Martin & Martin and Anor (No. 2)
[2014] FamCA 232
•9 April 2014
FAMILY COURT OF AUSTRALIA
| MARTIN & MARTIN AND ANOR (NO. 2) | [2014] FamCA 232 |
| FAMILY LAW – PRACTICE AND PROCEDURE – Subpoenae objection – relevance, oppression and fishing – objection rejected. FAMILY LAW – EVIDENCE – Expert evidence – Should the third party creditor by the wife be allowed to adduce evidence about the parties’ assets? – permission to file granted. FAMILY LAW – LEGAL PRACTITIONERS – Client privilege – implied waiver – Can a solicitor unilaterally ignore the privilege based on an assertion of, or anticipating of, a finding of implied waiver? |
| Family Law Act 1975 (Cth) |
| Alister v R [1984] HCA 85; (1984) 154 CLR 404 |
| APPLICANT: | Ms Martin |
| RESPONDENT: | Mr Martin |
| INTERVENOR: | X Firm |
| FILE NUMBER: | MLC | 9829 | of | 2007 |
| DATE DELIVERED: | 9 April 2014 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Cronin J |
| HEARING DATE: | 3 March 2014 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Ambrose |
| SOLICITOR FOR THE APPLICANT: | Cahill & Rowe Family Law |
| COUNSEL FOR THE RESPONDENT: | Mr Glick SC |
| SOLICITOR FOR THE RESPONDENT: | Taussig Cherrie Fildes |
| COUNSEL FOR THE INTERVENOR: | Mr Kirkham QC With Dr Ingleby |
| SOLICITOR FOR THE INTERVENOR: | Nedovic & Co |
Orders
That all material produced under subpoenae by J Firm and K Accountants is released for inspection and copying.
That the third party X Firm has leave to file the affidavit of Mr I.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Martin & Martin and Anor (No. 2) 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 MELBOURNE |
FILE NUMBER: MLC 9829 of 2007
| Ms Martin |
Applicant
And
| Mr Martin |
Respondent
REASONS FOR JUDGMENT
There were two issues in this interlocutory hearing which require determination prior to the matter proceeding to a final trial. They are:
(a)The husband’s objections to the release of information provided pursuant to subpoenae issued by the Court at the request of X Firm who are the interveners in the proceedings; and
(b)Whether X Firm should be permitted to lead evidence from a valuer in relation to a business conducted by the husband through a variety of corporate entities.
The first of the two issues arises because of the husband’s objection to the release of the subpoenaed material upon which a ruling is required.
Before dealing with those two matters, there is also a third (and perhaps underlying) issue which relates to whether or not evidence of the principal solicitor of X Firm should be allowed into evidence at all. The wife asserted, and the husband joined with her in submitting, that the acceptance of the affidavit into evidence amounted to permitting the solicitor to breach the privilege of her former client. Thus, the ancillary question is can and/or should, a solicitor presume that the client has impliedly waived the privilege based on the solicitor’s assertion of the client’s conduct (which in this case is that she colluded with her husband) or should permission of the Court be first obtained? And in either event, does it matter in this particular case?
The solicitor relied on two affidavits filed 17 December 2013 and 20 February 2014. In her evidence, which was not tested by cross-examination, the solicitor set out her various communications with the wife. The wife objected to the evidence being led on the basis just mentioned. She asserted the evidence breached her confidence as a client and there had not been any waiver. X Firm however, claimed that the wife had colluded with the husband to avoid the payment of their professional fees and wanted to call the evidence of various communications to prove that.
I am not in a position in an interlocutory hearing to make any findings that there has been any such collusion nor in this application, is it necessary that I do so.
I do however think it necessary to consider what happened here and whether it was appropriate.
The privilege of confidentiality is that of the client; a solicitor is bound by it unless and until such time as the privilege is waived either impliedly or expressly. X Firm relies upon an implied waiver. There is little doubt in this case that there were communications between the husband and the wife directly. Ultimately, they reached a settlement between themselves (apparently) absent assistance from lawyers. Whilst it is clear that such an assertion alone, that is, without significantly more evidence, could not amount to an implied waiver, because of the argument about the admissibility of the evidence, it is helpful to consider how the matter should have been approached.
A solicitor’s duty of confidentiality does not end with the termination of the solicitor’s retainer (see Spincode Pty Ltd v Look Software Pty Ltd [2001] 4 VCR 501). This duty is not only well established at common law but is also enshrined as a professional requirement, a breach of which can lead to disciplinary proceedings (see Professional Conduct and Practice Rules 2005, Rule 3 (Vic)). The legal professional privilege clearly belongs to the client and the solicitor is bound by it unless and until the client waives it either impliedly or expressly (see Mann v Carnell (1999) 201 CLR 1 at 28).
X Firm claims the conduct amounts to a waiver on an implied basis or on the basis that the communication was made in furtherance of an illegal or improper purpose (an example of which can be seen in Attorney-General for the Northern Territory v Kearney (1985) 158 CLR 500 at 528) but of course, that begs the question because until such time as the issue is determined by a finding of such improper purpose, the privilege remains that of the client.
Although the authorities on the subject of how the issue of the determination of whether the client’s actions amount to an implied waiver are clear, it is less so in relation to whether the solicitor can simply lead the evidence. The problem is more complicated here because at the time of the filing of the affidavit, its use as admissible evidence must have been presumed by the wife. X Firm did not know (other than through correspondence) whether or not the assertion of collusion would be challenged by evidence.
My view is that it is not appropriate for a solicitor to breach the confidence in anticipation that the Court will find an implied waiver or an exception to the privilege. To clarify the position, my view is that it is more appropriate for the solicitor to request the client to waive the privilege, failing which, the solicitor is entitled to bring an application to be relieved of the obligation.
Courts are accustomed to dealing with evidence which has been improperly or illegally obtained and are required constantly to rule on admissibility. This issue is different because it involves an officer of the court and the privilege is enshrined in legislation and jealously guarded. I conclude therefore that it is not appropriate for a solicitor to simply ignore the client’s privilege.
That said, the issue that was otherwise controversial was that X Firm relied upon the affidavit which contained a plethora of statements said to amount to a breach of the privilege.
In my view it would be artificial to now simply ignore the evidence after it has been canvassed and placed under such scrutiny. This evidence led to a line of inquiry which produced other evidence. I find there is no need for me to strike it out because there is sufficient other evidence upon which to make the determination of the two issues earlier set out. Accordingly, apart from the comments that I have just made, this discrete issue about the use of the affidavit seems more appropriate for consideration by the professional bodies responsible for the regulation of the profession.
The background in this case has been stated before in interlocutory determinations and does not need repeating. Suffice to say, the retainer between the wife and X Firm was terminated and the husband and wife reached their out of court settlement. That settlement was put before Coleman J and his Honour declined to make the orders on 12 November 2011 (see Martin and Martin (2012) 49 Fam LR 76).
X Firm have always maintained they have a cause of action within jurisdiction regardless of what the husband and wife decide to do. To the extent that I may have doubted the existence of that cause of action in the judgment that I delivered in February 2014 on the question of whether or not a cause of action had been properly pleaded, that problem now seems to me to have been rectified by the amended application filed on 3 March 2014. To the extent that there was any doubt about what X Firm was seeking, the action now seeks enforcement of an order made by consent under which properties were to be sold and a payment was to be made to the wife but indirectly thereafter to X Firm. That order read as follows:
3.That the Husband and the Wife each forthwith do all things necessary and sign all such documents as may be required to sell the properties at:
(a)[Property E] in the state of Victoria more particularly described as the whole of the land comprised in Certificate of Title Volume … Folio … ("[Property E]");
(b)[Property N] in the state of Victoria more particularly described as the whole of the land comprised in Certificate of Title Volume … Folio … ("[Property N]"); and
(c)[Property A] in the State of Victoria more particularly described as the whole of the land comprised in Certificate of Title Volume … Folio … ("Property A"),
(hereinafter collectively "Properties") in accordance with the terms of these orders so that the total net proceeds of sale of all of the Properties after payment of the amounts prescribed by the terms of these orders in relation to each of the Properties respectively be disbursed such that the Wife receive the first one million dollars as and by way of partial property settlement ("Wife's Million Dollar Entitlement") such amount to be paid to [X Firm] and the parties share any remaining balance equally as and by way of partial property settlement respectively and the parties be equally responsible for the sale of the Properties.
Just to make clear that there were other issues at play, the orders also required X Firm to withdraw caveats over the relevant properties and the rationale behind the order was seen in the notation to it. It read:
[Ms X] acknowledges that payment of such amount as shall be available from the Wife's One Million Dollar Entitlement (and any such further amount to which the Wife is entitled from the sales of the Properties) in accordance with the provisions of these Orders, is accepted by her in substitution for the caveats over [N Property] and [E Property].
As I understand it, X Firm will now argue an entitlement to that money (if necessary from assets under the control of the husband and various entities) because of the order and will seek its enforcement regardless of what action the husband and wife take. That is, if the husband and wife choose to withdraw their proposed pursuit of the endorsement of the court orders (under s 79 of the Act), X Firm will continue on.
I return to the two issues. The first relates to the subpoenae to:
J Firm; and
K Accountants
Other issues about subpoenae were resolved between the parties and the matters were not pressed.
The objection by the husband (and in which he was joined by the wife) related to the fact that the subpoenae were “fishing”, irrelevant and oppressive in that they sought every single file.
In support of the maintenance of the subpoenae, senior counsel for X Firm pointed to the existence of more than $3 million received by the husband or his corporate entities in December 2013 that had not been disclosed either to the Court or to X Firm. The significance of the requirement for the husband and possibly the wife to make that information available, must lie in two things:
(a)The husband and wife still seek that the Court make the orders arising out of their settlement; and
(b)X Firm is a party to the proceedings and is claiming to be a creditor of the wife.
It is put by the husband that this debt to X Firm is not his and that the receipt of these monies arose out of transactions that have occurred subsequent to the settlement with the wife. He (along with the wife) desires the Court to look at the values of various assets as at the time that the settlement agreement was reached between them. I do not accept that argument has merit because the husband and wife seek an alteration of interests in property which can only be done if the Court is satisfied that it is just and equitable. Even if the settlement is looked at in the light of the time in which it was executed, it would seem on the evidence before me that that is not the financial position of the parties as at today. Just how different (if at all) that situation is, remains to be seen at the point at which the settlement is finally canvassed. I am very conscious that considerable time has elapsed since that settlement was reached and importantly, for the reasons already mentioned above, Coleman J declined to make the orders.
Senior counsel for X Firm pointed to the fact that the receipt of the money by the husband and his entities was not the only issue that had not been disclosed. There is also an argument in relation to a property known as L Street in which the wife apparently resides and in which, on the face of various title documents, she is a tenant. In an earlier hearing, Dr Ingleby for X Firm pointed to the fact that the wife was an appointor (along with two other people) of a trust, the trustee of which, is the owner of the rented property. None of that appears to have been disclosed. If indeed that assertion of fact by X Firm is denied by either the husband or the wife, neither has said so in evidence. Innocent as it may be from the perspective of the husband and wife, X Firm desires to show that this was part of some transaction undertaken by the husband and wife to avoid X Firm being paid what they are owed by the wife.
There is another issue agitated by X Firm that the husband and wife have colluded. Because I accept that there is an argument that the two matters just mentioned should have been disclosed even if the husband and wife wanted to argue that the relevant date was their settlement date, it is not necessary for me to contemplate the third issue.
It is X Firm’s position that apart from being concealed by the husband and wife, these property interests were being excluded from the information upon which the Court was to decide whether the settlement between the husband and wife was just and equitable. As is now clear, under the settlement reached, the wife was to resign and transfer any interest she had in a variety of real properties as well as relinquish any interests in some trusts. In other words, the wife was to retain what she had and that would effectively have meant that there were insufficient funds to provide X Firm their now liquidated sum.
The quantum of the dispute between the wife and X Firm has been resolved in proceedings in the Supreme Court of Victoria.
As was evident from the submission filed by X Firm on 27 January 2014, the subpoenae to the various recipients (none of whom have filed an objection to the release of their material) were designed to lead to a line of inquiry to disclose the full financial circumstances of the husband and wife. But they were also designed to expose the actions that the husband and wife took that ultimately led to their settlement. Whilst it was asserted by X Firm that the collation of this material justified an allegation of collusion, I again say that I am certainly not in a position to make that finding absent the evidence being tested. It is unnecessary for me to do so because of the interlocutory nature of this application.
Senior counsel for the husband (and supported by counsel for the wife) submitted that the subpoena to J Firm was sent to the Court by the solicitors acting for X Firm in December 2013 indicating that the request to issue was based on past subpoenaed material. It was the husband’s submission that this was building a case where X Firm did not know the answers and that that was a classic example of “fishing”. The breadth of the subpoena was also objected to on the basis that it was wide such as to include questions about what fees had been paid by the husband to J Firm. Thus, it was submitted that every single category of document was “bad” on technical grounds and the Court should not allow it to stand or be rewritten. A similar argument was raised in respect of the K Accountant’s subpoena.
In my view, the objection on the grounds of both fishing and relevance fails. As Gibbs CJ said in Alister v R [1984] HCA 85; (1984) 154 CLR 404 albeit in a criminal law case, the focus of the Court should be whether it was “on the cards” that the documents would materially assist. “Fishing” can be argued where the pursuit of information is random, unguided and the pursuer has no case but seeks to build one. Here, X Firm says that it knows what it is looking for even if it cannot specifically point to the exact sequence of events. It submits that the documents pursued will provide the answers to fill in the missing details as distinct from providing it with a case. As I understand X Firm’s submission, this is an extension or further step based on that information. As such, I would not find the exercise to be fishing. Is it documentation that is therefore relevant? In Woley and Humboldt (No 3) [2009] FamCA 546 I said:
39.In Hudson Timber and Hardware Ltd v Chaudhary Group Pty Ltd [2002] FCA 832 the Full Court of the Federal Court examined the issue of apparent relevance and said that the relevant principles governing the obtaining of documents on subpoena which have “apparent relevance” were that inter alia:
(1)The relevance of documents was not limited to documents directly admissible in themselves in proof of an issue raised in pleadings; and
(2)If a class of document which has material forensic relevance could be shown to exist, then a subpoena would not normally be set aside.
40.In White v Tulloch (1995) FLC 92-640, the Full Court of the Family Court referred to the test in terms of documents having "a sufficient apparent connection to justify their production or inspection".
41.In Trade Practices Commission v Arnotts Ltd (No 2) (1989) 21 FCR 306, Beaumont J saw relevance as something where a document "could possibly throw light on the issues in the main case".
42.In Portal Software International Pty Ltd v Bodsworth, [2005] NSWSC 1115, Brereton J looked at a number of authorities including of this Court and said:
Thus it is plainly not the question at this (first) stage whether the documents, production of which is sought, will definitely advance the case of the parties issuing the subpoena, nor whether they will be admissible in evidence at the trial. It is sufficient that they could "possibly throw light" on the issues in the substantive proceedings, or that it appears to be "on the cards" that they will do so. What are the issues in the proceedings will appear from the pleadings (where there are pleadings), the affidavits, and the legal principles which govern the claims for relief in the substantive proceedings.
Counsel for the objector did not dispute that what I had there said summarised the law. In Papadopoulos and Papadopoulos (No 2) [2007] FamCA 1683, I observed:
49.The question of what is relevant takes on significance. The objective must be to assist the parties and the court in the determination of the issues in dispute. How does one determine that at an early stage? This issue was considered in the Victorian Supreme Court in Killorgan Investments Pty Ltd v Baycorp Advantage Business Information Services Limited and Ors where Byrne J said:
The degree of relevance for this purpose is not high: the inspecting party need only show a legitimate forensic purpose in the inspection. A party is entitled to inspect documents not only to see if they contain relevant facts, but also to see if they contain information which may be proved otherwise than through that document.
50.Accordingly, the bar is not set very high in respect to the question of relevance in a civil proceeding as between strangers. It should be less so in family law proceedings provided the pursuit of information is genuinely designed to assist in determining the issue and not for some illicit or harassing type of reason.
51.The onus in establishing the relevance lies on the person seeking the production of the documents either by way of subpoena or through discovery.
Based upon the fact that the husband and the wife have not denied the assertions of the existence of these interests nor disclosed them, I am satisfied that it is on the cards that the information provided (subject to an excising of the material that is clearly not relevant). I am satisfied therefore that the documents pursued in the subpoenae have apparent relevance to the X Firm claim before the Court. The objection fails and the documents should therefore be released for inspection.
The second question relates to the issue of X Firm’s request to be able to file an affidavit of Mr I who is a valuer and for them to be able to rely upon it.
Senior counsel for the husband submitted that this evidence was an attempt to avoid the single expert witness rules and that this was evidence about value. He submitted that all that the proposed witness had said was that the amount was different because he had the actual figures whereas the valuer upon whom the parties had otherwise relied, had projected or management figures. However, as counsel for X Firm submitted, there was no evidence before the Court about value bearing in mind that the husband and wife were relying upon a settlement with a set of figures that they had agreed upon between themselves.
X Firm do not accept the values of the assets as portrayed by the husband and wife whether that be at the time that the settlement was arrived at or indeed now.
The husband and wife argue that the value should be used as at 2011 because that is what they settled upon. X Firm argued not only that there is no evidence provided to the Court about value but there is no inclination on the part of the husband and wife to put any forward. The husband and wife have not withdrawn their request for the Court to decide whether or not the orders should be made. As such, it is a matter for the Court to decide whether s 79(2) of the Act is fulfilled. Notwithstanding the settlement may have been reached in 2011, in my view, the Court is still entitled to know what parties now have if the requirements of s 79(2) is to be met.
In addition to those matters, this is not just about the husband and wife’s consent orders. There is now a live cause of action brought by the third party. Whether that cause of action can be successful having regard to jurisdictional questions, remains to be seen. X Firm argues that there is jurisdiction. I am unclear whether that jurisdiction is conceded by the husband and wife but the extent of it is still to be determined. Ultimately, the issue at the moment is the question of whether or not the debt of X Firm can be satisfied from the entitlement of the wife. The Court is, in my view, entitled to know what the parties now have if there is to be an alteration of the legal and/or equitable interests between them.
Counsel for X Firm submitted that the proposed settlement did not give a proper explanation of how the husband and wife would ultimately walk away from any division of their assets and, it was submitted, the documents provided by them ignored the existence of the liability of the wife to X Firm. The balance sheet was 18 months old and both husband and wife were now alleging that there had been a worsening of their financial positions but had failed to provide an updated “balance sheet”.
To adduce evidence of an expert nature, Chapter 15 of the Family Law Rules 2004 applies. Rule 15.42 provides guidance. The relevant provisions are:
(a) to ensure that parties obtain expert evidence only in relation to a significant issue in dispute;
(b) to restrict expert evidence to that which is necessary to resolve or determine a case;
(c) to ensure that, if practicable and without compromising the interests of justice, expert evidence is given on an issue by a single expert witness
…
It is important to note the rule emphasises the need to confine the litigation process without compromising the interests of justice. I have concerns that there is no evidence other than what the husband and wife allege in circumstances where X Firm claim an interest because of the orders made as set out earlier. Is it open to the Court to find that the order amounted to the husband acknowledging the equitable interest of the wife? If possibly so, to deny X Firm an opportunity to present some evidence about value may mean that the interests of justice are not being met because the Court is not being given comprehensive information.
Rule 15.44 says:
(1) If the parties agree that expert evidence may help to resolve a substantial issue in a case, they may agree to jointly appoint a single expert witness to prepare a report in relation to the issue.
Note: Subrule 15.54 (3) sets out the requirements that apply to instructions to a single expert witness appointed by agreement between the parties.
(2) A party does not need the court's permission to tender a report or adduce evidence from a single expert witness appointed under subrule (1).
Rule 15.45 says:
(1) The court may, on application or on its own initiative, order that expert evidence be given by a single expert witness.
(2) When considering whether to make an order under subrule (1), the court may take into account factors relevant to making the order, including:
(a) the main purpose of these Rules (see rule 1.04) and the purpose of this Part (see rule 15.42);
(b) whether expert evidence on a particular issue is necessary;
(c) the nature of the issue in dispute;
(d) whether the issue falls within a substantially established area of knowledge; and
(e) whether it is necessary for the court to have a range of opinion.
(3) The court may appoint a person as a single expert witness only if the person consents to the appointment.
(4) A party does not need the court's permission to tender a report or adduce evidence from a single expert witness appointed under subrule (1).
In my view, the rules as indicated in Chapter 1 are designed to ensure that justice is done for all parties but particularly that the Court provide an expeditious outcome so that justice is done. If the evidence is not permitted to be called, a party would be entitled to argue that justice was not done. In my view therefore, the evidence can at least be filed and if it can be shown at the time of the hearing to be relevant to the causes of action before the Court, it can be admitted and then tested if necessary.
For those reasons, the orders as set out at the start of these reasons should be made.
The next issue relates to the question of when this case should be heard and I propose to hear the parties in respect of their availability and willingness for the trial to proceed.
I certify that the preceding Forty Three (43) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 9 April 2014.
Associate:
Date: 9 April 2014
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