Deffia and Zuddro and Ors - [2008] FamCA 643

FAMILY COURT OF AUSTRALIA

DEFFIA & ZUDDRO AND ORS

[2008] FamCA 643

FAMILY LAW – SUBPOENAE – non-party objection – costs.

Family Law Act 1975 (Cth)

A and A (2006) FamCA 102
Botany Bay Instrumentation and Control Pty Ltd v Stewart [1984] 3 NSWLR 98.
Colgate-Palmolive v Cussons Pty Ltd (1993) 46 FCR 225
Fuelexpress Limited v Erickson Pty Ltd (1987) 75 ALR 284
Greedy v Greedy (1982) FLC 91-250
Hatton v Attorney-General of Commonwealth of Australia and Ors (2000) FLC 93-038
Killorgan Investments Pty Ltd v Baycorp Advantage Business Information Services Ltd and Ors [2002] VSC 270
Relationships Australia v Pasternak and Children’s Representative (1996) FLC 92-699
Yunghanns & Ors & Yunghanns & Ors & Yunghanns (2000) FLC 93-029

APPLICANT:

Ms Deffia

RESPONDENT:

Mr Zuddrio

PERSONS WITH AN INTEREST

IN THE PROCEEDINGS:

Mr and Mrs Zuddrio (Snr) and Ms Zuddrio

FILE NUMBER:

MLC

12376

2007

DATE DELIVERED:

26 May 2008

PLACE DELIVERED:

Melbourne

PLACE HEARD:

Melbourne

JUDGMENT OF:

THE HONOURABLE JUSTICE CRONIN

HEARING DATE:

23 MAY 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT:

MR CANTWELL

SOLICITOR FOR THE APPLICANT:

HOGG & REID

COUNSEL FOR THE RESPONDENT:

MR TEASDALE

SOLICITOR FOR THE RESPONDENT:

KENNA TEASDALE

COUNSEL FOR THE PERSONS WITH AN INTEREST IN THE PROCEEDINGS:

MS STEWART

SOLICITOR FOR THE INTERVENOR:

Orders

That the wife pay to the parents and sister of the husband, Mr and Mrs Zuddro (Snr) and Ms Zuddro a total sum of $5000 by way of costs.
That there be a stay of payment in respect of the said costs until 31 December 2008.
That the wife have liberty to apply on or around 31 December 2008 for an extension of time for payment of the said costs if she is so advised.
That the subpoenae filed by the wife on 14 May 2008 against National Australia Bank, W Pty Ltd, C Pty Ltd, T Pty Ltd, E Pty Ltd and R Pty Ltd be all set aside.
That any documents produced by any of the recipients of the subpoenae referred to be returned to the persons producing those documents.
That the application in a case filed on 24 April 2008 by the husband’s parents and sister and the response by the wife filed 23 May 2008 be otherwise dismissed.

IT IS CERTIFIED:

That pursuant to Order 19.50 of the Family Law Rules 2004 it was appropriate in the circumstances to brief counsel for the parties.

IT IS NOTED that publication of this judgment under the pseudonym Deffia & Zuddro is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 12376 of 2007

MS DEFFIA

Applicant

And

MR ZUDDRO

Respondent

And

MR and MRS ZUDDRIO (SNR) and MS ZUDDRIO
Interveners

REASONS FOR JUDGMENT

There are two interim issues for determination in this case. They are:
(a)should the wife be entitled to inspect documents produced under subpoenae to a number of companies which are controlled by her parents-in-law and sister-in-law and to inspect documents produced under subpoenae to the bank of those persons; and
(b)what costs, if any, should be paid by the wife as a consequence of the compliance by those persons with these subpoenae including the question of them obtaining legal advice.
The simplicity of the issues belies the lurking complexity underneath.
There are two substantive issues in the proceedings that began in November 2007. They are applications by the wife:
(a)to set aside a financial agreement under Part VIIIA of the Family Law Act 1975 (Cth) (“the Act”) as between the husband and the wife; and
(b)to order the husband to pay spousal maintenance.
The two substantive applications very much set the parameters of the subpoena dispute.
The two interim issues were argued by counsel for the husband’s parents and sister, counsel for the wife and the solicitor for the husband.
The urgency about the case is made more obvious by the fact that the wife has an interim application for spousal maintenance returnable on Monday 26 May 2008 before Senior Registrar Fitzgibbon. I heard the arguments about the subpoena on Friday 23 May 2008.
Of the two interim issues, the second is the least important because it deals with compensating the subpoenaed parties. The rules are clear in providing for that situation even if the quantum and payment of costs and expenses is not. One way or the other, all agreed that the order was a discretionary one.
The first issue is equally discretionary but the pathway has been laid out in a number of authorities. I see no reason in this case to depart from that pathway.
A subpoena is not a substitute for discovery[1]. In A & A (2006) FamCA 102 Guest J set out the law succinctly. His Honour said that the question of relevance or apparent relevance is an arguable ground or basis for setting aside a subpoena and that a party seeking to uphold the issue of a subpoena seeking documents must demonstrate that those documents have an apparent relevance to the issue or issues before the Court and in respect of which the subpoena was filed. That is what I am looking at here.
[1] Relationships Australia v Pasternak and Children’s Representative (1996) FLC 92-699.
In Killorgan Investments Pty Ltd v Baycorp Advantage Business Information Services Ltd and Ors [2002] VSC 270 which was an unreported decision of Byrne J in the Supreme Court of Victoria, his Honour said that the degree of relevance for the purpose was not high. The inspecting party need only show a legitimate forensic purpose in the inspection. His Honour said that a party was entitled to inspect documents not only to see if they contain relevant facts but also to see if they contained information that might prove otherwise than through that document. Be that as it may however, the party seeking to uphold the issue of the subpoena has to show the connection between the documents and the issue before the Court. That is sometimes a problem in cases where emotions are running high.
The “apparent relevance” test was approved by the Full Court in Hatton v Attorney-General of Commonwealth of Australia and Ors (2000) FLC 93-038.
For the purposes of establishing the question of relevance, a court will only read the evidence in the affidavit as the basis for the argument about disclosure. That evidence must be credible and admissible. In other words, broad generalisations are not helpful to establish relevance even though the bar may not be high.
It has always been the position of the civil courts and this Court that a subpoena is not to be used for fishing purposes[2].
[2] Botany Bay Instrumentation and Control Pty Ltd v Stewart [1984] 3 NSWLR 98.
Family law cases are really no different from those which the courts around the Commonwealth have had to deal with for many years. It must be borne in mind that in family law cases as in others, it is not only a large and expensive task for the non-party but also one which is an invasion of their privacy. The focus therefore is clearly on relevance to the proceedings. In family law cases, where there is an allegation that the non-party has links with or is “in league” with a party to the substantive proceedings, the Court should be more cautious about excluding the pursuit of that information. That is where the evidence of the parties on the question of relevance to the substantive proceedings is critical. It is to that evidence then that I turn.
Before turning to the precise facts that require determination in this case, the chronology of the parties provides some assistance.
The parties began living together in June 2003 and their only child was born in February 2004. They were to be, and in fact were, married in June 2004. The evidence of the wife is that on 25 June 2004, the husband presented her with a financial agreement and required her to sign it to enable the marriage to proceed. The wife asserts that she was under enormous pressure from not only the husband but her own solicitor Mr Purcell as a result of which she was distinctly disadvantaged about property rights. Accordingly she signed the agreement and the marriage went ahead.
As I pointed out in discussion, those facts are controversial and will require significant court time to determine.
The parties separated between December 2004 and February 2006.
Having reconciled in February 2006, they finally separated on 25 July 2007.
On any view, the marriage was not a long one.
Prior to the relationship, the husband owned what I understand is now the matrimonial home and had considerable equity in it. I am not aware of what equity the wife brought to the marriage. The husband was an employee of one or more companies to which I shall turn below. Those companies are controlled by either his parents or his sister.
Counsel for the wife pointed to the fact that taxation returns provided by the husband showed that in the financial year ended 30 June 2004, his income from these family companies was $109,000 but for the three successive years thereafter, it dropped to $50,000. The wife rather cynically points to the fact that the first drop occurred in the period of time that the parties separated.
After the final separation, the wife obtained a child support assessment. That was ultimately reviewed. The husband told the Child Support Agency that his parents had terminated his employment but he intended to do private work. He said the father’s business was in some financial difficulty.
That is the position as it remains today. It is not suggested that the husband is without income.
On 14 November 2004, the wife filed her substantive application to which I have earlier referred. She sought to set aside the financial agreement and in the event that she was successful, a property settlement under s 79 of the Act. It was clear that the wife was aware of the jurisdictional hurdle that she had to jump.
The wife also sought periodic spousal maintenance.
I shall return to the facts in the affidavit material upon which the application for spousal maintenance was sought because it is to that material that I turn when I have to determine the question of the relevance of the subpoenae.
The husband’s response was simply to seek a dismissal of the wife’s application and an order for costs.
When the matter came on for a case assessment conference on 4 December 2007, the registrar refused to fix the application for spousal maintenance and referred the matter to a conciliation conference.
During all of this time, the evidence shows that the solicitor for the wife was pursuing the husband for documents.
The letter dated 21 December 2007 from the wife’s solicitors to the husband’s solicitors sought, inter alia,:
·    Financial statements including profit and loss statements and depreciation schedules for Zuddro Pty Ltd for the last five years;
·    All credit cards statements for credit cards held in your client’s name and/or credit cards which he is entitled to use for the last three years;
·    Any loan applications including attached asset and liability statement made by your client’s parents in relation to the construction of a property situated at H;
·    All financial statements including profit and loss statements in relation to the following companies for the last five years:
(a)   W Pty Ltd;
(b)   C Pty Ltd;
(c)   T Pty Ltd;
(d)   R Pty Ltd;
(e)   E Pty Ltd
There were a number of other documents sought from the husband but what I have just highlighted are those which relate to documents which I am satisfied were the property of persons other than the husband.
Throughout January, the wife pursued those documents.
On 29 January 2008, the wife’s solicitors issued a subpoena to the National Australia Bank. That subpoena sought the following:
All loan applications and supporting documentation including but not limited to any Asset and Liability Statements made by [the husband’s parents], both of […] Avenue, [R] in their names alone, jointly or with any other person and/or entity in which they have an interest for the purpose of purpose and/or construction of a property situated at [H].
The husband’s parents and sister obtained legal advice. The National Australia Bank complied and produced the documents required.
The return date of the subpoena was 7 February 2008. The day prior to that hearing, a discussion occurred between the solicitor for the wife and the solicitor for the husband’s parents and sister. It was apparently agreed that the issue was contested and that the matter would be adjourned over to the conciliation conference. The conciliation conference would have to be adjourned until April because the family report relating to the child had not been completed.
Notwithstanding the indication that the adjournment would occur, the solicitor for the husband’s parents attended. In fact, the subpoena issue was transferred to the conciliation conference date.
Part of the objection process by the parents required them to file an affidavit objecting to the release of the material produced by the National Australia Bank. They filed that affidavit.
Subsequent to that adjournment, the wife continued to request information about the entities to which I have earlier referred. To use the words of Mr Cantwell on behalf of the wife, she felt she was getting nowhere obtaining “proper information”. Accordingly the wife sought to issue subpoenae against the entities. On 28 March 2008, three subpoenae were issued which sought:
Copies of all financial statements, including but not limited to profit and loss statements in relation to…for the past five years.
Each subpoena was directed to the relevant entity and was in the terms above.
The parties attended the conciliation conference on 2 April 2008. It did not resolve the financial matters but the parenting orders were finalised.
For reasons which are unclear and would appear to be the subject of dispute, the registrar declined to allow the wife’s application for spousal maintenance to proceed and indicated that the appropriate course of action for the wife to take was to apply for a priority hearing. The wife took that course of action. I determined the priority application on the material provided and refused it. Underlying my decision was the fact that the spousal maintenance application had not been determined by the Court notwithstanding it had been issued and the wife should endeavour to take that course of action if, as I understood it, her dire financial circumstances were the major problem. It will be apparent therefore that there was some confusion between the wife and the registrar at the conciliation conference about what was the appropriate course of action.
As is now known, the wife applied for the spousal maintenance hearing.
As the conciliation conference came to a close, the wife withdrew the subpoenae in anticipation of regurgitating the issue at the trial stage. As I have just pointed out, she appeared to understand the registrar to be saying that the appropriate course of action was to seek a priority hearing.
The solicitor for the husband’s parents and sister were told that the subpoenae were withdrawn and on 24 April 2008, they filed an application seeking costs on an indemnity basis associated with the work done concerning the subpoenae. That matter was set down for hearing on 23 May 2008 in the Judicial Duty List.
In support of the application, the husband’s father filed an affidavit on 24 April 2008 and in response to that affidavit, the wife filed an affidavit with my leave on 23 May 2008.
In the meantime however, the wife having filed an application for the spousal maintenance substantive issue, issued new subpoenae all in identical terms to those which had been withdrawn at the conciliation conference.
The position of the husband and the wife in relation to the husband’s interest in these various companies does not seem to be an issue in dispute. In her affidavit filed on 14 November 2007, the wife, under the cover of the words “family business appears to comprise of”, sets out the corporate history of the relevant companies. The husband has no interest or control. In respect of one company, I was told that the husband had provided all of the documents required.
There is an assertion in the wife’s affidavit that the husband’s cessation of directorship of T Pty Ltd in July 2002 may have been an attempt to ensure that his then wife did not receive any assets. Apart from the fact that that is material that is inadmissible, I agree with counsel for the parents that it is scurrilous without further supporting material.
The husband responded to that affidavit confirming that he had no financial or beneficial interest in his father’s businesses nor in the various corporate entities.
The husband also went on to set out the details about his current income position. It must therefore be presumed that as at the end of November 2007, there was no assertion being made by the wife that the husband had any interest in these entities.
One must ask therefore what the relevance was of the subpoenae issued on 29 January 2008. In paragraph 2(c) of the husband’s affidavit, he made clear in November 2007 that he was an employee. As at November 2007, the only application to which any of this material could be relevant was the wife’s spousal maintenance application.
It was not asserted by the wife that the husband was obtaining money from his parents other than as an employee prior to the termination of his employment. It was not asserted by the wife that any of the corporate entity interests were held on trusts by the various family members for the husband. It is therefore difficult to see what the relevance of the material was as at that time.
I have already mentioned that the onus is on the wife to defend the subpoena and that I need only turn to her affidavit material. Whilst clearly I am entitled to draw inferences from the facts asserted in the affidavit material, to establish relevance, the assertions would have to have something to do with one or more of the elements that the wife needed to prove in her substantive application before the Court.
In her affidavit filed on 23 May 2008, the wife said:
The relevance of the initial Subpoena to the National Australia Bank with respect to the Husband’s parents loan was to confirm whether or not the Husband’s parents were representing to the Bank any financial stress, and to confirm my position whereby I did not believe that there was any financial difficulties in the Husband’s parents or the Husband which warrants his termination from the business on a full time basis.
In paragraph 7 of her affidavit, the wife for the first time asserted that the family business and the husband had “intermingled” finances. Nothing was said to justify that comment. Even if it were true, I refer to my earlier remark about the relevance of that to the substantive issue before the Court.
In paragraph 13 of her affidavit, the wife referred to the following:
As earlier deposed to in this Affidavit the families’ companies are so intermingled and there is such an interconnectiveness between the family members that I felt it was necessary to seek documents regarding the companies as part of discovery.
There was no explanation given as to that statement nor any evidence to support it. It was not put when the subpoenae were originally issued earlier in the year and it certainly does not address the question of relevance to the issue before the Court. There is no application before the Court even if there could be one, to set aside the husband’s termination of employment.
There is some reference in the wife’s affidavit material to the fact that the husband’s parents had lent him money. The dates referred to do not make sense. Even if they did, there is no suggestion from that affidavit that those matters would be relevant to the question of a spousal maintenance claim. It may very well be that although the monies lent are secured by unregistered mortgages and supported by a caveat, there is still ample equity in the home from which to secure a spousal maintenance order. That evidence seems to have been put into the affidavit for the purposes of indicating that what the husband said about his employment position with his parents was inconsistent with the way the parents were saying things to the Bank. That smacks of a collateral purpose and seems to me to be irrelevant to any issue that the Court has to determine.

Counsel for the husband’s parents and sister pointed to the fact there was no evidence from the wife addressing relevance. As I mentioned earlier, where there are family connections, a court is entitled to be more cautious than usual when listening to protestations about material under subpoena but in this case, there is no evidence that I could rely upon to establish that there was some relevance.
Mr Cantwell on behalf of the wife valiantly endeavoured to support the issuing of the subpoena. He said that the husband’s position relating to his employment was stretching all belief after 16 years. He used emotive language such as “conspiracy” and “cooperation” saying that the husband’s family were conspiring together to protect him. That is not the evidence that the wife presented before the Court on the question of what was relevant to the issue in dispute.
Mr Cantwell said it was quite reasonable for the wife to issue the subpoenae to check out what the husband was saying. Again, there is no reason why the wife cannot “check out” what she believes has been happening but she cannot use the Court as a fishing expedition.
Mr Cantwell said that the examination of the wife was directed to the way the husband defended himself before the Child Support Agency and how he presented his financial position before this Court. He said that justified the subpoenae against the companies. I disagree.
On the evidence therefore, there is nothing that is apparently relevant between the matter before the Court at this stage and the documents being pursued from the non-parties. To use the words of Powell J in Botany Bay Instrumentation and Control Pty Ltd v Stewart, one aspect of the Court’s jurisdiction is to prevent an abuse of process and in my view, this was such an abuse.
Accordingly, I propose to make orders that the subpoenae be set aside to the husband’s parents, sister and the National Australia Bank and to order that the documents be returned to the recipients of the subpoena.
Those orders apply to the subpoenae returnable on 23 May 2008 for which the objection was filed on 20 May 2008.
I turn then to the second issue in relation to costs.
The husband’s parents and sister seek costs initially on an indemnity basis or in the alternative as the Court sees fit. Attached to the affidavit of the husband’s father is a costing showing that they would have incurred $3010.25 on the scale of costs. The scale is considerably less than the amount they were charged because they executed a cost agreement on 6 February 2008. In addition, further costs of $2500 were incurred as a result of counsel appearing and the relevant briefing of counsel to have the matter argued on 23 May.
The husband’s parents and sister seek to be indemnified in respect of the costs that they have incurred rather than the scale costs.
Counsel for the wife argued that if I looked at all of the matters articulated in s 117(2A), it is clear that the wife’s financial position is dire. She lives on Centrelink benefits and incurs considerable expenses just to support herself and the child. She is currently living with her mother and is very much dependent upon her generosity. She is also a Victoria Legal Aid grant recipient. She points on the other hand to the fact that the applicants for the costs live in apparent affluence. Accordingly, according to Mr Cantwell, no order should be made for costs.
Mr Cantwell said that there was some basis to show that because of the confusion between the Registrar and the solicitor for the wife, no order should be made for costs. I agree that the process was unusual. However, the facts remain that the wife issued these subpoenae based upon the material she filed in November and the pursuit of the documents would have continued one way or the other. I see no basis to say that the confusion ameliorates the wife’s position.
As I have already pointed out, a subpoena is not a substitute for discovery.[3] It is an order of the court which is not vetted before hand compelling non-parties to do things that in many cases cause considerable inconvenience and in this case, costs. There is no specific rule in the Act that says a person who is the recipient of a subpoena should be responsible for their own legal costs. Unlike s 117(1) that clearly relates to a party. The provisions of s 117(2) of the Act clearly would indicate that if a court is justified in making a departure from the position in s 117(1), it should do so having regard to the provisions set out in s 117(2A). It would seem logical therefore that if I was justified in saying that as between the parties the rule should be departed from, the same logic must apply in respect of a person to whom s 117(1) does not apply.
[3] Greedy v Greedy (1982) FLC 91-250.
The provisions of Chapter 15 of the Family Law Rules 2004 set out clearly that a person who is the recipient of a subpoena may apply to be reimbursed for extra expenses or substantial loss incurred as a result of complying with the obligation.[4] In my view, a substantial loss means what it says and having regard to the extent to which the husband’s parents and sister have gone, I am content to find that they have incurred a substantial loss. It is also clear that in carrying out their obligations or ascertaining what those obligations are, the recipient of a subpoena is entitled to obtain legal advice particularly in situations where questions of confidentiality are relevant. The legal expenses incurred in that situation will normally be substantial and in any event, recoverable.[5] It is also trite to say that Chapter 15 of the Rules makes clear that the sum to be ordered is intended to compensate the party who has lost or incurred those costs but at the same time, not penalise the party who is to pay. It seems to me that all of these matters fall within the ambit of the discretion given to the Court to determine costs and expenses generally and in so doing, I have to determine what has been incurred but also whether it was reasonable to do so and whether the costs are reasonable in the circumstances.
[4] See Rule 15.23(3).
[5] See Fuelexpress Limited v Erickson Pty Ltd (1987) 75 ALR 284.
An indemnity costs order which is what the parents and sister seek here can only be justified if there is something unusual about its circumstances. The Full Court in Yunghanns & Ors & Yunghanns & Ors & Yunghanns (2000) FLC 93-029 said that the categories of cases where an indemnity costs order might be appropriate are not closed. The Court went on to say that in respect of making orders for costs, a court should not depart lightly from ordering costs on a party/party basis and that to do otherwise would require circumstances of an exceptional kind.
Sheppard J in Colgate-Palmolive v Cussons Pty Ltd (1993) 46 FCR 225 went further in indicating that there really need to be some special or unusual feature in the case to justify the court departing from ordinary practice.
In my view, there is no peculiar or unusual circumstance here. Notwithstanding the findings I have made about what the wife’s practitioners have done on her instructions, it is not unusual to see parties before the court who are prepared to engage legal practitioners whose proper fees and charges are commercially above the scale determined by the Rules. Hence, there is nothing unusual about this case and in those circumstances, it would not be appropriate to make an order for indemnity costs.
I am very conscious of balancing the interests of the wife whose circumstances are financially precarious against an affluent party who has every entitlement to privacy. I have taken into account that disparity. The major concern I have is that the wife has no assets and would only ultimately have assets from the marriage in the event in the future that she was successful in setting aside the financial agreement and ultimately satisfying a court that it was just and equitable to then make a property settlement order. As Mr Cantwell said, whilst the relationship was short and the contribution was therefore modest, there is a s 75(2) argument here because of the financial disparity between the parties and the fact that the wife has the care of the child. To not make an order for costs however would put impecunious parties in a position where they could risk orders for costs with impunity. That would be highly inappropriate.
In my view this is a case in which an order for costs should be made. How those costs are recovered is a matter between the parties. However having refused the application of the wife for a priority hearing, it is conceivable that the case will not be heard before the end of 2008. It would be inappropriate in my view for any costs to be paid out of a spousal maintenance order should one be made having regard to the purpose for which spousal maintenance is clearly intended. I propose to make an order for costs but that there be a stay in respect of enforcement until 31 December 2008 at which time, I propose to give leave to the wife to seek a further extension based upon her financial circumstances at that time.
Finally, I return to the issue of quantum. In my view, it is most unfortunate if practitioners in this Court give to each other an assurance that a particular course of action will be taken and those statements cannot be accepted. I understand the argument on behalf of the husband’s parents that the solicitor needed to attend the return date of the subpoena because of the objection but it was quite clear that the matter was not to proceed. That attendance cost the parents and sister $450.10 with a consequent letter costing $104.90 to advise them of the outcome. There seemed to me to be some commonsense between the practitioners in respect of the non-attendance at the conciliation conference by the husband’s parents and sister thereby averting further costs. All of these matters involve a very subjective exercise of discretion. It seems to me that the parents and sister should not have all of their costs albeit on scale and I propose to make an order generally for the sum of $2500. However, there was still no agreement between the parties and ultimately the matter had to be determined by me. The wife’s position was clear and she was not going to resile from that. That in turn required the briefing and attendance of counsel on all sides. In my view, the costs claimed of $2500 in respect of the hearing is appropriate having regard to the scale.
In the circumstances, I propose to make an order for $5000 costs against the wife.

I certify that the preceding Eighty (80) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate:

Date: 26 May 2008