondent’s favour, the respondent now had a substantial asset in Queensland. The issue before the Chief Justice was whether the benefit of the costs orders in the respondent’s favour was held on trust for a Dutch company H van Leewen Beheer NV (Beheer) or whether there was a simple debtor/creditor relationship between the respondent and Beheer. The respondent asserted before the Chief Justice that Beheer had entered into a cost agreement with JCL and paid all legal fees incurred by the respondent proceeding 8849. This was based on an affidavit filed on 11 March 2022 of a director of the respondent, Mr Simonet, who swore that for proceeding 8849 the legal fees incurred by the respondent had been paid by Beheer and an affidavit filed on 11 March 2022 of Mr Peeters, a director of Beheer, who confirmed Mr Simonet’s evidence that all legal fees in proceeding 8849 had been paid on behalf of the respondent by Beheer “as third-party payer”. Paragraph 10 of that affidavit stated:
“The Beheer paid the legal fees as third-party payer on the basis that the Beheer would be entitled to the benefit of any costs order made in favour of Virgtel in the proceeding as partial indemnity for the legal costs paid by Beheer.”
- On the hearing of this application, the appellants emphasised the statement made by the respondent’s counsel before the Chief Justice that he would endeavour to get the original of the cost agreement (which Beheer had entered into with JCL). That indication was formalised by the directions made by the Chief Justice at the conclusion of the hearing on 14 March 2022 to the effect:
- (a)any further affidavit exhibiting the cost agreement between JCL and the respondent, as well as any supplementary submissions on behalf of the respondent, be served by 4.00 pm on 15 March 2022;
- (b)the appellants deliver any supplementary submissions in response by 4.00 pm on 17 March 2022.
- A further affidavit of Mr Peeters was filed on 15 March 2022 that exhibited the letter from JCL to Beheer dated 9 September 2020 that attached the disclosure statement in relation to the proposed cost agreement for acting on behalf of the respondent in proceeding 8849 and the cost agreement. Mr Peeters deposed in paragraph 5 of that affidavit to signing the disclosure statement including the cost agreement on behalf of Beheer soon after receipt of JCL’s letter. Mr Peeters stated in paragraphs 4 and 7 of that affidavit that Beheer was the only party who provided funds for the legal fees (including disbursements) of JCL for acting in proceeding 8849 by paying JCL directly. Mr Peeters stated in paragraph 9 of that affidavit that there was no loan agreement, written or unwritten, between Beheer and the respondent in relation to the fees that had been paid by Beheer to JCL.
- The appellants filed an affidavit of the first appellant on 16 March 2022 and supplementary submissions of the appellants’ counsel. The supplementary submissions expressly noted (at paragraph 18) that Mr Peeters’ affidavit filed on 15 March 2022 did not provide any evidence in support of his assertion that Beheer had paid the fees rendered by JCL for proceeding 8849 directly to JCL, but that the submissions made on behalf of the appellants proceeded on the basis that Mr Peeters’ evidence was to the effect that payments were made directly by Beheer to JCL. The appellants submitted in these supplementary submissions that there was “an absence of any circumstances from which a court of equity would find that any funds received were in a fiduciary character”. The submission was therefore made that the basis on which the funds were received by JCL was simply the client agreement and the relationship between the respondent and Beheer was “no more and no less than one of debtor-creditor”.
- In deciding in favour of the respondent, the Chief Justice acted (at -) on the evidence of Mr Simonet and Mr Peeters that for proceeding 8849 the respondent’s legal fees had been paid by Beheer. The Chief Justice also relied (at ) on the affidavit of Mr Peeters filed on 15 March 2022 as confirming Beheer was the only party which had provided funds for the legal fees (including disbursements) of JCL for acting for the respondent in proceeding 8849 and that there was no loan agreement between Beheer and the respondent. The Chief Justice accepted (at ) that paragraph 10 of Mr Peeters’ affidavit filed on 11 March 2022 was evidence of “a clear indication of the intention of the paying party” and accepted (at ) the respondent’s submission that it was Beheer, the third party payer, that was entitled to the benefit of any costs order made in favour of the respondent in proceeding 8849. The Chief Justice also concluded (at ) in favour of the respondent in relation to a sum of money held in another proceeding that was described (at ) as the second basis for the application.
- There are seven grounds in the notice of appeal to this Court. Apart from ground 1(b), the grounds can be related to that part of the Chief Justice’s reasons that dealt with the costs orders made by Crow J in this proceeding. The grounds are framed on the basis of the evidence that was before the Chief Justice. The terms in which grounds 3 and 5 are framed make the quality of the evidence that was adduced by the respondent relevant to the appeal by asserting that other evidence was not adduced. Ground 5 is expressed in these terms:
“The learned primary judge erred in failing to consider or give due weight to the fact that Virgtel did not produce the original costs agreement between Virgtel’s solicitors and Virgtel and/or Beheer despite Virgtel’s offer to produce it to the learned primary judge.”
- Counsel who appeared on behalf of the respondent before the Chief Justice did offer to “endeavour to get the original of the cost agreement”, but the direction that was given by the Chief Justice was to file a further affidavit exhibiting the cost agreement. The manner in which a document is exhibited to an affidavit is by exhibiting a true copy of the document which was what Mr Peeters’ affidavit filed on 15 March 2022 did in respect of the cost agreement. No issue was taken by the appellants’ counsel in the supplementary submissions before the Chief Justice as to the manner in which the cost agreement was exhibited to Mr Peeters’ affidavit. The authenticity of the cost agreement signed by Beheer in September 2020 was not put in issue by the appellants before the Chief Justice.
- After the Chief Justice’s reasons were published, the then solicitors for the appellants sought production of documents pursuant to r 222 of the Uniform Civil Procedure Rules 1999 (Qld) from the respondent’s solicitors including the original email from JCL to Mr Peeters with the attached cost disclosure and cost agreement and the original email from Beheer to JCL with the attached executed cost disclosure and cost agreement. This request was rejected by JCL on the basis that the application before the Chief Justice had been determined and the permanent stay of proceeding 8849 remained in place. After the appeal was filed by the appellants, a further request pursuant to r 222 was made by the appellants of the respondents’ solicitors of the same emails and additional requested paper documents. That request was rejected by JCL primarily on the basis that the request was misconceived.
- The subpoena for production served on JCL seeks some of the documents that were sought by the appellants in the correspondence with JCL after the Chief Justice’s reasons were published. They are therefore not evidence that was before the Chief Justice.
- It is common ground that a subpoena can be issued in an appropriate case in connection with an appeal, particularly where it is likely that the Court on the appeal may exercise the power conferred by r 766(1)(c) of finding on special grounds that further evidence should be received as to questions of fact: see Collier v State of New South Wales  NSWCA 442 at .
- Mr C C Wilson of counsel for the appellants on the appeal (who did not appear on the appellants’ behalf before the Chief Justice) conceded properly that the subpoenaed documents were sought to evaluate whether the appellants should apply for leave to adduce any of the subpoenaed documents or other documents as a result of inspecting and/or analysing the subpoenaed documents that it would not necessarily follow from an inspection that such an application would be made, as it was contingent on the appellants’ assessment of the forensic significance of the subpoenaed documents.
- After the subpoena was served on JCL, JCL inquired of the solicitors for the appellants as to the relevance of the documents to the issues to be determined on the appeal. The response was to the effect that the documents went to “the authenticity and veracity of the costs disclosure and retainer agreement that is said to formalise Beheer’s status as a third party payer”. In paragraph 19 of the appellants’ outline for the purpose of opposing the setting aside of the subpoena, it is also asserted that the appellants have a legitimate forensic interest in determining the source of payment of JCL’s fees, even if the appellants decide upon inspection not to seek to adduce the documents on the hearing of the appeal.
- JCL seeks to set aside the subpoena on the basis that, first, the subpoena lacks any legitimate forensic purpose, because of the inability of the appellants to use the documents on the appeal which makes the documents irrelevant to the appeal and, second, from their description the documents do not have any apparent relevance to the issues to be ventilated on the appeal. Mr Johnstone of counsel who appears for JCL also notes that every document sought in the subpoena pre-dates the finalisation of the parties’ further submissions on the application before the Chief Justice.
- There were three affidavits of the first appellant which have been filed in the appeal that were relied on by the appellants to oppose JCL’s application. The first appellant’s first affidavit dealt with the appellants’ solicitors’ correspondence with JCL between 1 and 9 June 2022. The second and third affidavits of the first appellant were particularly directed to the subpoena issues. JCL objected to specific paragraphs in the second affidavit and all of the third affidavit. It is not necessary to determine these objections as the application to set aside the subpoena can be disposed of by reference to the manner in which the appellants conducted the application before the Chief Justice, the issues decided the Chief Justice and the grounds of appeal for the appeal that reflect the issues before the Chief Justice. The first appellant has qualifications and experience in relation to information technology and software that he relied on for the assessments he undertook of documents in his second affidavit which no doubt explains his suspicions and motivations for wishing to inspect and analyse the subpoenaed documents. The problem is that the appellants have nowhere endeavoured to explain why their speculation about the signing of the cost agreement and the payment of JCL’s legal fees and disbursements rendered in respect of acting for the respondent in proceeding 8849 was not raised before the Chief Justice or an adjournment sought before the Chief Justice to pursue that speculation. When the Chief Justice gave the further directions at the conclusion of the hearing on 14 March 2022 and there was an opportunity to put in further submissions after Mr Peeters’ affidavit was filed on 15 March 2022, there is no suggestion that the appellants sought an opportunity to undertake the investigations that they now flag they wish to pursue. There was a request made by the Chief Justice’s Associate to both parties’ counsel and solicitors on 28 March 2022 as to whether further oral submissions were sought to be made or whether the parties were happy for the Chief Justice to determine the application on the basis of the submissions received to date. Counsel then acting for the appellants replied that the appellants did not seek to make additional oral submissions. Likewise, the respondent did not seek to make any additional oral submissions.
- The appellant did not controvert the cost agreement before the Chief Justice after it was provided as an exhibit to Mr Peeters’ affidavit filed on 15 March 2022 and, in fact, relied on the limited nature of the evidence put in by the respondent in connection with the payment by Beheer directly to JCL of the respondent’s costs incurred in this proceeding to make the submission that was most favourable to the appellants’ case before the Chief Justice. That was the submission to the effect that the Chief Justice could not be satisfied the relationship between Beheer and the respondent was other than creditor and debtor.
- Ground 5 of the grounds of appeal is a complaint that the original cost agreement was not produced and not that the cost agreement, the copy of which was exhibited to Mr Peeters’ affidavit filed on 15 March 2022, was not authentic. The other grounds of appeal to the extent they relate to the costs orders made by Crow J are consistent with the manner in which the matter was conducted by the appellants before the Chief Justice.
- The focus of the appeal is on the conclusions reached by the Chief Justice (both as to fact and law) on the basis of the material that was adduced in the application before the Chief Justice. In these circumstances, there is objectively not a legitimate forensic purpose in connection with this appeal for the appellants to seek to inspect the documents that are identified in the subpoena.
- During the hearing of this application the appellants’ counsel on instructions from the first appellant specifically drew my attention to an email exhibited to the first appellant’s second affidavit (filed on 20 July 2022) at p 157 that he asserted was from Mr Simonet and that was one of a bundle of emails that he asserted were inconsistent with the statements by Mr Simonet and Mr Peeters in their affidavits filed on 11 and 15 March 2022 that the costs incurred by the respondent with JCL had been paid by Beheer. The emails range in date between 16 November 2017 and 14 June 2019. Proceeding 8849 did not commence until April 2020 and the cost agreement was not submitted by JCL to Beheer until 9 September 2020. The statements in the affidavits of 11 and 15 March 2022 about the payment of costs by Beheer were limited to the costs of proceeding 8849 which commenced after these emails.
- I will order that the subpoena for production issued on 4 July 2022 and served on James Conomos Lawyers be set aside. I will hear the parties on any ancillary orders and costs.
- Published Case Name:
Zabusky & Ors v Virgtel Limited
- Shortened Case Name:
Zabusky v Virgtel Limited
 QCA 134
01 Aug 2022