MacDowell & Williams & Ors

[2012] FamCA 479

FAMILY COURT OF AUSTRALIA

MACDOWELL & WILLIAMS AND ORS [2012] FamCA 479

FAMILY LAW - PRACTICE AND PROCEDURE - Subpoenas - Objection to subpoena by the Applicant Wife's parents - Where subpoena seeks to have the Wife's parents provide information regarding their wills and their corporate and trust structures, of which the Applicant Wife is a beneficiary - Where the Wife's parents submit that such subpoena is an invasion of privacy, an abuse of process and a 'fishing expedition' for irrelevant documents

Family Law Rules 2004 (Cth)

Keach & Keach [2011] FamCA 192
Kennon v Spry (2008) FLC 93-388

APPLICANT: Ms F G MacDowell

RESPONDENT: Mr Williams

INTERVENOR: Mr J MacDowell and Ms G MacDowell

FILE NUMBER: BRC 11260 of 2010

DATE DELIVERED: 22 June 2012

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Kent J

HEARING DATE: 30 January 2012

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Kirk SC

SOLICITOR FOR THE APPLICANT: Hopgood Ganim

COUNSEL FOR THE RESPONDENT: Mr Phillips

SOLICITOR FOR THE RESPONDENT: Murdoch Lawyers

COUNSEL FOR THE INTERVENOR: Mr Sullivan SC

SOLICITOR FOR THE INTERVENOR: Hemming & Hart

Orders

1. Upon the undertaking of the Intervenors that the documents identified in paragraphs 2 to 4 (inclusive) and 9(d) in relation to the F G MacDowell Discretionary Trust will be provided to the Respondent, the subpoena filed 4 October 2011 be set aside.

2. In the event that the parties are unable to agree in writing within 21 days of today what costs Order, if any, might be made regarding the costs of and incidental to these proceedings:

   (a)       Each party file within a further 14 days written submissions in respect of that issue; and

   (b)       Unless either party otherwise therein contends to the contrary, that issue be determined in chambers without the necessity of further appearance by either party.

3. In the event that the parties reach agreement in writing on the issue of costs, they be at liberty to file jointly, minutes of consent via e-mail to …@familycourt.gov.au

4. The matter otherwise be adjourned to the Registry for further mention.

IT IS NOTED that publication of this judgment by this Court under the pseudonym MacDowell & Williams and Ors 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 11260 of 2010

Ms F G MacDowell

Applicant

And

Mr Williams

Respondent

REASONS FOR JUDGMENT

Introduction

1. By application filed on 1 December 2012, Ms F G MacDowell (“the Wife”) sought final property Orders relating to her former marriage with Mr Williams (“the Husband”). The Wife was born in 1964 and is thus now 47 years of age. The Husband was born in 1947 and is thus now 64 years of age. The parties commenced cohabitation in about 2003, married in April 2004 and then separated on a final basis on 12 July 2010. There were no children of the relationship.

2. By way of subpoena filed on 4 October 2011 (“the subpoena”), the Husband sought certain documents from Mr J MacDowell and Ms G MacDowell, the parents of the Wife, in both their personal capacity and their capacity as directors of A Pty Ltd, B Pty Ltd and C Pty Ltd. The subpoena sought both the Wife’s parents’ current and any revoked wills and any relevant testamentary documents as well as a range of financial documents from entities of which the Wife’s parents were directors or shareholders.

3. On 17 October 2011, the Wife’s parents filed a Notice of Objection to the subpoena and sought that the subpoena be set aside pursuant to r 15.26 of the Family Law Rules 2004 (Cth) on two main grounds. First, that the documents sought from them in their personal capacity were not relevant given that both of them still retained testamentary capacity. Second, that the documents sought from them in their capacity as directors of the entities mentioned above were not relevant because neither the Husband nor the Wife had any proprietary interest in the entities (with respect to C Pty Ltd and B Pty Ltd) and because the Wife’s only link to these companies was as a beneficiary of the F G MacDowell Discretionary Trust, of which B Pty Ltd was the corporate trustee and the financial statements and trust deed of the F G MacDowell Discretionary Trust had already been disclosed.

4. The parties’ submissions regarding the subpoena can be conveniently divided into two categories; first, those concerning the financial documents relating to the corporate entities of which the Wife’s parents are directors or shareholders; and second, those relating to the testamentary wishes of the Wife’s parents.

The Financial Documents

1. The 4 October 2011 subpoena requested the following documents be produced by the Wife’s parents in their capacity as directors of A Pty Ltd, B Pty Ltd and C Pty Ltd:

   2. a copy of the trust deed of the [the Wife’s first name] [MacDowell] Discretionary Trust;

   3. copies of any deeds amending the original trust deed of the [the Wife’s first name] [MacDowell] Discretionary Trust;

   4. copies of the financial statements (including profit and loss and balance sheets) for the [the Wife’s first name] [MacDowell] Discretionary Trust for the period 30 June 2003 to 30 June 2011 (including any draft or management statements);

   5. copies of the financial statements (including profit and loss and balance sheets) for [B] Pty Ltd for the period 30 June 2003 to 30 June 2011 (including any draft or management statements);

   6. copies of the financial statements (including profit and loss and balance sheets) for [C] Pty Ltd for the period 30 June 2003 to 30 June 2011 (including any draft or management statements);

   7. copies of the financial statements (including profit and loss and balance sheets) for [A] Pty Ltd for the period 30 June 2003 to 30 June 2011 (including any draft or management statements);

   8. copies of the company constitutions for the following companies:

   a. [B] Pty Ltd – ACN […];

   b. [C] Pty Ltd – […]; and

   c. [A] Pty Ltd – […].

   9. copies of all minutes of directors (sic) meetings, resolutions and circulating resolutions including resolutions with respect to the payment of dividends or trust distributions, for the period 30 June 2003 to 30 June 2011 in respect of the following companies and trusts:

   a. [B] Pty Ltd;

   b. [C] Pty Ltd;

   c. [A] Pty Ltd; and

   d. [The Wife’s first name] [MacDowell] Discretionary Trust.

   …

2. It is noted that Counsel for the Husband accepted that the Trust was incorrectly named in the subpoena, being in fact called the F G MacDowell Discretionary Trust. I will use the name “F G MacDowell Discretionary Trust” for the remainder of these reasons.

3. It is further to be noted that both parties accepted that the documents relevant to the F G MacDowell Discretionary Trust had been provided to the Husband prior to the hearing before me on 30 January 2012, but only in respect of the period 1 July 2006 to 30 June 2010, and not in respect of the three earlier years requested by the Husband. Nonetheless, written submissions were made on behalf of the Wife’s parents that they did not object to providing the documents set out in points 2-4 and 9(d) of the subpoena.

4. By written submissions filed 24 January 2011, the solicitors for the Husband contended that the remaining requested documents were relevant on the basis that the Wife has a duty of full and frank disclosure in respect of her interests in those entities. It was submitted on behalf of the Husband that the entities in respect of which documents were requested were relevant on the following bases:

   a)The Wife is a primary and default beneficiary of the F G MacDowell Discretionary Trust (her parents being the secondary beneficiaries);

   b)C Pty Ltd is the corporate beneficiary of the F G MacDowell Discretionary Trust;

   c)B Pty Ltd, the corporate trustee for the F G MacDowell Discretionary Trust, the directors of which are the Wife’s parents, owns 100% of the shares in C Pty Ltd in that capacity as trustee;

   d)B Pty Ltd has a 25% shareholding in A Pty Ltd, of which the Wife’s parents are directors;

   e)The F G MacDowell Discretionary Trust made substantial distributions to both C Pty Ltd and the Wife’s parents in the financial year ending 30 June 2010;

   f)The Wife will assume control of the F G MacDowell Discretionary Trust, B Pty Ltd and C Pty Ltd at some point in the future

5. The Husband’s solicitors further submitted in the 24 January 2012 written submissions that the documents sought were necessary for the Husband to understand the pattern of past distributions; the understanding between the Wife, her parents and the Wife’s other siblings of the distribution or dividend policy and the management and ownership of the various entities; and the “reality” of the entities beyond the corporate veil. It was submitted that those matters are relevant to the composition of the property pool available for distribution, the value of that pool, the ascertainment of the financial resources of the Wife and the ascertainment of the distribution policy (if any) of the future income stream(s) of the Wife.

6. Mr Sullivan SC, Counsel for the Wife’s parents, provided written submissions filed 30 January 2012 which rebutted the alleged relevance of the financial documents sought in the subpoena. In summary, it was submitted that the documents were not prima facie relevant for the following reasons:

   a)B Pty Ltd holds its 25% shareholding in A Pty Ltd on trust in its role as corporate trustee of the F G MacDowell Discretionary Trust;

   b)B [the unanonymised name is an abbreviation of the Wife’s name] Pty Ltd, although bearing the name of the Wife, is controlled by the Wife’s parents, they being the only directors and shareholders of that company;

   c)Although the Wife is the primary beneficiary of the F G MacDowell Discretionary Trust, the Trust Deed provides the trustee with an absolute discretion to distribute the whole or part of the trust fund at any stage to the primary, secondary or tertiary beneficiaries as the trustee sees fit and to exercise its powers and discretions in a manner which benefits the trustee or any director or shareholder of the Trust Deed under clause 17(w);

   d)C Pty Ltd, although having received distributions from the F G MacDowell Discretionary Trust of $257,010.00 and an imputation credit of $110,147.00, is controlled by the Wife’s parents, who are its sole directors. The purpose of this entity is to hold funds for use by the Wife’s parents in future stages of their investment business run through A Pty Ltd;

   e)The Wife’s parents have already decided to use a portion of the funds held by C Pty Ltd for their investment business, and instructions were, at the time of hearing, underway to enable the payment of a dividend from C Pty Ltd to B Pty Ltd as trustee for the F G MacDowell Discretionary Trust for distribution to A Pty Ltd;

   f)Neither the Wife nor the Husband have ever been involved in any way in the Wife’s parents’ investment business, and nor have the Wife’s parents ever discussed the details of that business with the Husband or the Wife;

   g)The Wife’s parents have absolute control of all of these entities, including the F G MacDowell Discretionary Trust, and, although the Wife is the primary and default beneficiary of that Trust, the Wife’s parents have in the past caused the Trust to make distributions to themselves and to C Pty Ltd where the Wife might have otherwise received those distributions as the default beneficiary.

7. Both parties proposed opposing interpretations of the relevant law in this area. The solicitors for the Husband submitted that:

   The wife is the primary beneficiary of the trust as well as the default beneficiary. Her parents are secondary beneficiaries of the trust. The Principal of the Trust is the wife’s father, [Mr J MacDowell]. Per Kennon v Spry (2008) FLC 93-388, the wife’s interest here in the trust are property:

   “Rights to consideration and due administration of the wife as a beneficiary of the trust are equitable choses in action, and included as part of the wife’s property for the purposes of s 79. These rights can however be difficult to value. (Per French CJ, Gummow and Hayne JJ)”

   (italics in original)

8. However, I accept the submissions made on behalf of the Wife’s parents to the effect that this is a misstatement of the law on this point. As noted by Mr Sullivan SC, the “quote” provided by the solicitors for the Husband above is in fact an extract from a headnote which arguably does not reflect with complete accuracy the reasons of French CJ, Gummow or Hayne JJ. The most similar statement can be found in the judgment of French CJ, where something quite different was held:

   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. … Such a right has been treated as property for the purposes of the Bankruptcy Act 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.”

   76. In Evans, the majority of the Full Court of the Family Court found that consideration of the right to due administration of a superannuation fund offered “no solution as to how realistically to make practical orders under s 79 about that ‘property’ until it is in fact received”.  The case concerned a future entitlement to benefits form a superannuation fund. Nygh J drew the analogy between the unvested interest in a superannuation fund protected by a right of due administration and “the interest which a potential beneficiary has in the proper administration of a trust”.

   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.

   (footnotes omitted)

9. Earlier paragraphs also illuminate that French CJ, Gummow and Hayne JJ all also had in mind, in reaching the conclusion set out in paragraph 78 above, that in that case, Mr Spry also had total control of the trust. This is set out at paragraph 73 of French CJ’s reasons:

   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. …

10. It is clear, on the evidence before me, that the Wife does not in fact control any of the entities from which documents are sought by the Husband. The Husband concedes that the Wife is neither a director nor a shareholder in any of those companies, and that her interest is restricted to being the primary and default beneficiary of the F G MacDowell Discretionary Trust. However, the Husband would have this Court infer, from the title alone of the relevant companies (such as C [the unanonymised name is an abbreviation of the Wife’s name] Pty Ltd and B [the unanonymised name is an abbreviation of the Wife’s name] Pty Ltd), that the Wife’s parents intend for the Wife to take control of these company in the near future. I am not persuaded by that submission. I also find unpersuasive the Husband’s submission that the creation of C Pty Ltd in March 2010, near to the date of separation of the parties, of itself implies that this company was to be used as a vehicle for the protection of the Wife’s funds from any property dispute between the parties, without further evidence.

11. I also accept the submission of Senior Counsel for the Wife’s parents that the Wife otherwise has no interest in any of the corporate entities attempted to be subpoenaed by the Husband. The way in which money is distributed between those entities, save for the distributions made by the Trust (which the Wife’s parents have conceded they will provide), is not in any way controlled by the Wife, nor affects her financial position. The way in which distributions are made by the Trust are set out in the Trust Deed, which the Husband accepts has already been provided by the Wife’s parents.

12. The solicitors for the Husband further submitted that this case was analogous to that of Keach & Keach [2011] FamCA 192 (“Keach”), where the husband’s father in that case had, similarly to this case, established four trusts that the husband’s father controlled, each bearing the name of one of his four children. In that case, Strickland J held that, although the husband had no control over the trust, it could still be treated as a financial resource given the past pattern of benefits and distributions received by the husband from the trust and the likelihood of receiving the same in the future.

13. However, there appear to be significant distinctions between Keach and this case. In Keach, the husband was in fact a director and a minority shareholder in the corporate trustee of the trust and had also advanced loans to the trust. This, amongst other factors, indicates that although the husband in Keach did not technically control the relevant trust, he had significant input into its administration. This is a clear point of contrast with this case, where the Husband does not submit that the Wife has any directorship or membership of the corporate trustee of the F G MacDowell Discretionary Trust or any of the other entities subpoenaed by the Husband. There is not, at present, any evidence before this Court to suggest, even prima facie, that the Wife has control over any of the entities referred to in the subpoena or that such control is likely to occur in the future. Nor has there been a pattern of significant and consistent distributions which point to the F G MacDowell Discretionary Trust being a significant source of funds for the Wife into the future. As highlighted by Senior Counsel for the Wife’s parents, the Wife has received only $28,000.00 over the ten years of the existence of the Trust, and during that time, distributions have also been made to other beneficiaries of the Trust, indicating that this Trust is truly discretionary not only in form but also in use and effect.

1. As to the further submissions by the solicitors for the Husband, I note with some concern that the quote posited as appearing in the case of Blue & Blue [2007] FamCA 1444 does not in fact appear in that case at all, and also that the quotes extracted from Simmons [2008] FamCA 1088 do not, in contrast with what is implied in the submissions made on behalf of the Husband, appear in sequence.

2. In essence, I find that there is no satisfactory justification for the Husband’s attempt to subpoena the documents sought from the corporate entities mentioned in the subpoena, save for those connected with the F G MacDowell Discretionary Trust, which the Wife’s parents have conceded they will supply.

The Testamentary Documents

1. The Husband also sought, in the 4 October 2011 subpoena, that the following testamentary documents be provided by the Wife’s parents:

   10. copies of the last wills and testaments of [Mr J MacDowell] and [Ms G MacDowell] made between 2002 and 2011 including copies of any revoked wills;

   11. copies of any letters of direction to trustees, memoranda of directions, letters of wishes or memoranda of wishes relating to the last wills and testaments of [Mr J MacDowell] and [Ms G MacDowell] made or dated between 2002 and 2011 (sic)

2. It was submitted on behalf of the Husband that these documents were relevant given that the Wife may stand to inherit a portion of an estate worth, on the Husband’s affidavit evidence, in excess of $20,000,000.00. It was submitted on behalf of the Husband that this would amount to either a financial resource or a factor to be considered under s 75(2)(o).

3. However, it was conceded by Counsel for the Husband, Mr Kirk SC, in further submissions filed on 27 January 2012, that the Wife’s parents continue to have testamentary capacity. No evidence is offered by the Husband to contend that the Wife’s parents are in anything other than good health. At present, the Wife’s parents are aged 77 years (Mr J MacDowell) and 75 years (Ms G MacDowell) respectively and in fact continue to run, as sole directors, their investment business, A Pty Ltd. In such circumstances, it appears that there is no reason to suppose that the Wife is likely to receive any inheritance in the near future, or that any present testamentary directions made by the Wife’s parents will not change prior to their death. In those circumstances, I find that there is no justifiable reason why the Wife’s parents should be required to produce such documents to the Court.

4. I note the comments of the Full Court of this Court in White & Tulloch v Tulloch (1995) FLC 92-640 (“White & Tulloch “) that, in relation to the relevance of expected inheritances at 82,463:

   The ultimate criterion is whether the evidence is, or may be, relevant to the just and equitable process under s. 79. An expectancy of inheritance will not be relevant in many s. 79 proceedings. In the end, relevance must depend upon the nature of the claims being put forward and the facts of the particular case. For example, if the claims were based entirely upon contributions, it could not be suggested that an issue of expectancy could be relevant because no s. 75(2) factors would be involved. Where the claim includes s. 75(2) factors, the nature or degree of suggested relevance between those specific claims and the expectancy in question would need to be analysed. That is to say, there must be a worthwhile connection between a specific element of a party’s case and the suggested expectancy.

   That accords with what we understand to be the general practice at trials in this Court. That is, the initial relevance in the particular case needs to be established; once it is it becomes a question of weight and degree. The issue is then approached by considering it in a broad, general way, by taking into account the age of the relative or other relevant testator, state of health, some general assessment of his or her financial position and some general assessment of the suggested inheritance expectancy. Detailed evidence of these matters is rarely allowed. …

5. Counsel for the Husband, in the further written submissions filed on 27 January 2012, appeared to adopt the approach that although the Wife’s prospective inheritance may be of no weight, it is nonetheless relevant to this case and thus should be disclosed.

6. I find that submission reveals that this is to be regarded as a “fishing expedition” on behalf of the Husband. To submit that documents, which are private in nature and belong to persons not parties to these proceedings and which may very well hold no weight in any final determination, should nonetheless be disclosed to the Husband, raises questions of an abuse of process. Although I acknowledge, as was set out by the Full Court of this Court in White & Tulloch, that there may very well be situations in which a document is prima facie relevant but, upon closer examination, turns out to have no weight, given the evidence already provided by the Wife’s parents and the proper concession by Counsel for the Husband that the documents may be of no weight, I find that these documents are not relevant.

7. This is supported by the decision of the Full Court of this Court in White & Tulloch, where it was held at 82,464:

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

   The facts here fall between those extremes. The mother is 81 or 82 and in good or reasonable health. The fact that she is a widow and has two adult children may suggest a likelihood of her benefiting one or both of them but she would have little moral obligation to do so and may choose to benefit other persons or institutions. The case proceeded on the basis that she had significant property and the probabilities may suggest that that would continue to be the case although it might be diminished by intervening events such as expensive medical care and treatment, donations to third parties or institutions or other economic uncertainties…

   It appears to use oppressive to Mrs Tulloch to have to disclose detailed financial records in circumstances where that may prove ultimately to be of no more than marginal relevance. It is likely to widen the scope of these proceedings far beyond what is legitimate or useful and is not in accordance with a proper practice in these matters.

8. This case is further down the “irrelevant” end of the spectrum than that in White & Tulloch. Here, the Wife’s parents are 77 and 75 years of age and evidently, both still has their partner alive to whom they may leave the entirety of any inheritance. Both parties depose to be in good health and to possess full testamentary capacity, and there is no evidence or suggestion to the contrary.

9. Counsel for the Husband referred to the case of De Angelis & De Angelis(2003) FLC 93-133, where Lindenmayer and Finn JJ of the Full Court of this Court did take into account a prospective inheritance. However, I note that in that case, the relevant aunt had lost testamentary capacity at the time the case was decided and the relevant mother was frail and lived in a nursing home. The house which was said to be the subject of the inheritance was already treated by the wife in that case as her own, with the acquiescence of her mother. This is a very different case to the one at hand, as already set out.

10. As raised by Moore J in C v M [2000] FamCA 1086:

    In my experience more often than not when it has been raised in a particular case, there has been a misunderstanding of the basis upon which De Angelis proceeded. On my reading, it is confined to a narrow band of circumstances and is not an invitation to intrude and offend by a ghoulish pursuit of the current will of a parent of one party, merely because that parent may be of advanced years, or of concessions about the value of their property.

11. Although Moore J did, in the result, take into account the prospective inheritance considered in that case, that was in circumstances where the relevant testator was 90 years of age and had already lost testamentary capacity, a situation clearly distinguishable from the one at hand.

12. I therefore make Orders as set out at the commencement of these reasons.

I certify that the preceding thirty-one (31) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Kent delivered on 22 June 2012.

Associate: 

Date:  22 June 2012