Clifton & Aspen
[2023] FedCFamC1F 376
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Clifton & Aspen [2023] FedCFamC1F 376
File number(s): SYC 760 of 2021 Judgment of: ALDRIDGE J Date of judgment: 15 May 2023 Catchwords: FAMILY LAW – PRACTICE & PROCEDURE – Where the wife caused a subpoena to be served on the commercial lawyers for the husband and his father – Where the husband and his father objected – Confidential documents – Legal professional privilege – Where the wife contends that privilege was lost by the operation of s 125 of the Evidence Act 1995 (Cth) – Allegations of sham – Where even if the wife’s allegations are accepted at face value, they do not inexorably lead to a finding of sham – Claim of legal professional privilege upheld.
FAMILY LAW – PRACTICE & PROCEDURE – Oral application made by the wife to issue further subpoenas – Where the subpoenas were widely drawn – Where the further subpoenas are sought following the inspection of documents produced by a bank – Where those documents are contended to be relevant to the answers given by the husband in cross-examination – Sham claim abandoned – No apparent relevance to the remaining issues in the matter – Subpoenas declined to be issued.
FAMILY LAW – PRACTICE & PROCEDURE – Where the wife filed an Application in a Proceeding to amend her pleadings, tender documents and reopen cross-examination of the husband and his father – Where the application is brought following discovery of further documents – Where final submissions have been completed and only matters as to the expert report and balance sheet items remained – Several considerations to determine whether in interests of justice – Where the wife is to be given the opportunity to put the proposed claim forward but limited to the
foreshadowed case – Application granted.Legislation: Evidence Act 1995 (Cth) ss 118, 125
Family Law Act 1975 (Cth) ss 79, 106B
Cases cited: AWB Ltd v Cole (No 5) (2006) 234 ALR 651
Director of Public Prosecutions (Cth) v Kinghorn (2020) 102 NSWLR 72
Hatton v Attorney-General of Commonwealth of Australia & Ors (2000) FLC 93-038
Jess v Scott (1986) 12 FCR 187
Kang v Kwan & 2 Ors [2001] NSWSC 698
Lindon v The Commonwealth (No 2) (1996) 70 ALJR 541
Division: Division 1 First Instance Number of paragraphs: 131 Date of hearing: 6 April 2023 Place: Sydney Counsel for the Applicant: Mr Sirtes SC with Mr Auld Solicitor for the Applicant: Delaney Lawyers Counsel for the First Respondent: Mr Cummings SC with Mr Rogan Solicitor for the First Respondent: Pearson Emerson Counsel for the Second and Third Respondents: Mr Sulan SC with Ms Jeliba Solicitor for the Second and Third Respondents: Barkus Doolan Winning ORDERS
SYC 760 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS CLIFTON
Applicant
AND: MR B ASPEN
First Respondent
D PTY LTD
Second Respondent
MR C ASPEN
Third Respondent
ORDER MADE BY:
ALDRIDGE J
DATE OF ORDER:
15 MAY 2023
THE COURT ORDERS THAT:
1.The Further Amended Application in a Proceeding filed on 28 March 2023 is granted.
2.The matter is listed for further directions at 9.30 am on 22 May 2023.
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 a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
ALDRIDGE J:
INTRODUCTION
These are my reasons for upholding a claim of legal professional privilege on the fourth day of the hearing, the refusal of an application to re-open the evidence and to issue further subpoenas to E Lawyers and F Company prepared on 28 February 2023 and the determination of an Application in a case filed on 28 March 2023 seeking leave to re-open the evidence and to plead a new course of action.
The husband was a consultant to a major development taking place in Suburb J. His case is whilst he was offered the opportunity to invest in the development himself, he declined for a number of reasons. Instead, his mother took up the opportunity and the very valuable results of that investment are now held in the D Trust of which the trustee is D Pty Ltd.
The D Trust was established following the death of the husband’s mother in 2017. Prior to that, the assets held by that trust were held by the D Super Fund.
The wife contended that the trust structure was a sham and that the investments were held, in reality, by the husband. Alternatively, she contended that D Pty Ltd was the mere puppet of the husband. On the fifth day of hearing, during the course of the wife’s final submissions, the claim of sham was abandoned.
THE PRIVILEGE CLAIM
On the fourth day of the hearing, I heard and upheld a claim for privilege objecting to the production of certain documents. These are my reasons for doing so.
On 7 February 2023, the wife caused a subpoena to be served on G Lawyers, who have acted for the husband and his father (the third respondent) since 2012. The subpoena sought the production of the following documents:
1. A copy of this Subpoena.
2.A copy of the Affidavit of Executor and/or any other Affidavit executed in relation to Probate of the Late [Ms H], proceedings […].
3.A copy of instructions, file notes, correspondence, memorandums and any other document in respect to the preparation of the Inventory, and the Inventory, of the Late [Ms H] filed in proceedings […] and in respect to the Affidavit of Executor filed in proceedings […].
4.A copy of the invoice paid on or about 1 August 2016 in the amount of $2,750.00 by [K Pty Ltd] ATF the [K Trust] ANZ bank account number […59], reference […72], in respect to that Trust, or [Mr B Aspen] born […] 1969 ([Mr B Aspen]), or [Mr C Aspen] born […] 1930 ([Mr C Aspen]), or [D Super Fund], or the [Mr B Aspen Trust] or any other entity or trust under the control of either [Mr B Aspen] or [Mr C Aspen].
5.A copy of your invoice attached to your letter dated 16 March 2021 to [Mr C Aspen], tax invoice number […], due […] April 2021.
6.File notes, correspondences, memorandums and any other document in relation to any meeting with [Mr B Aspen], including in or about November 2019 with members of [F Company] and [Mr C Aspen], for the period 1 January 2015 to date.
(Emphasis in original)
K Pty Ltd is a company owned and controlled by the husband.
Objections were taken to the production and inspection of a number of documents which were identified in the affidavit of Mr L filed on 21 and 22 February 2023.
The wife accepted that the identified documents were “confidential documents” within the meaning of s 118 of the Evidence Act 1995 (Cth) (“the Evidence Act”) and thereby privileged from production and inspection. The wife contended however, that any privilege was lost by the operation of s 125 of that Act which provides:
125 Loss of client legal privilege: misconduct
(1) This Division does not prevent the adducing of evidence of:
(a)a communication made or the contents of a document prepared by a client or lawyer (or both), or a party who is not represented in the proceeding by a lawyer, in furtherance of the commission of a fraud or an offence or the commission of an act that renders a person liable to a civil penalty; or
(b)a communication or the contents of a document that the client or lawyer (or both), or the party, knew or ought reasonably to have known was made or prepared in furtherance of a deliberate abuse of a power.
(2)For the purposes of this section, if the commission of the fraud, offence or act, or the abuse of power, is a fact in issue and there are reasonable grounds for finding that:
(a) the fraud, offence or act, or the abuse of power, was committed; and
(b)a communication was made or document prepared in furtherance of the commission of the fraud, offence or act or the abuse of power; the court may find that the communication was so made or the document so prepared.
…
The wife submitted that a sham falls within the scope of the word “fraud” in that section (see Young J in AWB Ltd v Cole (No 5) (2006) 234 ALR 651 (“AWB Ltd v Cole”) at [210]–[212]) and that, as she had established a prima facie case of sham, the section applied so as to overcome any claim for privilege.
For present purposes, there is no distinction between the common law and the provisions of the Evidence Act (Director of Public Prosecutions (Cth) v Kinghorn (2020) 102 NSWLR 72 (“Kinghorn”) at [36]). Senior counsel for the husband and the father each accepted, at least for the purpose of the argument, that a sham falls within the meaning of fraud for the purposes of s 125. This is consistent with the discussion of principle by Santow J in Kang v Kwan & 2 Ors [2001] NSWSC 698 at [11] and [37(9)].
Also, again for the purpose of the argument, each senior counsel accepted that the factual matters set out at paragraph 10 of the wife’s written submissions dated 23 February 2023 on this issue had been established to a prima facie level. Although lengthy, it is necessary to set it out in full. The paragraph stated:
10.In light of the authorities, by which His Honour is bound, the wife’s prima facie case of a ‘sham’ is evident in the following truncated sequence of events:
10.1.[In] 2015 [N Pty Ltd] is incorporated with [Ms H] as sole director and only shareholder.
10.2.[In] 2015, The [D Super Fund] is established with [M Pty Ltd] as its trustee and with [Ms H] as the sole director and member.
10.3.[In] 2015 the [N Property Trust] (with [N Pty Ltd] as its trustee) is settled by way of deed with one unit holder, namely [M Pty Ltd] ATF [D Super Fund]. The [D Super Fund] then subscribes, in four tranches, to [over 250,000] units in the [N Property Trust] for a subscription price of $1 - all at a time when the [D Super Fund] has no operating bank account. The [D Super Fund] later subscribes to a further 400,000 units in [N Property Trust] for a $1 subscription price.
10.4. [N Property Trust] embarks on the [Suburb P] development whereby:
10.4.1.[N Property Trust in mid-2015] enters into a Deed in respect of [1 and 2 N Street, Suburb P] with an option to purchase. Following receipt of the $250,500, $221,243.60 of funds is used by [N Property Trust] to secure the options.
10.4.2.[In late] 2015 [N Property Trust] enters into a Deed in respect to [Q Street, Suburb P], with an option to purchase.
10.4.3.[In early] 2016 the [N Property Trust] enters into an Exclusivity Deed with a third party purchaser in respect of the options for the [Suburb P] properties. A Deed of Variation of the Exclusivity Deed is entered into five days later.
10.4.4.[Later that month, N Property Trust], in respect of the [Suburb P] properties, enters into an Agreement to Assign Options for $5,079,544 excluding GST
10.4.5.[The following month] the [N Property Trust] receives a deposit of $2,200,000 in respect of the options to purchase the [Suburb P] properties.
10.4.6.[Later that month] the [N Property Trust] enters into a Deed of Variation to Assign Option Deeds. [N Property Trust] receives proceeds of $3,167,498 and $220,000.
10.4.7.[In mid-2016] the [D Super Fund] repays the three Limited Recourse Borrowing Arrangements (see footnotes herein) to the [Mr B Aspen Trust], with accrued interest of $28,140.20.
10.4.8.[In mid-2016], the [N Property Trust] pays various expenses identified in a document as 'PSV for [Suburb P] Project' being stamp duty, GST, Agent fees etc.
10.4.9.[In mid-2016], the [N Property Trust] bank account is closed with the remaining proceeds of sale of the [Suburb P] Development of $4,024,210.65 transferred to the [D Super Fund]. [N Property Trust] is then wound up.
10.5.In the midst of those transactions and success of the [Suburb P] Development, [in mid-2015] the [D Super Fund] commences a pension for $179,835. [In early] 2016 the [D Super Fund] commences a pension for the sum of $58,308. As a result of the pensions, the [D Super Fund] is 100% exempted for the Financial Year ended 30 June 2016. The proceeds of the [Suburb P] Development are tax-exempt.
10.6.[In] 2017 [Ms H] unexpectedly died from illness. The Third Respondent becomes sole director of the [D Super Fund].
10.7.[D Pty Ltd] is incorporated [in] 2017 with the First and Third Respondent as directors.
10.8.[The following day] the [D Trust] is settled by way of Deed (by [Mr R] of [F Company]) with [D Pty Ltd] as its trustee, and the Third Respondent [Mr S] and [Mr R] as appointers and with:
10.8.1.[X] and [Y] as named primary beneficiaries;
10.8.2. The husband as a secondary beneficiary;
10.8.3.Neither of [Ms H’s] other children and/or grandchildren as beneficiaries; and
10.8.4. The wife as an excluded person, including as a widow.
10.9.Probate of the Estate of [Ms H] is granted [in] 2017.
10.10.[Mr C Aspen] is appointed sole director of [M Pty Ltd] [in] 2018. As sole director of [M Pty Ltd] (trustee of the [D Super Fund]), the third respondent resolves to pay all superannuation benefits of the [D Super Fund] to himself as a dependent including [over 3,600,000] units in the [V Unit Trust] and [over 3,600,000] units to the [D Trust].
10.11.The [D Super Fund] is wound up in [mid-2018].
10.12.[In] 2020 the wife meets with the person whom she believes is in a relationship with the husband, namely [Ms W], and informs the husband of said meeting.
10.13.The following day, the husband resigns as a director of [D Pty Ltd] and appoints his long-term commercial lawyer, [Ms Z], as joint director with the Third Respondent. The husband also resigns as director of [V1 Pty Ltd], [V2 Pty Ltd], and [V3 Pty Ltd] and appoints [Ms Z] in his place.
(Wife’s written submissions dated 23 February 2023, paragraph 10) (Emphasis in original) (Footnotes removed)
They also relied on paragraph 7, which is in the following terms:
7.It is the leaded case of the Applicant that the exclusion of the wife as a beneficiary of the [D Trust]) is a sham. It is the wife’s case that at all times, and notwithstanding the extensive appropriation of monies to form the seed capital of the [D Trust] and further appropriation of monies to inflate the value of the trust, the monies have at all times been matrimonial funds, from which the wife would be entitled to in a claim for property adjustment under s 79 and for the purposes of the Family Law Act 1975.
(Wife’s written submissions dated 23 February 2023, paragraph 7)
Reference was then made to the following passages in Kinghorn:
117.It can be accepted that the reference to “reasonable grounds” in s 125(2) encompasses proof of the relevant facts to a standard less than the balance of probabilities so as to warrant the loss of privilege: see Kang v Kwan [2001] NSWSC 698 at [37] points 6 and 7 (Santow J), citing Propend at 556 (McHugh J). However, the court was not referred to any case where s 125(2) was satisfied where there was some doubt as a matter of law whether the facts alleged, if demonstrated to the relevant standard, amounted to fraud, commission of offence etc. Thus, for example in Zemanek v Commonwealth Bank of Australia (Federal Court of Australia, Hill J, 2 October 1997, unrep), Hill J observed in relation to s 125(2) that “[s]uch conduct, if ultimately established, would amount to fraud” (at 13). In Kang v Kwan, Santow J referred to a “clear abuse of process” (at [44]).
118.Proof to a lesser standard of facts that amount to fraud is one thing; whether as a matter of law those asserted facts amount to a fraud is another. Section 125(2) is directed to whether the fraud, commission of offence etc is a “fact in issue”. It is not concerned with whether the law is in issue. Nothing in any of the ALRC Reports or any of the relevant authorities supports the suggestion that it is sufficient that the relevant facts, if established, only arguably amount to fraud or the commission of an offence. Instead those facts, if established, must constitute fraud, an offence, an act rendering a person liable to a civil penalty or a deliberate abuse of power. To hold that advice or litigation privilege is lost in circumstances where the relevant facts are not in issue, but a party asserts but declines to fully argue that those facts establish a fraud, an offence, an act rendering a person liable to a civil penalty or a deliberate abuse of power, would represent far too low a threshold for the loss of privilege.
There is therefore a difference between establishing the facts relied upon in proving fraud to a prima facie level (sometimes described as “needing only to give ‘colour to the charge’”) and what is the legal effect of those facts. If those facts, established at that prima facie level, must lead to a finding of fraud, then privilege is lost. If however, those facts only arguably amount to fraud, in this case, a sham, then the section does not apply.
In my opinion, the facts set in paragraph 10 of the wife’s written submissions, if accepted at face value, do not inexorably lead to a finding of sham. They are, at least, consistent with the intentions of the parties to the relevant transactions that the wife be excluded from any enjoyment of the property and the husband’s interest, if it can be called that, to being a beneficiary in a discretionary trust. The finding of a sham, on these facts, is arguable but not certain. It cannot be said that if the facts set out in paragraph 10 are established, there must be a finding of sham. At best, such a finding is merely arguable.
Thus, the reasoning of the Court of Appeal in Kinghorn applies and the privilege is not lost.
Counsel for the wife contended that all that was required was the establishment of a prima facie case, which had been done and that, to the extent there was a difference in approach between the Court of Appeal in Kinghorn and Young J in AWB Ltd v Cole, the latter was to be preferred.
As to the first part, the submission fails to recognise the difference between the proof of facts to the prima facie level and what it is that those facts are capable of establishing. It is only where those facts, as so established, must lead to a finding of sham, that the privilege is lost. That is not the case here.
Counsel did not raise any point of principle or refer to any authority to persuade me that I should follow the decision of Young J in AWB Ltd v Cole and not the Court of Appeal in Kinghorn. Whilst I am bound by neither, in a technical sense, a unanimous decision of the Court of Appeal carries greater weight than a decision of a single judge of the Federal Court of Australia. I have no difficulty in following the decision in Kinghorn.
For these reasons I upheld the claim of privilege.
THE ISSUE OF FURTHER SUBPOENAS
The hearing concluded on 24 February 2023, save for the evidence of the single expert valuer and any further evidence, if any, on balance sheet items which was to take place on 20 March 2023.
On 3 March 2023, by way of an oral application, the wife sought the issue of further subpoenas to F Company and to E Lawyers. After hearing some oral submissions, I determined that I would be more assisted by the articulation of the wife’s case in writing. Directions were made for the provision of written submissions and with the consent of the parties that the matter was to be decided in chambers.
After receiving the written submissions, I decided that I required more assistance and the matter was listed on 20 March 2023 for further argument. On that day I determined not to issue the subpoenas for reasons which would be given subsequently. These are the reasons for that determination.
It is necessary to record that subpoenas had already been issued to F Company and E Lawyers at the request of the wife.
On 9 February 2023, E Lawyers were served with a subpoena which required documents to be produced to the Court by 20 February 2023. The subpoena was very widely drawn and sought copies of “all agreements, consultancy agreements, Deeds, loans, heads of agreement, memoranda of understanding, and contacts” involving 23 entities from 1 July 2012 to date.
Unsurprisingly, E Lawyers took exception to the breadth of the subpoena and sought to limit the documents required to be produced. A letter to that effect was sent to the wife’s solicitor on 13 February 2023 which identified, by name, 186 files held by them which could contain documents required to be produced. Included in that list were files of K Pty Ltd described thus:
…
[K Pty Ltd] […]: Call Option [Suburb J] CONVI A […40]
…
[K Pty Ltd] […]: Put and Call Option [1‑2 N Street, Suburb P] CONVI A […93]
…
[K Pty Ltd] […]: Sale of [1‑2 N Street & Q Street, Suburb P] CONVI A […57]
(Wife’s affidavit filed on 8 March 2023, Annexure “C”)
The wife was therefore aware of the existence of those files from the receipt of that letter. By way of response on 14 February 2023, the wife agreed to limit the time period for some entities and identified 68 files which were not required to be produced.
Pursuant to a subpoena issued to a bank, documents were produced but not inspected during the hearing. On inspection, there were two Deeds of Covenant dated 6 June 2017 and 19 June 2017 involving K Pty Ltd as well as two Agreements for Lease dated 15 March 2016 and 30 March 2017.
The Deeds are, speaking broadly, an assignment of any rights that K Pty Ltd had as a landlord of the property to V1 Pty Ltd (referred to as the “purchaser” at [29]). That company is owned one half by D Pty Ltd as trustee for the D Trust. The husband executed the Deeds on behalf of K Pty Ltd and was one of two signatories who signed on behalf of V1 Pty Ltd.
Under the heading “Background” each Deed recites:
A[K Pty Ltd] is the landlord under the Tenancy Document. The Tenant is the tenant under the Tenancy Document. The Guarantors guarantee the obligations of the Tenant under the Tenancy Document.
B At the date of the Tenancy Document, it was intended that [K Pty Ltd] would be, or would be entitled to become, the registered proprietor of the Land (by completing a contract for the purchase of the Land from the Current Registered Proprietor) and accordingly, [K Pty Ltd] entered into the Tenancy Document (as landlord) with the Tenant in anticipation of becoming registered proprietor of the Land.
CSince the date of the Tenancy Document, at the request of [K Pty Ltd], the Current Registered Proprietor has contracted with the Purchaser to sell the land to the Purchaser instead of [K Pty Ltd].
DAs a consequence of Background paragraph B and C, [K Pty Ltd] wishes to assign to the Purchaser, with effect from the Effective Date, the benefit of all assignable covenants under the Tenancy Document as if the Purchaser was the landlord under the Tenancy Document.
(Wife’s affidavit filed on 8 March 2023, Annexures “D” and “E”)
The relevant “Tenancy Documents”, which are headed, “Agreement for Lease” are dated 15 March 2016 and 30 March 2017. Each contains the following under the heading “Background”:
AThe Landlord has or will have the entitlement to grant or procure the grant of a lease of the Premises from the registered proprietor of the Land.
BThe Landlord agrees to procure the grant and the Tenant agrees to accept a lease of the Premises on the terms of this document.
CThe Guarantor agrees to guarantee the Tenant’s obligations under this document and the Lease and to indemnify the Landlord for those obligations.
(Wife’s affidavit filed on 8 March 2023, Annexure “F”)
Whilst the terms of Recital A to the Agreement for Lease permit a number of possibilities, one is that K Pty Ltd would acquire the land. The wife contends that this supports the proposition that the husband had an interest in the land which he effectively disposed of to the D Trust.
I understand the land to be presently valued at $48 million.
In her affidavit, the wife said, speaking of the Deed of Covenant dated 6 June 2017:
12.…
The Deed did not appear to be directly relevant at hearing and was therefore not considered given the volume of documents required to be pursued during the trial. …
(Wife’s affidavit filed on 8 March 2023, paragraph 12)
The wife contended that these documents are relevant to answers given by the husband in cross‑examination. The husband denied that at any time prior to 2014 he entered a put and call option in respect of any of the land that comprised the Suburb J property (Transcript 20 February 2023, p.80 line 15). The husband said that he was “unaware” of having entered into a put and call option in 2014 in respect of the land at Suburb J (Transcript 20 February 2023, p.88 line 15). The husband denied that a put and call option, subsequently held by D Trust, had originally been held by K Pty Ltd (Transcript 20 February 2023, p.77 line 45).
After counsel for the wife complained that he did not have the necessary documents to pursue the above issues, the following exchange took place:
[COUNSEL FOR THE WIFE]: … Your Honour, can I hand – sorry, could I – your Honour, I seek leave to issue subpoenas – a subpoena to [E Lawyers] in respect of two documents entitled put and call options that they have identified in the list of documents that they hold in their offices.
HIS HONOUR: Well, if someone – if and when a draft subpoena is ready, we will consider issuing it, but it may be that you might want to ask [E Lawyers] whether they need one. But I will issue a – I will consider an application to issue a subpoena when I see the draft subpoena, Mr Batey. It just – I will leave it at that.
(Transcript 20 February 2023, p.80 lines 16–25)
No application was made until the one under consideration.
In addition to the documents relied upon as earlier described, documents produced by Westpac which established that in mid-2017 and late 2019 the husband, along with Mr T, as directors of V1 Pty Ltd, guaranteed its indebtedness to the bank in the sums of $13.84 million and $19.8 million respectively. Thus, it was asserted by the wife, that the husband was much more involved in the development of the Suburb J properties than he had disclosed.
The wife also relied upon a statement made by Mr T in a list of assets and liabilities he provided Westpac which included an entry to the effect that he was in a partnership with the husband, of which his share was worth $3 million. That, of course, does not establish that there was such a partnership, but I accept that it might lead to further enquiries.
The E Lawyers subpoena
The proposed subpoena to E Lawyers seeks production of the following documents:
1. A copy of this Subpoena;
2.Any draft or executed agreements in file number […40]: “[…]: Call Option [Suburb J]”;
3.Any draft or executed agreements in file number […89]: “[…]: Post Option Assignment Completion Matters”;
4.Any draft or executed agreements in file number […93]: “[…]: Put & Call option [1‑2 N Street, Suburb P]”;
5.Any draft or executed agreements in file number […57]: “[…]: Sale of [1‑2 N Street & Q Street, Suburb P]”;
6.For the period 1 January 2012 to 30 June 2018, any draft or executed agreements in respect to any of the following properties:
a. [1 N Street, Suburb P], NSW;
b. [2 N Street, Suburb P], NSW;
c. [1-2 N Street, Suburb P], NSW;
d. [Q Street, Suburb P], NSW.
7.For the period 1 January 2012 to date, any draft or executed agreements in respect to any option, put and call option, call option, agreement to purchase, agreement to sell and/or agreement to assign options, in respect to the following properties:
a. [AA Street, Suburb BB], NSW;
b. Lot […40]/DP […73];
c. Lot […41]/DP […73];
d. Lot […]/ DP […20];
e. Lots […]/ DP […14];
f. [1, 2 & 3 U Street, Suburb BB], NSW;
g. Lots […], DP […72];
h. Lot […] in DP […72];
i. [CC Street, Suburb BB], NSW;
8. The entire file in the following matters:
a. […40]: “[…]: Call Option [Suburb J]”
b. […89]: “[…]: Post Option Assignment Completion Matters”;
c.[…57]: “[…]: Sale of [1-2 N Street & Q Street, Suburb P]”
d. […50]: “[Aspen, Mr B Aspen]: Strategic Advice (Personal):”
The earlier subpoena to E Lawyers on 9 February 2023 sought the following documents:
2.For a period of 1 July 2012 to date, copies of all agreements, consultancy agreements, Deeds, loans, heads of agreement, memoranda of understanding, and contracts, with any of the following persons or entities…
An extensive list of people and entities followed. This led, as discussed earlier, to E Lawyers identifying the various files held relevant to the subpoena. Paragraphs 2–5 of the proposed subpoena refer to files identified as falling within the earlier subpoena.
The relevant test for the issue of a subpoena for the production of documents is that they must have some apparent relevance to the proceedings: Hatton v Attorney-General of Commonwealth of Australia & Ors (2000) FLC 93-038 at 87,606.
In Secretary of the Department of Planning, Industry and Environment v Blacktown City Council [2021] NSWCA 145, Bell P, as his Honour then was, discussed the principles relevant to a finding of apparent relevance (at [68]–[73]). At [89] Brereton JA said:
89.I agree with Bell P, for the reasons given by his Honour, that an issuing party is not required to show that it is “likely” (or “on the cards”) that the documents sought will materially assist its case, as distinct from that it is “likely” (or “on the cards”) that they will add, in some way or another, to the relevant evidence in the case, and that the essential question is whether the documents called for are apparently relevant, or capable of providing a legitimate basis for cross‑examination, in which case there is a legitimate forensic purpose for the issue of the subpoena. In my view, at least in civil proceedings and in the absence of any question of public interest immunity, no more is required to support the issue of a subpoena for production than that there is a reasonable basis for supposing that the material called for will likely add, in the end, in some way or another, to the relevant evidence in the case. This reflects the notions that the documents relate to, throw light on, or are sufficiently relevant to the dispute; that they “appear relevant in the sense that they relate to the subject matter of the proceedings”; or that they could possibly throw light on the issues in the case. Moreover, documents will add “in some way” to the relevant evidence in the case if they are capable of assisting in cross‑examination, or go to credit, and notwithstanding that they are inadmissible according to the rules of evidence.
Thus, the bar for establishing apparent relevant is set fairly low.
In her written submissions, the wife described the apparent relevance of the E Lawyers documents as follows:
11. During cross-examination:-
11.1. The husband denied entering into the [Suburb J] options; and,
11.2.The husband gave evidence he does not recall entering into the [Suburb P] options.
12.After cross-examination of the husband and the father had closed, the wife and her representatives reviewed material produced under the previous [E Lawyers] subpoena and identified several documents, including a document entitled “Deed of Covenant” dated 6 June 2017 and signed by the husband (“the Deed”)
13.The Deed contradicts the husband’s evidence regarding the [Suburb J] options and potentially calls into question the husband’s evidence regarding the [Suburb P] options.
(Wife’s written submissions filed on 8 March 2023, paragraphs 11–13) (Emphasis in original) (Footnotes removed)
I do not accept that the Deed of Covenant necessarily “contradicts” the husband’s evidence as to the Suburb J options given the limited questions he was asked and the range of options listed in the “Background” from the Deeds and Agreements for Lease already quoted. Nonetheless, I accept that the documents sought have some apparent relevance to the questions put to the husband.
The question is however, is the apparent relevance of the documents to issues in the proceedings. This was described in the wife’s submissions as:
5.The wife seeks to impugn the [D Trust] the [D Trust] including by reference to the developments, but contends her ability to do so has been limited by non‑disclosure of the husband and the father.
…
30.The subpoenas have “apparent relevance” to the following issues, and the subpoenaed documents may “throw light on the issues on the main case” before the Court:-
30.1The [E Lawyers] subpoena is directed to documents which may exist at the genesis of the developments, or otherwise cast light on the nature of the options, and the nature of the alleged gifts. The wife contends such documents would be relevant to:-
30.1.1.Cross-examination of the expert in relation to the value to be attributed by the Court to the [D Trust], and the value of the loan account attributed to the father, and therefore to other associated entities (“the related entities”);
30.1.2. The credit of the husband and/or the father;
30.1.3.Any contentions by the wife in relation to a global adjustment reflecting non-disclosure;
30.1.4.The wife’s contentions in respect of the developments and the options;
30.1.5. The wife’s contentions in respect of the alleged gifts.
(Wife’s written submissions filed on 8 March 2023, paragraphs 5 and 30) (Emphasis in original) (Footnotes removed)
Whilst the phrase “impugn the [D Trust]” is most unhelpfully vague, a footnote refers to paragraphs 21, 22 and 48 of the wife’s Further Amended Points of Claim filed on 22 February 2023. At paragraph 21 the wife “contends that [D Super Fund] was used as a vehicle to defeat her interest in matrimonial property as set out in paragraph 48 below”.
Paragraph 48 pleads that for the reasons given at paragraphs 48(a)–(u), the D Trust is “between the wife and the husband”:
48. …
v.the holder of assets that are properly property of the parties to the marriage for the purpose of these proceedings and for section 79 of the Family Law Act;
w. A sham;
x. The trustee of the trust is the mere puppet of the Husband; …
(Wife’s Further Amended Points of Claim filed on 22 February 2023, paragraph 48)
It is difficult to see how the claim described in paragraph 48(v) can be anything other than the claims described in paragraph 48(w) and paragraph 48(x).
The claim of sham has been abandoned.
The claim in paragraph 48(x) was limited in final submissions, that the husband held a power of attorney from the D Trust and alternatively, that trust always acted at his direction.
D Pty Ltd was incorporated in 2017. The power of attorney was granted nine days earlier.
Given those dates and the nature of the claim against the D Trust, the fact that a company of the husband’s had a right to become a registered proprietor of some of the Suburb J property or the Suburb P property, or at least, it was envisaged it might become an owner of them, is not relevant. It could be relevant to the sham argument given that the D Super Fund provided the funds which enabled the D Trust to acquire its current assets. The funds that the D Super Fund has initially arose from the Suburb P developments. However, to repeat, the sham claim has been abandoned.
As matters presently stand, the subject matter of paragraphs 2–7, 8 (a),(b) and (c) have no apparent relevance to the remaining issues in the matter. To the extent they are said to be relevant to credit, the cross-examination of all parties has been concluded.
It remains to deal with paragraph 8(d) which seeks production of the following file:
8. …
d. […50]: “[Aspen, Mr B Aspen]: Strategic Advice (Personal).”
The husband transferred $550,000 to his father via a number of Deeds of Gift. They bear the file number …50. The file therefore has apparent relevance to the wife’s claim that the funds are held by the father for the benefit of the husband or that the depositions should be set aside under s 106B of the Family Law Act 1975 (Cth) (“the Act”).
The wife did not deal with the likely issue of privilege. In any event, the husband accepts that the wife should receive the benefit of the transferred funds by them being treated as a notional asset retained by him, so it is difficult to see the point of the pursuit of this aspect of the subpoena.
The F Company subpoena
This subpoena seeks the production of the following documents:
1. A copy of this Subpoena.
2. For the period 1 January 2015 to 30 June 2018:
a.The entire file, including but not limited to all documents, correspondence, memorandums, advices and file notes in relation to the [D Super Fund].
b.The entire file, including but not limited to all documents, correspondence, memorandums, advices and file notes in relation to [M Pty Ltd].
c.The entire file, including but not limited to all documents, correspondence, memorandums, advices and file notes in relation to the [N Property Trust].
d.The entire file, including but not limited to all documents, correspondence, memorandums, advices and file notes in relation to [N Pty Ltd] (later known as [DD Pty Ltd]).
3. For the period 1 January 2017 to date:
a.The entire file, including but not limited to all documents, correspondence, memorandums, advices and file notes in relation to the [D Trust] from 1 July 2017 to date.
b.The entire file, including but not limited to all documents, correspondence, memorandums, advices and file notes in relation to [D Pty Ltd].
The wife describes the relevance of these documents as follows:
20.[Mr R] of [F Company] advised the mother and the husband in relation to the establishment of the [D Super Fund], and subsequently advised the husband and the father in relation to the establishment of the [D Trust].
21. The wife seeks to impugn the [D Trust], including by reference to:-
21.1.Transactions in [D Super Fund] prior to the death of the mother, including the [Suburb P] development (“the [D Super Fund] transactions”); and,
21.2.The circumstances around the creation of the [D Trust] following the death of the mother (“the creation of the [D Trust]”)
22.The wife contends the [D Trust] does not reflect the testamentary intentions of the mother. In answer to those contentions, the evidence of the father was that, in respect of the [D Super Fund] transactions and the creation of the [D Trust], the father relied solely on advice of [Mr R].
…
30.The subpoenas have “apparent relevance” to the following issues, and the subpoenaed documents may “throw light on the issues on the main case” before the Court:
…
30.2The [F Company] subpoena is directed to documents which may cast light on the nature of the advice of [Mr R] and therefore the circumstances around the [D Super Fund] transactions and the creation of the [D Trust]. The wife contends such documents would be relevant to:-
30.2.1.Cross-examination of the expert in relation to the value to be attributed by the Court to the [D Trust], and the value of the loan account attributed to the father, and the related entities;
30.2.2. The credit of the husband and/or the father;
30.2.3.Any contentions by the wife in relation to a global adjustment reflecting non-disclosure;
30.2.4.The wife’s contentions in respect of the [D Super Fund] and the [D Trust].
(Wife’s written submissions filed on 8 March 2023, paragraphs 20–22 and 30) (Emphasis in original) (Footnotes removed)
The footnote to paragraph 21 refers again to paragraphs 21 and 48 of the wife’s Further Amended Points of Claim.
Whilst some of those documents may have had some apparent relevance to the claim of sham, no apparent relevance can claimed to the presently articulated claim as identified.
Importantly, unlike the proposed subpoena for E Lawyers, no explanation has been given as to why this subpoena was not issued in a timely way for the preparation of the hearing.
The wife’s assertion is that the case is not yet over.
At paragraph 35 of the wife’s submissions:
35.On the anticipation the Court, the husband, the [D Trust] and the father will protest the issue of the subpoenas on the basis of some imputed sham case, the wife submits:-
35.1. The evidence has not closed.
35.2.The wife is entitled to amend her pleadings at any point prior to the close of evidence.
35.3.“Modern pleadings have never imposed so rigid a framework that if evidence which raises fresh issues is admitted without objection at trial, the case is to be decided upon a basis which does not embrace the real controversy between the parties.”
35.4.This is not a court of pleadings, and the Court would be extremely reticent to put the wife to prejudice on the basis of a narrow conception of the case, particularly in circumstances where the wife contends the husband and/or the father have not properly disclosed.
(Wife’s written submissions filed on 8 March 2023, paragraph 35) (Emphasis in original) (Footnotes removed)
In the course of submissions on 20 March 2023, I understood, for the first time, that the wife was not suggesting that the earlier subpoena to E Lawyers had not been properly complied with. Although no completed agreements were provided that fell within the terms of paragraphs 2–5 of the proposed subpoena, that was because there was none to be produced. So much was accepted by the wife.
After further discussion, senior counsel for the husband indicated that in terms of the proposed subpoena, on the basis that the word “draft” was omitted, there would be no further documents to be produced. Again, this was accepted by the wife.
The argument therefore developed into whether a subpoena to seek production of any drafts of documents identified in the proposed subpoena should be issued.
Before turning again to the wife’s submissions, in light of all this new material, it is well to restate the husband’s case, which was that he had the opportunity to take up interests in the Suburb P and Suburb J developments, but declined to do so and instead assisted his mother to take them up.
The wife submitted that the proposed documents were relevant to the husband’s credit. The husband said in evidence that he had not entered into a put and call option in relation to the Suburb J property before 2014 and could not remember doing so in 2014. I do not see how the existence of draft agreements affects the creditworthiness of those answers.
It was then said that draft agreements would be relevant to the current values of the properties and would be put to the single expert conducting the valuations. I do not see how draft agreements, which by definition have no legal effect, could bear upon the present value of the properties.
As discussed earlier, I do not see a relevant connection between the documents sought and the case as currently pleaded. That gap is compounded when it is accepted that all that is now sought is draft agreements. It is possible that such documents might lead to a claim of enquiry but, in the absence of actual agreements, draft agreements in favour of the husband are not at all inconsistent with the husband’s case.
For these reasons and having regard to the state of the proceedings as they then stood, and the conduct of them by the wife, I declined to issue either subpoena. The above are my reasons for doing so.
THE APPLICATION TO REOPEN AND RE-AMEND
Having made the above ruling, an oral application was made to amend the wife’s Further Amended Points of Claim so as to reinstate the claim for sham.
I declined to proceed on such an informal basis and directions were made for the matter to proceed by way of a formal application.
By way of a Further Amended Application in a Proceeding filed on 28 March 2023, the wife seeks the following orders:
1.That leave be granted to the Wife to adduce further evidence, if leave is required, and to reopen the Wife’s case to tender:
a. Documents contained in EXW4;
c. Such other documents as may be produced.
5.Leave to file a Second Further Amended Points of Claim reflecting the proposed amendments annexed hereto and marked “A”.
6.Leave to reopen the cross-examination of the Husband and the Husband’s Father, [Mr C Aspen].
The main documents in Exhibit “EXW4” are the Deeds of Covenant and Agreements for Lease discussed earlier.
In the proposed amendments to the Second Further Amended Points of Claim, the wife seeks to add a claim pursuant to s 106B of the Family Law Act 1975 (Cth) to set aside “its disposition or relinquishment by [K Pty Ltd] of its equitable interest in lot […40]/[…73] [in] 2017 to, or in favour of, [V1 Pty Ltd]” (Annexure “A”, paragraph 1). The wife does not seek to reinstate the claims of sham.
V1 Pty Ltd is not presently a party to the proceedings.
This matter was expedited because of the ill health of the husband and the age of his father, the third respondent, Mr C Aspen.
The hearing commenced on 20 February 2023. Without objection, the wife was granted leave to file a Further Amended Points of Claim. Points of claim identifying the relief sought against the second and third respondents, and the legal and factual basis for that relief had been ordered on 8 March 2021 so the wife has had ample time to formulate her case.
The second respondent, D Pty Ltd, is the trustee of the D Trust. The sole shareholder of D Pty Ltd is the third respondent, the husband’s father. The husband’s children are the primary beneficiaries and the husband and his father are the eligible secondary beneficiaries of the D Trust, although no dividends have yet been made to any of the beneficiaries of that trust.
D Pty Ltd as trustee of the D Trust owns half of the shares in a company known as V1 Pty Ltd. The other shares are owned directly or indirectly by Mr T.
V1 Pty ltd is the trustee of the V Unit Trust. D Pty Ltd holds just under half of the shares in the V Unit Trust, with the remaining shares owned largely by Mr T.
That trust owns a block of land at Suburb J, identified in folio identifier …40/…73. The land has been valued at being worth $48 million. As at 29 September 2022, V1 Pty Ltd had an outstanding bank bill business loan account of approximately $19.8 million. Thus, the interest of the D Trust in V1 Pty Ltd is very valuable.
The Further Amended Points of Claim, after setting out a number of facts, identifies in paragraph 48, 22 particulars which the wife asserted, that for the purpose of the proceedings, the D Trust is “between the husband and the wife”:
48. …
v.The holder of assets that are properly property of the parties to the marriage for the purpose of these proceedings and for section 79 of the Family Law Act;
w. A sham;
x. The trustee of the trust is a mere puppet of the Husband;
y.Is relevantly administered at the direction of, or with the consent of, or with the acquiescence of, or otherwise in accordance with the wishes of, the Husband;
z.Pursuant to section 106B, a disposition (including any specific gifts, transactions, and dispositions to be particularised) is likely to defeat any order recognising the Wife’s right, title or interest in those assets;
aa.Otherwise, the product of extremely aggressive estate and tax planning to defeat any interests, claims or orders that the Wife would have in property which is properly property of the parties to the marriage.
(Wife’s Further Amended Points of Claim filed on 22 February 2023, paragraph 48)
Subsequently, a declaration is sought that the assets held in the D Trust are property of the parties to the marriage. For present purposes it is unnecessary to refer to the claims made against the third respondent.
The hearing commenced notwithstanding that the report of the single expert valuer of the assets was not yet available. The course that was decided upon was that the case would run as far as it could on all, except valuation items and balance sheet items affected by the valuations which were to be dealt with on 20 March 2023. It followed therefore that the parties were cross‑examined on all other issues and submissions were made on all except the balance sheet items.
On 23 February 2023, one of two counsel appearing for the wife made extensive submissions supporting the wife’s claim that the D Trust was in fact a sham and that the true owner and controller was the husband.
On the following morning, the same counsel withdrew all the allegations of sham and preceded to make an argument based upon a power of attorney given to the husband by D Pty Ltd in 2017 to the effect that the company is a mere puppet. An alternative argument was put that an inference should be drawn that the trust was puppet of the husband which could be drawn from the facts as a whole, but including the grant of the power of attorney.
The power of attorney had only come to the attention of the lawyers acting for the wife during the hearing. That no doubt was due in part to the fact that relevant subpoenas were only issued by the wife on 9 February 2023, which gave little time for inspection of those documents when they were produced.
As I understood the position at the end of the wife’s submissions, the claims made in paragraph 48 of the Further Amended Points of Claim had been significantly truncated. I understood that the claims made in paragraphs 48(w) and 48(z), which I understood to be in effect the same claim, were abandoned. No submissions had been directed towards paragraph 48(z), no doubt because no disposition from the husband, or any entity controlled by him, to D Pty Ltd, had been identified. The significance of paragraph 48(aa), as presently advised, remains obscure to me. Thus the claim made against the D Trust was limited to the allegations that the trustee is the mere puppet of the husband and was relevantly administered at his direction. Both those arguments were based upon the power of attorney, which is not mentioned in the Further Amended Points of Claim at all.
Although the arguments have now been run and the amendment is a formality, nonetheless, it is still the case that the Points of Claim require some amendment so as to support the submissions that have been made.
Thus, at the conclusion of the matter on 24 February 2023, all the evidence and submissions the parties wished to have made had been concluded save for the cross-examination of the single expert and any issues arising out of what were described as balance sheet items.
It is to be noted, that contrary to the indication that the application was intended to seek the reinstatement of the sham argument, such is now expressly eschewed. The course that is now sought to be followed is to seek to set aside a disposition from K Pty Ltd to V1 Pty Ltd.
Again, the application was based upon the Agreements for Lease and the Deeds of Covenant. In the course of this argument, greater attention was now given to the terms of the four documents. It is helpful to restate the two relevant background provisions relied upon by the wife in the Agreements for Lease which are:
AThe Landlord has or will have the entitlement to grant or procure the grant of a lease of the Premises from the registered proprietor of the Land.
BThe Landlord agrees to procure the grant and the Tenant agrees to accept a lease of the Premises on the terms of this document.
…
(Wife’s affidavit filed on 28 March 2023, Exhibit “EXW4”)
Clause 2.1(b) of these documents provide that the agreement is subject to and conditional upon the landlord obtaining construction finance for the construction of a facility.
Clause 3.1 provides:
3.1 Grant of lease
Subject to this document, on the Commencing Date:
(a)The Landlord will grant (or if the Landlord is not registered proprietor of the Premises, the Landlord must procure the registered proprietor to grant) to the Tenant the Lease; and
(b) The Tenant will accept the Lease.
(Wife’s affidavit filed on 28 March 2023, Exhibit “EXW4”)
Clause 4 requires the landlord to obtain necessary approvals to construct the facility and to carry out the “landlord’s works” in a proper and workmanlike manner. Landlord’s works are defined as meaning “constructing the Building […] and constructing the Premises to the Warm Shell Stage in accordance with the Landlord’s Works Plans”. Those plans are set out in Annexure B to the Agreement for Lease.
Clause 11.2 provides:
11.2Registered proprietor to be bound by this document after the Commencing Date
a.If, as at the Commencing Date, the Landlord is not the registered proprietor of the Premises, the Landlord must cause the registered proprietor to agree with the Tenant, by a deed to comply with the Landlord’s obligations under this document to the extent the obligations apply after the Commencing Date.
b.When the deed referred to in (a) has been entered into, the Landlord shall be deemed to have been released from any further obligations or liabilities under or in respect of this document, but without prejudice to the Tenant’s rights in relation to any pre-existing breach by the Landlord of the provisions of this document.
(Wife’s affidavit filed on 28 March 2023, Exhibit “EXW4”)
The relevant paragraphs in the Deed of Covenant have been set out at [30]–[35] and there is no need to do so again. In the Deed, the “current registered proprietor” was identified as EE Pty Ltd. Clauses 2 and 3 of the Deed then provided:
2 Purchaser to comply with Obligations
The Purchaser covenants in favour of the Tenant to comply with the Obligations arising after the Effective Date as if the Purchaser had executed the Tenancy Document as landlord.
3 Tenants and Guarantors to comply with Obligations
The Tenant and the Guarantors covenants in favour of the Purchaser to comply with their respective Obligations owed to the landlord under the Tenancy Document as if the Purchaser had executed the Tenancy Document as landlord.
(Wife’s affidavit filed on 28 March 2023, Exhibit “EXW4”)
The “purchaser” was described in the document as V1 Pty Ltd.
According to the title search, V1 Pty Ltd became the owner of Lot …40 in deposited plan …73 in 2017 (Exhibit “2”).
Thus, the wife submitted, K Pty Ltd, by entering into this agreement obliged itself to obtain finance so as to enable it to construct the necessary building and was obliged to undertake that construction – two very significant commitments.
The wife therefore submitted, that K Pty Ltd would not have entered into the Agreement for Lease unless there was an obligation then existing between it and the registered proprietor of the land that would enable K Pty Ltd either to become the registered proprietor of the land or compel the registered proprietor to provide a lease. Further, the submission proceeds that K Pty Ltd would not have done so and would not have exposed itself to the obligation to construct a facility on the land if it did not have a legal or equitable basis for doing so. If in fact it had no basis for thinking it had an interest in the land, then it exposed itself to significant damages for breach of obligation to grant a lease as well as the breach of the obligation to construct a building.
In short, the wife contends that the Agreements for Lease and the Deed of Covenants evince an entitlement on behalf of K Pty Ltd of an interest in land sufficient for it to become the registered proprietor. That disposition is sought to be set aside under s 106B. However, rather than seeking an order that V1 Pty Ltd transfer the land to K Pty Ltd, which would involve the joinder of many parties, including V1 Pty Ltd itself, its shareholders, its mortgagee and its more than 20 tenants, she seeks an order that the D Trust pay the sum of $6,164,534 which is said to be derived as the present value of the D Trust’s interest in its shareholding of V1 Pty Ltd as derived from the Expert Report. I confess having some difficulty in understanding the derivation of that figure or how such an order could be made absent an order under s 106B setting aside a disposition. However, the significance of it is that presumably only V1 Pty Ltd would need to be added as a party if the amendment were to be permitted and not the myriad of tenants and the mortgagee. The addition of these many arm’s length parties would speak very strongly against any amendment.
Nonetheless, it is obvious that if the application is to be granted, the proceedings will be delayed for some months so that the V1 Pty Ltd can be served, appropriate further steps can be taken for the preparation of the rehearing and time set aside for the hearing, which will involve further cross-examination and possibly new witnesses.
Therefore, there are several considerations that must be undertaken to determine whether or not it is in the interests of justice to accede to the application. The first, is as I just said, the delay in the matter which is of concern when the proceedings have been expedited.
Certainly there is the wife’s attitude to the litigation itself. As is common in cases commenced by way of application or summons, in any court, complex legal and equitable claims are often required to be the subject of pleading in points of claim and points of defence so as to identify precisely the relief sought and the exact legal and factual basis on which it is contended that such relief is sought. Such a course is common in this court, particularly when such claims are made against third parties to the marriage.
Points of claim and points of defence identify the metes and bounds of the dispute that the applicant seeks to make against other respondents and, as with the statements of claim and defence, parties are bound by their pleadings. The case they seek to run is to be heard and determined by reference to the pleadings. Pleadings are not therefore not a general invitation to dance, but a precise articulation of the allegations made against the respondents. Contrary to the submissions of at least junior counsel for the wife in this matter, there is no right to amend the points of claim at any time the applicant feels fit.
As has been identified earlier, the hearing commenced with the filing of the Further Amended Points of Claim, indicating that it had already been the subject of significant amendment. The principal claim set out in that document, the claim of sham, was abandoned.
The next step taken was to seek to issue a subpoena, which was not relevant to the case as then pleaded. An indication was then made that the claim would made to re-plead the case of sham, which was not pursued, and the present application is now before the Court, which is to add an entirely different claim altogether.
The wife’s response to this is that relevant Agreements for Lease and Deeds of Covenant only emerged when documents which were produced by Westpac were inspected. Those documents were not, it appears, inspected until after the case had been closed. Whether this was a deliberate forensic decision, which the respondents assert it was, and one which must be sheeted home to the applicant, or an error, does not appear to be a fruitful area of enquiry. Neither favours the wife.
Whilst it is true that forensic decisions as to the running of a case by the parties falls to their lawyers, it is also true, that generally speaking, errors of lawyers should not be sheeted home to the litigants (Jess v Scott (1986) 12 FCR 187). Whilst there is no doubt that the inspection of the documents should have taken place earlier, it did not. It is also true, as the respondents submitted, that at some stage, the case must end and it cannot just meander on, lurching from claim to claim as the wife looks at new documents or decides that they have particular significance.
The wife’s response to the above, is to say that these documents should have been disclosed by the husband. That rather begs the question of whether the document disclosed that he or a company held by him had an interest in the Suburb J land. Although the position is not entirely clear, and may well be the subject of further evidence, as best as I understand the position, these documents may not have been held by the husband, may have been held by E Lawyers, but were not covered by a subpoena that was issued to them on 9 February 2023. Hence, the agreements and deeds were found in the documents produced by Westpac. Whether they should have been disclosed or not is an issue that cannot be determined on this application. There is no doubt it may however be relevant on cross-examination on the topic.
Regard can be had to the husband’s own evidence in chief. In his affidavit of 31 January 2023, the husband said:
121.In early 2015, [Mr T] discussed with me the need to develop a [facility] on the [AA Street] property within the [EE Property], later to be known as the [V4 Facility], so that potential operators of the proposed [facility] ([FF Facility]) would see that [professionals] were willing to locate their [business] into the area, as this was the primary reason there was lack of interest in the [FF Facility] to date. [Mr T] and I discussed this as it was important aspect of the early development and investment into the [FF Facility] as any operator and developer of the [FF Facility] needed to be assured that they could secure quality [professionals] to perform their [work] in the [Suburb J] location. This early strategy proved to be correct.
122.Initially, [Mr T] asked me if I would co-invest with him in this opportunity however, when he outlined the scale of the proposal I had to let [Mr T] know that I had no interest in personally investing funds (including through the [Mr B Aspen Trust]) into this opportunity because it was clearly going to require a few million in equity from me and there may be no return for some time. I do not regret this decision as I understand that to date no distributions have yet been made to the [V4 Facility] unitholders. [Mr T] also expressed his desire to have an equal partner in the investment because his funds would be tied up for a few more years until some of the larger land sales in the [EE property] had been completed.
123.Following my conversation with [Mr T] and knowing that the [Suburb P] investment was in process, I approached my mother with the [V4 Facility] development opportunity and explained that she could re-invest the profits she would make from the [Suburb P] investment to be held in the [D Super Fund]
124.In 2015, my mother met with [Mr T] and all three of us explored the [EE Property] together by driving across all of the unimproved land in my [vehicle]. [Mr T] and I showed my mother a survey plan for the entire [EE Property] and where we were building the public roads. We explained the rapid housing growth in the area and drove through the only housing estate at the time. We finished our tour at the [AA Street] property lot. Following this meeting, my mother was no immediately excited about the idea and said words to the effect of “this seems to be quite a project. I'll need to understand a lot more”. After this time, we had multiple conversations about the development of the [EE Property] and the [V4 Facility] development.
125.It was not until I explained to my mother how the basic feasibility analysis had matured and how the financing would work that she said to me words to the effect of, “I'm keen to do this if it all makes sense financially and I really like that it’s all focused on [an industry]”.
126.I attended approximately 3 meetings with my mother and [Mr R] about the [D Super Fund] investing in the [V4 Facility] development opportunity. My mother informed me that she had other meetings with [Mr R] and I understood from my mother that following the completion of the [Suburb P] development, my mother further gave instructions and directions to her advisers at the time to make appropriate arrangements and produce appropriate documents to establish the [V Unit Trust] and for the [D Super Fund] to invest into the [V4 Facility] development through the [V Unit Trust].
127.It was brought to my attention through my consultancy work for [the Suburb J property development] company and by my mother that [V1 Pty Ltd] became the registered proprietor ATF the [V Unit Trust] of the [AA Street] property [in] 2017. At this time, I was a director of [V1 Pty Ltd], to represent my mother’s interests in the investment and assist in managing the development. During my period as a director of [V1 Pty Ltd] ATF the [V Unit Trust], I worked with [Mr T] to manage the [V4 Facility] Development. The majority of my involvement in management involved overseeing with [Mr T] the project manager, [Mr GG], during the development phase and then overseeing with [Mr T] the property manager, [HH Real Estate] and then [JJ Real Estate], once the development had been completed.
(Husband’s affidavit filed on 1 February 2023, paragraphs 121–127)
There is no reference to, or explanation of, the Agreements for Lease or the Deeds of Covenant. The acquisition of an interest in the relevant land would go well beyond the involvement that the husband described in his affidavit, if in fact there was such an acquisition. However, even if there was not, there was no explanation as to how it was that K Pty Ltd came to enter into these agreements, and in doing so, expose itself to a risk of significant damages.
Taking all these matters into account, whilst I accept that the wife’s advisers should have inspected subpoenaed documents more promptly, and most likely ought to have issued subpoenas earlier in time to allow sufficient time for inspection, given the evidence of the husband, they had no reason to be looking out for them.
The respondents submit that it is pointless to grant the application because, on the face of the documents, the foreshadowed claim could not succeed. This is essentially for two reasons.
First, there is no evidence that suggests the registered proprietor of the land at the time the Agreements for Lease were entered into, acquiesced in those leases, or executed any document of any kind suggestive of granting K Pty Ltd an interest in the land. That is so, but it is to be remembered that the claim is in its early days.
Secondly, the language used in the Agreements for Lease was chosen carefully and does not lead to the inference that K Pty Ltd had, at the time of the entry into the Agreements for Leases, an interest in the land as opposed to a mere expectation that it might, or, indeed, might not, have such an interest in the future. This is because, Recital A says that the landlord “has or will have the entitlement to grant or procure the grant of a lease”.
Thus, the respondents submit, these documents fall short of establishing that K Pty Ltd had an interest in the land.
The same submission is made about the Deeds of Covenant, because, the combination of Recitals B and C suggest that whilst it was intended that K Pty Ltd would or would be entitled to become the registered proprietor, since that time, at the request of K Pty Ltd, the registered proprietor has contracted to sell the land to V1 Pty Ltd instead. Therefore, they submit that Recital C in particular is consistent with K Pty Ltd never having an interest in the land that would support it being able to grant a lease.
There is force in these submissions, but they are to be weighed against two things. First, as I have said, the evidence is not yet closed and the case is in its early days. Secondly, on one view, the husband’s evidence as to the scope of his engagement in the development of the Suburb J land omits reference what now appears to be a more active involvement. Its extent and import is something that can only be determined at a final hearing.
I accept that this application is to be decided having regards to the interests of justice and that justice is a two way street. The respondents are entitled to have the case against them prosecuted in a proper and timely manner, and ought not face, as they faced in this case, a shifting sea of allegations. I accept too that this is all the more so when the proceedings have been expedited.
The respondents face a real prejudice as to costs which on the facts of this case, is something that can be compensated in due course by an appropriate costs order. It is quite clear, that whatever the outcome, the wife will receive sufficient assets for that purpose.
I also bear in mind the words of Kirby J in Lindon v The Commonwealth Of Australia (No 2) (1996) 70 ALJR 541 at 545, where his Honour said, albeit it in the context of an application for summary judgment:
…Even a weak case is entitled to the time of a court. Experience teaches that the concentration of attention, elaborated evidence and argument and extended time for reflection will sometimes turn an apparently unpromising cause into a successful judgment.
Taking all these matters into consideration, I have determined that on balance, the interests of justice require that the wife be given the opportunity to put the proposed claim forward. However, the opportunity to do so must be limited. The remainder of the wife’s case and the reopening will be limited to the foreshadowed case, will have to be brought on with a great degree of expedition and whilst one can never make rulings in advance, the wife should proceed on the basis that she is unlikely to be granted any further indulgences in the running of this case.
The application to reopen and re-plead is granted. The matter will be listed on 22 May 2023 on which the wife is to provide a set of trial directions that will ready the matter for resumption of hearing in September 2023, which must include service on V1 Pty Ltd as well as draft Points of Claim appropriately amended to give effect to the claims discussed above.
I certify that the preceding one hundred and thirty-one (131) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Aldridge. Associate:
Dated: 15 May 2023
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