K & K

[2008] FamCA 957

FAMILY COURT OF AUSTRALIA

K & K [2008] FamCA 957

FAMILY LAW – DISCOVERY – Disclosure –  possession and control of documents - Issue of subpoena to lawyer of third parties in place of issuing one on each individually in respect of same document - Costs

Family Law Act 1975 (Cth)

Commissioner for Railways v Small (1938) 38 SR (NSW) 564
Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Co (1882) 11 QBD 55
Lonrho Ltd v Shell Petroleum Co Ltd [1980] 1 WLR 627
Rowntree v ASC (Federal Court of Australia, Lockhart J, 27 November 1992, unreported)

APPLICANT: Ms K

RESPONDENT: Mr K

FILE NUMBER: MLF 1913 of 2001

DATE DELIVERED: 10 November 2008

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 30 October 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Sweeney

SOLICITOR FOR THE APPLICANT: Lander & Rogers

COUNSEL FOR THE RESPONDENT: Mr Spicer

SOLICITOR FOR THE RESPONDENT: Kenna Teasdale Lawyers

Orders

1. That the husband forthwith disclose and make available for inspection by the wife and her practitioners:

   (a)    His personal Income Tax Returns for each of the financial years ended 30 June 2001 to financial year ended 30 June 2008 (inclusive), including accompanying documents such as Group Certificates and Notices of Assessment issued by the Australian Taxation Office;

   (b)    A copy of his current Will and a copy of any previous Will and draft Will prepared by him or on his behalf since 1 January 2001;

   (c)    A copy of his current passport and a copy of any other passport he has held which has expired since 1 January 2002;

   (d)    Bank statements in respect of all any bank accounts, including cheque accounts and credit cards held by the Husband with any financial institution within Australia and outside of Australia for the period 1 January 1999 to date;

   Without limiting the obligations imposed upon the Husband in respect of compliance with this Order, the Husband be specifically ordered to produce his bank statements for the period 1 January 1999 to date in respect of his Barclays card no. ….

   (e)    Copies of all superannuation statements issued to the Husband in respect of all and any superannuation fund(s) held in his name for the period 1 July 1999 to date;

   (f)     Copies of any documents such as financial statements (including trust) and company Income Tax Returns, Balance Sheets, Profit & Loss Statement, Explanatory Notes or other documents, distribution minutes, minutes of directors internal meetings, memoranda and bank statements in his possession power and control regarding the company K Services Ltd (“the company”) for the financial years ended 30 June 2002 to financial year ended 30 June 2008 inclusive;

   (g)    Copies of any documents in his possession, power and control regarding his current residential accommodation at O, including copies of any lease, rental receipts, rate notices, utility bills and related documents in relation to the period of the Husband’s occupation of that property.

2. That the wife forthwith disclose and make available for inspection by the husband and his practitioners:

   (a)    Her personal income Tax Returns for the financial years ended 30 June 2006, 2007 and 2008, including Group Certificates and Notices of Assessment from the Australian Taxation Office;

   (b)    Copies of all superannuation statements and contribution statements provided to the Applicant wife in relation to all superannuation funds and monies held in her name for the period 1 July 2005 to the current date;

   (c)    All bank statements in respect of all bank accounts, and all credit card statements, in the name of the wife alone or jointly with any other person for the years 2006, 2007 and 2008 to date;

   (d)    The relevant entries in the diary notes of the wife referred to in paragraph 51 of the affidavit filed by her on 22 October 2008.

3. That the wife file and serve electronically to my Associate by 4.00pm on 26 November 2008, any submission upon which she intends to rely in relation to the issue of the costs reserved by Morgan J on 21 September 2005.

4. That each party have leave to issue subpoenae returnable before me at 9.00am on 17 December 2008.

5. That the costs of this application (if any) be reserved to the hearing on 17 December 2008.

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

REASONS FOR JUDGMENT

1. It is the wife’s view in this case that the husband has a significant interest in a group of companies known as the K Group. For up to a decade, the husband was a director and shareholder of various companies within the K Group but resigned his directorships from 1999 through to 2001. Final separation occurred in 2001 and there is a dispute between the parties about whether there was an earlier one.

2. The wife asserts that the husband has ever since endeavoured to distance himself from the K Group.

3. The history of the case saw Morgan J make orders joining numerous companies as respondents only to have the Full Court overturn her Honour’s decision and discharge those orders.

4. The immediate issue before me relates mainly to discovery by both parties. The other issues are:

   (a)a dispute about costs arising from the Morgan J orders; and

   (b)the potential service of a subpoena or subpoenae on some professionals who have connections with the K Group.

5. Although the wife’s application sought from the husband a large number of documents, he offered to produce many. The husband also responded seeking documents from the wife and she agreed to provide many.

6. In reality, the dispute is narrow in compass.

Discovery

1. The wife seeks that the husband produce for inspection an array of documents concerning CR Pty Ltd including documents relating to the purchase of a property at S which had been previously owned by the parties and had been sold under court order but which has now been purchased by OP Pty Ltd the sole shareholder of which is CR Pty Ltd.

2. She also seeks that the husband produce documents relating to plans that the husband had to renovate a property he said he was renting alleging that he had “engaged” architects for that purpose.

3. The wife says the basis behind her pursuit of the husband for documents about these entities is that:

   (a)during the marriage, the husband and the family had access to large amounts of money and therefore believed it was sourced from “overseas and from companies within the ([K]) Group”;

   (b)the K Group had been “traditionally” owned, managed and controlled by six members of the husband’s family and in that, she included the husband;

   (c)the husband deposed to the fact that he was not an appointor in any trust (associated with the K Group) but that that was at odds with trust deeds provided to her solicitor;

   (d)the husband has disclosed an interest in a variety of companies within the K Group;

   (e)the husband’s representations as to his having no interest in the K Group and having gotten out of the business are false and that he retains a “significant and important” role in the Group;

   (f)the Group’s Human Resources Manager told the Australian Industrial Relations Commission in 2006 that the husband was a member of the Board of the K Group and the manager responsible for one division of the company.

4. The response of the husband was modestly but consistently simple. He said:

   (a)the historical matters should be determined at trial;

   (b)the statements, assertions and assumptions of the wife about his family, the entities and the trusts were matters over which he had no control and in which he had no interest; and

   (c)in relation to the Australian Industrial Relations Commission hearing, he had no knowledge of the statement and in any event, the statement of the Human resources Manager was “incorrect”.

5. The husband said that he gave his brother details of the vendor of the S property being interested in selling it and he was later told by his brother that he had bought it.

6. In relation to CR Pty Ltd, he said he no knowledge of the company or of his brother’s interest in it. In addition, he had no knowledge of the involvement of the named directors.

7. To make an order that the husband discover and produce documents relating to these entities and properties when he has already sworn what his position is would be pointless.

Disclosure obligation

1. The Family Law Rules 2004 sought to provide a “fundamental shift in the attitude” [1] of discovery, moving away from the very broad definitions of discovery provided for in Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Co (1882) 11 QBD 55 (“Peruvian Guano Case”).

   [1] Explanatory Statement Family Law Rules 2004 p 60.

2. The Court’s position is that discovery has been limited on the justification that “parties will … direct their mind to the higher standard and consider what is directly relevant to the disputed issues”.[2]

   [2] Explanatory Statement Family Law Rules 2004 p 62.

3. Rule 13.07 of the Family Law Rules says:

   Duty of disclosure -- documents

   The duty of disclosure applies to each document that:

   (a)is or has been in the possession, or under the control, of the party disclosing the document; and

   (b)is relevant to an issue in the case.

Relevance

1. The Explanatory Statement to the Rules went slightly further than what is stated in this rule and provided that it was the intent of the rules that discovery be of material “directly relevant to an issue”.[3]

   [3] Explanatory Statement Family Law Rules 2004 p 62.

2. In order to define what is directly relevant it may be useful to measure it against what is not relevant, and that is held to be when a party is seen to be going on a “fishing expedition”. In Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at 575 “fishing expedition” is defined as an exercise “endeavouring not to obtain evidence to support a case, but to discover whether the person has a case at all” and in Rowntree v ASC (Fed C of A, Lockhart J, 27 November 1992, unreported), Lockhart J described fishing as

   allowing a party who can produce no material to support an allegation, access to the documents of his opponent in the hope that he may discover something that supports his case.

   In my view, the “fishing” test equally applies in this Court.

3. Whilst there is also undoubtedly a difference between “relevant” and “directly relevant”, in the preliminary stages of disclosure as between parties to litigation in this court, there should be a less strict approach to establishing what is relevant than the standard adopted in other jurisdictions. The determining factor ought to be that there is evidence of some plausible connection to an issue that the court has to decide.

4. There is an indication here that the wife is “fishing” within the meaning of the civil law definition but because of the family connection of the husband and more importantly, the parties’ past connections with that enterprise, she should only have to show that there is a plausible explanation for her endeavours. The husband’s denials of any connection with the K Group are loud and strong and the recent indications to the contrary pointed to by the wife are but vague assertions.

5. Thus, to pursue the husband for disclosure orders, the wife has to show a breach of the duty of disclosure. To establish that, the wife needs to prove:

   (a)that documents are or have been in his possession or control; and

   (b)that the documents have relevance to an issue in the case.

Possession or control

1. The House of Lords in Lonrho Ltd v Shell Petroleum Co Ltd [1980] 1 WLR 627 considered the phrase “possession, custody or power” and held that it is in reference to the past and present but not the future and therefore that a party who does not have a present power over a document, is not obliged to take steps to obtain it. However the House of Lords did remark that such an obligation could be placed in the rules. There is no such positive obligation in the Family Law Rules 2004. That is not to say, however, that it would not arguably be in the spirit of full and frank disclosure, in circumstances where the association between a party and his family members and their professional advisers is close and where there is an assertion not entirely without some basis, for that party to pursue that information and respond. That is particularly so where the only other avenue open to a party is to pursue non-party discovery and subpoenae in circumstances where the non-parties have made their views clear about their desire not to be involved.

2. Mr Sweeney for the wife pointed to the fact that the wife’s ASIC search showed that two of the directors of CR Pty Ltd did not hold their shares beneficially. That does not assist me. However, Mr Sweeney pointed to the fact that it would have been easy for the husband to ascertain the details of the beneficial owners by simply asking them. Mr Spicer for the husband said his client had no such obligation. I accept that is correct. The wife’s affidavit makes clear that she is not expecting co-operation.

3. As for the wife’s assertion about the husband’s rental property and potential renovation, the husband simply responded by saying that he had made those inquiries about renovating the premises but when he sought permission from his brother and cousin, they rejected the idea. According to the husband, there are no documents.

4. Mr Sweeney said the wife would pursue that and decried the fact the husband had not even mentioned the name of the architect. There was no evidence on the other hand that the wife had asked.

5. Even if I could be satisfied that the husband had possession or control of the documents pursued, the wife still needs to show their relevance to an issue for determination. The wife for example, relies on the evidence of Mr N, the Group Human Resources Manager of K Group given to the Australian Industrial Relations Commission proceedings in 2006 in relation to the role of the husband in the K Group. The husband says that Mr N is no longer an employee of the K Group and in any event, was incorrect.

6. Accordingly, notwithstanding the lower standard for discovery, the wife has not been able to show that an order for specific discovery of those documents should be made.

7. The husband sought orders that the wife produce:

   (a)all registration and insurance documents concerning the car she is driving; and

   (b)all “contemporary diary notes” made prior to and subsequent to separation “to which reference has or will be made in these proceedings”.

8. Mr Sweeney said that the car was not owned by the wife and the husband seemed to know that by the way his application for an order was drawn. There is a certain irony about the wife being asked to pursue documents from another person in circumstances where the husband says it is not his obligation to do likewise. As with the CR Pty Ltd shares, I was not asked to make an order that the wife pursue the owner but rather that she produce documents which were within her possession, or under her control. Mr Spicer said that the husband could not access the registration records and he is right but with the impasse, the husband will have to follow the same path as the wife.

9. As for the diary notes, the wife referred in her affidavit to her “diary note” recorded “at the time”. Her counsel said he did not know what evidence she would be leading at this stage so to that extent, I have no knowledge as to the relevance to the rest of the diary entries.

10. I do not know the relevance of the rest of the diary to any issue in this case. There is certainly some relevance shown in relation to the individual entry referred to in the wife’s affidavit and to that extent, the wife has to disclose that because she is relying upon it to corroborate her recollection.

11. Accordingly, as with the wife, the husband has not been able to show that I should make an order for discovery of the disputed documents.

Other Issues: Subpoenae and Costs

1. I have also been asked to contemplate the other two issues of the subpoenae and the costs.

2. In relation to the subpoenae, the correspondence between the parties now indicates that the directors of CR Pty Ltd will be pursued by the wife and on the indication from their legal practitioner who was present in court before me, any invasion into their privacy requiring them to produce documents will be opposed. It is perhaps timely to say that the fact that the wife is unsuccessful as against the husband in relation to the pursuit of documents does not mean that I am saying that she will obtain the information she is seeking through the subpoena process. The tests there also have to be considered.

3. As for service however, on the basis that the potential recipients of the subpoenae are all represented by the one firm and that was confirmed by Mr Spender who was at court, it seems unnecessary to serve them individually and separately. I propose therefore to order that if the wife does issue a subpoena, subject to it relating to the same documents from all persons as contemplated by Rule 15.17(4)(b), it can be served upon Kennedy Wisewoulds. It will be returnable before me.

4. In relation to the costs question from the hearing before Morgan J, it was suggested by the wife that I should leave the determination until the ultimate trial. However, even if the wife is successful in due course in bringing in those extra parties or the K Group, it is the process that she followed that the Full Court found was flawed.

5. The Full Court said[4]:

   In our view, the correct conclusion was that, as the wife set out her proposed claim, she did not show that the power conferred by s 90AE could arguably be engaged.  Any order made pursuant to s 90AE(2)(b) must be for the purpose of effecting a division of property between the parties.  The order that the wife proposed was for the purpose of increasing the property of the parties, by an unknown amount and on unknown principles.

   It would be impossible, based upon the wife’s deposition, to identify what the wife said were the facts material to a cause of action which would lead to an order that the trustees of a discretionary trust distribute to one of a group of beneficiaries.  The amendment would have joined the third parties to an unformulated claim to which they would have had great difficulty responding.  That Morgan J did not address this issue is, in our view, an appealable error.

   In suggesting that Morgan J’s order did not cause the third parties substantial injustice, Mr North submits that because claims, other than those with which we have been here concerned, had been already made against some of the third parties, for example, to register transfers of shares from husband to wife, a successful appeal would not release all third parties from the litigation.  However, though some or all of the third parties may remain in the action because of those other claims, they are of a comparatively very limited nature and may not call for any substantial participation in proceedings by the third parties.

   [4] B Pty Ltd & K & K [2008] FamCAFC 113 Paragraphs 63-64 per Faulks DCJ, Coleman and Warnick JJ.

6. The wife chose to endeavour to join those parties and was found to be unsuccessful. The Full Court ordered she pay costs of the appeal.

7. I see no reason why waiting for the final hearing would make any difference in those circumstances.

8. I will give the wife 14 days to file her written submissions on the costs issue and determine the issue in chambers unless I decide that I do not have sufficient information to do so.

I certify that the preceding Forty Six (46) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate: 

Date:  10 November 2008