Lauritz and Lauritz & Ors
[2015] FamCA 635
•3 July 2015
FAMILY COURT OF AUSTRALIA
| LAURITZ & LAURITZ AND ORS | [2015] FamCA 635 |
|
| Family Law Act 1975 (Cth) s 121 Family Law Rules 2004 (Cth) rule 15.27 |
| Andrew Garrett Wine Resorts & Anor v National Australia Bank Limited (No. 6) (2005) 92 SASR 419 |
| APPLICANT: | Ms Lauritz |
| FIRST RESPONDENT: | Mr Lauritz |
SECOND RESPONDENT | B Pty Ltd |
THIRD RESPONDENT | C Pty Ltd |
FOURTH RESPONDENT | D Pty Ltd |
FIFTH RESPONDENT | E Pty Ltd |
SIXTH RESPONDENT | Ms F Lauritz |
SEVENTH RESPONDENT | Mr G Lauritz |
EIGHT RESPONDENT | H Accountants |
| FILE NUMBER: | SYC | 2896 | of | 2014 |
| DATE DELIVERED: | 3 July 2015 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Le Poer Trench J |
| HEARING DATE: | 21 May 2015 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Lethbridge SC |
| SOLICITOR FOR THE APPLICANT: | Mcdonell Milne Toltz Family Lawyers |
| COUNSEL FOR THE FIRST RESPONDENT: | Mr Campton SC |
SOLICITOR FOR THE FIRST RESPONDENT: | Solari & Stock Lawyers |
| COUNSEL FOR THE 2ND TO 8TH RESPONDENTS | Mr Givney |
| SOLICITOR FOR THE 2ND TO 8TH RESPONDENTS | MCW Lawyers |
Orders
IT IS ORDERED
The objection raised by B Pty. Ltd. to the subpoena served upon it by the wife is upheld in relation to paragraph 9 at this time. The balance of the objection is otherwise dismissed.
The applicant wife has leave to press for compliance with paragraphs 9 of the subpoena served upon B Pty. Ltd. should she be in a position to establish the relevance of the documents sought in those paragraphs to the courts satisfaction.
As additional comfort to the directors and shareholders of the 2nd to 5th respondents, the wife is restrained, until further order, from disseminating, publishing or repeating any information learned from the production of documents by B Pty. Ltd., C Pty Ltd, D Pty. Ltd., E Property Limited., pursuant to the subpoena issued against the companies at the request of the wife, otherwise than in the conduct of the proceeding in this court (this to include the ability to publish to any expert retained on behalf of the wife through her solicitors who appear on the record of this proceeding). FURTHER any copies of the documents produced by B Pty. Ltd., C Pty Ltd, D Pty. Ltd., E Property Limited., pursuant to the subpoena are to be retained (subject to any further order of the court) in the control of the wife’s legal representatives during the currency of the proceeding in this court and returned to the company producing the documents to the court pursuant to the subject subpoena within 28 days of the conclusion of the proceeding in this court.
The objection made by C Pty Ltd. to the subpoena issued on 25 March 2015 is dismissed so far as it relates to paragraphs 1, 2, 3, 4 thereof.
The applicant wife has leave to press for compliance with the balance of the paragraphs of the subpoena served upon C Pty Ltd should she be in a position to establish the relevance of the documents sought in those paragraphs to the courts satisfaction.
The objection made by D Pty. Ltd. to the subpoena issued by the court on behalf of the wife on 25 March 2015 is dismissed.
The objection made by E Pty. Ltd. to the subpoena issued by the court on behalf of the wife on 25 March 2015 is dismissed.
The objection made by H Accountants, to the subpoena issued by the court on behalf of the wife on 25 March 2015 is upheld. The subpoena is set aside.
So much of the subpoena issued to B Pty. Ltd., C Pty Ltd., D Pty. Ltd. and E Property Limited as has not been the subject of successful objection as set out in this order are to be complied with on or before 11.30 a.m. on 22 July 2015 at which time the subpoena is listed before the Registrar.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Lauritz & Lauritz 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 2896/2014
| Ms Lauritz |
Applicant
And
| Mr Lauritz |
Respondent
REASONS FOR JUDGMENT
Introduction
Before the Court are proceedings arising out of the marriage between Ms Lauritz (“the wife”) and Mr Lauritz (“the husband”).
The current proceedings relate to subpoenas issued by the wife on 25 March 2015 to the 2nd to 8th respondents.
At the commencement of the hearing, the parties handed up an agreed minute of order, being Exhibit X 5, which provided that:
1.Pending further order, without admissions, the Husband shall provide to the Wife 28 days’ notice in writing of any intention to relinquish or in any way quitting his position as a joint Appointor of the [C] Discretionary Trust.
2.That the parties have liberty to apply on 7 days’ notice to seek any variation of Order 1 hereof or any further injunction order in the event Notice is given by the husband pursuant to Order 1 hereof.
Background
The husband and the wife married in 1991 and separated in April 2012.
During the marriage, the husband was appointed as a director of a number of family companies, including but not limited to the respondent companies; C Pty Ltd, (“C”), B Pty Ltd (“B”), D Pty Ltd (“D Pty Ltd”) and E Pty Ltd (“E”). For the sake of my convenience I will hereafter refer to these entities as part of the “Lauritz family enterprise”.
The husband and wife commenced employment in C in 1991. C is a family business which was established by the husband’s parents in 1981. In 1991, the husband’s parents, Mr G and Ms F Lauritz, who are the sixth and seventh respondents in these proceedings, were the sole directors and shareholders of the company.
The wife asserts that on 21 March 1994, the husband’s father retired and the husband was appointed as the Managing Director of C. The husband disputes this and says that the husband and his two brothers were appointed as directors alongside his parents. It is agreed that the husband’s parents remained the sole shareholders of C.
In 1996, B, the first respondent, was registered as the main trading company for C, conducting a manufacturing business. The husband was appointed a director of B, along with his two brothers. The husband was also appointed as the secretary of the company. C is the sole shareholder of B. Therefore, the husband’s parents, who are the sole shareholders of C, are also the ultimate owners of B.
During the course of the marriage, the wife was employed on a full-time basis as an Accounts Manager in B. The husband contends that the wife had a relationship, during the marriage, with the General Manager, Mr I. Mr I and the wife left the employ of B following the separation of the parties. The husband asserts that during her employment at B, the wife used her position in the accounts department to provide monies to Mr I which he was not entitled to, and also assisted in negotiations for the corporation to purchase land owned by Mr I.
In March 1998, the husband and his brothers incorporated a company known as C Corporation, which is not a respondent to these proceedings. The husband and each of his brothers are directors and each hold five out of the 15 ordinary issued shares in the company.
D Pty Ltd, the third respondent, was established in December 2000 and provides residential and commercial services. The husband was appointed as a director and secretary of this company along with two other directors (who are not members of the husband’s family), Mr J and Mr K. C and two other entities were equal shareholders in D Pty Ltd.
E, the fourth respondent, was incorporated in December 2006. The company provides services to the manufacturing industry. The husband was appointed director and secretary and C was the sole shareholder.
On 15 August 2005, the husband received a lump sum amount of $350,000. The wife says this amount was a lump sum payment from C and the husband says that this was a gift from his parents.
On 9 October 2007, the L Unit Trust was settled. L Pty Ltd was incorporated on this same day as the trustee company of the L Unit Trust. The husband was appointed as one of three directors in L Pty Ltd and holds one third of the shares in this company. C holds ten of 30 units in the L Unit Trust. According to the wife in her affidavit sworn on 6 November 2014, the L Unit Trust owns a commercial property at M Street, N Town which recently underwent a $20,000,000 redevelopment and is leased out to the Australian Tax Office, ANZ and the Blood Bank.
On 11 January 2008, the C Discretionary Trust was settled and C was appointed as the trustee. The husband and his brother Mr O were joint appointors of the Trust. According to the husband, the husband and his children, the husband’s two brothers and their children, and the husband’s parents are beneficiaries of the trust.
The parties self-managed superannuation fund, P Superannuation fund, was also established in January 2008.
In May 2008, the husband was appointed as a director of Q Pty Ltd, which is the trustee of the Q Unit Trust. C holds 100 of 200 shares in the company and one third of units in the Trust.
In January 2010, the husband received $60,000 from B which was applied toward the purchase a 4WD motor vehicle, registered in the wife’s name.
The husband said his remuneration from B was reduced by his parents from 2010 onwards but that his parents began to gift monies to the husband from their after tax dividend income, totalling not less than $405,000. The husband deposes, in his affidavit sworn 19 February 2015, that this arrangement benefited both him and the wife as it reduced their tax payable. The wife says that what occurred in 2010 was in reality a restructuring of the husband’s remuneration, and the husband’s father commenced payment to the husband of ‘dividends’ of $3,536 per week.
The husband claims that from 1991 – 2012, his parents gifted him additional sums totalling over $84,000. The wife does not admit the husband’s assertions as to the source and nature of these funds.
The husband contends that in February 2011, the wife made an unauthorised payroll payment from B to Mr I for annual leave. The wife denies this.
The parties separated on 25 April 2012.
Mr I ceased his employment with of B Pty Ltd shortly after this time. The wife also ceased her employment with this company between June – December 2012.
The wife commenced proceedings in this Court for property settlement on 15 May 2014.
The husband asserts that in July 2014, B suffered financial decline and the loss of a major customer. The husband also states that in approximately August 2014, the husband was informed that his monetary gifts from his parents would cease and his salary would be reviewed from 1 July 2015. The wife puts these assertions into issue.
On 22 October 2014 the husband was removed as a director of B and C and also as the secretary of C. The husband’s parents and his two brothers remain the directors of C and the husband’s two brothers are the directors of B. The husband’s parents remain the sole shareholders in C, which in turn is the sole shareholder of B.
On 29 October 2014, the husband also resigned his office as a director and secretary of D Pty Ltd. In his affidavit sworn 19 February 2015, the husband deposed that he voluntarily resigned because the demands placed upon him for the production of documents caused tensions with his Co-Directors. A company search of D Pty Ltd annexed to the husband’s affidavit shows that as at 3 February 2015, the husband’s brother, Mr O, was the director and secretary of that company along with Mr J and Mr K. The shareholders are C and two other companies.
The husband also ceased to be a Director and Secretary of E on 29 October 2014 and his brother Mr O was appointed in his place. A company search annexed to the husband’s affidavit shows that as at 3 February 2015, the sole director and secretary of the company is the husband’s brother Mr O and C is the sole shareholder.
Further, on 29 October 2014, the husband resigned his directorships of L Pty Ltd and Q Pty Ltd.
The husband said he is currently on extended leave from B, which commenced in December 2014. He says that this leave was at the direction of his parents and his brothers, for his personal health and the benefit of the company. The husband said that his brothers are now making the day to day decisions for the company. The husband’s evidence on this issue is not agreed to by the wife.
On 25 March 2015, the wife issued the subpoenas which are the subject of these proceedings.
H, being the eighth respondent in these proceedings, is an accountancy practice which has prepared financial documents in relation to C, B and the C Discretionary Trust.
The husband is still employed as a manager of B.
The matter came before the Court on 21 May 2015. On this day, minutes of order were signed between the husband and wife providing that pending further order, without admissions, the husband shall provide to the wife 28 days’ notice in writing of any intention to relinquish his position as a joint appointor of the C Discretionary Trust.
The issues
A key issue between these parties in the proceedings at large is the extent to which the corporate structure involving the respondents, as outlined above, is a financial resource of the husband’s.
The issues to be determined in the present proceedings are as follows:
·Whether the subpoenas (or parts thereof) should be set aside because each:
· has no apparent relevance to these proceedings; and/or
· a fishing expedition; and/or
· is too wide; and/or
· is issued for the purpose of obtaining discovery; and/or
· would be likely to capture documents which the wife and/or her advisers are not entitled to inspect; and
· is not possible to be complied with;
· is otherwise oppressive and an abuse of process.
·If the subpoenas are not set aside on any of the above grounds, should there be additional safeguards imposed by the Court to prevent the unauthorised use/disclosure of the information obtained, given the confidentiality concerns raised by the respondents?
Submissions
It is the wife’s assertion that the husband may still obtain a significant financial resource through his involvement in these family companies and that accordingly, the documents sought by the subpoenas are directly relevant to the issues to be determined in the substantive property settlement proceeding.
It is her case that the husband’s father retired and ceased his day to day involvement from the respondent companies in 1994 and that thereafter, the husband has effectively controlled and managed these family companies.
In written submissions, it is asserted by the wife that the evidence before the Court discloses “a longstanding and intimate relationship” between the corporations which are subject to the subpoenas and the parties to the marriage.
The husband and the 2nd to 8th respondents put into issue the relevance of the subpoenas to the proceedings between the husband and the wife. The husband’s position is that he is no more than an employee of B (and currently on extended leave from this company). He maintains that he has no legal, beneficial or other interest in the respondent companies.
The husband asserts that he is unable to disclose the relevant company documents without consent of the other directors, and raises issues with the confidentiality and potential misuse of the documents in these proceedings by the wife. He deposes in his affidavit that his parents and the other directors have conveyed to him their view that the wife and Mr I were in a position of trust with the company and having regard to their breach of duties, they were firm in their position of refusing to provide the financial information requested by the wife. The husband said that his father told him, in mid-2014, words to the effect of “You and [the wife] can sort out your own affairs. Neither of you have any claim on my business, just like I don’t have any claim on your personal circumstances”.
B Pty Ltd
The schedule to the subpoena issued by the wife to B requests the following documents:
1.
30 June 2010- 30 June 2014
Copies of financial statements of the company for the financial years ended 30 June 2010 to 30 June 2014 inclusive.
2.
30 June 2014
In the event that financial statements for the financial year ended 30 June 2014 have not been prepared, copies of draft financial statements for that financial year
3.
30 June 2010 to date
Copies of management accounts for the period 1 July 2014 to 1 October 2014.
4.
1 July 2009 to date
Copies of loan account legers recording loans to and from [the husband] and/or [the wife] in respect of the period from 1 July 2009 to the date of this Subpoena.
5.
1 July 2009 to date
Copy of the Minute Books of directors meetings of the company in respect of the period from 1 July 2009 to the date of this Subpoena.
6.
1 July 2009 to date
Copies of Fringe Benefits Tax returns in respect of benefits received by [the husband] for the period 1 July 2009 to the date of this Subpoena.
7.
1 July 2009 to date
Copies of all documents, records and writings with respect to the payment of directors fees, salary, wages, bonuses, gifts, allowances, payments on behalf of or benefits to [the husband] in respect of the period from 1 July 2009 to the date of this Subpoena, including but not limited to pay slips, payment advices and correspondence.
8.
1 July 2009 to date
Copies of all documents, records and writings with respect to superannuation contributions made for and on behalf of [the husband] in respect of the period from 1 July 2009 to the date of this Subpoena.
9.
1 July 2014 to date
Copies of all documents, records and writings with respect to losses accruing to the company as a consequence of the placement of [R Pty Ltd] into administration including but not limited to debtors ledgers, records of write off of debts, correspondence, notices to creditors or administrators.
In his affidavit sworn on 19 February 2015, the husband says that the consent of the directors, being his parents, to provide the documents requested has not been forthcoming because in their view, the wife had breached her duties whilst in a position of trust with the Company. The husband states that having no legal, beneficial or other interest, he has no authority to disclose the requested documents relating to those entities without the consent of the other directors and shareholders to provide them.
The husband also deposes that as he is not, nor has he even been, a shareholder in B, he has not ever received any dividends from this company.
It is submitted on behalf of B that while the husband was employed by the corporation during the marriage, he has no proprietary interest in the company and his parents are the sole shareholders.
B asserts that the financial records and information sought by the wife is not relevant to the proceedings, and that the subpoena is a fishing expedition.
B also contends that, in light of the conduct by the wife with Mr I referred to above, there was a breach of trust by the wife to the Corporation and she could not be trusted with confidential information relating to the financial affairs and the conduct of the business.
B submits that paragraphs one to five and nine of the subpoena should be set aside. It notified the Court that paragraphs six, seven and eight of the subpoena will be produced within seven days of the date of this hearing.
With respect to paragraph four, the corporation advised that there are no loan accounts with respect to the husband.
C Pty Ltd
The schedule to the subpoena issued by the wife to C requests the following documents:
1.
30 June 2010- 30 June 2014
Copies of the financial statements of the company for the financial years ended 30 June 2010 to 30 June 2014 inclusive and management accounts, if any, for the period 1 July 2014 to 1 October 2014.
2.
1 July 2009 to date
Copies of loan account legers recording loans to/from [the husband] and/or [the wife] in respect of the period from 1 July 2012 to the date of this Subpoena
3.
1 July 2009 to date
Copy of the Minute Books of directors meetings of the company in respect of the period from 1 July 2009 to the date of this Subpoena.
4.
1 July 2009 to date
Copies of all documents, records and writings with respect to the payment of directors fees, salary, wages, gifts, allowances, payments on behalf of or benefits to [the husband] in respect of the period from 1 July 2009 to the date of this Subpoena, including but not limited to pay slips, payment advices and correspondence.
5.
1 July 2012 to date
Copies of any market appraisal, valuation reports or other written evidence as to the value of real estate owned by the company including but not limited to S Street, Suburb T.
C repeats the submissions made on behalf of B Pty Ltd with relation to its concerns regarding the disclosure of its financial documents in light of the conduct of the wife whilst she was employed by B Pty Ltd.
C submits that the corporation is wholly owned by the husband’s parents and that the husband is not employed by the corporation and has no proprietary interest in the corporation.
The husband also deposes in his affidavit sworn on 19 February 2015, that as he is not, nor has he even been, a shareholder in C, he has not ever received any dividends from this company. His parents are the sole shareholders owning 50 shares each.
D Pty Ltd
The schedule to the subpoena issued by the wife to D Pty Ltd requests the following documents:
1.
30 June 2012- 30 June 2014
Copies of the financial statements of the company for the financial years ended 30 June 2012 to 30 June 2014 inclusive and management accounts, if any, for the period 1 July 2014 to 1 October 2014.
2.
1 July 2012 to date
Copies of loan account legers recording loans to/from [the husband] and/or [the wife] in respect of the period from 1 July 2012 to the date of this Subpoena
3.
1 July 2012 to date
Copies of all documents, records and writings with respect to the payment of directors fees, salary, wages, benefits or allowances to [the husband] in respect of the period from 1 July 2012 to the date of this Subpoena, including but not limited to pay slips and payment advices.
4.
1 July 2012 to date
Copy of the Minute Books of directors meetings of the company in respect of the period from 1 July 2012 to the date of this Subpoena.
The husband contends that he has no interest in this company and has received no benefits from his previous position as a director. He also says that as he is not a shareholder, he has not received any dividends from the company.
D Pty Ltd submits that paragraphs one, two and four of the subpoena should be set aside.
It submits that the husband has no proprietary interest in the corporation. It advised the Court that there are no loan accounts with respect to the husband, and that the financial and other records sought are not relevant to the proceedings between the husband and the wife.
D Pty Ltd also repeats the submissions put by B and C with respect to the wife’s conduct.
E Pty Ltd
The schedule to the subpoena issued by the wife to E requests the following documents:
1.
30 June 2012- 30 June 2014
Copies of the financial statements of the company for the financial years ended 30 June 2012 to 30 June 2014 inclusive and management accounts, if any, for the period 1 July 2014 to 1 October 2014.
2.
1 July 2012 to date
Copies of loan account legers recording loans to/from [the husband] and/or [the wife] in respect of the period from 1 July 2012 to the date of this Subpoena
3.
1 July 2012 to date
Copies of all documents, records and writings with respect to the payment of directors fees, salary, wages, benefits or allowances to [the husband] in respect of the period from 1 July 2012 to the date of this Subpoena, including but not limited to pay slips and payment advices.
4.
1 July 2012 to date
Copy of the Minute Books of directors meetings of the company in respect of the period from 1 July 2012 to the date of this Subpoena.
In his affidavit, the husband asserts that all the profits from E are paid to B Pty Ltd. He denies having any interest in the company and deposes that he has never received any benefits in his company.
H Accountants
The schedule to the subpoena issued by the wife to H provides:
1.
All documents, records and writings with respect to taxation an all other accounting advice given to any of [the husband], [the husband’s father] and/or [the husband’s mother] personally or in his or her capacity as director/s of, or appointor or beneficiary of the entities set out below with respect to the creation of the relevant entity and thereafter its management and conduct of its business:
· C Pty Ltd Pty Ltd
· B Pty Ltd
· C Corporation Pty Ltd
· C Discretionary Trust Pty Ltd
· L Unit Trust
· Q Unit Trust
H submits that the subpoena should be set aside because it is:
·a fishing expedition;
·too wide;
·is for the purpose of obtaining discovery;
·Would likely to capture documents that the wife and/or her advisers are not entitled to inspect; and
·It is likely that they it is not possible to be complied with.
Mr G and Ms F Lauritz
63.Mr G and Ms F Lauritz, being the husband’s parents, have agreed to comply with the subpoenas issued by the wife.
The law
It is uncontroversial that this Court has the inherent power to set aside a subpoena (see Hatton, V.F. v Attorney General of Commonwealth of Australia, Commonwealth Bank of Australia and Commonwealth Development Bank of Australia (2000) FLC 93-038 (“Hatton”), Sharpe and Dalton (1990) FLC 92-167; Epstein & Epstein (1993) FLC 92-384; White and Tulloch v White (1995) FLC 92-640).
The grounds of objection to the subpoena raised by the 2nd to 8th respondents can be summarised as follows:
· The subpoenas are not relevant to the proceedings;
·The subpoenas constitute an abuse of process/a fishing expedition/are oppressive;
·The subpoenas are issued for the purpose of obtaining discovery; and
·The subpoenas would be likely to reveal confidential information to the wife which, given her past conduct, may be misused by her.
The fundamental question for the Court in these proceedings is whether the documents sought pursuant to the subpoenas have an apparent relevance to the issues in the proceedings currently on foot. His Honour Moffitt P in National Employers' Mutual General Association Ltd v Waind and Hill [1978] 1 NSWLR 372 (“Waind”) stated at 384 that the “only legitimate purpose of requiring production, and permitting the inspection, of a stranger’s documents can be to add, in the end, to the relevant evidence in the case”
It is contended by all the respondents that the subpoenas issued by the wife are not relevant to the issues in the current proceedings.
In Hatton, the Full Court confirmed that a lack of apparent relevance is an independent ground for the setting aside of a subpoena. Their Honours Finn, Kay and Dessau JJ stated at 87,606:
49. As to the proposition that lack of relevance cannot of itself be a ground for setting aside a subpoena but rather must constitute oppression or abuse of process, we consider that whatever may have been the position at the time that Waind and Hill was decided, the present state of authority is such that lack of apparent relevance will be a sufficient ground in itself to set aside a subpoena.
In Mulley & Marney v Manifold (1959) 103 CLR 341 at 345 Menzies J described the test for ascertaining the relevance of documents as:
Only a document which relates in some way to a matter in issue is discoverable, but it is sufficient if it could, or would lead to a train of inquiry which would, either advance a party’s own case or damage that of the adversary.
As outlined by the Full Court in Hatton, the Court may determine the apparent relevance of the subpoenas by reference to the terms of each subpoena and the paragraphs of the relevant affidavits filed in the substantive proceedings. It is not necessary, in this Court, that the respondents be required to first produce the documents sought by the subpoena. The Full Court stated at 87,607 - 87,608:
58. In relation to the first matter, we are satisfied, having regard to the decision in Santos, that the approach adopted by Rose J. in the present case of requiring the husband to establish that the terms of the subpoena had some apparent relevance to the issues in the property settlement proceedings between the husband and the wife, rather than requiring the Attorney-General to establish that the documents in his possession did not have any apparent relevance to the main proceedings, was correct. The obvious correctness of his Honour’s approach purely in practical terms can be demonstrated simply by asking the question: how could a complete stranger such as the Attorney-General know what issues would be relevant in property settlement proceedings between a husband and a wife?
59. Further, given that there are at the present time no pleadings in this Court, the only way in which apparent relevance of the subpoenaed material to the main property settlement proceedings could be established was by reference to the affidavit material filed in those proceedings. His Honour considered the paragraphs in affidavits on which the husband relied. His Honour found there was no apparent relevance between any issue raised on that material and the documents sought by the subpoena.
It is well established law that the issuing party, in this case the wife, bears the onus of proving that the documents sought have an apparent relevance to the issues in the matter. In the decision of Andrew Garrett Wine Resorts & Anor v National Australia Bank Limited (No. 6) (2005) 92 SASR 419 at paragraph 37, the Honorable Justice Gray stated that:
It is not enough for the party issuing the subpoena to raise a speculative possibility that the documents sought would assist the resolution of the dispute. The party supporting the subpoena must demonstrate that the documents sought in the subpoena are of real relevance to the issues in the case. It must be more than an outside chance that something useful might turn up in the documents.
Moore JR in Sharpe and Dalton at 78,147, citing the comments of Cantor J in R. v. Barton & Ors (1981) 2 N.S.W.L.R. 414 at 419, stated that, in relation to documents where the relevance is unclear:
…there is no simple guideline to follow. What is required, as I have stated, is a balancing of the competing and generally conflicting interests of the party to the proceedings and the stranger to the proceedings.
The Court will consider the nature of the documents specified and will determine as best it can the issues likely to arise. If it appears an issue may arise in litigation to which the documents may relate than [sic] I believe the right of the litigant should prevail over the right of the witness. Unless it appears that an issue may arise to which the documents may relate then the right of the witness will prevail.
It will be noted I do not postulate that the issue must arise in the litigation nor do I postulate that the documents must relate to an issue.
It seems to me, on this first step in relation to the subpoenaeing of documents from a stranger the Court will consider possible issues. This does not include fanciful issues. The Court should take a realistic attitude. Similarly in considering the type of documents and how they may bear upon an issue in the litigation the Court will act realistically and not require the production of documents which only would have a bearing upon an issue on an unreal, fanciful or speculative basis.
If it is established that the subpoenas issued by the wife do have an apparent relevance to the principal issues in the proceedings, they may still be set aside if they constitute an abuse of process, because, for example, they are found to be a ‘fishing expedition’ by the wife or if compliance with the subpoena would be an oppressive task. Alternatively the subpoena may be found to be too wide.
Subpoenas issued to the husband, his parents and the family accountant were found to be an abuse of process in Epstein and Epstein (1993) FLC 92-384, a case which was cited without criticism by the Full Court in White and Tulloch v White (1995) FLC 92-640. In that case, the subpoenas sought production of documents for periods spanning between over 17 years of marriage. Trevyaud J held the subpoenas to be “broad beyond belief”. His Honour found that compliance would have been a “nightmare” and held that it would be oppressive to require production of the documents requested. His Honour outlined the legal principles in relation to the setting aside of a subpoena which constitutes an abuse of the court’s process at 79,969:
The relevant Australian law commences with the judgment of Jordan C.J. in the case of The Commissioner for Railways v. Small (1938) 38 S.R. (N.S.W.) 564 at 573:
A writ of subpoena duces tecum may be addressed to a stranger to the cause or to a party. If it be addressed to a stranger, it must specify with reasonable particularity the documents which are required to be produced. A subpoena duces tecum ought not to be issued to such a person requiring him to search for and produce all such documents as he may have in his possession or power relating to a particular subject matter. It is not legitimate to use a subpoena for the purpose of endeavouring to obtain what would be in effect discovery of documents against a person who, being a stranger, is not liable to make discovery. A stranger to the cause ought not to be required to go to trouble and perhaps to expense in ransacking his records and endeavouring to form a judgment as to whether any of his papers throw light on a dispute which is to be litigated upon issues of which he is presumably ignorant: Lee v. Angas; Burchard v. Macfarlane; A.-G. v. Wilson; Newland v. Steer. And if a subpoena duces tecum is issued to such a person in an objectionable form, the witness may apply to the Court to have it set aside.
His Honour continued, at 79,969-79,970:
In 1984, in Purnell Bros Pty. Ltd. v. Transport Engineers Pty. Ltd. 73 F.L.R. 160 at 174-5, Powell J summarized circumstances in which the Court would exercise its power to set aside a subpoena. Having done so, he took a global view of the Court's power, saying:[79970]
It seems to me, however, that when, as one does, one finds assertions that the court's power to set aside a subpoena is but part of the inherent jurisdiction of the court (see, for example, R. v. Lewes Justices; Ex parte Secretary of State (supra) at 240 per Lord Parker C.J., 244 per Bridge J (as he then was) coupled with assertions that a subpoena will be set aside if it be used for an impermissible, or illegitimate, purpose, or, if to require compliance with it would be oppressive (see, for example, Commissioner for Railways v. Small (supra) at 573-575 per Jordan C.J.) it is difficult to avoid the conclusion that, in reality, the court's power to set aside a subpoena is but one aspect of the court's inherent jurisdiction to prevent an abuse of its process by a party to litigation, and that, accordingly, the particular classes of case which I have recorded above are to be regarded as no more than examples of situations which the courts, in the past, have held, and, in the future, would hold to be cases of an abuse of process.
Trevyaud J held that all the subpoenas ought to be set aside on the ground that they were oppressive and an abuse of process. His Honour found that the breadth and extent of the documents required by the subpoena would make the task of production oppressive, and that the relevance of the documents to the proceedings between the husband and the wife had not been established.
Turning then to the confidentiality concerns raised by the respondents, the Full Court in the decision of Sadek and Ors & Hall and Anor [2015] FamCAFC 23 provided a detailed outline of the restrictions governing the inspection and use of subpoena material within the Family Law Act 1975 (“the Act”), the Family Law Rules 2004 (Cth) and at common law. As outlined by the Full Court, additional safeguards may also be put in place by the Court, should this be appropriate in the circumstances. In that case, the appellants submitted that an injunction restraining each party from providing any information or copies of any documents obtained from the subpoena to any other person other than their legal representatives was inadequately protected their interests. The appeal was dismissed. I here set out the discussion of their Honours Thackray, Strickland and Aldridge JJ in full (bold emphasis added):
41. There are a number of restrictions upon the use of documents obtained pursuant to a subpoena. Firstly, s 121 of the Act provides relevantly:
(1) A person who publishes in a newspaper or periodical publication, by radio broadcast or television or by other electronic means, or otherwise disseminates to the public or to a section of the public by any means, any account of any proceedings, or of any part of any proceedings, under this Act that identifies:
(a) a party to the proceedings;
(b) a person who is related to, or associated with, a party to the proceedings or is, or is alleged to be, in any other way concerned in the matter to which the proceedings relate; or
(c) a witness in the proceedings;
is guilty of an offence punishable, upon conviction by imprisonment for a period not exceeding one year.
(2) A person who, except as permitted by the applicable Rules of Court, publishes in a newspaper or periodical publication, by radio broadcast or television or by other electronic means, or otherwise disseminates to the public or to a section of the public by any means (otherwise than by the display of a notice in the premises of the court), a list of proceedings under this Act, identified by reference to the names of the parties to the proceedings, that are to be dealt with by a court is guilty of an offence punishable, upon conviction by imprisonment for a period not exceeding one year.
....
(5) An offence against this section is an indictable offence.
....
(9) The preceding provisions of this section do not apply to or in relation to:
(a) the communication, to persons concerned in proceedings in any court, of any pleading, transcript of evidence or other document for use in connection with those proceedings; or
(b) the communication of any pleading, transcript of evidence or other document to:
(i) a body that is responsible for disciplining members of the legal profession in a State or Territory; or
(ii) persons concerned in disciplinary proceedings against a member of the legal profession of a State or Territory, being proceedings before a body that is responsible for disciplining members of the legal profession in that State or Territory; or
(c) the communication, to a body that grants assistance by way of legal aid, of any pleading, transcript of evidence or other document for the purpose of facilitating the making of a decision as to whether assistance by way of legal aid should be granted, continued or provided in a particular case; or
(d) the publishing of a notice or report in pursuance of the direction of a court; or
(da) the publication by the court of lists of proceedings under this Act, identified by reference to the names of the parties, that are to be dealt with by the court; or
(e) the publishing of any publication bona fide intended primarily for use by the members of any profession, being:(i) a separate volume or part of a series of law reports; or
(ii) any other publication of a technical character; or
(f) the publication or other dissemination of an account of proceedings or of any part of proceedings:
(i) to a person who is a member of a profession, in connection with the practice by that person of that profession or in the course of any form of professional training in which that person is involved; or
(ia) to an individual who is a party to any proceedings under this Act, in connection with the conduct of those proceedings; or
(ii) to a person who is a student, in connection with the studies of that person; or
(g) publication of accounts of proceedings, where those accounts have been approved by the court.....
42. Secondly, r 15.27 of the Family Law Rules 2004(Cth) provides:
(1) This Division applies to a subpoena for production.
(2) A person who inspects or copies a document under these Rules or an order must:
(a) use the document for the purpose of the case only; and
(b) not disclose the contents of the document or give a copy of it to any other person without the court’s permission.
43. Thirdly, there is an implied undertaking as to the use of documents produced under compulsion. This flows from the decision of Harman v Secretary of State for the Home Department [1983] 1 AC 280 which was described by the High Court in Hearne v Street [2008] HCA 36; (2008) 235 CLR 125 at 154 as being (footnotes omitted):
Where one party to litigation is compelled, either by reason of a rule of court, or by reason of a specific order of the court, or otherwise, to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use it for any purpose other than that for which it was given unless it is received into evidence.
44. Finally, as her Honour identified, in appropriate cases the court may grant an injunction further restricting the use of the material. Indeed, her Honour made such an injunction in this case.
45. As is correctly submitted by the appellants, s 121, r 15.27 and the implied undertaking have limited reach. It is also true that the possibility of contempt proceedings may not be sufficient to prevent disclosure. The contents of the documents could be disclosed Mr Gessly or indiscreetly. No doubt that is why her Honour issued the injunction.
46. It is true that none of these safeguards, or the injunction, prevent disclosure to the husband. It is also true that the court cannot guarantee that there would be no possibility of information leaking into the public domain. It follows, the appellants submit, that the only possibility of their privacy being guaranteed is for the documents not to be produced.
47. There is, however, a necessary compromise between the rights of justice of litigants and the rights of a stranger. The law has developed, as best it can, various means to protect the privacy of the stranger’s information. Courts frequently deal with cases involving highly confidential or commercially sensitive material. In appropriate cases, extra steps may be taken. Commonly, these include restricting access to lawyers only or to persons who have signed specific undertakings as to confidentiality, and limiting the copying of documents and their removal from the court’s premises. The injunction made by her Honour is an example of the orders that may be made.
48. As is apparent from her Honour’s consideration of s 121, r 15.27, the implied undertaking and her making of the injunction, her Honour was well aware of the desirability in this case of the court doing what it can to preserve the confidentiality of the appellants’ information and documents, and weighed that against the genuine forensic interest of the husband in obtaining any information about the wife’s interest in her late father’s estate. In doing so, her Honour acted entirely in accordance with well-established principles, and her Honour’s findings cannot be said to be clearly wrong.
49. It would be a rare case indeed when documents relevant to issues in proceedings were entirely protected from production because of concerns as to the effect of possible dissemination. As noted earlier, the court is capable of drafting stringent protections for such information. Ultimately, the court must effect a compromise between the rights of litigants and strangers to the litigation, as discussed earlier. This her Honour did.
50. We are not satisfied that her Honour has erred in the exercise of her discretion, and this ground does not succeed.
Determination
Applying the principles and decisions set out above I now turn to determine the objections raised to the subject subpoena.
It is common ground in this case that the entities objecting to the subpoena set out herein are all principally part of a family enterprise originally founded by the husband’s parents. The development of the corporate interests of the husband’s parents since the husband and his parents became adults appears to have involved their involvement in that now “family enterprise” as evidenced by the structure of the relevant corporations set out herein. In some circumstances persons other than immediate members of the husband’s family have taken positions with and interests in a corporation, trust, unit trust or other business as referred to earlier in these reasons.
It is the wife’s case that the subpoena issued to the entities opposing production of the documents sought, call for documents to disclose dealings within a family enterprise. It is the contention of the wife that the entities affected by the subpoena have operated from time to time in manner which has, or may have, bestowed benefits upon the husband which one would not normally expect to see occurring within the operations of a corporation where there is no familial relationship between the directors and/or shareholders.
The proposition advanced by the wife is not novel and it is the experience of this court that “family enterprises” can and do operate in a manner, from time to time, in dealing with the assets of corporations, unit trusts and trusts in a way which would not be expected to be seen where there is no familial relationship between the office bearers and shareholders. This information goes no further than that which can be seen in the reported decisions of this court.
With that background the question to be answered is whether the grounds for objection raised by each of the subject entities is established.
There is a second area of objection raised by the entities which goes to privacy and in particular the concern to limit dissemination of information about a private company or entity in which it is said neither the husband nor the wife have any beneficial interest. In this case some particular history is drawn upon to emphasis why the proprietors and office holders of the relevant entities are concerned about this aspect.
I have set out aspects of law which touch upon this aspect of use of information obtained from a particular item of litigation for some other unconnected purpose. In the usual circumstances it would generally be seen that the matters set out earlier herein would be sufficient comfort for a stranger to a piece of litigation providing documents for inspection by parties to the litigation whether the information contained therein could be described as sensitive or not. In this case I would not and could not, conclude at this time, that the wife would be inclined to act contrary to the law and deal with the documents produced under subpoena by the entities or any information learned therefrom contrary to the law. However, I consider that the entities do have a basis for concern as set out in their evidence. I can see no prejudice which flows to the wife if an injunction was made, as sought by the entities, specifically restraining the wife from dealing with the documents produced, or the information gleaned therefrom, in otherwise than a legal and proper manner. Such an order would, I understand, give some measure of comfort to the entities and those interested therein.
The objections raised by each entity to each subpoena objected to are set out herein. I will deal with each subpoena separately although at one level it may have been possible to make an “in globo” determination.
B Pty Ltd
I find the connection between the husband and this entity sufficient to warrant the issue of the subpoena. The husband has at a relevant time been a director and secretary of this company. The husband’s parents are the legal owners of the company through their corporation C. The beneficial ownership of C and B (so far as the husband is concerned) at this time, appears to be an issue between the husband and wife. If there be no beneficial interest in the husband then there is an asserted resource issue. The documents sought by the wife in the subpoena are sought to establish the case the wife brings. The case put by the wife is not put unsupported by particular knowledge accumulated by the wife during the cohabitation. It is common ground that the wife was employed within the Lauritz family enterprises and thereby potentially had knowledge of at least some aspects of the modus operandi of relevant entities.
Arising from the above I am satisfied there is sufficient potential relevance in the documents sought by the wife. I note the company also agrees there is a degree of relevance to documents sought in paragraphs 6, 7, and 8 of the subpoena.
There is an objection as to the relevance of particular documents sought and to the scope of the call for particular groups of documents. I have considered each of the categories of documents sought, the scope of the documents and the span of time sought. I conclude this objection is not sustained in relation to paragraphs 1, 2, 3, 4, 5, 6, 7, and 8 of the subpoena. All documents sought relate to a period during which the husband was a director of the company and/or seek relevant information personal to the husband’s financial position. I am not convinced, at this time, that the documents sought in paragraph 9 of the subpoena are sufficiently relevant to require production. I will however, permit the wife to renew her call for such documents at any time she is in a position to press the documents relevance.
C Pty Ltd
I propose to dismiss the objection raised by C so far as it refers to paragraph 1, 2, 3 and 4. I propose to extend the injunction restraining the wife from disseminating any information obtained from the documents produced by this entity in the same manner as I have proposed in relation to B.
The relevance of the documents sought by the wife from this entity, and which I propose to allow, is captured by the case the wife outlines in her affidavit material and her submissions, in particular the husband acknowledges he is a beneficiary of the C Discretionary Trust. The wife asserts that the husband was appointed as managing director of this company upon the retirement of his father as a director and/or managing director. The husband remained a director of this company until at least 1 October 2014.
The wife says that in August 2005 the husband received a payment of $350,000 from this company. The husband acknowledges the payment however he says it was a gift from his parents rather than a payment from the company.
The husband has described a method of remuneration he has received from the Lauritz family enterprises. He has received a reduced wage from B together with capital gifts from his parents. Those gifts are significant as set out earlier in these reasons.
Post the separation it is common ground that the husband has resigned most if not all of the offices he has held in the corporations which constitute the Lauritz family enterprises.
It is the wife’s case that the husband has a considerable financial resource in the Lauritz family enterprise. The companies who are objecting to the subject subpoena form part of the enterprise.
It is part of the wife’s case that the husband’s parents have already effectively restructured the family enterprise so as to provide the husband and his siblings with equity in the Lauritz family enterprise although the formal company documents may not record that fact.
I am satisfied there is sufficient relevant connection between the documents I propose to require C to produce and the husbands’ financial circumstances.
I will uphold the objection to paragraph 5 of the subpoena as I cannot see, at this time, how production of any such valuations would produce a relevant document nor a document to which the court could give any real weight should the document be accepted into evidence.
D Pty Ltd
The husband has a significant and relevant connection with this company and I repeat the findings I have made in relation to C and B as appear earlier in these reasons. This company is part of the Lauritz family enterprise. So much is conceded by the company through the objection not being pressed in relation to paragraph 3. The husband remained as a director of this entity until October 2014.
As stated earlier this company says the husband has no loan account in the company. That, with respect does not necessarily mean he has not previously held such account. If there are no records to produce in any particular category then that necessarily lessons the burden on the company to comply with the subpoena.
I propose to dismiss the objection raised by D Pty Ltd. I will make the documents produced under the subpoena subject to the same injunction as referred to earlier in relation to the objections to subpoena already addressed.
E Pty Ltd
As stated earlier in these reasons the husband asserts that all the profits generated by this entity are paid to B Pty Ltd. This assertion clearly links E to B Pty Ltd and consequently to C. As stated earlier in these reasons when addressing the subpoena addressed to each of C and B Pty Ltd, there has been established a relevant connection between the husband and each of those entities. As a consequence of that relevant connection I would dismiss the objection to the subpoena based on an assertion of no relevance.
Turning then to the particulars of documents sought to be produced under the subpoena and addressing the balance of the objection raised by E I find as follows.
All of the category of documents sought have a direct and relevant connection to the husband’s financial circumstances during a relevant period and to the future resources of the husband.
I will dismiss the objection and, in like fashion with the treatment of the other entities objecting to the subpoena, restrain the wife in the use of the documents and information obtained from production under this subpoena.
H Accountants.
The subpoena calls for production of accounting records and documents containing advice given to persons who are not the husband or wife in this proceeding. The subpoena calls for production of documents which are relevant to the personal financial circumstances of the named persons.
One of the grounds upon which the objection is made is that the subpoena is too wide. No time frame is provided to contain the documents sought. Records of both the husband’s parents are sought. Such records may or may not be relevant. The records sought in relation to the husband appear to be relevant if contained to a relevant time frame.
I find the objection upheld on the above ground.
I certify that the preceding one hundred and six (106) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Le Poer Trench delivered on 3 July 2015
Associate:
Date: 3 July 2015
2
5
2