Haldar & Santosh
[2022] FedCFamC2F 1594
Federal Circuit and Family Court of Australia
(DIVISION 2)
Haldar & Santosh [2022] FedCFamC2F 1594
File number(s): SYC 6610 of 2021 Judgment of: JUDGE MURDOCH Date of judgment: 22 November 2022 Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE – Application to review a Registrar’s decision filed by the wife– Subpoena issued by the wife to the husband’s father’s company – where both the husband and the director of the company being the husband’s father object to the production of documents –where the objections were upheld save for two categories of documents- where the wife asserts that the husband has unfettered control of the company or the company is at the least a financial resource for the husband– where it is asserted that the documents sought to be produced are not relevant, a fishing expedition, is oppressive and have no forensic purpose- – Application for Review upheld in part and orders made for the production of further documents. Legislation: Family Law Act (1975) (Cth)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021, rr 6.33, 6.35, 14.05, 14.07
Cases cited: 1 Alister v R [1984] HCA 85
Baumann & Ors & Rushbrook & Anor [2016] FamCA 90
Dunn v KAZ Group [2006] NSWSC 8
Hatton v Attorney-General of the Commonwealth of Australia & Ors [2000] FamCA 892Lucas Industries Ltd v Hewitt (1978) 18 ALR 555
McMillan Incorporated v Bishopgate Investment Trust [1993] 4 All ER 990
National Employers Mutual General Association Ltd v Waind & Hill [1978] 1 NSWLR 372
R v Barton [1981] 2 NSWLR 414
Shaw and Shaw [1989] FamCA 5
Trade Practices Commission v Arnotts Ltd (no 2) [1989] FCA 340X Pty Ltd and Ors & Merhi [2015] FamCA 622
Division: Division 2 Family Law Number of paragraphs: 45 Date of last submission/s: 8 November 2022 Date of hearing: 8 November 2022 Place: Sydney Solicitor for the Applicant Mr Roberts of Counsel Solicitor for the Respondent Mr Williams, KC Solicitor for the Intervener Mr Duc of Counsel ORDERS
SYC 6610 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MS HALDAR
Applicant
AND: MR SANTOSH
Respondent
B PTY LTD
Intervener
order made by:
JUDGE MURDOCH
DATE OF ORDER:
23 NOVEMBER 2022
THE COURT ORDERS THAT:
1.The Orders of 22 August 2022 are discharged.
2.The Schedule to Subpoena to B Pty Ltd filed 7 July 2022 is varied to read as follows:-
a.A copy of this Subpoena.
b.Copies of:
i.company tax returns, financial statements (including balance sheets, detailed profit and loss accounts, notes to the accounts, directors report and statement, and accountants or auditors reports);
ii.statements of bank accounts;
iii.statements of loan accounts between Mr Santosh and B Pty Ltd;
iv.employment records for Mr Santosh;
v.ledgers for any loan or other credit facility between Mr Santosh and B Pty Ltd and any applications for finance executed by the Husband in his role as general manager of B Pty Ltd; and
vi.fringe benefit tax returns
of B Pty Ltd for the period 1 July 2013 to present.
3.Within 42 days the Proper Officer, B Pty Ltd shall produce the documents listed in Order 2 to an officer of the Exhibits Section, Federal Circuit and Family Court of Australia, Sydney Registry in the state of New South Wales.
4.The parties are to file and serve written submissions of no more than two pages on any question of costs, including the cost of complying with the Subpoena as amended in Order 2 within 7 days. Any response thereto of no more than one page is to be filed and served within 7 days thereafter.
5.Unless any party objects in the written submissions referred to in Order 4 above the question of costs will be determined in Chambers.
6.Save as to the question of costs, the Notices of Objection filed 15 July 2022 and 21 July 20 are otherwise dismissed.
7.Save as to the question of costs, the Application for Review filed 14 September 2022 is otherwise dismissed.
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 Haldar & Santosh has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE MURDOCH
INTRODUCTION
These are parenting and property proceedings.
The parties married and commenced cohabitation in 2014. They separated in July 2019.
Trial directions were made in the substantive proceedings by a Senior Judicial Registrar on 21 July 2022 and the matter is listed for a compliance and readiness hearing before Deputy Chief Judge McClelland on 11 November 2022.
On 7 July 2022 the wife filed and served a Subpoena to produce documents to B Pty Ltd. (“B Pty Ltd”.) The director of this company is the husband’s father.
The Subpoena sought production of copies of the following documents:-
(1)A copy of this Subpoena
(2)Copies of:
2.1the Constitution, memorandum and/or articles of association;
2.2income tax returns, company tax returns, financial statements (including balance sheets, detailed profit and loss accounts, notes to the accounts, directors report and statement, and accountants or auditors reports);
2.3company activity statements and income activity statements;
2.4statements of bank accounts;
2.5statements of loan accounts
2.6employment records for the husband;
2.7ledgers for any loan or other credit facility between the husband and B Pty Ltd;
2.8fringe benefit tax returns
of B Pty Ltd for the period 1 July 2013 to present.
(3)Copies of all correspondence in relation to any application for finance including credit cards/company loans/overdrafts by B Pty Ltd and/or the husband in the period 1 July 2013 to date.
(4)Copies of all correspondence in relation to the employment of the husband in the period 1 July 2013 to date including but not limited to any communications with Mr C and/or Mr D.
(“the Schedule”).
A Notice of objection - Subpoena was filed by the director of B Pty Ltd on 15 July 2022 (“the objector’). A Notice of Objection - Subpoena was filed by the husband on 21 July 2022.
The notices of objection were listed before a Judicial Registrar and determined on 22 August 2022. The Judicial Registrar upheld in part the objections to subpoena such that the only documents to be produced were:-
2.6 the employment records for the husband; and
2.7 the ledgers for any loan or other credit facility between the husband and [B Pty Ltd].
This is a determination of the Application for Review of the determination by the Judicial Registrar on 22 August 2022 filed by the wife on 14 September 2022. Such application presses for the production of documents by B Pty Ltd as set out in paragraphs 1, 2 and 3 of the Schedule. Thus documents as sought in paragraph 4 of the Schedule are not pressed.
During the course of the hearing the wife advised that paragraph 3 of the Schedule was no longer pressed. Both the husband and the objector advised that they had no objection to the documents being produced as ordered by the judicial registrar.
Thus the question to be determined is whether the objector is to be required pursuant to the Subpoena to produce:-
(2) Copies of:
2.1 the Constitution, memorandum and/or articles of association;
2.2 income tax returns, company tax returns, financial statements (including balance sheets, detailed profit and loss accounts, notes to the accounts, directors report and statement, and accountants or auditors reports);
2.3 company activity statements and income activity statements;
2.4 statements of bank accounts;
2.5 statements of loan accounts; and
2.6 fringe benefit tax returns
of B Pty Ltd for the period 1 July 2013 to present.
EVIDENCE
In this matter I have read the following documents:-
·the Amended Response to Initiating Application filed by the wife on 24 May 2022;
·the Reply filed by the husband on 11 July 2022;
·the Financial statement of the husband filed 11 July 2022;
·paragraphs 24 – 29, 36-40, 43, 61, 91 and Annexure -1 of the husband’s affidavit filed 11 July 2022;
·paragraphs 8, 9, 53, 56 and 60 of the Affidavit of the wife filed 24 May 2022;
·Subpoena to B Pty Ltd filed 7 July 2022;
·Notice of Objection - Subpoena filed by the husband on 21 July 2022;
·Notice of Objection - Subpoena filed by the objector on 15 July 2022;
·Application for Review filed 14 September 2022;
·Outline of Case document filed on behalf of the wife on 17 August 2022;
·Outline of Submissions for the husband filed 9 August 2022; and
·Written Submissions of the objector which will be marked as Exhibit O1.
BACKGROUND
The wife deposes in her affidavit filed 24 May 2022 that:-
·the husband “operates” B Pty Ltd and throughout the parties’ cohabitation and post separation has had unfettered control of the company accounts and uses company funds to pay for personal living expenses including personal shopping, dining out, holidays and TAB bets;[1]
·In the period 1 July 2019 to 31 January 2022 the husband made drawings on his loan account with B Pty Ltd of an unspecified amount. Annexed to the wife’s affidavit is a statement for the loan account for the period 1 July 2019 to 31 January 2022 for B Pty Ltd which appears to record extensive and numerous expenses being paid for the husband including groceries, speeding and parking fines to NSW Revenue, clothing, haircuts and dining out.[2]
·Annexed to the wife’s affidavit are the husband’s income taxation returns recording that the husband’s taxable income for the 2019 financial year was $136,920, for the 2020 financial year was $92,620 and for the 2021 financial year was $35,950.[3]
·During the period of cohabitation the parties paid rent to the husband’s parents in the sum of $8000 per month. The wife deposes that the husband would receive income from the “family company” in the same amount as the rent and pay that income/rent back into his parents loan account.[4]
·The wife worked at B Pty Ltd from January 2016 until 2019. During this time the wife observed that deposits from clients were mainly paid in cash and the husband received the cash personally from these bookings.[5]
[1] Wife affidavit filed 24 May 2022, paragraph 8 (“Wife affidavit”).
[2] Ibid.
[3] Wife affidavit, paragraph 9.
[4] Wife affidavit, paragraph 53.
[5] Wife affidavit, paragraph 56.
The husband deposes in his Affidavit filed 11 July 2022 that:-
·During the marriage he worked on a full-time basis as the general manager of B Pty Ltd. He is not and has never been an officeholder or shareholder of the company.[6]
·The husband is currently employed as the manager of the company. This role requires him to oversee all events and ensure all events run smoothly.[7]
·From his employment he has been provided with the benefit of a company credit card which he uses for both company and personal expenses. The loan account was offered to him by his father on the basis that: “Any personal expense made on the company card will be added to this loan account and if you make work expenses on your personal card it will be credited against it.” [8] The personal expenses the husband incurs are placed on the loan account and are expected to be repaid.[9] “The shortfall I have in my income is being met by assistance I receive from my parents through my loan account which I have which I am slowly meeting from my income.”[10]
·Paragraph 61 of the Affidavit then deposes that the husband is employed as the general manager of the company. He has never received a dividend or share of profits and the husband’s father is the sole director and is involved in the day-to-day running of the company.[11]
[6] Husband affidavit filed 11 July 2022, paragraph 24 (“Husband affidavit”).
[7] Husband affidavit, paragraph 36.
[8] Husband affidavit, paragraph 38.
[9] Husband affidavit, paragraph 38-39.
[10] Husband affidavit, paragraph 43.
[11] Husband affidavit, paragraph 63.
The husband’s Financial Statement filed on 11 July 2022 deposes that:-
·He is the general manager of B Pty Ltd earning $1,562 per week with an annual gross salary of $75,000.[12]
·The husband’s average weekly expenses as particularised by him in Part N is estimated from his expenditure from his savings account and credit card. He deposes that he also has work expenses that he has paid for on his credit card and he is reimbursed for those.
·When purchasing groceries for the family he often purchases those groceries together with the groceries for work and accordingly has attributed 30% of the total groceries he purchases on his personal credit cards as his own personal expense.
[12] Financial Statement of husband filed 11 July 2022, Part D(9).
On any view, the financial circumstances of the husband are closely interwoven with those of the company.
THE OBJECTIONS
The husband objects to the production and inspection of the balance of the documents sought in the subpoena on the following grounds:
·relevance;
·fishing expedition; and
·no forensic purpose.
The third-party recipient of the subpoena being the company by way of the husband’s father as director has listed eight reasons for his objection to the production of all of the documents sought in the subpoena, including those documents required to be produced pursuant to the orders made by the Judicial Registrar. It appears that these eight reasons can be grouped under the following headings:-
·the documents sought are not relevant and are therefore an abuse of process;
·the subpoena is a fishing expedition; and
·the scope of the subpoena is oppressive.
SUBMISSIONS
The wife submitted that:-
·The husband gives differing evidence as to his role of employment in the company. A live issue in the proceedings is the role of the husband within the company with the wife contending that he takes the role of a shadow director and has control and access to the profitability of the company beyond what he declares as salary income. On the husband’s own evidence he has unfettered access to loan accounts. There is no evidence the husband has to seek approval for such expenditure from the father. There is no evidence as to how the loan accounts are dealt with in the husband’s taxation returns.
·In the event that it is not accepted that the husband has an interest in the company, there remains an issue as to the financial benefit the husband derives from the family company. It is not disputed that the husband has the benefit of a loan account with the company and access to a company credit card. The husband deposes to his loan account being $106,143 as at 11 July 2022. Further the husband deposes he has used employees from the company to cook dinner for him and the wife during their marriage.[13]
·The arrangement between the father and the company is not an ordinary employee arrangement in circumstances where the husband’s brother has a similar arrangement with his father of drawing on funds debited as a loan from the company.
·It could not be said that the financial records of the company are not relevant given the significant issue in dispute as to the husband’s interest in the company or in the alternative as a financial resource available to the husband.
·The level of benefit the husband retains referable to the company’s profitability and his access to the wealth within that company over the course of the relationship and continuing is relevant to both contribution assessments under section 79(4) and s79(4)(e) including those matters referred to in s75(2). Without the documents as a whole the court will be unable to access this financial resource. It is akin to the beneficiaries of a trust as on the husband’s own evidence he has unfettered access to the accounts.
·The documents sought are targeted and not sought on speculation.
·The documents sought are to test not only the wife’s contentions in these proceedings based on the knowledge of the financial circumstances of the parties during the relationship and throughout her employment at the company but also to test the veracity of the husband’s contention that he owes in excess of $100,000 to the company. The husband seeks that liability to be shared by the wife as part of the proceedings.
·The wife ought to be at liberty to test the veracity of the husband’s assertion that the husband has disclosed all of his income and loan accounts.
[13] Husband affidavit, paragraph 91.
It was submitted on behalf of the husband that:-
·The wife does not claim in her response that the shares in the company are the property of the husband by way of declaration or otherwise, nor does she propose by seeking a declaration that the company is the alter ego or puppet of the husband. In these circumstances alone the documents that are the subject of the subpoena cannot be apparently relevant to a fact in issue and are clearly fishing and oppressive to the company.
·If the court were to analyse whether, despite the lack of a claim by the wife there is a chance the shares in the company are the property of the husband or the company is his alter ego or puppet it would dismiss that possibility in accordance with the relevant authorities.
·The husband has no legal control over the company nor any ability to affect a beneficial interest in it for himself.
·The highest position that the wife’s evidence raises is that he is an employee of the company.
·The extent to which the husband’s employment and his loan from his parents is relevant to a fact in issue is the possible finding that the company may be a financial resource of the husband, which is not admitted by him. The wife’s proposition does not permit the investigation into a private company’s affairs. There is a clear delineation between property and a financial resource. A financial resource does not require a value to be attributed to it – see Shaw and Shaw (1989) FLC 92-030. There needs to be an appreciation as to the extent the husband might reasonably expect to receive benefits in the future.
·In any event, evidence in support of that proposition is readily available from the husband’s financial disclosure together with records held by the company about his employment and loan account which is not the subject of objection by the husband.
·For the wife to delve into the company’s records to prove something she doesn’t claim and to fish for evidence to discover a claim is an impermissible use of the court’s power.
The objector submitted broadly that:-
·The subpoena requires the objector to form a judgement as to which documents in its possession relate to the issues in dispute between the parties: National Employers Mutual General Association Ltd v Waind & Hill [1978] 1 NSWLR 372.
·The objector is a third party to the proceedings. The documents sought are oppressive and a fishing expedition arising from the nature of the poor drafting of the subpoena. It will require the objector to guess what needs to be produced.
·It is speculative and a fishing expedition. The wife’s assertion that the company is the alter ego of the husband is not pleaded in any of the wife’s material.
·Seeking nine years of documents is oppressive and extends well beyond what is required of any other litigants in this court: X Pty Ltd and Ors & Merhi [2015] FamCA 622.
THE LAW
Pursuant to rule 14.05 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) “the Rules” a party may seek a review of an exercise of power by a Registrar by filing an Application for Review within 21 days of the Registrar’s decision. The Review Application was filed within such timeframe.
Rule 14.07 states that the hearing of an Application for Review of a Registrar’s decision is an “original hearing”; that is, the court will hear the whole matter afresh rather than determining whether the original decision was in error. The court may receive further evidence in addition to the evidence before the Registrar: rule 14.07(2).
Rule 6.33 provides that on application, the court may make an order setting aside all or part of a subpoena. The court may in the alternative vary the terms of the subpoena: Lucas Industries Ltd v Hewitt (1978) 18 ALR 555 at [577].
Rule 6.35 enables the recipient of the subpoena to seek payment for any substantial loss or expense that would be incurred in properly complying with the subpoena.
A subpoena must only be used for a legitimate forensic purpose. It is unnecessary for the party issuing the subpoena to establish actual relevance. The test is one of “apparent relevance.” If it is not apparently relevant, it is an abuse of process: Hatton v Attorney-General of the Commonwealth of Australia & Ors (2000) FLC ¶ 93-038 (“Hatton”). Whilst the bar for establishing relevance is not high, the party seeking to rely upon the subpoena must nonetheless establish that it is “on the cards” that the documents would bear upon and have relevance to the issues in the substantive proceedings: Baumann & Ors & Rushbrook & Anor [2016] FamCA 905. Subpoenas must not require the production of documents which only would have a bearing on an issue on an unreal, fanciful or speculative basis: Cantor J in R v Barton (1981) 2 NSWLR 414 at 420. It is not enough for a party seeking to uphold a subpoena to show that the documents might lead to ‘a train of enquiry’ which might assist his or her case: see McMillan Incorporated v Bishopgate Investment Trust (1993) 4 All ER 998 at 1005. “Expressed in the reverse, it is not legitimate to issue a subpoena on the basis of an ‘outside chance’ that something useful might turn up in the documents”: see X Pty Ltd & Ors & Merhi [2015] FamCA 622.
This is to be distinguished from the process of discovery where such a motive is permissible.
A subpoena must not cast a serious and unfair or reasonable burden or prejudice upon the respondent to the subpoena: Trade Practices Commission v Arnotts Ltd (no 2) (1989). It must describe with reasonable particularity the documents for which it calls: Campbell J in Dunn v KAZ Group (2006) NSWSC 8. The terms must not be too broad so as to be oppressive, impose an onerous task on a stranger or be an abuse of process. Further, it is oppressive to require a stranger to form judgments as to what is relevant to the issues in the proceedings: Hatton. The applicant must have a case and not be seeking to build one: per Gibbs J in Alister v R [1984] HCA 85.
DETERMINATON
I am satisfied that, subject to variation as detailed below, the subpoena to B Pty Ltd to produce documents is for a legitimate purpose.
The court ought not be circumspect in undertaking an evaluation of the threshold of apparent relevance at this stage of the proceedings. It is to be remembered that a determination as to an absence of apparent relevance to the documentation sought by the wife is akin to summary determination of that issue in the litigation on a preliminary basis.
I am satisfied for the purposes of my determination of the objections to subpoena that the wife by way of her affidavit evidence as recorded in these reasons achieves the threshold of apparent relevance to the documents sought. I am satisfied that on the whole the documents sought have a forensic purpose and are therefore not an abuse of process subject to my further findings below.
The wife’s evidence supports the closely intertwined financial relationship of the husband and the company. I accept that the husband can use the loan account without quantification or qualification.
It is to be remembered that it is the husband’s case that, as a mere employee of the corporation he would not in the ordinary course have access to the documents sought by the wife for what I have found to be a legitimate forensic purpose for the purposes of disclosing them pursuant to Chapter 6 of the Rules. The only forensic process whereby the wife can achieve access to the relevant documents is by way of subpoena.
I agree with the submissions made by the wife that the documents sought are focused, readily identifiable and should be able to be readily produced as they comprise normal documents produced and received in the ordinary course of business.
Turning specifically to each category of documents sought of B Pty Ltd for the period 1 July 2013 to present :-
2.1 the Constitution, memorandum and/or articles of association;
I am not satisfied as to the apparent relevance of these documents when it is uncontroversial that the husband has never held a shareholding in the corporation. The wife submits that what benefits may be conferred to an employee may be in the constitution. I agree with the submissions made on behalf of the husband that in circumstances where there is no evidence that the husband has a proprietary or beneficial ownership, the constitution and other material contained within paragraph 2.1 of the schedule is irrelevant. It will be struck out.
1.2 income tax returns, company tax returns, financial statements (including balance sheets, detailed profit and loss accounts, notes to the accounts, directors report and statement, and accountants or auditors reports);
The wife concedes that the production of income tax returns are superfluous if the company taxation returns are produced. Both objectors submit that the documents have no apparent relevance, do not go to a fact in issue and has no legitimate forensic purpose in circumstances where the husband has never held a position of director, company secretary or shareholder.
I will allow this category of documents. The wife ought to have the capacity to have an understanding as to the asset and liability position and trading circumstances of the company including the benefits received by the husband’s parents when compared to the husband and the husband’s brother so as to enable an assessment as to the proportionality of the interwoven financial affairs of the husband with the company. The company taxation returns permit a verification as to the integrity of the financial statements.
2.3 company activity statements and income activity statements
The wife conceded that the production of these documents “may be premature.” If the financial statements are provided, that will cover company activity statements. I agree with the submissions made on behalf of the husband and the objector that it is unclear how summaries of income and expenses relating to the expenditure and collection of GST could be seen as relating to being on the cards as to a fact in issue. I am not satisfied these documents have apparent relevance and this category will be struck out.
1.3 statements of bank accounts
Production is sought of over nine years of bank account statements. It is submitted that in those circumstances it is clearly a fishing expedition which would require great time and cost to obtain.
There is no evidence as to the number of bank accounts or the quantity of statement required to be produced for the period, just a bald assertion made in submissions that it will require great time and great cost to obtain. These documents will afford the wife the opportunity to check the veracity of the company financial statements and the evidence of the husband as to the apparent interchangeability as between his personal credit card and corporate credit card. The company had the opportunity to put on evidence as to any oppressive nature of the subpoena and elected not to do so.
This category of documents will be allowed.
1.4 statements of loan accounts
This category of documents is too broad. As submitted by the objector, it fails to specify whether it refers to loans it has obtained from financial institutions nor who it has loaned money to and from. As currently drafted this is a fishing exercise.
The category will be narrowed to require production of statements of loan accounts between the husband and B Pty Ltd together with any applications for finance executed by the husband in his role as general manager of the company for the specified period.
2.8 fringe benefit tax returns
The respondent and objector submit these are irrelevant and are an abuse of process. I am satisfied that there is apparent relevance in circumstances where the issue of the benefits the husband has received from the company is an issue in the substantive proceedings.
Orders will be made accordingly.
I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Murdoch. Associate:
Dated: 23 November 2022
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