Leib and Leib

[2009] FamCA 1134

FAMILY COURT OF AUSTRALIA

LEIB & LEIB [2009] FamCA 1134

FAMILY LAW – PROPERTY – Duty of disclosure – documents in possession of a third party – s 290 Corporations Act 2001 (Cth) – insufficient notice of application – adjournment granted

Corporations Act 2001 (Cth) s 290
Family Law Rules 2004 (Cth) Part 13.1

APPLICANT: Ms Leib

RESPONDENT: Mr Leib

FILE NUMBER: MLC 1495 of 2009

DATE DELIVERED: 2 September 2009

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Bennett J

HEARING DATE: 2 September 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT: MR B.R. GEDDES QC
MR D. SWEENEY

SOLICITOR FOR THE APPLICANT: Kennedy Wisewoulds

COUNSEL FOR THE RESPONDENT:

MR M. BARTFELD QC

MR A.I. STRUM

SOLICITOR FOR THE RESPONDENT: Taussig Cherrie & Associates

Orders

IT IS ORDERED:

1. That all proceedings be and are hereby adjourned to a date to be fixed.

2. That the determination of the wife’s application as articulated in Exhibit “W2” disclosure be and is hereby adjourned to a date to be fixed.

3. That by not later than 4.00 p.m. on 14 September 2009 the husband file and serve any submissions in opposition to the orders sought by the wife in relation to disclosure.

4. That the question of the costs of both parties of and incidental to this day be reserved.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 1495 of 2009

MS LEIB

Applicant

And

MR LEIB

Respondent

REASONS FOR JUDGMENT

ex tempore

1. This matter comes before me on an application by the wife against the husband for production of documents by way of disclosure within the meaning of Part 13.1 of the Family Law Rules 2004 (Cth) which provides that each party to a case has a duty to the court and to each other party to give full and frank disclosure of all information relevant to the case, in a timely manner, starting with pre-action procedure and concluding when the case is finalised.

2. Mr Geddes QC and Mr Sweeney, of counsel, appeared for the wife.  Mr Bartfeld QC and Mr Strum appeared for the husband.

3. The proceedings relate to children and financial matters.  Today, the relevant proceedings are the competing applications for final alteration of property interests and spousal maintenance.  The documents sought are documents in relation to trusts of which the husband is a director of the relevant trustee company and which are in the possession of those companies.  The court has heard submissions and the matter was stood down for discussions.  There has been no oral evidence or cross examination.  The husband did not attend court.

Background

1. The husband is 35 years old.  He is employed by one of his father’s business interests.  His salary is about $40,000 a year.  The wife is 29 years old and is not employed outside the home. 

2. The husband and wife commenced co-habitation in February 2003 and married in June 2003.  There are two children of the marriage:  X, aged four and a half, and Y, aged two and a half.  The girls reside primarily in the care of the mother and spend time with the father.  The parties separated on 9 February 2008 and have since divorced.

3. Upon separation, the husband vacated a family home at F Street, K, which is a property in which he says he has no proprietary interest.  He now lives at S Street, K, which is also a property in which he says he has no proprietary interest, and the children live there with him when they are with him.

4. The husband’s parents, Mr and Mrs Leib Snr, are wealthy.  Mr Bartfeld’s description of his client’s financial position was, in effect, that howsoever the wealth might be held or the entities structured, the assets in this case reside with the husband’s parents and it is only through them that the husband receives the substantial benefits that he does and, for the time being, the wife also enjoys.  He submitted, in effect, that there is a significant disproportion of wealth in this case but it not as between the husband and the wife but more accurately between the husband’s parents and everyone else.  Wealth in this case is in the hands of the husband’s father and that is a matter that the husband and, very particularly, the wife ‘have to come to grips with’.

5. On 27 April 2009, a corporate lawyer, Mr R, swore an affidavit for the husband in which he described the family’s financial situation in the following terms:-

   2.        The [Leib] Group comprises numerous corporate, unit trust and discretionary trust entities that represent the interests of the [Leib] Family, which comprises [Mr and Mrs Leib Snr] and their three children, [T], [E] and [the husband] (“the [Leib] Children”).

   3.        The assets of the [Leib] Group are substantial.  They include a large number of [businesses] in Australia managed by its various private companies, significant shareholdings in public companies and a number of different businesses and investments.

   4.        Despite the fact that the [Leib] Group is a very large corporate group, employing approximately 1800 people, it retains many of the characteristics of a family company because of the key role played by [the husband’s father] in relation to all decisions concerning the assets and income of the Group.  [The husband’s father] is the main person responsible for building the Group to what it is today.

   9.         I have worked closely with [the husband’s father] and [Mr L] on matters concerning the [Leib] Group.  [Mr L] is a director of [C Business].  He is also a director of other [Leib] Group companies. He is, and has acted as, a strategic adviser to the Group.

   10.       Each of the [Lieb] children performs roles in relation to particular companies within the [Leib] Group, but has no involvement in the decisions concerning the distribution of income earned by entities within the Group.  [The husband’s father] plays a key role in the making of these decisions.

6. The husband says that Mr R’s description provides a general overview of how the family business operates.  The legal representatives of the wife do not concede that the description is at all accurate.

The current application

1. The current application was first articulated in paragraph 5 of the orders sought by the wife in an application in a case filed on 23 February 2009.  It was then refined to specify documents set out in annexure ‘SL1’ to the wife’s affidavit sworn on 26 August 2009.  Today, a minute proposed by the wife was tendered. I have marked it exhibit ‘W2’.  It is that document which constitutes the wife’s application today.  It reads:-

   1.The husband forthwith provide to the wife’s solicitors Kennedy Wisewoulds, Solicitors, copies of the following documents:-

   (i)The Trust Deed for [F] Property Trust (“[F]”);

   (ii)Accounts (including Financial Sttements) for [F] for each of the financial years from and including 30^th June 2001 to date;

   (iii)Documents relevant to the acquisition, improvement and upkeep of the real property at [F Street, K].

   2.As a director of [P Business] Pty Ltd (“[P]”) the husband forthwith make a request of [P] pursuant to s 290 of the Corporations Law 2001 (“the Act”) for access to and copies of:-

   (i)Bank statements and credit card statements in respect to all accounts operated by the husband or for or on behalf of the husband or by the wife or for and on behalf of the wife;

   (ii)Any loan account balances relating to the husband;

   (iii)Any loan agreement between the husband and [P];

   (iv)Journal entries, statements or ledgers pertaining to the husband.

   3.As a director of [Leib] Investments Pty Ltd (“[Leib] Investments”) the husband forthwith make a request of [Leib] Investments pursuant to s290 of the Act for access to and copies of:

   (i)Any loan account balances relating to the husband;

   (ii)Any loan agreement between the husband and [Leib] Investments;

   (iii)Journal entries, statements or ledgers pertaining to the husband.

   4.The husband personally and as a director of [RC] Pty Ltd (“[RC]”) forthwith make a request of [RC] for access to and copies of the following documents:

   (i)The Trust Deed for the [S] Trust;

   (ii)Accounts (including Financial Statements) for the said trust for each of the financial years from and including 30^th June 2001 to date;

   (iii)Documents relevant to the acquisition, improvement and upkeep of the real property at [S Street, K];

   (iv)Taxation returns for the said trust for each of the financial years from and including 30^th June 2001 to date.

   5.The husband forthwith provide to the wife’s solicitors copies of his taxation returns and personal bank statements for each of the financial years from June 2001 to date.

   6.The husband as a director of [TP] Pty Ltd (“[TP]”) make a request of [TP] pursuant to the Act for access to and copies of:

   (i)Any loan account balances relating to the husband;

   (ii)Any loan agreement between the husband and [TP];

   (iii)Journal entries, statements or ledgers pertaining to the husband;

   (iv)Documents relating to any payments to or for the benefit of the husband.

   7.In the event that copies of documents ordered pursuant to these orders are not forthcoming or access is denied to such documents then within 14 days of this date the husband issue an application in this Court to compel compliance with s 290 of the Act.

2. An interchange between myself and senior counsel for the husband fairly encapsulates the current state of the financial proceedings.  The wife seeks to be excused from particularising what orders she seeks be made by way of final alteration of property interests and spousal maintenance pending full and frank disclosure on behalf of the husband and certain valuations.  The husband, in response, also fails to particularise the relief he seeks by way of a final alteration of property interests.  I made enquiries of counsel for the father mainly because I did not understand the husband’s stance.  For instance, I am not aware of the husband alleging that the wife is of hidden wealth or entitlement that she is failing to disclose.  Counsel for the father stated that his client is waiting to hear the wife’s proposal.

3. Financial cases are determined by reference to contributions and application of the adjustive factors in Section 75(2), rather that what another party seeks.  It follows that I do not understand the husband’s position.  In fairness, he acknowledges that the wife says that she is unable to specify what she seeks until she has access to certain documents which other company directors, including the husband’s mother, do not agree for the wife to see.

4. Relevantly, there is power under the s 290 of the Corporations Act 2001 (Cth) (‘the Corporations Act’) for the husband, in his capacity as a director of certain companies, to compel the entities of which he is a director to produce documents to him and/or to the wife and to those who advise her in these proceedings. However, the husband does not wish to take that course. Mr Bartfeld QC acknowledges that s 290 confers a statutory entitlement on the husband to obtain documents but says that his client ought not be compelled to take advantage of that entitlement because to do so would put him in a position of conflict with his father and mother. Mr Bartfeld QC submitted that statutory rights are not always rights which are exercised or enforced in family situations and what the wife seeks is to require the husband to sue his parents. Furthermore, Mr Bartfeld QC submits that the husband’s parents are the source of money for both the husband and the wife at the present time and if the wife wants to take on the husband’s parents, the husband will not risk the benefits he now receives by lending assistance to the wife to do so. The dynamics that Mr Bartfeld QC describes do not auger well for an efficient or economical resolution of the financial issues.

5. The articulation of the wife’s claim, both on 23 February 2009 and on 26 August 2009, did not specify the husband’s obligations or entitlements pursuant to s 290 of the Corporations Act. However, that provision was discussed in some detail this morning. Relevantly, it provides:-

   (1)A director of a company, registered scheme or disclosing entity has a right of access to the financial records at all reasonable times.

   Court order for inspection on director's behalf

   (2)On application by a director, the Court may authorise a person to inspect the financial records on the director's behalf.

   (3)A person authorised to inspect records may make copies of the records unless the Court orders otherwise.

   (4)The Court may make any other orders it consider appropriate, including either or both of the following:

   (a)an order limiting the use that a person who inspects the records may make of information obtained during the inspection;

   (b)an order limiting the right of a person who inspects the records to make copies in accordance with subsection (3).

6. For the purposes of s 290, the Family Court is a court to whom an application can be made by a director to inspect financial records. It would appear that all of the documents sought by the wife in her application (as articulated in exhibit W2) are financial records within the meaning of the Corporations Act.

7. The husband objects to the wife’s application on the basis that counsel are not prepared to answer some aspects of it. Counsel for the husband seeks an adjournment of the matter in order to respond specifically to the issues raised by requiring the husband to use s 290 of the Corporations Act to compel the production of documents by the husband’s family.

8. The husband’s case is put generally to the effect that he does not see that the documents should be disclosed or discovered, and he is not prepared to take any step which would put him in conflict with his parents. That is, he does not wish to take any proceedings pursuant to section 290 of the Corporations Act. It is a significant stance because the husband’s financial statement indicates that the only assets which are under his ownership, and therefore divisible between the parties in these property proceedings, are a modest amount of superannuation and $300,000 worth of household furniture. Mr Bartfeld QC adds that the husband’s parents are also the source of the superannuation and household chattels.

9. Counsel for the husband has informed the court that the Leib Group concede that in the event subpoenae do issue against the proper officers of companies, the company officers will not take an objection that subpoenae are being used inappropriately to effect discovery.  However, the husband also does not wish to issue any subpoena against his parents which requires them to produce documents. 

10. The adjournment application is opposed.  It is submitted on behalf of the wife that the husband, and those who advise him, are deemed to know the law so they should be prepared to answer the application. 

11. There is some support for that proposition on the basis that counsel for the husband did address me earlier today to the effect that the husband had made requests of the relevant entities which constituted requests under s 290. However, I am not satisfied that properly states the issues. I agree that the husband’s lawyers should know the law but it is reasonable that they have sufficient time to consider the implications, in the wider sense which involves third parties, of resisting or acceding to the application.

12. Mr Bartfeld QC has asked for time to consider if there is an exception to the exercise of s 290 which would preclude his client from having to commence litigation against his parents. If there is no exception, they would consider whether the husband should bring such application as he may be compelled to make in another court. I am not impressed by these submissions but lack of merit does not compensate for a lack of procedural fairness.

13. Counsel for the wife contends that the husband has a duty to disclose documents and they have identified s 290 as the means by which he can discharge that duty. It is submitted on behalf of the wife that the husband’s reasons for not producing documents or compelling the production of those documents to him are not sincere and are a transparent endeavour to exhaust the wife. Counsel for the wife submits that the adjournment application is a further tactic of delay aimed at wearing the wife down. That might be so.

14. I am not satisfied that the procedure under section 290 of the Corporations Act was identified by counsel for the wife earlier than this morning, providing very little notice to the husband. The orders sought by the wife constitute a mandatory injunction for the husband to exercise rights available to him under the Corporations Act. This court has jurisdiction under the Corporations Act, but it is a discrete area of law and derived from a separate head of constitutional power. Accordingly, if it is sought to be engaged, it is worthy of early and specific identification.

Conclusion

1. The court will accede to the husband’s request for an adjournment.  However, I will order that the husband put his response to the wife’s application in writing within 10 days. 

2. Regarding when the matter next comes to court, I am unable to give a specific hearing date in October 2009, and I do not want to give a date that must then be vacated as a result of judicial unavailability.  Therefore I will adjourn it to a date to be fixed in October 2009 and to be advised by my Associate on appropriate notice.  All other things being equal, I will endeavour to accommodate the availability of counsel.

I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Bennett

Associate: 

Date:  19 September 2009