Leader and Martin-Leader (No 2)

[2009] FamCA 979

FAMILY COURT OF AUSTRALIA

LEADER & MARTIN-LEADER (NO. 2) [2009] FamCA 979

FAMILY LAW – PRACTICE AND PROCEDURE – SUBPOENAS – where the husband issued subpoenas to an accounting firm and an accountant retained by the intervener – where the intervener consists of a group of companies and trusts of the wife’s parents and family – where the husband asserts that the wife has an interest in or obtains a benefit from entities within the group – where the subpoenas seek the production of documents from 1988 to present relating to various entities in the group – where the intervener objects to the production and inspection/copying of documents –– where the intervener is a “person” having a sufficient interest in the subpoenas to object – whether the documents sought are sufficiently relevant to the proceedings – whether the subpoenas are oppressive –where confidentiality of the documents is not a basis for setting aside the subpoenas – where the extent of the wife’s interest in the companies and trusts and her property and financial resources are issues to be determined in the proceedings – apparent and sufficient relevance established – production of documents ordered

Family Law Act 1975 (Cth) ss 38, 75(2), 79, 90AA, 90AC, 90AE & 123
Family Law Rules 2004(Cth) rr 15.26 & 15.27

Hatton v Attorney-General of Commonwealth of Australia and Others (2000) FLC 93-038
National Employers’ Mutual General Association v Waind and Hill [1978] 1 NSWLR 372
Relationships Australia v Pasternak & Pasternak & Children’s Representative (1996) FLC 92-699
Kennon v Spry (2008) 40 FamLR 1

APPLICANT: Mr Leader

RESPONDENT: Ms Martin-Leader

INTERVENER: Martin Group

FILE NUMBER: ADF 6300 of 1993

DATE DELIVERED: 16 October 2009

PLACE DELIVERED: Adelaide

PLACE HEARD: Adelaide

JUDGMENT OF: Dawe J

HEARING DATE: 7 August 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Livesey QC
with Mr McGinn

SOLICITOR FOR THE APPLICANT: Allen Burtt

COUNSEL FOR THE RESPONDENT: Mr Richards

SOLICITOR FOR THE RESPONDENT: Howe Martin & Associates

COUNSEL FOR THE INTERVENER: Mr Bartfeld QC

SOLICITOR FOR THE INTERVENER: Winters

Orders

1. It is therefore ordered that Mr H and W Accountants Pty Ltd attend Court to produce the following documents to the Registrar:

   For the period from the 1 January 1988 to the present date:

   (a)All trust deeds and any amending deeds;

   (b)All corporate constitutions and amendments to the same;

   (c)All profit and loss statements;  and

   (d)All balance sheets;

   of or in relation to:

   1.1Martin Pty Ltd (ACN …);

   1.2S Pty Ltd (ACN …);

   1.3S Investment Trust (ABN …);

   1.4R Investments Pty Ltd (ACN …);

   1.5R Investment Trust (ABN ...);

   1.6Martin Grandchildren’s Settlement established by the Indenture dated 24 August 1971;

   1.7P Pty Ltd (ACN …);

   1.8D Nominees Pty Ltd (ACN …);

   1.9A Martin Family Unit Trust (formerly A & I Unit Trust) (ABN …);

   1.10C Pty Ltd (ACN …);

   1.11X & L Endowment Trust (ABN …);

   1.12…

   1.13N No 2 Pty Ltd (ACN …);

   1.14N Investment Trust (ABN …);

   1.15N Nominees Pty Ltd (ACN …);

   1.16G Pty Ltd (ACN …);

   1.17D Pty Ltd (ACN …);

   1.18V Pty Ltd (ACN …);

   1.19V Pastoral Trust (ABN …);

   1.20V Pastoral Trust No 2 (ABN …);

   1.21…

   1.22F Pty Ltd (ACN …);

   1.23A & T Endowment Trust (ABN …);

   1.24N Pty Ltd (ACN …);

   1.25U Pty Ltd (ACN …);

   1.26K Pty Ltd (ACN …);

   1.27E Pty Ltd (ACN …);

   1.28T Family Trust No 2 (ABN …);

   1.29O Pty Ltd (ACN …);

   1.30Martin Partnership (ABN …);

   1.31A Martin Family Unit Trust (ABN …)

IT IS NOTED that publication of this judgment under the pseudonym Leader & Martin-Leader is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT ADELAIDE

FILE NUMBER: ADF 6300 of 1993

MR LEADER

Applicant

And

MS MARTIN-LEADER

Respondent

REASONS FOR JUDGMENT

Introduction

1. In March 2009 the husband Mr Leader through his solicitor, Allen Burtt, issued two subpoenas.  One was to W Accountants Pty Ltd, the other was to Mr H of the same address.  Both subpoenas were to produce documents only.  Both subpoenas were issued pursuant to leave granted to the husband’s solicitors by the order of 4 March 2009.

2. Following hearings before a Registrar of this Court on 25 March 2009 and 16 April 2009 both recipients of the subpoenas filed objections on the 30 April 2009.  Both notices of objection filed on the 30 April 2009 object to both the production of some or all of the documents to the Court and to the inspection/copying of some or all of the documents produced.

3. The reasons given in both notices of objections are:

   “1.    Privilege, oppression, confidentiality relevance.

   2.    Insufficient conduct money.”

4. At the second hearing before the Registrar of this Court the question of the objections to the subpoenas was adjourned to 1 May 2009 at 9.15 am before me.

5. On 1 May 2009 Counsel appeared for the husband, wife and the recipients of the subpoenas.  I made certain orders directing the matter to be prepared for hearing and adjourned the matter for one-day argument before me to 7 August 2009.

Hearing

1. At the hearing before me on 7 August 2009 the husband was represented by Mr Livesey QC with Mr McGinn, the wife was represented by Mr Richards and the Martin Group was represented by Mr Bartfeld QC.

2. Written submissions were received by the parties, including written submissions on behalf of the Martin Group in opposition to the subpoenas issued by the husband’s solicitors.

3. The Martin Group is the collective name given to the companies and trusts of the wife’s parents and family.  Documents sought by the subpoenas related to the Martin Group.

4. After hearing the submissions judgment was reserved.

Relevant background

1. Property settlement proceedings were commenced by the wife in 2001.  Since then the conclusion of the proceedings has been delayed by litigation in other jurisdictions.  There have been numerous interim applications.

2. In November 2008 further steps were taken to prepare the matter for final trial, including orders made on the 5 November 2008 in relation to discovery of documents and preparation of experts’ reports.

3. Many of the interim matters dealt with steps being taken to identify the assets, liabilities and financial resources of the husband and the various entities in which he was alleged to have had an interest.

4. On application of the husband leave was granted on the 4 March 2009 to the husband’s solicitors to issue subpoenas to produce documents to Mr H and W Accountants Pty Ltd in terms of Annexure ‘B’ to the affidavit of the husband’s solicitors filed on the 30 January 2009.

5. In that affidavit Mr Burtt filed he set out the basis upon which the husband’s solicitors were seeking to issue subpoenas to the various entities which were companies and trusts in which it was asserted that the wife had an interest or from which the wife had obtained a benefit.  This group is now described as the Martin Group.

6. The subpoenas for which leave was given were directed to Mr H and W Accountants Pty Ltd.

7. Mr H is a director of W Accountants Pty Ltd and describes himself as:

   “A chartered accountant and in this capacity I am retained by the ‘[Martin] Group’ to attend to the financial affairs of the entities within that group.” 

   (Paragraph 2 of Mr H’s affidavit filed on the 4 August 2009).

8. In that affidavit Mr H says that “with the exception of ‘[A Martin] Family Unit Trust’” the trusts referred to in his affidavit are discretionary trusts and that the wife is within the class of beneficiaries of those trusts.  The affidavit then deals with a large number of entities within the S Group, F Group, D Group, C Group, N Group and L Group which are all part of the Martin Group.

9. The affidavit of the wife’s brother, X Martin, filed on 27 July 2009 confirms the material in Mr H’s affidavit.

10. The wife’s brother describes himself as the “Manager of the [Martin] Group” on a day to day basis, but asserts that the control of the group is maintained by his father and mother.  In that affidavit he refers to Deeds of Family Agreement which have been entered into by some of the family members who are possible beneficiaries under the trusts.

11. Originally the two Family Agreement Deeds were not produced other than in a sealed envelope for which confidentiality was claimed.  At the hearing however it was conceded that both documents were relevant and could be inspected by the husband’s legal representative.  The first Family Agreement is dated 10 May 1996.  The second is undated, save and except it refers to 2002.

12. The wife is one of the seven parties to the Family Agreement of 2002.  The wife’s parents and siblings are the other parties to the Agreement.  The document recites that each of the children are within the definition of an eligible beneficiary in a list of trusts which are also some of the entities to which the subpoenas relate.  Clause “E” of the notation says:

    “Notwithstanding that they and others are beneficiaries under the said trusts to whom at the discretion of the respective trustee distributions of income or capital can be made it is acknowledged between the children that the trusts described below have been established with the intention of being ultimately for the benefit of the parties as described below”

13. The wife is then named as the beneficiary to the S Investment Trust.

14. Clause “F” recites:

    “The children each have either by direct entitlement or through trusts a one-fifth interest in the assets of the [D] Group but subject to possible partial or total divestment as referred to in Clause 10.1.”

15. The terms of the Deed set out specific conditions in relation to each of the numerous trusts.  The siblings acknowledge “although they qualify as beneficiaries” in particular trusts they then agree to direct the trustee not to consider them or any spouse or descendent of theirs when exercising its discretion to distribute income or capital from the trust fund and agree not to oppose or dispute any exercise or proposed exercise of the trustees discretion as to distribution and undertake not to support any spouse or descendent in disputing the exercise of the trustees discretion. 

16. The effect of the document is that the wife agrees not to make any objection or seek any distribution from any of the trusts save and except the S Investment Trust and that her siblings do the same in relation to the S Investment Trust for the wife’s benefit. 

17. There are then specific clauses dealing with the D Group and the A and T Endowment Trust.

18. Clause 12 provides that the wife and her sisters, X and Y have certain “occupancy rights” in relation to properties owned by the various trusts, including an entitlement to “casual occupancy” of properties at B, The Penthouse, The Terrace, P, J and V.

19. Paragraph 13.2 states:

    “13.2If [the wife] is unmarried or married but separated and living apart from her husband and if she requests housing assistance from the [Martin] family a company or trust under the control of the [Martin] family shall provide financial assistance of an amount to be at the discretion of the [Martin] family but not less than $200,000.00 to enable or assist [the wife] to purchase a residence to which she shall have an exclusive right of occupation.  Further if as a consequence of a property settlement with her husband [the wife] becomes entitled to own or occupy exclusively the [Adelaide] property currently occupied by her she may still call upon financial assistance of not less than $200,000.00 either for the purpose of improving that residence or alternatively such other reasonable purpose as [the wife] may designate.

    Financial assistance to [S Company] shall be deemed to be assistance to [the wife] for the purposes of this clause.”

20. Other clauses in the agreement refer to the rights of the registered proprietor and responsibilities of the occupier.

21. Paragraph 20 is headed “Safety Net – [the wife], [Y] and [Z]”.  It provides:

    “20.If either [the wife], [Y] or [Z] requires additional income or financial support as a result of failure of any investments in which that person has an interest or other substantial decrease in her income, [A and T] or the survivor of them or upon their death [X] and [L] will, (without being under any legal obligation to do so) at their or his or her discretion cause her to receive sufficient income or other support to enable her to maintain her standard of living.”

22. The Deed acknowledges the overriding rights of the wife’s parents.  It also provides that if any distribution is made other than in the terms of the Family Agreement then the recipient of the distribution will indemnify the person nominated to receive that distribution in the terms of the Deed.

23. The Deed also makes provision for the benefits under the Family Agreement to be pleaded in bar to any claim pursuant to the Inheritance (Family Provision) Act 1972 (SA) in relation to the estates of the wife’s parents.

24. Some of the documents sought by the subpoenas have been produced. 

The Law

1. Section 38 of the Family Law Act 1975 (Cth) is headed “Practice and Procedure” and provides:

   (1)    Subject to this Act, the practice and procedure of the Court shall be in accordance with the regulations and the standard Rules of Court.

   (2)    In so far as the provisions applicable in accordance with subsection (1) are insufficient, the Rules of the High Court, as in force for the time being, apply, mutatis mutandis , so far as they are capable of application and subject to any directions of the Court or a Judge, to the practice and procedure of the Court.

   (2A) This section does not apply in relation to proceedings that are transferred to the Court from the Federal Court of Australia.

   (3)    In this section, practice and procedure includes all matters with respect to which regulations or standard Rules of Court may be made under this Act.

2. The proceedings before the Court between the husband and wife are proceedings under s 79 which provides for the Court to make orders with respect to the property of the parties to the marriage or either of them altering the interests of the party to the marriage in the property (s 79(1)(a)).

3. Section 79(2) provides:

   (2)    The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.

4. The court is required to take into account those matters set out in s 79(4) when considering what order, if any, should be made. This includes the matters referred to in sub-section 75(2) so far as they are relevant. (Section 79(4)(e)).

5. Matters to be taken into account under s 75(2) include the income property and financial resources of the husband and wife (s 75(2)(b)).

6. Part VIIIAA is headed “ Orders and injunctions binding third parties”. Section 90AA states:

   The object of this Part is to allow the court, in relation to the property of a party to a marriage, to:

   (a)make an order under section 79 or 114; or

   (b)grant an injunction under section 114;

   that is directed to, or alters the rights, liabilities or property interests of a third party.

7. Section 90AC(1) provides:

   (1)    This Part has effect despite anything to the contrary in any of the following (whether made before or after the commencement of this Part):

   (a)any other law (whether written or unwritten) of the Commonwealth, a State or Territory;

   (b)anything in a trust deed or other instrument.

8. Section 90AE provides:

   (1)    In proceedings under section 79, the court may make any of the following orders:

   (a)an order directed to a creditor of the parties to the marriage to substitute one party for both parties in relation to the debt owed to the creditor;

   (b)an order directed to a creditor of one party to a marriage to substitute the other party, or both parties, to the marriage for that party in relation to the debt owed to the creditor;

   (c)an order directed to a creditor of the parties to the marriage that the parties be liable for a different proportion of the debt owed to the creditor than the proportion the parties are liable to before the order is made;

   (d)an order directed to a director of a company or to a company to register a transfer of shares from one party to the marriage to the other party.

   (2)    In proceedings under section 79, the court may make any other order that:

   (a)directs a third party to do a thing in relation to the property of a party to the marriage; or

   (b)alters the rights, liabilities or property interests of a third party in relation to the marriage.

   (3)    The court may only make an order under subsection (1) or (2) if:

   (a)the making of the order is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage; and

   (b)if the order concerns a debt of a party to the marriage--it is not foreseeable at the time that the order is made that to make the order would result in the debt not being paid in full; and

   (c)the third party has been accorded procedural fairness in relation to the making of the order; and

   (d)the court is satisfied that, in all the circumstances, it is just and equitable to make the order; and

   (e)the court is satisfied that the order takes into account the matters mentioned in subsection (4).

   (4)    The matters are as follows:

   (a)     the taxation effect (if any) of the order on the parties to the marriage;

   (b)    the taxation effect (if any) of the order on the third party;

   (c)the social security effect (if any) of the order on the parties to the marriage;

   (d)    the third party's administrative costs in relation to the order;

   (e)if the order concerns a debt of a party to the marriage--the capacity of a party to the marriage to repay the debt after the order is made;

   Note:See paragraph (3)(b) for requirements for making the order in these circumstances.

   Example:The capacity of a party to the marriage to repay the debt would be affected by that party's ability to repay the debt without undue hardship.

   (f)the economic, legal or other capacity of the third party to comply with the order;

   Example:The legal capacity of the third party to comply with the order could be affected by the terms of a trust deed. However, after taking the third party's legal capacity into account, the court may make the order despite the terms of the trust deed. If the court does so, the order will have effect despite those terms (see section 90AC).

   (g)if, as a result of the third party being accorded procedural fairness in relation to the making of the order, the third party raises any other matters--those matters;

   Note:See paragraph (3)(c) for the requirement to accord procedural fairness to the third party.

   (h)    any other matter that the court considers relevant.

9. The Rules of the Court are made pursuant to the provisions of s 123 of the Family Law Act 1975 (Cth). Chapter 15, Part 15.3 of the Family Law Rules 2004 (Cth) deals with subpoenas. In particular, rule 15.26 provides that:

   If a named person or a person having sufficient interest in a subpoena:

   (a)seeks an order that the subpoena be set aside in whole or in part;

   (b)objects to the production of a document required by the subpoena;

   (c)seeks to be paid for any loss or expense relating to the person’s attendance, or the production of a document, in compliance with the subpoena; or

   (d)seeks any other relief in relation to the subpoena;

   the person must attend court on the court date to apply for the order.

10. Grounds upon which an objection to subpoena can be made include, in appropriate circumstances, those summarised in the Notice of Objections as:

    “1.    Privilege;  oppression;  confidentiality;  relevance.

    2.    Insufficient conduct money.”

1. The decided cases in this Court and in other Superior Courts of Record establish that a subpoena may be set aside on a number of grounds including:

   1.     Where the evidence of documents are not relevant.

   2.     Where the subpoena is so wide that it is considered oppressive.

   3.     There is absence of particularity in the description of the document sought.

   4.     That it is an abuse of process.

   5.     That the documents are protected by privilege or the form of confidentiality which outweighs the requirement to produce.

2. The Full Court of the Family Court of Australia in the decision of Hatton v Attorney-General of Commonwealth of Australia and Others (2000) FLC 93-038 considered in detail the power of the Court to set aside a subpoena and the grounds to set aside the subpoena. In particular the Court considered the ground that there was a lack of relevance.Paragraphs 34 and 35 of the judgment state:

   “34. In determining whether Rose J. was in error in setting aside the subpoena to the Attorney-General, it should be observed at the outset that while the power to issue subpoenae to produce documents is expressly provided for in the Family Law Rules (O.28 r.1), as it is in the Federal Court Rules (O.27 r.2), unlike in the Federal Court Rules (O.27 r.9), there is no express provision in the Family Law Rules for the setting aside of a subpoena. (In relation generally to the scope of the power of the Federal Court in relation to the issue and setting aside of subpoenae, see the decision of French J. in Trade Practices Commission v CSR Limited (1989) ATPR 40-970).

   35. Nevertheless, the existence of a power in this Court to set aside subpoenae seems to have long been assumed or accepted by this Court (see in this regard: Sharpe and Dalton (1990) FLC 92-167; Epstein (1993) FLC 92-384; White and Tulloch v White (1995) FLC 92-640; Re Z (1996) FLC 92-694 at 83,240; and Relationships Australia v Pasternak (1996) FLC 92-699). However, the principles which should govern the exercise of the power have not, it would seem, to date been the subject of any extensive examination.”

3. In a lengthy discussion concerning the principles espoused in the NSW Court of Appeal decision of National Employers’ Mutual General Association v Waind and Hill [1978] 1 NSWLR 372 (Waind and Hill) in paragraph 40 of the Full Court judgment in Hatton (supra) they underlined the portion which stated:

   “The only legitimate purpose of requiring the production, and permitting the inspection, of a stranger's documents can be to add, in the end, to the relevant evidence in the case”

4. In paragraph 45 of the Full Court judgment the Full Court also emphasised the passage:

   “As to relevance, the law is that ‘production of a document on subpoena by a stranger is only required if the document is sufficiently relevant to the action in the sense that it is likely to add in the end, in some way or other, to the relevant evidence of the case’. Waind and Hill (1978) 1 NSWLR 372).”

5. The Full Court also decided that it was up to the person who sought to enforce the subpoena to “establish that the terms of the subpoena had some apparent relevance to the issues in the property settlement proceedings between the husband and the wife…”  (Paragraph 58 of Hatton (supra)).

6. At paragraph 59 the Full Court said:

   “59.  Further, given that there are at the present time no pleadings in this Court, the only way in which apparent relevance of the subpoenaed material to the main property settlement proceedings could be established was by reference to the affidavit material filed in those proceedings.  His Honour considered the paragraphs in affidavits on which the husband relied.  His Honour found there was no apparent relevance between any issue raised on that material and the documents sought by the subpoena.”

7. The cases also establish that subpoenas should not be used as a substitute for discovery and that such a process may be considered abusive or oppressive.  (Relationships Australia v Pasternak & Pasternak & Children’s Representative (1996) FLC 92-699).

8. Clearly issues to be determined in the property settlement proceedings between the husband and wife include the identification of the property of the wife and any financial resources of the wife.

9. The High Court decision of Kennon v Spry (2008) 40 FamLR 1 discussed the significance of the wife’s rights as a discretionary beneficiary of a trust in relation to s 79 property settlement proceedings. The facts of that case however can be distinguished from the present case because of the role of the husband in Kennon v Spry (supra) as a former trustee who held legal title to the trust fund property.

10. Paragraphs 70, 73, 74 and 75 of the judgment French CJ said:

    70.    The characterisation of the assets of the Trust, coupled with Dr Spry's power to appoint them to his wife and her equitable right to due consideration, as property of the parties to the marriage is supported by particular factors. It is supported by his legal title to the assets, the origins of their greater part as property acquired during the marriage, the absence of any equitable interest in them in any other party, the absence of any obligation on his part to apply all or any of the assets to any beneficiary and the contingent character of the interests of those who might be entitled to take upon a default distribution at the distribution date.

    …

    73.    In light of the trial judge's findings about the purposes of the 1998 Instrument and the 18 January 2002 Dispositions, the preceding conclusion is sufficient to support the trial judge's orders and the dismissal of these appeals. They are also supported by a consideration of Mrs Spry's equitable right to due consideration as an object of the Trust prior to the 1998 Instrument and, for the reasons enunciated by Gummow and Hayne JJ, by consideration of that right in conjunction with Dr Spry's power as trustee to apply the assets or income of the Trust to any of the beneficiaries in his discretion. It is desirable to say something further specifically about that.

    The rights to due consideration and due administration as "property"

    74.    Each of the beneficiaries had the right to compel the trustee to consider whether or not to make a distribution to him or her and a right to the proper administration of the Trust.  In Gartside v Inland Revenue Commissioners, Lord Wilberforce put it thus:

    ‘No doubt in a certain sense a beneficiary under a discretionary trust has an 'interest': the nature of it may, sufficiently for the purpose, be spelt out by saying that he has a right to be considered as a potential recipient of benefit by the trustees and a right to have his interest protected by a court of equity. Certainly that is so, and when it is said that he has a right to have the trustees exercise their discretion 'fairly' or 'reasonably' or 'properly' that indicates clearly enough that some objective consideration (not stated explicitly in declaring the discretionary trust, but latent in it) must be applied by the trustees and that the right is more than a mere spes. But that does not mean that he has an interest which is capable of being taxed by reference to its extent in the trust fund's income: it may be a right, with some degree of concreteness or solidity, one which attracts the protection of a court of equity, yet it may still lack the necessary quality of definable extent which must exist before it can be taxed.’

    75.    The rights to consideration and to due administration are in the nature of equitable choses in action. There has been considerable judicial discussion about the nature of a beneficiary's right to due administration in the case of the residuary legatee of an unadministered deceased estate and members of superannuation funds whose benefits have not vested. The residuary legatee has an equitable right , "a chose in action, capable of being invoked for any purpose connected with the proper administration of [the] estate" - #.  Such a right has been treated as property for the purposes of the BankruptcyAct 1966 (Cth). In the case of a residuary legatee the right to due administration is connected to a real expectancy of an interest in the property. The same is true for the members of a superannuation fund although vesting of a benefit may be many years in the future. However, the right to due administration taken by itself in relation to a superannuation fund was described by the Full Court of the Family Court in 1986, in a brief consideration of the question, as "an empty present right of no relevance". (Emphasis added, footnotes omitted).

11. At paragraphs 77 and 78 it was stated:

    77.    The beneficiary of a non-exhaustive discretionary trust who does not control the trustee directly or indirectly has a right to due consideration and to due administration of the trust but it is difficult to value those rights when the beneficiary has no present entitlement and may never have any entitlement to any part of the income or capital of the trust.

    78.    Gummow and Hayne JJ, in their joint reasons, characterise Mrs Spry's right with respect to the due administration of the Trust as part of her property for the purposes of the Family Law Act. I respectfully agree with their Honours that prior to the 1998 Instrument the equitable right to due administration of the Trust fund could be taken into account as part of the property of Mrs Spry as a party to the marriage. So too could her equitable entitlement to due consideration in relation to the application of the income and capital. In so agreeing, however, I acknowledge, consistently with the observations of the Full Court in Hauff and Evans, that it is difficult to put a value on either of these rights though a valuation might not be beyond the actuarial arts in relation to the right to due consideration.  (Emphasis added).

12. Gummow and Hayne JJ delivered a joint judgment.  In their conclusions at paragraph 125 and 126 they said:

    125.     The wife was an eligible object of benefaction of the Trust. She was one of the class of "beneficiaries" identified in cl 4 of the 1981 Instrument. The use in that document of the term "beneficiaries" was inapt insofar as it suggested the existence of any vested beneficial interest in the assets held on the trust of the 1981 Instrument. Dr Hardingham correctly identified the wife as one of the class of objects of the discretionary power conferred upon the trustee by cl 6 of the 1981 Instrument. She also was one of the class of objects for division of the fund at the distribution date (cl 7). Furthermore, as an object of these powers the wife had a right in equity to due administration of the Trust. The existence of such a right did not depend upon entitlement to any fixed and transmissible beneficial interest in the trust fund. The right of the wife was accompanied at least by a fiduciary duty on the part of the trustee, the husband, to consider whether and in what way he should exercise the power conferred by cl 6.

    126. Reference was made earlier in these reasons to the comprehensive sense in which the term "property" is defined in s 4(1) of the Act. And it will also be recalled that the "property" which may be the subject of orders under s 79(1) of the Act is "the property of the parties to the marriage or either of them" (emphasis added). The right of the wife with respect to the due administration of the Trust was included in her property for the purposes of the Act. The submissions by Mr Gleeson to this effect should be accepted. The submissions to the contrary by Mr Myers should not be accepted. And in considering what is the property of the parties to the marriage (as distinct from what might be identified as the property of the husband) it is important to recognise not only that the right of the wife was accompanied at least by the fiduciary duty of the husband to consider whether and in what way the power should be exercised, but also that, during the marriage, the power could have been exercised by appointing the whole of the Trust assets to the wife. Observing that the husband could not have conferred the same benefit on himself as he could on his wife denies only that he had property in the assets of the Trust, it does not deny that part of the property of the parties to the marriage, within the meaning of the Act, was his power to appoint the whole of the property to his wife and her right to a due administration of the Trust.  (Emphasis added, footnotes omitted).

13. The majority of the High Court did not make any decision about the categorisation of the wife’s possible beneficial interest as a financial resource.

Discussion

1. During the submissions of counsel on the 7 August 2009 the Court sought clarification about those documents which had been produced and those documents to which objection was taken.  At the request of counsel the matter was stood down whilst further enquiries and instructions were taken.

2. Towards the end of the hearing, and after initial submissions had been heard, discussion took place about the interpretation of the specific wording of paragraph 1 of the subpoenas.

3. After a further discussion and brief adjournment to allow counsel to consider the matters raised, it was established that the dispute concerning the subpoenas could be limited to the trust deeds, corporate constitutions, profit and loss statements and balance sheets for all of the entities mentioned in paragraph 1, save 1.12 and 1.21, for each year since 1988.

4. Mr Bartfeld QC, counsel for the Martin Group informed the Court that no opposition was taken to the production of accounts and relevant documents for every trust mentioned in recital E of the 2002 Family Agreement which related to the wife.

5. Husband’s counsel continued to press for the production of the trust deeds, corporate constitutions, profit and loss accounts and balance sheets for all of the other entities in which the wife had a potential beneficial interest or direct interest, whether or not she had ever received any distribution or payment. 

6. Mr H and W Accountants Pty Ltd were the recipients of subpoenas requiring them to produce documents which they held in their capacity as accountants for the Martin Group.  The companies and trusts referred to as the Martin Group are clearly persons having a sufficient interest in the subpoenas to object to the subpoena. 

7. In the written submissions on behalf of the Martin Group reference is made to three categories of entities:

   (a)    Companies and Trusts in which the wife has an interest or from which she derives benefits;

   (b)    Trusts controlled by her parents or other members of her family of origin in which the wife falls into a class of discretionary beneficiaries but over which she has no control or power in respect of the appointment of the income or capital of the trust and from which she receives no benefit or from which she or a company or trust fitting the description in sub paragraph (a) above has received benefits (such as distribution of furniture and artwork) at the discretion of her parents;

   (c)    Companies and Trusts in which she has no interest or control at all and which are connected with the other members of her family of origin.

8. The oral submissions made to the Court indicate that the issue was in fact limited to (b), it being conceded by the wife and the Martin Group that documents in relation to (a) were not the subject of the objection.  It was also conceded by the husband’s counsel that documents falling within the category of (c) were not being sought.

9. Paragraph 8 of the written submissions of counsel for the Martin Group stated:

   “8.    It is submitted that the complaints made on the husband’s behalf in his solicitor’s affidavit, taken at their highest, fail to identify why most of the documents sought in the subpoena, and which relate to companies and trusts;

   (a)over which the wife has no control or an enforceable beneficial interest (other than perhaps the “right to be considered” and/or the right to require due administration);  or;

   (b)from which the wife receives no substantial benefits from such trusts or companies;  or;

   (c)which do not own assets which were produced or derived from the efforts of the husband and/or the wife[1]

   are in any way relevant to the proceedings between the husband and the wife.”

   [1]See French CJ at paragraph 65 of Kennon v Spry (2008) FLC 93-388

10. The Martin Group relied upon the affidavits of Mr H and the wife’s brother. 

11. One of the arguments in support of the opposition to the subpoenas was that the source and “providence” of the assets in the family companies and trusts was not the product of anything done by either the husband or the wife during, before or after the marriage.  Emphasis was placed upon the fact that the wife was no more than a possible discretionary beneficiary in the trusts which were connected to the trusts and companies in the Martin Group.  Mr Bartfeld QC  referred to the Family Agreement Deeds as establishing a right for some of the siblings to occupy real properties and could be described as the siblings surrendering various rights “to be remembered” in various trusts. 

12. It was emphasised that the wife’s case was that her parents maintained overall control of the Martin Group and that documents for any entity in which the wife had a direct identifiable enforceable right to property, had been or would be disclosed.

13. The affidavit of Mr H refers to the entities of the Martin Group in the following context:

    “7.    The in practice administration of the Trusts and benefits received by [the wife] from the Trusts are set out below.”

14. The affidavit then lists each of the entities in a group and sets out whether the documents in relation to each of those entities has been produced and made available for inspection.  The affidavit however states in paragraph 6:

    “6.    With the exception of the ‘[A Martin] Family Unit Trust’ the Trusts referred to herein are Discretionary Trusts and [the wife] is within the class of beneficiaries.”

15. In the balance of the affidavit reference is made to those trusts in which the wife has been a director/secretary/shareholder of the company and where she has received any distribution from the trusts.

16. The affidavit of Mr H the accountant is significant in that it purports to provide evidence as to the structure of the group and the assets of some of the entities however, does not provide any of the documents upon which that evidence might be based or which supports the evidence of the accountant.  Mr Bartfeld QC conceded that Mr H might be the subject of cross-examination at the trial, but did not concede that documents upon which his evidence was based should be produced in answer to the subpoenas. 

17. On behalf of the Martin Group it was asserted that the relevance of the documents to the outcome of the matrimonial property settlement proceedings needed to be compared to the expense, inconvenience and invasion of privacy for the Martin Group who were not parties to the matrimonial proceedings.

18. The Martin Group and the wife rely upon the submission that the husband has not provided evidence which would bring the companies and trusts in which the wife does not have a direct or enforceable interest into the category of assets which would be included in the pool of assets to be divided between the husband and the wife.  The husband asserts however, that given the terms of the Family Agreements entered into by the wife and her siblings, the documents sought to be produced in relation to all the entities in which the wife is potentially a beneficiary are relevant in order to establish not only the assets, but also the financial resources of the wife.

19. Whether the interests of the wife, if only falling into the category of “right to be considered” or a financial resource can easily be valued, is not necessarily determinative of whether the documents and evidence in relation  to those matters are relevant.

1. The Martin Group also referred to the broad and oppressive nature of the subpoenas which call for the production of a large number of documents in relation to the numerous entities which form part of the Martin Group. 

2. On behalf of the husband it is submitted that the documents sought by the subpoenas are necessary to assist in determining the actual nature of the interest of the wife in the various entities.  In particular, it is argued on his behalf that even if the wife is merely an eligible beneficiary in the various trusts forming part of the Martin Group, such an interest may be described as property following the decision of the High Court in Kennon v Spry (supra).  In the alternative the husband asserts that if the interest of the wife is to be regarded merely as a financial resource an appreciation of the value of that resource may be necessary and therefore relevant.

3. The husband’s counsel do not accept that the Court should receive the evidence of the wife’s brother and the Group accountant without providing the husband with an opportunity of testing that evidence by examination of the relevant documents and expert assessment if appropriate.

4. On behalf of the husband it was submitted that the subpoena should be seen in the context that until recently the wife failed to disclose the Family Agreement and the details of any trust in which she was an eligible beneficiary as to capital or income in accordance with the Family Law Rules (rule 13.04).

5. On behalf of the Martin Group it was submitted that the subpoenas should not be used as a substitute for discovery. 

6. The Deeds of Family Agreements entered into by the wife (the last of which came into existence after the parties divorce) contained provisions whereby the wife gave up certain “rights” in some of the family entities in exchange for the provision of other “rights” which were described by the wife’s brother in his affidavit at paragraph 39 as:

   “39.  The females in our family have always been provided for by way of Trusts but this is not to the same degree or in such manner as to give them control of or access to any other entities within the group.”

7. The husband submits that one of the reasons for the Family Agreements was the property settlement proceedings between the husband and wife.  This is denied.  This will be a matter, if it continues to be relevant, to be determined at the trial.  The Family Agreements however, are asserted to bring about a situation which ties “all of the entities together through a series of mutual promises”.  (See 13.23 of the submissions of counsel for the husband).

8. The documents which the husband seeks are said by his counsel to be relevant:

   (a)because the Family Agreements provide the wife with an enforceable right under the last Deed which may create property beyond a mere financial resource;

   (b)the evidence of the wife’s brother and the Martin Group accountant provides summaries or opinions and the husband is entitled to consider the documents or records upon which they are based;

   (c)the fact that there are a large number of documents which might fall within the subpoenas because there are a large number of entities does not make the subpoenas oppressive;

   (d)the specified documents are capable of being readily identified by the accountant as documents which fall within the classes sought;

   (e)the opposition based upon an argument that the assets or financial resources were not produced or derived from the efforts of either the husband or wife is not sustainable;

   (f)the question of who has “effective control” over the numerous entities which form part of the Martin Group may be a matter to be determined upon full and properly tested evidence which would take place after all relevant documents have been produced and inspected.

9. On behalf of the Martin Group it is emphasised that the documents to which exception is taken form part of the entities in the Martin Group with which the wife has no connection other than that she is in a category of potential or eligible beneficiary.  It is asserted that such documents should not be produced because it is an unwarranted invasion of privacy and beyond that which is relevant.  It was conceded however that those entities which are involved in the S Investment Trust and the D Group (which are referred to as being “allocated” to the wife in the Family Agreements) would produce the documents sought.

Conclusions

1. The privacy of the Martin family is in itself not sufficient objection to the subpoenas for documents which are relevant to the determination of the issues between the husband and wife in the property settlement proceedings.

2. The evidence of the brother and Mr H in their affidavits provides a summary and assertions which are yet to be tested by cross-examination and the production of any connected documents.

3. Similarly, whether the interest of the wife as a person within a class of beneficiaries is to be described as “property” or a “financial resource” is a matter which can only be determined after the full consideration of all of the relevant evidence which has been provided and appropriately tested. 

4. The reasons in Kennon v Spry (supra) (and in particular of French CJ in paragraphs 77 and 78 and Gummow and Hayne JJ in paragraphs 125 and 126) will need to be considered taking into account all of the available admissible evidence and the facts established in this case.

5. Whether or not the interest of the wife as a “right to property” or a “financial resource” can be easily valued, is again a determination which cannot be made until such time as both parties have available to them the documents which would assist in the valuation or determining whether such a valuation is possible.

6. On the face of the documents produced and the evidence of the wife’s brother and the Martin Group accountant, it appears that the ultimate control of the trusts and entities under consideration remains with the wife’s parents. 

7. Thus, the related factors of control by one party to the marriage and a potential beneficial interest of one party to the marriage which existed together in the matter of Kennon v Spry (supra) can be distinguished from this matter in which it is asserted that the wife does not have any control of any of the entities but is merely a potential beneficiary or a person falling within the class of beneficiaries.  The Family Agreement between the parents and siblings is not construed to be binding upon the parents so far as their exercise of control of the trust is concerned.  The Family Agreement could be construed as providing the wife with certain rights in relation to her siblings and possible other rights yet to be determined. 

8. The decision of Kennon v Spry (supra) dealt specifically with consideration of issues relating to what was property of the husband and wife or parties to the marriage. The decision did not consider whether the entitlements of either of the parties could be described as a financial resource and thus relevant for the purposes of ss 75(2) and 79 of the Family Law Act.

9. In this case the wife’s status as a potential beneficiary or a person who could be described as an “eligible beneficiary” is a factor which may be relevant to determining the financial resources of the wife.  Such a determination must await the final hearing, however, it is at this stage established that the documents which are sought are sufficiently relevant to an issue to be determined by the Court in the property settlement proceedings between the parties.

10. This is enforced by the need to consider the terms of the Family Agreement made in 2002.

11. This is therefore not a case in which the records being sought could be described as of “no more than marginal relevance”.  It therefore does not fall within the category referred to in the Full Court decision of White & Tulloch v White (1995) FLC 92-640 (page 82,464) in which it was described as being oppressive to require the disclosure of financial records in circumstances that may prove ultimately to be of no more than marginal relevance.

12. This case is one where the issue of the wife’s financial resources is an issue which is legitimate and therefore supports the subpoenas.

13. Whilst the time period from January 1988 until the present time is a long period, the property and financial resources of each of the parties immediately before cohabitation commenced, during the period of marriage and cohabitation and since separation to the date of trial are all relevant matters.

14. The evidence of the accountant already before the Court supports the finding that it would not be onerous for the recipients of the subpoenas to identify, locate and produce the documents now sought to be the subject of these subpoenas.  The number of entities involved and the lengthy period concerned make the task larger than is commonly the case but this in itself does not make the requirement to produce the same so onerous as to overcome the other factors in support of production.

15. Although the notices of objections referred to “privilege” there was no submission to support this ground.

16. For reasons discussed above the provision of the documents now sought by the husband, albeit in relation to numerous entities, cannot be considered to be so oppressive as to be a basis for setting aside the subpoenas. 

17. Similarly, the question of confidentiality is not determinative particularly as restrictions are placed upon the husband and his advisers preventing the use of the documents or publication of the documents other than strictly for the purposes of these Family Court proceedings.

18. Rule 15.27 of the Family Law Rules relate to subpoenas and provides:

    (1)    This Division applies to a subpoena for production.

    (2)    A person who inspects or copies a document under these Rules or an order must:

    (a)     use the document for the purpose of the case only; and

    (b)not disclose the contents of the document or give a copy of it to any other person without the court’s permission.

19. This obligation not to use the documents for any other purpose is also supported by the decision of the High Court of Australia in Hearne v Street (2008) 235 CLR 125.

20. The main issue therefore to be determined is whether there is sufficient or apparent relevance of the documents sought to the issues to be determined in these Family Court proceedings.

21. The extent of the wife’s interest in the companies and trusts which form part of the Martin Group is an issue to be determined in these proceedings, in particular whether the wife has an “asset” or any “property” because of her interest in the Martin Group or whether the wife has an interest which would be described as a “financial resource”.

22. An apparent and sufficient relevance is therefore established.

23. The documents now requested by the husband’s counsel should be provided.

24. The submissions of counsel for the husband indicated that the husband as the issuing party would agree to meet the costs of the recipients of the subpoena being the costs necessary to comply with providing the documents sought.  If necessary, I will hear from counsel as to any specific order sought.

I certify that the preceding nine-five (95) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Dawe

Associate: 

Date:  16 October 2009