Chen and Chen and Ors (No 2)
[2017] FamCA 555
•3 August 2017
FAMILY COURT OF AUSTRALIA
| CHEN & CHEN AND ORS (NO 2) | [2017] FamCA 555 |
| FAMILY LAW – PROPERTY – interlocutory orders. Where relationships are complicated by various parties and a financial agreement. Order to hear setting aside application separately. |
| Family Law Act 1975 (Cth) |
| Mulley v Manifold (1959) 103 CLR 341 R v Ross-Jones; ex parte Green (1984) 156 CLR 185 |
| APPLICANT: | Ms Chen |
| 1ST RESPONDENT: | Mr Chen |
| 2ND RESPONDENT: | Mr Quen |
| 3RD RESPONDENT: | C Pty Ltd (ACN …) |
| 4TH RESPONDENT: | Quen Pty Ltd (ACN …) |
| 5TH RESPONDENT: | E Pty Ltd (ACN …) |
| 6TH RESPONDENT: | Company F (ACN …) |
| 7TH RESPONDENT: | G Pty Ltd (ACN …) |
| 8TH RESPONDENT: | Mr A Chen |
| 9TH RESPONDENT: | Mr B Chen |
| 10TH RESPONDENT: | Mr C Chen |
| FILE NUMBER: | MLC | 5805 | of | 2016 |
| DATE DELIVERED: | 3 August 2017 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Cronin J |
| HEARING DATE: | 27 July 2017 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Dinelli |
| SOLICITOR FOR THE APPLICANT: | Taussig Cherrie Fildes |
| COUNSEL FOR THE 2ND, 4TH, 5TH AND 6TH RESPONDENTS: | Mr Glick QC with Mr Matta |
| SOLICITOR FOR THE RESPONDENT: | Bowlen Dunstan & Associates |
| COUNSEL FOR THE 3RD, 8TH, 9TH AND 10TH RESPONDENTS: | Mr Puckey |
| SOLICITOR FOR THE INTERVENOR: | Marshalls & Dent |
Orders
That the dispute relating to the binding nature of the financial agreement executed between the first respondent and the second respondent in October 2015 be heard separately from all other matters pending.
That the parties attend a mention at 9.00am on 16 August 2017 for the purposes of determining the date for the hearing referred to in paragraph (1) of these orders and for any timetable to be so prepared.
That the second respondent file and serve on all other parties a financial statement that complies with Chapter 13 of the Family Law Rules 2004 by 31 August 2017.
That the second respondent provide discovery of the documents referred to in (a) and (b) of Annexure A to the wife’s submissions filed 26 July 2017 such that the extent of discovery accords with the reasons for judgment this day.
That all outstanding applications for final relief are adjourned to a date to be fixed convenient to the court.
That all interim applications relating to orders by way of written submissions are otherwise dismissed save as to paragraph [3] of the response of the third, eighth, ninth and tenth named respondents filed on 19 July 2017 seeking that interim order which is adjourned to a date to be fixed to be listed by arrangement with the court.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Chen & Chen and Ors (No 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 5805 of 2016
| APPLICANT: | Ms Chen |
| 1ST RESPONDENT: | Mr Chen |
| 2ND RESPONDENT: | Mr Quen |
| 3RD RESPONDENT: | C Pty Ltd (ACN …) |
| 4TH RESPONDENT: | Quen Pty Ltd (ACN …) |
| 5TH RESPONDENT: | E Pty Ltd (ACN …) |
| 6TH RESPONDENT: | Company F (ACN …) |
| 7TH RESPONDENT: | G Pty Ltd (ACN …) |
| 8TH RESPONDENT: | Mr A Chen |
| 9TH RESPONDENT: | Mr B Chen |
| 10TH RESPONDENT: | Mr C Chen |
REASONS FOR JUDGMENT
There are two issues for determination arising from the interlocutory hearing held on 27 July 2017:
(a)should a discrete hearing be held to determine whether or not a financial agreement should be set aside; and
(b)to what extent should discovery be ordered now.
The orders at the beginning of these reasons reflect the answers.
It is sufficient to set the context by saying that there are a number of contentious facts here and I am not asked to make findings about them. Those contentions do make the determination difficult.
For my convenience, rather than refer to the parties by name, I shall group them and describe them by their relationship status.
The husband and the wife were married and there are three relevant adult children to that marriage. These are all so described. There is a company C Pty Ltd which might loosely be described as being controlled by the children although the wife has a shareholding.
Whilst still married and living with the wife, the husband had a relationship with a party who, for my convenience, I shall describe as the de facto wife.
The de facto wife has control of a company B Pty Ltd but through its senior counsel, as the de facto wife is a director, it agreed to abide by the determination of the court.
Three other companies as respondents but connected to the de facto wife, are also parties.
For clarity, all parties were otherwise represented.
The genesis of the dispute stems from the husband and the de facto wife and also the children (without the wife’s knowledge) assisted by lawyers, entered into a deed of settlement in August 2015 and then a financial agreement said to be made under s 90UD of the Family Law Act 1975 (Cth) (“the Act”) in October 2015.
The position of the de facto wife is to maintain that the financial agreement is binding. The position of the husband and the wife, supported by the children, is to attack the binding nature of that agreement.
After a number of interlocutory hearings, the first question in (a) above arose. The de facto wife seeks that that discrete issue be determined separately and, first in time. She is supported in that application by the husband; the children do not oppose it. The wife is agnostic about it but says she will agree if there is no opposition from the de facto wife to her having discovery. As I am to determine question (b) separately, I consider the wife’s position should be seen as indeed agnostic, that is, neither consenting nor opposing.
“Bifurcation”
I see some sense in the discrete hearing for the following reasons:
1.The majority of parties do not disagree about that course of action;
2.It is a jurisdictional issue (as between the husband and the de facto wife) because s 90SA makes clear there is no role for the court in exercising Part VIII AB if there is a financial agreement binding on the parties. Query what impact that has on the question of a “matter” and the associated jurisdiction of the court but I need not consider that here. The wife and for that matter, the husband, assert they are still able to litigate about the wife’s interests but it may shorten the ultimate trial, and more particularly, the preparation for it;
3.Albeit the court has jurisdiction to determine whether the agreement is binding, by its very nature, it is a matter of jurisdiction and it should be heard expeditiously and probably, as a matter of utmost urgency (see R v Ross-Jones; ex parte Green [1984] HCA 82; (1984) 156 CLR 185);
4.There will most probably be a saving in respect of interlocutory issues such as discovery and valuation which are apparently voluminous because the resolution of this matter will quell arguments about the entitlement to documents. The discovery issue is contentious including if the agreement is set aside what, if any, restitution needs to be contemplated. If that is to occur, I would imagine discovery will be very large;
5.It is asserted that the ownership of property in the de facto wife’s control has largely come from the arrangement made with the husband and thus, the clarification of whether the agreement is binding still leaves the question of whether the de facto wife obtained property in which the wife had an interest. That issue is largely about what happened between the husband and the de facto wife and therefore different to the other issues in dispute. A discrete hearing may reduce costs for the other parties;
6.Some of the focus of the overall dispute revolves around the August 2015 settlement deed and the resolution of the financial agreement may (but also may not) enable the importance of that settlement document to be clarified.
Those matters and there may be others as well, justify this issue being dealt with separately.
Discovery
By her submissions filed 26 July 2017, the wife sought that irrespective of the outcome of the issue above, discovery should be provided by the husband, the de facto wife and her company in respect of:
(a) properties that had been sold in which she claimed an interest;
(b) the transfers of shares in B Pty Ltd; and
(c)proceeds of sale of property and the business of B Pty Ltd in respect of which, it was submitted by the wife:
“it is appropriate that the wife be able to explore where those funds have been expended.
By her proposed orders, the wife expanded those three categories.
A financial statement
The wife also sought that the de facto wife file “an amended” financial statement. I have not been able to find any original financial statement. Dealing with that issue first, Rule 13.05 requires a party filing a response to a financial case to file a financial statement. A financial case is defined in the dictionary to the rules as meaning relevantly, an application under s 90UM of the Act.
The de facto wife was silent on the subject the wife’s request that she file a financial statement. None appears to have been filed to date by her.
Before looking at the specific rule, it is helpful to look at the chapter of the rules to give context to the specific rule.
Chapter 13 of the Family Law Rules 2004, governs the general duty of disclosure. Those rules relevantly provide that each party to a case has a duty to give full and frank disclosure of all information relevant to the case, in a timely manner. This same context assists in relation to the issue below concerning discovery because the chapter refers to disclosure and production of documents. The rule requires parties to note that it starts with the “pre-action procedure” for a case and continues until the case is finalised.
Rule 13.05(1) relating to the filing of a financial statement is mandatory. The mandatory nature of the rule can still be overridden if there is no relevance in the material or for some other good reason. But chapter 1 of the rules also gives context. It provides that the main purpose of the rules is to ensure that each case is resolved in a just and timely manner at a cost to the parties and the court that is reasonable in the circumstances of the case and the court must apply those rules to promote the main purpose.
Even if the provision of such information is difficult because it is complicated by the parties’ financial structures, there can no longer be any doubt that the obligation to disclose is fundamental. The language of the rules about full and frank disclosure leaves no room for doubt and the specific reference to the nature of the statutory relief sought makes it so. In addition, the same concept can be seen not just in the fact that a specific form is to be completed but by the requirement to file an affidavit if the form is insufficient or unhelpful.
The rule also specifies that the financial statement is to be filed at the time of the filing of whatever document it is that seeks the discretionary relief of the court.
For those reasons, the de facto wife’s financial statement should have been filed when she sought the relief that she did and as it was not done, it should be done within one month.
Returning to discovery
I return then to discovery and the reference that I just made to relevance to the case. It is asserted by the de facto wife that there can be no relevance in some of these documents until the issue of the financial agreement is determined. Concession was made by senior counsel for the de facto wife that documents relating to some property sold in 2016 and 2017 were relevant and the contract of sale would be produced. That would confirm the sale document was executed but not necessarily the settlement of that sale. I see no reason why one would distinguish between the two documents if it is accepted that the sale of properties is relevant.
The relevance lies in the wife’s trust argument that even if the de facto wife is successful on the financial agreement, there is still a problem to be determined about whether the wife had an interest in some of the property that the husband “gave away”.
So too, the class of documents about bank statements and the like relating to what happened to that money must be relevant to confirm that the settlement of the sale actually took place and that the money (both deposit and balance) was as indicated in the settlement statement. I would therefore limit the wife’s category (a)(vii) to disclosing the details and evidence of the accounts into which the relevant payments went.
Category (b) is not contentious.
Category (c) is opposed. It is widely drawn.
The issue of discovery is found in the rules of court. As I earlier observed, it sits comfortably with the duty of general disclosure but it is important to observe that it is not just documents that are required but also information.
The specific duty lies in rule 13.07 which refers to each document that is relevant to an issue in the case. It is those words that are the focus now. This particular rule must be seen in the context of the main purpose of the rules in chapter 1.
Rule 13.22 provides for the application made here by the wife; a list of documents has been provided. The de facto wife declines to provide them (as she may do by seeking to be relieved of the otherwise strict obligation) and hence, the application.
The critical part of the rule can be found in 13.22(2) which provides that, relevantly, the wife, must satisfy the court that the order is necessary for disposing of the case or an issue or reducing costs.
The court may consider :
(a ) whether the disclosure sought is relevant to an issue in dispute;
(b)the relative importance of the issue to which the document or class of documents relates;
(c)the likely time, cost and inconvenience involved in disclosing a document or class of documents taking into account the amount of the property, or complexity of the corporate, trust or partnership interests (if any), involved in the case; and
(d)the likely effect on the outcome of the case of disclosing, or not disclosing, the document or class of documents.
It is difficult to see how category (c) of the pursued documents is presently relevant even taking into account the arguments of the wife outside of her application to set aside the financial agreement. Counsel for the wife submitted that this was information that the wife needed to properly put her case and she acknowledges that she does not have that information.
Senior counsel for the de facto wife submitted that the wife was otherwise putting her case of entitlement on the basis of the existence of a trust. He submitted that the documents had nothing to do with the creation of a trust although he conceded that it would have relevance if the financial agreement was set aside because the property would then potentially revert to the husband. Another major concern however was expense but that will have to be faced if restitution issues are to be contemplated.
I am not able to determine just how important these documents going back to 2011 and 2012 (bearing in mind the agreements were in 2015) are but having determined to deal with the discrete issue of the financial agreement first, I agree with the de facto wife that they are not immediately that important in the context of the costs associated with their production. The likely effect of them not being immediately disclosed is not apparent.
Ultimately, the matter has to be determined on the basis of direct relevance. In Mulley v Manifold [1959] HCA 23; (1959) 103 CLR 341 at p.345, Menzies J discussed the test of relevance in the discovery process as it then applied saying:
...Only a document which relates in some way to a matter in issue is discoverable, but it is sufficient if it would, or would lead to a train of enquiry which would, either advance a party’s own case or damage that of his adversary.
The Mulley test which sounds very close to what the wife seeks the court to order here, is no longer the way this issue should be determined because the present rules of court emphasise that discovery applies only to a document directly relevant to an issue in dispute. It was submitted by senior counsel for the de facto wife that the documents were sought based on an assumption of a trust. I agree with that analysis at this point in the litigation. It is difficult to see how the category (c) documents relate to the present issue. I do acknowledge they may become relevant in the future.
Even accepting that the disclosure obligation created by the Act and rules applies and is very wide, the wife still needs to point to the relevance of the category of documents she pursues in an environment where the court is initially going to deal with a discrete point. I consider that the necessary evidence is not present.
I certify that the preceding Forty (40) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 3 August 2017.
Associate:
Date: 3 August 2017
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