Grimmond & Hartin (No 3)
[2022] FedCFamC1F 917
Federal Circuit and Family Court of Australia
(DIVISION 1)
Grimmond & Hartin (No 3) [2022] FedCFamC1F 917
File number(s): DNC 234 of 2021 Judgment of: BERMAN J Date of judgment: 11 November 2022 Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE – Subpoena – Where the applicant issued various subpoenas in relation to the second respondent’s business – Where the subpoenas were the subject of objection by the second respondent – Where the applicant conceded that there was merit in the objection and sought leave to amend the schedule to limit the scope – Where the test of relevance is satisfied – Where no evidence is provided by the second respondent to support his contention that the subpoena catches 106,225 pages and will cost $165,000 to comply – Orders made. Cases cited: Hatten v Attorney General of the Commonwealth of Australia & Ors (2000) FLC 93- 038
Lucas Industries Ltd v Hewitt & Ors (1978) 18 ALR 555
Martin & Martin & Anor (No 2) [2014] FamCA 232
Woley and Humboldt (No 4) [2009] FamCA 546
Division: Division 1 First Instance Number of paragraphs: 31 Date of hearing: 11 November 2022 Place: Adelaide via MS Teams Counsel for the Applicant: Ms Giacomo Solicitor for the Applicant: Darwin Family Law Counsel for the Respondent: Mr Berghofer Solicitor for the Respondent: Cozens Johansen Lawyers Counsel for the Objector: Mr Cavanagh Solicitor for the Objector: Withnalls Lawyers ORDERS
DNC 234 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS GRIMMOND
Applicant
AND: MR HARTIN
Respondent
order made by:
BERMAN J
DATE OF ORDER:
11 NOVEMBER 2022
THE COURT ORDERS:
1.That the Applicant be granted leave to amend the Schedule of the subpoena to B Pty Ltd filed 4 October 2022, to read as follows:
1.A copy of this subpoena.
2.Any quotations prepared by B Pty Ltd with respect to any work undertaken for the following:
2.1Q Pty Ltd;
2.2R Trust;
2.3S Pty Ltd;
2.4T Pty Ltd;
2.5U Pty Ltd;
2.6V Pty Ltd;
2.7 W Pty Ltd;
2.8X Pty Ltd;
2.9Y Pty Ltd;
2.10Mr Z;
2.11Mr AA;
2.12Mr BB;
2.13Mr DD;
2.14Mr CC;
2.15Mr EE;
2.16Mr FF;
2.17Mr GG; and
2.18Mr HH.
3.Any contracts entered into by B Pty Ltd, including purchase orders and/or accepted quotations for supply of services to the following:
3.1Q Pty Ltd;
3.2R Trust;
3.3S Pty Ltd;
3.4T Pty Ltd;
3.5U Pty Ltd;
3.6V Pty Ltd;
3.7W Pty Ltd;
3.8X Pty Ltd;
3.9Y Pty Ltd;
3.10Mr Z;
3.11Mr AA;
3.12Mr BB;
3.13Mr DD;
3.14Mr CC;
3.15Mr EE;
3.16Mr FF;
3.17Mr GG; and
3.18Mr HH.
2.That the Notice of Objection filed 19 October 2022, is dismissed.
3.That the time for compliance by B Pty Ltd is extended to 9.00 am on 21 November 2022.
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 Grimmond & Hartin has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
BERMAN J
Introduction
Ms Grimmond and Mr Hartin are the applicant and respondent respectively, to property settlement proceedings commenced by Initiating Application filed on 21 May 2021.
The proceedings have been listed for a final hearing to commence on 21 November 2022.
The applicant and the respondent are Directors and equal shareholders of an electrical contracting business known as C Pty Ltd.
The applicant joined the parties’ son, Mr X Hartin, as second respondent to the proceedings. Mr X Hartin was successful in an Application for Disjoinder on the basis that the applicant did not seek any final orders in respect to Mr X Hartin and there was the potential for an abuse of process in that his retention as a party, may have been for the purpose of discovery.
Mr X Hartin had been an employee of C Pty Ltd and following a break down in his relationship with the applicant, he and the respondent incorporated B Pty Ltd. The contention of the applicant is that the respondent and Mr X Hartin set up B Pty Ltd to be in direct competition to C Pty Ltd.
It appears that the respondent gave consideration to his circumstances as a Director of B Pty Ltd which resulted in his removal as a Director and shareholder in or about February/March 2021.
The single expert valuer has valued the interests of the parties in C Pty Ltd as at 30 June 2022, at a sum significantly less than the value as at 30 June 2020.
The applicant considers that the diminution in value of C Pty Ltd is as a direct result of the respondent assisting Mr X Hartin, to compete for work by using client information and intellectual property of C Pty Ltd.
The applicant caused subpoenas to be issued on 13 January 2022, seeking a range of documents in relation to:-
·Mr Hartin;
·Mr X Hartin;
·C Pty Ltd; and
·B Pty Ltd.
The subpoenas were the subject of objection by Mr X Hartin, in his capacity as the second and third respondents, to the proceedings. The objections were on the following basis:-
(1)The subpoena issued is not relevant to an issue in proceedings;
(2)The subpoena amounts to a “fishing” expedition;
(3)The subpoena amounts to an abuse of process;
(4)The subpoena does not possess a legitimate forensic purpose; and
(5)The material has not been requested by way of discovery.
By Order made 23 May 2022, the Notices of Objection filed 24 January 2022, was dismissed.
On 4 October 2022, the applicant caused the further issue of a subpoena to B Pty Ltd seeking the following:-
copies of all correspondence, emails, purchase orders, work orders, quotations, invoices, receipts, documents, records, diary notes, file notes, reports and writings in your possession, custody or control for the period 22 May 2020 to date in relation to a range of entities and persons as set out in paragraph 2 (a) to (r) inclusive of the applicant’s subpoena.
It is likely that the entities and persons identified were customers of C Pty Ltd and are now customers of B Pty Ltd.
The Notice of Objection filed by B Pty Ltd on 19 October 2022, sets out in detail the basis for objection summarised as follows:-
(1)There is estimated to be 106,225 pages of documents required for production;
(2)The subpoenaed documents contain financial information which is commercial in confidence, commercially sensitive or includes material relating to classified defence infrastructure.
(3)That the subpoena does not possess a legitimate forensic purpose, is too broad and amounts to a fishing expedition.
(4)That the potential cost of compliance could be as high as $165,000 on the basis that it will take 442 hours to collate.
The applicant conceded that there was merit in the objection and sought leave to amend the schedule of the subpoena to limit the scope of the documents to be produced to the following categories:-
(1)Any quotations prepared by B Pty Ltd with respect to any work undertaken for the entities as set out in paragraph 2.1 to 2.18 inclusive of the orders sought.
(2)Any contracts entered into by B Pty Ltd including purchase orders and/or accepted quotations for supply of services to the entities set out in paragraph 3.1 to 18 inclusive.
In submissions, B Pty Ltd maintained its objection to the production of the documents as set out in the amended schedule and asserted that compliance with the category of documents sought, would be onerous both as to volume and cost.
Legal principles
The general practice, as it relates to subpoena’s to produce documents, is explained by Smithers J in Lucas Industries Ltd v Hewitt & Ors (1978) 18 ALR 555 at 570:-
The purpose of the process of subpoena is to facilitate the proper administration of justice between parties. For that purpose it is the policy of the law that strangers who have documents may be put to certain trouble in searching for and gathering together relevant documents and bringing them to court. It is according to the same principle that persons who have knowledge of facts are put to the inconvenience of being brought to court and required to give evidence.
The primary test is the relevance of the documents to the issues before the Court. The Full Court in Hatten v Attorney General of the Commonwealth of Australia & Ors (2000) FLC 93- 038, considered the test of relevance and set out examples of where a court may determine where it is proper to set aside a subpoena:-
·If the subpoena is for an improper purpose namely to obtain discovery against a third party;
·Where it might be oppressive to comply with the subpoena;
·Where a party embarks upon a “fishing expedition”; and
·That the subpoena should be set aside because it lacked relevance to the proceedings.
In Martin & Martin & Anor (No 2) [2014] FamCA 232 (“Martin”), Cronin J found that the focus of the Court should be whether it was “on the cards”[1] that the documents would materially assist the proceedings. In Martin (supra) at [28], Cronin J referred to his own remarks in Woley and Humboldt (No 4) [2009] FamCA 546 where he said:-
[1] Martin & Martin & Anor (No 2) [2014] FamCA 232 at [28].
39.In Hudson Timber and Hardware Ltd v Chaudhary Group Pty Ltd [2002] FCA 832 the Full Court of the Federal Court examined the issue of apparent relevance and said that the relevant principles governing the obtaining of documents on subpoena which have “apparent relevance” were that inter alia:
(1)The relevance of documents was not limited to documents directly admissible in themselves in proof of an issue raised in pleadings; and
(2)If a class of document which has material forensic relevance could be shown to exist, then a subpoena would not normally be set aside.
40.In White v Tulloch (1995) FLC 92-640, the Full Court of the Family Court referred to the test in terms of documents having "a sufficient apparent connection to justify their production or inspection".
41.In Trade Practices Commission v Arnotts Ltd (No 2) (1989) 21 FCR 306, Beaumont J saw relevance as something where a document "could possibly throw light on the issues in the main case".
(Emphasis in original)
In summary, it is not enough for a party issuing the subpoena, to raise a speculative possibility that the documents sought would assist the resolution of the dispute. The parties supporting the subpoena must demonstrate that the documents sought in the subpoena, are of real relevance to the issues in the case. It must be more than an outside chance that something useful might turn up.
Discussion
The thrust of the applicant’s case, is a contention that the respondent and Mr X Hartin, agreed to set up B Pty Ltd to be in direct competition to C Pty Ltd.
It is likely that the entities and persons referred to in the amended schedule of documents sought, had been customers of C Pty Ltd and were now either customers of B Pty Ltd or were considering quotations provided by B Pty Ltd.
The applicant’s assertion is denied by the respondent but on page 12 of the applicant’s affidavit of 13 August 2021, she makes specific reference to the B Pty Ltd business plan dated May 2021, which includes the following extract:-
… . [B Pty Ltd] is in essence [C Pty Ltd], with some critical improvements and without the [C Pty Ltd] director restrictions. [B Pty Ltd] intends to service the same industrial customers as [C Pty Ltd], and is confident that its director, [Mr X Hartin] will be able to carry over strong client relationships to his new company. [B Pty Ltd] Group has already approached many of the highly-skilled [C Pty Ltd] staff, who have agreed to transition. …
On page 18 of the applicant’s affidavit of 13 August 2021, the B Pty Ltd business plan dated May 2021, says as follows:-
[C Pty Ltd] is currently the largest customer in the [P Region] of many of its suppliers including [H Company] (triple the next highest amount), [J Company], [K Company], and [L Company]. It is anticipated that these suppliers will wish to retain their current large turnover from this business by providing their goods and credit to [B Pty Ltd].
[C Pty Ltd] has quoted and expected to win, or has already secured purchase orders, for numerous projects. When [B Pty Ltd] starts operating, [C Pty Ltd] will have no ability to fulfil its current contracts and so it will either need to subcontract the work or forfeit the opportunity. Many of the clients will likely follow the team as it transitions to [B Pty Ltd] due to the strong relationships developed over the years.
It appears that there has been a transition of C Pty Ltd customers to B Pty Ltd.
The issue as between the applicant and the respondent, is whether the evidence will support the wife’s contention that the respondent was instrumental in assisting Mr X Hartin to set up B Pty Ltd, to the detriment of C Pty Ltd, in terms of its value as may be reflected in the single expert valuer’s valuation.
I consider that the test of relevance has been satisfied as was the basis for the dismissal of the objection to the applicant’s subpoena’s to O Corporation and N Bank as ordered on 23 May 2022.
B Pty Ltd has not provided any evidence in support of the contention of Mr X Hartin that the subpoena catches thousands of pages of documents and would require significant time and cost to be incurred in collating the documents sought. No evidence has been presented that would enable an assessment to be undertaken as to documents that might be considered as commercial in confidence or documents detailing classified defence infrastructure which would require security clearance.
I do not consider that the subpoena amounts to an abuse of process and given that the category of documents now sought are confined to quotations and contracts involving the named entities and parties, the applicant has not embarked upon a fishing expedition.
The cost of compliance may well be a relevant consideration however, that issue can be determined upon the documents being produced.
These reasons are provided in support of the Orders made on 14 November 2022.
I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Berman. Associate:
Dated: 22 November 2022
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