Alves & Bernet
[2021] FedCFamC1F 185
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Alves & Bernet [2021] FedCFamC1F 185
File number(s): SYC 5557 of 2021 Judgment of: CHRISTIE J Date of judgment: 10 November 2021 Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE – Subpoena objection – Apparent relevance – Legal professional privilege – Where the documents giving effect to the corporate restructuring are plainly relevant. Legislation: Evidence Act 1995 (Cth) s 118
Family Law Act 1975 (Cth) s 106B
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 67
Federal Circuit and Family Court of Australia Rules 2021 (Cth) r 6.33
Cases cited: Mann v Carnell (1999) 201 CLR 1 Division: Division 1 First Instance Number of paragraphs: 35 Date of hearing: 9 November 2021 Place: Sydney Counsel for the Applicant: Ms Lioumis Solicitor for the Applicant: Antunes Lawyers Counsel for the Respondent: Mr O’Reilly Solicitor for the Respondent: Broun Abrahams Burreket ORDERS
SYC 5557 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS ALVES
Applicant
AND: MR BERNET
Respondent
ORDER MADE BY:
CHRISTIE J
DATE OF ORDER:
10 NOVEMBER 2021
THE COURT ORDERS:
1.That the solicitors for the husband have first access to documents produced on subpoena by C Lawyers.
2.That on or before 19 November 2021 the solicitors for the husband inspect the documents produced by C Lawyers and serve on the wife and Mr M a schedule of documents (“the schedule”) over which the husband seeks to maintain a claim of legal professional privilege, if any.
3.That on or before 19 November 2021 the solicitors for the husband place into a separate envelope those documents contained in the schedule.
4.That on or before 19 November 2021 the solicitors for the wife identify with precision what paragraphs of the subpoena to D Company are pressed.
5.That the subpoenae and objections be stood over to 9:30am on 27 November 2021 with liberty to both parties to vacate that date on the filing of a consent order dealing with the subpoenae and objections.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Alves & Bernet has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
CHRISTIE J:
This interim proceeding concerns two (2) subpoenae caused to be issued at the request of the applicant wife Ms Alves (“the wife”) in the context of contested financial proceedings between the husband and wife.
The respondent husband Mr Bernet (“the husband”) objects to inspection of material produced.
The husband’s father, Mr M, appeared on his own behalf as an interested party.
BACKGROUND
The husband says the parties commenced cohabitation in September 2014 and the wife says they commenced cohabitation in October 2012 and both say they separated on 13 May 2020.
The husband says that prior to cohabitation he and his father agreed to go into business together with Mr M being a “silent partner” entitled to profits. E Pty Ltd (“E Company”) held a franchise agreement to operate one (1), and later multiple, H Company franchises. The sole shareholder of E Company was F Pty Ltd (“F Company”). F Company was the trustee of the F Trust.
The corporate structure gave no legal ownership to Mr M in the shareholding of the entities or the underlying assets. In the Financial Statements for F Company for the period prior to the restructure, there are entries to which I was taken in submissions under the heading “Non-current liabilities” which record “Owner drawings” and “Profit Share” to Mr M. This was at a time when Mr M was not a shareholder of F Company nor was he a specified beneficiary of the F Trust, although he was a discretionary beneficiary.
In July 2020, the husband in consultation with accountants and lawyers changed the structure such that Mr M from that time received a legal interest in the various businesses and a corresponding legal entitlement to profits (“the corporate restructure”).
On 12 February 2021 the lawyers acting for the husband wrote to the lawyers acting for the wife providing disclosure documents and stating:
You will note that in 2020 the group of entities which operates various [‘H Company’] [franchises] was restructured consistent with the previous underlying beneficial interest held by our client’s father in the same. The group has always been a joint enterprise of our client and his father.
The wife says the corporate restructure took place without her knowledge or consent.
On 1 October 2021 the parties entered into consent orders in the context of competing interim applications. The consent orders provided, at order 10 for disclosure as follows:
10.That unless the same has already been provided or previously explained by the Husband, within 42 days of the date of these Orders, the Husband provide the following to the Wife:
10.1All documents in relation to the transaction in about July 2020 that brought about the existence of [E Pty Ltd] and [J Pty Ltd] (‘[E Company]’), including but not limited to any Minutes of Meetings and Annual General Meeting Minutes of 2020, any loan agreement, contract or memo of understanding entered into between the husband and the husband’s father in relation to his alleged interest in [E Company] as stated in the file note dated 29 February 2012.
10.2All documents including correspondence and bank statements evidencing any consideration provided by the Husband’s father to the Husband for his purported 50% share in [E Company] including the $175,000 alleged payment made by [Mr M] in August 2011 that are in the possession, custody or control of the Husband.
10.3Any documents which may demonstrate payments and distributions from the trust to [Mr M] and/or [B Company] from August 2011 to September 2021 that are in the possession, custody or control of the Husband.
10.4Minutes of Meetings in relation to the distribution of dividends from [E Company] and the distribution of income from the [F Trust].
10.5 [E Pty Ltd]:
10.5.1 Bank statements for the following:
a)All bank accounts for the [Suburb G H Company franchise] with a balance of $47,308 as recorded in the Financial Statement as at 30 June 2021;
b)Mastercard Billing Account statements from June 2019 to date, with a balance owing of $18,286 as recorded in the Financial Statement as at 30 June 2021;
c)Provide particulars of the $12,000 payment made from the Westpac [Suburb K] account number ending [#…69] on 31 August 2021;
10.6 F Trust:
10.6.1All amendments to the Original Trust Deed dated 25 August 2011, between 2011 and 2019 and all minutes of meeting of the Trustee between 2011 and 2019.
10.7Financial Statements (balance sheet, profit and loss) and Tax Returns for each entity comprising the [Bernet Group] (being [F Pty Ltd, F Trust and E Pty Ltd]) for the financial years ended 2011 to 2014 inclusive.
10.8Further and better particulars of the alleged underlying beneficial interest asserted by him, as sought by the Wife in her solicitor’s letter dated 1 September 2021.
On 6 October 2021 the wife caused to be issued two (2) subpoenae addressed to The Proper Officer, C Lawyers (the firm of solicitors who provided legal advice about the corporate restructure) and Mr L, D Company (the accountants who provided advice about the corporate restructure).
On 20 October 2021 the husband filed Notices of Objection in respect of both subpoena.
Objection was taken to both production and inspection on the basis that:
1. The documents requested and scope of the Subpoena is too wide and constitutes a fishing expedition;
2. The categories described in the Subpoena require the recipient, who is not a party to the proceedings, to interpret the scope of the Subpoena;
3. The Subpoena requires the production of documents that may be the subject of legal professional privilege.
I was told that documents had been produced.
On 8 November 2021, Mr M provided to the Court via email, Notices of Objection in respect of the subpoenae. The basis of his objection was identified as:
1. No apparent relevance;
2. Documents are privileged.
Mr M did not rely on any evidence in support of his objection.
The husband relied on his affidavit of 14 September 2021 and the wife her affidavit of 3 August 2021.
The matter was listed for hearing of the objections on 9 November 2021. The husband and wife relied on written submissions, supplemented by oral submissions.
Mr M appeared on his own behalf as an interested party and made oral submissions.
SETTING ASIDE SUBPOENA: THE LAW
Rule 6.33 of the Federal Circuit and Family Court of Australia Rules 2021 (Cth) provides that on application the court may make an order setting aside all or part of a subpoena.
The basis upon which a subpoena may be set aside in whole or part include where:
·The documents are not relevant or not apparently relevant;
·The subpoena is an abuse of process;
·Compliance would be oppressive;
·The terms of the subpoena are ambiguous or require interpretation;
·The subpoena constitutes a fishing expedition.
The grounds argued here were relevance, fishing, abuse of process and legal professional privilege.
The Evidence Act 1995 (Cth) s 118 provides that evidence which would disclose a confidential communication which was created for the dominant purpose of providing legal advice is not admissible. As is plain from the text of s 118 it relates to admissibility and not explicitly to the question of production by way of discovery or on subpoena. As a consequence the common law applies (Mann v Carnell (1999) 201 CLR 1).
The party seeking to rely on the privilege must establish its existence.
CONSIDERATION
The objections based on relevance (and in a similar vein “fishing”) can be dealt with in short form. Both the husband and wife contend that the corporate restructure is relevant; the wife because she says it effectively reduced the legal interest of the husband in an asset which would otherwise have been taken into account at full value. For the husband’s part (and Mr M) each say that the purpose of the transactions was to legally recognise an existing interest. Given the dispute, the documents effecting the restructure are plainly relevant.
Counsel for the husband pointed to the fact that the wife had not made an application under the Family Law Act 1975 (Cth) s 106B (“the Act”) or sought to join Mr M as precluding her from arguing that the documents produced on subpoena would have relevance. On the evidence before me on this application I cannot draw a conclusion as to whether the wife’s failure to join Mr M or seek relief under s 106B of the Act are fatal to her claim. To draw such conclusions I would need to have more information about the size of the asset pool both inside and outside the corporate structure.
Both the husband and Mr M argued that the documents sought from both the lawyers and the accountants would be covered by a claim of legal professional privilege. It is for the party who asserts the privilege to establish that the documents sought to be inspected were created for the dominant purpose of obtaining legal advice. It cannot be established by assertion. In circumstances where the privilege was asserted to apply to both the documents in the files of the lawyers (C Lawyers) and those in the files of the accountants, it is necessary for the husband and Mr M to establish both that a claim of privilege is available, who is the client claiming the privilege and what documents it is said to cover. I was not taken to any specific evidence about the documents sought and the manner in which they came into existence and the purpose for which they came into existence. In those circumstances I cannot be satisfied that the documents sought from the accountants would attract the privilege.
To the extent that it was argued that the subpoenae should be set aside because they were too broad or oppressive (or required interpretation by a non-party), I note that this objection was not made by the subpoenaed party and the documents have been produced.
Of more significant concern was the oral submission on behalf of the husband that the wife had caused to be filed subpoenae directed to third parties to obtain documentation theoretically in the possession or control of the husband before the time for compliance with the parties’ consent orders requiring disclosure had elapsed.
Where the documents sought are in the possession or control of a party to the litigation then in the ordinary course, the documents should be provided by way of discovery or disclosure before a subpoena issues.
If the wife had waited 42 days and tailored subpoenae to address lacunae in the disclosure then there could be no suggestion that the filing of the subpoenae constituted an abuse of process. As it stands, she caused a subpoenae to issue five days after entering into consent orders for disclosure.
I am conscious that the parties not be put to further expense. Consistent with the Federal Circuit and Family Court of Australia Act 2021 (Cth) s 67, the overarching purpose of the practice and procedure provisions is to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible. For that reason, I do not intend to set the subpoenae aside notwithstanding the wife’s failure to exhaust discovery prior to the filing of the subpoena. To do so may risk all parties having to undertake the same exercise if the subponae were to be refiled later.
I expect the parties to confer with a view to agreeing which documents captured by the subpoena to the accountants have been produced by way of discovery and which (if any) remain outstanding. Consistent with the views expressed above I will then grant leave to the wife to inspect documents produced by the accountants, the scope of which will have been narrowed by disclosure.
In respect of the subpoena to the lawyers (C Lawyers), the lawyer’s for the husband shall be given first access consistent with the proposal in the wife’s submissions. This strikes a balance between protection of the privilege that may attach and full and frank disclosure in these proceedings. Upon inspecting the documents produced by C Lawyers, the husband will produce a schedule of documents over which he seeks to maintain a claim of legal professional privilege. The schedule should be provided to the wife and Mr M on or before 19 November 2021.
I have not forgotten that Mr M made oral submissions and apart from adopting the submissions made by counsel for his son, submitted that the documents where “private” in nature. Unfortunately, where documents are relevant, the fact that they may have been intended to be private will not act as a bar to their production and inspection.
The question of whether the corporate restructure after separation was no more than a series of transactions designed to reflect the reality of the business dealings between father and son or a device designed to remove an asset (or part thereof) from consideration in adjustment of property interests as between the husband and wife, is squarely in issue between the parties. The documents the wife seeks go directly to that issue. It is difficult to understand why the husband does not also seek to put before the Court all the documents relevant to that issue. Once the schedules of documents over which privilege is claimed have been served and the wife has the opportunity to inspect the balance, the question of whether or not the husband’s maintenance of a claim of legal professional privilege is consistent with the position he takes in the litigation may be explored.
I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Christie. Associate:
Dated: 10 November 2021
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