Kroll and Kroll

[2011] FamCA 989

FAMILY COURT OF AUSTRALIA

KROLL & KROLL [2011] FamCA 989

FAMILY LAW – PROCEDURE – subpoena set aside.

APPLICANT: Mr Kroll

RESPONDENT: Ms Kroll

FILE NUMBER: SYC 4571 of 2011

DATE DELIVERED: 14 December 2011

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Stevenson J

HEARING DATE: 29 November 2011

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Asha Fielding
Aitken Lawyers

SOLICITOR FOR THE RESPONDENT: Bill Karras
Karras Partners Lawyers

Orders

1. That paragraph 1 of the wife’s subpoena to the Proper Officer of D Pty Ltd is set aside, on condition that the husband use his best endeavours to obtain affidavit evidence from the directors of that company to verify that he is a salary partner and not an equity partner in that enterprise.

IT IS NOTED that publication of this judgment under the pseudonym Kroll & Kroll 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 SYDNEY

FILE NUMBER: SYC 4571  of 2011

Mr Kroll

Applicant

And

Ms Kroll

Respondent

REASONS FOR JUDGMENT

the proceedings

1. On 29 September 2011 the wife, Ms Kroll, issued subpoenas to Mr Z, as attorney for Mr Kroll Snr, and to the Proper Officer of D Pty Limited.  Mr Kroll Snr is the father of the husband, Mr Kroll, and his brother Mr Z holds their father’s power-of-attorney.  Mr Kroll Snr is 72 years of age and suffers from Parkinson’s disease.  D Pty Limited (“D”) is the husband’s employer. 

2. The subpoena to Mr Z sought production of the following documents: 

   1    The current Will and Testament of [Mr Kroll Snr].

   2Any statement available to you setting out the assets and liabilities of [Mr Kroll Snr] as from 1 January 2008, to date.

   3Any valuation reports held by you in respect of any asset owned by [Mr Kroll Snr] as from 1 July 2009, to date.

   4The last five bank statements in relation to any bank account conducted by [Mr Kroll Snr] or conducted by any person on his behalf.

   5The Taxation Return and Notices of Assessment for [Mr Kroll Snr] for the financial year ended 30 June 2009.

   6The Taxation Return and Notices of Assessment for [Mr Kroll Snr] for the financial year ended 30 June 2010.

   7The Taxation Return and Notices of Assessment for [Mr Kroll Snr] for the financial year ended 30 June 2011.

3. The subpoena to the Proper Officer of D Pty Ltd sought production of the following documents: 

   1.Shareholders Agreement referrable to D Pty Limited (“the company”).

   2.Documents evidencing any commissions, bonuses, option grants, dividends and any other non-salary emolument or benefit paid or accrued to [Mr Kroll] (“[Kroll]”) as a result of his employment or other association with the company as from 1 July 2009, to date.

   3.Copy of bank statement, electronic transfer confirmation or cheque in relation to the payment by the company to [Ms Kroll] in the sum of $61,450.00 transacted on or about 23 December, 2010.

   4.All correspondence (including emails) and documents whereby [Kroll] was offered any equity or capital entitlements in the company as from 29 January, 2004 to date.

   5.All correspondence (including emails) and documents by which [Kroll] accepted or rejected any offer made to him as described and identified in Item 4 hereof.

   6.All correspondence between [Kroll] and the company in relation to his employment performance, employee assessment reports and his personnel file generally.

4. Mr Z voluntarily produced the will of Mr Kroll Snr but objected to production of all other documents sought by the subpoena.  “D” objected to production of the shareholders agreement and the husband’s personnel file.  “D” consented to the production of the documents specified in paragraphs 2 to 5 inclusive of the subpoena.

The Subpoena to Mr Z Kroll as Attorney for Mr Kroll Snr

1. The husband asserted in his Financial Statement sworn on 9 August 2011 that he is indebted to his father in an amount of $400,000.  In an Application in a Case filed on 1 September 2011 the wife sought copies of “all documents in the husband’s possession in relation to the two alleged loans from [Mr Kroll Snr] obtained by the husband during the course of the marriage including a copy of any loan agreement, evidence of loan funds being received, evidence as to how the funds were applied and details as to the repayment requirements imposed by [Mr Kroll], or agree to by (sic) [Mr Kroll] and [Mr Kroll Snr] and details of any loan repayments made.”  None of these documents were provided prior to the issue of the subpoenas.

2. The wife’s solicitor submitted, with some force in my view, that these documents are clearly relevant to the issue of the existence and terms of any loans between the husband and his father.  An amount of $400,000 is obviously a significant sum and, in my opinion, the wife is entitled to explore fully issues in relation to the alleged loan by way of this subpoena.  In fact, counsel for the husband conceded in his oral submissions that “there is obvious relevance in relation to the loan agreement”. 

3. The potential relevance of a will and other documents related to a potential inheritance was considered by the Full Court in White & Tulloch v White (1995) FLC 92-640.In that case the solicitors for the husband issued a subpoena to the wife’s mother, requiring production of the following documents –

   1.The original or a copy of all agreements, correspondence or other documents providing details of any monies lent, gifted or advanced by you to Helen Mary Tulloch and the documents providing details of any monies paid or repaid by the said Helen Mary Tulloch to you during the period from 1^st July 1992 to date.

   2.       The original of your current Will and Testament.

   3.The original or copies of any revoked but undestroyed prior Wills that you have made in which any legacy, bequest or other benefit was proposed to be left by you to the said Helen Mary Tulloch.

   4.The original or copies of any Certificates of Title or Folio Identifiers in respect of any real estate of which you are the beneficial owner whether solely or jointly with any other person.

   5.All Share Certificates in respect of any shares held by you and any bank accounts debenture certificates or documentation evidencing any term deposits held by your or in your name at the present time and any epitome of mortgage in respect of any mortgage under which you are the mortgagee at the present time.

4. In considering the potential relevance of these documents to the property proceedings between the husband and wife, the Full Court said:

   The central point of proceedings under s.79 remains the division of the property of the parties to the marriage and thus the essential concentration should be upon the financial circumstances of those parties.  This is emphasised by the circumstance that the thrust of almost all of the matters in ss.79 and 75(2) is to direct the court to consider various aspects relating to the parties themselves (or their children).  As a matter of principle and day to day management of trials, it would not ordinarily be appropriate to perform that exercise largely by detailed reference to the property of a third party or to require a third party to make a detailed disclosure of his or her testamentary intentions and financial circumstances.  It would be highly undesirable that in a property proceeding between husband and wife significant amounts of time should be devoted to a detailed examination of such matters.

5. Their Honours said further: 

   It is ultimately a question of fact and degree.  During the course of argument a number of obvious examples at each end of the spectrum were referred to.  In a case where the testator had already made a will favourable to the party but no longer had testamentary capacity and there was no evidence of his or her likely impending death in circumstances where there may be a significant estate, and where there was a connection to s.75(2) factors, it would be shutting one’s eyes to realities to treat that as irrelevant.  On the other hand, the bald assertion that one of the parties has an elderly relative who has property and is or is likely to benefit that party is so speculative that it would be inappropriate to contemplate it as relevant in a s.79 determination, it being too remote to affect the justice and equity of the case in any worthwhile way.

6. In the circumstances of that case, the Full Court took the view that the documents sought in paragraphs 1 and 2 of the subpoena could be viewed as relevant to the proceedings between the husband and wife.  These documents were the mother’s will and any material relating to loans and advancement of money between her and the wife.  Their Honours were unimpressed with the notion of requiring the wife’s mother to produce revoked wills for the purpose of investigating whether her motive was the property proceedings between the parties.  The court considered that it would be “oppressive” to the wife’s mother to require her to produce the financial material otherwise specified in the subpoena.  Their Honours also expressed concerns about the invasion of her privacy.

7. It is common ground that Mr Kroll Snr lacks testamentary capacity.  His attorney has voluntarily produced his current will, which constitutes the husband a beneficiary jointly with his brother and sister.  It is thus inevitable that the husband will receive an inheritance from his father at some unidentifiable time. 

8. It is true that there was no evidence that the demise of Mr Kroll Snr is imminent.  I do not accept however, the submission on behalf of the husband that White & Tulloch v White is authority for the proposition that “the only reason an expectancy under a will would be taken into account [pursuant to section 75(2)(o)] is where the maker of the will is likely to die immediately. 

9. It seems to me to be of considerable significance that the husband’s father lacks testamentary capacity.  In the words of the Full Court in White & Tulloch v White, it would be “shutting one’s eyes to reality” to treat the documents sought in the subpoena as irrelevant to the proceedings between the husband and wife.

The Subpoena to D Pty Ltd (“D”)

1. The submissions on behalf of “D” were based on the premise that the husband is a salaried partner, rather than an equity partner, in this enterprise.  I assume that this proposition is correct, although the husband deposed otherwise in his affidavit sworn on 9 August 2011. 

2. Following service of this affidavit the solicitor for the wife sought “the provision of a copy of the employment contract and partnership deed with [D Pty Ltd], and all documentation confirming the husband’s base salary, and details of all bonuses received by him, or by third parties on his behalf in the financial year ended 30 June 2011 and the financial year commencing 1 July 2011 to date”.

   The husband did not take up this invitation but has now elected to provide a copy of his contract of employment.

3. “D” took no objection to production of the documents listed in paragraphs 2 to 5 inclusive of the subpoena.  Objection was taken to the production of the shareholders agreement and the husband’s personnel file. 

4. On behalf of the wife it was submitted that access to the husband’s personnel file would clarify the situation in relation to bonuses paid to him and as to the overall benefits which he receives from his employment.  It was pointed out that the wife received a bonus from “D” for reasons unknown to her.

5. It seems to me that the wife is entitled to investigate fully the benefits which flow to the husband from his employment.  In my view, the wife should have access to his personnel file.

6. On behalf of “D” it was submitted that the shareholders agreement is a “sensitive and confidential document of a third party”.  The legal representative of “D” offered to provide an affidavit from the directors to establish that the husband is not an equity partner, which it was submitted would obviate the necessity for the production of the shareholders agreement.  It seems to me that the directors should provide this evidence. I will order that this paragraph of the subpoena is set aside, a condition that the husband use his best endeavours to obtain affidavit evidence from the directors of “D” to that he is a salary partner.

I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Stevenson delivered on 14 December 2011.

Associate:     

Date:              14 December 2011