K & K
[2009] FamCA 87
•6 January 2009
FAMILY COURT OF AUSTRALIA
| K & K | [2009] FamCA 87 |
| FAMILY LAW – PRACTICE AND PROCEDURE – Subpoenae - Test for Apparent Relevance not established – Apparent Relevance to proceedings must be shown on material before the court and must be more than broad generalisations |
| Family Law Rules 2004 (Cth) |
| A & A & Ors [2005] FamCA 561 Botany Bay Instrumentation & Control Pty Ltd v Stewart [1984] 3 NSWLR 98 Deffia & Zuddro & Ors [2008] FamCA 643 Hatton v Attorney General (Cth) & Ors (2000) 26 FamLR 570 National Employers’ Mutual General Association Limited v Waind & Hill [1978] 1 NSWLR 372 O’Hara & O’Hara & Ors [2007] FamCA 1346 |
| APPLICANT: | Ms K |
| RESPONDENT: | Mr K |
| SUBPOENAED PARTIES: | Mr W, Mr A, Mr R, Mr S |
| FILE NUMBER: | MLF | 1913 | of | 2001 |
| DATE DELIVERED: | 6 January 2009 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | THE HONOURABLE JUSTICE CRONIN |
| HEARING DATE: | 17 December 2008 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | MR SPICER |
| SOLICITOR FOR THE APPLICANT: | MILLS OAKLEY |
| COUNSEL FOR THE RESPONDENT: | MR HARRIS |
| SOLICITOR FOR THE RESPONDENT: | KENNA TEASDALE LAWYERS |
| COUNSEL FOR THE SUBPOENAED PARTIES: | MS MCMILLAN |
| SOLICITOR FOR THE SUBPOENAED PARTIES: | KENNEDY WISEWOULDS |
IT IS NOTED that publication of this judgment under the pseudonym K & K is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLF 1913 of 2001
| MS K |
Applicant
And
| MR K |
Respondent
And
| MR W, MR A, MR R, MR S |
Subpoenaed Parties
REASONS FOR JUDGMENT
This is another part of a long-running property dispute. The substantive issue is predominantly about whether the husband now has an interest in his family’s business enterprises.
The immediate issue is about the right of the wife to have access to material which has been quite properly produced under subpoenae.
Both parties were granted permission on 3 October 2008 to issue further subpoenae returnable before me on 17 December 2008.
The wife issued subpoenae to each of the directors and shareholders of CR Pty Ltd: Mr S; Mr W; Mr R and Mr A. For reasons which I shall endeavour to set out, the four men are all linked.
The subpoenae sought documents relating to:
(a)the establishment/ownership of CR Pty Ltd;
(b)the acquisition of shares by CR Pty. Ltd in OP Pty Ltd; and
(c)the acquisition by OP Pty Ltd of a unit at S.
Those parties are jointly represented and have filed a notice of objection to those subpoenae seeking to have them set aside on the following bases:
(a)The documents sought in the schedule to the subpoena are irrelevant to the issues that are in dispute in these proceedings, or in the alternative, have no apparent relevance to the issues in dispute in these proceedings;
(b)The attempt to seek the documents referred to in the schedule to the subpoena involves an abuse of process and the documents are not sought for any purpose connected with these proceedings;
(c)Further, or in the alternative, insofar as the applicant wife seeks the documents referred to in the schedule to the subpoena, the witness respectfully claims that the request for such documents is patently fishing.
The focus of my attention is on the evidence presented by both parties. What does that say about the connection between the husband (or the husband and wife) and these companies?
Background
On 21 September 2005, Morgan J joined a large number of entities as parties. On appeal, her Honour’s decision was overturned.
In the proceedings before Morgan J and material upon which her Honour relied, the wife said:
5.The personal financial circumstances of the husband and I are relatively modest. …
…
7. That otherwise, the husband and I, throughout our marriage, always considered his hard work and dedication as a pivotal member of the [K] Group would pay off and, provide us with a stake in the Group that would, in effect, represent our superannuation. In fact, on different occasions during the course of our marriage, the husband advised me that he would be retiring at age 45 with “a nest egg” which grew during the marriage from $1M to $2M. The husband left me in no doubt that he and I would share in the financial rewards of the [K] Group which became extremely successful in the latter part of the 1990’s.
8. The [K] Group is a global organisation involved in the [mining industry], supplying highly technical equipment and plant as well as construction of the various processing plants. …
9. As a family we enjoyed a high standard of living which, from time to time, was subsidised by lump sums of money which I believed to have been sourced from overseas and from companies within the Group.
The Full Court said that the wife’s evidence was insufficient to found her proposed claim under s 90AE of the Family Law Act 1975 against the third parties.
The Evidence
The wife relied upon an affidavit filed 22 October 2008.
She said that the parties sold a holiday unit at S in March 2005 which was subsequently purchased by OP Pty Ltd (“OP”) of which the sole shareholder is CR Pty Ltd (“CR”), and that the four directors and shareholders of CR are the four subpoenaed parties.[1]
[1] Paragraphs 28-33 wife’s affidavit.
The wife said that the husband, his brother and cousins “sought legal and family law advice to develop a trust structure so complex, clever and tight that it would be impenetrable to any future marriage breakdown or threat”. [2]
[2] Paragraph 10 of wife’s affidavit.
In relation to the holiday unit, the wife said that “[…] (the husband’s brother) never visited [S] nor did he stay at our unit…at any time during our ownership until 2004”. She said that conversely the husband was “passionate about visiting” and “loved to holiday in [S]” to fish.[3]
[3] Paragraph 36 of wife’s affidavit.
The statements about this holiday unit were all prefaced by her evidence that “[r]ecently I was advised that the property had been sold to either the husband or his brother […]” and “I believe…”.[4]
[4] Paragraphs 29 and 36 of wife’s affidavit.
The wife’s assertions based upon those statements led her to say that OP and CR were merely “fronts” for the husband’s true ownership of the S property. Hence, she wanted to see all of the documents of the company and its directors.
On 30 October 2008, the husband filed an affidavit denying any connection with the holiday unit or the various corporate entities.
On 15 December 2008, Mr A, a subpoena recipient, filed an affidavit as to his objection. He said that in or about March 2006, the husband’s brother advised him that he wished to acquire an entity for the purposes of investing in property. He said that the husband’s brother did not tell him he was acquiring the S property and he subsequently found out during the presentation of material for taxation returns.
On 15 December 2008, Mr W, a subpoena recipient, filed an affidavit as to his objection. He spoke for the other directors.
Mr W said CR was established in 2003 to act as the trustee of various family trusts or as the shareholder of another corporate trustee. He went on to say that CR did not carry out any function in relation to any family trust connected with either the husband or the wife and it had not traded. He said he knew nothing of substance about the S property acquisition. He “strenuously and completely” denied that CR Pty Ltd was a “front”.
None of this evidence was or could be tested on this application.
The Law
The Full Court of the Family Court in Hatton v Attorney General (Cth) & Ors (2000) 26 FamLR 570 generally approved of description of the three stages involved in the subpoena process given by Moffit P in National Employers’ Mutual General Association Limited v Waind & Hill [1978] 1 NSWLR 372 at 381:
The first is obeying the subpoena, by the witness bringing the documents to the court and handing them to the judge. This step involves the determination of any objections of the witness to the subpoena, or to the production of the documents to the court pursuant to the subpoena. The second step is the decision of the judge concerning the preliminary use of the documents, which includes whether or not permission should be given to a party or parties to inspect the documents. The third step is the admission into evidence of the document in whole or in part; or the use of it in the process of evidence being put before the court by cross-examination or otherwise. It is the third step which alone provides material upon which ultimate decision in the case rests. In these three steps the stranger and the parties have different rights, and the function of the judge differs.
In this case given that the first step has been fulfilled and that the relevant documents in the possession of the subpoenaed parties were brought to court, although not produced formally, the next step is to determine whether or not the wife should be entitled to inspect and view those documents or whether the subpoenae should be struck out.
The Family Law Rules 2004 (Cth) do not provide the grounds upon which a subpoena can be set aside. Rule 15.26 provides that a subpoenaed person may object to that subpoena or seek costs in relation to it, but must appear before the court to do so.
The Full Court in Hatton v Attorney General (Cth) & Ors (2000) 26 FamLR 570 considered the bases on which a subpoena could be set aside. Their Honours referred to the list set out by Powell J in Botany Bay Instrumentation & Control Pty Ltd v Stewart [1984] 3 NSWLR 98 at 100:
Although a reference to the authorities makes it tolerably plain that the court will exercise its undoubted jurisdiction to set aside a subpoena in a variety of cases, as, for example:
1.unless the subpoena was issued for the purpose of a pending trial, hearing or application: see, for example, Central News Co v Eastern News Telegraph Co (1884) WN (Eng) 23 (Mathew J); 53 LJ QB 236 (Divl Ct); Elder v Carter; cp Raymond v Tapson;
2.where to require the attendance of a witness would be oppressive: Raymond v Tapson; Re Mundell; Fenton v Cumberlege;
3.where the subpoena had not been issued bona fide for the purpose of obtaining relevant evidence and the witness to whom the subpoena had been addressed was unable to give relevant evidence; R v Baines; R v Hove Justices; Ex parte Donne;
4.where the subpoena has been used for the purpose of obtaining discovery or further discovery against a party: Commissioner for Railways v Small; Waind v Hill; Finnie v Dalglish;
5.where the subpoena has been used for the purpose of obtaining discovery against a third party: Burchard v Macfarlane; Ex parte Tyndall; Commissioner for Railways v Small; Senior v Holdsworth; Ex parte Independent Television News Ltd; Waind v Hill; Finnie v Dalglish;
6.where to require a party to comply with a subpoena to produce documents would be oppressive: Commissioner for Railways v Small; Senior v Holdsworth; Ex parte Independent Television News Ltd; Waind v Hill; Finnie v Dalglish;
7.where the subpoena has been issued for a purpose which is impermissible, as, for example, “fishing”: Hennessy v Wright (No 2) (1888) LR 24 QBD 445(n) at 448; Griebart v Morris [1920] 1 KB 659 at 664, 667; Commissioner for Railways v Small at 574;
the authorities do not make clear whether such classes of case to which I have referred above are to be regarded as the only cases in which the court will intervene, or, whether such cases are to be regarded as merely particular examples of a broad class of case in which the court will intervene to exercise its jurisdiction to set aside a subpoena, or, indeed, whether the jurisdiction to set aside a subpoena is but one part of a wider jurisdiction of the court.
The Full Court in Hatton, commenting upon the list propounded by Powell J in Botany Bay, added that apparent relevance should be included in addition as a ground for setting a subpoena aside, if it was not already impliedly included within the ground of oppression.[5]
[5] Hatton v Attorney General (Cth) & Ors (2000) 26 FamLR 570 per Finn, Kay and Dessau J at Paragraph 27.
The position of the wife and the objectors
Mr Harris appeared on behalf of the wife. He submitted that the documents which were sought under the subpoenae were relevant to the ultimate determination of the s 79 proceedings between the husband and wife.
Mr Harris said that the application for the documents and the recipients’ objections had to be seen in the context of an exceptionally close relationship between the husband and the subpoenaed parties and also the other individuals within the K Group, in particular the husband’s brother.
Mr Harris pointed to the connections between the objectors, the husband, his brother and the husband’s family’s enterprise:
(a)Mr W is the in- house lawyer of the K Group and has been for several years;
(b)Mr R is the former financial controller and operations manager of the K Group; and
(c)there is a longstanding relationship between Mr A and the K Group in his role as financial and accounting manager.
It was argued this is not an unrelated third party such as a bank or financial institution coming to the court with little or no connection to the parties to the proceedings but rather, there was a “significant relationship” between the husband’s brother and the objectors.
In relation to an issue of the paucity of documents produced by the objectors, Mr Harris said that having regard to the role of these four professional men in advising the K Group in their accounting and legal affairs it was “incongruous” that there were not other documents than a declaration of trust”. He said one “would expect given the nature of the relationship that there would be other documents in existence such as letters or memorandum between themselves, and also between themselves and [the husband’s brother]”.
Mr Harris urged me to consider O’Hara & O’Hara & Ors [2007] FamCA 1346. That was a case that I decided on an interlocutory basis. There, I noted:
(a)at the time of separation, the husband and his brother were the shareholders and directors of a company;
(b)the husband and his brother appeared to have determined that the company would sell its business to another family company and that thereafter, they would trade under the new company name. That plan was implemented;
(c)the first company then went into liquidation;
(d)When the second company was incorporated, the husband was a director and shareholder;
(e)Another and different company again showed its principal place of business as the same address as the husband;
(f)Another company later again showed various office holders including the brother of the husband’s girlfriend and subsequently, the husband’s cousin became the sole director;
(g)Later again, another company was incorporated and the sole director of this company was the husband’s mother and the company search showed the address of the husband’s mother as his address;
(h)minutes of a company meeting recorded that the husband was present and a note in unidentified handwriting showed that the agenda included some of the aspects of (a) above.
In that case, the wife pointed to a whole host of factual matters that were what I described as “strikingly odd in a case in which the husband has had no arms-length interest”.[6]
[6] O’Hara & O’Hara & Ors [2007] FamCA 1346 at paragraph 36
Ms McMillan for the objectors submitted that the facts are clearly distinguishable. I have to agree. She submitted that in O’Hara there were numerous aspects of the evidence which could establish the apparent relevance of the material sought but here the wife started with the proposition that because the subpoenaed parties work for the K Group and knew the husband’s brother, there was connection between the holiday unit and the husband.
In O’Hara at paragraph 35 I said:
The invasion of privacy of a purely unrelated party is something which must be considered carefully but equally, careful scrutiny of the situation must occur where there is an allegation that the non-party has links with or is in league with a party to the substantive proceedings. Where the evidence points to that closeness of relationship, the court should be more cautious about excluding a party to the substantive proceedings from pursuing this information.
Mr Harris submitted that the wife was not on a “fishing expedition” but knew what the target was and pointed to the production of specific documents. He said it was “incongruous” that some of the documents sought did not exist.
Ms McMillan submitted that this was “clearly fishing”. She submitted that the only relevant principle was that of apparent relevance and that there is a distinction between using a subpoenea in the hope that something relevant may be produced, which is patent fishing, and demonstrating the apparent relevance based on the affidavit material and then connecting that to the documents which are sought under the subpoenae. She said that there must be a legitimate forensic purpose behind the seeking of documents rather than assumptions that “there must be something”. Again, I agree.
Finally Mr Harris submitted that the threshold test was lower than in a civil jurisdiction and lower again when one takes into account the length of the relationship between the subpoenaed witnesses and the husband.
The subpoenaed parties concede that there is a connection between CR and the husband’s brother and the S property but what is missing is any connection between the husband, the brother and that property and then the objectors.
Ms McMillan argued that the wife must show more in her affidavit material than simply allegations that the husband liked to visit the property whereas his brother did not and that the companies were a “front”. It is important to point out that the evidence here is that CR is acting as a bare trustee for at least two family trusts.
Ms McMillan submitted that the wife did not assert that the husband had any role in, or control of, CR nor ON Pty Ltd. She pointed out that the wife did not say that the husband’s brother had any control or interest in CR Pty Ltd. Instead, the wife used vague and illusive language particularly without specifying the source of her information or the basis of her belief.
Another decision of mine was raised. In Deffia & Zuddro & Ors [2008] FamCA 643 (26 May 2008), the wife was seeking documents from her husband’s parents and sister in relation to various company entities for the purpose of a spousal maintenance claim. In relation to the evidence which the wife sought to rely on as substantiating the apparent relevance of the documents sought from the non parties, I said:
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 will therefore be obvious that the evidence of the wife is distinctly lacking. All that the wife has presented is assertion and hearsay which does not come close to reaching the test of apparent relevance even with a lower standard of proof than in other civil cases. As Guest J said in A & A & Ors [2005] FamCA 561 (unreported judgment of 9 June 2005) statements which are merely “generic and unsubstantiated assertions” are not credible and do not meet the bar for the purposes of establishing apparent relevance.
Ms McMillan also submitted that the subpoenae were too wide in scope such as to be oppressive but having regard to the view that I have taken, I do not need to deal with that issue.
For those reasons, I do not find there to be any evidence that would satisfy the apparent relevance test. The objection of the recipients of the subpoena must be upheld.
I certify that the preceding Forty Four (44) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin
Associate:
Date: 6 January 2009
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