Dillon & Dillon
[2012] FamCA 319
•24 April 2012
FAMILY COURT OF AUSTRALIA
| DILLON & DILLON | [2012] FamCA 319 |
| FAMILY LAW – PRACTICE AND PROCEDURE - Subpoena and objection on grounds of relevance - Husband pursues wife’s interests in family trusts - Wife’s right limited to the due administration of the trust - Apparent relevance shown in relation to documents in possession of trustee that may be able to assist valuer assess wife’s entitlements. |
| Evidence Act 1995 (Cth) Family Law Act 1975 (Cth) |
| Hatton and Attorney-General of the Commonwealth of Australia and Ors [2000] FamCA 892 Kennon v Spry (2008) FLC 93-388 Leader and Martin-Leader [2009] FamCA 979 Portal Software v Bodsworth [2005] NSW Supreme Court 1115 Read and Chang and Anor (2010) FLC 93-450; [2010] FamCA 876 Seven Network Limited v News Limited (No 11) [2006] FCA 174 Simmons and Anor v Simmons [2008] FamCA 1088 Spencer Motors Pty Ltd v LNC Industries [1982] 2 NSWLR 921 White and Tulloch v White (1995) FLC 92-640 |
| APPLICANT: | Mr Dillon |
| RESPONDENT: | Ms Dillon |
| THIRD PARTY: | Arnold Bloch Leibler |
| FILE NUMBER: | MLC | 9167 | of | 2010 |
| DATE DELIVERED: | 24 April 2012 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Cronin J |
| HEARING DATE: | 27 February 2012 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Glick SC with Mr Strum |
| SOLICITOR FOR THE APPLICANT: | Lander & Rogers |
| COUNSEL FOR THE RESPONDENT: | No Appearance |
| SOLICITOR FOR THE RESPONDENT: | Taussig Cherrie Fildes |
| COUNSEL FOR THE THIRD PARTY: | Mr St John SC |
| SOLICITOR FOR THE THIRD PARTY: | Arnold Bloch Leibler |
Orders
That as soon as practicable, and to the extent not already provided, the subpoenaed parties provide to the solicitors for the husband
(a)any memoranda of wishes and/or memoranda of preferences and/or letters of wishes or like documents of the trust (that is the family discretionary trusts);
(b)minutes of trustee meetings and resolutions of trustees relating to past distributions, planning for future distributions and the conduct of the trusts (past, present or future) taking into account any memoranda or letters of wishes or preferences; and
(c)copies of correspondence between the trustees or directors of the trustees (acting in such capacity) and the wife.
That the objection of the respondents is dismissed.
That should any party seek costs arising out of these orders, such application be made by written submission and filed and served by no later than 7 May 2012 with such submission being endorsed with the fact that it has been so served on the other party and any recipient of such submission have until 14 May 2012 to file and serve any response and such response be endorsed with the fact that it has been so served on the other party and upon receipt of any such application for costs, it or they be determined in chambers.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Dillon & Dillon has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 9167 of 2010
| Mr Dillon |
Applicant
And
| Ms Dillon |
Respondent
And
Arnold Bloch Leibler
Third Party
REASONS FOR JUDGMENT
In property proceedings, the husband caused the issue and service of a number of subpoenae to produce documents relating to discretionary trusts and a testamentary trust. All of these trusts involved the family of the wife.
The wording of the subpoenae might be said on the one hand to be clumsy, and on the other hand, oppressive. Ultimately, documents sought by the husband were:
(a)any memoranda of wishes and/or memoranda of preferences and/or letters of wishes or like documents of the trust (that is the family discretionary trusts);
(b)minutes of trustee meetings and resolutions of trustees relating to past distributions, planning for future distributions and the conduct of the trusts (past, present or future) taking into account any memoranda or letters of wishes or preferences; and
(c)copies of correspondence between the trustees or directors of the trustees (acting in such capacity) and the wife.
An objection was filed to the release of the documents both on the grounds of relevance and that the scope of the subpoenae was oppressive. The notice of objection was carefully drafted but in reality, the issue in dispute concerned relevance. The ground relating to oppression was not argued.
Mr Glick SC and Mr Strum of counsel appeared for the husband seeking the release of the documents. Mr St John SC appeared for the objectors. The objectors were the wife’s father in his various capacities, and seven companies which act as trustees of the relevant family discretionary trusts.
The issue of relevance arises because:
(a)the wife is a beneficiary of the discretionary trusts and therefore the question is asked about her entitlement to property as a consequence; and
(b)the wife is said to have an interest in property by virtue of the testamentary trust controlled by her father who is the trustee.
The husband’s over-arching argument was directed to the entitlement of the husband to have the wife’s property rights (whatever they may be), valued. Regardless of how nebulous they were, if the wife had some property rights, it was argued that how they were valued, was something for the experts to assess.
The starting point is the objection on the grounds of relevance.
In Hatton and Attorney-General of the Commonwealth of Australia and Ors [2000] FamCA 892 the Full Court observed that the parties seeking the documents pursuant to the subpoena had to establish apparent relevance to the issues in the property settlement proceedings between the husband and the wife. The Court said that the only way in which apparent relevance could be so established was by reference to the affidavit material filed in the proceedings.
The words “apparent relevance” still have a nebulous quality about them. Other courts have approached the question of relevance by asking whether the subpoena has a legitimate forensic purpose or is ultimately likely to add, in some way or other, to the relevant evidence in the case (see Spencer Motors Pty Ltd v LNC Industries [1982] 2 NSWLR 921 at 927). The scope of the inquiry albeit by examination of the evidence set out in the affidavit, must be narrow (Seven Network Limited v News Limited (No 11) [2006] FCA 174).
Evidence is only admissible if it is relevant. The Evidence Act 1995 (Cth) (s 55) provides that evidence is relevant if were it accepted, it could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding. The fact in issue in the property dispute is the entitlement of the respective parties to a division of whatever property either or both of them has having regard to the provisions of s 79 of the Family Law Act 1975 (Cth) (“the Act”). To test whether something would rationally affect the probability of a fact in issue requires consideration of the probative value of the material. In respect of material pursued under a subpoena, it must be asked whether that material would be reasonably expected to throw some light on the issue in the proceeding.
Until such time as there is an answer about whether the documents may shed some light on the proceedings, one cannot know whether they will be admissible in evidence. In Portal Software v Bodsworth [2005] NSW Supreme Court 1115, Brereton J said that it was only sufficient to demonstrate that there is a possibility that the documents may shed some light on the issues of the case. With respect, I agree with his Honour. The test that should be applied is whether there is some apparent relevance such as may ultimately lead a court to admit the document into evidence.
Senior counsel for the respondents acknowledged that there was only a limited number of documents in dispute because, it was said, much had already been provided. Although there was no affidavit by the objectors, senior counsel for the respondent said that he was instructed that some of the pursued materials did not exist. Curiously, that had not been a subject of a denial in an affidavit. As senior counsel for the husband said, had the statement been made formally (by way of affidavit) much of the argument may have been avoided.
The difficult question in this case is that it is common ground between the parties that the wife has no control over any of the trusts and that the possible value of those trusts is many millions of dollars. It is acknowledged that there are other beneficiaries of the trusts and it was known to the husband that distributions to the wife had been limited. None of those were matters of substance in this case because as I earlier mentioned, what the husband wants to do is to value whatever that entitlement (if any) the wife has.
Both parties referred me to a number of powerful decisions in relation to questions of the rights and entitlements of beneficiaries of trusts.
In a written outline of submissions, counsel for the husband said that the beneficial interest of the wife in the family trust was property by virtue of her right as a beneficiary to the due consideration and due administration of the trust. If that was so, then that property had to be identified and valued. To do the valuation exercise, the husband wanted the documents to which I have earlier referred to inform the valuation process. Memoranda relating to wishes and preferences might give some indication as to whether distributions would be made in future. Counsel relied on Kennon v Spry (2008) FLC 93-388, Simmons and Anor v Simmons [2008] FamCA 1088 and Read and Chang and Anor (2010) FLC 93-450; [2010] FamCA 876 (specifically on the issue of memoranda relating to wishes). Senior counsel for the objectors relied upon a decision of Dawe J of Leader and Martin-Leader [2009] FamCA 979 in which it was said her Honour distinguished Spry. The objectors also relied upon the decision of the Full Court of this Court in White and Tulloch v White (1995) FLC 92-640 relating to documents concerning the will of an aging parent and similar financial records.
The material which enables me to determine the matter however is the respective affidavits of the husband filed 28 February 2011 and an affidavit by the solicitor acting on behalf of the objectors filed 10 November 2011.
From the outset, it must be said that even if the statements of French CJ, Gummow and Hayne JJ in Spry were dicta or that that case is distinguishable from cases such as this, it is a powerful statement which may ultimately require this Court to reconsider some of its traditional approaches to the identification of property and valuation.
In White and Tulloch v White (supra) unlike Spry (supra) there was also the consideration of the concept of financial resource. In White and Tulloch, the Full Court said that the task of the Court was to make an order which was just and equitable in all the circumstances and that s 75(2)(o) directed the Court to consider any fact or circumstances which in the opinion of the Court, the justice of the case required to be taken into account. As the Full Court pointed out, all circumstances which may affect that just and equitable outcome had to be considered. The Full Court gave no indication about what facts were relevant but said that cases had to be conducted within manageable proportions with the real emphasis being upon how property was to be divided. Property is defined in the Act to mean property to which a party may be entitled whether in possession or reversion. It is a very wide definition and included what Mr Glick SC described as “a bundle of rights”. Thus, the Court must look at the property, in its various guises, to which parties have an entitlement. It may be that a party’s “financial resource” is not property in the strict sense but s 75(2)(b) would require that it be considered when ultimately deciding to make any adjustment of the property of the parties.
In White and Tulloch, the Full Court said that it did not consider that a prospect of an inheritance could be regarded as a financial resource. The Full Court said that the issue was whether it was relevant to take it into account as a matter of justice. Ultimately, the Court said that there was not to be an absolute rule and thus, each case must be judged according to its peculiar circumstances. Their Honours said that there had to be a worthwhile connection between a specific element of the parties’ case and the suggested expectancy (in that case the party’s mother’s will). In the case of future entitlements in any estate, the Full Court said that one could not shut one’s eyes to the realities in circumstances where it was unlikely that wills were to be changed. All of this means that one has to consider each case on its merits.
In Spry, the facts certainly were different to here. It has never been suggested that the wife has control of the significant property in the trust nor any control over the determinations. Her rights are limited to the due administration of the trust and a right to be considered. However in Spry, French CJ said that until the wife in that case had been removed as a beneficiary of the trust, she had the equitable right to which I have just referred and that that was “part of the property” of the wife as a party to the marriage. Gummow and Hayne JJ noted that the existence of those rights did not depend upon the entitlement to any fixed or transmissible beneficial interest in the trust fund (see paragraph 125). The rights of the wife were accompanied by a fiduciary duty on the part of the husband to consider whether and in what way, he should exercise the power under the trust deed. How those rights might be valued is a different question.
In Leader (supra) Dawe J distinguished Spry saying that Dr Spry as a party to the marriage, had been the legal title holder to a trust fund property. In Leader, as here, the trust beneficiary was never a legal title holder or had any control over the assets of the trust. Again, the “property right” was limited to the due administration of the trust. Albeit it would be very difficult to value such “property”, that right and one of being considered as a beneficiary does not have to be necessarily coupled with anything relating to legal title even though that was the case in Spry.
Counsel for the husband submitted that these rights or entitlements were analogous to cases involving loss of opportunity or hypothetical chances. There were clearly difficulties in endeavouring to value those nebulous concepts but that did not mean they did not exist.
In Read and Chang and Anor (supra), Cohen J directed inspection of documents relating to the memorandum of wishes and preferences as well as letters of wishes relating to a trust. In that case however, the trustees had conceded that they had been influenced by the settlor which although not binding, clearly affected them. His Honour thought that those documents were likely to point to the wife’s financial future and therefore he found them to be relevant.
In this case, as I earlier said, it is now maintained that there are no such documents although I am not entirely sure what that means.
I am satisfied that it is possible that documents in the possession of the trustee as set out in the subpoena may provide a valuer with information to form the foundation of a valuation. I must also be satisfied that despite the lack of documents indicating past and/or recent distributions of money to the wife, it may be open to the husband to argue that the wife has a financial resource depending upon a whole raft of issues that may fold when documents of the nature sought by the husband are examined. I am so satisfied.
In the circumstances therefore, the specific documents sought by the husband, to the extent that they exist, should be open to the husband’s professional advisors to decide whether a valuation exercise can be undertaken at all. Having regard to what was conceded as having been satisfied in relation to the documents pursued, I propose only to make the orders in the terms of the minute handed to me.
Rather than have the parties return specifically to court, I shall make provision in the orders in relation to submissions on costs.
I certify that the preceding Twenty Seven (27) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 24 April 2012.
Associate:
Date: 24 April 2012
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