Gilmore & Patrick

Case [2022] FedCFamC1F 1015

Federal Circuit and Family Court of Australia

(DIVISION 1)

Gilmore & Patrick [2022] FedCFamC1F 1015

File number(s): SYC 8338 of 2019
Judgment of: AUSTIN J
Date of judgment: 21 December 2022
Catchwords:

FAMILY LAW – PRACTICE AND PROCEDURE – Review of Decision – Subpoena Objection – Where the parties are engaged in complex financial proceedings – Where the wife caused a subpoena to issue to D Limited (“D Limited”) in New Zealand – Where D Limited filed a Notice of Objection to the subpoena – Where the subpoena objection was heard and subsequently dismissed by a senior judicial registrar – Where D Limited filed an Application for Review seeking to review the senior judicial registrar’s decision – Where D Limited sought that the subpoena be set aside pursuant to common law principles – Where the subpoena casts a wider net than the evidence properly permits – Where the review application succeeds in respect of certain orders made by the senior judicial registrar – Where the ambit of the subpoena is confined so as to require D Limited to produce certain financial documents within a specified timeframe – Where the time for D Limited’s compliance with the subpoena is extended – Orders made – Costs reserved.

FAMILY LAW – PRACTICE AND PROCEDURE – Application in a Proceeding – Where the wife was granted leave to issue the subpoena to D Limited pursuant to the Trans-Tasman Proceedings Act 2010 (Cth) (“the TTP Act”) – Where D Limited sought that the subpoena be set aside under s 36 of the TTP Act – Where D Limited’s application under the TTP Act to set aside the subpoena fails – Application dismissed – Costs reserved.

Legislation:

Family Law Act 1975 (Cth) Pt VIII, s 79

Trans-Tasman Proceedings Act 2010 (Cth) ss 35, 36,

Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 5.06, 6.36

Companies Act 1993 (NZ) ss 178, 179

Trust Act 2019 (NZ) ss 52, 53
Cases cited:

Alister v The Queen (1984) 154 CLR 404

1           Breen v Williams (1996) 186 CLR 71

2           Carroll v Attorney General for NSW (1993) 70 A Crim R 162

3           Commissioner for Railways v Small (1938) 38 SR (NSW) 564

4           Erceg v Erceg [2017] 1 NZLR 320

5           Gray v Guardian Trust Australia Ltd [2003] NSWSC 704

6           Hall v Hall (2016) 257 CLR 490

7           Hatton v Attorney-General of Commonwealth of Australia and Ors (2000) FLC 93-038

8           Hearne v Street (2008) 235 CLR 125

9           Kehoe & Seden (No.2) [2022] FedCFamC1F 346

10          Kennon v Spry (2008) 238 CLR 366 at 387

Loughran v Perpetual Trustees WA Ltd [2007] VSC 50

11          McDonald v Ellis (2007) 72 NSWLR 605

12          National Employers’ Mutual General Association Ltd v Waind and Hill [1978] 1 NSWLR 372

13          Re Simersall; Blackwell v Bray (1992) 108 ALR 375

14          Schmidt v Rosewood Trust Ltd [2003] 2 AC 709

15          Secretary of the Dept of Planning, Industry and Environment v Blacktown City…

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Gilmore & Patrick [2022] FedCFamC1F 1015
Case
[2022] FedCFamC1F 1015
Decision Date

CaseChat Overview and Summary

Gilmore & Patrick was an interim dispute between a wife and D Limited, heard in the Family Court of Australia. The central issue was the validity and scope of a subpoena issued by the wife, seeking various documents from D Limited, including financial statements. The case required the court to decide whether the subpoena was properly issued and whether its scope was justified in the context of the proceedings. The wife argued that the subpoena was necessary to value her interest in the family trust and related corporations, while D Limited contended that the subpoena was overly broad and sought information irrelevant to the current proceedings.

The court examined the evidence provided by both parties, including affidavits and documentary exhibits. It noted that the Rules do not allow D Limited to file a reply affidavit when the opposing party does not raise a new cause of action. Despite this procedural irregularity, the court admitted the reply affidavit as the wife did not object to it. The wife’s objection to a specific paragraph in an affidavit was also deemed insufficient to exclude the evidence. The court further considered the nature of the family trust, the relationships between the various entities, and the specific instructions given to the single expert appointed to value the parties' interests.

The court found that the subpoena was too wide in scope. Paragraph 1 of the subpoena was deemed superfluous as the wife conceded its relevance. Paragraph 2, which defined the corporate entities within the "[D Group]," was also problematic as it required D Limited to produce documents on behalf of other corporations over which it had no control. The court emphasised that D Limited was only associated with six out of the seven corporations named in the subpoena, and it did not have control over the seventh. The court also dismissed the wife's suggestion that another corporation should be subject to the subpoena based on an inference that its shareholder held shares beneficially for the family trust. The court concluded that D Limited’s association with the remaining five corporations did not entitle the wife to seek their financial statements through the subpoena.

The court ordered that the subpoena be confined to exclude the irrelevant and overly broad provisions. The specific orders made by the court were not detailed in the text, but it was clear that the subpoena needed to be narrowed to only include documents directly relevant to the wife’s interest in D Limited and the family trust.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

The interim dispute was contested between only the wife and D Limited. Neither the husband nor any of the other corporate respondents appeared.Evidence In prosecuting its case in opposition to the subpoena, D Limited relied upon the affidavits of:(a)Ms E, filed on 15 November 2022;(b)Mr F, filed on 15 November 2022; (c)Mr G, filed on 16 November 2022; and(d)Mr H, filed on 28 November 2022. The last affidavit was filed by D Limited in reply to the wife’s second affidavit, filed in response to D Limited’s application to set aside the subpoena. The Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) do not envisage D Limited being able to file and rely upon the affidavit in reply (r 5.06) as the wife did not raise any new cause of action when opposing D Limited’s application, but she took no objection to the reply affidavit. The wife objected to a single paragraph within the affidavit of Mr G, but the terms of the objection were amended in a way which eradicated any real dispute and the evidence was admitted unconditionally. In defence of the subpoena, the wife relied upon:(a)the two affidavits filed by her solicitor (Tineka Winter) on 12 July 2022 and 23 November 2022 – the first in support of her initial application for leave to issue the subpoena and the second to resist D Limited’s application to set it aside; and(b)an additional bundle of documents, marked as an exhibit.[1][1] Exhibit W1factual setting Both parties are discretionary beneficiaries, but the husband is a primary beneficiary and was also the former appointor, of the Patrick Family Trust (“the family trust”). In recent years, the husband has received large distributions described as “spend money” and also acquired loans from the family trust.[2] The wife has not received any form of financial accommodation from the family trust.[2] Exhibit W1, pages 92–93 The corporate trustee of the family trust (Q Limited (“the corporate trustee”)) holds shares in D Limited, which are the “most significant asset” of the family trust – a fact not contested by D Limited. The sole director of the corporate trustee is Mr G. Neither the corporate trustee, Mr G, nor D Limited are parties to these proceedings. As long ago as March 2020, orders were made for the appointment of single expert witnesses to value real estate and relevant corporate entities. A specific single expert (“the single expert”) was appointed by the parties to value their interests in various corporations and the family trust in these terms:The parties have agreed to your appointment as a Single Expert…to provide a written market valuation of their respective interests in a number of corporate and/or trust entities.[3][3] Exhibit W1, page 1. Within the instructions provided to the single expert, his attention was specifically drawn to the family trust and the spouses’ mutual belief that the family trust enjoys “ownership” in D Limited and other corporations “operating as one economic group”. Such instructions may entail an admission by the husband of some form of ill-defined corporate group, but no such admission was made by D Limited for present purposes.

Decision

Reasons for decision

If D Limited refuses to reveal its financial statements – the prospect of which L Company seems to be cognisant – then L Company would instead fall back on an educated guess at D Limited’s value by comparing it to comparable corporations. It is not clear how such comparable corporations would be identified. Surely a suitable comparison could not be established merely because another corporation has similar petroleum or mining interests. The unstated assumption is that the benchmark value of the comparable corporations would be established by access to their financial statements. D Limited is seemingly in denial about the essentiality of financial statements of either it or a comparable corporation to the valuation of its shares. The wife has an interest in D Limited’s financial statements, but certainly no interest at all in the financial statements of an entirely unrelated corporation and so could not procure them instead.conclusion The subpoena is too wide and ought be confined, albeit not for reasons expressly addressed by D Limited in its submissions. Paragraph 1 is superfluous, as the wife conceded. It does not matter if D Limited fails to produce to the Court a copy of the subpoena. Paragraph 2 does not require the production of anything. It simply purports to define the constituent corporate entities said to comprise the “[D Group]”. While the subpoena is directed to only D Limited, it purports to oblige D Limited to produce documents for and on behalf of the seven other corporations in addition to its own documents. Although the subpoena alleges the other seven corporations are “all related entities, holding companies and subsidiaries”, the evidence establishes D Limited’s association or affiliation with only six. As noted already, the wife conceded she could not press for D Limited’s production of the financial statements of the corporation over which it has no control (the one identified at paragraph 2.1.1). Since D Limited disposed of its shares in another corporation (the one identified at paragraph 2.1.2) in April 2019, it no longer has any control over that corporation either. The shares were transferred to a third party corporation, of which Mr G is the shareholder and director, so the wife suggested an inference should be drawn that he holds the shares beneficially for the family trust, in which case the subpoena should still apply to it. The submission is rejected. An inference requires more than a guess. D Limited is the sole and exclusive shareholder in each of the remaining five corporations named in the subpoena. Even though the family trust financial statements may claim some form of “investment” in those corporations, the family trust actually holds shares in none.[27] Why the family trust has been paid dividends by those corporations when it holds no shares in them remains a mystery.[28] According to the New Zealand corporate searches, which is the best evidence, the family trust only has a direct proprietorial interest by shareholding in D Limited. [27] Exhibit W1, pages 50–64[28] Exhibit W1, page 81

Ratio Decidendi

Legal Principle Established

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