Lavell & Lavell
[2012] FamCA 34
•3 February 2012
FAMILY COURT OF AUSTRALIA
| LAVELL & LAVELL | [2012] FamCA 34 |
| FAMILY LAW – PROPERTY – Where there are significant issues as to each party’s credit – Where the wife admitted giving false evidence in her affidavit – Where the husband has failed to adduce evidence regarding his interest, if any, in a foreign trust – Whether the rules in Jones v Dunkel applies – Consideration of the rule in Blatch v Archer – Where relatively short marriage – Where the parties lived off husband’s pension paid from his self-managed super fund – Where the parties spent the majority of their relationship travelling overseas, using the husband’s resources – Where the circumstances of the case are such that neither a “global approach” nor an “asset-by-asset” approach is suitable –Where the wife’s assets have increased and the husband’s have decreased as a result of the marriage –Where s 75(2) factors favour the husband – Where an order that the parties retain the property they currently hold and the wife transfer $100,000 from her superannuation interest into the husband’s just and equitable in the circumstances. FAMILY LAW – PRACTICE AND PROCEDURE – Subpoenas – Where the wife issued a subpoena to the husband’s accountancy firm – Where the wife provided $43 by way of conduct money – Where the accountant seeks in excess of $4000 for “loss” and “expense” incurred as a result of compliance with the subpoena – Whether an order should be made pursuant to r 15.23(3) of the Family Law Rules – Where the expenses claimed are “substantial” – Whether the expenses sought are “reasonable” – Where recompense envisaged by r 15.23 is not what the firm would charge for the work involved – Where $1000 represents adequate recompense for the loss or “expense” incurred by the accountancy firm as a result of compliance with the wife’s subpoena. |
| Evidence Act 1995 (Cth) |
| Australian Securities and Investments Commission v Rich [2009] NSWSC 1229 LexisNexis Butterworths, Cross on Evidence. |
| APPLICANT: | Mr Lavell |
| RESPONDENT: | Ms Lavell |
| FILE NUMBER: | BRC | 1571 | of | 2010 |
| DATE DELIVERED: | 3 February 2012 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Murphy J |
| HEARING DATE: | 1 & 2 September 2011 |
REPRESENTATION
| SOLICITOR FOR THE APPLICANT: | Small Myers Hughes |
| COUNSEL FOR THE APPLICANT: | Mr George |
| SOLICITOR FOR THE RESPONDENT: | Bridges Family Law |
| COUNSEL FOR THE RESPONDENT: | Mr Hamwood |
Orders
IT IS ORDERED THAT
The wife’s superannuation interest in the M Superannuation Fund be subject to a splitting order that effects a transfer of $100,000 to the husband’s interest in same.
Subject to paragraph 1, each of the parties shall retain the property currently held by them to the exclusion of the other party.
So as to give effect to paragraphs 1 and 2, the parties shall, within 21 days of the date of this Order, file by way of joint communication forwarded by email to …[email protected] agreed minutes of order.
Within 21 days of the date of this Order, the wife shall pay $1000.00 to Managing Director of P Accountants pursuant to r 15.23(3) of the Family Law Rules 2004 for “loss” and “expense” incurred as a result of compliance with the wife’s subpoena filed 17 February 2011.
IT IS NOTED that publication of this judgment under the pseudonym Lavell & Lavell 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 BRISBANE |
FILE NUMBER: BRC 1571 of 2010
| Mr Lavell |
Applicant
And
| Ms Lavell |
Respondent
REASONS FOR JUDGMENT
The parties to these s 79 proceedings cohabitated for four years and nine months, commencing in April 2004. They married in May 2006 and separated on 26 December 2009. At the time of trial, the husband was aged 84. The wife was aged 54.
The wife’s ultimate submission as to her entitlement by way of property settlement varies from her Application, Response, Amended Response and Case Outline. She asserts that she should retain the real property owned unencumbered by her at the commencement of the relationship, together with her current member benefit entitlement in a private superannuation fund, the trustee of which is a company of which the parties are directors and share-holders (M Fund Pty Ltd), and she should, in addition, be paid the sum of $500,000.
The husband asserts that he ought receive 70% of the available property and superannuation interests, the bulk of which (consequent upon taking account of a liability he alleges is owed by a trust, the C Trust, to another trust, the R Trust), are in the hands of the wife. The husband also seeks to have added-back the legal fees of both parties, along with interest said to have been lost as a result of the wife’s premature withdrawal of funds from a term deposit held on trust for the parties’ self-managed superannuation fund.
That short outline does not, though, encompass issues central to the determination of this case. Those issues derive from the wife’s assertion that the husband controls the R Trust such that any property it owns ought be regarded as the husband’s. In that respect, she asserts its value as exceeding $20million. The wife also contends that the husband has failed to disclose gold coins, held, she says, in a vault in a central European country and which have a value exceeding $1.5million. She also contends that the husband is the effective owner of N Company timeshares and their associated points having, she says, a total value exceeding $400,000.
Overview of the Parties’ Relationship and Issues
The parties commenced their cohabitation with the wife owning an unencumbered home unit at L. The unit became unencumbered when the wife sold a business which she owned. The wife does not depose to the net amount/s received from that business.
Those net proceeds discharged, she asserts, the mortgage over the home unit. She says that those same proceeds permitted her to provide (unspecified) sums to her adult children and to invest about $240,000 into the husband’s self-managed superannuation fund.
In total the wife’s property and superannuation interests at the date of cohabitation are agreed to have had a value of $581,600.
About twelve months subsequent to the commencement of their relationship, the parties executed a cohabitation agreement on 27 April 2005 pursuant to s266 of the Property Law Act 1974 (Qld). In it, the parties certify to their respective assets and liabilities as follows:
The husband (Schedule One to the Agreement):
ASSETS:
“[M Super Fund] (as at 30/06/04) $779,641
“[C Trust]” $NIL
Holden [motor vehicle] $44,000
LIABILITIES:
Money that the [C Trust] owes the [R
Trust], [A central European country] (as at 30/06/04) $1,130,441
The wife (Schedule Two to the Agreement):
ASSETS:
BMW motor vehicle $7,000
[Property at L] $330,000
Suncorp Bank account … $2,500
Suncorp Bank account … $2,100
Money transferred into [the husband’s] “[M
Super Fund] (but retained as separate property by
[the wife] $240,000
LIABILITIES
Contingent liability – Chose in action of …
Under Part 19 of Property Law Act 1974 (Qld)
or common law $NK
Overview of the Nature of the Parties’ Relationship
Neither party had any dependants at the commencement of the relationship. The wife’s three children from a previous relationship were all adults at the commencement of the relationship. The parties do not have any children together.
In her affidavit (at [13]) the wife lists where the parties resided during the course of their relationship. Reference to that table reveals that the parties travelled for approximately 33 months of the 57 months that they cohabited. That includes an effectively continuous period of approximately 12 months in 2009 immediately prior to the separation of the parties.
On the wife’s case the parties travelled first class or business class and stayed in accommodation of a high standard (“3½ to 4 stars”). The wife accepts that these trips were funded via the use of N Company points and associated “travel miles” or “points” together with amounts from the husband’s pension paid to him from his superannuation fund.
The wife does not depose to the parties ever living in the wife’s home unit. The wife’s unit was rented and it seems clear from her evidence that any rental received was kept separate from any funds used by the parties for the purposes of their day-to-day living. The wife asserts that she received “$150 to $200” rent per week.
When not travelling, the parties resided in rental accommodation, paid for, as the wife concedes, by the husband without monetary input from her. Rental on those properties ranged, according to the wife, from $235 per week to $700 per week.
The husband did not engage in remunerative employment during the course of the parties’ relationship. The wife has qualifications in healthcare. She engaged in very little remunerative employment during the course of the relationship. (The husband asserts, and it does not appear to be disputed that the wife earned from remunerative employment in the 2007, 2008 and 2009 financial years respectively about $7,000, $11,000 and $2,000).
Entities
Reference is made in the list of assets above to three entities. The husband and wife are the directors of, and shareholders in, M Pty Ltd. That company is the trustee of a self-managed superannuation fund of which the husband and wife are members. The husband’s interest is in the payment phase (as a pension); the wife’s fund is in the accumulation phase.
The husband is the trustee and appointor of the C Trust. He was appointed to each position on 6 February 2003. He replaced his late wife who died early that same year. The whole of the trust deed is not in evidence. What is said to be its Schedule is attached to the husband’s affidavit filed 7 February 2011. That otherwise typed document has a handwritten date of 11 September 2002 inserted as the “Date of Making this Deed”.
It seems tolerably clear that the creation of this trust preceded the parties’ relationship and preceded the death of the husband’s first wife, which, in turn, preceded the commencement of the parties’ relationship by more than 12 months. There is no issue that the husband wholly controls the C Trust.
As will be seen, the R Trust and its workings remain mysterious, although its existence is not in dispute. The husband asserts that he is not, and never has been, “an appointor, executor, trustee or a beneficiary of” this trust and that “I do not, and have never, made decisions with respect to the [R Trust], or directed its business, investments or operations”.
The husband deposes that he has “never received any distributions of capital or income from the [R] trust”. It is, he says, “a registered trust in the principality of [a central European country]” and that, “as far as [he is] aware, [the trust] is operated by a board of directors, manager of which is ‘[K Company]’”. K Company is, he deposes, “comprised of persons who are not directly related to me”.
It is not in dispute that the C Trust has received monies from the R Trust. Those monies have been designated as loans in the books of account of the C Trust. It is not in dispute that those monies have, via the C Trust, benefited the husband and the wife.
The wife alleges that, despite his denials, the husband has been during the course of their relationship, and is currently, in effective control of the R Trust. There are no documents in evidence from the R Trust. The wife asserts, despite his denials, that any such documents as might be relevant to the affairs of the R Trust and its relevant financial dealings are in the possession, power or control of the husband.
Alleged Other Assets
The husband denies the existence of the gold coins of significant value earlier referred to.
It is not in doubt that the husband (and the parties during their relationship) had use of “[N Company] time shares” which, as the wife alleges, have a right to “reciprocal free accommodation benefits worldwide and [N company] points which accumulate annually and are converted to travel points with [an airline]”. The husband says the investments, and the points, belong to the R Trust.
In respect of their benefits, the husband concedes that accumulated points have been used for flights undertaken by he and the wife (“[o]n average, the annual points that I have used equate to about two long distance (say from Australia to Europe or the United States) return, business class flights each year).
The s 90C Financial Agreement
Subsequent to their marriage, the parties executed a s 90C financial agreement on 15 June 2007. In Schedules to it, the parties certify as to their respective assets and liabilities. As listed, the assets and liabilities largely mirror those contained in the Schedules to the cohabitation agreement. (In the latter of the two Schedules, the wife does not list the BMW and Suncorp accounts as assets and lists no liabilities).
But, in an affidavit in support of an application to have the s 90C agreement “declared unenforceable or otherwise set aside”, the husband contends (among other things) that the Schedules contain errors. In particular, the husband asserts that the agreement did not reflect transactions occurring two days before it was signed which, he says, affected the asset and liability positions of the parties.
On that date (13 June 2007), the C Trust is said to have borrowed just short of $200,000 which sum is, in turn, shown as being lent by that trust to the wife as a result of being deposited to her member benefit entitlement within the private super fund earlier referred to. The wife’s member benefit entitlement within the super fund had concomitantly increased by just short of $200,000 more than that revealed by the Schedule to the agreement and the C Trust’s alleged indebtedness to the R Trust had also increased by that amount.
On the husband’s application, the s 90C financial agreement was set aside by consent pursuant to s 90J(1)(b) of the Family Law Act 1975 (Cth) (“the Act”) on 29 July 2010.
The Parties’ Assertions as to Property and Issues
Against the background just described, the hugely divergent assertions as to the “property of the parties or either of them” earlier referred to can be seen in the respective assertions of the parties as to the constitution and value of that property as at the date of separation.
The wife deposes to those assets and liabilities as at that date in the following terms:
[The Husband]
“[M Super Fund]” $ 346,000.00
“[C Trust]” $NIL
½ share in Holden [motor vehicle] E$ 10,000
“[R Trust]” as at 4/6/2009 E$ 21,000,000
[N Company] time shares E$ 266,670+
Plus value points E$ 130,000+
[G coins] E$1,500,000+
Totalling E$23,252,670.00
[The Wife]
½ share in Holden [motor vehicle] E$ 10,000
[Property at L] $ 380,000
Money transferred into [the husband’s]
“[M Super Fund]” (but retained as
separate property by [the wife]) E$ 599,000
Total E$989,000.00
The figures provided by the wife in relation to the parties’ respective superannuation interests as at separation accord with the figures provided by the husband (affidavit filed 7 February 2011) for each of his and the wife’s member balances in 2009.
The husband does not provide a similar list of assets and liabilities as at separation. He does, however, depose to the following assets and liabilities as at 7 February 2011:
[Property at L] (W) $380,000
Holden [motor vehicle] (H) $20,000
[C Trust] Deficit value of $71,903
[M Super Fund] (H) $246,000
[M Super Fund] (W) $599,461
[H Super Fund] (W) $E 7,000
[S Super Fund] (W) $E 5,000
Liabilities
H loan from [C Trust] $1,048,403
W loan from [C Trust] $208,962
On 24 August 2011, the husband filed an Amended Initiating Application in which he set out the parties’ assets and liabilities at that date as follows:
[Property at L] 380,000
Holden [motor vehicle] 20,000
[C Trust] (71,903)
Husband’s interest in [M
Super Fund] 58,849
Wife’s interest in [M
Super Fund] 499,461
Add-back for income lost as a direct
result of early termination of
term deposits 95,339
Add-back for husband’s legal fees 150,000
Add-back for wife’s legal fees 100,000
Wife’s [H & S Super Funds] 12,000 1,243,746
Liabilities:
H Loan from the [C Trust] (1,048,403)
W Loan from the [C Trust] (208,962) (1,257,365)
It will be noted that this list differs from the one provided by the husband on 7 February 2011, specifically in terms of the inclusion of $345,399 in add-backs and, perhaps more significantly, the lower values ascribed to each of the parties’ superannuation interests.
In an affidavit filed the same day as the husband’s Amended Initiating Application, Mr Y sets out what he asserts are the “current” member’s interests of each of the parties; the values ascribed to the parties’ superannuation interests in the 24 August 2011 list above are identical to those deposed to by Mr Y. Mr Y states that the wife’s interest is arrived at by deducting the $100,000 withdrawn for legal fees in accordance with two separate Court orders, from the wife’s interest as at 30 June 2009 ($599,461). The husband’s interest similarly takes account of $130,000 paid out of his interest for legal fees. However, the value attributed to the husband’s interest also takes into account a pension of $4083.33 per month paid to the husband from June 2010 as well as $100,350.18 withdrawn from accounts held on trust for the parties’ super fund by the husband in late 2009 (about which more will be said below). My own calculations confirm that, when account is taken of these withdrawals, the husband’s current interest is $58,849.
One undisputed fact, among the considerable uncertainty plaguing many aspects of this case, is that on 29 December 2009 the wife unilaterally withdrew $862,322.06 from accounts held by the trustee of the M Superannuation Fund (the parties’ self-managed super fund). Annexed to the husband’s affidavit is a letter from Suncorp Bank dated 4 January 2010 which indicates that the sum withdrawn from the account was subject to a penalty of $56,208.97 (as a result of the premature withdrawal). Those moneys were subsequently refunded such that the wife had in her possession $918,503.13 belonging to the parties’ superannuation fund.
The wife did not spend any of the funds she withdrew. On 31 May 2010 I made orders, among others, that the wife “transfer the sum of $918,503.13” to a specified account in the name of the trustee of the M Superannuation Fund and facilitate the husband “drawing a pension of not more than $49,000 per annum from the accounts of the super fund…”.
Another undisputed fact is that, following the wife’s unilateral withdrawal of funds, the husband similarly unilaterally withdrew $100,350.18 from accounts held on trust for the M Superannuation Fund. The husband says that an additional $50,000 had been “previously given to [his accountant, Mr Z] to invest in a video game”. It seems, though, that those funds had not been spent for that purpose because the husband deposes to having spent a total of about $150,000 as follows:
·$49,936.58 towards “accountant’s fees”;
·$72,258.32 towards “solicitors fees”;
·$24,500 “towards my day to day costs of living”; and
·$4,800 on his car.
The withdrawals by each of the parties total $962,672.24. The amounts attributed to each of the party’s respective member’s interest as at 30 June 2009 amount to $945,827. How the parties were able to withdraw $16,845.24 more than the total of their combined member’s interests was not addressed. Nor is it readily discernable from either the oral or affidavit evidence of the parties or the submissions made by their respective counsel.
There is a similar lack of explanation for why the wife’s member’s interest is said to have decreased (despite being in the accumulation phase) from $616,868 at the end of the 2007 financial year to $599,461 at 30 June 2009.
Following the orders made by me requiring the wife to deposit the $918,503.13, two separate orders were made enabling the withdrawal of $230,000 from those funds. On 10 January 2011 orders resulted in $55,000 being applied from the husband’s member’s interest to his legal fees and $25,000 being similarly applied by the wife from her member’s interest. Consent orders made on 11 August 2011 provided for a further $75,000 to be transferred from each of the parties’ member’s interests to their respective solicitors’ trust accounts, to be applied to their legal and accounting fees. (The terms of the orders submitted and agreed to were designed, it was said, to deal with the fact that, within the fund, one interest was in accumulation and the other in payment).
It seems, therefore, that the best evidence before me with respect to the value of the parties’ current member’s interest is the financial statements of the M Superannuation Fund and the Orders made on 10 January and 11 August 2011. Such evidence, when taken together, results in a figure of $138,782.73 for the husband’s interest and $499,461 for the wife’s. These figures take account of the $130,000 and $100,000 paid for legal fees to the husband and wife respectively by reason of the orders earlier referred to as well as a pension of $4083.33 per month drawn by the husband since June 2010 (i.e. 19 months).
The R Trust and its Control
Persons Referred to in the Evidence in Connection with the R Trust
As part of eschewing any meaningful knowledge of, or association with, the R Trust, the husband deposes that he is unaware of the current directors of K Company. However a number of persons, most notably a Ms X and a Mr V, are referred to in the evidence (although not necessarily as directors of K Company). Alleged dealings and conversations with some or all of those people are central to the inferences which the wife would have the Court draw about the husband’s asserted interest in, or control over, the R Trust.
The wife alleges that Ms X is “the manager of the [R Trust]” and is the “only director of that company”. No evidentiary foundation is offered of the last statement. A document said by the husband to be a loan agreement and exhibited to his 2011 affidavit, is “signed by [K Company] as trustee of the [R Trust]” over what are said to be the signatures of Ms X and Mr W given, in each case according to the document, on 5 December 2002.
The wife deposes to visits to, and meetings with, Ms X during visits by the husband and her to Europe in 2005, 2007 and 2009.
On the first of those visits, the wife alleges that she met with Ms X and Mr W and that she there “signed some papers” which, she says, were designed to “change the trust deeds to include my children and I as the beneficiaries”. She does not specify what trust (or trusts) she refers to. During the 2007 visit to Europe, the wife swears that she met with Ms X and Mr V in Ms X’s office on 5 July. She also deposes to meeting Ms X with the husband during their visit to Europe in 2009.
Although the husband deposes to meeting with Ms X, Mr V and/or Mr E at various times during the parties’ visits to the central European country, he swears that he has never met with Ms X in the wife’s presence - as alleged or at any time. He also asserts that he has never met with Mr W in the wife’s presence.
The wife also deposes that the husband has told her that Ms X is required to “obtain the joint authority of [Mr V], a director and employee of the [Q Bank]” in order for funds to be paid out of the R Trust “so as to minimize the risk of any misappropriation of funds”. This, too, is denied by the husband.
The wife alleges that she was involved in both meetings and social occasions with Mr V. The husband deposes that “it is completely untrue that [Mr V] met with [the wife] and me to discuss investments, that [Mr V] discussed financial or investment reports/summaries with either [the wife] or me, or that I ever said to [the wife] that ‘we have 9 million dollars’”. Similarly, the husband says that it is “completely untrue” that “we discussed reports and investments made or to be made ‘at great length and regularly’ … at no time have we ever discussed investments of the [R Trust] as though they were ours, or made decisions with respect to them”.
The wife alleges that on 2 July 2009 she witnessed the husband dealing with Mr E at the Q Bank at which time, she says, the husband requested and received $6,000 from him. She also alleges that Mr E was the agent for conducting unspecified share purchases (she says on behalf of she and the husband) covering $10million dollars in total investment. Again, this is denied by the husband. Again, the only evidence in support of the allegations is the wife’s assertions.
The husband said in oral evidence that he has had an ongoing association with the central European country, through his first wife, “since 1955”. Notwithstanding the death of his first wife in 2003, the husband continues to frequently travel to the central European country. As well as the unchallenged evidence of the wife that she and the husband travelled there in 2005, 2007 and 2009, the husband and his accountant, Mr Y each depose to travelling there together in 2010 where they met Ms X and Mr E who is, apparently, a director of the Q Bank.
According to the husband, he has known Ms X and Mr V for “many years”. He became acquainted with Ms X about 10 – 12 years ago as a result of her employment with K Company. (He says that was because of an association between his late wife and the R Trust rather than an association between that trust and him). The husband says that Mr V, (a then “director” of the Q Bank, through which R Trust transactions passed), was a “personal friend” of his. The husband said in oral evidence that Mr V died “in early 2010”.
When asked why he continues to visit Ms X, given his repeated denials of having any interest in the R Trust, the husband said that he has maintained contact as a result of the loans made by the R Trust to the C Trust and as a result of the N Company points and the TopCard. Each of those matters will be looked at more closely below.
The husband acknowledged that Mr V worked for the bank with which the R Trust banked and through which the R Trust facilitated transfers of money to the C Trust. Interestingly, despite his “purely social” relationship with Mr V, the husband agrees that meetings with him took place at the Q Bank. When asked why, the husband said that “is where he worked” and that is “where he was during the day”.
While the husband alleges that financial affairs, investments and the like were never discussed with Mr V, he appears not to challenge the wife’s evidence that she and the husband socialised with Mr V and his family and that she and he met his wife, one of their daughters and a grandson. The wife annexes a Christmas card from him addressed to the husband and wife where Mr V’s wife’s illness is briefly referred to.
Disclosure
The wife alleges that the husband has possession of, or power or control over, documents belonging to the R Trust and that he has failed to disclose any such documents. The husband denies his capacity to disclose them. He has, he says, directed an authority signed by him to the R Trust (through Ms X) giving, to the extent he is permitted or empowered to do so, both permission to disclose all such documents held by that trust as might be relevant and a request to do so. The husband deposes to “not receive[ing] a positive response” to the authority.
In addition, a series of questions were sent to Ms X by the husband addressing in broad terms issues that might be seen to be relevant to his alleged control over, or interest in, the R Trust. Those questions were purportedly responded to by Ms X, but her answers were sought to be led through the husband. The evidence in that form was ruled inadmissible.
The issue of what inferences might be drawn from the failure to call Ms X (or others) as witnesses is addressed later in these reasons.
Documents and Loans
The husband asserts that the R Trust (in which he says he has no interest, control or entitlement) is owed over $1million by another trust (the C Trust) which he controls. Despite the size of that borrowing, documentation is scant to say the least and it is not suggested by the husband that security has been sought, offered or given.
Whilst several pages of the trust deed for the C Trust are in evidence, the entirety of the deed is not. The husband exhibits to his affidavit a document entitled “Schedule” which refers to the C Trust and which has handwritten on it the date 11 September 2002 as the date upon which the deed was allegedly made. It refers to the husband’s late wife as the trustee and nominates her and the husband as appointors. A “Deed of Retirement and Appointment of Trustee of the [C Trust]” follows this document as an exhibit to the husband’s affidavit. It records the death of the husband’s then wife “with no personal representative” and records the husband, as appointor, appointing himself as the Trustee.
Interestingly, to the extent that the “Schedule” constitutes the sole admissible evidence of the C Trust, it lists the late wife as the trust’s only beneficiary. It is not known what, if any, terms of the trust might govern the trust’s beneficiary/ies upon her death. This issue is not addressed anywhere in the evidence. What is known from the financial statements of the trust exhibited to the husband’s affidavit is that over a million dollars is shown as having been lent by the trust to the husband and over $200,000 to the wife.
The R Trust has, on the husband’s case, lent, in 2002, $600,000 in trust moneys to a different trust (the C Trust) in a foreign country. The husband exhibits a document to his affidavit which he says evidences that loan.
It should be observed that, at the time of the loan, the trustee of the borrowing trust was a person (the husband’s late wife) who, the husband says, did have some form of association with, or interest in, the R Trust.Yet, the exhibited “Deed of Loan” (whose authorship is not deposed to) remains in my view a somewhat curious document for the following reasons:
·It provides for no security;
·It provides for no interest;
·It provides for no repayment amounts or schedule;
·It provides for no term; the defined “repayment date” is “such date as the lender and the borrower agree in writing”;
·Whilst the borrowing is said to be repayable upon “death or incapacity” (the latter of which expressions is undefined), it is not said whose death or incapacity triggers the clause. If the borrower is to be implied, the borrower identified in the document is the trustee of a trust;
·Whilst the advance is provided “on the terms and subject to the conditions set out in this agreement” no such (meaningful or certain) terms or conditions are immediately apparent.
Two further exhibits to the husband’s affidavit are letters purportedly from “[K Company]” signed by it as “Trustee of [R Trust]” over the hand of “[Ms X]” whose position and/or authority to sign are not stated on the document. Each is in similar terms and dated, respectively, 25 March 2004 and 8 June 2007. They will be referred to in more detail in a moment. In the current context, it is observed that each is said to evidence, and refers in terms to, a “further loan” of, respectively. “AUD 60.000” and “AUD 200.000”. Each also makes reference to “the Deed of Loan dated 5th December 2002” to which reference has just been made.
Of course, between that Deed of Loan and the “further loans”, the trustee of the borrowing trust had changed to the husband. As a result, the borrower ( the C Trust) no longer had as its trustee (and appointor) a person who, on the husband’s case, had some interest of some type in the R Trust (the husband describes it as the “family trust of [his late wife]”) and, on the husband’s case, the new trustee of the C Trust was, in stark contrast to its previous trustee, a person who had no connection with, or interest in, the R Trust.
Further, despite those letters cross-referring to the 2002 “Deed of Loan”, the “borrower” in that document was, in terms, different to the borrower in respect of each of the two later alleged loans.
It is not in dispute that no repayments have been demanded at any time from the R Trust, including subsequent to the death of the husband’s first wife.
Each of the matters referred to in the dot points above apply equally to each of the two “further loans”, and to the total amount purportedly evidenced by those documents ($860,000).
It might also be observed that the financial statements of the C Trust put in evidence by the husband reveal it having no fixed or hard assets by which it could meet a claim by the R Trust for repayment of significantly more than a million dollars which, according to the accounts, is owed to it.
Documents Evidencing a 2007 Advance and the Parties’ Credibility
It is not in dispute that $200,000 was advanced from the R Trust to the C Trust in 2007; the husband exhibits to his 2010 affidavit bank statements for the C Trust showing a deposit on 13 June 2007 of $199,969.69. The circumstances in which that payment arose and was documented are, though, significantly in issue.
It will be recalled that the husband exhibits to his February 2011 affidavit a document purportedly signed by Ms X on behalf of the R Trust dated 8 June 2007 purportedly recording a loan of $200,000.
As has been seen above, the wife alleges that she met with a number of people relating to the affairs of the husband and R Trust (which she asserts are synonymous) during trips to the central European country with the husband. Specifically, in respect of an alleged meeting in July 2007, the wife deposes in her affidavit of evidence in chief:
98. On this occasion, [the husband] required to evidence the earlier transfer of AUD$200,000 to the [C Trust] account, which had already taken place. [Ms X] produced a copy of a letter, dated 25 March, 2004. In my presence, [the husband] deleted certain parts of that letter such as the addressees name and address, date of the letter and where the funds were to be sent. He inserted my name and address, back dated the letter to 8 June 2007 and instructed that the funds be deposited to the [C Trust] account number […]. He then instructed [Ms X] to retype the letter which was done without any questions or further discussions. I observed [Ms X] to simply do what she was told to do, without questions. The [husband] was totally in control of the situation and did not appear to be someone who was negotiating a loan in his favour. I was aware that at this time, the funds totalling AUD$200,000 had already been transferred to the [C Trust] account. In fact, I had earlier heard the [husband] talking with [Mr V] over the telephone and instructing him to transfer the funds to [C Trust] account. [Exhibit E1 to the affidavit is the document dated 25 March said to have been altered by the husband in the wife’s presence].
99. I say that attached to this letter marked annexure E1, with a staple, was another sheet of paper which [Ms X] had typed:
“1.Get loan from [R Trust] to [C Trust] for $200,000 or some other amount as you consider appropriate or as [R Trust] allows.
2.[C Trust] gives [the husband] a loan of $200,000
3,[The husband] gives [the wife] a gift of $200,000
4,[The wife] makes an undeducted contribution to the superannuation fund of $200,000”.
[Exhibit E2 to the affidavit is a copy of the document deposed to]. I say that this document was created because [the husband] had explained to [Ms X] in my presence how he wanted this draw down to be structured. [Ms X] therefore typed up these instructions. She gave him a copy which was stapled to the letter with the alteration.
The wife tendered the original of that letter (Exhibit W1). The husband admitted that the original handwritten notations on that document are his. The amendments reflect what was ultimately contained in the letter from Ms X (on behalf of K Company) purportedly dated 8 June 2007 in relation to the $200,000 loan. (The document also contains a photocopied handwritten notation in its top right-hand corner. That notation was appended to the original of the earlier document to which the husband’s handwritten notations were added in circumstances that will be addressed below).
The husband and his accountant, Mr Y, give an entirely different account of the creation of these two documents.
Mr Y swears that he instructed the husband to make the amendments to the letter which the husband subsequently did whilst in Mr Y’s presence. Mr Y deposes to having advised the husband to document the $200,000 loan “the same as the previous loans”. Mr Y pointed out that his initials were on the copy of the document subsequently amended by the husband along with a date (23 February 2006). That is the photocopied notation appearing on Exhibit W1 to which reference was made above.
Interestingly, Mr Y swore that the wife was present when the husband amended the document. Mr Y stated that he could “remember…very clearly”; the wife was “looking out the window singing” at the time.
After referring to his records in the witness box, Mr Y said in cross-examination that the consultation during which the letter was amended by the husband took place on 6 December 2006. That is contrary to Mr Y’s affidavit evidence which is to the effect that the letter was amended in “early June 2007”. His explanation for this disparity was that “I didn’t go back and check my timesheets at the time and we had many meetings. I assumed it was that meeting [i.e. the June 2007 meeting] and I didn’t go back far enough. [The husband] arrives at times without any appointment. We had no reference of it. If it is only a few minutes, I don’t even charge him for it”.
In oral evidence Mr Y said that there were multiple discussions involving both the husband and wife in December 2006, February 2007 and, subsequently, June 2007, regarding obtaining a significant sum of money to put into the wife’s superannuation member benefit account. According to Mr Y, during those multiple discussions he provided advice to both the husband and wife regarding how that might be achieved. He said he asked the husband if it would be possible to obtain a further loan from the R Trust. But, he said, it was not until some months after the money had been received on 13 June 2007, that he became aware (whilst completing the 2007 financial statements), that further funds had been acquired from that source.
In direct contrast to the (detailed) deposition of the wife in her affidavit, Mr Y gave evidence that he was “certain” he had prepared the document exhibited as E2 to the affidavit of the wife. It will be recalled that, in that affidavit, the wife swears that “[Ms X] had typed” it and further swears that the document had been prepared by [Ms X] because “… [the husband] had explained to [her] in my presence how he wanted this draw down to occur”.
Mr Y’s oral evidence was interposed during the cross-examination of the wife who remained in the courtroom to hear it. When the wife’s cross-examination resumed after Mr Y had given evidence that he was certain he had prepared the document just referred to, the wife admitted that her sworn evidence that Ms X had prepared the document was false.
She went on to say in cross-examination that she had told her lawyers that Ms X had prepared that document because she was “intimated” by Mr Y. The only evidence which might appear even remotely consistent with the assertion of “intimidation” is that deposed to at [49] of the wife’s affidavit filed 9 March 2011:
…[d]uring this meeting I observed the [husband] to appear confused and [Mr Y] appeared ignorant of the arrangement [regarding the $200,000 loan from the R Trust], and ignored my explanation. I felt threatened. In particular the [husband] could not understand how I had contributed more than he had into the self managed fund and became angry and said “she should not have so much”. I observed Mr…[Y] to appear happy when the [husband] was angry with me, but offered no explanation to placate the Applicant.
Of course, this paragraph merely compounds the lie to which the wife admitted; the premise of the claim is based upon the wife’s false assertion that Ms X, as opposed to Mr Y in consultation with the husband, compiled the document setting out how to “draw down” additional funds.
Upon further questions being asked, I adjourned the Court to allow the wife to obtain legal advice in respect of any potential claim of privilege against self-incrimination or civil penalty (s 128 Evidence Act 1995 (Cth)). Upon the Court resuming, the wife elected not to answer the questions. But the wife then sought to claim that her evidence with respect to the husband amending the letter in the presence of Ms X was truthful. Quite how that assertion is said to sit with her earlier evidence (and the reason for its falsity) was not explained in evidence or in submissions.
I accept the evidence of Mr Y as to the circumstances in which the documents E1 (and its original, Exhibit W1) and E2 came into existence and the circumstances leading up to their creation. I accept his explanation for the difference in dates between, on the one hand, his affidavit and, on the other, his oral evidence. The evidence seemed to me to have the ring of truth about it and I accept that the nature of the professional relationship between he and the husband was as he described it as referred to above.
I reject the evidence of the wife in respect of this issue. I think it highly likely that her evidence (including, it might be noted, the detail which attended it) is simply concocted. Her earlier sworn account – given not under cross-examination but in her own affidavit – is not (and, in any event in my view, could not) be explained as mistaken or confused. Nor, as I have said, can it be explained on the basis of alleged “intimidation” by Mr Y.
I find that the two documents were created by, and in the presence of, an entirely different person to that deposed by the wife (Mr Y, the husband’s accountant and not Ms X) at an entirely different time (6 December 2006 and not July 2007) and in an entirely different country (Australia and not the central European country).
Discussions relating to the acquisition of a significant sum of money ($200,000) ultimately received on 13 June 2007 took place over at least three consultations between Mr Y and the parties between December 2006 and June 2007. Mr Y affidavit evidence is that the husband said to him that “I can ask [R Trust] to see if they agree to a loan, but how do I assure them that it will be repaid” to which Mr Y responded (according to the husband) “document it the same as the earlier loans”.
Mr Y is a qualified accountant. I find it puzzling that a qualified accountant would have said that in response to the husband’s statement. He may have said it in the context of a conversation by reference to other matters (for example the recording of the advance in the books of account), but how the document was supposed to reassure a trustee about repayment eludes me as does the statement itself in response to the alleged statement by the husband. But, the husband was not challenged on the evidence referred to in the preceding paragraph and Mr Y was not asked about it.
The husband asserts that he had to “beg” Ms X to have the R Trust lend these moneys to “save his marriage”. I reject that evidence as I reject much of the husband’s evidence; I think this specific evidence is false.
The document that was produced so as to, apparently, reassure a foreign trustee about an unsecured loan of $200,000 to an Australian trust was the same, substantively, as the letter allegedly evidencing the earlier alleged loan of $60,000. There is no evidence before the Court of the R Trust (whether through Ms X or otherwise) engaging in any written negotiation or discussion about the loan of a further $200,000 to the C Trust. Rather, a typed version of the document as modified by the husband is said to emerge (without alteration or any further query) signed, apparently, by Ms X in terms mirroring precisely the husband’s handwritten notations.
One of the handwritten amendments, made by the husband in Mr Y’s (and the wife’s) presence on 6 December 2006, is the inclusion of a date on the document (8 June 2007). The typed document, signed by Ms X and emanating from the R Trust evidencing a payment of $200,000 made on 13 June 2007 bears precisely the same date as what the husband had handwritten some six months earlier.
It will be appreciated from what has been said earlier that ultimate findings about the R Trust will need to be made based, essentially, upon the evidence of the parties. The findings already made in respect of aspects of the evidence of the wife have, plainly enough I would have thought, been significant in my forming an overall view that I have grave reservations about the veracity and reliability of the wife’s evidence.
That view is also informed by my general impression of the wife in the witness box and her evidence in general. I had the distinct impression that her evidence was not formed by her seeking to give the most accurate exposition of her honest recall but, rather, by the tailoring of evidence to suit her ultimate ends in the proceedings.
On three occasions proceedings were stood down so as to allow the wife to receive legal advice from those advising her in respect of s 128 of the Evidence Act. I have already referred to one of those occasions above. Having permitted the wife to take objection, I determined in each case that there were reasonable grounds for each (see s 128 Evidence Act). I did not require the wife to answer any such questions under cover of a certificate (s 128(4) Evidence Act), deciding against that course because the questions and the answers thereto pertained essentially to the issue of credit, as distinct from an answer that might provide an avenue of inquiry in respect of issues to be directly decided by me in these proceedings.
One of the adjournments just referred to was occasioned by counsel for the husband asking whether or not the wife had stolen the husband’s passport from the husband’s briefcase. Those questions arose against a background where the husband contends that the wife stole his briefcase from the courtroom after a hearing in January 2011. The husband maintains that his passport and phonebook (and copies of emails he had placed therein) were in the briefcase at the time it was stolen.
The husband says that, subsequent to his complaint to court staff about the missing briefcase, it was located outside the ladies’ toilets in this Registry. He says that the wife was the only person with the opportunity to remove it and that she did so. Having taken advice, the wife answered the questions put about this topic and denied taking the husband’s briefcase or anything within it.
However, despite this denial, the wife says that she “found” a red phone book which, she concedes, belonged to the husband. She found it, she said, on George Street near the Court. Interestingly, it was “found” on the day that the husband says it, and his briefcase, was removed from the courtroom. Inside the phone book, the wife says, was an email between Mr Y and Mr E. She removed the email.
Having removed an email, which she knew did not belong to her, from a phone book, which she knew did not belong to her, she says she put the phone book back on the street where she found it. Further, she says that she said not a word to anyone about finding the phone book, or the email, for eight months. At that time – August 2011 – she says that she gave a copy of the email to her solicitors.
I reject that wife’s evidence as to finding the phone book or the email and the circumstances said to surround it. Indeed, I consider her evidence borders on the farcical. In saying that, I am aware of the gravity of a finding that the wife has stolen property and the steps that should be taken to afford her natural justice in respect of any such potential finding. I make it plain that I do not purport to make that finding here. But, as will, I think, be obvious, this evidence, too, contributes significantly to my grave reservations about the veracity and/or reliability of the wife’s evidence in general.
Having said that, I also have very significant reservations about the veracity and/or reliability of the husband’s evidence, particularly as it relates to the R Trust. I have arrived at that conclusion having carefully observed the husband in the witness box and listened carefully to his evidence. I consider that he, too, tailored his evidence in a manner which he perceived was consistent with the desired outcome as distinct from attempting to give his best honest recall of earlier events.
That general impression is particularly informed by his evidence in respect of the N Company timeshares and the use of a “TopCard” (which, the evidence reveals, is a credit card similar to a Visa Card).
The N Company Timeshares and “TopCard”
In relation to the N Company Points, the husband’s evidence is that he had ready use of those points (which, he says belong to the R Trust and accumulate from “timeshare investments” which also belong to the R Trust). The husband deposes that “[o]n average, the annual points that I have used equate to about two long distance (say from Australia to Europe or the United States) return, business class flights each year”.
In support of her claim that the husband owns, or at least has effective control over, the N Company timeshare investments which, in turn, give rise to an airline travel points, the wife annexes to her affidavit (filed 9 March 2011) an email (Annexure “P”) and a letter (Annexure “Q”). Each is from the N Company Club.
The email, dated 2 December 2009, was sent to the wife and is in these terms:
Dear Mr. and Mrs. [Lavell]:
RE: […], […] and […]
Thank you for contacting Resale Operations at [N Company Club] regarding the sale of your timeshare. As requested, attached is your listing agreement packages…
Please note that each owner must sign a Durable Power of Attorney page which requires a notary AND two witness signatures.
…
Should you have additional questions or if you choose not to sell your ownership through [N Company Club], contact our office toll free number…
Regards,
…
Resale Operations[N Company Club].
[…]
The letter, on “[N Company Club]” letterhead, is dated 1 December 2009 and is in these terms (noting that “[J]” is the name of the husband’s late wife):
[The husband’s full name] and [J Lavell], as Trustees of the [Mr Lavell] and [J Lavell] Trust dated November 20, 1995
C/O [K Company], PO Box […] […][…], [Central European country]
[…], Fixed-Platinum
Owner Number: #[…]
Dear Mr. and Mrs. [Lavell],
As Requested, enclosed are documents to list your week for sale with [N Company Club]. Please verify that the name(s), address and phone number(s) are correct. All documents must be completed with necessary signatures in order to place your week on the market. Note that the Sample Contract of Sale is to be retained for your records and does not need to be returned with your listing agreement.
Enclosed:
·Open Listing Agreement
·Durable Power of Attorney*
·Agency Disclosure
·Title Defects
·Sample Contract of Sale
…
We are pleased to inform you that [N Company Club] continues to evaluate opportunities to promote the sale of your ownership. As such, [N Company] may offer special promotions and discounts to attract buyers. As our client, you will be presented such offers for consideration. Your response to accept or decline an office is required within 24 hours. Accordingly, please ensure that you provide us with your current email address or preferred contact number…
This resale listing agreement will expire 14 days from December 1, 2009. If the documents have not been returned we will presume you have chosen to stay within the [N Company Club] family.
Sincerely,
Resale Operations
[N Company Club]
*Durable Power of Attorney forms must be notarized AND witnessed by two adults. If more than one party holds title, a separate Durable Power of Attorney page must be complete for each individual.
[Bold in original]
Attached to the letter is an “Open Listing Agreement”. It is expressed to be between “[N Company]” and “[Mr Lavell] and [J Lavell] as Trustees of the [Mr Lavell and J Lavell Trust] dated November 20, 1995”. The authenticity of the documents is not challenged. It is not suggested that the documents are not documents belonging to a third party commercial entity (that is to say, an entity arms length removed from the parties and these proceedings).
The wife deposes to receiving the letter and email after making enquiries, at the request of the husband, about selling the timeshares (an allegation not addressed by the husband). It is in my view significant for present purposes that N Company was prepared to deal with the wife. The husband, when shown those documents, denied the existence of a “[Mr Lavell and J Lavell Trust]”. The husband suggested that N Company must have got the name of the R Trust confused with his name and his first wife’s name. I reject that explanation.
The husband’s counsel offered a different explanation in submissions: he submitted (or, more accurately, speculated) that the “[Mr Lavell and J Lavell Trust]” and the “[R Trust]” may be the same trust; that is, the former may be an earlier name of the latter. It is, according to counsel, too coincidental that both trusts have the same trustee (K Company). No such suggestion was made by the husband in evidence.
Moreover, any such submission/speculation would appear to be contrary to the evidence. The husband says that he spoke to a Dr KK about the R Trust in “the late fifties”. He also says that the R Trust previously had a trustee other than K Company. Each of the letter and listing agreement just referred to describe the Lavell trust as “dated November 20, 1995”. No evidence is offered by the husband whereby he seeks to disabuse N Company of what he would assert is a mistaken view as to the ownership, nor is any document produced to that effect.
The wife deposes that the R Trust paid the annual fees associated with the timeshares, which was deducted from the husband’s “TopCard” (the credit card held by the husband that, it is common ground, is paid for by the R Trust). In support of this, the wife annexes to her affidavit an email from an N Company adviser dated 7 October 2009 (exhibit “O1”) which states:
[Ms Lavell & Mr Lavell], [i.e. the wife and husband]
It is $104 per week to trade for points. It has always been there. From the beginning [Ms CC] had a credit card on file to just charge, but I have no credit card any longer. I believed he switched cards or something and that why [sic] I no longer have it.
The wife replied to that email on the same date (exhibit “O2”):
Thank you for your explanation. [The husband’s] credit card was stolen in Paris by pick pockets, a month ago on 09/09/09. We canceled [sic] it and now have a new card for him;
[The husband’s] card is a Visa in the name of … [account number and expiry date have been omitted].
Again, the authenticity of the documents is not challenged. It was not suggested that the documents are not documents belonging to a third party commercial entity. In my view the inference properly to be drawn from the former document is that the reference to “he” is a reference to the husband and that the company had his credit card on file with which they could “trade” for points.
It is accepted that ownership of the timeshares (and/or the “trading” which is referred to in exhibits “P” and “Q”) produces travel points which, it is accepted, are used by the husband. Why or how that is so, and the terms upon which they might be used (if any) are not deposed to by the husband. Indeed, why the husband would be permitted (apparently unlimited) use of timeshares, and the points flowing from them, when each purportedly belong to a trust in which he has no interest is also not explained by him, save to suggest (implicitly) that it has always been so.
The husband’s evidence is that he obtained use of a TopCard following his first wife’s death and that he used the card in “emergencies” only. The wife annexes to her affidavit filed 9 March 2011, bank statements relating to the husband’s TopCard which reveal charges to, inter alia, a rental car company. The husband claimed, during cross-examination, that the card had been incorrectly charged and that the document annexed by the wife was used by the husband to draw the company’s attention to this incorrect deduction. Those statements also reveal charges to various stores and supermarkets in both the United States and Australia.
The husband also admits to using the TopCard to pay for his “pacemaker operation” in the US in 2009. The total of that operation was US$32,000. Counsel for the wife put to the husband that the use of the TopCard was not necessary as the husband ultimately had at least four months to pay the account and could have drawn on his cash resources in Australia to pay the account. The husband stated that he could not withdraw the funds from his account in Australia without incurring significant penalties and that is why he had to rely upon the TopCard and, ultimately, the R Trust.
The husband also obtained a “subsidiary card” for the wife, which, according to the husband was to be used by the wife “in the case of [the husband] being incapacitated”. The husband states that the wife used her TopCard “as and when she saw fit”. Again, why a trustee might permit a stranger to the trust to do so is not explained. The husband claims that when he travelled to the central European country in 2010, Ms X “cut up” his TopCard due to overuse and the husband has not, he says, been provided with a new card.
I do not accept the husband’s explanation or his evidence in respect of the N Company timeshares. I consider it highly likely that a Mr Lavell and J Lavell Trust exists and that the husband’s assertions about his knowledge to the contrary are false. Further, and independent of that finding, I find that whatever person or entity owns the N Company timeshares, the timeshares can be dealt with at the direction of the husband or his agent.
While I consider it likely that, as he deposes, the husband may have sought to keep use of the TopCard to a minimum, I do not accept that the reason for that is that the R Trust, or Ms X on behalf of it or its trustee, exercises effective control over the card or its use. Nor do I accept that, even if it is true that the husband does not currently possess a TopCard (which I doubt), he will not be able to readily access such a card in the future which such card, as in the past, will be paid for by the R Trust.
Gold coins
The sole evidentiary foundation for the wife’s assertion as to the existence and value of the gold coins which she asserts the husband owns and has not disclosed in these proceedings is her deposition that:
82. The [husband] and I were then taken to a security vault in the basement of the [Q Bank]. It was a room sized safe, containing many safety deposit boxes along a wall, which looked like very large post office boxes. [Mr V] unlocked the [husband’s] safety deposit box with a key he had and waited outside the safe for us to finish with our business. I was amazed and excited as I had never seen a vault like this before. I saw many valuable items in the deposit box including some jewellery and a plastic coin box, the size of a cement brick containing 1,000 (one thousand) [gold coins]. The [husband] encouraged me to lift the box containing the [gold coins] to appreciate how heavy the gold was. I found the container quiet [sic] heavy to lift and while attempting to put the container back into the safe deposit box in the wall, I managed to crease my skirt, as it got caught between the entry to the safe deposit box and the container containing he [sic] [gold coins]. I had to ask the [husband] to help me pull my skirt out. I recall that I was wearing a white skirt with a white blouse.
I reject the wife’s evidence in that respect. It is asserted by her counsel that I should attach reliability to it by reference to the specificity and particularity of the details surrounding the event. I am not comforted by either. The same might be said of her affidavit evidence surrounding Exhibit W2 earlier discussed, which such evidence she admitted is false. I do not consider that her evidence in this respect has the ring of truth about it. I accept in this respect the husband’s evidence that no such visit at no such bank vault occurred.
Further, and in any event, no basis is given by the wife for her assertion that there were “a 1000 gold coins”. Having provided no foundation (apart from her assertion) that there were 1000 coins, the wife then seeks to use that assertion together with further (hearsay) assertions as to the weight of these gold coins and the value of gold (and the implicit assertion that these gold coins are pure gold) so as to arrive at an asserted value. Counsel for the wife suggested I could use judicial notice (s 144, Evidence Act). I reject that submission. While I might be able to take judicial notice of the fact that there are such things as these gold coins, I cannot do so in respect of the additional matters relied upon; I do not consider them matters of “common knowledge”.
The Parties’ Failure to Call Other Evidence?
The “rule in Jones v Dunkel” relates to the potential for an adverse inference to be drawn in circumstances where evidence presented in a case raises an inference against a party and that party is in a position to give or call evidence to refute it and does not do so. But, the “rule in Jones v Dunkel” can be seen as “a particular application” of “the rule in Blatch v Archer”. (See Ho v Powell [2001] NSWCA 168 per Hodgson JA at [15], Beazley JA agreeing).
The latter “... applies where a person bearing the onus of proof does not give or call evidence which that person is plainly in a position to give or call; and unless some explanation is given of that failure, the tribunal of fact is entitled to infer that this evidence would not have assisted that person’s case …” (Ho v Powell). The principle in Blatch v Archer can be seen as wider than the “rule in Jones v Dunkel” “because it is also available against the person bearing the onus of proof where that person does not adduce evidence that he or she was plainly in a position to adduce”. (Australian Securities and Investments Commission v Rich [2009] NSWSC 1229 per Austin J at [439].
Further, the:
… failure of a party who bears an onus of proof to call an available witness who could cast light on some matter in dispute can be taken into account in deciding whether that onus is discharged, in circumstances where such evidence as has been called does not itself clearly discharge the onus. This is an application of [the rule in Blatch v Archer] … (ASIC v Rich at [440] citing Shalhoub v Buchanan [2004] NSWSC 99 at [71] per Campbell J.
Counsel for the husband submitted, in answer to my questions in relation to the “rule in Jones v Dunkel”, that the husband has difficulties “getting any information out of [K Company] … because of the nature of their obligations in [the central European country]”. When I asked for the evidentiary foundation for that submission, counsel conceded there was “no direct evidence in support of that proposition”.
Counsel for the husband also submitted that there was no place for inferences because his client has been wholly truthful and the wife has “lied about his involvement and his control [and] knowledge of the [R Trust]”. As will be clear from what I have earlier said, I do not accept the premise for that submission.
Counsel also submitted in that context that the “onus is not on [the husband]” and that the husband “should not have to prove a negative”. In my view, neither submission is correct. First, there is no single onus of proof; rather, “the burden of proof upon the different issues may be variously distributed between the parties …” (LexisNexis Butterworths, Cross on Evidence, online edition, [7005]). Secondly, where an inference can fairly be drawn from evidence against the interests of a party, if findings against that party’s interests are not to be made, an “evidential burden” or “burden of adducing evidence” arises (Cross on Evidence, [7015]). It is irrelevant whether that involves proving “a positive” or “a negative”.
Those broad principles have particular application in this Court. Each of the parties is required to put before the Court all such evidence as each is willing and able to bring in support of the findings contended for and, in this Court, that is done by exchange of affidavits ahead of the trial. The discussion of evidentiary burdens rendered operative by the establishment of a prima facie case in courts where evidence is given viva voce and not disclosed prior to the trial (see, e.g. Cross, above) becomes almost moot; such findings as each party contends for have (or should have) their evidentiary bases in evidence sworn ahead of the trial.
It seems to me that, by reason of the processes of this Court, the “rule in Blatch v Archer” might have some importance in cases such as the present where documentary and independent evidence is scant and where each party seeks to have the court draw inferences from contested evidence and where reservations attend the veracity of that contested evidence.
The principles that might govern the application of that principle (see e.g. Ho v Powell cited in ASIC v Rich at [438]) can be seen to have parallels in the three conditions that must be met for the “rule in Jones v Dunkel” to apply: the “missing witness [or evidence] would be expected to be called by one party rather than the other (which implies that the witness must be available to give evidence)”; the “evidence would elucidate a particular matter, which is a live matter at the trial” and “the absence [of the evidence] is unexplained”. (ASIC v Rich at [449]).
Here, each of the parties contend for findings to which evidence of Ms X, Mr E or Mr V might pertain. Ms X, in particular, can be seen as highly likely to be able to give evidence about the day to day workings of the R Trust, its trustee, and the role, if any, played by the husband in directing or controlling it. Mr V might be seen to play a vital role in the establishment in the gold coins allegedly seen by the wife in the bank vault in his presence. Mr E’s role is less clearly defined on the evidence, but he had dealings with the husband and Mr Y during their joint visit to the central European country in 2010 and he, too, it might be thought, could provide evidence if called upon or compelled to do so.
No explanation has been provided – by either party – for why Ms X, Mr V or Mr E are not deponents. (According to the husband, Mr V died “in early 2010”. But, in terms of swearing an affidavit, it might be observed that these proceedings commenced in February 2010 and that the husband swore an affidavit in these proceedings on 16 February 2010).
No explanation has been provided by the husband for why Ms X or Mr E have not otherwise been called as witnesses and he offers no evidence of any attempts that might have been made to render them witnesses (whether on affidavit or otherwise). The wife deposes to having “tried to subpoena information from [various entities including K Company and the R Trust], but as they are based overseas and/or because my subpoenas are requiring third party disclosures, my attempts have been futile”.
The wife asserts that she has made numerous attempts to obtain documents via the agency of Ms X. She is aware of the husband (or the husband and his late wife’s) long-standing relationship with Ms X. She alleges secrecy on the part of the husband and it is common ground that, whatever be the relationships and conditions underpinning it, it has not been possible to obtain information from or about the R Trust through the agency of Ms X.
I don’t consider it open to find that the wife had an ability to obtain evidence from Ms X. Nor, on the evidence before me can I conclude that it is likely that Ms X would have provided that evidence.
In my view, the husband is in a different position.
His case is that he has been able to access significant sums of money from the trustee of the R Trust by dealing with Ms X. He has, he says, known her for many years (as he had Mr V prior to his death). He has visited her on frequent trips to Europe. Ms X was prepared, ostensibly on behalf of the trustee of the R Trust, to sign a letter purporting to record the terms of an advance of $200,000 in terms drafted by the husband without alteration. Further, the husband alleges that she was prepared to answer questions put to her by him pertaining to his involvement in the R Trust, yet to not do so by way of deposition.
I do not accept the husband’s assertion that it was not possible for him to obtain any affidavit from Ms X. For example, I cannot see any basis for a finding that the husband could not have obtained an affidavit from her to the effect that she was, as the husband alleges, unable to provide evidence or answer questions about the R Trust despite the association with the husband/C Trust just referred to. That is, there is no evidence from the husband which satisfies me that he could not have obtained an affidavit from Ms X pertaining to the question of why she could not or would not give evidence in respect of the central factual issues in this case. That is all the more so in light of the fact that she was, on his case, prepared (according to him) to answer questions posed by him, but not to depose to them.
I consider that similar considerations apply to Mr E. In that respect, I reiterate that Mr E was, on the husband’s case, willing to speak with he and Mr Y and answer their questions during their 2010 visit to the central European country. Why he was prepared to meet them and answer questions but not depose to same is not explained.
Mr V’s position is different, of course, by reason of his death in early 2010 (noting that proceedings commenced in February 2010).
Mr V’s position is also different to that of either Ms X or Mr E for another reason. The wife claims in respect of Mr V a personal relationship that involved her as well as the husband; it will be recalled that she exhibits a Christmas card to her affidavit and speaks of meeting Mr V’s family. I do not consider that, in so far as Mr V was a potential deponent before his death that he should be considered as a witness who would likely be called by the husband rather than the wife.
The “rule in Jones v Dunkel” “… permits evidence [here the wife’s] to be given greater weight and an inference or inferences to be more readily drawn when the other party who might have called evidence to the contrary has chosen not to do so”. (Ho v Powell at [76] per Davies A-JA). The “rule in Blatch v Archer” is of “wider application”:
[14]… in deciding facts according to the civil standard of proof, the court is dealing with two questions: not just what are the probabilities on the limited material which the court has, but also whether that limited material is an appropriate basis on which to reach a reasonable decision …
[15]In considering the second question, it is important to have regard to the ability of the parties, particularly parties bearing the onus of proof, to lead evidence on a particular matter, and the extent ot which they have in fact done so …
[16]The case of Jones v Dunkel … is a particular application of this principle …In my opinion a similar principle applies where a person bearing the onus of proof does not give or call evidence which that person is plainly in a position to give or call; and unless some explanation is given of this failure, the tribunal of fact is entitled to infer that this evidence would not have assisted that person’s case: cf Commercial Union Assurance Co. of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389.
[Ho v Powell].
In ASIC v Rich Austin J held:
[440]There is another respect in which Jones is a particular application of Blatch, again indicating that the latter has a wider operation. Whereas Jones reinforces an inference drawn against the party who has not called evidence, to the effect that the evidence would not have assisted that party’s case, Blatch leads either to the drawing of such an inference, or to some other assessment of the weight of evidence, unfavourable to the party against whom the principle is applied. In Shalhoub v Buchanan [2004] NSWSC 99 at [71], Campbell J explained the point as follows:
[71]Failure to call all those witnesses still has a consequence, even though I do not go through the process of drawing any Jones v Dunkel inferences concerning them … I shall assume that all of these witnesses … were available to be called by either party. Even making that assumption, failure of a party who bears an onus of proof to call an available witness who could cast light on some matter in dispute can be taken into account in deciding whether that onus is discharged, in circumstances where such evidence as has been called does not itself clearly discharge the onus.
I consider that that husband had the power, in the relevant sense, to, at the least, obtain affidavits from each of Ms X and Mr E. I consider that they could have each cast light on whether the husband’s evidentiary onus in respect of his assertion that, despite what is known of the relationship between the R Trust and the C Trust and the use of assets which he asserts belong to the R Trust, he has no interest in, or control of, that trust.
I propose to take account of his failure to adduce that evidence, in assessing the weight of the evidence in respect of that issue. I infer that the evidence of Ms X and Mr E would not have assisted the husband. Ms X and Mr E can be described as witnesses from whom affidavit evidence might have been expected on the part of the husband rather than the wife. I consider that evidence from them had the potential to elucidate a number of issues central to the determination of this case and I consider that the absence of evidence from each of them is unexplained in the sense in which that expression is used in the authorities.
In considering the application of the “rule in Jones v Dunkel”, it must be borne in mind that the rule permits, but does not require, an inference to be drawn that the evidence would not have assisted the party against whom the inference is drawn. Also, the application of the rule cannot be used to “fill gaps” in the evidence.
Here, I am of the view that the “rule” does have application and that an inference can be drawn as against the husband that the evidence of Ms X and that of Mr E would not have assisted the husband’s case. That is not, however, the same as finding that either of those witnesses would have given evidence consistent with the wife’s case or that this inference can be used as determinative of the question of the control of the R Trust or the matters otherwise contended for by the wife.
As I have said, I reject the submission on behalf of the husband that the wife bore the onus in the sense of the expression referring to one overall or overarching onus. In my view, each of the parties bore “evidentiary” or “tactical” or “persuasive” burdens in respect of those issues about which they would respectively have the Court make findings. Equally, the requirement to call evidence in support of discharging any such burden can only apply in respect of evidence which a party has the power to obtain or require. (ASIC v Rich at [443].
By reason of the evidence of the dealings and relationship between the husband and Ms X earlier described, I consider that he had the power to obtain from Ms X affidavit evidence touching on the issues in question. As but an instance of that, if, as the husband would seek to assert, there are constraints imposed upon Ms X by her asserted position within the R Trust, why is it not possible for the husband to obtain an affidavit deposing to same, the limits of her capacity and her relationship otherwise with the husband? Certainly the husband offers no evidence as to why this would be so.
Less is known about Mr E and the nature and extent of his relationship, if any, with the husband. However, as an important example of what is known, on the husband’s own case, is that Mr E was prepared to have a conversation with the husband (a person who says he has no association with the R Trust and its banker) and Mr Y (a person who, on the evidence is a complete stranger to Mr E and who has had no prior dealings with him).
Alleged Values
The wife asserts that the R Trust had assets of about $9 million at the commencement of the relationship.
The sole evidentiary basis for that assertion is an alleged admission made by the husband (who was allegedly with Mr V) on an occasion alleged by her to have occurred on 7 June 2005. (Affidavit filed 9 March 2011, at [80]). The evidence there pertaining to what Mr V said is inadmissible as hearsay as is the reference to the purported contents of alleged “graphs and pie charts” and a “written summary”. I reject the submissions of counsel for the wife that the deposed conversation can be read “distributively”; that is, that both the husband and Mr V said that the husband owned $9 million. To the extent that it is said that there is an admission by the husband, in my view there is no particularised statement by the husband that could be so classified.
In any event, the husband denies this conversation or an event of the type described occurred. Despite my reservations about his veracity in general, I am not prepared to accept the evidence of the wife that any such conversation occurred.
The wife goes on to depose to a further alleged admission. She says there was a conversation between she and the husband in the car park after the meeting just referred to during which she says “the [husband] turned to me and said words to the effect that ‘we owned nine million dollars’”. Again, the husband denies this conversation. I reject the wife’s evidence.
The wife asserts that the R Trust now has a value of $21million. In my judgment, there is no admissible evidence before the court that could sustain that, or indeed any, finding about the value of the R Trust.
It is accepted between the parties that they have had past use of N Company timeshares and the travel miles associated therewith. Such evidence as there purports of the value of those timeshares and points (which, together, the wife alleges, are valued at just short of $400,000 (see, above at [30]) is as follows (the wife’s affidavit filed 9 March 2011):
158.The [husband] has failed to disclose three time shares and his right to reciprocal free accommodation benefits worldwide and [N Company] points that accumulate annually and are converted to travel points with [an airline]. At the time of separation there were 2,445,155 flight miles available. These flight miles are accumulated by 200,000 [N Company] points per time share per year. We travelled business class and first class when we used these points.
159.I estimate the value of these accumulated points to be approximately AUD$E130,000 and which allowed us free travel with [an airline] and accommodation with [N Company] worldwide. The [husband] and I used these travel options annually.
Hearsay evidence purporting to speak of the value of the timeshares was struck out on objection from counsel for the husband.
In truth, there is no admissible evidence of the value of either.
Summary of Findings: R Trust and Property of the Parties
I think it significantly more likely than not that the husband has given false evidence in respect of his association with the R Trust.
I do not consider the evidence and the inferences available from the evidence are such that I can make a positive finding about the husband’s precise role within the R Trust (for example whether he is (solely or jointly) a trustee, appointor, beneficiary or the like).
In the course of a short marriage with the characteristics earlier described, the wife has preserved, with exception of a motor vehicle, each and all of the assets and superannuation interests held by her at the commencement of the relationship. In respect of her real property she has earned and retained the net income from its rental. The wife can be seen to have preserved those sums. But, the husband must also be seen as having contributed indirectly to the preservation of same; the wife’s assets and income were not called upon for the purposes of the marriage.
To the wife’s “pool”, the husband, through the agency of the two trusts previously described, contributed a quarter of a million dollars. There is no evidence that the wife has made any direct financial contribution to the husband’s “pool”. Because of the fact that the husband was meeting the vast majority of the expenses from his superannuation interest, the capital of his “pool” was diminishing.
The wife’s counsel made clear that the wife’s contributions are those deposed to by her at [14] – [43] of her affidavit. In general terms they can be described as caring for the husband, including by administering his medication, and by assisting the husband in arranging travel and with his business transactions. As the findings made earlier in these reasons will, I think, make clear, I consider the contributions made by the wife in the last respect to be nominal.
The husband takes various medications and suffers from Diabetes. He has a pacemaker. He said during oral evidence that “I have been looking after myself for thirty years before [the wife] came along”. I think that is likely to be true; the husband, who was, apparently, a former elite sportsman, impresses as an independent man who would not take easily to the ministrations of others. I consider that the wife has significantly exaggerated her contribution in the stated respect. Whilst I have little doubt that the wife was supportive of the husband during their relationship, neither the medical evidence nor the evidence in its totality leads to a conclusion that the husband was so frail such as to require the nature or extent of the care adumbrated.
The lifestyle of the parties admits of a limited amount of ordinary day to day homemaking contributions being made by either party whilst travelling in the manner described. I am inclined to accept the wife’s evidence that she was primarily responsible for the cooking and cleaning during the 26 months or so that the parties were not travelling during their relationship. I think it likely that the wife did assist in arranging – or, at least, planning – the parties’ travel. Given the circumstances of the marriage, this is a contribution to the marriage if not to the property of either party.
In my view, the husband can be seen to have made very significant contributions to the property and superannuation interests of the wife. As but one measure of that, the wife’s property increased by approximately 68% during the approximately 4½ years that the parties cohabited. As has been seen, the husband’s property and superannuation interests (comprised, primarily, of the latter) significantly diminished. As some measure of that, the percentage decrease is approximately 80% during the same period.
The wife made a greater contribution to “homemaking” than the husband. But, bearing in mind the circumstances of this marriage, the husband should be seen to have contributed to the “welfare of the family constituted by the parties to the marriage …”, by reason of committing a diminishing capital resource to its financial maintenance. Those contributions, too, favour the husband.
To those conclusions in respect of s 79(4)(a) to (c) should be added the finding that any proposed order will have no effect on the earning capacity of either party (s 79(4)(d)); each party will need to have recourse to the earning capacity that each had prior to the commencement of this approximately 4½ year marriage.
The factor which looms largest by reference to s 79(4)(e) is my findings with respect to the R Trust and the N Company timeshares and associated points being each significant future financial resources for the husband. They are important for that fact alone. They are particularly important because, in the case of the R Trust, my findings admit of the likelihood of the husband having ready access to funds by which the capital diminished during the relationship can be replenished. The very significant contribution of a diminishing capital resource from which the husband’s future income is derived and his future needs met becomes, in my view, an entirely different matter (in terms of justice and equity) if those same funds are likely to be replenished, and replenished without further effort by him.
Similarly, continued access to a “TopCard” (or similar credit card) and access to the N Company timeshares and associated points permit of the husband continuing to enjoy the lifestyle enjoyed during the marriage. That, too, is a highly important matter in assessing the overall justice and equity of orders because, again, what has been contributed in that way, and would otherwise be “lost” can be, as it were, regained.
The importance of the factor just described (which can be seen to be relevant to s 75(2)(b)) should not mask the fact that other factors enumerated within s 75(2) are also relevant.
The length of the relationship is an important consideration. So, too, is the preservation of the wife’s assets and resources all of which are available to her post-separation.
The wife contends that, due to the husband “wanting to leave Australia” to travel overseas, she was unable to complete a teaching qualification “which would have allowed [the wife] to teach [healthcare]”. I do not accept the premise; I consider the wife was an active and willing participant in the lifestyle enjoyed by the parties as, for example, the tenor of her affidavit and its exhibits make clear. Moreover, no evidence is offered to suggest that the course does not remain available and I can see no evidence supportive of a contention that the parties’ relationship had any significant impact on the wife’s capacity to undertake that course.
There are no children of the relationship. Neither party has any other children who are dependent upon them.
The husband is 84 years of age. He suffers from Diabetes. He has had a pacemaker inserted. The wife is 54 years of age and has no medical problems to which she deposes. The wife suffered an injury to her eye from an assault at work post-separation and has undergone treatment as a result. She was, at the time of trial, still suffering some symptoms (sporadic, involuntary closure of the eye). But there is no medical or other evidence which suggests that the wife will not be able to work in the future in her pre-marriage employment.
The husband’s sole source of income is the pension he draws from the M Superannuation Fund. The wife worked remuneratively in healthcare post-separation until her injury in April 2011. Whilst working, the wife was earning approximately $30 per hour on a weekday and $44 per hour on a weekend. At the time of trial, the wife was receiving payments from WorkCover.
Just and Equitable Orders?
An order that would see each of the parties retain the property and superannuation interests which each now have would see the wife emerge from this short relationship with all of the property which she entered the relationship with and with her real property intact and capable of earning income as it was at commencement.
The wife leaves the marriage with her capacity to earn income intact and unaffected, as I find, by the fact, or length, of the relationship. Her contributions to the property and superannuation interests of the husband during the marriage are negligible in a direct financial sense and very modest, as I find, in a homemaking or indirect sense. As a result of the direct and indirect contributions of the husband during the marriage, she has enjoyed a lifestyle significantly more lavish than what her pre-marriage property and circumstances would suggest. That has come about through the husband accessing, as I find, resources over which he has a significant measure of control.
The husband can be seen to have, concomitantly, made the overwhelming bulk of the contributions that have permitted the circumstances and respective financial positions to which reference has just been made.
But, as I find, the husband has had, and will likely continue to have recourse to a very significant financial resource. I repeat: the resource is not capable of valuation as such, but very significant funds have been advanced for use by the husband (and, during the relationship, the wife). Moreover, the feature earlier identified that, as I find, it can be used to replenish the capital from which the husband draws a pension (and be used, as I find, to accrue credit card debt that will be paid for) is, as I find, a very significant matter.
Of course, I have also found that the husband has been significantly less than full and frank in the disclosure made by him. That needs to be balanced with the fact that the wife admitted to giving a detailed false account in her affidavit and the fact that I found her sworn evidence in respect of finding the husband’s address book to also be false.
I consider that the orders which best represent a just and equitable result are those which reflect the fact that the husband’s contributions (to the property (s. 79(4)(a) or otherwise directly or non-directly to the marriage (s 79 (b) and(c)) overwhelm those of the wife but where his resources and future needs are such that a significant adjustment is called for.
A finding that parties should each retain the property and superannuation interests that they currently have, is tantamount to a finding that the s 79(4)(e) factors favour the wife to an extent that, despite the overwhelmingly greater contributions made by the husband, she should, after not quite five years of marriage, retain over a quarter of million dollars in additional superannuation to which she made negligible direct contribution during the marriage because the 84 year old husband has access to a resource that (effectively) gives him what he needs.
That seems to me to pay insufficient regard to the contributions made by the husband and what those contributions produced for the parties during the marriage and what they have produced, absent a s 79 order, in terms of the property and superannuation interests held by each of the parties.
It seems to me that a just and equitable result would see the wife retain her current member benefit entitlement save for $100,000 which such sum should be the subject of a splitting order in favour of the husband and, otherwise, the parties retaining property, financial resources and superannuation interests that they each have. I will give the parties the opportunity to draft appropriate terms of orders by reference to Part VIIIB of the Act and the relevant superannuation Regulations.
In summary, I consider that just and equitable orders will reflect:
(a)A splitting order being made such that the husband receives $100,000 from the current member benefit entitlement of the wife;
(b)The parties otherwise retaining the property, financial resources and superannuation interests that they each currently have; and
(c)All other applications being dismissed.
Loss and Expense Associated With Subpoena
Mr Y, as the Managing Director of P Accountants (“the firm”), was the recipient of a subpoena issued by the wife seeking documents listed in its schedule. During the course of the trial, Mr Y sought an order for the reimbursement of what he claims is substantial loss and expense incurred by the firm’s compliance with that subpoena.
Mr Y has not filed an Application. It can be presumed that for such “loss and expense” the order sought is pursuant to r 15.23 of the Family Law Rules 2004.
The expenses claimed are contained in an invoice (Exhibit “H1”) in the sum of $4192.55.
I directed that the parties file written submissions as to Mr Y’s claim. In doing so I noted that there was no evidence before the Court that challenged Mr Y’s invoice in the sense that it was not suggested that the work there listed was not performed. The husband and wife have each filed submissions in response to Mr Y’s application.
It is submitted on behalf of the wife that Mr Y’s expenses ought not be paid or, if the Court determines they should be, that the Court should order that the husband bear Mr Y’s costs “directly” as a result of the husband’s dishonesty “in his evidence and in his disclosure…”.
It is submitted on behalf of the husband that Mr Y did incur “significant and substantial loss or expense” and that the amount sought by Mr Y “is a reasonable amount to award”. It is further submitted that “it can not be seriously contended that the husband could be at all responsible for the costs associated with [Mr Y’s firm’s] compliance with the wife’s subpoena” and as such, “the wife should bear the entirety of [Mr Y’s] invoice accordingly”.
In Markoska & Markoska (Costs) [2011] FamCA 833 I looked at the basis for a claim by a third party in respect of the “reimbursement” for “substantial loss or expense” greater than the amount of conduct money tendered with a subpoena pursuant to r 15.23.
Here, $43.00 conduct money (that is to say, $33.00 more than the minimum prescribed) was tendered by the wife upon service of the subpoena on Mr Y. Submissions filed on behalf of the husband point out that the subpoena required “27 different categories of documents (the descriptions for which were detailed to the extent that they were a total of two and a half pages in length, despite the small font used)” and that “in a number of items, sought documents ‘since 2000’ to date”. In that respect, it is reiterated that the parties relationship subsisted for less than five years and commenced in April 2004.
The issues raised here are very similar to those raised in Markoska & Markoska (Costs). It is convenient to set out the principles there discussed:
Conduct money and the Rules
53.In examining the historical basis of “conduct money” in Bank of New South Wales v Withers (1981) 35 ALR 21, Sheppard J held (at 38):
…it should be emphasized that unless the payment is provided for in the rules there can be no recovery. Collins v Godefroy remains the law. The citizen’s duty to aid the administration of the law by attending remains paramount and is the reason why there can be no recovery for loss of time as distinct from out of pocket expenses in the absence of specific provisions in rules of court.
54.Similar sentiments can be seen in the principles underlying the issue of subpoenae to third parties. For example In Lucas Industries v Hewitt (1978) 18 ALR 555, Bowen CJ, Smithers and Nimmo JJ said (at 570–571):
The purpose of the process of subpoena is to facilitate the proper administration of justice between parties. For that purpose it is the policy of the law that strangers who have documents may be put to certain trouble in searching for and gathering together relevant documents and bringing them to court. It is according to the same principle that persons who have knowledge of facts are put to the inconvenience of being brought to court and required to give evidence.
Assessment of the reasonableness of burdens involved in complying with a subpoena must take account, inter alia, of the desirability that justice be administered effectively. The capacity of a party to collect and produce the documents referred to is a relevant circumstance. Large business entities may be thought to be highly organized and well staffed. What may be burdensome to lesser entities may be of small significance to a large one.
55. In this Court, r 15.23 provides relevantly:
(1) A named person is entitled to be paid conduct money by the issuing party at the time of service of the subpoena, of an amount that is:
(a) sufficient to meet the reasonable expenses of complying with the subpoena; and
(b) at least equal to the minimum amount mentioned in Part 1 of Schedule 4.
…
(3)A named person may apply to be reimbursed if the named person incurs a substantial loss or expense that is greater than the amount of the conduct money or witness fee payable under this rule.
56. Rule 15.31 provides:
(1)This rule applies if the named person, or a person having sufficient interest in a subpoena for production:
(a) objects to the production of a document identified in the subpoena; or
(b) objects to a document identified in the subpoena being inspected or copied by any of the parties.
(2) The person must, as soon as practicable after being served with the subpoena and at least 10 days before the court date, give written notice of the objection, or other order sought, in accordance with Part F of the Subpoena, to:
(a) the Registry Manager;
(b) the named person, if applicable;
(c) the other parties; and
(d) any independent children’s lawyer.
(3) A notice under this rule operates as a stay on the operation of the parties’ and independent children’s lawyer’s right, under subrule 15.30 (4), to inspect and copy a document produced under a subpoena.
…
59. In Kelleher & Anderson [2008] FamCA 113, Carter J said:
[35]Provided that the loss or expense is otherwise reasonable in the circumstances of any case the recipient of a subpoena may seek to be reimbursed, for example, for the expenses of finding, collecting, collating, marshalling and producing the documents or materials sought, together with the incidental cost of attending the court. For the purposes of Pt 15.3 the recovery of costs of legal advice and representation in relation to the documents which have been subpoenaed may also be sought. (See Fuelxpress Ltd v LM Ericsson Pty Ltd (1987) 75 ALR 284; and Hadid v Lenfest Communications Inc (1996) 65 FCR 350.) The sort of matters envisaged include legal costs incurred in seeking advice as to the validity of the subpoena, or as to matters such as privilege and confidentiality.
60.In Moriarty & Moriarty [2009] FamCA 369, the issue was discussed by Cronin J:
What is the loss to be compensated?
57. The rules refer to a “substantial” loss or expense.
58.The determination of what is substantial is very subjective. In my view, it means that the expense must be large causing loss; it must be unusual in the sense of requiring normal activity to be stopped; or it must cause an unfair inconvenience having regard to the fact that the recipient has nothing to do with the litigation.
59. Assessment of the reasonableness of burdens involved in complying with a subpoena must take account the capacity of a party to collect and produce the documents. That means that in a large organization, the capacity to cover the expense is greater than in a small organization (see Lucas Industries v Hewitt (1978) 18 ALR 555 and G and D & D (2005) FamCA 1429).
60. Notwithstanding the administration of justice issue, the rules are not intended to put the individual presenting the documents in a position where they lose income or capital. The rule however refers to a substantial expense and each situation must be determined on its peculiar facts.
61. However, if the subpoena is simple and clear, requiring the production of the recipient’s own documents, the inconvenience is intended and expected to be minimal.
62. Thus, in a case where a professional fee is claimed or the bobcat driver claims significant hours of “downtime”, the question still remains whether the finding, collecting, collating, marshalling and producing the documents or materials required the attention of the owner, partner or professional or whether it could be done by a clerical person albeit with some ownership or professional oversight. It is that question that the judicial officer has to ask in every case.
63. The outcome is determined by the exercise of a discretionary judgment guided by the rules of court.
…
The wife seeks to resist Mr Y’s claim principally by reference to what is asserted to be his “relationship” with the husband. It is submitted that Mr Y’s firm has acted as “accountants, administrators and tax agents for the husband, the husband’s superannuation fund and the C Trust; since 2001 in respect of the husband and 2005 in respect of the fund and trust”.
It is submitted that Mr Y discloses nowhere in his affidavit material prior to the filing of an affidavit on 24 August 2011 that, contrary to the husband’s position, it was his specific advice to the husband, as set out in exhibit ‘E2’ to the wife’s affidavit-in-chief, that the $200,000 contribution to the wife’s superannuation fund should be the result of “a gift from the husband to the wife…”. It is said on behalf of the wife that “[Mr Y] at no time prior to cross-examination disclosed that the travel to Europe, which took place as a result of that arrangement, was at the expense of the husband in that the husband used the [N Company] points to which he was entitled to pay for both his and [Mr Y’s] airfares from Australia to Zurich return”.
It is submitted that Mr Y cannot be seen to be independent of the husband. There is some substance to that assertion. For example, the evidence of Mr Y that the relationship between he and the husband was such that the husband frequently dropped into his office unannounced and, in respect of those consultations he was not charged, lends credence to this submission. Moreover, as counsel for the wife points out in written submissions, Mr Y received the benefit of the travel miles accumulating from the N Company timeshares in order to travel to Europe, part of which journey included travelling to the central European country on the husband’s own account. I agree that the purpose of that journey can be seen, in significant part, as “an evidence gathering exercise in support of the husband’s case”.
It is also submitted that, given the reference in the Binding Financial Agreement (dated 15 June 2007) to the “R Trust” and that entity’s involvement in an alleged loan to the C Trust for US$600,000 and the fact that these moneys had been paid to the C Trust prior to the death of the husband’s first wife, it “was reasonable in circumstances where [Mr Y] deposed to having acted for and receive [sic] instructions from the husband’s first wife to seek disclosure of any documents that might be in his power in relation to this alleged transaction”.
It will be appreciated that these submissions gain force from the findings ultimately made about the husband’s relationship to the R Trust. In my view, they are not diluted by reference to findings made against the wife in respect of the veracity of her evidence. The wife can give a false account of certain events yet at the same time reasonably require of a third party documents in their/its possession directly relevant to the case she seeks to make.
Against Whom Does a Claim Properly Lie?
In Markoska & Markoska (Costs) under the heading “The Court’s Powers”, I said:
70.The terms of r 15.23(3) might be contrasted with the provisions of Order 20 Rule 17 of the Family Law Rules 1984 (that is, the Rules as they existed prior to their amendment in 2004). That rule provided:
17. Where in proceedings a person being –
(a) a respondent to an application under rule 7; or
(b)a person required by an order made under rule 8 to produce a document, reasonably incurs costs or expenses on the hearing of the application or in connection with the production of the document, as the case may be, the person may apply to the court for an order as to the assessment and payment of such costs and expenses and the court may make such an order or give such directions as it thinks fit. [Emphasis added].
71.In drafting the Rules, the rule-makers, presumed to be cognisant of the provisions of the earlier Rules, altered the expression “costs and expenses” to the expression “substantial loss or expense”. So, too, the specific reference to “costs or expenses on the hearing… or in connection with the production …” was changed to make specific reference to “substantial loss or expense” and so as to provide in the sub-rule a specific reference to relevant amounts “payable under this Rule”.
72.Rule 15.23 appears within Part 15.3 of the Rules which deal generally with subpoenas. Within that context, r 15.23 provides initially for the payment of conduct money sufficient to meet the reasonable expenses of complying with a subpoena in an amount at least equivalent to the amount specified in Part 1 of Schedule 4 to the Rules (15.23(1)) and, separate to that, “a witness fee” where the subpoena relates to giving evidence or to giving evidence and producing documents (15.23(2)). The entitlement to claim provided for in sub-rule (3) is, by the terms of that sub-rule, confined to a reimbursement of an amount considered reasonable that is related to either conduct money or a witness fee (as the case may be), “payable under this rule”.
73.In my view, the rule should be read as a whole and the sub-rule as governing the amounts that might be paid by an “issuing party” to a “named person” as “conduct money” or a “witness fee” as the case may be.
74.Consistent with the historical context earlier referred to (e.g. Bank of New South Wales v Withers; Lucas Industries v Hewitt, above) the Rules prescribe very modest amounts payable as a minimum or “default” (r 15.23(1) and (2)) but, in order to strike the balance referred to, for example, in the authorities just mentioned, application can be made for the issuing party to pay a greater (but reasonable) amount where loss or expense is established as “substantial”.
75.In my view the sub-rule gives power to the Court to enlarge the amounts of conduct money or witness fee payable to a named person by an issuing party in compliance with a subpoena, where the claimed loss or expense can be regarded as “substantial”; where the conduct money or witness fee as the case may be is otherwise payable pursuant to sub-rules (1) or (2); and where any amount claimed is, in any event, determined by the Court to be reasonable in all the circumstances of the individual case.
I subsequently found that the “Court does not have the power to make an order pursuant to r 15.23(3) in favour of the ‘named party’ against any person other than the ‘issuing party’ for a subpoena (as each expression is defined in r 15.16(1))”.
As the authorities discussed in Markoska & Markoska (Costs) make plain, where a receiving party has incurred “reasonable” loss or expense and that loss or expense is “substantial”, the issuing party must bear what is determined to be the reasonable amount of loss or expense of “justice being administered effectively”. The loss or expense ultimately borne by the issuing party will be determined by the Court as the figure which provides sufficient recompense for the “reasonable expenses” incurred by the third party whilst bearing in mind that “it is the policy of the law that strangers who have documents may be put to certain trouble in searching for and gathering together relevant documents and bringing them to court” (Lucas Industries v Hewitt).
While r 15.23(3) relief, in my view, can only be sought against the issuing party, any potential injustice to that party can be pursued in an application costs pursuant to s 117(2).
I am of the view that any order pursuant to r 15.23(3) in the present case must be borne entirely by the wife.
Is the Rule 15.23(3) Claim Against the Wife Made Out?
In Markoska & Markoska (Costs) I said, in respect of the process to be undertaken when determining whether or not an application pursuant to r 15.23(3) has been made out:
112.As has been seen, r 15.23(3) gives the “named person” in a subpoena an entitlement. It is an entitlement to be paid the “reasonable expenses” of complying with the subpoena in an amount not less than the prescribed minimum (currently $10). But, where the prescribed amount [or other amount] is tendered and is asserted by the named person to be less than the named person’s “reasonable expenses”, an onus is cast upon the named person to make application for an additional payment. When that application is made, the Court must be satisfied that the named person has incurred a “substantial” loss or expense. If that threshold is crossed, the claimed amount cannot be greater than the “reasonable expenses” of compliance with the subpoena.
113.Thus, it is necessary to ask :
(a)What “loss or expense” is asserted to have been incurred by the named party?; and
(b)Can the loss or expense/s so claimed be regarded as “reasonable expenses of complying with the subpoena” for this particular named party receiving this particular subpoena in these particular circumstances?; and
(c)Can any such reasonable expense/s be regarded as “substantial loss or expense” that is, relevantly, greater than the $10 tendered?
114. The answers to those questions should be given a proper context.
115.The historical context referred to earlier (Bank of New South Wales v Withers etc) and the extremely modest amount provided for as the “minimum” or “default” amount of conduct money both give context to any claim for reimbursement of substantial loss or expense. What is reasonable (and what is “substantial”) should in my view be seen against, and balanced with, “the citizen’s duty to aid the administration of the law”…
116.Reasonable expenses of compliance are, in my view, not ascertained by reference to any pre-ordained categorisation of those expenses. Rather, what are reasonable expenses must be ascertained by first looking as to what reasonably needed to be done so as to comply with the particular subpoena and any obligations attached to, or associated with, its compliance?
117.Thus, for example, the particularity with which a subpoena is drawn or the type or extent of the documents it seeks to have produced might each be relevant to the question. So, too, what might be a reasonable expense will change with the circumstances of a particular case. The obtaining of legal advice as to compliance with a subpoena might be recoverable pursuant to r 15.23 in one case (e.g. Fuelxpress Pty Ltd, cited in Kelleher &Anderson, above) but not be recoverable in another case. The briefing of counsel to appear at a subpoena hearing and preparation for that hearing may be recoverable in one case, but not in another. Collating and photocopying may be recoverable in one case, but not in another.
118.Whether a particular expense, or particular expenses, should be seen as reasonable can also depend in my view upon the manner in which compliance is effected, or might reasonably have been effected. Compliance with a subpoena – including obligations imposed by the Rules or court procedures which attend compliance – might permit of same by a means more economical than that which was in fact employed. Where it is established that a more economical means of compliance ought reasonably have been perceived and could reasonably have been carried out, it might be argued that it is not a “reasonable expense of compliance” if a more expensive means of compliance is actually employed.
119.Thus, an assessment of the reasonableness of expenses might take account of those things which were done that ought reasonably not have been done, those things which were not done that might reasonably have been done and, things which might have been done significantly more economically than those things which were or were not done.
Mr Y asserts that 1083 documents were ultimately produced to the Court pursuant to the subpoena. The invoice provided by Mr Y records 6.5 hours spent by an individual (presumably an employee of the firm) “searching for documents for the subpoena…reviewing all documents in all available databases. Print out all documents and collate as required. Meeting with [Mr Y] to go through all items”. The cost of those 6.5 hours is $1027.39 (which equates to approximately $158.00 per hour). The invoice also includes the following charges:
· 1.10 hours spent by Mr Y engaging in “discussions in relation to the subpoena” totalling $455.87 (that is, approximately $415.00 per hour);
· 0.7 hours spent by the employee “review[ing] subpoena for information required…Set up meeting time for [Mr Y]” totalling $110.64;
· $1,243.38 for 3 hours spent by Mr Y “review[ing] all 1083 documents and prepare letter”;
· $489.99 for 3.10 hours spent by the employee “meeting with [Mr Y] to go over source documents found. Counting all pages to be ent out as per Subpoena. Resolving other items required to be added to the list of documents”;
· $316.12 for 2 hours spent by the employee on “work regarding Subpoena; finding further source documents required after meeting with [Mr Y] upon reviewing Subpoena”; and
· $207.12 for half and hour spent by Mr Y on a “letter to [the wife’s] lawyer”.
Mr Y also seeks $541.50 for “printing out records”.
Plainly the expenses claimed by Mr Y are “substantial”; they are significantly greater than the $43.00 conduct money provided by the wife and are, to use the words employed by Cronin J in Moriarty at [59], “large causing loss” and “unusual in the sense of requiring normal activity to be stopped”.
The question then is whether or not, in the context of the present case, the expenses are “reasonable”.
The question is not (or, at least, not solely) whether the amounts listed are reasonable amounts for an accountant to charge; they may well be. The issue is what is reasonable for an issuing party to pay. The measure of that amount is not, in my view, what the named party might charge ordinarily for the specified tasks.
In essence, what is reasonable is partial compensation for loss associated with being drawn into a process essential to the administration of justice.
I respectfully agree with what Cronin J said in Moriarty (above):
[54]…there is nothing in the rules nor should there be that gives any profession or business sector a right to claim expenses based upon their respective scales or charges. It is inappropriate for a court to look at those scales as anything more than a guide.
…
[56]… the subpoena process is an integral part of the administration of justice. If we are to enjoy the benefits of a justice system, the community must be prepared to bear that cost to some degree… that is a facet of community responsibility.
An examination of what is reasonable can, of course, involve an examination of what was, or was not, done by the named party.
Here, for example, it was open to Mr Y to object to production of the documents on the basis that the subpoena was oppressive or sought irrelevant documents (see r 15.31, quoted above). Indeed each of those matters of objection appears to underlie, in part, the submissions made on behalf of the husband.
Equally, if an item-by-item analysis of the work is undertaken it does not appear to me reasonable to compensate the named party here, in respect of, for example, “expenses” claimed for two meetings with a partner to “discuss” the subpoena, nor do I consider expenses claimed in relation to a partner “review[ing]” the documents produced and preparation of a letter to the wife’s solicitors to be “reasonable” costs of compliance with the subpoena in the sense earlier described.
In addition, the subpoena was simple and clear in its description of the documents sought. There is no evidence before me to suggest that the task of searching the firm’s records for the documents sought in the subpoena was especially complex and I would not, for example, consider it reasonable (in the r 15.23(3) context) for Mr Y and his employee to spend up to 4.2 hours in meetings “discuss[ing]” the subpoena and “source documents found”.
As I have said, I consider that the recompense envisaged by r 15.23 is not what the firm would charge for the work involved, but, rather, is in the nature of a broad, discretionary payment designed to balance the interests of the administration of justice, and the inconvenience that is sometimes necessarily caused to third parties with loss or expense that can seen to be other than minimal or ordinary and can be classified as “substantial”.
Given the circumstances of this case and the authorities discussed above, I find that a sum of $1000 represents adequate recompense for the loss or “expense” incurred by Mr Y’s firm as a result of its compliance with the wife’s subpoena.
I will order accordingly.
I certify that the preceding two hundred and sixty-one (261) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Murphy delivered on 3 February 2012.
Associate:
Date: 3 February 2012
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