Kelly and Lomax
[2014] FamCA 431
•23 June 2014
FAMILY COURT OF AUSTRALIA
| KELLY & LOMAX | [2014] FamCA 431 |
FAMILY LAW – PROPERTY SETTLEMENT – Interim application – Disclosure – Where the wife seeks an order that the husband disclose further documents – When relevant documents relate to corporations for which the husband was a director – When the husband is no longer a director – When the wife has made previous applications in relation to disclosure – Where previous applications were denied – Whether the husband can be compelled to seek additional documents from these corporations – When the Corporations Act2001 (Cth) provides that a director has a right to access documents for seven years for the purpose of litigation – When the litigation does not relate to the husband’s position as a director – Where the application is denied.
FAMILY LAW – SPOUSAL MAINTENANCE – Interim application – Where the wife seeks interim spousal maintenance – Where the wife is not currently employed – Where the wife asserts that unemployment is sufficient to justify maintenance – Where previous applications for maintenance have been denied.
| Corporations Act 2001 (Cth) ss 9, 198F, 1303. Angus & Petrino [2013] FamCA 817. |
| APPLICANT: | Ms Kelly |
| RESPONDENT: | Mr Lomax |
| FILE NUMBER: | BRC | 6009 | of | 2010 |
| DATE DELIVERED: | 23 June 2014 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Hogan J |
| HEARING DATE: | 3 and 27 February and 26 May 2014 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Baston by way of direct access brief |
| FOR THE RESPONDENT: | Mr Lomax in person |
Orders
All outstanding Interim Applications are dismissed.
Any application for costs arising out of the Interim Applications filed 29 January 2014 and 22 May 2014 are adjourned to the trial judge.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Kelly & Lomax has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT |
FILE NUMBER: BRC 6009 of 2010
| Ms Kelly |
And
| Mr Lomax |
REASONS FOR JUDGMENT
Application that Mr Lomax obtain documents from corporate entities for which he was previously a director
By Clauses 2 and 3 of an Application in a Case filed 29 January 2014, Ms Kelly, for convenience referred to as (“the wife”) seeks an Order that Mr Lomax, for convenience referred to as (“the husband”) “make, file and serve an affidavit of documents including but not limited to those documents set out in Schedule A attached to these Orders”; and that he “make available for inspection and copying for by [the wife] and her lawyers those documents disclosed by him in accordance with Order 1 hereof”.
It is clear that the reference to ‘Order 1 hereof’ should be read as a reference to proposed Order 2.
The documents listed in Schedule A relate to the following entities: DD Pty Ltd; DD 1 Pty Ltd; DD 2 Pty Ltd; I Pty Ltd; DD 3 Pty Ltd; K Pty Ltd; EE Pty Ltd; D Pty Ltd; D Pty Ltd; EE 1 Inc; L Pty Ltd; Lomax Family Trust; FF Trust; and GG Trust.
A perusal of earlier interim applications filed by the wife reveals that orders in the same terms were sought in an Application in a Case filed 3 September 2013 (“the September 2013 Application”). The September 2013 Application was dealt with by Orders made by Registrar Brooks on 25 September 2013 which included a Notation that: “Orders 3 and 4 of the orders sought in the Application in a Case referred to in Order 1 hereof have been dealt with by these orders and are no longer sought by the Applicant.”
Notwithstanding this, it became apparent during the hearing of the application that, in essence, the wife seeks an order requiring the husband to seek financial documents from the particularised corporate entities for which he was previously a director.
It was submitted that ss 198F(2) and 1303 of the Corporations Act 2001 (Cth) (the Corporations Act) mean that the husband has a right to obtain the documents the wife seeks to obtain from the entities and that, as a result, he is obliged to act to obtain them so they can be disclosed to the wife given her assertions as to their relevance in the property settlement proceedings between the parties. Further, given the terms of s 1303 of the Corporations Act, it was submitted that the Court could, by order, compel that a copy of a relevant book – defined in s 9 of the Corporations Act to include a register, any other record of information, financial reports or financial records however compiled, recorded or stored and a document – be provided to the husband by the relevant entity. It was submitted that, given his obligation of ongoing full and frank disclosure, once the documents were within the husband’s possession, he would be compelled to disclose them to the wife.
"Section 198F of the Corporations Act provides for the right of access to company books for both current directors and previous directors who ceased being a director less than seven years prior. Subsection (2) of this section provides:
(2) A person who has ceased to be a director of a company may inspect the books of the company (including its financial records) at all reasonable times for the purpose of a legal proceeding:
(a)to which the person is a party; or
(b)that the person proposes in good faith to bring; or
(c)that the person has reason to believe will be brought against them.
This right continues for seven years after the person ceased to be a director of the company.
Section 198F was introduced into the Corporations Act by the Corporate Law Economic Reform Bill. The Explanatory Memorandum relevant to s 198F refers to the principles of common law by which a director has a right of access to all company information necessary to enable the director to discharge his or her fiduciary or statutory obligations, subject to the limitation that such information could only be used by the director for the purposes of the company. It was explained that if, for example, a director was being sued by the company for an alleged breach of duty owed to the company it could be difficult for the director to demonstrate that access to documents would be “for the purposes of the company” – even more so if the person is a retired director. Against this background, the Explanatory Memorandum outlined that s 198F as proposed would allow current and retired directors a legally enforceable right of access, at all reasonable times, to the books of a company in which they are or were a director.
Section 1303 of the Corporations Act provides that the Court may compel compliance:
If any person in contravention of this Act refuses to permit the inspection of any book or to supply a copy of any book, the Court may by order compel an immediate inspection of the book or order the copy to be supplied.
The husband has sought that the relevant entities provide him with documents. They have refused on the basis that s 198F(2) or s 1303 of the Corporations Act is limited in its application to proceedings in which a person, such as the husband, is involved as a consequence of their role as director.
On 12 February 2014, I ordered that the wife give notice, by 4.00 pm that day, to all corporate entities in respect of which she sought orders. When the matter returned on 27 February 2014, none of the entities sought to be heard.
In his written submissions the husband referred the Court to a number of decisions:
a)Angus & Petrino[1] in which Cronin J mentions that there is ‘significant authority in relation to the approach of Courts’ in relation to the application of s 198F of the Corporations Act;
b)Nyles & Nyles,[2] in which the “limits of section 198F were not challenged”;
c)Stern v Sekers[3] - a decision of the New South Wales Supreme Court;
d)Dick v Alan Powell Holdings Pty Ltd[4] – a decision of the Queensland Supreme Court; and
e)Archer Capital 4A Pty Ltd v Sage Group plc[5] – a decision of the Federal Court of Australia,
which he submitted were authority for the proposition that s 198F is limited in its application to legal proceedings in which a party is involved as a consequence of, or arising from, that party’s ‘capacity as a director of a company’.
[1] [2013] FamCA 817.
[2] [2010] FamCA 1232.
[3] [2010] NSWSC 59
[4] [2009] QSC 184.
[5] [2013] FCA 1029.
The husband argues that the nature of the current proceedings is such that, by virtue of the limitation said to be imposed on the operation of s 198F, neither that section nor s 1303 has application in the present case.
It seems to me that the decisions referred to above all proceed on an acceptance of the discussion by Emmett J in Hardcastle v Advanced Mining Technologies Pty Ltd [2001] FCA 1846 where his Honour said, at pars 23-25:
There appear to me to be two possible restrictions on the right of inspection that is conferred by s 198F(2). The first is clear: inspection must be for the purposes of a legal proceeding. The legal proceeding must be one to which the person requesting access is a party, one that the person proposes to bring in good faith or one that the person has reason to believe will be brought against him or her. That requires that the purpose for inspection of specific books be identified.
That does not mean to say that specific documents need to be identified by the former director. A former director would not necessarily remember every piece of paper that a Company had. However, in my view, the section requires that a person seeking to inspect books must identify at least specific categories or classes of books, which have some bearing on the relevant legal proceeding. There may be a question as to whether or not the former director is required to identify precisely how the relevant books are relevant or material to that proceeding. There must, however, be some indication of the nature of the books sought and the bearing that the books have on the proceeding in question.
A second possible limitation on the operation of s 188F(2) is that the proceeding must be a proceeding to which the former director is a party or believes might be brought against him or her or which he or she proposes to bring in his or her capacity as a director of the company. It would be curious if a person who, fortuitously, happened to have been a director of a company in the past would be entitled to access to books of the company that might be material to proceedings brought by that former director or which might be brought against the former director in a capacity totally unconnected with the capacity of the former director as a director. I do not express any firm or final view on that question at this stage because it does not arise in the application before me… (my emphasis)
I express the tentative view that, despite the clearly expressed limitation set out above, the subsequent decisions of various Courts noted above have applied the ‘second possible limitation’ to the interpretation of s 198F(2) as though it is firmly established. Section 198F(2) itself contains no express restriction or limitation – as could easily have been done had it been the intention to restrict a director’s access to records – as to the nature of the legal proceeding to which it refers. Further, it may be argued the discretionary nature of s 1303 itself provides a means by which unnecessary or irrelevant requests for access to records by current or former directors can be overseen. In any event, I consider it unnecessary to express a concluded view about the application of ss 198F and 1303 of the Corporations Act in dealing with the current application.
I am not persuaded to make an order in the terms sought by the wife. Whilst there is now evidence from Mr HH as to the necessity of the particularised documents for the purpose of carrying out valuations of the parties’ asserted “interests” in the specified entities, such evidence does not go to the fundamental dispute which remains as it was when an earlier interim application for disclosure was determined by Tree J: namely, whether the husband has, in fact, an interest in these entities such that that they are property of the parties for the purpose of the proceedings in this Court. If this is, in fact, established by the wife at trial, it may well be that documents sought are relevant to a valuation of the – then established – interest of the husband in the relevant entities.
However, at this time, there is nothing different in the evidence before me and the evidence which was before Tree J when his Honour concluded that he was not persuaded, on the evidence before him, that the Mr Lomax’s new wife’s interest in D Pty Ltd is in fact legal or equitable property of the husband.[i]
Further Orders for Disclosure
The wife filed an Amended Application in a Case on 29 January 2014. In it she sought an order that the husband make, file and serve an affidavit of documents including but not limited to those set out in schedule “A” attached to the Amended Application in a Case and that he make available for inspection and copying by her and her lawyers the documents disclosed. She does so on the basis of an assertion that, despite his assertion to the contrary, the husband has failed to make full disclosure during the course of the proceedings.
The husband opposes the making of an order in the terms sought by the wife because he says he has made disclosure of all relevant documents during the proceedings and there have already been a number of orders for disclosure made on a number of occasions – for example:
a)on 28 March 2011 (by consent) by Federal Magistrate Demack (as Her Honour then was);
b)on 15 August 2011 by Federal Magistrate Demack;
c)on 12 December 2011 by Federal Magistrate Demack;
d)on 25 September 2013 by Registrar Brooks.
In the circumstances of this history of previous orders dealing with the issue of disclosure, I am not persuaded to make further orders in relation to the same. Both parties remain bound by their ongoing obligation to disclose relevant financial documents. Should the wife establish at trial that the husband has failed to comply with this on-going obligation, it will, of course, be open to her to urge the Court not to be unduly cautious in making findings in her favour: Weir and Weir (1993) FLC 92-338.
Further application for the appointment of a person to prepare a report in respect of the husband’s financial circumstances
On 12 February 2014 I dismissed paragraph 4 of the wife’s Amended Application in a Case filed 29 January 2014 and paragraph 5 of the wife’s Application in a Case filed 3 September 2014 – which both related to the appointment of an expert witness to prepare a report in relation to the husband’s financial position.
I did so for the following reasons.
The wife filed an Application in a Case on 3 September 2013 (the September 2013 Application). In this she sought, amongst other things, an order in the following terms: “That a single expert be appointed for the purpose of preparing a report in respect of the financial circumstances of the husband, [Mr Lomax].”
The September 2013 Application was filed at a time when a decision in respect of an earlier Interim Application filed by the wife on 4 March 2013 was reserved before Tree J – the hearing of it and the application for other interim orders having occupied three (3) days in March 2013.
It is immediately apparent from paragraphs 5 and 97 to 101 of the Reasons for Judgment delivered by Tree J on 25 October 2013 that his Honour was asked to determine – and did – the wife’s application that valuers be appointed to value certain real properties and corporations which she asserted formed part of the property of the parties for the purpose of the property settlement proceedings.
As is clearly apparent from the material before the Court – and as was specifically recognised by Tree J at paragraph 69 of his Reasons for Judgment, albeit whilst discussing the issue of disclosure – one of the primary issues in dispute between the parties in these proceedings is whether certain corporate entities are, for all intents and purposes, the husband’s property or not.
The wife filed an Amended Application in a Case on 29 January 2014 (the January 2014 Application). In this she relevantly sought an order in the following terms: “That [Mr HH] of [JJ] Accountants be appointed for the purpose of preparing an expert report in respect of the financial circumstances of the husband, [Mr Lomax].”
Whilst couched in different terms, it seems to me that the order sought by the wife in both the September 2013 Application and the January 2014 Application are little more than further attempts to revisit the valuation issue dealt with by Tree J in March 2013.
When Tree J denied the wife’s application for an order that the sixteen particularised entities - the same as are particularised in the September 2013 and January 2014 Applications - be the subject of expert valuation, there was no evidence as to the likely cost of the valuation exercise: paragraph 99 Reasons for Judgment Tree J delivered 25 October 2013.
Whilst there is now evidence going to this issue - in that Mr HH has advised he would undertake the necessary work and has offered to receive his fees on a deferred basis – it seems to me that there is no established change to the factual premise relied upon by Tree J in declining to order the valuation of the particularised entities.
Application for spousal maintenance
The wife filed an Application in a Case on 19 March 2014 (the March 2014 Application) in which she sought, amongst other things, an order that the husband pay her the sum of $500.00 per week spouse maintenance. She later filed an Amended Application in a Case, on 22 May 2014 (the May 2014 Application), in which she sought, amongst other things, an order that the husband pay her the sum of $796.00 per week spouse maintenance.
The parties separated in 2004: the husband asserts early 2004, while the wife asserts it was late 2004. The wife, a qualified professional who was employed from August 2004 until about August 2012, remains unemployed. Counsel who appeared on her behalf appeared, during submissions, to assert that the mere fact of unemployment was sufficient to persuade the Court to make an order in the terms sought.
The wife has previously sought orders that the husband pay to her monies by way of spouse maintenance: see, for example, the Amended Application filed 5 December 2011, the Amended Initiating Application filed 15 June 2012, the Second Further Amended Application filed 18 June 2012, the Third Further Amended Application filed 9 August 2012 and the Third Amended Application in a Case filed for March 2013 (the March 2013 Application).
The March 2013 Application was heard by Tree J in March 2013. In October 2013 his Honour delivered Reasons for Judgment outlining, at paragraphs 50 to 91, the basis upon which he declined to order spouse maintenance as sought.
Whilst the wife filed affidavits on 19 March 2014 and on 22 May 2014 in support of the March 2014 and May 2014 Applications, neither, it seems to me, contains evidence sufficient to establish the pre-requisites for an order for the payment of spousal maintenance.
At most, in the affidavit filed 19 March 2014, the wife asserts that:
I have no way to make the mortgage payments as I am currently unemployed and caring for the two children and one adult child of the marriage. I am a qualified [professional] and have been searching for employment since my last employment contract completed in October 2012. There are limited employment positions available in the industry at the moment. I have recently undertaken study at [a TAFE college] to make sure my qualifications are up-to-date and continue to actively look for employment.
The parties’ four children are aged 20, 18, 14 and 11 respectively.
There is no evidence as to the wife’s attempts to obtain paid employment in any area other than her professional field. There is no evidence that she faces any particular restriction on her ability to engage in paid employment in areas other than her professional field.
I am not persuaded on the evidence that the wife is unable to support herself adequately: s 72 Family Law Act. Consequently, I dismiss the application for spouse maintenance.
Application in respect of mortgage payments
By an Amended Application in a Case filed 22 May 2014, the wife sought an order that the husband pay or cause to be paid the mortgage, rates and Urban Utilities accounts relating to the former matrimonial home situated at B Street, Suburb C (the B Street property).
She did so in circumstances where, on 28 March 2011 Federal Magistrate Demack ordered that the husband continue to pay the mortgage payment he was currently paying, rates and building insurance in respect of the B Street property and in Reasons for Judgment delivered 25 October 2013 Tree J determined, in the context of considering the husband’s application for the sale of the B Street property, that the husband had failed to establish an inability to service the mortgage.
Given the existence of the Order made on 28 March 2011, there is no utility in making a further order which will have the same effect and I decline to do so.
Whilst it will probably fall on deaf ears, I entreat the parties to focus upon the final determination of this matter. Issues about asserted non-compliance with orders, ability or inability to comply with the terms of orders, arrears of payments alleged to have accrued over time and the responsibility for the same are best ventilated at a trial during which cross-examination of the parties is possible. A continuation of the seemingly never-ending series of interim applications - during which assertion and counter-assertion about the disputed underlying factual premise are made and remade - simply prevents the matter being finally determined.
I certify that the preceding forty-three (43) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Hogan delivered on 23 June 2014.
Associate:
Date: 23 June 2014
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