Briggs & Briggs
[2022] FedCFamC1F 971
Federal Circuit and Family Court of Australia
(DIVISION 1)
Briggs & Briggs [2022] FedCFamC1F 971
File number(s): MLC 5050 of 2020 Judgment of: MCNAB J Date of judgment: 24 November 2022 Catchwords: FAMILY LAW – PROPERTY - Application in a Case – Application to adduce expert evidence – Application in circumstances where the parties have not obtained expert evidence – Application for disclosure of documents regarding a company in which the husband is a director – Test of possession and control over documents – Where the wife could subpoena the documents from the company. Legislation: Corporations Act 2001 (Cth) s198F, s291
Evidence Act 1995 (Cth) s 50, s80
Family Law Act 1975 (Cth)
Federal Circuit and Family Court (Family Law) Rules 2021 (Cth) r 6.03, r 7.18(3)(a)
Cases cited: Schweitzer & Schweitzer (2012) FamCA 445
Sharpe v Grobbel (2017) NSWSC
Division: Division 1 First Instance Number of paragraphs: 33 Date of hearing: 18 November 2022 Place: Melbourne Counsel for the Applicant: Mr Sweeney Solicitor for the Applicant: Tisher Finer Fc Law Counsel for the Respondent: Mr Geddes KC Solicitor for the Respondent: Taussig Cherrie Fildes ORDERS
MLC 5050 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR BRIGGS
Applicant
AND: MS BRIGGS
Respondent
order made by:
MCNAB J
DATE OF ORDER:
24 NOVEMBER 2022
THE COURT ORDERS THAT:
1.Pursuant to rule 7.11 of the Federal Circuit and Family Court (Family Law) Rules 2021 (Cth) the Applicant Husband be granted leave to tender a Taxation Report dated 30 June 2022 from Mr B, of C Company, and adduce evidence from Mr B, as required at the Trial of these proceedings listed before the Honourable Justice McNab commencing on 30 January 2023.
2.Pursuant to rule 7.11 of the Federal Circuit and Family Court (Family Law) Rules 2021 (Cth) the Applicant Husband be granted leave to tender a Forensic Accounting Report dated23 June 2022 from Mr D, of E Company, and adduce evidence from Mr D, as required at the Trial of these proceedings listed before the Honourable Justice McNab commencing on 30 January 2023.
3.Pursuant to rule 7.11 of the Federal Circuit and Family Court (Family Law) Rules 2021 (Cth) the Husband and Wife respectively be granted leave to tender an expert report in relation to the value of the ordinary, T Class and P Class shareholdings held by the Husband and F Pty Ltd in G Pty Ltd (formerly H Pty Ltd).
4.By 13 January 2023 the Respondent Wife file and serve an Amended Response identifying with precision the orders that she seeks including particularising what funds she seeks to quarantine to pay any taxation, pursuant to paragraph 4(d) her Trial Amended Response to Initiating Application filed 9 August 2022.
5.By 13 January 2023 the Respondent Wife file and serve an Affidavit particularising the premature distributions of property she contends have been made to or on behalf of the Applicant Husband up to the date of trial, pursuant to paragraph 2(c) of her Trial Amended Response to Initiating Application filed 9 August 2022.
6.By 13 January 2023 the Respondent Wife file and serve on the solicitors for the Applicant Husband a Balance Sheet in accordance with the orders of this Court made on 19 August 2020 or, in the alternative, she make, file and serve an Affidavit setting out with particularity the documents she asserts have not been disclosed which prevent her from preparing a full and complete Balance Sheet in accordance with that order.
7.The costs of and incidental to the Husband's Application in a Proceeding filed 21 October 2022 and the Wife's Response to an Initiating Application filed 14 November 2022 be reserved.
8.The Application in a Proceeding filed 21 October 2022 be otherwise dismissed
AND THE COURT NOTES THAT:
A.The matter remains listed for final hearing on 30 January 2023 for 3 days.
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 Briggs & Briggs has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
(Revised from Transcript)McNab J
This matter relates to an application in a proceeding filed by the applicant husband on 25 October 2022 seeking orders in the following terms:
(1)to be granted leave to adduce:
(a)a taxation report of Mr B of C Company and to adduce evidence of Mr B at trial was required, and
(b)a forensic accounting report of Mr D of E Company.
(2)a part property settlement to the husband of $1.75 million;
(3)the wife file and serve:
(a)an amended response specifying orders sought with respect of quarantining funds to taxation;
(b)an affidavit particularising her allegations of the premature distributions to or on behalf of the husband; and
(c)a balance sheet or an affidavit setting out with particularity assets that she asserts have not been disclosed which prevent her from preparing a balance sheet.
In her response filed 14 November 2022 the respondent wife disputed that these orders were appropriate and sought orders in the following terms:
(1)a part property settlement to each of herself and the husband of $1 million each;
(2)that the parties jointly engage Mr J of K Company to value the parties' 4 million ordinary shares and nearly 11 million T class shares and nearly 11 million P class shares in G Pty Ltd (“G Pty Ltd”); and
(3)the husband is to provide all documents and information as requested for the purposes of that report and the parties share the costs of the valuation.
The wife also sought orders for the production by the husband of the following documents:
(1)a copy of business plan and annual budget from G Pty Ltd for this calendar year, from 1 January to 31 December 2022, noting that it was required to be completed by December 2021;
(2)a copy of the management accounts for G Pty Ltd up to 31 October 2022;
(3)a copy of any group equity valuation of G Pty Ltd which relates to the value of the ordinary shares, the T class and P shares held by the husband; and
(4)board resolutions or minutes to confirm the decision for no STI to be made to the husband for the financial year ended December 2022, and the status of any ongoing negotiations for an exit event or board decisions in relation to same or the vesting of the shares.
The parties agreed to orders being made by consent for there to be a part property settlement to each party in the sum of $1.75 million and orders have been made to that effect.
The applicant referred to the following documents:
(1)The orders of 19 August 2020,
(2)the trial orders of 13 August 2021,
(3)orders of 7 June 2022,
(4)an amended initiating application of 6 July 2022,
(5)the affidavit of the husband of 6 July 2022 and
(6)the application in the proceeding at 21 October 2022.
Reference was also made to
(1)an affidavit of Ms L of 21 October 2020,
(2)the reply affidavit of the husband of 16 November 2022 and
(3)an amended further response to the initiating application of the wife dated 9 August 2022.
The respondent relied on the following:
(1)the response to an application of proceeding of 14 November 2022,
(2)an affidavit of the wife of 14 November 2022, and
(3)an affidavit of the wife of 9 August 2022.
Both parties filed outlines setting out their submissions. The matter proceeded on 18 November 2022 where the parties attended in person. The applicant was represented by Mr Sweeney and the respondent by Mr Geddes KC.
The matter remains listed for final hearing over three days from 30 January 2023.
Report of Mr B
In relation to the report of Mr B, the issue of the value of the contingent tax liability attaching to income earned through entities associated with the husband whilst he was resident in Country M has been an ongoing focus of the parties. I was advised and accept that there have been numerous exchanges of correspondence on this issue, in particular in relation to obtaining expert evidence on the issue. Both parties acknowledged that the determination of the question of any tax liability in Country M is an issue, as is the question of whether funds are to be quarantined to provide for the contingency that tax is payable in Country M.
In the course of proceedings, the husband raised issues about using an account from C Company to provide an opinion as C Company had previously provided advice to the corporation which was the subject of the income earned. He has withdrawn any objection to C Company providing an opinion or Mr B preparing a report, Mr B being an employee of C Company, based on C Company’s and Mr B's opinion that no conflict of interest exists. The wife objects to the reception of the report on the grounds that Mr B is not an independent witness and that the husband is unable to satisfy the Court that he will comply with Rule 7.18(3)(a) to give an objective and an unbiased opinion.
I will allow the applicant to adduce the evidence of Mr B. Whilst the process of obtaining the evidence has not been by way of obtaining a jointly appointed expert report, the fact that a report has been obtained by the applicant leads to no apparent injustice. The process in the terms of his appointment have been transparent. The issues of any conflict have been addressed by him, and if that remains an issue for the wife, he can be cross-examined. Expert evidence regarding the Country M tax issue is necessary for the Court to determine the property pool. If the respondent takes issue with the opinion proffered by Mr B, she can seek her own advice and take steps to file an adversarial opinion prior to hearing if she sees fit.
The Report of Mr D.
The respondent has raised as an issue in the proceeding what is said to be premature distributions of funds by the husband. The husband has given evidence at paragraph [69] and [106]-[112] of his trial affidavit in relation to the money that has been spent since 2016 which meet the description. The wife has neither denied nor admitted that evidence.
The evidence of Mr D collates and sets out the documents going to the issue of the premature distribution of funds. The applicant submits that if the husband is required to assay each of the payments in his evidence, the process would be lengthy and time-consuming. It was submitted that the alternative he would be able to produce a summary pursuant to section 50 of the Evidence Act 1995 (Cth) which, again, would involve considerable time and expense.
The respondent objects to the reception of the report on the grounds:
(a)that Mr D was not jointly appointed; and
(b)the report is qualified to the extent that it relies on documents and accounts provided by the husband and the accounts have not been audited.
Objection was taken with at paragraph 1.23(a) of Mr D's report which stated:
I am instructed to clearly set out that no funds have been removed, quarantined or distributed from the parties' asset pool by [Mr Briggs], and that any funds received have not otherwise been misappropriated by [Mr Briggs].
That was said to represent a legal question for the trial judge and not for the expert. As I read that part of his report, Mr D is simply setting out the instructions that he has obtained from Mr Briggs and does not constitute the expression of an opinion. In relation to whether there has been an audit conducted on the financial information that was provided to Mr D, in my view that is not unusual in a case of this kind and the requirement that all these accounts be audited would be prohibitively expensive, even when there is a large asset pool, as it is in this case. Indeed, as I understood the submissions, the respondent was not pressing for the accounts to be audited.
There was also a complaint that the report is qualified to the extent that it relies on documents and accounts provided by the husband. The process by which he was appointed and the material with which he was provided has been disclosed. Mr D can be cross-examined both in relation to the methodology that he has adopted and the opinions that he has expressed. I will allow the evidence of Mr D to be adduced. His evidence is relevant.
Some criticism is made of his report that Mr D expresses conclusions about the ultimate issue. The rule against the expression of an opinion on the ultimate issue was abrogated by operation of section 80 of the Evidence Act. Further, Mr D can be cross-examined on the opinions that he has expressed. I do not regard that the questions raised about the methodology or the scope of the documents that he has been provided are fatal to the admission of the document and it is a matter for cross-examination as to the weight that is put on it or to the extent that it is actually received into evidence.
Balance of Issues
In terms of the balance of the issues raised by the application, in my view it is appropriate for the wife to file an amended response which specifies the orders sought with respect to quarantining of funds and the payment in relation to the payment of taxation. There should be also a response which particularises allegations as to what she says are premature distributions made by husband. She should also file a statement of what she says constitutes the asset pool. Those documents should be filed by 13 January 2023. By that time the wife will be in a position to consider the reports of Mr D and Mr B and to obtain any adversarial opinion.
The issue as to the fixing of the asset pool and the specification of orders sought and specification of allegations against what is said to be premature distributions to or on behalf of the husband all have been issues that have been raised for some time in the proceeding and have been the subject of previous orders and I think for the matter to proceed in an orderly fashion on 30 January 2023, that those matters should be particularised. I also note that the parties intend to attend a mediation during the course of January prior to the trial. That sort of information is necessary for the orderly and efficient conduct of a mediation, particularly when a significant asset pool is under consideration.
In respect of the orders sought by the respondent, the applicant has objected to the productions of the documents sought on the grounds that:
(1)his employment contract provides that the documents of the kind sought are confidential and could not be produced by reason of limitations in the employment contract; and
(2)the applicant has no right of possession or control of the documents sought and, therefore, cannot be required to produce the documents and has no right of access to them.
It was submitted that it was open to the respondent to issue a subpoena to the company to produce the documents sought.
As to the first ground, the employment contract makes specific reference to the production of documents as required by law. Given the documents are sought by the operation of the rules of the Court, that proviso would be met. If the documents were produced, they would be subject to the Harman obligations. However, it is not strictly necessary for me to determine this ground as I have otherwise determined that the documents are not disclosable by the applicant.
The applicant submits he does not having a right of possession or control over the documents sought. The applicant refers to rule 6.03 which provides the duty of disclosure applies to each document that:
(1)It is or has been in the possession or under the control of the party disclosing the document; and
(2)It is relevant to an issue in the proceeding.
The applicant submits that the documents sought are not in the possession or control of the applicant. As to control, the applicant refers to Schweitzer & Schweitzer (2012) FamCA 445 at [45] where O'Reilly J stated:
This, accordingly, throws further light on the meaning of “possession” within the meaning of r 13.07(a), (being analogue to the rule 6.03) that it means not mere physical possession (custody) but “possession” within the accepted meaning of “the legal right to possession”: see in B v B
(Citations omitted).
Further, at [47] of the same decision, as to the meaning of “control”:
The fiduciary obligations which obtain in relation to directors of corporations and trustees (whether natural persons, or corporations) has effect that there is no right to “possession”, or “control”, in any personal capacity, but, as emphasised in Mills (above), Edman v Ross (above), Lonhro (above) and s 290(1) Corporations Act, there is only a right of access to documents, strictly for the purposes of the corporation or the trust.
Counsel for the respondent referred the Court to Sharpe v Grobbel (2017) NSWSC 1065 per Brereton J at paragraph [21] which provided:
Moreover, directors are entitled, at common law, to access the books and records of the company as a necessary incident of the office of director, in order that they may properly perform their duties. The statutory right of access under Corporations Act, s 198F, now permits access for the purpose of legal proceedings to which a director or former director is or may become a party, notwithstanding that the director’s purpose may be a private one. For present purposes I am content to accept, without deciding, that consistently with the authorities on s 247A, s 198F may not abrogate legal professional privilege and thus may not override legal professional privilege in respect of advice to the company in connection with a dispute between it and the director. But subject to that exception, a company cannot insist on privilege against its director. (emphasis added)
Specific reference was made by senior counsel to the phrase "notwithstanding that the director's purpose may be a private purpose." It was submitted that this private purpose may include family law proceedings in which a director of a company is a party.
In my view in accordance with Schweitzer and the authorities referred to therein, the director's purpose must be a purpose which is a necessary incident of the office of the director in order that they may properly perform their duties as a director. The applicant is not a party to this proceeding because he was a director in G Pty Ltd and the production of documents is not sought as a result of a necessary incident of the office of director or in order that he may perform his duties. The documents are neither in the possession or control of the applicant and he has no power to compel their production pursuant to sections 291 or 198F of the Corporations Act 2001 (Cth).
As was found in Schweitzer and in a number of other decisions which were referred to me by counsel for the applicant, the appropriate course for the respondent, if so advised, is to direct a subpoenae to G Pty Ltd to produce the documents sought. In the course of discussion, the Court did raise concerns about the breadth of the request for the documents sought, but makes no determination in relation to that as it was not fully argued and may object on that is one to be taken by the company.
In relation to the orders for the joint valuation of the parties’ shares in G Pty Ltd, I am not minded to order that a joint valuation of those shares be obtained. Given the history of this matter and the difficulties associated with the parties' co-operating and the process of obtaining a jointly appointed expert evidence, there is a real risk that the hearing date will be jeopardised if an order was made to that effect. In the circumstances, I will make orders that each party have leave to tender an expert report in relation to the value of the ordinary T class and P class shareholding or the shares, the relevant shares held by the husband and F Pty Ltd and G Pty Ltd.
In those circumstances, the Court will make orders in the terms of the orders sought by the husband.
I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the ex tempore Reasons for Judgment of the Honourable Justice McNab. Associate:
Dated: 24 November 2022
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